<HTML>
<HEAD>
<TITLE>FORM S-1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>As filed with the Securities and Exchange Commission on
May&nbsp;16, 2005</B>
</DIV>

<DIV align="right" style="font-size: 10pt;">
<B>Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
</DIV>

<DIV align="center" style="font-size: 6pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FORM S-1</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>UNDER</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact Name of Registrant as Specified in Its Charter)</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Delaware</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>3511</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>20-1780492</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or Other Jurisdiction of<BR>
    Incorporation or Organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(Primary Standard Industrial<BR>
    Classification Code Number)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(I.R.S. Employer<BR>
    Identification Number)</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Paul Clark Drive</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Olean, New York 14760</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(716)&nbsp;375-3000</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant&#146;s Principal Executive Offices)</I>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Leonard M. Anthony</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Executive Vice President and</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Chief Financial Officer</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Paul Clark Drive</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Olean, New York 14760</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(716) 375-3000</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)</I>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Copies to:</I></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Edward P. Tolley&nbsp;III,&nbsp;Esq.<BR>
    Simpson Thacher&nbsp;&#38; Bartlett LLP<BR>
    425 Lexington Avenue<BR>
    New York, New York 10017-3954<BR>
    Tel: (212) 455-2000<BR>
    Fax: (212) 455-2502</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>James S. Scott Sr.,&nbsp;Esq.<BR>
    Shearman&nbsp;&#38; Sterling LLP<BR>
    599 Lexington Avenue<BR>
    New York, New York 10022-6069<BR>
    Tel: (212) 848-4000<BR>
    Fax: (212) 848-7179</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Approximate
date of commencement of proposed sale of the securities to the
public:</B>&nbsp;&nbsp;&nbsp;&nbsp;As soon as practicable after
this Registration Statement becomes effective.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any of
the securities being registered on this form are being offered
on a delayed or continuous basis pursuant to Rule&nbsp;415 under
the Securities Act, check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this
form is filed to register additional securities for an offering
pursuant to Rule&nbsp;462(b) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this
form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this
form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
delivery of the prospectus is expected to be made pursuant to
Rule&nbsp;434, check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Proposed Maximum</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Amount Of</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Title Of Each Class&nbsp;Of</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Aggregate</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Registration</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Securities To Be Registered</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Offering Price(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Fee</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Stock, par value $.01&nbsp;per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $400,000,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $47,080</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Estimated solely for the purpose of calculating the registration
    fee under Rule&nbsp;457(o) of the Securities Act of 1933, as
    amended (the &#147;Securities Act&#148;).</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 9pt;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The
registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section&nbsp;8(a), may determine.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" cellpadding="5" style="border: 3pt double #000000; margin-bottom: 6pt; font-size: 10pt"><TR><TD>
<B><FONT style="font-size: 8pt" color="#E8112D">The information
in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and we are
not soliciting offers to buy these securities in any state where
the offer or sale is not
permitted.</FONT><FONT style="font-size: 8pt"> <BR>

</FONT></B>
</TD></TR></TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT color="#E8112D">PROSPECTUS (Subject to
Completion)</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Issued &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005</B>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y08819s1y0881920.gif" alt="(DRESSER RAND LOGO)">
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Dresser-Rand Group Inc.</B>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Common Stock</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Dresser-Rand Group Inc. is offering shares of its common stock.
All of
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock are being sold by us. We intend to use
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
of the net proceeds from the sale of the shares being sold in
this offering to repay certain of our indebtedness and
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
of the net proceeds to pay a dividend to our stockholders
existing immediately prior to this offering, consisting of
affiliates of First Reserve and certain members of senior
management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This is our initial public offering and no public market
currently exists for our shares. We anticipate that the initial
public offering price will be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. We intend to apply to list the common stock on the New
York Stock Exchange under the symbol &#147;DRC.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters have the option to purchase up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock from us at the initial public offering price
less the underwriting discount to cover over-allotments. We
intend to use the proceeds we receive from any shares sold
pursuant to the underwriters&#146; over-allotment option to pay
an additional dividend to our existing stockholders.
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Investing in the common stock involves risks. See &#147;Risk
Factors&#148; beginning on page&nbsp;14.</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Proceeds,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Initial Public</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underwriting</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>before expenses,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Offering Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Discount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>to Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Per Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriters expect to deliver the shares to purchasers
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 18pt;">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B>Morgan Stanley</B></TD>
    <TD align="right"><B>Citigroup</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TABLE OF CONTENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#101'>Prospectus Summary</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>Risk Factors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Special Note&nbsp;Regarding Forward-Looking
    Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>The Transactions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>Use of Proceeds</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#106'>Dividend Policy</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Capitalization</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Dilution</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#110'>Unaudited Pro Forma Financial
    Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Selected Historical Financial
    Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Industry Overview</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#114'>Business</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#115'>Management</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Principal Stockholders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#117'>Certain Related Party Transactions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#120'>Description of Indebtedness</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#118'>Description of Capital Stock</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Shares Eligible For Future Sale</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#121'>Certain United States Federal Income and
    Estate Tax Consequences to Non-U.S.&nbsp;Holders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#122'>Underwriting</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#123'>Validity of the Shares</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>116</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#124'>Experts</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>116</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#125'>Where You Can Find More Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>116</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#126'>Index to Financial Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv4w2.txt">EX-4.2: INDENTURE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv4w3.txt">EX-4.3: REGISTRATION RIGHTS AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w1.txt">EX-10.1: EQUITY PURCHASE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w2.txt">EX-10.2: CREDIT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w4.txt">EX-10.4: DOMESTIC GUARANTEE AND COLLATERAL AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w5.txt">EX-10.5: TRANSITION SERVICES AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w6.txt">EX-10.6: SUPPLY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w7.txt">EX-10.7: LICENSE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w8.txt">EX-10.8: LICENSE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w9.txt">EX-10.9: AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w10.txt">EX-10.10: EMPLOYMENT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w11.txt">EX-10.11: EMPLOYMENT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w12.txt">EX-10.12: FORM OF STOCKHOLDER AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w13.txt">EX-10.13: STOCK INCENTIVE PLAN</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w14.txt">EX-10.14: FORM OF SUBSCRIPTION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv10w15.txt">EX-10.15: FORM OF MANAGEMENT STOCK SUBSCRIPTION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv21w1.txt">EX-21.1: LIST OF SUBSIDIARIES</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y08819s1exv23w2.txt">EX-23.2: CONSENT OF PRICEWATERHOUSECOOPERS LLP</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with
information different from that contained in this prospectus. We
are offering to sell shares of common stock and seeking offers
to buy shares of common stock, only in jurisdictions where
offers and sales are permitted. The information contained in
this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this
prospectus or any sale of the shares of common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Through and
including &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 (the 25th day after the date of this prospectus), all
dealers that buy, sell or trade shares, whether or not
participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers&#146; obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.</B>
</DIV>

<P align="center" style="font-size: 10pt;">i
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">MARKET AND INDUSTRY DATA</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The data included in this prospectus regarding
industry size and relative industry position are based on a
variety of sources, including company research, third-party
studies and surveys, industry and general publications and
estimates based on our knowledge and experience in the industry
in which we operate. These sources include publications by the
International Compressed Air and Allied Machinery Committee, the
National Electrical Manufacturers Association, the Gas
Processors Association, the Gas Processors Suppliers
Association, the Hydrocarbon Processing Industry, the Energy
Information Administration, the National Petroleum Council, the
National Petrochemical and Refiners Association, the American
Petroleum Institute, Oil&nbsp;&#38; Gas Journal magazine, Diesel
and Gas Turbine World magazine, as well as information derived
from our technology enabled selling system, D-R Avenue, and our
CRM system, Client Interface Response System. Our estimates have
been based on information obtained from our clients, suppliers,
trade and business organizations and other contacts in the
industry. We believe these estimates to be reliable as of the
respective date of each report and as of the date of this
prospectus. However, this information may prove to be inaccurate
due to the method by which we obtained some of the data for our
estimates or because this information cannot always be verified
with complete certainty due to the limits on the availability
and reliability of raw data, the voluntary nature of the data
gathering process and other limitations and uncertainties.
Forecasts are particularly likely to be inaccurate, especially
over long periods of time. As an example of the unpredictable
nature of these forecasts, in 1983, the U.S.&nbsp;Department of
Energy forecast that oil would cost $74&nbsp;per barrel in 1995;
however, the price of oil in 1995 was actually $17&nbsp;per
barrel. In addition, we do not know what assumptions regarding
general economic growth were used in preparing the forecasts we
cite. As a result, you should be aware that industry data
included in this prospectus, and estimates and beliefs based on
that data, may not be reliable.
</FONT>

<P align="center"><FONT size="2">ii
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
<A name='101'></A>
</DIV>

<!-- link1 "PROSPECTUS SUMMARY" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PROSPECTUS SUMMARY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>This summary highlights information contained elsewhere in
this prospectus. This summary is not complete and may not
contain all of the information that is important to you. We urge
you to read this entire prospectus including the &#147;Risk
Factors&#148; section and the consolidated and combined
financial statements and notes thereto, before investing in our
common stock.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Unless the context otherwise indicates, as used in this
prospectus, (i)&nbsp;the terms &#147;we,&#148; &#147;our,&#148;
&#147;us&#148; and similar terms refer to Dresser-Rand Group
Inc. and its consolidated subsidiaries after giving effect to
the consummation of the acquisition and financing thereof as
described in &#147;The Transactions,&#148; (ii)&nbsp;the term
&#147;issuer&#148; refers to Dresser-Rand Group Inc. and not to
any of its subsidiaries, (iii)&nbsp;the term &#147;Dresser-Rand
Entities&#148; refers collectively, to Dresser-Rand Company and
its direct and indirect subsidiaries, Dresser-Rand Canada, Inc.
and Dresser-Rand GmbH and (iv)&nbsp;the term
&#147;Ingersoll-Rand&#148; refers to Ingersoll-Rand Company
Limited, a Bermuda corporation, and its predecessors.</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Dresser-Rand Group Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are among the largest global suppliers of rotating equipment
solutions to the worldwide oil, gas, petrochemical and process
industries. In 2004, approximately 94% of our combined revenues
were generated from oil and gas infrastructure spending. Our
services and products are used for a wide range of applications,
including oil and gas production, high-pressure field injection
and enhanced oil recovery, pipelines, refinery processes,
natural gas processing, and petrochemical production. We believe
we have the largest installed base in the world of the classes
of equipment we manufacture, with approximately 40% of the total
installed base of equipment in operation. Our installed base
includes such well-recognized brand names as Dresser-Rand,
Dresser-Clark, Worthington, Turbodyne and Terry. We provide a
full range of aftermarket parts and services to this installed
base through our global network of 24&nbsp;service and support
centers covering 105&nbsp;countries. Our extensive and diverse
client base consists of most major and independent oil and gas
producers and distributors worldwide, national oil and gas
companies, and chemical and industrial companies. Our clients
include BP, ChevronTexaco, Statoil, ExxonMobil, Lukoil, Sinopec,
Shell Chemical, Duke Energy and the U.S. and certain foreign
governments. No single client has represented more than 5% of
our total revenues over any consecutive two-year period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We operate globally with manufacturing facilities in the United
States, France, Germany, Norway, India and Brazil. We have one
of the broadest sales and services networks in the industry,
with locations in all of the major international energy markets,
established coverage of 105 countries, and over 4,600 employees.
We believe our recent financial performance demonstrates our
ability to improve our results through on-going commitment to
operational excellence, as well as through the growth of our
services-centered, solutions-based business model. At
December&nbsp;31, 2003 and December 31, 2004, our backlog was
$419.9&nbsp;million and $637.6&nbsp;million, respectively. For
the year ended December 31, 2003, the period from January 1,
2004 through October 29, 2004 and the period from October 30,
2004 through December 31, 2004, we generated net income of
$20.4&nbsp;million, $42.2&nbsp;million and $7.2&nbsp;million and
EBITDA of $59.0&nbsp;million, $73.7 million and
$40.4&nbsp;million, respectively. EBITDA is defined, reconciled
and its importance explained in note&nbsp;6 to
&#147;&#151;&nbsp;Summary Historical and Pro Forma Financial
Information.&#148; This reflects the impact of both our
growth-oriented business realignment and our continued focus on
operating efficiency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We continue to grow our business through a solutions-based
service strategy that combines our industry-leading technology,
proprietary worldwide service center network and deep product
expertise. This approach drives our growth as we offer
integrated service solutions that help our clients maximize
returns on their production and processing equipment. We believe
our business model and alliance-based approach align us with our
clients who are shifting from purchasing isolated units and
services on a transactional basis to choosing service providers
that can help optimize performance over the entire life cycle of
their equipment. Our alliance program encompasses both the
provision of new units and/or services, and we offer our clients
a
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">1
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left">
<FONT size="2">dedicated team, streamlined engineering and
procurement process and a life cycle approach to manufacturing,
operating and maintaining their equipment, whether originally
manufactured by us or by a third party.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business operates in two segments: new units
and aftermarket parts and services. The following charts show
the proportion of our revenue generated by segment, geography
and end market for the periods indicated:
</FONT>

<P align="center">
<IMG src="y08819s1y0881900.gif" alt="(PIE CHART)">

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">New Units</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a leading manufacturer of
highly-engineered turbo and reciprocating compression equipment
and steam turbines, and also manufacture special-purpose gas
turbines. In new unit sales of turbo and reciprocating
compressors, we are the market leader in North America, and have
consistently ranked in the top three in worldwide market share.
We build custom-designed products to client specifications for
long-life, critical applications.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe clients are increasingly choosing
their suppliers based upon the capability to custom engineer,
manufacture and deliver reliable high-performance products, with
the lowest total cost of ownership, in the shortest cycle time,
and to provide timely, locally based service and support. Our
client alliance sales have increased substantially as a result
of our ability to meet these client requirements. For example,
the proportion of our combined core centrifugal and process
reciprocating new unit revenues from client alliances has
increased from approximately $17&nbsp;million in 2000 to
approximately $98&nbsp;million in 2004.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Aftermarket Parts and
    Services</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The aftermarket parts and services segment
provides us with long-term growth opportunities and a steady
stream of recurring revenues and cash flow. With a typical
operating life of 30&nbsp;years or more, rotating equipment
requires substantial aftermarket parts and services over its
operating life. The cumulative revenues from these aftermarket
activities often significantly exceed the initial purchase price
of a unit, which in many cases can be as low as five percent of
the total life-cycle cost of the unit to the client.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Given the critical role played by the equipment
we sell, customers place a great deal of importance on a
supplier&#146;s ability to provide rapid, comprehensive service,
and we believe that the aftermarket parts and services business
represents a significant long-term growth opportunity. We offer
a comprehensive range of aftermarket parts and services,
including installation, maintenance, monitoring, operation,
repairs, overhauls and upgrades. We provide our solutions to our
clients through a proprietary network of 24 service and support
centers in 14 countries, employing approximately 1,000 service
personnel, servicing our own and other OEMs&#146; turbo and
reciprocating compressors as well as steam and gas turbines. Our
coverage area of service centers servicing both turbo and
reciprocating compressors is approximately twice as large as
that of our next closest competitor.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe we have the largest installed base of
the classes of equipment we manufacture and the largest
associated aftermarket parts and services business in the
industry. We provide parts and aftermarket services to the
majority of our installed base of equipment, and estimate that
we capture approximately 50% of the
</FONT>
</DIV>

<P align="center"><FONT size="2">2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left">
<FONT size="2">supplier-provided aftermarket revenue generated
by our installed base. We focus on a global offering of
technologically advanced aftermarket products and services, and
as a result, our aftermarket activities tend to be concentrated
on the provision of higher value-added parts and upgrades and
the delivery of sophisticated operating, repair, and overhaul
services. Smaller independent companies tend to focus on local
markets and have a more basic aftermarket offering.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The steady demand from our installed base for
parts and aftermarket services represents a stable source of
recurring revenues and cash flow. Moreover, with our value-based
solutions strategy, we have a demonstrated track record of
growth in this segment as a result of our focus on expanding our
service offerings into new areas, including servicing other
OEMs&#146; installed base of equipment, developing new
technology upgrades and increasing our penetration of higher
value-added services to our own installed base.
</FONT>

<P align="left">
<B><FONT size="2">Our Industry</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The rotating equipment and services industry
manufactures and services a wide range of technologically
advanced equipment, including centrifugal and reciprocating
compressors, steam and gas turbines, expanders and control
systems. The rotating equipment industry includes manufacturing
and servicing a wide and diverse range of products, which can be
grouped into two distinct categories:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;standard&#148; equipment used for
    low-horsepower, lower-pressure and lower-volume applications; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">custom-engineered equipment, built to customer
    specifications, engineered for the specific operating
    environment and application in which it will be put to use. This
    equipment is generally used in high-pressure/volume
    applications, typically consists of large equipment packages,
    and is generally used in large scale production operations.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most of our revenues are generated from the sale
and servicing of this second category of rotating equipment.
Demand for these products and services comes from a wide variety
of large end markets, including companies in the three major
segments of the oil and gas industries (upstream, involving the
production of oil and gas; midstream, involving the preparation
and transportation of natural gas and liquids for future use;
and downstream, involving refining), and in the petrochemical,
chemical, general industrial and power industries. We estimate
that the worldwide aggregate annual value of new unit sales of
the classes of equipment we manufacture and the aftermarket
parts and services needs of the installed base of such equipment
(both in-house and outsourced) is approximately $10&nbsp;billion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that the rotating equipment and
services industry will continue to demonstrate significant
growth due to the following factors:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">natural gas consumption increased worldwide at an
    average rate of 2.4%&nbsp;per year as a result of worldwide
    economic growth and the recognition of natural gas as a
    clean-air fuel;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">increased demand for forecasted natural gas is
    driving substantial growth in spending on liquefied natural gas
    infrastructure; forecast spending on LNG plant equipment for
    2005-2008 is $13.4&nbsp;billion, 155% more than was spent from
    1964-2004;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">decline rates associated with maturing natural
    gas fields in the United States and other countries have
    resulted in increased requirements for compression products and
    services to maintain commercially viable levels of production;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the refining sector continues to experience
    increasing demand pressures as current refinery capacity is
    reaching a peak;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">environmental laws such as the Clean Air Act and
    the curtailing of the practice of flaring gas increase the
    demand for compression products and services;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the production of natural gas and oil worldwide
    will continue to grow as a result of increasing demand for
    fossil fuels;&nbsp;and
    </FONT></TD>
</TR>

</TABLE>
</DIV>

<P align="center"><FONT size="2">3
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">continued development of pipeline infrastructure,
    particularly in Asia and Latin America, and increased
    privatization of state-owned energy producers internationally,
    are leading to increased outsourcing of compression services.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that rotating equipment solutions
providers with global scale will be well positioned to
participate in a disproportionately high share of the future
growth in this industry as customers increasingly shift their
business to the handful of companies with the ability to fulfill
the full range of their equipment and service needs worldwide.
</FONT>

<P align="left">
<B><FONT size="2">Competitive Strengths</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Global Presence and Market
    Leadership.</FONT></I><FONT size="2"> We believe that our broad
    portfolio of products and services, global presence, strong
    brand recognition, track record of innovation and reputation for
    quality and performance, combined with established coverage of
    105 countries, provide us with a significant advantage in
    competition for business from large, multinational customers. We
    operate in all the world&#146;s significant energy markets and
    believe that we are a leading provider in most of the markets we
    serve.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Largest Installed Base in the
    Industry.</FONT></I><FONT size="2"> As of December&nbsp;31,
    2004, we estimate that there were more than 77,000 of our units
    in operation. We believe this represents approximately 40% of
    all the units in our classes of products that are currently in
    operation and is the largest installed base of such equipment in
    the industry. This significant scale advantage offers a number
    of competitive benefits, including:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a significant opportunity to grow our aftermarket
    parts and services business as a result of the portion of our
    installed base currently serviced by clients in-house, combined
    with an industry trend toward outsourcing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a substantial source of stable, recurring,
    high-margin aftermarket revenue from the significant parts and
    services requirements of units over their long operational lives
    and our clients&#146; general preference for OEM parts and
    services; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the capacity to support both a high level of
    reinvestment in research and development and a global service
    center network that is difficult for competitors with a smaller
    installed base to match.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Largest Network of Service and Support
    Centers.</FONT></I><FONT size="2"> We have 24&nbsp;service and
    support centers employing approximately 1,000 service personnel
    in 14&nbsp;countries, providing coverage in 105 countries and
    offering a broad range of support services. Because many
    aftermarket parts and services sales decisions are made by
    clients at the local plant level, on the basis of supplier
    expertise, local presence and response time, we believe that our
    global network protects our existing aftermarket activity and
    positions us for future growth in this business.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Leading Technology
    Platform.</FONT></I><FONT size="2"> We have a long history of
    technology leadership and innovation in our industry. Our
    research efforts center around leading technologies that
    maximize operating performance by increasing efficiency,
    durability, reliability and versatility. For example, in the
    mid-1990s we spent approximately five years and over
    $60&nbsp;million to develop our DATUM turbo compressor platform
    offerings. We believe this platform is more efficient than
    competing offerings, offers clients the lowest total cost of
    ownership, reduces emissions and noise levels and improves ease
    and speed of maintenance.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Fastest Cycle Time.</FONT></I><FONT size="2">
    We believe we generally have the fastest cycle time in the
    industry among manufacturers in our product range. Our short
    cycle time, the time from order booking to unit delivery, is
    valuable to the client and provides us with a competitive
    advantage. On a typical oil and gas project, our fast cycle time
    can reduce unit delivery time by as much as twelve&nbsp;weeks,
    thus reducing project costs and providing earlier start-up of
    the production equipment.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Substantial Investment in
    Systems.</FONT></I><FONT size="2"> We view systems and processes
    as key elements in providing rapid, high-quality, differentiated
    service. We have invested substantial resources to develop a
    number of key proprietary systems. These systems automate
    portions of the engineering and design phases of a product,
    track information on our and our competitors&#146; installed
    base of equipment, and allow clients to log any technical
    support or service requests they have into our system and
    automatically be directed to
    </FONT></TD>
</TR>

</TABLE>
</DIV>

<P align="center"><FONT size="2">4
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">the most appropriate subject-matter expert in our
    company. These proprietary systems enable us to reduce costs,
    shorten cycle times, better serve our clients and grow our
    aftermarket parts and services business, as well as allow us to
    effectively monitor and manage our responsiveness to client
    requests and manage the entire sales cycle from lead generation
    to order booking on a global basis.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Strong and Experienced Management
    Team.</FONT></I><FONT size="2"> Our management team has a
    demonstrated track record of financial and operational
    achievement. The management team has an average of 17&nbsp;years
    experience with us, including our CEO who has been with us for
    24&nbsp;years, and has extensive industry experience and
    longstanding customer relationships. This management team has
    been responsible for the successful services revenue growth and
    cost reduction initiatives that have driven our increased
    profitability.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Attractive Business
    Model.</FONT></I><FONT size="2"> Our business model has several
    attractive features, including:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Strong, Stable Cash Flow with Low Growth
    Capital Requirements.</FONT></I><FONT size="2"> As a result of
    the recurring revenue from our aftermarket parts and services
    business, progress payments from customers that limit our need
    for additional working capital as we grow, and the moderate
    capital expenditures needed to support our services-based growth
    model, our business generates strong, recurring cash flows. Our
    cash flow from operations was $51.0&nbsp;million, $57.7 million
    and $17.9&nbsp;million, for the year ended December 31, 2003,
    the period from January&nbsp;1, 2004 through October 29, 2004
    and the period from October&nbsp;30, 2004 through December 31,
    2004, respectively.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Visibility.</FONT></I><FONT size="2"> We have
    a high degree of visibility into our forecasted financial
    performance. A substantial portion of our new unit orders is
    booked six to nine months in advance of delivery. As of December
    31, 2004, our new units backlog was $489.3&nbsp;million or 70.0%
    above the new units backlog at December 31, 2003. Since December
    2000, our new units backlog has consistently exceeded 80% of our
    next twelve month new units revenues. Customers may cancel an
    order at any time. Upon cancellation, customers are
    contractually obligated to pay us an amount sufficient to cover
    all costs and commitments incurred through the date of
    cancellation, plus a profit margin. Since 2003, only two orders
    have been cancelled.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Business Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2004, approximately 94% of our combined
revenues were generated from energy infrastructure and oilfield
spending. Additionally, 62% of our total combined revenues were
generated by our aftermarket parts and services business. We
intend to continue to focus on the oilfield, natural gas and
energy sectors and thus expect to capitalize on the expected
long-term growth in equipment and services investment,
especially related to natural gas, in these sectors.
Specifically, we intend to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Increase Sales of Aftermarket Parts and
    Services to Existing Installed Base.</FONT></I><FONT size="2">
    The substantial portion of the aftermarket parts and services
    needs of our existing installed base of equipment that we
    currently do not, or only partially service represents a
    significant opportunity for growth. We believe the market has a
    general preference for aftermarket OEM parts and services. We
    are implementing a proactive approach to aftermarket parts and
    services sales that capitalizes on our knowledge of the
    installed base of our own and our competitors&#146; equipment.
    We believe our premium service level will result in continued
    growth of sales of aftermarket parts and services.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Expand Aftermarket Parts and Services Business
    to Non-Dresser-Rand OEM Equipment.</FONT></I><FONT size="2"> We
    believe the aftermarket parts and services market for
    non-Dresser-Rand equipment represents a significant growth
    opportunity that we have only just begun to pursue on a
    systematic basis. As a result of the knowledge and expertise
    derived from our long history and experience servicing the
    largest installed base in the industry, combined with our
    extensive investment in technology, we have a proven process of
    applying our technology and processes to improve the operating
    efficiency and performance of our competitors&#146; products. We
    intend to capitalize on our knowledge, our broad network of
    service centers, flexible technology and existing client
    relationships with most major industry participants to grow our
    aftermarket parts and services solutions for non-Dresser-Rand
    equipment.
    </FONT></TD>
</TR>

</TABLE>
</DIV>

<P align="center"><FONT size="2">5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Grow Alliances.</FONT></I><FONT size="2"> As a
    result of the need to improve efficiency in a competitive global
    economy, oil and gas companies are frequently consolidating
    their supplier relationships and seeking alliances with
    suppliers, shifting from purchasing units and services on an
    individual transactional basis to choosing service providers
    that can help them optimize performance over the entire life
    cycle of their equipment. In the past three years, we have seen
    a high level of interest among our clients in seeking alliances
    with us, and we have entered into agreements with more than 30
    of our major clients. We plan to leverage our market leadership,
    global presence and comprehensive range of products and services
    to continue to take advantage of this trend by pursuing new
    client alliances as well as strengthening our existing alliances.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Expand our Performance-Based Long-Term Service
    Contracts.</FONT></I><FONT size="2"> We are growing the
    outsourced services market with our performance-based operations
    and maintenance solutions (known as our <I>Availability+
    </I>program), which are designed to offer clients significant
    value (improved equipment performance, decreased life cycle cost
    and higher availability levels) versus the traditional services
    and products approach. These contracts generally represent
    multiyear, recurring revenue opportunities for us that typically
    include a performance-based element to the service provided. We
    offer these contracts for most of the markets that we serve.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Introduce New and Innovative Products and
    Technologies.</FONT></I><FONT size="2"> We believe we are an
    industry leader in introducing new, value-added technology.
    Product innovation has historically provided, and we believe
    will continue to provide, significant opportunities to increase
    revenues from both new product sales and upgrades to our, and
    other OEMs&#146;, installed base of equipment. Examples of
    recent new offerings include adapting the DATUM compressor
    platform for the revamping of other OEM equipment, a new design
    of dry-gas seals and bearings, a new generation of multi-phase
    turbo separators and a complete line of remote-monitoring and
    control instrumentation that offers significant performance
    benefits to clients and enhances our operations and maintenance
    services offerings. We plan to continue developing innovative
    products, including new compressor platforms for subsea and
    underground applications, which would further open up new
    markets to us.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Continue to Improve
    Profitability.</FONT></I><FONT size="2"> We continually seek to
    improve our financial and operating performance through cost
    savings and productivity improvements. Since the fourth quarter
    of 2002, we adopted a number of cost savings programs across our
    entire company. An important element in these programs was
    process innovation that permitted us to streamline our
    operations. As a result, from September&nbsp;30, 2002 through
    December&nbsp;31, 2004, we consolidated eight facilities and
    reduced headcount from 5,849 to 4,631&nbsp;employees. As a
    result of our business realignment toward our aftermarket parts
    and services segment, our lean manufacturing initiatives and our
    decision to begin charging customers a margin on third-party
    equipment they ask us to package with our own units, our
    operating income per employee (based on the average number of
    employees in each period) for the year ended December&nbsp;31,
    2004 improved substantially as compared to the year ended
    December&nbsp;31, 2003. We are focused on continuing to improve
    our cost position in every area of our business, and we believe
    there is substantial opportunity to further increase our
    productivity in the future.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Selectively Pursue
    Acquisitions.</FONT></I><FONT size="2"> We intend to continue
    our disciplined pursuit of acquisition opportunities that fit
    our business strategy. We expect to make acquisitions within the
    energy sector that add new products or technologies to our
    portfolio, provide us with access to new markets or enhance our
    current market positions. Given our size and the large number of
    small companies in our industry and related industries, we
    believe we are well positioned to be an industry consolidator
    over time.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="2">Risk Factors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Investing in our common stock involves
substantial risk. You should carefully consider all the
information in this prospectus prior to investing in our common
stock. Our ability to execute our strategy is subject to the
risks that are generally associated with the rotating equipment
and services industry. For example, our profitability could
decline due to a significant downturn in our clients&#146;
markets, decrease in the consumption of oil, gas or
petrochemicals, as well as unanticipated operating conditions,
loss of customers and other factors that are not within our
control. Our operations and properties are subject to stringent
environmental laws and
</FONT>
</DIV>

<P align="center"><FONT size="2">6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
regulations that impose significant actual and potential costs
on us, and future regulations could increase those costs.
Furthermore, the heavily regulated nature of our clients&#146;
industries imposes significant safety performance requirements
on us, and we could lose the opportunity to bid on certain
clients&#146; contracts if we do not meet those requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are also subject to a number of risks related to our
competitive position and business strategies. For example, our
acquisitive business strategy exposes us to the risks involved
in consummating and integrating acquisitions, including the risk
that in a future acquisition we could incur additional debt and
contingent liabilities which could adversely affect our
operating results. For additional risks relating to our business
and the offering, see &#147;Risk Factors&#148; beginning on
page&nbsp;14 of this prospectus.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Acquisition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;25, 2004, Dresser-Rand Holdings, LLC, our
indirect parent and an affiliate of First Reserve Corporation
(&#147;First Reserve&#148;), entered into an equity purchase
agreement with Ingersoll-Rand to purchase all of the equity
interests in the Dresser-Rand Entities for approximately
$1.13&nbsp;billion. The acquisition closed on October&nbsp;29,
2004. In connection with the acquisition, funds affiliated with
First Reserve contributed $430&nbsp;million in cash as equity to
Dresser-Rand Holdings, LLC, which used this cash to fund a
portion of the purchase price for the Dresser-Rand Entities. The
remainder of the cash needed to finance the acquisition,
including related fees and expenses, was provided by funds
raised by the offering of our $420&nbsp;million senior
subordinated notes due 2014 (the &#147;notes&#148;) and
borrowings under our $695&nbsp;million senior secured credit
facility. The senior secured credit facility consists of a
$395&nbsp;million term loan portion and a $300&nbsp;million
revolving portion. See &#147;The Transactions.&#148;
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Company Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Dresser-Rand Group Inc. is a Delaware corporation formed in
October 2004. Our principal executive offices are located at
Paul Clark Drive, Olean, New York 14760 and our telephone number
is (716)&nbsp;375-3000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our predecessor company was initially formed on
December&nbsp;31, 1986, when Dresser Industries, Inc. and
Ingersoll-Rand entered into a partnership agreement for the
formation of Dresser-Rand Company, a New York general
partnership owned 50% by Dresser Industries, Inc. and 50% by
Ingersoll-Rand. On October&nbsp;1, 1992, Dresser Industries,
Inc. purchased a 1% equity interest from Dresser-Rand Company.
In September 1999, Dresser Industries, Inc. merged with
Halliburton Industries, and Dresser Industries, Inc.&#146;s
ownership interest in Dresser-Rand Company transferred to
Halliburton Industries. On February&nbsp;2, 2000, a wholly-owned
subsidiary of Ingersoll-Rand purchased Halliburton
Industries&#146; 51% interest in Dresser-Rand Company.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">7
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<P align="center">
<B><FONT size="2">The Offering</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Shares of common stock offered by Dresser-Rand
    Group Inc.&nbsp;</FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Shares of common stock to be outstanding after
    this offering
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Over-allotment option
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Use of proceeds
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We estimate that the net proceeds to us from this
    offering, after deducting underwriting discounts and estimated
    offering expenses, will be approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
    We intend to use approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    of the net proceeds
    ($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    in the event the underwriters exercise their over-allotment
    option) to repay certain indebtedness. We intend to use the
    remaining net proceeds of approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
    assuming an initial public offering price per share of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    to pay a dividend to our stockholders existing immediately prior
    to the offering, consisting of affiliates of First Reserve and
    certain members of senior management. See &#147;Use of
    Proceeds.&#148; We also intend to use the proceeds we receive
    from any shares sold pursuant to the underwriters&#146;
    over-allotment option to pay an additional dividend to our
    existing stockholders.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Proposed New York Stock Exchange symbol
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#147;DRC&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless we specifically state otherwise, all
information in this prospectus:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">assumes no exercise by the underwriters of their
    over-allotment option;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">gives effect to the 1,006,092.87 for one stock
    split effected in February&nbsp;2005;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">assumes that we issue an
    additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock to our existing stockholders pursuant to a
    stock dividend that we will declare prior to the consummation of
    this offering, the terms of which will require that shortly
    after the expiration of the underwriters&#146; over-allotment
    option (assuming the option is not exercised in full), we issue
    to our existing stockholders the number of shares equal to
    (x)&nbsp;the number of additional shares the underwriters have
    an option to purchase minus (y)&nbsp;the actual number of shares
    the underwriters purchase from us pursuant to that
    option;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">excludes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock reserved for issuance in connection with
    currently outstanding options under our Stock Incentive Plan, of
    which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;have
    been granted as of the date of this prospectus.
    </FONT></TD>
</TR>

</TABLE>
</DIV>

<P align="center"><FONT size="2">8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Historical and Pro Forma Financial Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the closing of the transactions on October&nbsp;29,
2004, Dresser-Rand Group Inc. did not have any assets,
liabilities or results of operations. Therefore, the following
summary historical financial data as of and for the years ended
December&nbsp;31, 2003 and 2002 and for the period from
January&nbsp;1, 2004 through October&nbsp;29, 2004 have been
derived from the audited combined financial statements of the
Dresser-Rand Entities (the predecessors to Dresser-Rand Group
Inc.), which have been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm. The summary
historical financial information as of December&nbsp;31, 2004
and for the period from October&nbsp;30, 2004 (our date of
inception) to December&nbsp;31, 2004 have been derived from the
audited consolidated financial statements of Dresser-Rand Group
Inc. The audited financial statements for the years ended
December&nbsp;31, 2002 and 2003, for the period from
January&nbsp;1, 2004 through October&nbsp;29, 2004, for the
period from October&nbsp;30, 2004 through December&nbsp;31, 2004
and as of December&nbsp;31, 2003 and 2004 are included elsewhere
in this prospectus. The following summary unaudited pro forma
combined financial information for the year ended
December&nbsp;31, 2004 has been prepared to give pro forma
effect to the transactions as if they had occurred on
January&nbsp;1, 2004. The pro forma adjustments used in
preparing the pro forma financial information reflect our
estimates of the purchase price allocation, which may change
upon finalization of our analysis. The pro forma financial
information is for informational purposes only and should not be
considered indicative of actual results that would have been
achieved had the transactions actually been consummated on the
dates indicated and do not purport to indicate balance sheet
information or results of operations as of any future date or
any future period. This information is only a summary and should
be read in conjunction with &#147;Unaudited Pro Forma Financial
Information,&#148; &#147;Selected Historical Financial
Information,&#148; &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations&#148;
and the consolidated and combined financial statements and the
notes thereto included elsewhere in this prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period October 30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of Operations Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,031,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,335,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>715,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>199,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>915,402</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of goods sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>865,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,132,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>538,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>149,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>704,497</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>165,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>210,905</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143,094</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,710</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of purchased in-process research and development assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring charges(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,101</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(776</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,654</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(54,004</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,202</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,846</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,133</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,515</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7,382</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</DIV>

<P align="center" style="font-size: 10pt;">9
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended December</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period January 1</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period October 30</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">October 29,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(In thousands, except share and per share data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">Earnings per share data(3)(4)(5):</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Basic and diluted earnings (loss) per share:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.07</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Weighted average shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,115,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">Cash flow data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash flows provided by operating activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,963</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,729</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,948</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash flows provided by (used in) investing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,813</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,089</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,907</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,126,939</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash flows provided by (used in) financing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,759</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(63,487</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(52,030</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,217,099</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">Other financial data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">EBITDA(6)(7)(8)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62,604</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,974</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">127,413</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,109</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,269</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66,276</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Capital expenditures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,590</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">Balance Sheet Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">111,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Property, plant and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">226,764</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,063,875</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,751,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">423,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Debt:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Short-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,716</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Long-term debt, including current maturities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400,679</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Senior subordinated notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">420,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,929</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">823,413</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Partnership interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">565,035</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">452,897</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes severance expenses and facility exit
    costs associated with our corporate restructuring activities.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">On the closing date of the transactions we became
    a corporation subject to corporate income taxes in the United
    States. In the United States, we were a partnership during the
    Predecessor periods presented. The data presented does not give
    effect to income taxes we would have been required to recognize
    if we were organized as a corporation, except with regard to the
    pro forma period.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Historical basic and diluted earnings per share
    data has not been presented for the Predecessor because the
    Predecessor did not operate as a separate legal entity from
    Ingersoll-Rand.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">For the Successor, basic and diluted earnings per
    share is calculated by dividing net earnings by the weighted
    average shares outstanding adjusted to reflect the 1,006,092.87
    for one&nbsp;stock split effected in February&nbsp;2005.
    </FONT></TD>
</TR>

</TABLE>
</DIV>

<P align="center"><FONT size="2">10
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Unaudited pro forma basic and diluted earnings per share have
    been calculated in accordance with the SEC rules for initial
    public offerings. These rules require that the weighted average
    share calculation give retroactive effect to any changes in our
    capital structure as well as the number of shares whose sale
    proceeds would be necessary to repay any debt or to pay any
    dividend as reflected in the pro forma adjustments. Therefore,
    pro forma weighted average shares for purposes of the unaudited
    pro forma basic and diluted earnings per share calculation, has
    been adjusted to reflect the stock dividend
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    to our existing stockholders that will be made shortly after the
    expiration of the underwriters&#146; over-allotment option
    assuming no exercise of that option, and is comprised of
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock outstanding immediately prior to this
    offering
    plus &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock being offered hereby and the stock dividend
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    EBITDA is defined as net income before interest, taxes,
    depreciation and amortization. EBITDA is not intended to
    represent cash flow from operations as defined by GAAP and
    should not be used as an alternative to net income as an
    indicator of operating performance or to cash flow as a measure
    of liquidity. While EBITDA is frequently used as a measure of
    operations and the ability to meet debt service requirements, it
    is not necessarily comparable to other similarly titled captions
    of other companies due to potential inconsistencies in the
    method of calculation. We present EBITDA because we consider it
    an important supplemental measure of our performance and believe
    it is frequently used by our investors and other interested
    parties, as well as by our management, in the evaluation of
    companies in our industry, many of which present EBITDA when
    reporting their results. In addition, EBITDA provides additional
    information used by our management and board of directors to
    facilitate internal comparisons to historical operating
    performance of prior periods. Further, management believes
    EBITDA facilitates their operating performance comparisons from
    period to period because it excludes potential differences
    caused by variations in capital structures (affecting interest
    expense), tax positions (such as impact of changes in effective
    tax rates or net operating losses) and the age and book
    depreciation of facilities and equipment (affecting relative
    depreciation expense). The following table reconciles EBITDA to
    net income:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period January 1</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 29,</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7,382</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,970</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,515</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,938</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,156</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,004</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,715</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,276</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EBITDA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>62,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>58,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>73,680</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>127,413</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
EBITDA is different from Adjusted EBITDA, which is a measure
used in certain covenants contained in our debt instruments. See
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&nbsp;&#151; Covenant
Compliance&#148; for a discussion of this measure and the
covenants in which it is used.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">11
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    The following table provides supplemental information as to
    identified expenses that are reflected in EBITDA that are
    expected to be either reduced or increased, as applicable, due
    to the change in ownership of Dresser-Rand Group Inc. as a
    result of the acquisition:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Successor</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period January 1</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October 30</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>through</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 29,</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net reduction in SFAS&nbsp;106 expense(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,322</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Excess (additional) corporate allocation(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,876</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,122</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,122</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Removal of incremental corporate overhead(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,025</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,025</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,317</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,529</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,085</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Compensation adjustment(e)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(832</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(832</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(693</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,305</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,232</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<FONT style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</FONT>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Reflects the adjustment to historical expense for the change in
    postretirement benefits other than pension expense due to
    Ingersoll-Rand&#146;s retention of the obligations for all
    employees who are retired or eligible to retire as well as the
    results of actuarial valuations performed as of the transaction
    date for the portion retained by us.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(b)&nbsp;</TD>
    <TD align="left">
    Reflects the difference between the corporate overhead expenses
    allocated to us by Ingersoll-Rand and our estimated annual
    stand-alone expenses.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(c)&nbsp;</TD>
    <TD align="left">
    Reflects adjustment for removal of incremental corporate
    allocation initiated in 2003 by Ingersoll-Rand.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(d)&nbsp;</TD>
    <TD align="left">
    Reflects an adjustment for additional funding of certain pension
    plans and the elimination of actuarial losses through purchase
    accounting.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(e)&nbsp;</TD>
    <TD align="left">
    Reflects compensation expense related to the management equity
    program of $682,000 annually and CEO compensation adjustment of
    $150,000 annually.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">12
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    The following table provides supplemental information as to
    unusual and other items that are reflected in EBITDA:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Productivity measures(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(62</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,617</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nigeria loss contract(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,643</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nigeria casualty losses(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for obsolete material(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New York State grant(e)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity (earnings) losses(f)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(194</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>819</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Insurance claim(g)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,145</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Settlement of product liability claim(h)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,500</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,500</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    China receivables(i)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>970</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of purchased in-process research and development assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory step-up write off(j)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other expense (income)(k)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,976</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(826</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>191</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,946</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,840</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<FONT style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</FONT>
</DIV>

<DIV style="margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(a)</TD>
    <TD align="left">
    Reflects severance expenses associated with our efficiency
    initiatives. These expenses were included in cost of goods sold
    and selling and administrative expenses. See
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(b)</TD>
    <TD align="left">
    Reflects losses under (i)&nbsp;a contract imposed on the
    business by Halliburton Industries terminated at the end of
    2004, and (ii)&nbsp;a contract in Nigeria we were forced to exit
    because of force majeure.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(c)</TD>
    <TD align="left">
    Reflects losses of inventory stocks resulting from a fire in a
    warehouse in Nigeria.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(d)</TD>
    <TD align="left">
    Offsets impact of decision to increase obsolete and slow moving
    inventory reserve level. See &#147;Management&#146;s Discussion
    and Analysis of Financial Condition and Results of
    Operations.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(e)</TD>
    <TD align="left">
    Reflects one-time income from a New York State grant for the
    year ended December&nbsp;31, 2002, and one-time charge related
    to refunding a portion of the grant in the year ended
    December&nbsp;31, 2003. See &#147;Management&#146;s Discussion
    and Analysis of Financial Condition and Results of
    Operations.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(f)</TD>
    <TD align="left">
    Non-cash (gains) losses in joint ventures.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(g)</TD>
    <TD align="left">
    Reflects gains from the settlement of an insurance claim
    relating to a fire that occurred in 2000.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(h)</TD>
    <TD align="left">
    Reflects one-time gain from settlement of a legal claim. See
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(i)</TD>
    <TD align="left">
    Reflects write-off of receivables related to business closure.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(j)</TD>
    <TD align="left">
    As a result of the transaction, we wrote up inventory in the
    amount of $7.4&nbsp;million. Of this amount, $2.3&nbsp;million
    was expensed in the two-month period from October&nbsp;30, 2004
    through December&nbsp;31, 2004.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(k)</TD>
    <TD align="left">
    Non-operating income and expense and other non-cash charges and
    credits. See &#147;Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations.&#148;</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">13
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='102'></A>
</DIV>

<!-- link1 "RISK FACTORS" -->

<P align="center">
<B><FONT size="2">RISK FACTORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Investing in our common stock involves
substantial risk. You should carefully consider all the
information in this prospectus prior to investing in our common
stock. In particular, we urge you to consider carefully the
factors set forth under the heading &#147;Risk
Factors.&#148;</FONT></I>

<P align="left">
<B><FONT size="2">Risks Related to Our Business</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We have identified material weaknesses in
    our internal controls, which could affect our ability to ensure
    timely and reliable financial reports and the ability of our
    auditors to attest to the effectiveness of our internal
    controls.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2004, the Public Company Accounting
Oversight Board, or PCAOB, adopted rules for purposes of
implementing Section 404 of the Sarbanes-Oxley Act of 2002,
which included revised definitions of material weaknesses and
significant deficiencies in internal control over financial
reporting. The PCAOB defines a material weakness as &#147;a
significant deficiency, or a combination of significant
deficiencies, that results in more than a remote likelihood that
a material misstatement of the annual or interim financial
statements will not be prevented or detected.&#148; The new
rules describe certain circumstances as being both significant
deficiencies and strong indicators that a material weakness in
internal control over financial reporting exists.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of our transition from a subsidiary
of a multinational company to a stand alone entity, we have
identified a number of factors contributing to our conclusion
that we have a material weakness, including the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">identification by our auditors of misstatements
    in internal drafts of our financial statements that were not
    initially identified by our internal control process, indicating
    a weakness with respect to our ability to properly monitor and
    account for non-routine transactions, and to apply GAAP in
    transactions subject to new or complex accounting pronouncements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the need for a Chief Financial Officer with SEC
    reporting experience, a Director of Financial Reporting with
    strong accounting and SEC reporting experience and additional
    skilled accounting and SEC experienced personnel to enhance the
    accounting department to remedy insufficient experience in
    public company accounting and periodic reporting matters among
    our existing staff;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the need to develop a tax department;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the need to develop a risk management department;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the need to establish an internal audit
    department; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the need to enhance our documentation of our
    systems and controls.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">We have already taken a number of actions to
begin to address the items identified including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">recently hiring an experienced Chief Financial
    Officer with broad finance and SEC reporting experience, a
    Director of Financial Reporting with strong accounting and SEC
    reporting experience, a Director of Risk Management, a Director
    of Internal Audit and a General Counsel.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">engaging additional outside personnel to assist
    our internal personnel with audit work and SEC reporting;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">outsourcing our tax functions to a professional
    service firm;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">evaluating external resources to supplement our
    Section 404 evaluation efforts; and
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">While we have taken actions to address the items
identified, additional measures will be necessary, including the
hiring of a Chief Accounting Officer, and these measures along
with other measures we expect to take to improve our internal
controls may not be sufficient to address the issues identified
by our independent auditors or ensure that our internal controls
are effective. If we are unable to provide reliable and timely
financial reports our business and prospects could suffer
material adverse effects and our share price could be
</FONT>

<P align="center"><FONT size="2">14
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">adversely affected. In addition, we may in the
future identify further material weaknesses or significant
deficiencies in our internal control over financial reporting.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Beginning with the year ending December 31, 2006,
pursuant to Section 404 of the Sarbanes-Oxley Act, our
management will be required to deliver a report that assesses
the effectiveness of our internal control over financial
reporting, and our auditors will be required to deliver an
attestation report on management&#146;s assessment of and
operating effectiveness of internal controls. We have
substantial effort ahead of us to complete documentation of our
internal control system and financial processes, information
systems, assessment of their design, remediation of control
deficiencies identified in these efforts and management testing
of the design and operation of internal controls. We may not be
able to complete the required management assessment by our
reporting deadline. An inability to complete and document this
assessment could result in us receiving something other than an
unqualified report from our auditors with respect to our
internal controls. In addition, if material weaknesses are
identified and not remediated with respect to our internal
control over financial reporting, we would not be able to
conclude that our internal controls over financial reporting
were effective, which could result in the inability of our
external auditors to deliver an unqualified report, or any
report, on our internal controls. Inferior internal controls
could cause investors to lose confidence in our reported
financial information, which could have a negative effect on the
trading price of our securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">While a division of our prior owner, we had two
&#147;reportable conditions&#148; in our internal financial
controls:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">During the third quarter of 2003, a management
    review identified an issue relating to work-in-process inventory
    at two of our manufacturing locations. It was determined that
    certain work-in-process inventory had not been properly relieved
    upon shipment during the time period from 1999 through 2003,
    resulting in an overstatement of inventory. Management
    immediately began an extensive, in-depth review of our accounts
    and records. As a consequence of these problems, we implemented
    an internal review of the functions and processes at the two
    plants that were involved, identified gaps in our internal
    controls and put in place remedial measures. At the end of this
    review and remediation process, our auditors determined that we
    had successfully eliminated the weakness in our inventory
    controls.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">During June 2004, management uncovered an issue
    relating to payroll fraud at our U.S.&nbsp;Shared Services Unit
    in Olean, NY. It was determined that the payroll supervisor had
    misappropriated funds through the payroll system from February
    1994 to June 2004. A thorough investigation was undertaken
    involving Dresser-Rand Company personnel, Ingersoll-Rand
    Internal Audit and the forensic investigations section of an
    independent accounting firm. The review of past payroll records
    from both Oracle (2/01&nbsp;- 6/04) and GEAC (1/90&nbsp;- 12/00)
    systems revealed that $1.042&nbsp;million had been illegally
    processed through payroll and diverted to the payroll
    supervisor&#146;s bank account. As part of the investigation,
    steps were taken to ensure that proper segregation of duties
    exist such that no one in the payroll, human resources or
    information technology areas has update capability for both the
    payroll and the human resources systems.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;


<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We will soon be subject to financial
    reporting and other requirements for which our accounting and
    other management systems and resources may not be adequately
    prepared.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This registration will result in our becoming
subject to reporting and other obligations under the Exchange
Act. These reporting and other obligations will place
significant demands on our management, administrative and
operational resources, including our accounting resources. Since
the transactions, we have continued to upgrade our systems,
implement additional financial and management controls,
reporting systems and procedures and hire additional accounting
and finance staff. If we are unable to upgrade our financial and
management controls, reporting systems and procedures in a
timely and effective fashion, our ability to comply with our
financial reporting requirements and other rules that apply to
reporting companies could be impaired. If we are late in filing
certain SEC reports, it could constitute a default under our
indenture and senior secured credit facility.
</FONT>

<P align="center"><FONT size="2">15
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Our operating results could be harmed
    during economic or industry downturns.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The businesses of most of our clients,
particularly oil, gas and petrochemical companies, are, to
varying degrees, cyclical and historically have experienced
periodic downturns. Profitability in those industries is highly
sensitive to supply and demand cycles and volatile product
prices, and our clients in those industries historically have
tended to delay large capital projects, including expensive
maintenance and upgrades, during industry downturns. These
industry downturns have been characterized by diminished product
demand, excess manufacturing capacity and subsequent accelerated
erosion of average selling prices. Demand for our new units and,
to a lesser extent, aftermarket parts and services is driven by
a combination of long-term and cyclical trends, including
increased outsourcing of services, maturing oil and gas fields,
the aging of the installed base of equipment throughout the
industry, gas market growth and the construction of new gas
infrastructure, and regulatory factors. In addition, the growth
of new unit sales is generally linked to the growth of oil and
gas consumption in markets in which we operate. Therefore, any
significant downturn in our clients&#146; markets or in general
economic conditions could result in a reduction in demand for
our services and products and could harm our business and such
downturns, or the perception that they may occur, could have a
significant negative impact on the market price of our stock .
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We may not be successful in implementing
    our business strategy to increase our aftermarket parts and
    services revenue.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We estimate that we currently provide
approximately 50% of the supplier-provided aftermarket parts and
services needs of our own manufactured equipment base and less
than two percent of the aftermarket parts and services needs of
the equipment base of other manufacturers. Our future success
depends, in part, on our ability to provide aftermarket parts
and services to both our own and our competitors&#146; equipment
base and our ability to develop and maintain our alliance
relationships. Our ability to implement our business strategy
successfully depends on a number of factors, including the
success of our competitors in servicing the aftermarket parts
and services needs of our clients, the willingness of our
clients to outsource their service needs to us, the willingness
of our competitors&#146; clients to outsource their service
needs to us, and general economic conditions. We cannot assure
you that we will succeed in implementing our strategy. See
&#147;Business&nbsp;&#151; Business Strategy.&#148;
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We face intense competition that may cause
    us to lose market share and harm our financial
    performance.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We encounter competition in all areas of our
business, principally in the new unit segment. The principal
methods of competition in our markets include product
performance, client service, product lead times, global reach,
brand reputation, breadth of product line, quality of
aftermarket service and support and price. Our clients
increasingly demand more technologically advanced and integrated
products, and we must continue to develop our expertise and
technical capabilities in order to manufacture and market these
products successfully. To remain competitive, we will need to
invest continuously in research and development, manufacturing,
marketing, client service and support and our distribution
networks. In addition, our significant leverage and the
restrictive covenants to which we are subject may harm our
ability to compete effectively. In our aftermarket parts and
services segment, we compete with our major competitors, small
independent local providers and our clients&#146; in-house
service providers. Other OEMs typically have an advantage in
competing for services and upgrades to their own equipment.
Failure to penetrate this market will adversely affect our
ability to grow our business. In addition, our competitors are
increasingly emulating our alliance strategy. Our alliance
relationships are terminable without penalty by either party,
and failure to maintain or enter into new alliance relationships
will adversely affect our ability to grow our business.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We may not be able to complete, or achieve
    the expected benefits from, any future acquisitions, which could
    adversely affect our growth.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have at times used acquisitions as a means of
expanding our business and expect that we will continue to do
so. If we do not successfully integrate acquisitions, we may not
realize operating advantages and cost savings. Future
acquisitions may require us to incur additional debt and
contingent liabilities, which may
</FONT>

<P align="center"><FONT size="2">16
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">materially and adversely affect our business,
operating results and financial condition. The acquisition and
integration of companies involve a number of risks, including:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">use of available cash, new borrowings or
    borrowings under our senior secured credit facility to
    consummate the acquisition;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">demands on management related to the increase in
    our size after an acquisition;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">diversion of management&#146;s attention from
    existing operations to the integration of acquired companies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">integration into our existing systems;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">difficulties in the assimilation and retention of
    employees; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">potential adverse effects on our operating
    results.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may not be able to maintain the levels of
operating efficiency that acquired companies achieved
separately. Successful integration of acquired operations will
depend upon our ability to manage those operations and to
eliminate redundant and excess costs. We may not be able to
achieve the cost savings and other benefits that we would hope
to achieve from acquisitions, which could have a material
adverse effect on our business, financial condition and results
of operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Economic, political and other risks
    associated with international sales and operations could
    adversely affect our business.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since we manufacture and sell our products and
services worldwide, our business is subject to risks associated
with doing business internationally. For the year ended
December&nbsp;31, 2004, 39% of our net revenue was derived from
North America, 18% from Latin America, 15% from Europe, 13% from
Asia Pacific and 15% from the Middle East and Africa.
Accordingly, our future results could be harmed by a variety of
factors, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in foreign currency exchange rates;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">exchange controls;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in a specific country&#146;s or
    region&#146;s political or economic conditions, particularly in
    emerging markets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">civil unrest in any of the countries in which we
    operate;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">tariffs, other trade protection measures and
    import or export licensing requirements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">potentially negative consequences from changes in
    tax laws;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">difficulty in staffing and managing widespread
    operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">differing labor regulations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">requirements relating to withholding taxes on
    remittances and other payments by subsidiaries;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">different regimes controlling the protection of
    our intellectual property;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">restrictions on our ability to own or operate
    subsidiaries, make investments or acquire new businesses in
    these jurisdictions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">restrictions on our ability to repatriate
    dividends from our subsidiaries;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">difficulty in collecting international accounts
    receivable;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">difficulty in enforcement of contractual
    obligations governed by non-U.S.&nbsp;law;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">unexpected transportation delays or interruptions;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">17
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">unexpected changes in regulatory
    requirements;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the burden of complying with multiple and
    potentially conflicting laws.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our international operations are affected by
global economic and political conditions. Changes in economic or
political conditions in any of the countries in which we operate
could result in exchange rate movements, new currency or
exchange controls or other restrictions being imposed on our
operations or expropriation. In addition, the financial
condition of foreign clients may not be as strong as that of our
current domestic clients.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Some of the international markets in which we
operate are politically unstable and are subject to occasional
civil and communal unrest, such as Venezuela and Western Africa.
For example, in Nigeria we recently terminated a contract due to
civil unrest. Riots, strikes, the outbreak of war or terrorist
attacks in foreign locations, such as in the Middle East, could
also adversely affect our business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From time to time, certain of our foreign
subsidiaries operate in countries that are subject to sanctions
and embargoes imposed by the U.S.&nbsp;government and the United
Nations. Although these sanctions and embargoes do not prohibit
those subsidiaries from selling products and providing services
in such countries, they do prohibit the issuer and its domestic
subsidiaries, as well as employees of our foreign subsidiaries
who are U.S.&nbsp;citizens, from participating in, approving or
otherwise facilitating any aspect of the business activities in
those countries. These constraints on our ability to have
U.S.&nbsp;persons, including our senior management, provide
managerial oversight and supervision may negatively affect the
financial or operating performance of such business activities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fluctuations in the value of the U.S.&nbsp;dollar
may adversely affect our results of operations. Because our
combined financial results are reported in dollars, if we
generate sales or earnings in other currencies the translation
of those results into dollars can result in a significant
increase or decrease in the amount of those sales or earnings.
In addition, our debt service requirements are primarily in
U.S.&nbsp;dollars, even though a significant percentage of our
cash flow is generated in euros or other foreign currencies.
Significant changes in the value of the euro relative to the
U.S.&nbsp;dollar could have a material adverse effect on our
financial condition and our ability to meet interest and
principal payments on U.S.&nbsp;dollar denominated debt,
including the notes and the U.S.&nbsp;dollar denominated
borrowings under the senior secured credit facility.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, fluctuations in currencies relative
to currencies in which our earnings are generated may make it
more difficult to perform period-to-period comparisons of our
reported results of operations. For purposes of accounting, the
assets and liabilities of our foreign operations, where the
local currency is the functional currency, are translated using
period-end exchange rates, and the revenues and expenses of our
foreign operations are translated using average exchange rates
during each period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to currency translation risks, we
incur currency transaction risk whenever we or one of our
subsidiaries enters into either a purchase or a sales
transaction using a currency other than the local currency of
the transacting entity. Given the volatility of exchange rates,
we cannot assure you that we will be able to effectively manage
our currency transaction and/or translation risks. Volatility in
currency exchange rates may have a material adverse effect on
our financial condition or results of operations. We have
purchased and may continue to purchase foreign currency hedging
instruments protecting or offsetting positions in certain
currencies to reduce the risk of adverse currency fluctuations.
We have in the past experienced and expect to continue to
experience economic loss and a negative impact on earnings as a
result of foreign currency exchange rate fluctuations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We might not be able to improve our
    operating efficiencies and productivity as much as we have in
    the past.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since the fourth quarter of 2002, we have engaged
in restructuring and productivity improvement programs, which
have had a positive impact on our results of operations. We
intend to implement additional measures to enhance our operating
efficiencies and productivity in the future. However, they may
not have as positive an impact on our operating performance as
such prior measures, and it is possible that they could impair
our results of operations.
</FONT>

<P align="center"><FONT size="2">18
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">If we lose our senior management, our
    business may be adversely affected.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The success of our business is largely dependent
on our senior managers, as well as on our ability to attract and
retain other qualified personnel. Six of the top members of our
senior management team have been with us for over 20&nbsp;years,
including our chief executive officer and president who has been
with us for 24&nbsp;years. In addition, there is significant
demand in our industry for qualified engineers and mechanics. We
cannot assure you that we will be able to attract and retain the
personnel, including qualified mechanics and engineers,
necessary for the development of our business. The loss of the
services of key personnel or the failure to attract additional
personnel as required could have a material adverse effect on
our business, financial condition and results of operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Environmental compliance costs and
    liabilities could affect our financial condition
    adversely.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our operations and properties are subject to
stringent foreign, federal, state and local laws and regulations
relating to environmental protection, including laws and
regulations governing the investigation and clean up of
contaminated properties as well as air emissions, water
discharges, waste management and disposal and workplace health
and safety. Such laws and regulations affect a significant
percentage of our operations, are continually changing, are
different in every jurisdiction and can impose substantial fines
and sanctions for violations. Further, they may require
substantial clean-up costs for our properties (many of which are
sites of long-standing manufacturing operations) and the
installation of costly pollution control equipment or
operational changes to limit pollution emissions and/or decrease
the likelihood of accidental hazardous substance releases. We
must conform our operations and properties to these laws and
adapt to regulatory requirements in all jurisdictions as these
requirements change.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We routinely deal with natural gas, oil and other
petroleum products. As a result of our fabrication and
aftermarket parts and services operations, we generate, manage
and dispose of or recycle hazardous wastes and substances such
as solvents, thinner, waste paint, waste oil, washdown wastes
and sandblast material. Hydrocarbons or other hazardous
substances or wastes may have been disposed or released on,
under or from properties owned, leased or operated by us or on,
under or from other locations where such substances or wastes
have been taken for disposal. These properties may be subject to
investigatory, clean-up and monitoring requirements under
foreign, federal, state and local environmental laws and
regulations. Such liability may be imposed without regard to
legality of the original actions and without regard to whether
we knew of, or were responsible for, the presence of such
hazardous or toxic substances, and such liability may be joint
and several with other parties. If the liability is joint and
several, we could be responsible for payment of the full amount
of the liability, whether or not any other responsible party
also is liable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have experienced, and expect to continue to
experience, both operating and capital costs to comply with
environmental laws and regulations, including the clean-up and
investigation of some of our properties as well as offsite
disposal locations. In addition, although we believe our
operations are in compliance with environmental laws and
regulations and that we will be indemnified by Ingersoll-Rand
for certain contamination and compliance costs (subject to
certain exceptions and limitations), new laws and regulations,
stricter enforcement of existing laws and regulations, the
discovery of previously unknown contamination, the imposition of
new clean-up requirements, new claims for property damage or
personal injury arising from environmental matters, or the
refusal and/or inability of Ingersoll-Rand to meet its
indemnification obligations could require us to incur costs or
become the basis for new or increased liabilities that could
have a material adverse effect on our business, financial
condition and results of operations. For more information on the
limitations of Ingersoll-Rand&#146;s indemnity, see
&#147;Business&nbsp;&#151; Environmental and Government
Regulation.&#148;
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Failure to maintain a safety performance
    that is acceptable to our clients could result in the loss of
    future business.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our U.S.&nbsp;clients are heavily regulated by
the Occupational Safety&nbsp;&#38; Health Administration, or
OSHA, concerning work place safety and health. Our clients have
very high expectations regarding safety and health issues and
require us to maintain safety performance records for our
worldwide operations, field services, repair centers, sales, and
manufacturing plant units. Our clients often insist that our
safety performance equal or
</FONT>

<P align="center"><FONT size="2">19
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">exceed their safety performance requirements. We
estimate that over 90% of our clients have safety performance
criteria for their suppliers in order to be qualified for their
&#147;approved suppliers&#148; list. For instance, British
Petroleum, one of our largest customers in 2003, requires its
suppliers to have an OSHA Recordable Incident Rate of 2.5 or
less. If we fail to meet a client&#146;s safety performance
requirements, we may be removed from that client&#146;s approved
suppliers database and precluded from bidding on future business
opportunities with that client.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In response to our clients&#146; requirements
regarding safety performance, we maintain a database to measure
our monthly and annual safety performance and track our incident
rates. Our incident rates help us identify and track accident
trends, determine root causes, formulate corrective actions, and
implement preventive initiatives. Within the past two years, we
have been removed from one client&#146;s approved supplier
database for failure to meet the client&#146;s safety
performance requirements. We cannot assure you that we will be
successful in maintaining or exceeding our clients&#146;
requirements in this regard or that we will not lose the
opportunity to bid on certain clients&#146; contracts.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Our business could suffer if we are
    unsuccessful in negotiating new collective bargaining
    agreements.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2004, we had 4,631
employees worldwide. Of our employees, approximately 65% are
located in the United States. Approximately 37% of our employees
in the United States are covered by collective bargaining
agreements. None of our material collective bargaining
agreements will expire through the end of 2005, and one will
expire in each of 2006, 2007 and 2008. In addition, we have an
agreement with the United Brotherhood of Carpenters and Joiners
of America whereby we hire skilled trade workers on a
contract-by-contract basis. Our contract with the United
Brotherhood of Carpenters and Joiners of America can be
terminated by either party with 90&nbsp;days prior written
notice. Our operations in the following locations are unionized:
Le Havre, France; Oberhausen, Germany; Kongsberg, Norway; and
Naroda, India. Additionally, overseas, approximately 38% of our
employees belong to industry or national labor unions. Although
we believe that our relations with our employees are good, we
cannot assure you that we will be successful in negotiating new
collective bargaining agreements, that such negotiations will
not result in significant increases in the cost of labor or that
a breakdown in such negotiations will not result in the
disruption of our operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We are controlled by First Reserve, whose
    interests may not be aligned with yours.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of this offering, First Reserve
will continue to control a majority of our capital stock on a
fully diluted basis. As a result, First Reserve has the ability
to control our policies and operations including the appointment
of management, the entering into of mergers, acquisitions, sales
of assets, divestitures and other extraordinary transactions,
future issuances of our common stock or other securities, the
payments of dividends, if any, on our common stock, the
incurrence of debt by us and amendments to our certificate of
incorporation and bylaws. For example, First Reserve could cause
us to make acquisitions that increase our indebtedness or to
sell revenue-generating assets. Additionally, First Reserve is
in the business of making investments in companies and may from
time to time acquire and hold interests in businesses that
compete directly or indirectly with us. First Reserve may also
pursue acquisition opportunities that may be complementary to
our business, and, as a result, those acquisition opportunities
may not be available to us. So long as First Reserve continues
to own a significant amount of our equity, even if such amount
is less than 50%, they will continue to be able to strongly
influence or effectively control our decisions.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We are a &#147;controlled company&#148;
    within the meaning of the New York Stock Exchange rules and, as
    a result, will qualify for, and intend to rely on, exemptions
    from certain corporate governance requirements.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of this offering, First Reserve
will continue to control a majority of our outstanding common
stock. As a result, we are a &#147;controlled company&#148;
within the meaning of the New York Stock Exchange corporate
governance standards. Under the New York Stock Exchange rules, a
company of which more than 50% of the voting power is held by
another company is a &#147;controlled company&#148; and may
elect not to comply with certain New York Stock Exchange
corporate governance requirements, including (1)&nbsp;the
requirement that a majority of the board of directors consist of
independent directors, (2)&nbsp;the requirement
</FONT>

<P align="center"><FONT size="2">20
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">that we have a nominating/corporate governance
committee that is composed entirely of independent directors
with a written charter addressing the committee&#146;s purpose
and responsibilities and (3)&nbsp;the requirement that we have a
compensation committee that is composed entirely of independent
directors with a written charter addressing the committee&#146;s
purpose and responsibilities. Following this offering, we intend
to utilize these exemptions. As a result, we will not have a
majority of independent directors nor will our nominating and
corporate governance and compensation committees consist
entirely of independent directors. Accordingly, you will not
have the same protections afforded to stockholders of companies
that are subject to all of the New York Stock Exchange corporate
governance requirements.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Our historical financial information may
    not be comparable to future periods.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The historical financial information included in
this prospectus may not necessarily reflect our results of
operations, financial position and cash flows in the future or
the results of operations, financial position and cash flows
that would have occurred if we had been a separate, independent
entity during the periods presented. The historical financial
information included in this prospectus does not reflect the
many significant changes that have occurred in our capital
structure, funding and operations as a result of the
transactions or the additional costs we incur in operating as an
independent company. For example, funds required for working
capital and other cash needs historically were obtained from
Ingersoll-Rand on an interest-free, intercompany basis without
any debt service requirement. Furthermore, we were a limited
partnership in the United States until October&nbsp;29, 2004 and
generally did not pay income taxes, but have since become
subject to income taxes. We may need to supplement our
financial, administrative and other resources, and we may have
underestimated the difficulties and costs of obtaining any
required resources and successfully operating as an independent
company.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We did not have a recent operating history
    as a stand-alone company prior to the acquisition.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although we have a substantial operating history,
prior to the acquisition we were not operating as a stand-alone
company. As a result of the acquisition, we no longer have
access to the borrowing capacity, cash flow, assets and services
of Ingersoll-Rand and its other affiliates as we did while under
Ingersoll-Rand&#146;s control. We are a significantly smaller
company than Ingersoll-Rand, with significantly fewer resources
and less diversified operations. Consequently, our results of
operations are more susceptible than those of Ingersoll-Rand to
competitive and market factors specific to our business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we entered into a transition
services agreement with Ingersoll-Rand in connection with the
acquisition whereby Ingersoll-Rand agreed to provide us with
certain services including, among others, compensation delivery
services, health and welfare administration, pension
administration, legal services and other services. Once the
transition periods specified in the transition services
agreement have expired, or if Ingersoll-Rand does not or is
unable to perform its obligations under the transition services
agreement, we will be required to provide these services
ourselves or to obtain substitute arrangements with third
parties. We may be unable to provide these services due to
financial or other constraints or be unable to implement
substitute arrangements on terms that are favorable to us, or at
all.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We may be faced with unexpected product
    claims or regulations as a result of the hazardous applications
    in which our products are used.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because some of our products are used in systems
that handle toxic or hazardous substances, a failure or alleged
failure of certain of our products have resulted in and in the
future could result in claims against our company for product
liability, including property damage, personal injury damage and
consequential damages. Further, we may be subject to potentially
material liabilities relating to claims alleging personal injury
as a result of hazardous substances incorporated into our
products.
</FONT>

<P align="center"><FONT size="2">21
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">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.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our success depends in part on our proprietary
technology. We rely on a combination of patent, copyright,
trademark, trade secret laws, confidentiality provisions and
licensing arrangements to establish and protect our proprietary
rights. If we fail to successfully enforce our intellectual
property rights, our competitive position could suffer, which
could harm our operating results. We may be required to spend
significant resources to monitor and police our intellectual
property rights. Similarly, if we were to infringe on the
intellectual property rights of others, our competitive position
could suffer. Furthermore, we cannot assure you that any pending
patent application or trademark application held by us will
result in an issued patent or registered trademark, or that any
issued or registered patents or trademarks will not be
challenged, invalidated, circumvented or rendered unenforceable.
Also, others may develop technologies that are similar or
superior to our technology, duplicate or reverse engineer our
technology or design around the patents owned or licensed by us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Litigation may be necessary to enforce our
intellectual property rights and protect our proprietary
information, or to defend against claims by third parties that
our products infringe their intellectual property rights. Any
litigation or claims brought by or against us, whether with or
without merit, or whether successful or not, could result in
substantial costs and diversion of our resources, which could
have a material adverse effect on our business, financial
condition or results of operation. Any intellectual property
litigation or claims against us could result in the loss or
compromise of our intellectual property and proprietary rights,
subject us to significant liabilities, require us to seek
licenses on unfavorable terms, prevent us from manufacturing or
selling products and require us to redesign or, in the case of
trademark claims, rename our products, any of which could have a
material adverse effect on our business, financial condition and
results of operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Our brand name may be subject to
    confusion.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our company&#146;s name and principal mark is a
combination of the names of our founder companies, Dresser
Industries, Inc. and Ingersoll-Rand. We have acquired rights to
use the &#147;Rand&#148; portion of our principal mark from
Ingersoll-Rand, and the rights to use the &#147;Dresser&#148;
portion of our name from Dresser, Inc., the successor of Dresser
Industries, Inc., and an affiliate of First Reserve. If we lose
the right to use either the &#147;Dresser&#148; or
&#147;Rand&#148; portion of our name, our ability to build our
brand identity could be negatively affected.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The common stock and certain debt securities of
Ingersoll-Rand and certain debt securities of Dresser, Inc. are
publicly traded in the United States. Acts or omissions by these
unaffiliated companies may adversely affect the value of the
&#147;Dresser&#148; and &#147;Rand&#148; brand names or the
trading prices of our common stock. In addition, press and other
third party announcements or rumors relating to any of these
unaffiliated companies may adversely affect the market prices of
our common stock and demand for our services and products, even
though the events announced or rumored may not relate to us,
which in turn could adversely affect our results of operations
and financial condition.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Natural gas operations entail inherent
    risks that may result in substantial liability to
    us.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We supply products to the natural gas industry,
which is subject to inherent risks, including equipment defects,
malfunctions and failures and natural disasters resulting in
uncontrollable flows of gas or well fluids, fires and
explosions. These risks may expose our clients to liability for
personal injury, wrongful death, property damage, pollution and
other environmental damage. We also may become involved in
litigation related to such matters. If our clients suffer
damages as a result of the occurrence of such events, they may
reduce their orders from us. Our business, consolidated
financial condition, results of operations and cash flows could
be materially adversely affected as a result of such risks.
</FONT>

<P align="center"><FONT size="2">22
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Risks Related to Our Leverage</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Our substantial indebtedness could
    adversely affect our financial condition and prevent us from
    fulfilling our debt service obligations.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our financial performance could be affected by
our substantial indebtedness. As of December 31, 2004, our total
indebtedness was approximately $821&nbsp;million. In addition,
we had $143.4&nbsp;million of letters of credit outstanding and
additional borrowings available under the revolving portion of
our senior secured credit facility of $156.6&nbsp;million,
subject to certain conditions. We may also incur additional
indebtedness in the future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our high level of indebtedness could have
important consequences, including, but not limited to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">making it more difficult to generate sufficient
    cash flows to pay interest and satisfy our debt obligations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">making it more difficult to self-insure and
    obtain surety bonds or letters of credit;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">increasing our vulnerability to general adverse
    economic and industry conditions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">limiting our ability to obtain additional
    financing to fund future working capital, capital expenditures,
    research and development or other general corporate or business
    requirements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">limiting our flexibility in planning for, or
    reacting to, changes in our business and in our
    industry;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">placing us at a competitive disadvantage.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our net cash flow generated from operating
activities was $42.0&nbsp;million, $51.0&nbsp;million,
$57.7&nbsp;million and $17.9&nbsp;million for 2002, 2003, the
period from January 1, 2004 through October 29, 2004 and the
period from October 30, 2004 through December 31, 2004,
respectively. Our high level of indebtedness requires that we
use a substantial portion of our cash flow from operations to
pay principal of, and interest on, our indebtedness, which will
reduce the availability of cash to fund working capital
requirements, capital expenditures, research and development or
other general corporate or business activities, including future
acquisitions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, a substantial portion of our
indebtedness bears interest at variable rates. If market
interest rates increase, debt service on our variable-rate debt
will rise, which would adversely affect our cash flow.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If our cash flows and capital resources are
insufficient to fund our debt service obligations, we may be
forced to sell assets, seek additional capital or seek to
restructure or refinance our indebtedness. These alternative
measures may not be successful and may not permit us to meet our
scheduled debt service obligations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We require a significant amount of cash to
    service our indebtedness. Our ability to generate cash depends
    on many factors beyond our control.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our ability to make payments on and to refinance
our debt, and to fund planned capital expenditures and research
and development efforts, will depend on our ability to generate
cash. Our ability to generate cash is subject to economic,
financial, competitive, legislative, regulatory and other
factors that may be beyond our control. We cannot assure you
that our business will generate sufficient cash flow from
operations or that future borrowings will be available to us
under our senior secured credit facility or otherwise in an
amount sufficient to enable us to pay our debt, or to fund our
other liquidity needs. We may need to refinance all or a portion
of our debt on or before maturity. We might be unable to
refinance any of our debt, including our senior secured credit
facility or the notes, on commercially reasonable terms.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The covenants in the senior secured credit
    facility and the indenture governing the notes impose
    restrictions that may limit our operating and financial
    flexibility.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our senior secured credit facility and the
indenture governing the notes contain a number of significant
restrictions and covenants that limit our ability to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">incur liens;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">borrow money, guarantee debt and, in the case of
    restricted subsidiaries, sell preferred stock;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">23
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">issue redeemable preferred stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">pay dividends;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make redemptions and repurchases of certain
    capital stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make capital expenditures and specified types of
    investments;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">prepay, redeem or repurchase subordinated debt;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">sell assets or engage in acquisitions, mergers,
    consolidations and asset dispositions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">amend material agreements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">change the nature of our business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">engage in affiliate transactions;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">restrict dividends or other payments from
    restricted subsidiaries.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The senior secured credit facility also requires
us to comply with specified financial ratios and tests,
including but not limited to, a maximum consolidated net
leverage ratio and a minimum consolidated interest coverage
ratio.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These covenants could materially and adversely
affect our ability to finance our future operations or capital
needs. Furthermore, they may restrict our ability to expand,
pursue our business strategies and otherwise conduct our
business. Our ability to comply with these covenants may be
affected by circumstances and events beyond our control, such as
prevailing economic conditions and changes in regulations, and
we cannot be sure that we will be able to comply. A breach of
these covenants could result in a default under the indenture
governing the notes and/or the senior secured credit facility.
If there were an event of default under the indenture governing
the notes and/or the senior secured credit facility, the
affected creditors could cause all amounts borrowed under these
instruments to be due and payable immediately. Additionally, if
we fail to repay indebtedness under our senior secured credit
facility when it becomes due, the lenders under the senior
secured credit facility could proceed against the assets and
capital stock which we have pledged to them as security. Our
assets and cash flow might not be sufficient to repay our
outstanding debt in the event of a default.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Because most of the proceeds from this
    offering will be used to pay a dividend to our current
    stockholders, only a small portion of the proceeds will be used
    to repay our existing debt and none of such proceeds will be
    used to further invest in our business.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We estimate that the net proceeds from the sale
by us of the shares of common stock being offered hereby, after
deducting underwriting discounts and estimated offering
expenses, will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
We intend to use approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
of the net proceeds to repay certain indebtedness. We intend to
use the remaining net proceeds of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
assuming an initial public offering price per share of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
to pay a dividend to our stockholders existing immediately prior
to the offering. This leaves no proceeds to further invest in
and grow our business. See &#147;Use of Proceeds.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Risks Related To This Offering</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">There is no existing market for our common
    stock, and we do not know if one will develop to provide you
    with adequate liquidity.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has not been a
public market for our common stock. We intend to apply to list
our common stock on the New York Stock Exchange. However, we
cannot predict the extent to which investor interest in our
company will lead to the development of a trading market on the
New York Stock Exchange or otherwise or how liquid that market
might become. If an active trading market does not develop, you
may have difficulty selling any of our common stock that you
buy. The initial public offering price for the shares will be
determined by negotiations between us and the representatives of
the underwriters based on numerous factors that we discuss in
the &#147;Underwriting&#148; section of this prospectus and may
not be indicative of
</FONT>

<P align="center"><FONT size="2">24
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">prices that will prevail in the open market
following this offering. Consequently, you may not be able to
sell our common stock at prices equal to or greater than the
price you paid in this offering.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Future sales of our shares could depress
    the market price of our common stock.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The market price of our common stock could
decline as a result of sales of a large number of shares of
common stock in the market after the offering or the perception
that such sales could occur. These sales, or the possibility
that these sales may occur, also might make it more difficult
for us to sell equity securities in the future at a time and at
a price that we deem appropriate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, D-R Interholding, LLC and all of our
stockholders existing prior to this offering have agreed with
the underwriters not to sell, dispose of or hedge any shares of
our common stock or securities convertible into or exchangeable
for shares of our common stock, subject to specified exceptions,
during the period from the date of this prospectus continuing
through the date that is 180&nbsp;days after the date of this
prospectus, except with the prior written consent of Morgan
Stanley&nbsp;&#38; Co. Incorporated and Citigroup Global Markets
Inc. See &#147;Underwriting.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After this offering, we will
have &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares of common stock outstanding. Of those shares,
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares we are offering will be freely tradable.
The &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares that were outstanding immediately prior to this offering
will be eligible for resale from time to time after the
expiration of the 180-day lock-up period, subject to contractual
and Securities Act restrictions. None of those shares may
currently be resold under Rule&nbsp;144(k) without regard to
volume limitations and no shares may currently be sold subject
to volume, manner of sale and other conditions of Rule&nbsp;144.
After the expiration of the 180-day lock-up period, First
Reserve and their affiliates, which collectively beneficially
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares, will have the ability to cause us to register the resale
of their shares and certain other holders of our unregistered
common stock will be able to participate in such registration.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The market price of our common stock may be
    volatile, which could cause the value of your investment to
    decline.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Securities markets worldwide experience
significant price and volume fluctuations. This market
volatility, as well as general economic, market or political
conditions, could reduce the market price of our common stock in
spite of our operating performance. In addition, our operating
results could be below the expectations of securities analysts
and investors, and in response, the market price of our common
stock could decrease significantly. As a result, the market
price of our common stock could decline below the initial public
offering price. You may be unable to resell your shares of our
common stock at or above the initial public offering price.
Among other factors that could affect our stock price are:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">actual or anticipated variations in operating
    results;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in financial estimates by research
    analysts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">actual or anticipated changes in economic,
    political or market conditions, such as recessions or
    international currency fluctuations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">actual or anticipated changes in the regulatory
    environment affecting our industry;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in the market valuations of our industry
    peers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">announcements by us or our competitors of
    significant acquisitions, strategic partnerships, divestitures,
    joint ventures or other strategic initiatives.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the past, following periods of volatility in
the market price of a company&#146;s securities, stockholders
have often instituted class action securities litigation against
those companies. Such litigation, if instituted, could result in
substantial costs and a diversion of management attention and
resources, which could significantly harm our profitability and
reputation.
</FONT>

<P align="center"><FONT size="2">25
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The book value of shares of common stock
    purchased in the offering will be immediately diluted and may be
    subject to additional dilution in the future.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The initial public offering price per share of
our common stock is substantially higher than our pro forma net
tangible book value per common share immediately after the
offering. As a result, you may pay a price per share that
substantially exceeds the book value of our assets after
subtracting our liabilities. Investors who purchase common stock
in the offering will be diluted by
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share after giving effect to the sale of shares of common stock
in this offering at an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, the mid-point of the estimated price range on the cover
of this prospectus, and the sale of up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares to the underwriters pursuant to their over-allotment
option. If we grant options in the future to our employees, and
those options are exercised or other issuances of common stock
are made, there will be further dilution.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Provisions in our amended and restated
    certificate of incorporation and amended and restated bylaws and
    Delaware law may discourage a takeover attempt.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Provisions contained in our amended and restated
certificate of incorporation and amended and restated bylaws and
Delaware law could make it more difficult for a third party to
acquire us. Provisions of our amended and restated certificate
of incorporation and amended and restated bylaws and Delaware
law impose various procedural and other requirements, which
could make it more difficult for stockholders to effect certain
corporate actions. For example, our amended and restated
certificate of incorporation authorizes our board of directors
to determine the rights, preferences, privileges and
restrictions of unissued series of preferred stock, without any
vote or action by our stockholders. Thus, our board of directors
can authorize and issue shares of preferred stock with voting or
conversion rights that could adversely affect the voting or
other rights of holders of our common stock. These rights may
have the effect of delaying or deterring a change of control of
our company. These provisions could limit the price that certain
investors might be willing to pay in the future for shares of
our common stock. See &#147;Description of Capital Stock.&#148;
</FONT>

<P align="center"><FONT size="2">26
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This prospectus includes &#147;forward-looking
statements.&#148; These forward looking statements include
statements concerning our plans, objectives, goals, strategies,
future events, future revenue or performance, capital
expenditure, financing needs, plans or intentions relating to
acquisitions, business trends and other information that is not
historical information. When used in this prospectus, the words
&#147;anticipates,&#148; &#147;believes,&#148;
&#147;expects,&#148; &#147;intends&#148; and similar expressions
identify such forward-looking statements. Although we believe
that such statements are based on reasonable assumptions, these
forward-looking statements are subject to numerous factors,
risks and uncertainties that could cause actual outcomes and
results to be materially different from those projected. These
factors, risks and uncertainties include, among others, the
following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">material weaknesses in our internal controls;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">economic or industry downturns;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our inability to implement our business strategy
    to increase our aftermarket parts and services revenue;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">competition in our markets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">failure to complete, or achieve the expected
    benefits from, any future acquisitions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">economic, political and other risks associated
    with our international sales and operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">loss of our senior management;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">environmental compliance costs and liabilities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">failure to maintain safety performance acceptable
    to our clients;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">failure to negotiate new collective bargaining
    agreements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to operate as a stand-alone company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">unexpected product claims or regulations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">infringement on our intellectual property or our
    infringement on others&#146; intellectual property;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">other factors described in this prospectus.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our actual results, performance or achievements
could differ materially from those expressed in, or implied by,
the forward-looking statements. We can give no assurances that
any of the events anticipated by the forward-looking statements
will occur or, if any of them does, what impact they will have
on our results of operations and financial condition. We
undertake no obligation to update or revise forward-looking
statements which may be made to reflect events or circumstances
that arise after the date made or to reflect the occurrence of
unanticipated events.
</FONT>

<P align="center"><FONT size="2">27
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='103'></A>
</DIV>

<!-- link1 "THE TRANSACTIONS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following contains summaries of the terms of certain
material agreements that were entered into in connection with
the acquisition. The descriptions of such agreements do not
purport to be complete and are qualified in their entirety by
reference to such agreements. Such agreements have been filed as
exhibits to the registration statement of which this prospectus
is a part.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Acquisition</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>General</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;25, 2004, Dresser-Rand Holdings, LLC entered into
an equity purchase agreement with Ingersoll-Rand to purchase all
of the equity interests in the Dresser-Rand Entities for
approximately $1.13&nbsp;billion. The acquisition closed on
October&nbsp;29, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to determine the post-closing purchase price
adjustments, the agreement required that Ingersoll-Rand deliver
to Dresser-Rand Holdings, LLC, shortly before the closing date,
an estimated net cash statement and an estimated client
prepayments statement, and within 90&nbsp;days of the closing
date, a closing working capital statement, a closing net cash
statement, and a closing client prepayments statement. If the
parties do not agree on the appropriate adjustments within a
specified time period, the determination will be referred to an
independent accounting firm for resolution. The purchase price
will be increased or decreased to account for any difference
between:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the final net working capital amount and $149,677,999;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the final net cash amount and the estimated net cash
    amount;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the final client prepayments amount and the estimated client
    prepayments amount.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of April&nbsp;11, 2005, Ingersoll-Rand had provided all three
closing statements, resulting in a purchase price reduction of
$2.4&nbsp;million, which is subject to final approval and
agreement from Dresser-Rand Holdings, LLC and has been reflected
in the historical financial information included in this
prospectus. We anticipate final agreement on the purchase price
adjustment will be reached sometime during the second quarter of
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the following additional amounts were paid to
Dresser-Rand Holdings, LLC at closing:
(1)&nbsp;$17.0&nbsp;million, which amount equals certain retiree
welfare benefits less certain overdue receivables,
(2)&nbsp;$25.8&nbsp;million with respect to defined benefit
pension fund deficiencies in defined pension plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the acquisition, funds affiliated with First
Reserve contributed an aggregate of $430.0&nbsp;million to
Dresser-Rand Holdings, LLC, our indirect parent, in exchange for
all the membership interests in Dresser-Rand Holdings, LLC.
Pursuant to an agreement reached with management prior to our
acquisition by funds affiliated with First Reserve, certain
members of management were offered the opportunity in October
2004 to acquire common units in Dresser-Rand Holdings, LLC at
the same price per unit paid by the funds affiliated with First
Reserve in connection with the acquisition. Executives who
purchased common units were also issued profits units in
Dresser-Rand Holdings, LLC, which permit them to indirectly
share in appreciation in the value of our shares. After a period
of several weeks to evaluate the offer, certain of our executive
officers, including our Chief Executive Officer and each of our
four other most highly compensated executive officers availed
themselves of this opportunity in November and invested cash
equity in Dresser-Rand Holdings, LLC, which commensurately
reduced First Reserve&#146;s indirect percentage interest in
Dresser-Rand Holdings, LLC. Dresser-Rand Holdings, LLC used
First Reserve&#146;s equity contribution, borrowings under the
senior secured credit facility and the proceeds from the notes
offering to fund the acquisition and to pay fees and expenses
related to the transactions.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>The Equity Purchase Agreement</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The equity purchase agreement contains customary seller
representations and warranties, customary buyer representations
and warranties, and customary covenants and other agreements
between the sellers and Dresser-Rand Holdings, LLC.
</DIV>

<P align="center" style="font-size: 10pt;">28
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The equity purchase agreement provides for
indemnification for losses relating to specified events,
circumstances and matters. The sellers have agreed to indemnify
Dresser-Rand Holdings, LLC for certain liabilities, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any losses arising from the inaccuracy or breach
    of certain representations and warranties of the sellers
    contained in the equity purchase agreement;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any losses arising from breaches or defaults in
    the performance of any covenant, undertaking or other agreement
    or obligation of the sellers pursuant to the equity purchase
    agreement;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any claim related to the sale or use of products
    containing asbestos;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any claim for personal injury or property damage
    alleging defect in design, manufacture, materials or
    workmanship, or an alleged failure to exercise reasonable care
    in repair, service or maintenance, or failure to warn or provide
    adequate warning relating to the Dresser-Rand Entities&#146;
    products shipped prior to the closing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">specified pre-closing taxes;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">specified environmental liabilities.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The equity purchase agreement does not allow
Dresser-Rand Holdings, LLC to make a claim for indemnification
for any loss relating to a breach of a representation or
warranty or covenant unless the losses for any claim or series
of related claims exceed a de&nbsp;minimus limitation of $50,000
(other than for losses relating to several specified
representations and warranties not subject to the
de&nbsp;minimus limitation). The sellers&#146; indemnification
obligations with respect to breaches of representations and
warranties and covenants are subject to a &#147;basket&#148; of
$18,000,000 in damages (other than for losses relating to
several specified representations and warranties and covenants
not subject to this basket). After Dresser-Rand Holdings, LLC
has incurred damages as a result of breaches of representations
and warranties contained in the equity purchase agreement that
are in excess of the basket, the sellers are required to
indemnify Dresser-Rand Holdings, LLC up to a cap of 33 1/3% of
the purchase price (other than for losses relating to several
specified representations and warranties and covenants not
subject to the cap). Asbestos liability and products liability
are not subject to the cap or basket, and taxes are not subject
to either the cap, the basket or the de&nbsp;minimus limitation.
Claims for breach of representations and warranties generally
expire after 18&nbsp;months, although breaches of the
environmental and tax representations and warranties expired at
closing, and several specified representations and warranties
survive without limitations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The equity purchase agreement provides that, with
the exception of non-Superfund off-site liabilities and
non-asbestos environmental tort cases, which have a three-year
time limit for a claim to be filed, Ingersoll-Rand will remain
responsible without time limit for certain specified known
environmental liabilities that exist as of the closing date.
Each of these liabilities is to be placed on The Environmental
Remediation and Compliance Schedule to the equity purchase
agreement (the &#147;Final Schedule&#148;). We will be
responsible for all liabilities that were not identified prior
to the closing date and placed on the Final Schedule. To
determine which matters will be included on the Final Schedule,
we conducted Phase I&nbsp;and Phase&nbsp;II assessments at 30
Dresser-Rand Entity facilities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The equity purchase agreement provides that the
Final Schedule will include all noncompliance and contamination
matters identified in the Phase&nbsp;I and Phase&nbsp;II
assessments that the parties agree should be included thereon. A
contamination matter will be included on the Final Schedule if
it meets one of several standards, the most important of which
is that if such contamination matter were known by the
applicable governmental authority, that authority would be
expected to require a response action (which is broadly defined
to include not only cleanup, but investigation and monitoring).
For purposes of inclusion on the Final Schedule, contamination
matters are broadly defined to include each known point of
contamination plus all additional contamination associated with,
or identified during an investigation of, such known point of
contamination. Pursuant to the equity purchase agreement,
Ingersoll-Rand is responsible for all response actions
associated with the contamination matters and must perform such
response actions diligently. However, to the extent
contamination at leased properties was caused by a third party
and to the extent
</FONT>

<P align="center"><FONT size="2">29
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
contamination at owned properties resulted from the migration of
releases caused by a third party, Ingersoll-Rand is only
required to conduct response actions after being ordered to do
so by a governmental authority.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the parties cannot agree whether a noncompliance or
contamination matter should be included on the Final Schedule,
they shall resolve the issue pursuant to an arbitration
provision that is included in the equity purchase agreement. To
date, the parties have resolved all but a small number of
outstanding issues with respect to what should be included on
the Final Schedule. We do not believe any of the outstanding
items are material.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Ancillary Agreements</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The parties have entered into agreements governing several of
their relationships following the closing. These agreements
include a transition services agreement, supply agreement and
license agreement, as well as an amended and restated limited
liability company agreement which governs the rights of the
funds affiliated with First Reserve with respect to their
limited liability company interests in Dresser-Rand Holdings,
LLC, and provides specific rights to the management investors of
Dresser-Rand Holdings, LLC. The parties also entered into a
stockholders&#146; agreement. See &#147;Certain Related Party
Transactions.&#148;
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>The Financing</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the acquisition, funds affiliated with First
Reserve contributed $430&nbsp;million in cash to Dresser-Rand
Holdings, LLC, which used this cash to fund a portion of the
purchase price of the equity interests in the Dresser-Rand
Entities. Immediately following the consummation of the
transactions, Dresser-Rand Holdings, LLC, a holding company
owned by funds affiliated with First Reserve, owned all of the
capital stock of D-R Interholding, LLC, which in turn owns 99.7%
of the issuer&#146;s outstanding shares of capital stock. The
remainder of the cash needed to finance the acquisition,
including related fees and expenses, was provided by the
offering of the notes and the borrowings under the senior
secured credit facility provided by affiliates of the
underwriters, as joint bookrunners, lead arrangers or lenders,
and a syndicate of banks and other financial institutions. Our
senior secured credit facility consists of a $395&nbsp;million
term loan portion and a $300&nbsp;million revolving portion.
Following the closing date of the transactions, the term loan
portion of the senior secured credit facility was fully funded
and as of March&nbsp;31, 2005 we had approximately
$125&nbsp;million of borrowing capacity under the revolving
portion of our senior secured credit facility, subject to
certain conditions, after giving effect to approximately
$175&nbsp;million of outstanding letters of credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table illustrates the approximate sources and uses
for the acquisition.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="5" align="center" nowrap><B>Sources</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="center" nowrap><B>Uses</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>



<TR style="font-size: 8pt;">
    <TD colspan="11" align="center" nowrap><B>(In millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior secured credit facility:(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Purchase of equity interests of the</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolving credit facility(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Dresser-Rand Entities(3)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,125.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Term Loan&nbsp;B</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>395.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Cash(3)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior subordinated notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Existing indebtedness</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Existing indebtedness</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Transaction fees and expenses</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity invested by First Reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>430.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Sources of Funds</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,252.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Total Uses of Funds</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,252.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 2pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Of the $395&nbsp;million Term Loan&nbsp;B facility,
    <FONT face="times new roman,times">&#128;</FONT>78.5&nbsp;million
    is denominated in Euros.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    As of March&nbsp;31, 2005, we had approximately
    $125&nbsp;million available for borrowing under the revolving
    portion of the senior secured credit facility, subject to
    certain conditions, after giving effect to approximately
    $175&nbsp;million of outstanding letters of credit.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    First Reserve and Ingersoll-Rand agreed to a gross cash purchase
    price of $1.2&nbsp;billion for the acquisition, subject to
    working capital and other post-closing adjustments. The parties
    also agreed that, subject to certain closing adjustments, we
    were to have approximately $81.0&nbsp;million of cash on hand
    upon consummation of the acquisition, resulting in the net
    purchase price reflected herein.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">30
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Equity Sponsor</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
First Reserve Corporation is the leading private equity firm
specializing in the energy industry with $4.7&nbsp;billion under
management in four active funds. Founded in 1980, First Reserve
was the first private equity investment firm to actively pursue
building a broadly diversified investment portfolio within the
energy and energy-related sectors and has made investments
totaling over $3.0&nbsp;billion in over 80 principal
transactions. The current management team has been in place
since 1983, and First Reserve&#146;s investment team
collectively has over 250&nbsp;years of energy investment
experience. Other past and present First Reserve portfolio
companies include Alpha Natural Resources, Cal&nbsp;Dive
International, Chicago Bridge&nbsp;&#38; Iron, Dresser, Inc.,
Foundation Coal Corporation, Maverick Tube Corporation, National
Oilwell, Natural Resource Partners, Pride International,
Superior Energy Services and Weatherford International.
</DIV>

<P align="center" style="font-size: 10pt;">31
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='104'></A>
</DIV>

<!-- link1 "USE OF PROCEEDS" -->

<P align="center">
<B><FONT size="2">USE OF PROCEEDS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We estimate that the net proceeds from the sale
by us of the shares of common stock being offered hereby, after
deducting underwriting discounts and estimated offering
expenses, will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
assuming an initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
We intend to use approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
of the net proceeds to redeem a portion of the $420&nbsp;million
aggregate principal amount of our 7 3/8%&nbsp;senior
subordinated notes due 2014, including the payment of the
applicable redemption premium. The proceeds from the 7
3/8%&nbsp;senior subordinated notes were used, together with
other related financings, to finance the acquisition and to pay
related transaction fees and expenses incurred in connection
with the acquisition and the related financings. We intend to
use the remaining net proceeds of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
(assuming an initial public offering price per share of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;),
to pay a dividend to our stockholders existing immediately prior
to the offering, consisting of affiliates of First Reserve and
certain members of senior management. We also intend to use the
proceeds we receive from any shares sold pursuant to the
underwriters&#146; over-allotment option to pay an additional
dividend to our existing stockholders. In the event the
underwriters exercise their over-allotment option, the amount
available to repay debt would be reduced to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
as a result of payment by us of the underwriting discount.
</FONT>

<P align="center">
<B><FONT size="2">DIVIDEND POLICY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Immediately prior to the consummation of this
offering, we intend to declare three dividends, which will be
payable to our stockholders existing prior to the offering.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The first dividend will be a cash dividend of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
    assuming an initial public offering price per share of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    which we will pay to our existing stockholders out of a portion
    of the net proceeds from this offering.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The second dividend will be a cash dividend of up
    to
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
    assuming an initial public offering price per share of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    which we will pay to our existing stockholders with all of the
    proceeds we receive from the shares sold pursuant to the
    underwriters&#146; over-allotment option, if exercised.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The third dividend will be a stock dividend of up
    to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock, which we will pay to our existing
    stockholders, the terms of which will require that shortly after
    the expiration of the underwriters&#146; over-allotment option
    (assuming the option is not exercised in full), we issue to our
    existing stockholders the number of shares equal to (x)&nbsp;the
    number of additional shares the underwriters have an option to
    purchase minus (y)&nbsp;the actual number of shares the
    underwriters purchase from us pursuant to that option.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other than the dividends described above, we do
not currently intend to pay any cash dividends on our common
stock, and instead intend to retain earnings, if any, for future
operations and debt reduction. The amounts available to us to
pay cash dividends will be restricted by our senior secured
credit facility. The indenture governing the senior subordinated
notes also limits our ability to pay dividends. We intend to
seek an amendment to our senior secured credit facility prior to
the consummation of this offering to remove certain restrictions
on our ability to consummate the offering and use the proceeds
as described in &#147;Use of Proceeds.&#148; Any decision to
declare and pay dividends in the future will be made at the
discretion of our board of directors and will depend on, among
other things, our results of operations, financial condition,
cash requirements, contractual restrictions and other factors
that our board of directors may deem relevant.
</FONT>

<P align="center"><FONT size="2">32
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='105'></A>
</DIV>

<!-- link1 "CAPITALIZATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CAPITALIZATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our capitalization as of
December&nbsp;31, 2004 (1)&nbsp;on an actual basis and
(2)&nbsp;on an as adjusted basis to reflect:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the sale by us of
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock in this offering at an assumed initial
    public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, the mid-point of the estimated price range shown on the
    cover page of this prospectus, after deducting underwriting
    discounts and estimated offering expenses;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the application of the estimated net proceeds as described in
    &#147;Use of Proceeds&#148;;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the 1,006,092.87 for one stock split effected in February 2005;
    and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the stock dividend
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
    shares to our existing stockholders shortly after the expiration
    of the underwriters&#146; over-allotment option, assuming no
    exercise of that option.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The information in this table should be read in conjunction with
&#147;The Transactions,&#148; &#147;Unaudited Pro Forma
Financial Information,&#148; &#147;Management&#146;s Discussion
and Analysis of Financial Condition and Results of
Operations&#148; and our historical consolidated and combined
financial statements and accompanying notes thereto appearing
elsewhere in this prospectus. The table excludes cash and cash
equivalents as of December&nbsp;31, 2004 of $111.5&nbsp;million,
on an actual basis and as adjusted basis.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As Adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Debt:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior secured credit facility:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolving credit facility(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Term loan facility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>400.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior subordinated notes due 2014</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>823.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Stockholders&#146; equity:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, par value $0.01 per
    share, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    authorized, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares issued
    and outstanding, actual
    and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares issued and
    outstanding, as adjusted for the offering and the stock splits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>436.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive earnings (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total capitalization</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,276.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    As of December 31, 2004, we had $156.6&nbsp;million available
    for borrowing under the revolving portion of the senior secured
    credit facility, subject to certain conditions, after giving
    effect to $143.4&nbsp;million of letters of credit outstanding
    thereunder. See &#147;The Transactions&#148; and
    &#147;Description of Indebtedness.&#148;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">33
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DILUTION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the initial public
offering price per share and the net tangible book value per
share after this offering. The net tangible book value per share
presented below is equal to the amount of our total tangible
assets (total assets less intangible assets) less total
liabilities as of December&nbsp;31, 2004, divided by the number
of shares of our common stock that would have been held by our
existing stockholders had the stock dividend
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares to our existing stockholders shortly after the expiration
of the underwriters&#146; over-allotment option, assuming no
exercise of that option, been made as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005. As of December&nbsp;31, 2004, we had a net tangible book
deficit of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. On a pro forma basis, after giving effect to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the sale
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock in this offering at an assumed initial public
    offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, the mid-point of the price range on the cover of this
    prospectus;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the payment of the
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    dividend that we intend to declare prior to the consummation of
    this offering to the existing stockholders,</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
our pro forma net tangible book value as of December&nbsp;31,
2004 would have been
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock. This represents an immediate increase in
net tangible book value (or a decrease in net tangible book
deficit) of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to existing stockholders and an immediate dilution in net
tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table illustrates this dilution on a per share
basis:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed initial public offering price per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net tangible book deficit per share at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in net tangible book value per share attributable to
    this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net tangible book deficit per share after the offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dilution per share to new investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will reduce the number of shares that we will issue to our
existing stockholders in the stock dividend described in the
first paragraph above by the number of shares sold to the
underwriters pursuant to their over-allotment option. We will
also pay to our existing stockholders a cash dividend equal to
all proceeds we receive from any such sale to the underwriters.
As a result, our pro forma net tangible book value will not be
affected by the underwriters&#146; exercise of their
over-allotment option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes, on the same pro forma basis as
of December&nbsp;31, 2004, the total number of shares of common
stock purchased from us, the total consideration paid to us and
the average price per share paid by the existing stockholders
and by new investors purchasing shares in this offering:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares Purchased</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Total Consideration</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Price</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per Share</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Existing stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total consideration and average price per share paid by the
existing stockholders in the table above give effect to the
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
dividend we intend to pay to the existing stockholders in
connection with this offering. As the table indicates, the total
consideration for the existing stockholders&#146; shares is
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
with an average share price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
which means that the existing stockholders in the aggregate will
have received
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
more than they originally invested.
</DIV>

<P align="center" style="font-size: 10pt;">34
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='106'></A>
</DIV>

<!-- link1 "UNAUDITED PRO FORMA FINANCIAL INFORMATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following unaudited pro forma financial information has been
derived by the application of pro forma adjustments to the
historical combined financial statements as of December&nbsp;31,
2004 and for the period from January&nbsp;1, 2004 through
October&nbsp;29, 2004 and our consolidated financial statements
for the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004. The unaudited pro forma statement of
operations give effect to (i)&nbsp;the purchase of the
Dresser-Rand Entities, (ii)&nbsp;the notes offering of
October&nbsp;29, 2004, (iii)&nbsp;the other related financing
transactions and (iv)&nbsp;the offering and the estimated use of
proceeds therefrom, as if they had been consummated on
January&nbsp;1, 2004. The unaudited pro forma balance sheet as
of December&nbsp;31, 2004 gives effect to this offering as if it
had occurred on December&nbsp;31, 2004. The adjustments
necessary to fairly present this pro forma financial information
have been made based on available information and in the opinion
of management are reasonable and are described in the
accompanying notes. The unaudited pro forma financial
information should not be considered indicative of actual
results that would have been achieved had these transactions
been consummated on the respective dates indicated and do not
purport to indicate results of operations as of any future date
or for any future period. We cannot assure you that the
assumptions used in the preparation of the unaudited pro forma
financial information will prove to be correct. You should read
the unaudited pro forma financial information together with
&#147;Risk Factors,&#148; &#147;Use of Proceeds,&#148;
&#147;Capitalization&#148; and &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; and the consolidated and combined financial
statements and the notes thereto, included elsewhere in this
prospectus.
</DIV>

<P align="center" style="font-size: 10pt;">35

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>UNAUDITED PRO FORMA BALANCE SHEET</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>AS OF DECEMBER&nbsp;31, 2004</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Historical</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Adjustments</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Pro Forma</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>(In thousands)</B></TD>
</TR>

<TR>
    <TD colspan="15" align="center" valign="top">
    <B>Assets</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>111,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts and notes receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>264,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>574,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investments in and advances with partially owned equity companies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant &#38; equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>226,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>423,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other intangible assets, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>479,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15" align="center" valign="top">
    <B>Liabilities and Stockholders&#146; Equity</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable and accruals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>271,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer advance payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current maturities of long term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>329,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Postemployment and other benefit liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>396,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior subordinated notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other noncurrent liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,298,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>(a)(b)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Reflects the use of the proceeds to us of this offering, net of
    fees and expenses, to repay
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    of our senior subordinated notes and the related estimated write
    off of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    of unamortized deferred debt issuance costs and incur prepayment
    penalties of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
    See &#147;Use of Proceeds.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(b)&nbsp;</TD>
    <TD align="left">
    Reflects the assumed gross proceeds of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    from the issuance of new shares, net of fees and expenses of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
    Approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    of the net proceeds from the offering is assumed to be used to
    pay a dividend to the existing stockholders. See &#147;Use of
    Proceeds.&#148;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">36

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA STATEMENT OF OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Year Ended December&nbsp;31, 2004</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>For the Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>For the Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Offering and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments(3)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments(3)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(In thousands except share and per share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>715,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>199,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>915,402</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of goods sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>538,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>149,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(508</TD>
    <TD align="left" valign="bottom" nowrap>)(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>704,497</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,458</TD>
    <TD align="left" valign="bottom" nowrap>)(b)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,918</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(c)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,220</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(d)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,281</TD>
    <TD align="left" valign="bottom" nowrap>)(e)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,891</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>210,905</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(127</TD>
    <TD align="left" valign="bottom" nowrap>)(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143,094</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,864</TD>
    <TD align="left" valign="bottom" nowrap>)(b)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(c)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>732</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(f)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,710</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of purchased in-process research and development assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,800</TD>
    <TD align="left" valign="bottom" nowrap>)(g)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,986</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,101</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,654</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47,506</TD>
    <TD align="left" valign="bottom" nowrap>)(h)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>(j)(k)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(54,004</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,846</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(61,492</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,133</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,730</TD>
    <TD align="left" valign="bottom" nowrap>)(i)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>(i)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,515</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(56,762</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7,382</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Basic and Diluted Earnings Per Share Data(4)(5)(6)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,115,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our capital structure changed significantly as a result of the
October&nbsp;29, 2004 acquisition and the concurrent refinancing
of debt. Due to required purchase accounting adjustments
relating to such transaction the consolidated financial and
other information for the period subsequent to the acquisition
(the &#147;Successor&#148; period) is not comparable to such
information for the periods prior to the acquisition (the
&#147;Predecessor&#148; periods). The pro forma information,
including the allocation of the purchase price, is based on
management&#146;s estimates and valuations of the tangible and
intangible assets being acquired.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The amounts in this column represent the reported results of
    Dresser-Rand Company, our predecessor company, from
    January&nbsp;1, 2004 through October&nbsp;29, 2004.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">37

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    The amounts in this column represent the reported results of
    Dresser-Rand Group, Inc., the successor, from October&nbsp;30,
    2004 through December&nbsp;31, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    The amounts in these columns represent the adjustments to
    reflect the pro forma impact of the transactions.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a) <BR></TD>
    <TD></TD>
    <TD valign="top">
    Reflects the adjustment to historical expense for the change in
    pension expense due to Ingersoll-Rand&#146;s retention of
    pension assets and obligations for one pension plan that was
    reflected in our historical combined statements as well as the
    results of actuarial valuations performed as of the transaction
    date for the portion retained by us.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b) <BR></TD>
    <TD></TD>
    <TD valign="top">
    Reflects the adjustment to historical expense for the change in
    postretirement benefits other than pension expense due to
    Ingersoll-Rand&#146;s retention of the obligations for all
    employees who are retired or eligible to retire as well as the
    results of actuarial valuations performed as of the transaction
    date for the portion retained by us.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c) <BR></TD>
    <TD></TD>
    <TD valign="top">
    Reflects the adjustment to historical expense for the change in
    depreciation expense due to the revaluation of our property,
    plant and equipment in purchase accounting. Annual depreciation
    expense under the new basis of accounting is estimated to be
    $23,574, of which $3,929 was recognized during the period from
    October&nbsp;30, 2004 through December&nbsp;31, 2004.
    Depreciation expense under the old basis of accounting of
    $16,573 was recognized during the period from January&nbsp;1,
    2004 through October&nbsp;29, 2004, resulting in a pro forma
    adjustment of $3,072. We estimate that 95% of our depreciation
    expense is recorded in cost of goods sold, and 5% of our
    depreciation expense is recorded in selling, general and
    administrative expenses.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d) <BR></TD>
    <TD></TD>
    <TD valign="top">
    Reflects the adjustment to historical expense for the change in
    amortization expense due to the revaluation of our identifiable
    intangible assets in purchase accounting. Annual amortization
    expense under the new basis of accounting is estimated to be
    $42,702, of which $12,340 was recognized during the period from
    October&nbsp;30, 2004 through December&nbsp;31, 2004.
    Amortization expense under the old basis of accounting of $6,142
    was recognized during the period from January&nbsp;1, 2004
    through October&nbsp;29, 2004, resulting in a pro forma
    adjustment of $24,220 to cost of goods sold.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (e) <BR></TD>
    <TD></TD>
    <TD valign="top">
    Reflects a $2,281 reduction in cost of goods sold relating to
    the non-recurring amortization of the step-up in inventory basis
    to fair market value, for inventory that was sold during the
    period from October&nbsp;30, 2004 through December&nbsp;31, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (f) <BR></TD>
    <TD></TD>
    <TD valign="top">
    Reflects the adjustment to historical expense for new
    compensation contracts with management. In conjunction with the
    transactions, we entered into a new employment agreement with
    our President and Chief Executive Officer, and our executives
    were issued profit units in Dresser-Rand Holdings, LLC, which
    permit them to indirectly share in appreciation in the value of
    our shares. The new employment agreement increases the annual
    compensation of our President and Chief Executive Officer by
    $150, $25 of which was reflected in the period from
    October&nbsp;30, 2004 through December&nbsp;31, 2004. The annual
    compensation expense associated with the profit units is $682,
    $75 of which was reflected in the period from October&nbsp;30,
    2004 through December&nbsp;31, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (g) <BR></TD>
    <TD></TD>
    <TD valign="top">
    Reflects a $1,800 reduction in selling, general and
    administrative expenses relating to the non-recurring write-off
    of the value allocated to purchased in-process research and
    development, which was recognized during the period from
    October&nbsp;30, 2004 through December&nbsp;31, 2004.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">38

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR>
    <TD valign="top">
    (h) <BR></TD>
    <TD></TD>
    <TD valign="top">
    The adjustment to interest expense reflects the following:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustment for Period</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Annual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;1, 2004 through</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expense</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense on letters of credit issued with our new
    revolving credit facility (at 2.5%)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,063</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense on our new revolving credit facility (at 4.67%)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitment fee on our new revolving credit facility (at 0.5%)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>617</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense on our new Term Loan B (at 4.29%)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,130</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense on the notes (at 7.375%)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,813</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of debt issuance costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,688</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total interest adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,506</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR>
    <TD valign="top">
    <BR></TD>
    <TD></TD>
    <TD valign="top">
    Interest expense on average outstanding letters of credit of
    $147&nbsp;million in 2004 was 2.5%. A change of
    <FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">8</FONT>&nbsp;percentage
    point in interest rates on the aggregate amount outstanding
    under the new revolving credit facility and term loan B would
    change annual interest expense by $500.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (i) <BR></TD>
    <TD></TD>
    <TD valign="top">
    Reflects the income tax effect of our pro forma adjustments to
    the income statement. We used a statutory tax rate of 38% for
    adjustments recorded at United States entities and the statutory
    tax rate of each foreign country for adjustments recorded at
    foreign entities. However, the pro forma income tax expense also
    reflects a full valuation allowance on the net income tax
    benefit generated in the United States.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (j) <BR></TD>
    <TD></TD>
    <TD valign="top">
    In 2005, through May&nbsp;11, we made $111.7&nbsp;million of
    principal payments on our senior secured credit facility. The
    annualized interest savings at interest rates in effect at
    December&nbsp;31, 2004 of these prepayments was
    $5.1&nbsp;million. As a result of these payments, we will incur
    a one-time charge of approximately $2.5&nbsp;million from the
    write-off of deferred financing fees.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (k) <BR></TD>
    <TD></TD>
    <TD valign="top">
    In connection with the offering, we intend to use approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    of the net proceeds to redeem
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
    the $420&nbsp;million aggregate principal amount of our
    7<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">8</FONT>%
    senior subordinated notes due 2014, including the payment of the
    applicable redemption premium. The annualized interest savings
    resulting from the redemption would be
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    and we will incur a one-time charge of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;from
    the write-off of deferred financing fees and incur prepayment
    penalties of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Historical basic and diluted earnings per share data has not
    been presented for the Predecessor because the Predecessor did
    not operate as a separate legal entity from Ingersoll-Rand.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    For the Successor, basic and diluted earnings per share is
    calculated by dividing net earnings by the weighted average
    shares outstanding adjusted to reflect the 1,006,092.87 for 1
    stock split effected in February&nbsp;2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Unaudited pro forma basic and diluted earnings per share have
    been calculated in accordance with the SEC rules for initial
    public offerings. These rules require that the weighted average
    share calculation give retroactive effect to any changes in our
    capital structure as well as the number of shares whose sale
    proceeds would be necessary to repay any debt or to pay any
    dividend as reflected in the pro forma adjustments. Therefore,
    pro forma weighted average shares for purposes of the unaudited
    pro forma basic and diluted earnings per share calculation, has
    been adjusted to reflect the stock dividend
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    to our existing stockholders that will be made shortly after the
    expiration of the underwriters&#146; over-allotment option
    assuming no exercise of that option, and is comprised of
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock outstanding immediately prior to this
    offering
    plus &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock being offered hereby and the stock dividend
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">39

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <A name='107'></A></TD>
</TR>

</TABLE>

<!-- link1 "SELECTED HISTORICAL FINANCIAL INFORMATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SELECTED HISTORICAL FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the closing of the transactions on October&nbsp;29,
2004, Dresser-Rand Group Inc. did not have any assets,
liabilities or results of operations. Therefore, the selected
historical combined financial information as of and for the
three years ended December&nbsp;31, 2003 and the period from
January&nbsp;1, 2004 through October&nbsp;29, 2004 have been
derived from the audited combined financial statements of the
Dresser-Rand Entities (the predecessor to Dresser-Rand Group
Inc.), which have been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm. The selected
historical consolidated financial information as of
December&nbsp;31, 2004 and for the period from October&nbsp;30,
2004 (our date of inception) through December&nbsp;31, 2004 have
been derived from the audited consolidated financial statements
of Dresser-Rand Group Inc. The audited financial statements for
the years ended December&nbsp;31, 2002 and 2003, for the period
from January&nbsp;1, 2004 through October&nbsp;29, 2004, for the
period from October&nbsp;30, 2004 through December&nbsp;31, 2004
and as of December&nbsp;31, 2003 and 2004 are included elsewhere
in this prospectus. The selected historical combined balance
sheet information as of December&nbsp;31, 2001 and the selected
historical combined statement of operations information for the
year ended December&nbsp;31, 2001 has been derived from
Dresser-Rand Company&#146;s audited combined financial
statements, which are not included in this prospectus. The
selected historical combined balance sheet information as of
December&nbsp;31, 2000 and the selected historical combined
statement of operations information for the one month ended
January&nbsp;31, 2000 and the eleven months ended
December&nbsp;31, 2000 have been derived from Dresser-Rand
Entities&#146; unaudited combined financial statements, which
are not included in this prospectus. In the opinion of
management, such unaudited financial information reflects all
adjustments, consisting only of normal and recurring
adjustments, necessary for a fair presentation of the results
for those periods. Prior to February 2000, Dresser-Rand Company
was jointly owned by Ingersoll-Rand (49%) and Halliburton
Industries (51%) under the terms of a joint venture agreement.
Halliburton exercised a put option in the joint venture
agreement which required Ingersoll-Rand to purchase
Halliburton&#146;s 51% interest in Dresser-Rand Company. The
purchase was completed on February&nbsp;2, 2000. Accordingly,
the results of operations are separately stated for the eleven
months ended December&nbsp;31, 2000 to reflect the new ownership
structure and related changes in the underlying accounts of the
Dresser-Rand Entities resulting from the purchase transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should read the following table together with
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and the consolidated
and combined financial statements and the notes thereto,
included elsewhere in this prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1 Month</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>11 Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 30</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(In thousands, except share and per share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of Operations Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales, third parties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>873,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,026,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,332,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>712,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>199,907</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other operating revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>777,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>876,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,031,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,335,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>715,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>199,907</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of goods sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>714,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>865,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,132,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>538,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>149,564</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>162,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>165,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,343</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,499</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,040</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of purchased in-process research and development assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring charges(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,004</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(302</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(776</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,654</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,202</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,846</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from continuing operations before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,504</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision (benefit) for income taxes(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,275</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,498</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20,331</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,229</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">40
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1 Month</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>11 Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 30</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(In thousands, except share and per share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discontinued Operations:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings from discontinued operations, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on disposal of discontinued operations, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,577</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,229</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Earnings per share data(3)(4)(5):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic earnings (loss) per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.07</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,115,080</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash flow data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>50,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,948</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows provided by (used in) investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,896</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,089</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,907</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,126,939</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows provided by (used in) financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42,937</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,759</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(63,487</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(52,030</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,217,099</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>As of December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance Sheet Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>41,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>111,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,030,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,052,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,119,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,063,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,749</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, net of current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>396,664</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior subordinated notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>823,413</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Partnership interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>588,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>526,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>565,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452,897</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Includes severance expenses and facility exit costs associated
    with our corporate restructuring activities.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    On the closing date of the transactions we became a corporation.
    Prior to that time, in the United States, we were a partnership.
    The information presented does not give effect to the income
    taxes we would have been required to recognize if we were
    organized as a corporation. Pro forma tax expense for the year
    ended December&nbsp;31, 2004 was $14,515. Pro forma tax expense
    reflects income tax expense that we would have been required to
    pay if we were organized as a corporation during these periods
    and also includes other pro forma adjustments related to the
    acquisition of Dresser-Rand Company by First Reserve on
    October&nbsp;29, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Historical basic and diluted earnings per share data has not
    been presented for the Predecessor because the Predecessor did
    not operate as a separate legal entity from Ingersoll-Rand.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    For the Successor, basic and diluted earnings per share is
    calculated by dividing net earnings by the weighted average
    shares outstanding adjusted to reflect the 1,006,092.87 for 1
    stock split effected in February 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Unaudited pro forma basic and diluted earnings per share have
    been calculated in accordance with the SEC rules for initial
    public offerings. These rules require that the weighted average
    share calculation give retroactive effect to any changes in our
    capital structure as well as the number of shares whose sale
    proceeds would be necessary to repay any debt or pay any
    dividend as reflected in the pro forma adjustments. Therefore,
    pro forma weighted average shares for purposes of the unaudited
    pro forma basic and diluted earnings per share calculation, has
    been adjusted to reflect the stock dividend
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    to our existing stockholders that will be made shortly after the
    expiration of the underwriters&#146; over-allotment option,
    assuming no exercise of that option and is comprised of
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock outstanding immediately prior to this
    offering
    plus &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock being offered hereby and the stock dividend
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">41

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='108'></A>
</DIV>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>AND RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The statements in this discussion regarding the industry
outlook, our expectations regarding the future performance of
our business, and the other non-historical statements in this
discussion are forward-looking statements. These forward-looking
statements are subject to numerous risks and uncertainties,
including, but not limited to, the risks and uncertainties
described in the &#147;Risk Factors&#148; section. You should
read the following discussion together with the sections
entitled &#147;Forward-Looking Statements,&#148; &#147;Risk
Factors&#148; and the consolidated and combined financial
statements and notes thereto of the Dresser-Rand Entities
included elsewhere in this prospectus.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are among the largest global suppliers of rotating equipment
solutions to the worldwide oil, gas, petrochemical and
industrial process industries. Our segments are new units and
aftermarket parts and services. Our services and products are
used for a wide range of applications, including oil and gas
production, refinery processes, natural gas processing,
pipelines, petrochemical production, high-pressure field
injection and enhanced oil recovery. We also serve general
industrial markets including paper, steel, sugar, distributed
power and government markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We operate globally with manufacturing facilities in the United
States, France, Germany, Norway, India and Brazil. We provide a
wide array of products and services to our worldwide client base
in over 105 countries from our 61 global locations in 11
U.S.&nbsp;states and 25 countries. Our total combined revenues
by geographic region for the twelve months ended
December&nbsp;31, 2004 consisted of North America (39%), Latin
America (18%), Europe (15%), Asia Pacific (13%) and the Middle
East and Africa (15%).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Corporate History</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;31, 1986, Dresser Industries, Inc. and
Ingersoll-Rand (collectively, the partners) entered into a
partnership agreement for the formation of Dresser-Rand Company,
a New York general partnership owned 50% by Dresser Industries,
Inc. and 50% by Ingersoll-Rand. The partners contributed
substantially all of the operating assets and certain related
liabilities, which comprised their worldwide reciprocating
compressor, steam turbine and turbo-machinery businesses. The
net assets contributed by the partners were recorded by
Dresser-Rand Company at amounts approximating their historical
values. Dresser-Rand Company commenced operations on
January&nbsp;1, 1987. On October&nbsp;1, 1992 Dresser
Industries, Inc. acquired a 1% equity interest from Dresser-Rand
Company to increase its ownership to 51% of Dresser-Rand Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September 1999, Dresser Industries, Inc. merged with
Halliburton Industries. Accordingly, Dresser Industries,
Inc.&#146;s ownership interest in Dresser-Rand Company
transferred to Halliburton Industries on that date. On
February&nbsp;2, 2000, a wholly-owned subsidiary of
Ingersoll-Rand purchased Halliburton Industries&#146; 51%
interest in Dresser-Rand Company for a net purchase price of
approximately $543&nbsp;million. Dresser-Rand Company&#146;s
combined financial statements reflect Ingersoll-Rand&#146;s
additional basis in Dresser-Rand Company. Dresser-Rand Company
formerly operated as an operating business unit of
Ingersoll-Rand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;25, 2004, Dresser-Rand Holdings, LLC, our
indirect parent and an affiliate of First Reserve, entered into
an equity purchase agreement with Ingersoll-Rand to purchase all
of the equity interests in the Dresser-Rand Entities for
$1.13&nbsp;billion. The acquisition closed on October&nbsp;29,
2004. In connection with the acquisition, funds affiliated with
First Reserve contributed $430&nbsp;million in cash as equity to
Dresser-Rand Holdings, LLC, which used this cash to fund a
portion of the purchase price for the Dresser-Rand Entities. The
remainder of the cash needed to finance the acquisition,
including related fees and expenses, was provided by borrowings
of $420&nbsp;million in senior subordinated notes due 2014 and
under a $695&nbsp;million senior secured credit facility. The
senior secured credit facility consists of a $395&nbsp;million
term loan portion and a $300&nbsp;million revolving portion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated financial statements reflect our financial
position as of December&nbsp;31, 2004 and our results of
operations and cash flows for the period from October&nbsp;30,
2004 to December&nbsp;31, 2004, and the
</DIV>

<P align="center" style="font-size: 10pt;">42
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">financial position of our predecessor entity, on
a combined basis, as of December&nbsp;31, 2003 and its results
of operations and cash flows for the period from January&nbsp;1,
2004 to October&nbsp;29, 2004 and for the years ended
December&nbsp;31, 2003 and 2002.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated and combined financial
statements included in this prospectus include the accounts of
all wholly-owned and majority-owned subsidiaries of Dresser-Rand
Company as well as the operations of Dresser-Rand Canada, Inc.
and Dresser-Rand GmbH.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preparation of the Predecessor financial
statements was based on certain assumptions and estimates,
including allocations of costs from Ingersoll-Rand, which the
Predecessor believed were reasonable. This financial information
may not, however, necessarily reflect the results of operations,
financial positions and cash flows that would have occurred if
our Predecessor had been a separate, stand-alone entity during
the periods presented.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the transactions, we incurred
substantial indebtedness, interest expense and repayment
obligations. The interest expense relating to this debt will
adversely affect our net income. In addition, we accounted for
the acquisition under the purchase method of accounting, which
resulted in an increase in depreciation and amortization above
historical levels. As a result of the transactions, we incurred
a number of one-time fees and expenses of approximately
$43.9&nbsp;million. See &#147;The Transactions.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Streamlining Actions</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since the fourth quarter of 2002, we adopted a
number of restructuring and productivity improvement programs
across our entire company. An important element in these
programs was headcount reductions. As of December&nbsp;31, 2002,
our worldwide headcount was 5,849 employees. For the year ended
December&nbsp;31, 2003, we reduced our headcount, on a worldwide
basis, by 968 employees. By December&nbsp;31, 2004, we had
reduced our headcount by an additional 250 employees to 4,631.
An additional element of our restructuring plan was our
streamlining of administrative functions. For example, we
consolidated the management of three of our factories in New
York under one management team. We continue to seek and
implement cost-saving measures on an on-going basis.
</FONT>

<P align="left">
<B><FONT size="2">Effects of Currency Fluctuations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conduct operations in over 105 countries.
Therefore, our results of operations are subject to both
currency transaction risk and currency translation risk. We
incur currency transaction risk whenever we or our subsidiaries
enter into either a large purchase or sales transaction using a
currency other than the local currency of the transacting
entity. With respect to currency translation risk, our financial
condition and results of operations are measured and recorded in
the relevant local currency and then translated into
U.S.&nbsp;dollars for inclusion in our historical consolidated
financial statements. Exchange rates between these currencies
and U.S.&nbsp;dollars in recent years have fluctuated
significantly and may continue to do so in the future. The
majority of our revenues and costs are denominated in
U.S.&nbsp;dollars, with euro-related revenues and costs also
being significant. The net appreciation of the euro against the
U.S.&nbsp;dollar over the 2002 to 2004 period has had the impact
of increasing sales, cost of sales and selling and
administrative expenses, as reported in U.S.&nbsp;dollars in our
historical consolidated and combined financial statements.
Historically, we have engaged in hedging strategies from time to
time to reduce the effect of currency fluctuations on specific
transactions. However, we have not sought to hedge currency
translation risk. We expect to continue to engage in hedging
strategies going forward. These strategies do not qualify for
hedge accounting treatment and therefore, significant declines
in the value of the euro relative to the U.S.&nbsp;dollar could
have a material adverse effect on our financial condition and
our ability to meet interest and principal payments on
U.S.&nbsp;dollar denominated debt, including the notes and
borrowings under the senior secured credit facility.
</FONT>

<P align="left">
<B><FONT size="2">Revenues</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our revenues are primarily generated through the
sale of new units and aftermarket parts and services. Revenues
from the sale of new units and revamps (the overhauling of
installed units) are recognized under the completed contract
method. Under this method, revenue and profits on contracts are
recognized when the
</FONT>

<P align="center"><FONT size="2">43
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">contracts are completed or substantially
complete. Revenues from aftermarket parts and services are
recognized as the parts are shipped and services are rendered.
Revenues have historically been driven by volume, rather than
price, and are sensitive to foreign currency fluctuations.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Cost of Sales</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cost of sales includes raw materials and plant
and related work force costs, freight and warehousing, as well
as product engineering.
</FONT>

<P align="left">
<B><FONT size="2">Selling and Administrative Expenses</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling expenses consist of costs associated with
marketing and sales. Administrative expenses are primarily
management, accounting, corporate allocations and legal costs.
</FONT>

<P align="left">
<B><FONT size="2">Research and Development Expenses</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Research and development expenses include
payroll, employee benefits, and other labor related costs,
facilities, workstations and software costs associated with
product development. These costs are expensed as incurred.
Expenses for major projects are carefully evaluated to manage
return on investment requirements. We expect that our research
and development spending will continue in line with historical
levels.
</FONT>

<P align="left">
<B><FONT size="2">Other Income (Expense)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other income (expense)&nbsp;includes those items
that are non-operating in nature. Examples of items reported as
other income (expense)&nbsp;are insurance proceeds, equity in
earnings in partially-owned affiliates, casualty losses,
government grants and the impact of currency fluctuations.
</FONT>

<P align="left">
<B><FONT size="2">Depreciation and Amortization</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property, plant and equipment is reported at cost
less accumulated depreciation, which is generally provided using
the straight-line method over the estimated useful lives of the
assets. Expenditures for improvements that extend the life of
the asset are generally capitalized. Intangible assets primarily
consist of amounts allocated to the customer relationships,
software and technology, trade names and other intangibles. All
of the intangible assets are amortized over their estimated
useful lives.
</FONT>

<P align="left">
<B><FONT size="2">Income Taxes</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the Predecessor periods presented, certain of
the Dresser-Rand Entities were accounted for as a partnership
and were not required to provide for income taxes, since all
partnership income and losses were allocated to the partners for
inclusion in their respective financial statements. In
connection with the transactions, the assets of the former
partnership are now subject to corporate income taxes. For
income tax purposes, the former partnership assets have been
recorded at, and will be depreciated based upon their fair
market value at the time of the transaction instead of the
historical amount. On October&nbsp;29, 2004, our business became
subject to income tax, which has impacted our results of
operations for the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004 and will affect our results in the future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the Predecessor periods presented and prior
to the transactions, certain of our operations were subject to
U.S.&nbsp;or foreign income taxes. After the transactions, all
of our operations are subject to U.S.&nbsp;or foreign income
taxes. In preparing our financial statements, we have determined
the tax provision of those operations on a separate company
basis.
</FONT>

<P align="left">
<B><FONT size="2">Bookings and Backlog</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">New Units</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Bookings represent orders placed during the
period, whether or not filled. The elapsed time from booking to
completion of performance may be up to 15&nbsp;months (or longer
for less frequent major projects). The
</FONT>

<P align="center"><FONT size="2">44
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">backlog of unfilled orders includes amounts based
on signed contracts as well as agreed letters of authorization
which management has determined are likely to be performed.
Although backlog represents only business that is considered
firm, cancellations or scope adjustments may occur. In certain
cases, cancellation of a contract provides us with the
opportunity to bill for certain incurred costs and penalties.
Backlog is adjusted to reflect project cancellations, deferrals,
currency fluctuations and revised project scope.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Aftermarket Parts and
    Services</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Bookings represent orders placed during the
period, whether or not filled. Backlog primarily consists of
unfilled parts orders, with open repair and field service orders
comprising a small part of the backlog. The cancellation of an
order for parts can generally be made without penalty.
</FONT>

<P align="left">
<B><FONT size="2">Controls over Inventory</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the third quarter of 2003, a management
review identified an issue relating to work-in-process inventory
at two of our manufacturing locations. It was determined that
certain work-in-process inventory had not been properly relieved
upon shipment during the time period from 1999 through 2003,
resulting in an overstatement of inventory. Management
immediately began an extensive, in-depth review of our accounts
and records. As a consequence of these problems, we implemented
an internal review of the functions and processes at the two
plants that were involved, identified gaps in our internal
controls and put in place remedial measures. At the end of this
review and remediation process, our auditors determined that we
had successfully eliminated the weakness in our inventory
controls.
</FONT>

<P align="left">
<B><FONT size="2">Letters of Credit, Bank Guarantees and Surety
Bonds</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the ordinary course of our business, we make
use of letters of credit, bank guarantees and surety bonds. We
use both performance bonds, ensuring the performance of our
obligations under various contracts to which we are a party, and
advance payments bonds, which ensure that clients that place
purchase orders with us and make advance payments under such
contracts are reimbursed to the extent we fail to deliver under
the contract. Under the revolving portion of our senior secured
credit facility, we are entitled to have up to $300&nbsp;million
of letters of credit outstanding at any time, subject to certain
conditions.
</FONT>

<P align="left">
<B><FONT size="2">Basis of Presentation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The acquisition of the Dresser&#150;Rand Entities
was accounted for under the purchase method of accounting. As a
result, the financial data presented for 2004 include a
predecessor period from January&nbsp;1, 2004 through
October&nbsp;29, 2004 and a successor period from
October&nbsp;30, 2004 through December&nbsp;31, 2004. As a
result of the acquisition, the consolidated statement of
operations for the successor period includes interest and
amortization expense resulting from the notes and senior secured
credit facility, and, depreciation of plant and equipment and
amortization of intangible assets related to the acquisition.
Further, as a result of purchase accounting, the fair values of
our assets on the date of the acquisition became their new cost
basis. Results of operations for the successor period is
affected by the newly established cost basis of these assets. We
allocated the acquisition consideration to the tangible and
intangible assets acquired and liabilities assumed by us based
upon their respective fair values as of the date of the
acquisition, which resulted in a significant change in our
annual depreciation and amortization expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accompanying financial statements for the
periods prior to the acquisition are labeled as
&#147;Predecessor&#148; and the period subsequent to the
acquisition are labeled as &#147;Successor.&#148;
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Successor</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our consolidated financial statements for the
period from October&nbsp;30, 2004 through December&nbsp;31, 2004
include the accounts of the Dresser-Rand and its wholly-owned
subsidiaries. Included in this period are fair value adjustments
to assets and liabilities, including inventory, goodwill, other
intangible assets and property, plant and equipment. Also
included is the corresponding effect that these adjustments had
to cost of sales, depreciation and amortization expenses.
</FONT>

<P align="center"><FONT size="2">45
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Predecessor</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements for the period from
January&nbsp;1, 2004 through October&nbsp;29, 2004 and for the
years ended December&nbsp;31, 2003 and 2002 include the accounts
and activities of the Predecessor. Partially-owned companies
have been accounted for under the equity method.
Dresser-Rand&#146;s financial statements reflect costs that have
been allocated by Ingersoll-Rand prior to the consummation of
the acquisition. As a result of recording these amounts, our
predecessor&#146;s combined financial statements for these
periods may not be indicative of the results that would be
presented if we had operated as an independent, stand-alone
entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Results of Operations</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Total Company</I></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>For the Period from October&nbsp;30, 2004 through
    December&nbsp;31, 2004 (Successor) and for the Period from
    January&nbsp;1, 2004 through October&nbsp;29, 2004 (Predecessor)
    Compared to the Year Ended December&nbsp;31, 2003
    (Predecessor)</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents selected historical financial
information for the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004, for the period from January&nbsp;1, 2004
through October&nbsp;29, 2004 and for the year ended
December&nbsp;31, 2003. Amounts are also presented as a
percentage of total revenues.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>January&nbsp;1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the Period</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>October&nbsp;30 through</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>October&nbsp;29, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>



<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>(Dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of Operations Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,335.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>715.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>199.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of goods sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,132.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>538.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>149.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of purchased in-process research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4.9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Total Revenues.</I> Total revenues were $199.9&nbsp;million
for the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004 and $715.5&nbsp;million for the period
from January&nbsp;1, 2004 through October&nbsp;29, 2004 compared
to $1,335.4&nbsp;million for the year ended December&nbsp;31,
2003. The sales volume decrease of $420.0&nbsp;million was
primarily from new units segment and was attributable to the
following factors: (1)&nbsp;our decision to start charging
customers a margin with respect to third party equipment that we
had been purchasing on their behalf on a cost only basis (we
refer to such purchases as &#147;buyouts&#148;) resulting in
certain customers purchasing such equipment directly; this led
to reduction in revenue for buyouts of $12.4&nbsp;million and
$55.4&nbsp;million for the period from October&nbsp;30, 2004
through December&nbsp;31, 2004 and for the period from
January&nbsp;1, 2004 through October&nbsp;29, 2004,
respectively, from $263.8&nbsp;million for the year ended
December&nbsp;31, 2003 and (2)&nbsp;volume decreases in units
sold due to an unusually high level of orders shipped in the
prior year which was in part due to the large backlog of orders
at the end of 2002. This backlog consisted of large orders
</DIV>

<P align="center" style="font-size: 10pt;">46
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
for North Sea and Gulf of Mexico projects as well as large
orders for the U.S.&nbsp;Government. The oil&nbsp;and gas
industry can be very cyclical with regards to sales of units
caused by the price of oil and the buying cycles of our larger
clients for major projects. The decrease in units was offset by
the aftermarket parts and services segment revenues which were
$570.1&nbsp;million in 2004 compared to $542.4 in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cost of goods sold.</I> Cost of goods sold was
$149.6&nbsp;million, $538.0&nbsp;million and
$1,132.1&nbsp;million for the period from October&nbsp;30, 2004
through December&nbsp;31, 2004, the period from January&nbsp;1,
2004 through October&nbsp;29, 2004, and the year ended
December&nbsp;31, 2003, respectively. Cost of goods sold as a
percentage of revenues decreased 10.0&nbsp;percentage points to
74.8% for the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004, and decreased 9.6&nbsp;percentage points
to 75.2% for the period from January&nbsp;1, 2004 through
October&nbsp;29, 2004, from 84.8% for the year ended
December&nbsp;31, 2003. This improvement in 2004 was primarily
due to three factors. First, we began charging customers a
margin on third-party equipment referred to as buyouts. This
change resulted in the cost of goods sold declining as a
percentage of revenues. Second, higher-margin aftermarket parts
and services revenues increased for the two periods in 2004
compared to the year ended December&nbsp;31, 2003. Third,
manufacturing efficiencies were achieved through workforce
reductions, supply chain management initiatives and capacity
rationalization efforts. As mentioned previously, we embarked on
a series of headcount reductions since the fourth quarter of
2002. During 2004, total headcount decreased by 250, or 5.1%.
Also impacting 2004 results were the workforce reductions
initiated in 2003. These reductions amounted to 968 employees,
from 5,849 to 4,881, or 16.5%. The year-over-year savings
associated with workforce reductions are reflected in the
financial statements beginning in the month following the
reduction. Supply chain management efforts resulted in
year-over-year savings of approximately 2.0%. Concerning
capacity rationalization, our results reflect the closure of two
under-performing repair centers as well as the continued
improvement of the New York State factories now under common
management. Our results also improved due to the settlement of a
product liability lawsuit in an appellate court judgment
reversing the initial ruling against us of $4.5&nbsp;million,
which was credited to cost of goods sold in the period from
January&nbsp;1, 2004 through October&nbsp;29, 2004. Partially
offsetting these factors were additional costs related to
purchase accounting adjustments which increased costs by
$14.6&nbsp;million for the period from October&nbsp;30, 2004
through December&nbsp;31, 2004, and an additional
$2.1&nbsp;million reserve for obsolete and slow moving inventory
recognized in the period from January&nbsp;1, 2004 through
October&nbsp;29, 2004, which was sold for scrap in the same
period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross Profit.</I> Gross profit was 25.2% for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004 and 24.8%
for the period from January&nbsp;1, 2004 through
October&nbsp;29, 2004 compared to 15.2% for the year ended
December&nbsp;31, 2003. The increase is attributable to the
factors mentioned above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling and administrative expenses.</I> Selling and
administrative expenses of $21.5&nbsp;million and
$122.7&nbsp;million, respectively, for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004 and for the
period from January&nbsp;1, 2004 through October&nbsp;29, 2004,
decreased from $156.1&nbsp;million in the year ended
December&nbsp;31, 2003 as a result of our efforts to streamline
our administrative operations by reducing headcount, and, a
reduction in third party commissions due to decreased revenues.
In addition, information technology costs allocated to selling
and administrative expenses decreased in the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004 and the
period from January&nbsp;1, 2004 through October&nbsp;29, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Research and development expenses.</I> Total research and
development expenses were $1.0&nbsp;million for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004 and
$5.7&nbsp;million for the period from January&nbsp;1, 2004
through October&nbsp;29, 2004 compared to $8.1&nbsp;million for
the year ended December&nbsp;31, 2003. This decrease was due to
the allocation of resources to production jobs due to the
increased incoming order activity during 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Write-off of purchased in-process research and development
assets.</I> As a result of the transactions, we wrote off
$1.8&nbsp;million of purchased in-process research and
development assets in the period from October&nbsp;30, 2004
through December&nbsp;31, 2004. This write-off was a one-time
event and is not comparable to past or future periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating income.</I> Operating income for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004 and for the
period from January&nbsp;1, 2004 through October&nbsp;29, 2004
increased as a percentage of revenues to
</DIV>

<P align="center" style="font-size: 10pt;">47

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
13.0% and 6.9%, respectively, compared to 2.9% the year ended
December&nbsp;31, 2003. The increase is primarily attributable
to the factors contributing to the increased gross margin and
decreased selling and administrative expenses, as discussed
above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interest income (expense), net.</I> Net interest income
(expense) was ($9.7)&nbsp;million for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004 and
$3.1&nbsp;million for the period from January&nbsp;1, 2004
through October&nbsp;29, 2004 compared to $1.9&nbsp;million for
the year ended December&nbsp;31, 2003. Interest expense of
$10.0&nbsp;million was incurred for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004 on the
outstanding principal of the senior secured credit facility and
long-term debt. Interest income of $3.9&nbsp;million and
$3.5&nbsp;million for the period from January&nbsp;1, 2004
through October&nbsp;29, 2004 and the year ended
December&nbsp;31, 2003, respectively, was earned on loans to the
predecessor parent company, which was offset by interest expense
on outstanding loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other income (expense), net.</I> Other income (expense), net
was $(1.8)&nbsp;million for the period from October&nbsp;30,
2004 through December&nbsp;31, 2004, $1.9&nbsp;million for the
period from January&nbsp;1, 2004 through October&nbsp;29, 2004,
and $(9.2)&nbsp;million for the year ended December&nbsp;31,
2003. The decrease in expense for the two periods in 2004 was
primarily the result of $2.8&nbsp;million of casualty losses in
2003 (which did not occur in 2004), related to a fire at a
warehouse in Nigeria, and lower currency losses for the period
from October&nbsp;30, 2004 through December&nbsp;31, 2004 and a
currency gain for the period from January&nbsp;1, 2004 through
October&nbsp;29, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table depicts the components of other income
(expense), net for the periods presented.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;1, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30, 2004</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(In millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Currency gains (losses)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.0</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.0</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Casualty losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New York State grant</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    All other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.0</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Provision for income taxes.</I> The provision for income
taxes was $7.3&nbsp;million for the period from October&nbsp;30,
2004 through December&nbsp;31, 2004, $11.9&nbsp;million for the
period from January&nbsp;1, 2004 through October&nbsp;29, 2004,
and $11.4&nbsp;million for the year ended December&nbsp;31,
2003, resulting in an effective rate of 50.2%, 22.1% and 36.0%,
respectively. For the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004, the effective tax rate of 50.2% differed
from the statutory U.S.&nbsp;rate of 35% primarily due to the
valuation allowance recorded by U.S.&nbsp;operations, state and
local income taxes and foreign tax rate differences. For the
period from January&nbsp;1, 2004 through October&nbsp;29, 2004
and the year ended December&nbsp;31, 2003, the effective tax
rate differed from the statutory U.S.&nbsp;rate of 35% primarily
due to partnership income or loss not taxed, foreign tax rate
differences, and changes in the valuation allowance recorded by
certain foreign operations. The change in the effective tax rate
was primarily due to the relationship of nontaxable partnership
income or loss to total income in each period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Bookings and backlog.</I> Bookings represent orders placed
during the period, whether or not filled. Backlog as of any date
represents the number of orders left unfilled as of that date.
Bookings during the year ended December&nbsp;31, 2004 were
$1,119.2&nbsp;million, 24.2% above bookings for the year ended
December&nbsp;31, 2003, and backlog at December&nbsp;31, 2004
was $637.6&nbsp;million compared to $419.9&nbsp;million at
December&nbsp;31, 2003, a 51.8% increase. The bookings increase
was seen in revenue components and was driven by strong oil and
gas market activity.
</DIV>

<P align="center" style="font-size: 10pt;">48
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Year Ended December&nbsp;31, 2003 Compared to the Year
    Ended December&nbsp;31, 2002</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents selected historical financial
information for the years ended December&nbsp;31, 2003 and
December&nbsp;31, 2002. Amounts are also presented as a
percentage of total revenues. The two columns under year-to-year
change show the dollar change and percentage change from 2002 to
2003.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year-to-Year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Change</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31, 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Change</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>



<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>(Dollars in Millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of Operations Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,031.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,335.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>304.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of goods sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>865.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,132.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>266.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>165.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(100.0</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>183.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>337.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(161.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Total Revenues.</I> Total revenues increased by
$304.0&nbsp;million, or 29.5%, to $1,335.4&nbsp;million in 2003
from $1,031.4&nbsp;million in 2002. The sales volume increase
was almost entirely attributable to sales by the new units
segments, which experienced a $294.2&nbsp;million increase. This
increase resulted from increases in new units sales of
$149.0&nbsp;million, buyouts of $112.0&nbsp;million and revamps
of $33.0&nbsp;million. The high invoicing levels were primarily
for products delivered from Le Havre, Norway and Olean that were
in backlog at the end of 2002. This backlog consisted of large
orders for North Sea and Gulf of Mexico projects as well as
large orders for the U.S.&nbsp;Government. The oil and gas
industry can be very cyclical with regards to sales of units,
caused by the price of oil and the buying cycles of our larger
clients for major projects.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cost of goods sold.</I> Cost of goods sold as a percentage of
revenues increased slightly to 84.8% in 2003 from 84.0% in 2002.
This increase was primarily due to (i)&nbsp;the mix shift caused
by the dramatic increase in new unit shipments as mentioned
above, (ii)&nbsp;severance costs incurred related to headcount
reductions in 2003 of $6.3&nbsp;million. The large mix shift was
offset by improvements in the individual cost of goods sold
components due to increased manufacturing efficiencies achieved
through workforce reductions (5,849 to 4,881, or 16.5%) and
favorable material costs achieved through supply chain
management efforts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross profit.</I> Gross profit increased by
$37.8&nbsp;million, or 22.8%, to $203.3&nbsp;million in 2003
from $165.5&nbsp;million in 2002 and decreased to 15.2% of
revenues in 2003 from 16.0% in 2002, due to the factors
mentioned above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling and administrative expenses.</I> Selling and
administrative expenses were $156.1&nbsp;million and
$138.5&nbsp;million for 2003 and 2002, respectively. This
increase was primarily attributable to corporate overhead
allocations from Ingersoll-Rand which increased
$13.8&nbsp;million from the 2002 amount of $1.3&nbsp;million to
the 2003 amount of $15.1&nbsp;million. During 2003, we began the
process of integrating numerous functions with Ingersoll-Rand
Services provided by Ingersoll-Rand in 2003 included treasury
and cash management, internal audit services, tax planning and
compliance, risk management services and various payroll and
benefits services.
</DIV>

<P align="center" style="font-size: 10pt;">49

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Research and development expenses.</I> Total research and
development expenses of $8.1&nbsp;million in 2003 were virtually
unchanged from $8.0&nbsp;million in 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Restructuring charges.</I> At the end of 2002, we incurred
restructuring charges of $5.2&nbsp;million. The 2002 charges,
primarily for workforce reductions, resulted in 2003 savings
were $18.5&nbsp;million in cost of sales and $1.9&nbsp;million
in selling and administrative expenses. No charges were incurred
in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating income.</I> Operating income increased by
$25.3&nbsp;million, or 183.3%, to $39.1&nbsp;million in 2003
from $13.8&nbsp;million in 2002. The increase is primarily
attributable to increased volume as well as the factors
contributing to the increased gross margin, as discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interest income (expense), net.</I> Net interest income
(expense) was $1.9&nbsp;million in 2003 compared to
($0.8)&nbsp;million in 2002. The interest income in 2003 was
attributable to interest earned on receivables from
Ingersoll-Rand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other income (expense), net.</I> Other income (expense), net
was ($9.2)&nbsp;million in 2003, or $24.2&nbsp;million less than
the $15.0&nbsp;million other income reported in 2002 as depicted
in the table below. During 2003, we suffered two casualty
losses. The casualty losses amounted to $2.8&nbsp;million, which
was primarily due to a fire at our inventory warehouse in
Nigeria resulting in the loss of $2.3&nbsp;million. At the end
of 2002, we received a training and capital grant from the New
York State Empire Development Corporation, which resulted in
other income of $8.0&nbsp;million. In late 2003, we agreed to
repay a portion of the grant due to lower-than-anticipated
employment levels resulting in other expense of
$1.3&nbsp;million. During 2002, we received insurance proceeds
as a result of a fire that destroyed a third-party facility,
which warehoused patterns we use in the production process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table depicts the components of other income
(expense), net for the periods presented and the period over
period change for each component.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Change</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(In millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Currency losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Casualty losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New York State grant</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Insurance claims</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Provision for income taxes.</I> Provision for income taxes
for the year ended December&nbsp;31, 2003 was $11.4&nbsp;million
resulting in an effective rate of 36.0%. This compares to an
income tax provision of $11.9&nbsp;million in 2002 resulting in
an effective rate of 42.5%. Our effective tax rate differed from
the statutory U.S. rate of 35% primarily due to partnership
income or loss not taxed, foreign tax rate differences, and
changes in the valuation allowance recorded by certain foreign
operations. Our effective tax rate was 36.0% and 42.5% for the
years ended December&nbsp;31, 2003 and 2002, respectively. The
change in our effective tax rate was primarily due to the
relationship of nontaxable partnership income or loss to total
income in each period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Bookings and backlog.</I> Bookings during the year ended
December&nbsp;31, 2003 of $901.0&nbsp;million were 13.4% below
bookings for the year ended December&nbsp;31, 2002, and backlog
at the end of 2003 was $419.9&nbsp;million compared to
$826.4&nbsp;million at the end of 2002, a 49.2% decrease. The
decreased bookings, combined with the high revenue achieved,
resulted in the decrease in backlog.
</DIV>

<P align="center" style="font-size: 10pt;">50
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Segment Analysis</I></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Period from October&nbsp;30, 2004 through
    December&nbsp;31, 2004 (Successor) and for the Period from
    January&nbsp;1, 2004 through October&nbsp;29, 2004 (Predecessor)
    Compared to the Year Ended December&nbsp;31, 2003
    (Predecessor)</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents selected historical financial
information regarding both of our segments for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004, for the
period from January 1, 2004 through October&nbsp;29, 2004 and
for the year ended December&nbsp;31, 2003. Amounts are also
presented as a percentage of total revenues.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Period from</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>January&nbsp;1 through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>October&nbsp;30 through</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>October&nbsp;29, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>



<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In millions)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>793.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>267.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>77.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aftermarket parts and services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>542.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>447.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,335.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>715.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>199.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Gross Profit</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aftermarket parts and services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>163.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Operating Income (Loss)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aftermarket parts and services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unallocated corporate expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47.6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>New Units</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues.</I> Revenues in the new units segment were
$77.6&nbsp;million, $267.7&nbsp;million and $793.0&nbsp;million
for the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004, for the period from January&nbsp;1, 2004
through October&nbsp;29, 2004, and for the year ended
December&nbsp;31, 2003, respectively, and were 38.8%, 37.4% and
59.4%, respectively, as a percentage of total revenues. The
decreases in revenues as a percentage of total revenues for the
two periods in 2004 were primarily due to (1)&nbsp;our decision
to start charging customers a margin on buyouts, resulting in
certain customers purchasing such equipment directly; this led
to reduction in buyout revenue of $12.4&nbsp;million in the
period from October&nbsp;30, 2004 through December&nbsp;31,
2004, and $55.4&nbsp;million in the period from January&nbsp;1,
2004 through October&nbsp;29, 2004, from $263.8&nbsp;million for
the year ended December&nbsp;31, 2003, and (2)&nbsp;volume
decreases in units sold due to an unusually high level of orders
shipped in the prior year, which was in part due to the large
backlog of orders at the end of 2002. This backlog consisted of
large orders for North Sea and Gulf of Mexico projects as well
as large orders for the U.S.&nbsp;Government. The oil&nbsp;and
gas industry can be very cyclical with regards to sales of units
caused by the price of oil and the buying cycles of our larger
clients for major projects. Invoicings in any given year are
typically highly dependent on the beginning of the year backlog.
See &#147;Bookings and backlog&#148; discussions below for
current trends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross profit.</I> Gross profit for new units as a percentage
of new unit segment revenues increased to 12.6% for the period
from October&nbsp;30, 2004 through December&nbsp;31, 2004 and to
12.1% for the period from January&nbsp;1, 2004 through
October&nbsp;29, 2004 from 5.0% for the year ended
December&nbsp;31, 2003. This improvement was primarily due to
the two factors discussed above. First, we began charging
customers a margin on third-party equipment referred to as
buyouts. Second, manufacturing efficiencies were achieved
through productivity
</DIV>

<P align="center" style="font-size: 10pt;">51

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
initiatives, workforce and capacity rationalization efforts
including a reduction in headcount and cost reductions in supply
chain management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating income.</I> Operating income (loss)&nbsp;was
$3.6&nbsp;million, ($0.5) million and ($11.4) million for the
period from October&nbsp;30, 2004 through December&nbsp;31,
2004, for the period from January&nbsp;1, 2004 through
October&nbsp;29, 2004, and for the year ended December&nbsp;31,
2003, respectively. As a percentage of segment revenues,
operating income (loss)&nbsp;improved compared to the year ended
December&nbsp;31, 2003 primarily due to the increase in the
gross profit percentage over 2003 and was partially offset by
higher selling and administrative expenses as a percentage of
revenues for the period from January&nbsp;1, 2004 through
October&nbsp;29, 2004. Selling and administrative expenses
increased as a percentage of revenues due to the decline in
revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Bookings and backlog.</I> Bookings for the twelve&nbsp;months
ended December&nbsp;31, 2004 were $536.9&nbsp;million, 38.2%
above the bookings in 2003, and backlog at December&nbsp;31,
2004 was $489.3&nbsp;million, or 70.0% above the backlog at
December&nbsp;31, 2003. As previously mentioned, bookings were
favorably impacted by the strong oil and gas market. This fact,
coupled with the low invoicings level during 2004, resulted in a
large increase in backlog.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Aftermarket Parts&nbsp;&#38; Services</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues.</I> Revenues were $122.3&nbsp;million, from
$447.8&nbsp;million and $542.4&nbsp;million for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004, for the
period from January&nbsp;1, 2004 through October&nbsp;29, 2004,
and for the year ended December&nbsp;31, 2003, respectively, and
were 61.2%, 62.6% and 40.6%, respectively, as a percentage of
total revenues. Total combined revenues in 2004 increased by
$27.7&nbsp;million, or 5.1%, from $542.4&nbsp;million for the
year ended December&nbsp;31, 2003 primarily due to an increase
in parts sales, which accounted for $24.2&nbsp;million of the
increase. Services revenue increased slightly by
$3.5&nbsp;million; however, after discounting the affect of the
$20.2&nbsp;million turn-key project in 2003 (see 2003 compared
to 2002 below), services increased approximately 12.5%. This
segment&#146;s revenues are primarily generated through the
large installed base of equipment worldwide and, therefore, are
not subject to the fluctuations in volume to the same extent as
the New Units segment, which is dependent on new projects from
major oil and gas clients. The increase in revenues was driven
by a combination of factors including (i)&nbsp;annual price
increases; (ii)&nbsp;proactive marketing of new aftermarket
solutions; and (iii)&nbsp;improved on-line delivery performance
and reduced lead times to delivery.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross profit.</I> Gross profit as a percentage of aftermarket
parts and services segment revenues increased to 33.1% for the
period from October&nbsp;30, 2004 through December&nbsp;31, 2004
and to 32.4% for the period from January&nbsp;1, 2004 through
October&nbsp;29, 2004, from 30.2% for the year ended
December&nbsp;31, 2003, as a result of the increase in sales
volume and the improvement in gross margins partially achieved
through price increases, and due to a more favorable product mix
(as parts has a greater margin than services), the price
realizations mentioned above and the headcount reductions
previously discussed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating income.</I> Operating income was
$30.5&nbsp;million, $85.0&nbsp;million and $98.2&nbsp;million
for the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004, for the period from January&nbsp;1, 2004
through October&nbsp;29, 2004, and for the year ended
December&nbsp;31, 2003, respectively. Operating income as a
percentage of aftermarket parts and services segment revenues
increased to 24.9% for the period from October&nbsp;30, 2004
through December&nbsp;31, 2004 and to 19.0% for the period from
January&nbsp;1, 2004 through October&nbsp;29, 2004 from 18.1%
for the year ended December&nbsp;31, 2003 due to improvements in
gross profit in both periods in 2004, in addition to reduced
selling and administrative expenses. The majority of selling and
administrative expenses are fixed and, as revenue decreases, the
expenses increase as a percentage of revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Bookings and backlog.</I> Bookings during the
twelve&nbsp;months ended December&nbsp;31, 2004 were
$582.3&nbsp;million, 13.6% above bookings for the same period in
2003, and backlog at December&nbsp;31, 2004 was
$148.3&nbsp;million, or 12.2% above the backlog at
December&nbsp;31, 2003. This increase in bookings in 2004 is a
result of our increased emphasis on aftermarket parts and
services sales and the impact of economic and political unrest
in Nigeria, Venezuela and the Middle East, which depressed
bookings in this segment in the 2003 period. During 2004, the
spare parts business in Venezuela and the Middle East returned
to normal levels. Civil unrest continues to depress the repairs
business in Nigeria.
</DIV>

<P align="center" style="font-size: 10pt;">52
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Year Ended December&nbsp;31, 2003 Compared to the Year
    Ended December&nbsp;31, 2002</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents selected historical financial
information regarding both of our segments for each of the years
ended December&nbsp;31, 2003 and 2002, respectively. Revenues by
segments show dollars in millions and are also presented as a
percentage of total revenues. The two columns under year-to-year
change show the dollar and percentage change from 2002 to 2003.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year-to-Year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Change</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002 to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Change</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>498.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>793.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>294.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aftermarket parts and services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>532.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>542.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,031.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,335.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>304.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Gross Profit</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>411.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aftermarket parts and services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>163.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>165.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>203.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Operating Income (loss)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(32.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aftermarket parts and services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unallocated corporate expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47.6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>183.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>New Units.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues.</I> Revenues increased by $294.2&nbsp;million, or
59.0%, to $793.0&nbsp;million in 2003 from $498.8&nbsp;million
in 2002 due to strong shipments resulting from large bookings
achieved in 2001 and 2002. Buyouts accounted for
$112.2&nbsp;million of the increase. For buyout orders booked
before 2003, no margin was earned.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross profit.</I> Gross profit increased by
$31.7&nbsp;million, or 411.7%, to $39.4&nbsp;million in 2003
from $7.7&nbsp;million in 2002. As a percentage of segment
revenues, gross profit increased to 5.0% in 2003 from 1.5% in
2002 primarily due to improved operating efficiencies incurred
as a result of headcount reduction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating income (loss).</I> Operating loss decreased by
$21.4&nbsp;million, to a loss of $(11.4)&nbsp;million in 2003
from a loss of $(32.8)&nbsp;million in 2002. As a percentage of
segment revenues, operating income improved primarily due to the
factors mentioned above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Bookings and backlog.</I> Bookings during the year ended
December&nbsp;31, 2003 were $388.5&nbsp;million, or 22.2% below
bookings for 2002, and backlog at December&nbsp;31, 2003 was
$287.7&nbsp;million, or 56% below the unusually high level in
2002 of $656.9&nbsp;million. As mentioned previously, the new
units business is driven by the dynamics of the oil and gas
industry, which is driven by the price of oil and gas and
consequent changes in capital expenditures by the major oil and
gas companies worldwide. Our strong new units bookings in 2001
and 2002 were invoiced in 2003. The high invoicing level
combined with the lull in booking due to political unrest in
Venezuela, Nigeria and the Middle East resulted in a much lower
backlog at year end 2003 as compared to 2002.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;</I></TD>
    <TD>
    <I>Aftermarket Parts and Services</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues.</I> Revenues increased by $9.8&nbsp;million, or
1.8%, to $542.4&nbsp;million in 2003 from $532.6&nbsp;million in
2002. This increase was attributable to the large increase in
field service activity due to an increase of $28.3&nbsp;million
primarily due to a $20&nbsp;million service agreement in 2003.
These revenues were offset by
</DIV>

<P align="center" style="font-size: 10pt;">53

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
decreases in parts of $8.3&nbsp;million and repair of
$12.7&nbsp;million due to the delay in orders as a result of
political and economic unrest in Nigeria, Venezuela and the
Middle East.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross profit.</I> Gross profit increased by
$6.1&nbsp;million, or 3.9%, to $163.9&nbsp;million in 2003 from
$157.8&nbsp;million in 2002 as a result of the increase in
volume and the improvement of gross margins. As a percentage of
revenues, gross profit increased to 30.2% in 2003 from 29.6% in
2002 due to a more favorable product mix, price realization and
increased manufacturing efficiencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating income.</I> Operating income increased by
$12.4&nbsp;million, or 14.5%, to $98.1&nbsp;million in 2003 from
$85.7&nbsp;million in 2002. Despite the modest increase in
revenues, operating income as a percentage of revenues increased
to 18.1% in 2003 from 16.1% in 2002 due to cost control
initiatives, manufacturing and operating efficiencies and a more
favorable product mix.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Bookings and backlog.</I> Bookings during the twelve month
period ended December&nbsp;31, 2003 were $512.5&nbsp;million,
5.3% below 2002, and backlog at December&nbsp;31, 2003 was
$132.2&nbsp;million, or 22.0% below 2002. The 2003 bookings were
adversely impacted by geopolitical issues in Venezuela, the
Middle East and Nigeria. The slowdown in bookings combined with
the accelerated shipments of backlog resulted in lower backlog
levels at year end 2003 compared to 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Liquidity and Capital Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Historically, our primary source of cash has been from
operations. Prior to the closing of the transactions, our
Predecessor participated in Ingersoll-Rand&#146;s centralized
treasury management system whereby, in certain countries, our
Predecessor&#146;s cash receipts were remitted to Ingersoll-Rand
and Ingersoll-Rand funded our Predecessor&#146;s cash
disbursements. Our Predecessor&#146;s primary cash disbursements
were for capital expenditures and working capital. Following the
consummation of the transactions, we initially relied upon a
transition services agreement with Ingersoll-Rand to provide
these services until we could establish our own cash management
system. As of April&nbsp;2, 2005, we were no longer reliant upon
Ingersoll-Rand for any cash management services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash flows provided by operating activities were
$17.9&nbsp;million, $57.7&nbsp;million, $51.0&nbsp;million, and
$42.0&nbsp;million for the period from October&nbsp;30, 2004
through December&nbsp;31, 2004, the period from January&nbsp;1,
2004 through October&nbsp;29, 2004, and the years ended
December&nbsp;31, 2003 and 2002, respectively, mainly due to
profitable results of operations and changes in working capital.
Changes in working capital was primarily affected by accounts
receivable, inventories, predecessor affiliated loans and
receivables, customer advance payments, and accounts payable and
accrued liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accounts receivable increased $22.9&nbsp;million to
$264.9&nbsp;million at December&nbsp;31, 2004 from
$242.0&nbsp;million at December&nbsp;31, 2003 primarily due to
pension and other receivables from Ingersoll-Rand of
$32.9&nbsp;million recorded as a result of the transactions. The
offsetting decrease in accounts receivable is primarily due to
lower revenues in the fourth quarter of 2004 compared to 2003
for the Norway operations, and due to a reduction in the
year-end accounts receivable balance for Nigeria. Inventories
increased by $42.4&nbsp;million or 31.8% to $175.9&nbsp;million
at December&nbsp;31, 2004 compared to $133.4&nbsp;million at
December&nbsp;31, 2003 for the following reasons:
(1)&nbsp;finished goods and work-in-progress inventories on hand
at year-end were $209.2&nbsp;million at December&nbsp;31, 2004
compared to $142.1&nbsp;million at December&nbsp;31, 2003, an
increase of $67.1&nbsp;million or 47.2% primarily due to the
large increase in backlog; and (2)&nbsp;raw materials
inventories decreased $1.5&nbsp;million as a result of our
continued efforts to reduce slow moving inventories and dispose
of obsolete inventories. Loans and receivables due from
Ingersoll-Rand of $228.2&nbsp;million and loans payable to
Ingersoll-Rand of $14.8&nbsp;million at December&nbsp;31, 2003
were extinguished as a result of the transactions. Accounts
payable and accruals decreased $20.6&nbsp;million primarily due
to the retention by Ingersoll-Rand of a portion of the liability
for post retirement benefits for those employees who were
retired and retirement-eligible employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories decreased by $121.6&nbsp;million to
$133.4&nbsp;million at December&nbsp;31, 2003 compared to
$255.0&nbsp;million at December&nbsp;31, 2002 due to a decrease
in the number of bookings in 2003 compared to 2002, and due to
increased sales in 2003 resulting in a higher relief of
inventories than replenishment. Loans and receivables due from
Ingersoll-Rand of $228.2&nbsp;million at December&nbsp;31, 2003
increased from $153.2&nbsp;million at
</DIV>

<P align="center" style="font-size: 10pt;">54

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
December&nbsp;31, 2002 as a result of transferring funds to
Ingersoll-Rand for cash management purposes discussed above.
Customer advance payments decreased by $74.8&nbsp;million at
December&nbsp;31, 2003 compared to December&nbsp;31, 2002
because work-in-progress and finished goods inventories
decreased thereby reducing the need for customers to advance
funds on in-progress orders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004, the period from January&nbsp;1, 2004
through October&nbsp;29, 2004, and the years ended
December&nbsp;31, 2003 and 2002, net cash flows provided by
(used in) investing activities were $(1,126.9)&nbsp;million,
$(4.9)&nbsp;million, $(7.1)&nbsp;million and $3.8&nbsp;million,
respectively, partly as a result of capital expenditures of
$1.8&nbsp;million, $7.7&nbsp;million, $7.6&nbsp;million and
$13.7&nbsp;million, respectively. The acquisition was
$1,125.1&nbsp;million in the period from October&nbsp;30, 2004
through December&nbsp;31, 2004. These results were also
favorably affected in 2002 by the receipt of insurance proceeds
of $10.1&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the period from October&nbsp;30 through December&nbsp;31,
2004, net cash flow provided by financing activities was
$1,217.1&nbsp;million, $420.0&nbsp;million of which was from the
proceeds from the offering of the notes, $395.0&nbsp;million of
which was from additional long-term debt, and
$437.1&nbsp;million of which was from proceeds from the issuance
of common units and common stock. For the period from January 1
through October&nbsp;29, 2004, and the years ended
December&nbsp;31, 2003 and 2002, net cash flows used in
financing activities were $52.0&nbsp;million,
$63.5&nbsp;million, and $18.8&nbsp;million, respectively,
primarily relating to the impact of the net change in
intercompany accounts with Ingersoll-Rand. Additionally,
dividends of $8.2&nbsp;million and $5.1&nbsp;million were paid
in 2002 and in the period from January 1 through
October&nbsp;29, 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Predecessor had approximately $44.3&nbsp;million of cash on
the closing date, subject to closing adjustments. Our primary
cash uses will be to fund principal and interest payments on our
debt, and for working capital and capital expenditures. Interest
expense was $10.0&nbsp;million for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004. Our
interest expense, after giving effect to the transactions, for
the twelve month period ended December&nbsp;31, 2004 would have
been approximately $54.0&nbsp;million. We expect to fund these
cash needs with operating cash flow and borrowings under the
revolving credit portion of our senior secured credit facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of the transactions, we incurred debt of
$815.0&nbsp;million under the notes and the senior secured
credit facility, assumed approximately $3.1&nbsp;million of debt
in foreign locations, and have additional borrowing capacity of
$300.0&nbsp;million under the revolving credit portion of the
senior secured credit facility, subject to certain conditions.
At December&nbsp;31, 2004, of the $300.0&nbsp;million of
capacity, $143.4&nbsp;million was used for outstanding letters
of credit. The senior secured credit facility requires, among
other covenants, that a minimum consolidated net interest
coverage ratio and a maximum consolidated net leverage ratio be
maintained.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The interest rates applicable under the Term B and revolving
credit portion of our senior secured credit facility vary based
on LIBOR and EURIBOR and our leverage ratio. The interest rate
on the senior subordinated notes is fixed at
7<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">8</FONT>%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The $395.0&nbsp;million of term loans under the senior secured
credit facility have fixed amortization of principal required to
be repaid quarterly beginning on December&nbsp;31, 2004 in an
amount equal to
<FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>
of 1% of the amount of principal outstanding. In addition, we
are is also required to make additional mandatory prepayments of
principal with any excess cash flow (as defined in the senior
secured credit facility), if any. See &#147;Description of
Indebtedness.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our capital expenditures have averaged $10.3&nbsp;million per
year over the past three years. We expect that our capital
expenditures going forward will continue to approximate 1.0% of
sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our ability to make payments on and to refinance our
indebtedness, including the notes, and to fund planned capital
expenditures and research and development efforts, will depend
on our ability to generate cash in the future. This, to a
certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are
beyond our control. Based on our current and anticipated levels
of operations and conditions in our markets and industry, we
believe that our cash flow from operations, available cash and
available borrowings under the senior secured credit facility
will be adequate to meet our working capital, capital
expenditures, debt service and other funding requirements in the
foreseeable future.
</DIV>

<P align="center" style="font-size: 10pt;">55
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Quantitative and Qualitative Disclosures About Market Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our results of operations are affected by fluctuations in the
value of local currencies in which we transact business. We
record the effect of non-U.S. dollar currency transactions when
we translate the non-U.S. subsidiaries&#146; financial
statements into U.S.&nbsp;dollars using exchange rates as they
exist at the end of each month. The effect on our results of
operations of fluctuations in currency exchange rates depends on
various currency exchange rates and the magnitude of the
transactions completed in currencies other than the U.S. dollar.
Net foreign currency losses (gains) were $1.0&nbsp;million,
($2.1)&nbsp;million, $4.4&nbsp;million and $1.1&nbsp;million for
the periods from October&nbsp;30, 2004 through December&nbsp;31,
2004 and January&nbsp;1, 2004 through October&nbsp;29, 2004, and
the years ended December&nbsp;31, 2003 and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We enter into financial instruments to mitigate the impact of
changes in currency exchange rates that may result from
long-term customer contracts where we deem appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have interest rate risk related to the term loan portion of
our senior secured credit facility as the interest rate on the
principal outstanding on the loans is variable. A 1% increase in
the interest rate would have the effect of increasing interest
expense by $4.0&nbsp;million annually (based on the outstanding
principal balance at December&nbsp;31, 2004).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Contractual Obligations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a summary of our significant future contractual
obligations by year as of December&nbsp;31, 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Payments Due by Period</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Less than</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>More than</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1&nbsp;Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1-3&nbsp;Years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>3-5&nbsp;Years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5&nbsp;Years</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt obligations(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>820,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>800,399</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loans payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    License agreement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,778</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>843,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>802,177</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Principally includes amortization payments required to be made
    under our senior secured credit facility, as well as the notes.
    See &#147;Description of Indebtedness.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Covenant Compliance</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that our senior secured credit facility and the
indenture governing our outstanding notes are material
agreements, that the covenants are material terms of these
agreements and that information about the covenants is material
to an investor&#146;s understanding of our financial condition
and liquidity. The breach of covenants in the senior secured
credit facility that are tied to ratios based on Adjusted
EBITDA, as defined below, could result in a default under the
senior secured credit facility and the lenders could elect to
declare all amounts borrowed due and payable. Any such
acceleration would also result in a default under our indenture.
Additionally, under the senior secured credit facilities and
indenture, our ability to engage in activities such as incurring
additional indebtedness, making investments and paying dividends
is also tied to ratios based on Adjusted EBITDA.
</DIV>

<P align="center" style="font-size: 10pt;">56
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Covenant levels and pro forma ratios for the four quarters ended
December&nbsp;31, 2004 are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Covenant Level</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004 Ratio</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Senior Secured Credit Facility(1)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum Adjusted EBITDA to cash interest ratio</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.75</TD>
    <TD align="left" valign="bottom" nowrap>x</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.88</TD>
    <TD align="left" valign="bottom" nowrap>x</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Maximum total debt to Adjusted EBITDA ratio</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.85</TD>
    <TD align="left" valign="bottom" nowrap>x</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.53</TD>
    <TD align="left" valign="bottom" nowrap>x</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Indenture(2)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pro forma Adjusted EBITDA to pro forma fixed charge
    ratio required to incur additional debt pursuant to ratio
    provisions(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.0</TD>
    <TD align="left" valign="bottom" nowrap>x</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.85</TD>
    <TD align="left" valign="bottom" nowrap>x</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Our senior secured credit facility requires us to maintain an
    Adjusted EBITDA to cash interest ratio starting at a minimum of
    1.75x and a total debt to Adjusted EBITDA ratio starting at a
    maximum of 6.85x. Failure to satisfy these ratio requirements
    would constitute a default under the senior secured credit
    facility. If lenders under the senior secured credit facility
    failed to waive any such default, repayment obligations under
    the senior secured credit facility could be accelerated, which
    would also constitute a default under the indenture.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Our ability to incur additional debt and make certain restricted
    payments under our indenture, subject to specified exceptions,
    is tied to an Adjusted EBITDA to fixed charge ratio of at least
    2.0 to 1.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    The ratio is calculated giving pro forma effect to the
    acquisition and the incurrences of debt under the indenture and
    the senior secured credit facility.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA as used herein is defined as net income before
interest expense, provision for income taxes, depreciation and
amortization and further adjusted to exclude non-recurring
items, non-cash items and other adjustments permitted in
calculating covenants contained in the related senior secured
credit facility and indenture governing the notes, as shown in
the table below. We believe that the inclusion of supplementary
adjustments to EBITDA applied in presenting Adjusted EBITDA are
appropriate to provide additional information to investors to
demonstrate compliance with financing covenants. The
presentation of Adjusted EBITDA, a non-GAAP financial measure,
and ratios based thereon, do not comply with accounting
principles generally accepted in the United States.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Four Quarters</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004(a)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,380</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,245</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,938</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,156</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,498</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,984</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EBITDA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net reduction in SFAS&nbsp;106 expense(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,322</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Excess (additional) corporate allocation(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,876</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,122</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Removal of incremental corporate overhead(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,025</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring severance(e)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Productivity measures(f)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(62</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,617</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension(g)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,317</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,529</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">57

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Four Quarters</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October 29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004(a)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(In thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nigeria loss contract(h)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,643</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nigeria casualty losses(i)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for obsolete material(j)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New York State grant(k)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity (earnings) losses(l)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(194</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>819</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Insurance claim(m)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,145</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Settlement of product liability claim(n)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,500</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,500</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    China receivables(o)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>970</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of purchased in-process research and development assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory step-up write-off(p)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,281</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other expense (income)(q)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,976</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(826</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>191</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Compensation adjustment(r)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(150</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(150</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(125</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(125</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted EBITDA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>52,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>106,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>104,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>45,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>149,901</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects the combination of financial information for the
    Predecessor and Successor periods as required by the covenants
    of our senior secured credit facility and the indenture
    governing the notes.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects the adjustment to historical expense for the change in
    postretirement benefits other than pension expense due to
    Ingersoll-Rand&#146;s retention of the obligations for all
    employees who are retired or eligible to retire as well as the
    results of actuarial valuations performed as of the transaction
    date for the portion retained by us.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects the difference between the corporate overhead expenses
    allocated to us by Ingersoll-Rand and our estimated annual
    stand-alone expenses.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects adjustment for removal of incremental corporate
    allocation initiated in 2003 by Ingersoll-Rand.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects severance expenses associated with our efficiency
    initiatives. Subsequent to 2002, these expenses were included in
    cost of goods sold and selling and administrative expenses. See
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (f)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects severance expenses associated with our efficiency
    initiatives. The expenses were included in the cost of goods
    sold and selling and administrative expenses. See
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (g)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects an adjustment for additional funding of certain pension
    plans and the elimination of actuarial losses through purchase
    accounting.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (h)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects losses under (i)&nbsp;a contract imposed on the
    business by Halliburton Industries terminated at the end of
    2004, and (ii)&nbsp;a contract in Nigeria we were forced to exit
    because of force majeure.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (i)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects losses of inventory stocks resulting from a fire in a
    warehouse in Nigeria.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (j)</TD>
    <TD></TD>
    <TD valign="top">
    Offsets impact of decision to increase obsolete and slow moving
    inventory reserve level. See &#147;Management&#146;s Discussion
    and Analysis of Financial Condition and Results of
    Operations.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (k)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects one-time income from a New York State grant for the
    year ended December&nbsp;31, 2002, and one-time charge related
    to refunding a portion of the grant in the year ended
    December&nbsp;31, 2003. See &#147;Management&#146;s Discussion
    and Analysis of Financial Condition and Results of
    Operations.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (l)</TD>
    <TD></TD>
    <TD valign="top">
    Non-cash (gains) losses in joint ventures.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (m)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects gains from the settlement of an insurance claim
    relating to a fire that occurred in 2000.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">58
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    (n)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects one-time gain from settlement of a legal claim. See
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (o)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects write-off of receivables related to business closure.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (p)</TD>
    <TD></TD>
    <TD valign="top">
    As a result of the transactions, we wrote up inventory in the
    amount of $7.4&nbsp;million. Of this amount, $2.3&nbsp;million
    was expensed in the two-month period from October&nbsp;30, 2004
    through December&nbsp;31, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (q)</TD>
    <TD></TD>
    <TD valign="top">
    Non-operating income and expense and other non-cash charges and
    credits. See &#147;Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (r)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects increased compensation expense for our Chief Executive
    Officer.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recent Accounting Pronouncements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB released SFAS&nbsp;123R, Share-Based
Payments, that is a revision of SFAS&nbsp;No.&nbsp;123,
&#147;Accounting for Stock-Based Compensation.&#148; This
statement supersedes APB Opinion No.&nbsp;25, &#147;Accounting
for Stock Issued to Employees,&#148; and its related
implementation guidance. SFAS&nbsp;123R focuses primarily on
accounting for transactions in which an entity obtains employee
services in share-based payment transactions. We have elected to
early adopt the provisions of SFAS&nbsp;123R as of
October&nbsp;30, 2004. As a result, we recognized compensation
cost in relation to share-based compensation arrangements of $75
thousand for the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the FASB issued SFAS&nbsp;No.&nbsp;151,
&#147;Inventory Costs, an Amendment of Accounting Research
Bulletin No.&nbsp;43, Chapter&nbsp;4&#148;.
SFAS&nbsp;No.&nbsp;151 clarifies that abnormal amounts of idle
facility expense, freight handling costs and wasted materials
(spoilage)&nbsp;should be recognized as current-period charges
and require the allocation of fixed production overheads to
inventory based on the normal capacity of the production
facilities. The guidance in this statement is effective for
inventory costs incurred during fiscal years beginning after
June&nbsp;15, 2005. The adoption of this statement is not
expected to have a material impact on our financial reporting
and disclosures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;153,
&#147;Exchanges of Nonmonetary Assets, an Amendment of APB
Opinion No.&nbsp;29, &#147;Accounting for Nonmonetary
Transactions&#148;. SFAS&nbsp;No.&nbsp;153 eliminates the
exception from fair value measurement for nonmonetary exchanges
of similar productive assets in paragraph&nbsp;21 (b)&nbsp;of
APB Opinion No.&nbsp;29 and replaces it with an exception for
exchanges that do not have commercial substance.
SFAS&nbsp;No.&nbsp;153 specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange.
This statement is effective for fiscal years beginning after
June&nbsp;15, 2005. The adoption of this statement is not
expected to have a material impact on our financial reporting
and disclosures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employee Benefit Plans</B>
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Pensions</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We contributed a discretionary amount of $14.4&nbsp;million to
our pension plans in 2003, $33.3 million for the period from
January&nbsp;1, 2004 through October&nbsp;29, 2004 and $0.5
million from the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004. We contributed approximately
$3.6&nbsp;million to our non U.S.&nbsp;plans during 2004. Our
policy is to fund an amount, which could be in excess of the
pension cost expensed, subject to the limitations imposed by
current tax regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pension benefit payments for 2004 were $17.7 million for the
period from January&nbsp;1, 2004 through October&nbsp;29, 2004
and $2.5 million for the period from October&nbsp;30, 2004
through December&nbsp;31, 2004. Pension expense for 2004 was
$3.4 million for the period from January&nbsp;1, 2004 through
October&nbsp;29, 2004 and $0.5 million for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004.
</DIV>

<P align="center" style="font-size: 10pt;">59
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Postretirement Benefits Other Than Pensions</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We fund postretirement benefit costs principally on a
pay-as-you-go basis. Benefit payments for postretirement
benefits, which reflect future service, as appropriate, are
expected to be paid as follows: $22,000 in 2005, $82,000 in
2006, $213,000 in 2007, $491,000 in 2008, and $11.7&nbsp;million
for the years 2009 through 2014.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the transactions, Ingersoll-Rand has agreed
to retain all postretirement benefit obligations with respect to
our employees who were retired or were eligible to retire on or
prior to the consummation of the transactions. Our
postretirement benefit obligations decreased by approximately
67% as a result of Ingersoll-Rand&#146;s retention of these
obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Critical Accounting Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The notes to the financial statements include a summary of
significant accounting policies and methods used in the
preparation of the consolidated financial statements and the
following summarizes what we believe are the critical accounting
policies and methods we use:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Revenue recognition</I>&nbsp;&#151; We use the completed
    contract method for recognizing revenue for our long-term
    contracts. This method recognizes revenue when the contract is
    substantially completed as opposed to the
    percentage-of-completion method which recognizes revenue as the
    contract progresses. If we use the percentage-of-completion
    method to recognize revenue, revenue would be recognized in
    periods prior to substantial completion of the contract.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
     The completed contract method requires the use of estimates as
    to the future costs that will be incurred related to the
    contract. These costs include material, labor and overhead.
    Factors influencing these future costs include the availability
    of materials and skilled laborers.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Inventories</I>&nbsp;&#151; We purchase materials for the
    manufacture of components for use in our contracts and for use
    by our aftermarket parts and services business. The decision to
    purchase a set quantity of a particular item is influenced by
    several factors including: current and projected cost; future
    estimated availability; existing and projected contracts to
    produce certain items; and the estimated needs for our
    aftermarkets parts and services business. We value our inventory
    at the lower of cost or market value. We estimate the net
    realizable value of our inventories and establish reserves to
    reduce the carrying amount of these inventories as necessary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Employee benefit plans</I>&nbsp;&#151; We provide a range of
    benefits to employees and retired employees, including pensions,
    postretirement, postemployment and health care benefits.
    Determining the cost associated with such benefits is dependent
    on various actuarial assumptions, including discount rates,
    expected return on plan assets, compensation increases, employee
    mortality and turnover rates, and health care cost trend rates.
    Independent actuaries perform the required calculations to
    determine expense in accordance with U.S.&nbsp;generally
    accepted accounting principles. Actual results may differ from
    the actuarial assumptions and are generally accumulated and
    amortized over future periods. We review our actuarial
    assumptions at each measurement date and make modifications to
    the assumptions based on then current rates and trends if
    appropriate to do so. The discount rate, the rate of
    compensation increase and the expected long-term rates of return
    on plan assets are determined as of the measurement date. The
    discount rate reflects a rate at which pension benefits could be
    effectively settled. The discount rate is established and based
    primarily on the yields of high-quality fixed-income investments
    available and expected to be available during the period to
    maturity of the pension and postretirement benefits. We also
    review the yields reported by Moody&#146;s on AA corporate bonds
    as of the measurement date. The rate of compensation increase is
    dependent on expected future compensation levels. The expected
    long-term rates of return are projected to be the rates of
    return to be earned over the period until the benefits are paid.
    Accordingly, the long-term rates of return should reflect the
    rates of return on present investments, expected contributions
    to be received during the current year and on reinvestments over
    the period. The rates of return utilized reflect the expected
    rates of return during the periods for which the payment of
    benefits is deferred. The expected long-term rate</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">60
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    of return on plan assets used is based on what is realistically
    achievable based on the types of assets held by the plans and
    the plan&#146;s investment policy. We review each plan and its
    returns and asset allocations to determine the appropriate
    expected long-term rate of return on plan assets to be used. At
    the end of 2002, we believed a revision to our long-term
    expectations for returns was necessary based upon the market
    performance experienced in 2001 and 2002. We believe that the
    assumptions utilized in recording its obligations under its
    plans are reasonable based on input from its actuaries, outside
    investment advisors, and information as to assumptions used by
    plan sponsors.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
     Stockholders&#146; equity for the periods from October&nbsp;30,
    2004 through December&nbsp;31, 2004, from January&nbsp;1, 2004
    through October&nbsp;29, 2004, and for the year ended
    December&nbsp;31, 2003, include a reduction for a minimum
    liability adjustment net of tax of $0.9 million, $5.0 million
    and $(0.9) million, respectively. The reason for the increase in
    the minimum liability adjustment year-over-year is primarily due
    to the change in the discount rates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
     Changes in any of the assumptions that were used in computing
    the net periodic pension cost or postretirement cost could have
    an impact on the various components that comprise these costs.
    Estimated sensitivities to the U.S. net periodic pension cost of
    a 0.25% rate decrease in the two basic assumptions are a
    follows: the discount rate would increase expense by
    approximately $1.0&nbsp;million, and the estimated return on
    assets assumption would increase expense by approximately
    $0.6&nbsp;million. A 0.25% rate decrease in the discount rate
    for postretirement benefits would increase net periodic
    postretirement benefit cost by $0.3&nbsp;million and a 1.0%
    increase in the health care cost trend rate would increase the
    cost by approximately $2.8&nbsp;million.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Commitments and contingencies</I>&nbsp;&#151; We are involved
    in various litigations, claims and administrative proceedings,
    including environmental matters, arising in the normal course of
    business. We have recorded reserves in the financial statements
    related to these matters which are developed based on
    consultation with legal counsel and internal and external
    consultants and engineers, depending on the nature of the
    reserve. We provide for environmental reserves when, in
    conjunction with our internal and external counsel, we determine
    that a liability is both probable and estimable. In many cases,
    the liability is not fixed or capped when we first record a
    liability for a particular site. Factors that affect the
    recorded amount of the liability in future years include: our
    participation percentage due to a settlement by or bankruptcy of
    other potentially responsible parties; a change in the
    environmental laws requiring more stringent requirements; a
    change in the estimate of future costs that will be incurred to
    remediate the site; and changes in technology related to
    environmental remediation. We have property and casualty
    insurance to cover such liabilities, but there is no guarantee
    that the coverage will be sufficient.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
     We have accrued liabilities for product liability claims,
    including workers&#146; compensation matters and product
    warranty issues. We have recorded reserves in the financial
    statements related to these matters, which are developed using
    input derived from actuarial estimates and historical and
    anticipated experience data depending on the nature of the
    reserve. We believe our estimated reserves are reasonable. If
    the level of claims changes or if the cost to provide the
    benefits related to these claims should change, our estimate of
    the underlying liability may change.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Goodwill and other intangible assets</I>&nbsp;&#151; We have
    significant goodwill and other intangible assets on our balance
    sheet. The valuation and classification of these assets and the
    assignment of amortization lives involves significant judgments
    and the use of estimates. The testing of these intangible assets
    under established accounting guidelines for impairment also
    requires significant use of judgment and assumptions,
    particularly as it relates to the identification of reporting
    units and the determination of fair market value. These
    estimated fair market values are based on estimates of future
    cash flows of our businesses. Factors affecting these future
    cash flows include: the continued market acceptance of the
    products and services offered by our businesses; the development
    of new products and services by our businesses and the
    underlying cost of development; the future cost structure of our
    businesses; and future technological changes. Our goodwill and
    other intangible assets are tested and reviewed for impairment
    on an annual basis or when there is a significant change in
    circumstances. We believe that</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">61
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">our use of estimates and assumptions are
    reasonable and comply with generally accepted accounting
    principles. Changes in business conditions could potentially
    require future adjustments to these valuations.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preparation of all financial statements
includes the use of estimates and assumptions that affect a
number of amounts included in our financial statements. If
actual amounts are ultimately different from previous estimates,
the revisions are included in our results for the period in
which the actual amounts become known. Historically, the
aggregate differences, if any, between our estimates and actual
amounts in any year, have not had a significant impact on the
consolidated financial statements.
</FONT>

<P align="center"><FONT size="2">62
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='109'></A>
</DIV>

<!-- link1 "INDUSTRY OVERVIEW" -->

<P align="center">
<B><FONT size="2">INDUSTRY OVERVIEW</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Compression is a process whereby a volume of gas
or liquid at an existing pressure is moved to a desired higher
pressure. Compression is required at many steps of the oil and
natural gas production and processing cycle: at the wellhead, at
gathering lines, in pipelines, in storage systems, and at
refineries and processing facilities.
</FONT>

<P align="left">
<B><FONT size="2">Upstream</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Over the life of an oil and gas well, reservoir
pressure and deliverability typically decline as reserves are
extracted. With respect to gas, as the natural reservoir
pressure of the well declines below the line pressure of the gas
gathering or pipeline system used to transport the product, gas
no longer flows naturally in those facilities. At this time
compression equipment is applied to increase and overcome the
pressure into the system. Compression is also used for enhanced
oil production via secondary or tertiary recovery techniques,
such as by re-injecting gas to lift oil or maintain reservoir
pressure, increasing the reservoir production rate and yield.
</FONT>

<P align="left">
<B><FONT size="2">Midstream</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Midstream applications involve the transmission
and storage of hydrocarbons. As gas is transported through a
pipeline, compressor units are applied along the pipeline to
manage the flow of natural gas through the pipeline to its
destination.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon reaching a processing facility, crude oil
and natural gas are generally impure and not marketable as
produced at the wellhead. Processing equipment is used to
separate oil, gas and water and to remove various contaminants
in preparation for further processing. This processing involves
chemical reactions at specific temperatures, volumes and
pressures. Compression is integral to affect these processes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Compression is also used in gas storage projects
to inject gas into underground reservoirs during off-peak
seasons for withdrawal later during periods of high demand.
</FONT>

<P align="left">
<B><FONT size="2">Downstream/ Industrial</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In refining and petrochemical applications, oil
and gas are further treated to create a wide range of fuels,
industrial gases and chemicals. In refineries, compression is
integral to producing fuels such as gasoline, jet fuel, diesel
and heating oil from crude oil.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In late 1999, the Clean Air&nbsp;&#38; Water Act
was legislated with a Tier&nbsp;2 revision to reduce the sulfur
content of gasoline and diesel by mid-2006. The Clean Air Act,
Tier&nbsp;2 impacts all domestic refiners and international
suppliers who ship to the U.S. with respect to sulfur, toxins,
diesel and gasoline fuels emissions, and air and water purity.
These regulations are driving increased use of compression
equipment in the refinery industry as such products are integral
to the processes that allow the production of fuels that meet
the more stringent emissions standards set forth by the
U.S.&nbsp;Environmental Protection Agency.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other downstream compression applications are
found in the petrochemical industry where hydrocarbon raw
material (primarily crude oil and natural gas) are processed
into products such as ethylene, propylene, ammonia or methanol
for the production of end use products like fertilizer, plastics
and fibers.
</FONT>

<P align="left">
<B><FONT size="2">Rotating Equipment Industry</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The rotating equipment and services industry
manufactures and services a wide range of technologically
advanced equipment, including centrifugal and reciprocating
compressors, steam and gas turbines, expanders and control
systems. Demand for these solutions comes from a wide variety of
large end markets, including the three major segments of the oil
and gas industries (upstream, involving the production of oil
and gas; midstream, involving the preparation and transportation
of natural gas and liquids for future use; and downstream,
involving refining), and the petrochemical, chemical, general
industrial and power industries.
</FONT>

<P align="center"><FONT size="2">63
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The rotating equipment industry includes a wide
and diverse range of products, which can be grouped into two
distinct categories:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;standard&#148; equipment, based on a
    single, non-custom design, used for low-horsepower,
    lower-pressure and lower-volume applications in wellhead
    production from onshore or shallow-water offshore platform
    production; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">custom-engineered equipment, built to customer
    specifications, engineered for the specific operating
    environment and application in which it will be put to use. This
    equipment is generally used in high-pressure/volume
    applications, typically consists of large equipment packages,
    and is generally used in large scale production operations
    including mission-critical applications in deepwater offshore
    sites, major pipeline and storage systems and large processing
    and refining facilities and liquefying natural gas.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most of our revenues are generated from the sale
and servicing of this second category of rotating equipment. We
estimate that the worldwide aggregate annual value of new unit
sales of the classes of equipment we manufacture and the
aftermarket parts and services needs of the installed base of
such equipment (both in-house and outsourced) is approximately
$10&nbsp;billion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our industry is typically divided into two
segments: new unit sales and aftermarket parts and services.
</FONT>

<P align="left">
<B><FONT size="2">New Units</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">New unit sales includes the engineering,
manufacturing and sales of reciprocating and centrifugal
compressors, steam and gas turbines, expanders and control
systems.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Reciprocating
    Compressors.</FONT></I></B><FONT size="2"> Reciprocating
    compressors use traditional piston and cylinder design to
    increase pressure within a chamber. Typically, reciprocating
    compressors are used in lower volume/higher compression ratio
    applications, including refinery processes, natural gas
    gathering and processing, extraction of natural gas liquids,
    chemical and refrigeration processes, and natural gas, ethylene,
    carbon dioxide and natural gas pipelines.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Centrifugal
    Compressors.</FONT></I></B><FONT size="2"> Centrifugal
    compressors are a class of turbomachinery that uses a series of
    graduated impellers to increase pressure. Centrifugal
    compressors are typically used in a variety of
    higher-volume/lower compression ratio, and low and high pressure
    applications, including oil and gas production, liquid natural
    gas, gas to liquid, synfuels, and process applications similar
    to reciprocating compressors.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Turbines.</FONT></I></B><FONT size="2">
    Steam and gas turbines are typically used as prime movers for
    mechanical and electrical drive applications including
    compressors, pumps, fans, blowers, and electrical generators.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since many of the units we sell are placed in
critical applications for clients, it is important that this
equipment functions efficiently, reliably and at a low cost. For
this reason we believe that clients are focused on reducing the
total cost of ownership throughout the life cycle of the
equipment, and typically seek the most advanced technology in
order to increase operating efficiency. Additionally, with units
having a typical operating life of 30&nbsp;years or more, units
have substantial long term parts and services needs over their
operating lives. For this reason we also believe clients
consider quality and breadth of aftermarket support in selecting
a supplier of rotating equipment.
</FONT>

<P align="left">
<B><FONT size="2">Aftermarket Parts and Services</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">With operational lives measured in decades, there
is a substantial installed base of compressors and related
equipment in operation worldwide. Over their operating life
cycle, these units have substantial parts and servicing needs.
In addition, the units are typically completely revamped on a
periodic basis. Clients purchase parts and upgrades either from
the OEM or third-party providers. Repair, maintenance, and
revamp service needs are met through a combination of client
inhouse resources, OEMs and third-party service providers.
Clients are increasingly outsourcing their services, as
outsourcing affords clients greater financial and operating
flexibility by reducing their investment in maintenance
personnel while providing them technically proficient service
resources with strong product experience. When selecting an
aftermarket service
</FONT>

<P align="center"><FONT size="2">64
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">provider, clients typically seek suppliers who
can provide responsive and reliable service and solutions, from
locally based service centers, across their entire installed
base.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Industry Conditions</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Overall demand for compression products and
services is generally linked to oil and natural gas consumption,
both domestically and internationally. We believe that the
rotating equipment and aftermarket services industry continues
to have significant growth potential due to the following
factors:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">natural gas consumption increased worldwide at an
    average rate of 2.4%&nbsp;per year as a result of worldwide
    economic growth and the recognition of natural gas as a clean
    air fuel;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">increased demand for forecasted natural gas is
    driving substantial growth in spending on liquefied natural gas
    infrastructure; forecast spending on LNG plant equipment for
    2005-2008 is $13.4&nbsp;billion, 155% more than was spent on
    such equipment from 1964-2004;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">decline rates associated with maturing natural
    gas fields in the United States (as reflected in the graph
    below) and other countries have resulted in increased
    requirements for compression products and services to maintain
    commercially viable levels of production;
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<IMG src="y08819s1y0881904.gif" alt="(Graph)">
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the refining sector continues to experience
    demand pressures as current refinery capacity is reaching a peak;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">environmental laws such as the Clean Air Act and
    the curtailing of the prior practice of flaring gas will
    increase the demand for compression products and services;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the production of natural gas and oil worldwide,
    as reflected in the graph below, will continue to grow as a
    result of increasing demand for fossil fuels;&nbsp;and
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<IMG src="y08819s1y0881905.gif" alt="(Graph)">

<P align="center"><FONT size="2">65
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">continued development of pipeline infrastructure,
    as reflected in the graph below, particularly in Asia and Latin
    America, and increased privatization of state-owned energy
    producers internationally, are leading to increased outsourcing
    of compression services.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<IMG src="y08819s1y0881906.gif" alt="(Graph)">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that rotating equipment solutions
providers with global scale will be well positioned to
participate in a disproportionately high share of the future
growth in this industry as customers increasingly shift their
business to the handful of companies with the ability to fulfill
the full range of equipment and service needs worldwide.
</FONT>

<P align="left">
<B><FONT size="2">Industry Stability</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Demand for compressors and related products and
aftermarket services is generally less affected by short-term
market cycles and oil and gas price volatility than the
financial performance of companies operating in other sectors of
the oilfield services industry because:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the demand for rotating equipment solutions is
    tied primarily to oil and natural gas consumption, which is
    generally less cyclical in nature than exploration activities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">rotating equipment is typically required for
    (i)&nbsp;oil and gas to be delivered from the wellhead to
    end-users, and (ii)&nbsp;end users to be able to process the oil
    and gas;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the customer base for rotating equipment
    solutions covers a wide range of end markets; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">demand for rotating equipment and services is
    geographically diversified.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Adding to this stability is the fact that, while
rotating equipment often must be specifically engineered or
reconfigured to meet the unique demands of our customers, the
fundamental technology of compression equipment has not
experienced significant technological change.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The foregoing information includes projections,
or &#147;forward-looking statements.&#148; Projections are
inherently uncertain; actual events will differ from the
projections. Forecasts are particularly likely to be inaccurate,
especially over long periods of time. See &#147;Risk
Factors&#148; for factors that could cause actual results to
vary from results referred to in the forward-looking statements
above. See &#147;Market and Industry Data.&#148;
</FONT>

<P align="center"><FONT size="2">66
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='110'></A>
</DIV>

<!-- link1 "BUSINESS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BUSINESS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are among the largest global suppliers of rotating equipment
solutions to the worldwide oil, gas, petrochemical and process
industries. In 2004, approximately 94% of our combined revenues
were generated from oil and gas infrastructure spending and 62%
of our total combined revenues were generated by our aftermarket
parts and services segment, with the remainder generated by our
new units segment. Our services and products are used for a wide
range of applications, including oil and gas production,
high-pressure field injection and enhanced oil recovery,
pipelines, refinery processes, natural gas processing, and
petrochemical production. We believe we have the largest
installed base in the world of the classes of equipment we
manufacture, with approximately 40% of the total installed base
of equipment in operation. Our installed base of equipment
includes such well-recognized brand names as Dresser-Rand,
Dresser-Clark, Worthington, Turbodyne and Terry. We provide a
full range of aftermarket parts and services to this installed
base through our global network of 24&nbsp;service and support
centers covering 105&nbsp;countries. Our extensive and diverse
client base consists of most major independent oil and gas
producers and distributors worldwide, national oil and gas
companies, and chemical and industrial companies. Our clients
include BP, ChevronTexaco, Statoil, ExxonMobil, Lukoil, Sinopec,
Shell Chemical, Duke Energy and the U.S. and certain foreign
governments. No single client has represented more than 5% of
our total revenues over any consecutive two-year period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We operate globally with manufacturing facilities in the United
States, France, Germany, Norway, India and Brazil. We have one
of the broadest sales and services networks in the industry,
with locations in all of the major international energy markets,
established coverage of 105&nbsp;countries, and over
4,600&nbsp;employees worldwide. We believe our recent financial
performance demonstrates our ability to improve our results
through on-going commitment to operational excellence, as well
as through the growth of our services-centered, solutions-based
business model. For the year ended December&nbsp;31, 2003 we
generated net income of $20.4&nbsp;million and EBITDA of
$59.0&nbsp;million. For the period from January&nbsp;1, 2004
through October&nbsp;29, 2004 and the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004 we
generated net income of $42.2&nbsp;million and
$7.2&nbsp;million, respectively, and EBITDA of
$73.7&nbsp;million and $40.4&nbsp;million, respectively. This
reflects the impact of both our growth-oriented business
realignment and our continued focus on operating efficiency. Our
backlog at December&nbsp;31, 2004 was $637.6&nbsp;million
compared to $419.9&nbsp;million at December&nbsp;31, 2003. Our
backlog increased from $520.0&nbsp;million at March&nbsp;31,
2004 to $841.8&nbsp;million at March&nbsp;31, 2005, of which we
expect $250.1&nbsp;million not to be filled by December&nbsp;31,
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We continue to evolve our business toward a solutions-based
service offering that combines our industry-leading technology,
proprietary worldwide service center network and deep product
expertise. This approach drives our growth as we offer
integrated service solutions that help our clients maximize
returns on their production and processing equipment. We believe
our business model and alliance-based approach align us with our
clients who are shifting from purchasing isolated units and
services on a transactional basis to choosing service providers
that can help optimize performance over the entire life cycle of
their equipment. Our alliance program encompasses both the
provision of new unit and/or services, and we offer our clients
a dedicated team, streamlined engineering and procurement
process and a life cycle approach to manufacturing, operating
and maintaining their equipment, whether originally manufactured
by us or by a third party. In our alliances, we are either the
exclusive or preferred supplier of equipment and aftermarket
parts and services to a client. Our alliances enable us to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    lower clients&#146; total cost of ownership and improve
    equipment performance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    lower our and our clients&#146; transaction costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    better forecast our future revenues;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The markets in which we operate are large and fragmented. We
estimate that the worldwide aggregate annual value of new unit
sales of the classes of equipment we manufacture and the
aftermarket parts and services needs of the installed base of
such equipment (both in-house and outsourced) is approximately
</DIV>

<P align="center" style="font-size: 10pt;">67
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">$10&nbsp;billion. We believe that we are well
positioned to benefit from a variety of long-term trends driving
demand in our industry, including:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the trend to increased outsourcing of equipment
    maintenance and operation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the maturation of producing fields worldwide,
    which requires increasing use of compression equipment to
    maintain production levels;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the substantial increase in demand for natural
    gas, which is driving growth in gas production, storage and
    transmission infrastructure;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulatory and environmental initiatives,
    including clean fuel legislation and stricter emissions controls
    worldwide;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the aging installed base of equipment, which is
    increasing demand for aftermarket parts and services, revamps
    and upgrades;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">increasing construction of natural gas
    production, storage and transportation infrastructure;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the increased worldwide demand for fuel and
    feedstock resulting from economic growth.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Competitive Strengths</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Global Presence and Market
Leadership.</FONT></I><FONT size="2"> We believe that our broad
portfolio of products and services, global presence, strong
brand recognition, track record of innovation and reputation for
quality and performance, combined with established coverage of
105&nbsp;countries, provide us with a significant advantage in
competition for business from large, multinational customers. We
operate in all of the world&#146;s significant energy markets
and believe that we are a leading provider in most of the
markets we serve.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Largest Installed Base in the
Industry.</FONT></I><FONT size="2"> As of December&nbsp;31,
2004, we estimate that there were more than 77,000 of our units
in operation. We believe this represents approximately 40% of
all the units in our classes of products that are currently in
operation, and is the largest installed base of such equipment
in the industry. This significant scale advantage offers a
number of competitive benefits, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a significant opportunity to grow our aftermarket
    parts and services business as a result of the portion of our
    installed base currently serviced by clients in-house, combined
    with an industry trend toward outsourcing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a substantial source of stable, recurring,
    defensible high-margin aftermarket revenue from the significant
    parts and services requirements of units over their long
    operational lives and clients&#146; general preference for OEM
    parts and services; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the capacity to support both a high level of
    reinvestment in research and development and a global service
    center network that is difficult for competitors with a smaller
    installed base to match.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Largest Network of Service and Support
Centers.</FONT></I><FONT size="2"> We have 24 service and
support centers employing approximately 1,000 service personnel
in 14 countries, providing coverage in 105&nbsp;countries and
offering a broad range of support services. Because many
aftermarket parts and services sales decisions are made by
clients at the local plant level, on the basis of supplier
expertise, local presence and response time, we believe that our
global network puts us in position to win aftermarket business
by responding quickly to client service needs with local
resources and OEM product knowledge and experience. This network
helps us to protect and grow our aftermarket parts and services
business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Leading Technology
Platform.</FONT></I><FONT size="2"> We have a long history of
technology leadership and innovation in our industry. Our
research efforts center around leading technologies that
maximize operating performance by increasing efficiency,
durability, reliability and versatility. We are focused on
developing new platform products, enhancing our existing
platforms, and developing upgrades that can be offered to our
existing installed base of units. For example, in the mid-1990s
we spent approximately five years and over $60&nbsp;million to
develop our DATUM turbo compressor platform offerings. We
believe this platform is more efficient than competing
offerings, offers clients the lowest total cost of ownership,
reduces emissions and noise levels and
</FONT>

<P align="center"><FONT size="2">68
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">improves ease and speed of maintenance. In
addition, we have brought to market numerous upgrades to our
installed base in the past several years, including emission
control equipment, performance and maintenance enhancers, and a
suite of remote monitoring instrumentation.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Fastest Cycle Time.</FONT></I><FONT size="2">
We believe we generally have the fastest cycle time in the
industry among manufacturers in our product range. Our short
cycle time, the time from order booking to unit delivery, is
valuable to the client and provides us with a competitive
advantage. For example, the rules based design of our DATUM
compressor platform, combined with our proprietary product
Configurator software, allow us to shorten the front-end
specification, design and engineering phases of the
manufacturing process typically by one-third, thereby reducing
the overall delivery time to our clients. On a typical oil and
gas project, this can reduce unit delivery time by as much as
twelve&nbsp;weeks, thus reducing project costs and providing
earlier start-up of the production equipment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Substantial Investment in
Systems.</FONT></I><FONT size="2"> We view systems and processes
as key elements in providing rapid, high-quality, differentiated
service. We have invested substantial resources to develop a
number of key proprietary systems, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Configurator.</FONT></I><FONT size="2"> Our
    proprietary system for automating the preliminary engineering
    phase of designing a product to client specifications and
    automatically generating design drawings and bills of materials,
    which enables us to reduce costs and reduce by more than two
    months the typical industry cycle time of 12-14&nbsp;months.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">D-R Avenue.</FONT></I><FONT size="2"> Part of
    our Client Relationship Management (CRM) system, D-R Avenue is a
    recently deployed proprietary database with information on our
    installed base of equipment as well as the equipment of some of
    our competitors, including type, location, age, application, and
    maintenance history. This database positions us to better serve
    our clients and grow our aftermarket parts and services business
    by leveraging our knowledge and resources through a proactive
    sales approach.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Client Interface and Response System
    (CIRS).</FONT></I><FONT size="2"> Part of our CRM system, this
    proprietary client relationship system allows clients to log any
    technical support or service requests they have into our system,
    automatically directs the request to both our field-based
    account manager and the most appropriate subject-matter expert
    in our company, and tracks our follow up on the client request.
    This provides the client with rapid access to the most
    knowledgeable personnel in our organization, and allows us to
    effectively monitor and manage our responsiveness to client
    requests.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Skills Registry.</FONT></I><FONT size="2">
    This database contains profiles of our service personnel,
    including education, training, experience, performance and
    safety records, and language skills. We frequently provide
    clients with profiles of our proposed service personnel,
    allowing them the opportunity to preapprove members of their
    service team.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">TES.</FONT></I><FONT size="2"> We use a
    Siebel-based technology enabled selling tool (TES), which allows
    us to systematically manage the entire sales cycle from lead
    generation to order booking on a global basis. This system
    provides productivity gains in our business processes associated
    with opportunity management, data collection and analysis,
    market intelligence, and communication associated with our
    clients and markets.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Strong and Experienced Management
Team.</FONT></I><FONT size="2"> Our management team has a
demonstrated track record of financial and operational
achievement. The management team has an average of 17&nbsp;years
experience with us, including our CEO who has been with us for
24&nbsp;years, and has extensive industry experience and
longstanding customer relationships. This management team has
been responsible for the successful services revenue growth and
cost reduction initiatives that have driven our increased
profitability.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Attractive Business
Model.</FONT></I><FONT size="2"> Our business model has several
attractive features, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Strong, Stable Cash Flow with Low Growth
    Capital Requirements.</FONT></I><FONT size="2"> As a result of
    the recurring revenue from our aftermarket parts and services
    business, progress payments from customers that limit our need
    for additional working capital as we grow, and the moderate
    capital expenditures needed to support our services-based growth
    model, our business generates strong, recurring cash flows. Our
    cash
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">69
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">flow from operations was $51.0&nbsp;million,
    $57.7&nbsp;million and $17.9&nbsp;million, for the year ended
    December&nbsp;31, 2003, the period from January&nbsp;1, 2004
    through October&nbsp;29, 2004 and the period from
    October&nbsp;30, 2004 through December&nbsp;31, 2004,
    respectively.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Visibility.</FONT></I><FONT size="2"> We have
    a high degree of visibility into our forecasted financial
    performance. A substantial portion of our new unit orders is
    booked six to nine months in advance of delivery. As of
    December&nbsp;31, 2004 and December&nbsp;31, 2003, our new units
    backlog was $488.9&nbsp;million and $287.7 million,
    respectively, representing a 69.9% increase. Since December
    2000, our new units backlog has consistently exceeded 80% of our
    next twelve month new units revenues. Customers may cancel an
    order at any time. Upon cancellation, customers are
    contractually obligated to pay us an amount sufficient to cover
    our costs and commitments incurred through the date of
    cancellation, plus a profit margin. Since 2003, only two orders
    have been cancelled.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Business Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2004, approximately 94% of our combined
revenues were generated from energy infrastructure and oilfield
spending. Additionally, 62% of our total combined revenues were
generated by our aftermarket parts and services business. We
intend to continue to focus on the oilfield, natural gas and
energy sectors and thus expect to capitalize on the expected
long-term growth in equipment and services investment,
especially related to natural gas, in these sectors.
Specifically, we intend to:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Increase Sales of Aftermarket Parts and
Services to Existing Installed Base.</FONT></I><FONT size="2">
The substantial portion of the aftermarkets parts and services
needs of our existing installed base of equipment that we
currently do not, or only partially, service represents a
significant opportunity for growth. We believe the market has a
general preference for aftermarket OEM parts and services. We
are implementing a proactive approach to aftermarket parts and
services sales that capitalizes on our knowledge of the
installed base of our own and our competitors&#146; equipment.
By using D-R Avenue, we are in a position to be able to identify
technology upgrades that improve the performance of our
clients&#146; assets and to proactively suggest upgrade and
revamp projects that clients may not have considered. We are
upgrading our service response by integrating the expertise of
our factory-based product engineers with the client-oriented
service personnel in the field through our CIRS system. The CIRS
system significantly enhances our ability to rapidly and
accurately respond to any technical support or service request
from our clients. We believe our premium service level will
result in continued growth of sales of aftermarket parts and
services.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Expand Aftermarket Parts and Services Business
to Non-Dresser-Rand OEM Equipment.</FONT></I><FONT size="2"> We
believe the aftermarket parts and services market for
non-Dresser-Rand equipment represents a significant growth
opportunity that we have only just begun to pursue on a
systematic basis. As a result of the knowledge and expertise
derived from our long history and experience servicing the
largest installed base in the industry, combined with our
extensive investment in technology, we have a proven process of
applying our technology and processes to improve the operating
efficiency and performance of our competitors&#146; products.
Additionally, with the largest global network of full-capability
service centers, we are often in a position to provide quick
response to clients and to offer local service. We believe these
are important service differentiators for our clients. Through
the D-R Avenue project, we have assembled a significant amount
of data on competitors&#146; installed equipment base, and we
intend to capitalize on our knowledge, our broad network of
service centers, flexible technology and existing relationships
with most major industry participants to grow our aftermarket
parts and services solutions for non-Dresser-Rand equipment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Grow Alliances.</FONT></I><FONT size="2"> As a
result of the need to improve efficiency in a competitive global
economy, oil and gas companies are frequently consolidating
their supplier relationships and seeking alliances with
suppliers, shifting from purchasing units and services on an
individual transactional basis to choosing service providers
that can help them optimize performance over the entire life
cycle of their equipment. In the past three years, we have seen
a high level of interest among our clients in seeking alliances
with us, and we have entered into agreements with more than 30
of our major clients. We plan to leverage our market leadership,
global presence and comprehensive range of products and services
to continue to take advantage of this trend by pursuing new
client alliances as well as strengthening our existing
alliances. We currently are the only alliance
</FONT>

<P align="center"><FONT size="2">70
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">partner for rotating equipment with Statoil,
Marathon Ashland Petroleum, Shell Chemicals (USA)&nbsp;and
others. In addition, we are a preferred, non-exclusive supplier
to other alliance partners, including British Petroleum,
ConocoPhillips, ExxonMobil and Duke Energy.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Expand our Performance-Based Long-Term Service
Contracts.</FONT></I><FONT size="2"> We are growing the
outsourced services market with our performance-based operations
and maintenance solutions (known as our <I>Availability+
</I>program), which are designed to offer clients significant
value (improved equipment performance, decreased life cycle cost
and higher availability levels) versus the traditional services
and products approach. These contracts generally represent
multiyear, recurring revenue opportunities for us that typically
include a performance-based element to the service provided. We
offer these contracts for most of the markets that we serve.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Introduce New and Innovative Products and
Technologies.</FONT></I><FONT size="2"> We believe we are an
industry leader in introducing new, value-added technology.
Product innovation has historically provided, and we believe
will continue to provide, significant opportunities to increase
revenues from both new product sales and upgrades to our, and
other OEMs&#146;, installed base of equipment. Many of our
products utilize innovative technology that lowers operating
costs, improves convenience and increases reliability and
performance. Examples of recent new offerings include adapting
the DATUM compressor platform for the revamping of other OEM
equipment, a new design of dry-gas seals and bearings, and a new
generation of multiphase turbo separators. We recently have
introduced a complete line of remote-monitoring and control
instrumentation that offers significant performance benefits to
clients and enhances our operations and maintenance services
offering. We plan to continue developing innovative products,
including new compressor platforms for subsea and underground
applications, which would further open up new markets to us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Continue to Improve
Profitability.</FONT></I><FONT size="2"> We continually seek to
improve our financial and operating performance through cost
savings and productivity improvements. Since the fourth quarter
of 2002, we adopted a number of restructuring programs across
our entire company. An important element in these programs was
process innovation that permitted us to streamline our
operations. As a result, from September&nbsp;30, 2002 through
December&nbsp;31, 2004, we consolidated eight facilities and
reduced headcount from 5,849 to 4,631&nbsp;employees. As a
result of our business realignment toward our aftermarket parts
and services segment, our lean manufacturing initiatives and our
decision to begin charging customers a margin on third-party
equipment they ask us to package with our own units, our
operating income per employee (based on the average number of
employees in each period) for the year ended December&nbsp;31,
2004 improved substantially as compared to the year ended
December&nbsp;31, 2003. We are focused on continuing to improve
our cost position in every area of our business, and we believe
there is substantial opportunity to further increase our
productivity in the future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Selectively Pursue
Acquisitions.</FONT></I><FONT size="2"> We intend to continue
our disciplined pursuit of acquisition opportunities that fit
our business strategy. We expect to make acquisitions within the
energy sector that add new products or technologies to our
portfolio, provide us with access to new markets or enhance our
current market positions. Given our size and the large number of
small companies in our industry and related industries, we
believe we are well positioned to be an industry consolidator
over time.
</FONT>

<P align="center"><FONT size="2">71
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Services and Products</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We design, manufacture and market highly
engineered rotating equipment and services sold primarily to the
worldwide oil, gas, petrochemical and industrial process
industries. Our segments are new units and aftermarket parts and
services. The following charts show the proportion of our
revenue generated by segment, geography and end market for the
periods indicated:
</FONT>

<P align="center">
<IMG src="y08819s1y0881900.gif" alt="(PIE CHART)">

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">New Units</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a leading manufacturer of
highly-engineered turbo and reciprocating compression equipment
and steam turbines and also manufacture special-purpose gas
turbines. Our new unit products are built to client
specifications for long-life, critical applications. The
following is a description of the new unit products that we
currently offer.
</FONT>

<P align="left">
<IMG src="y08819s1y0216008.gif" alt="(PRODUCT TABLE)">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Turbo Products.</FONT></I><FONT size="2"> We
are a leading supplier of turbomachinery for the oil and gas
industries worldwide. In 2004, in North America new unit
turbomachinery sales, we were the leader, and continued to rank
in the top three in worldwide market share. Turbo products sales
represented 48.7%, 62.5% and 53.4% of our total revenues for the
fiscal years ended 2004, 2003 and 2002, respectively.
Centrifugal compressors utilize turbomachinery technology that
employs a series of graduated impellers to increase pressure.
Generally, these centrifugal compressors are used to re-inject
natural gases into petroleum fields to increase field pressures
for added petroleum recovery. In addition, centrifugal
compression is used to separate the composition of various gases
in process applications to extract specific gases. These
compressors are also used to provide the compression needed to
increase pressures required to transport gases between gas
sources through pipelines.
</FONT>

<P align="center"><FONT size="2">72
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">Applications for our turbo products include gas
lift and injection, gas gathering, storage and transmission,
synthetic fuels, ethylene, fertilizer, refineries and chemical
production.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 1995, we introduced the DATUM product line,
which incorporates enhanced engineering features that provide
significant operating and maintenance benefits for our clients.
The DATUM is a comprehensive line of radial and axial split,
modular and scalable construction, for flows to 500,000 cubic
feet per minute(CFM), and discharge pressures to over 10,000
pounds per square inch gauge (psig). In some applications, a
single DATUM compressor can compress greater flows per frame
size than a comparable existing product offering, resulting in
the capability to handle the same pressure ratio with less
frames. The DATUM product line also offers improved rotor
stability characteristics. DATUM compressors are available in 14
frame sizes. In addition to the DATUM centrifugal compressor
line, we manufacture a line of axial flow compressors, legacy
centrifugal compressors, hot-gas expanders, gas and power
turbines and control systems.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we offer a variety of gas turbines
ranging in power capacity from approximately 1.5 to
60&nbsp;megawatts (MW), which support driver needs for various
centrifugal compressor product lines, as well as for power
generation applications.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Reciprocating
Compressors.</FONT></I><FONT size="2"> We are a leading supplier
of reciprocating compressors, offering products ranging from
medium to high speed separable units driven by engines to large
slow speed motor driven process reciprocating compressors. In
2004, in North America new unit reciprocating compressor sales,
we were the clear leader, and continued to rank in the top three
in worldwide market share. Reciprocating compressor sales
represented 32.3%, 23.1% and 28.8% of our total revenues for the
fiscal years ended 2004, 2003 and 2002, respectively.
Reciprocating compressors use a traditional piston and cylinder
design engine to increase pressure within a chamber. Typically,
reciprocating compressors are used in lower volume/higher
compression ratio applications. We offer 11 models of process
reciprocating compressors, with power capacity ranging from 5 to
45,000 HP, and pressures ranging from vacuum to 60,000 psig. We
offer six models of separable compressors, with power ratings to
10,500 HP. Applications for our reciprocating compressors
include refiner processes, natural gas transmission and
processing, high pressure injection, pipelines, production,
natural gas liquid recovery, gas gathering, gas lift, gas
reinjection and fuel gas booster.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Steam Turbines.</FONT></I><FONT size="2"> We
are a leading supplier of standard and engineered mechanical
drive steam turbines and turbine generator sets. Steam turbines
represented 19.0%, 14.4% and 17.8% of our total revenues for the
fiscal years ended 2004, 2003 and 2002, respectively. Steam
turbines use steam from power plant or process applications and
expand it through nozzles and fixed and rotating vanes,
converting the steam energy into mechanical energy of rotation.
We are one of the few remaining North American manufacturers of
standard and engineered multi-stage steam turbines. Our
mechanical drive steam turbine models have power capacity
ranging from 2 to 75,000 HP and are used primarily to drive
pumps, fans, blowers and compressors. Our models that have power
capacity up to 75,000 kW are used to drive electrical
generators. Our steam turbines are used in a variety of
industries, including oil and gas, refining, petrochemical,
chemical, pulp and paper, electrical power production and
utilities, sugar and palm oil. We also build equipment for
universities, municipalities and hospitals. We are the sole
supplier to the United States Navy of steam turbines for
aircraft carrier propulsion.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Revamp/Upgrade Opportunities</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to supplying new rotating units,
there are significant opportunities for us to supply engineered
revamp and upgrade services to the installed base of rotating
equipment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Revamp services involve significant improvement
of the aerodynamic performance of rotating machinery by
incorporating newer technology to enhance equipment efficiency,
durability or capacity. For example, steam turbine revamps
involve modifying the original steam flow path components to
match new operating specifications such as horsepower, speed and
steam condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upgrade services are offered on all our lines of
rotating equipment, either in conjunction with revamps or on a
stand alone basis. Upgrades are offered to provide the latest
applicable technology components for the equipment to improve
durability, reliability, and/or availability. Typical upgrades
include replacement of
</FONT>

<P align="center"><FONT size="2">73
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">components such as governors, bearings, seals,
pistons, electronic control devices, and retrofitting of
existing lubrication, sealing and control systems with newer
technology.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our proactive efforts to educate our clients on
improved revamp technologies to our DATUM line has proven to
offer significant growth potential with attractive margins. We
have the support systems in place, including our technology
platform and service facilities and our cost effective
Configurator platform, for preparing accurate proposals, to take
advantage of the growth potential in this market. In addition,
we believe our alliance relationships will allow us to create
new revamp opportunities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">New Product Development</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">New product development is an important part of
our business. We believe we are an industry leader in
introducing new, value-added technology. Our investment in
research and development has resulted in numerous technology
upgrades focused on aftermarket parts and services growth. Our
recent new product development includes adapting the DATUM
compressor platform for revamping of other OEM equipment, a new
design of dry-gas seals and bearings, and a new generation of
multiphase turbo separators. We have recently introduced a
complete suite package of remote monitoring and control
instrumentation that offers significant performance benefits to
clients and enhances our operations and maintenance services
offering. We plan to continue developing innovative products,
including new compressor platforms for subsea and underground
applications, which would be first-in-class products opening up
new markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe clients are increasingly choosing
their suppliers based upon capability to custom engineer,
manufacture and deliver reliable high-performance products, with
the lowest total cost of ownership, in the shortest cycle time,
and to provide timely, locally based service and support. Our
client alliance sales have increased substantially as a result
of our ability to meet these client requirements. For example,
the proportion of our combined core centrifugal and process
reciprocating new unit revenues from client alliances has
increased from approximately $17&nbsp;million in 2000 to
approximately $98&nbsp;million in 2004.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Aftermarket Parts and
    Services</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The aftermarket parts and services segment
provides us with long-term growth opportunities and a steady
stream of recurring revenues and cash flow. With a typical
operating life of 30&nbsp;years or more, rotating equipment
requires substantial aftermarket parts and services needs over
its operating life. Parts and services activities tend to
realize higher margins than new unit sales. Additionally, the
cumulative revenues from these aftermarket activities often
exceed the initial purchase price of the unit, which in many
cases is as low as five percent of the total life cycle cost of
the unit to the client. Our aftermarket parts and services
business offers a range of services designed to enable clients
to maximize their return on assets by optimizing the performance
of their mission-critical rotating equipment. We offer a broad
range of aftermarket parts and services, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Replacement Parts
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Equipment Repair&nbsp;&#38; Rerates
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Field Service Turnaround
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Equipment Installation
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">U.S.&nbsp;Navy Service&nbsp;&#38; Repair
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Applied Technology
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Operation and Maintenance Contracts
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Long-Term Service Agreements
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Rotor Storage
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Special Coatings/ Weldings
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">74
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Condition Monitoring
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Product Training
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Controls Retrofit
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Turnkey Installation/ Project Management
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Equipment Technology Upgrades
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Site/ Reliability Audits
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe we have the largest installed base of
the classes of equipment we manufacture and the largest
associated aftermarket parts and services business in the
industry. Many of the units we manufacture are unique and highly
engineered and require knowledge of their design and performance
characteristics to service. We estimate that we currently
provide approximately 50% of the supplier-provided aftermarket
parts and services needs of our own manufactured equipment base,
and less than two percent of the aftermarket parts and services
needs of the equipment base of other manufacturers. We focus on
a global offering of technologically advanced aftermarket
products and services, and as a result, our aftermarket
activities tend to be concentrated on the provision of
higher-value added parts and upgrades, and the delivery of
sophisticated operating, repair, and overhaul services. Smaller
independent companies tend to focus on local markets and have a
more basic aftermarket offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe clients generally show a preference
for purchasing aftermarket parts and services from the OEM of a
unit. A significant portion of our installed base is serviced
in-house by our clients. However, we believe there is an
increasing trend for clients to outsource this activity, driven
by declining in-house expertise, cost efficiency and the
superior service levels and operating performance offered by OEM
service providers. We do not believe that a material portion of
our installed base is serviced by any single third-party
provider. The steady demand from our installed base for parts
and aftermarket services represents a stable source of recurring
revenues and cash flow. Moreover, with our value-based solutions
strategy, we have a demonstrated track record of growth in this
segment as a result of our focus on expanding our service
offerings into new areas, including servicing other OEMs&#146;
installed base of equipment, developing new technology upgrades
and increasing our penetration of higher volume-added services
to our own installed base.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because equipment in our industry typically has a
multi-decade operational life, we believe aftermarket parts and
services capability is a key element in both new unit purchasing
decisions and sales of service contracts. Given the critical
role played by the equipment we sell, customers place a great
deal of importance on a supplier&#146;s ability to provide
rapid, comprehensive service, and we believe that the
aftermarket parts and services business represents a significant
long-term growth opportunity. We believe important factors for
our clients include a broad product range servicing capability,
the ability to provide technology upgrades, local presence and
rapid response time. We offer a comprehensive range of
aftermarket parts and services, including installation,
maintenance, monitoring, operation, repairs, overhauls and
upgrades. We provide our solutions to our clients through a
proprietary network of 24 service and support centers in 14
countries, employing approximately 1,000 service personnel,
servicing our own and other OEMs&#146; turbo and reciprocating
compressors as well as steam and gas turbines. Our coverage area
of service centers servicing both turbo and reciprocating
compressors is approximately twice as large as that of our next
closest competitor.
</FONT>

<P align="left">
<B><FONT size="2">Sales and Marketing</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We market our services and products worldwide
through our established sales presence in over
20&nbsp;countries. In addition, in certain countries in which we
do business, we sell our services and products through
distributors. Our sales force is comprised of over 350 direct
sales/service personnel and a global network of 85 independent
representatives, as well as 24 service and support centers in 14
countries who sell our products and provide service and
aftermarket support to our installed base locally in
105&nbsp;countries.
</FONT>

<P align="center"><FONT size="2">75
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Manufacturing and Engineering Design</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our manufacturing processes generally consist of
fabrication, machining, component assembly and testing. Many of
our products are designed, manufactured and produced to order
and are often built to clients&#146; specifications for
long-life, mission-critical applications. To improve quality and
productivity, we are implementing a variety of manufacturing
strategies including focus factories, low cost manufacturing,
and integrated supply chain management. With the introduction of
the Configurator, we have reduced cycle times of engineering
designs by approximately one-third, which we believe to be one
of the lowest cycle times in the industry. In addition, we have
been successful in outsourcing the fabrication of subassemblies
and components of our products, such as lube oil consoles and
gas seal panels, whenever costs are significantly lower and
quality is comparable to our own manufacturing. Our
manufacturing operations are conducted in nine locations around
the world. We have major manufacturing plants outside the United
States in France, Norway and Germany.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We strive to manufacture the highest quality
products and are committed to improve the quality and efficiency
of our products and processes. For example, we have established
a full-time worldwide process innovation team of 80 employees
who work across our various departments, including engineering,
finance, purchasing and others, and who are focused on providing
our clients with faster and improved configured solutions, short
service response times, improved cycle times and
on-time-delivery. The team uses a combination of operational
performance and continuous improvement tools from Lean
Enterprise, 6 Sigma, Value Engineering/ Value Analysis, Total
Quality Management, plus other value-creation and change
management methodologies. Our aggressive focus on product
quality is essential due to the strict performance requirements
for our final products. All of our plants are certified in
compliance with ISO 9001, with several also holding ISO 14001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We manufacture many of the components included in
our products. The principal raw materials required for the
manufacture of our products are purchased from numerous
suppliers, and we believe that available sources of supply will
generally be sufficient for our needs for the foreseeable future.
</FONT>

<P align="left">
<B><FONT size="2">Clients</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our clients include most of the world&#146;s
major and national oil companies, large, independent refiners,
major energy companies, multinational engineering and
construction companies, process and petrochemical companies, the
United States government, and other businesses operating in
certain process industries. Our extensive and diverse client
base consists of most major public, private and government
energy companies worldwide and includes BP, ChevronTexaco,
Statoil, ExxonMobil, Lukoil, Sinopec, Shell Chemical, Duke
Energy and U.S. and foreign governments. While orders in our
industry tend to be large, no single client has represented more
than 5% of our total revenues over any consecutive two year
period, and only in 2003 has a single client represented greater
than 10% of our total net revenues. In 2003, British Petroleum
represented 10.8% of our total revenues.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe our business model aligns us with our
clients who are shifting from purchasing isolated units and
services on an individual transactional basis to choosing
service providers that can help optimize performance over the
entire life cycle of their equipment. We are responding to this
demand by moving to an alliance-based approach. An alliance can
encompass the provision of new units and/or services, whereby we
offer our clients a dedicated, experienced team, streamlined
engineering and procurement processes, and a life cycle approach
to operating and maintaining their equipment. Pursuant to the
terms of an alliance agreement, we become the client&#146;s
exclusive or preferred supplier of rotating equipment and
aftermarket parts and services which gives us an advantage in
obtaining new business from that client. Our client alliance
agreements include frame agreements, preferred supplier
agreements, and blanket purchasing agreements. The alliance
agreements are generally terminable upon 30&nbsp;days&#146;
notice without penalty, and therefore do not assure a long-term
business relationship. We have so far entered more than 30
significant alliances, and currently are the only alliance
partner for like rotating equipment with exclusive alliances
with Statoil, Marathon Ashland and Shell Chemicals (USA). We
also have preferred supplier alliances with ConocoPhillips,
ExxonMobil and Duke Energy, and non-exclusive agreements with BP
and other clients.
</FONT>

<P align="center"><FONT size="2">76
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Competition</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We encounter competition in all areas of our
business, principally in the new units segment. We compete
against products manufactured by both U.S. and
non-U.S.&nbsp;companies. The principal methods of competition in
these markets relate to product performance, client service,
product lead times, global reach, brand reputation, breadth of
product line, quality of aftermarket service and support and
price. We believe the significant capital required to construct
new manufacturing facilities, the production volumes required to
maintain low unit costs, the need to secure a broad range of
reliable raw material and intermediate material supplies, the
significant technical knowledge required to develop high
performance products, applications and processes and the need to
develop close, integrated relationships with clients serve as
disincentives for new market entrants. Some of our existing
competitors, however, have greater financial and other resources
than we do.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Over the last 20&nbsp;years, the turbo compressor
industry has consolidated from more than 15 to 8&nbsp;of our
larger competitors, the reciprocating compressor industry has
consolidated from 12 to 6 of our larger competitors and the
steam turbine industry has consolidated from 18 to 9 of
our&nbsp;larger competitors. Our larger competitors in the new
unit segment of the turbo compressor industry include General
Electric/ Nuovo Pignone, Siemens, Solar Turbines, Inc.,
Rolls-Royce Group plc, Elliott/ Ebara, Mitsubishi Heavy
Industries and Man Turbo (GHH); in the reciprocating compressor
industry include General Electric/ Nuovo Pignone, Burckhardt,
Sulzer, Ltd., Neuman&nbsp;&#38; Esser, Peter Brotherhood Ltd.,
Ariel Corp., Thomassen and Cooper Compression; and in the steam
turbine industry include Elliott, Siemens, General Electric/
Nuovo Pignone, Mitsubishi Heavy Industries, Tuthill Energy
Systems, Shin Nippon and K&#252;hnle, Kopp&nbsp;&#38; Kausch.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our aftermarket parts and services segment, we
compete with our major competitors as discussed above, small
independent local providers and our clients&#146; in-house
service providers. However, we believe there is an increasing
trend for clients to outsource services, driven by declining
in-house expertise, cost efficiency and the superior service
levels and operating performance offered by OEM knowledgeable
service providers.
</FONT>

<P align="left">
<B><FONT size="2">Research and Development</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We typically spend about one percent of our
revenues on research and development each year. Our research and
development expenses were $5.7&nbsp;million and
$1.0&nbsp;million for the period from January&nbsp;1, 2004
through October&nbsp;29, 2004 and for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004,
respectively. We believe current expenditures are adequate to
sustain ongoing research and development activities. It is our
policy to make a substantial investment in research and
development each year in order to maintain our product and
services leadership positions. We have developed many of the
technology and product breakthroughs in our markets, and
manufacture some of the most advanced products available in each
of our product lines. We believe we have significant
opportunities for growth by developing new services and products
that offer our clients greater performance and significant cost
savings. We are also actively involved in research and
development programs designed to improve existing products and
manufacturing methods.
</FONT>

<P align="left">
<B><FONT size="2">Employees</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2004, we had 4,631
employees worldwide. Of our employees, approximately 65% are
located in the United States. Approximately 37% of our employees
in the United States are covered by collective bargaining
agreements. None of our material collective bargaining
agreements will expire through the end of 2005, and one will
expire in each of 2006, 2007 and 2008. In addition, we have an
agreement with the United Brotherhood of Carpenters and Joiners
of America whereby we hire skilled trade workers on a
contract-by-contract basis. Our contract with the United
Brotherhood of Carpenters and Joiners of America can be
terminated by either party with 90&nbsp;days prior written
notice. Our operations in the following countries are unionized:
Le Havre, France; Oberhausen, Germany; Kongsberg, Norway; and
Naroda, India. Additionally, overseas, approximately 38% of our
employees belong to industry or national labor unions. We
believe that our relations with our employees are good.
</FONT>

<P align="center"><FONT size="2">77
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Properties and Facilities</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our corporate headquarters are located in Olean,
New York. The following table describes the material facilities
owned or leased by us and our subsidiaries as of
December&nbsp;31, 2004:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Approx.</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Location</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Status</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Square Feet</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Type</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Painted Post, New York
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Owned/Leased</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">840,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">Manufacturing and services</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Olean, New York
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Owned/Leased</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">970,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">Manufacturing and services</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Wellsville, New York
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Owned/Leased</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">380,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">Manufacturing and services</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Campinas, Brazil
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Owned</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">Manufacturing and services</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Kongsberg, Norway
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Leased</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">Manufacturing and services</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Le Havre, France
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Owned/Leased</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">650,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">Manufacturing and services</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Naroda, India
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Leased</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">730,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">Manufacturing and services</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Oberhausen, Germany
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Owned</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">Manufacturing and services</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Houston, Texas
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Owned</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">115,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Services</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Environmental and Government
Regulation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Manufacturers, such as our company, are subject
to extensive environmental laws and regulations concerning,
among other things, emissions to the air, discharges to land,
surface water and subsurface water, the generation, handling,
storage, transportation, treatment and disposal of waste and
other materials, and the remediation of environmental pollution
relating to such companies&#146; (past and present) properties
and operations. Costs and expenses under such environmental laws
incidental to ongoing operations are generally included within
operating budgets. Potential costs and expenses may also be
incurred in connection with the repair or upgrade of facilities
to meet existing or new requirements under environmental laws.
In many instances, the ultimate costs under environmental laws
and the time period during which such costs are likely to be
incurred are difficult to predict. We do not believe that our
liabilities in connection with compliance issues will have a
material adverse effect on us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Various federal, state and local laws and
regulations impose liability on current or previous real
property owners or operators for the cost of investigating,
cleaning up or removing contamination caused by hazardous or
toxic substances at the property. In addition, such laws impose
liability for such costs on persons who disposed of or arranged
for the disposal of hazardous substances at third-party sites.
Such liability may be imposed without regard to legality of the
original actions and without regard to whether we knew of, or
were responsible for, the presence of such hazardous or toxic
substances, and such liability may be joint and several with
other parties. If the liability is joint and several, we could
be responsible for payment of the full amount of the liability,
whether or not any other responsible party is also liable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have sent wastes from our operations to
various third-party waste disposal sites. From time to time we
receive notices from representatives of governmental agencies
and private parties contending that we are potentially liable
for a portion of the investigation and remediation costs and
damages at such third party sites. We do not believe that our
liabilities in connection with such third-party sites, either
individually or in the aggregate, will have a material adverse
effect on us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The equity purchase agreement provides that, with
the exception of non-Superfund off-site liabilities and
non-asbestos environmental tort cases, which have a three-year
time limit for a claim to be filed, Ingersoll-Rand will remain
responsible without time limit for certain specified known
environmental liabilities that exist as of the closing date.
Each of these liabilities is to be placed on The Environmental
Remediation and Compliance Schedule to the equity purchase
agreement (the &#147;Final Schedule&#148;). We will be
responsible for all liabilities that were not identified prior
to the closing date and placed on the Final Schedule. To
determine which matters will be included on the Final Schedule,
we conducted Phase I&nbsp;and Phase&nbsp;II assessments at 30 of
the Dresser-Rand Entities&#146; facilities. To date, the parties
have resolved all but a small number of outstanding issues with
respect to what should be included on the Final Schedule. We do
not believe any of the outstanding items are material.
</FONT>

<P align="center"><FONT size="2">78
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The equity purchase agreement provides that the
Final Schedule will include all noncompliance and contamination
matters identified in the Phase&nbsp;I and Phase&nbsp;II
assessments that the parties agree should be included thereon. A
contamination matter will be included on the Final Schedule if
it meets one of several standards, the most important of which
is that if such contamination matter were known by the
applicable governmental authority, that authority would be
expected to require a response action (which is broadly defined
to include not only cleanup, but investigation and monitoring).
For purposes of inclusion on the Final Schedule, contamination
matters are broadly defined to include each known point of
contamination plus all additional contamination associated with,
or identified during an investigation of, such known point of
contamination. Pursuant to the equity purchase agreement,
Ingersoll-Rand is responsible for all response actions
associated with the contamination matters and must perform such
response actions diligently. However, to the extent
contamination at leased properties was caused by a third party
and to the extent contamination at owned properties resulted
from the migration of releases caused by a third party,
Ingersoll-Rand is only required to conduct response actions
after being ordered to do so by a governmental authority.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the parties cannot agree whether a
noncompliance or contamination matter should be included on the
Final Schedule, they shall resolve the issue pursuant to an
arbitration provision that is included in the equity purchase
agreement. To date, the parties have reached agreement with
respect to the inclusion on the Final Schedule of many of the
matters identified in the Phase&nbsp;I and Phase&nbsp;II
assessments. Ingersoll-Rand, however, has taken the position
that certain identified matters should not be included on the
schedule because, according to Ingersoll-Rand, they do not
constitute violations of law; the violations of law have already
being corrected; or, with respect to contamination matters, the
regulatory authorities would not require a response action if
they knew of such matters. The parties are currently negotiating
to resolve these outstanding matters.
</FONT>

<P align="left">
<B><FONT size="2">Intellectual Property</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We rely on a combination of patent, trademark,
copyright and trade secret laws, employee and third-party
nondisclosure/confidentiality agreements and license agreements
to protect our intellectual property. We sell most of our
products under a number of registered trade names brand names
and registered trademarks which we believe are widely recognized
in the industry.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, many of our products and
technologies are protected by patents. Except for our
company&#146;s name and principal mark &#147;Dresser-Rand,&#148;
no single patent, trademark or trade name is material to our
business as a whole. We anticipate we will apply for additional
patents in the future as we develop new products and processes.
Any issued patents that cover our proprietary technology may not
provide us with substantial protection or be commercially
beneficial to us. The issuance of a patent is not conclusive as
to its validity or its enforceability. If we are unable to
protect our patented technologies, our competitors could
commercialize our technologies. Competitors may also be able to
design around our patents. In addition, we may also face claims
that our products, services, or operations infringe patent or
other intellectual property rights of others.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">With respect to proprietary know-how, we rely on
trade secret protection and confidentiality agreements.
Monitoring the unauthorized use of our proprietary technology is
difficult, and the steps we have taken may not prevent
unauthorized use of such technology. The proprietary disclosure
or misappropriation of our trade secrets could harm our ability
to protect our rights and our competitive position.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our company&#146;s name and principal mark is a
combination of the names of our founder companies, Dresser
Industries, Inc. and Ingersoll-Rand. We have acquired rights to
use the &#147;Rand&#148; portion of our principal mark from
Ingersoll-Rand, and the rights to use the &#147;Dresser&#148;
portion of our name from Dresser, Inc., the successor of Dresser
Industries, Inc, and an affiliate of First Reserve. If we lose
the right to use either the &#147;Dresser&#148; or
&#147;Rand&#148; portion of our name, our ability to build our
brand identity could be negatively affected.
</FONT>

<P align="left">
<B><FONT size="2">Legal Proceedings</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the normal course of business, we are involved
in a variety of lawsuits, claims and legal proceedings,
including commercial and contract disputes, employment matters,
product liability claims, environmental liabilities and
intellectual property disputes. In our opinion, pending legal
matters are not expected to have a material adverse effect on
our results of operations, financial condition, liquidity or
cash flows.
</FONT>

<P align="center"><FONT size="2">79
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='111'></A>
</DIV>

<!-- link1 "MANAGEMENT" -->

<P align="center">
<B><FONT size="2">MANAGEMENT</FONT></B>

<P align="left">
<B><FONT size="2">Directors and Executive Officers</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the name, age as
of May&nbsp;1, 2005 and position of each person that serves as
an executive officer or director of our company.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Age</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Position</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Vincent R. Volpe Jr.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">President, Chief Executive Officer and Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Leonard M. Anthony
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President and<BR>
    Chief Financial Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Stephen A. Riordan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President Finance
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Walter J. Nye
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President, Product Services
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Bradford W. Dickson
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President, Worldwide Units
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Christopher Rossi
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President and General Manager,<BR>
    North American Operations
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Jean-Francois Chevrier
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President and General Manager, European
    Operations
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Elizabeth C. Powers
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President and Chief Administrative Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Randy D. Rinicella
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, General Counsel and Secretary
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">William E. Macaulay
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chairman of the Board of Directors
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Thomas J. Sikorski
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Mark A. McComiskey
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Kenneth W. Moore
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Vincent R. Volpe
Jr.</FONT></I></B><FONT size="2"> is our President and Chief
Executive Officer and has served as a member of our board of
directors since the acquisition in October 2004. Mr.&nbsp;Volpe
has been with Dresser-Rand Company and its predecessor companies
since 1981. He has held positions in Engineering, Marketing and
Operations residing and working in various countries, including:
Applications Engineer in Caracas, Venezuela; Vice President
Dresser-Rand Japan in Tokyo, Japan; Vice President Marketing and
Engineering Steam and Turbo Products; and Executive Vice
President European Operations in Le Havre, France and President
Dresser-Rand Europe in London, U.K. Mr.&nbsp;Volpe returned to
Olean in January 1997 and became President of Dresser-Rand
Company&#146;s Turbo Product Division, a position he held until
September 2000. In April 1999, he assumed the additional role of
Chief Operating Officer for Dresser-Rand Company, responsible
for worldwide manufacturing, technology and supply chain
management, serving in that position until September 2000.
Mr.&nbsp;Volpe became President and Chief Executive Officer of
Dresser-Rand Company in September 2000. He is proficient in five
languages. Mr.&nbsp;Volpe earned a BS in Mechanical Engineering
and a BA in German literature, both from Lehigh University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Leonard M. Anthony
</FONT></I></B><FONT size="2">has been our Executive Vice
President and Chief Financial Officer since April&nbsp;2005.
Prior to that, he served as Chief Financial Officer of
International Steel Group Inc since May 2003. He has over
25&nbsp;years of financial management experience. He joined
Bethlehem Steel Corporation, an integrated steel producer in
1979 and advanced through increasingly responsible financial
management positions. He served as Corporate Credit Manager of
Bethlehem Steel Corporation from October 1985 to October 1986,
Director of Financial Services from November 1986 to November
1990, Director Risk Management from December 1990 to February
1993, Manager Financial Planning from March 1993 to March 1995,
Assistant Treasurer from March 1995 to March 1998, Vice
President and Treasurer from October 1999 to September 2001 and
Senior Vice President Finance and Chief Financial Officer from
October 2001 to May&nbsp;2003. In October 2001, Bethlehem Steel
filed for bankruptcy protection under Chapter&nbsp;11 of the
U.S. Bankruptcy Code. Mr.&nbsp;Anthony earned a BS in Accounting
from Pennsylvania State University, an MBA from the Wharton
School of the University of Pennsylvania and an AMP from the
Harvard Business School.
</FONT>

<P align="center"><FONT size="2">80
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Stephen A. Riordan </I></B>has been our Vice President
Finance since April 2005. Mr.&nbsp;Riordan served as Chief
Financial Officer from October 2004 to April 2005. Prior to
that, Mr. Riordan served as Vice President Finance from January
2003 to October&nbsp;2004. From January 1998 until December
2002, Mr.&nbsp;Riordan worked as an independent consultant to
numerous Ingersoll-Rand business units both domestically and
internationally. Mr.&nbsp;Riordan joined Ingersoll-Rand in 1981
and spent sixteen years in the finance function in positions of
increasing responsibility. From May 1993 until November 1997,
Mr.&nbsp;Riordan was the Worldwide Division Controller for
Ingersoll-Rand&#146;s European Paving Equipment business unit in
Germany. Mr.&nbsp;Riordan earned his CPA and is presently a
Certified Management Accountant. Mr.&nbsp;Riordan possesses a BS
in Accountancy from Bentley College and an MBA from Lehigh
University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Walter J. Nye </I></B>has been our Executive Vice
President, Worldwide Product Services since the acquisition in
October 2004. Mr.&nbsp;Nye has been with Dresser-Rand Company
and its predecessor companies since 1975. He has held numerous
positions of increasing responsibility including Controller,
Turbo Products Division; President, Dresser-Rand Services
Division; and most recently served as Executive Vice President,
Product Services from October 1997 until October 2004. Prior to
this appointment, Mr.&nbsp;Nye served as Controller for
Worldwide Turbo Operations. He has worldwide responsibility for
our aftermarket parts and services business, including sales,
repairs, field technical support, services and solutions. He has
also been active in the involvement in Olean Turbo world class
manufacturing investment program, reengineering, business
strategy and cost reduction. Mr.&nbsp;Nye earned a BA from St.
Bonaventure University and a Certificate in Management
Accounting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Bradford W. Dickson </I></B>has been our Executive Vice
President, New Equipment Worldwide since the acquisition in
October 2004. Mr.&nbsp;Dickson has been with Dresser-Rand
Company and its predecessor companies since 1977. He has held
various leadership positions in International Sales, Marketing,
and Project Management for Dresser-Rand Company and its
predecessors, including three years located in Caracas,
Venezuela managing the Venezuelan and Colombian Operations. From
January 1999 to August 2000, Mr.&nbsp;Dickson served as
Executive Vice President, Latin America, and served as Executive
Vice President, The Americas Region, from August 2000 to
April&nbsp;2, 2003. From April 2002 to July 2003,
Mr.&nbsp;Dickson served as Executive Vice President, The
Americas and Asia Pacific Regions. From July 2003 to October
2004, he served as Executive Vice President, responsible for all
company new equipment sales worldwide, and also carries
responsibility for Corporate Marketing and the Government
Business Unit. Mr.&nbsp;Dickson has over 27&nbsp;years of
experience in the global energy industry working with
compressors and turbines for process, oil and gas applications.
Mr.&nbsp;Dickson earned a BS in Engineering from the University
of Illinois and an MBA from the University of Southern
California&#146;s Marshall School of Business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Christopher Rossi </I></B>has been our Vice President and
General Manager, North American Operations since the acquisition
in October 2004. Mr.&nbsp;Rossi has been with Dresser-Rand
Company and its predecessor companies since 1987. He has held
various leadership positions within Dresser-Rand Company in the
areas of Engineering, Production, Materials Management, and
Supply Chain Management. From October 2003 to October 2004,
Mr.&nbsp;Rossi was Vice President and General Manager, North
American Operations, responsible for all U.S.&nbsp;plants, and
worldwide Development Engineering. Mr.&nbsp;Rossi served as Vice
President, Supply Chain Management Worldwide from March 1998 to
January 2001, and as Vice President and General Manager Painted
Post Operation from February 2001 to October 2003.
Mr.&nbsp;Rossi earned a BSME from Virginia Tech and an MBA in
Corporate Finance and Operations Management from the University
of Rochester&#146;s Simon School of Business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Jean-Francois Chevrier </I></B>has been our Vice President
and General Manager, European Operations since the acquisition
in October 2004. Mr.&nbsp;Chevrier has been with Dresser-Rand
Company and its predecessor companies since 1990. He has held
the positions of Operations Manager in Le Havre, France;
Director, Special Projects in Olean, New York; and General
Manager Turbo Products, Europe. From March 1997 to July 2000, he
held the position of Vice President&nbsp;&#38; General Manager,
French Operations. From August 2000 to October 2004,
Mr.&nbsp;Chevrier served as the Vice President&nbsp;&#38;
General Manager for European Operations in Le Havre, France,
which included responsibility for our businesses and plants in
Oberhausen, Germany, and Kongsberg, Norway. Prior to joining
Dresser-Rand Company, Mr.&nbsp;Chevrier held various leadership
positions
</DIV>

<P align="center" style="font-size: 10pt;">81
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">at a Peugeot subsidiary, specializing in military
and aerospace hydraulic equipment. Mr.&nbsp;Chevrier earned a
BSME from Tarbes University in France.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Elizabeth C. Powers
</FONT></I></B><FONT size="2">has been our Vice President and
Chief Administrative Officer since April&nbsp;2005. Prior to
that, Ms.&nbsp;Powers served as Vice President, Human Resources
since the acquisition in October 2004 and as Vice President,
Human Resources of Dresser-Rand Company from October&nbsp;2004
to April 2004. Ms.&nbsp;Powers was the Vice President for
Ingersoll-Rand&#146;s Global Business Service from January 1999
until January 2003. In this capacity, she was responsible for
directing the design of worldwide benefits, as well as
establishing the Human Resource Shared Services organization for
Ingersoll-Rand. Ms.&nbsp;Powers left Ingersoll-Rand on a leave
of absence from January 2003 until March 2004. Ms.&nbsp;Powers
has been with Dresser-Rand Company and its predecessor companies
since 1986. She has held various Human Resource positions in
Dresser-Rand Company since the start of the joint venture and
has also worked as Director and Vice President of Human
Resources in various Ingersoll-Rand businesses. From 1994 to
1998, Ms.&nbsp;Powers served as worldwide Vice President, Human
Resources, Production Equipment Group. She has also served on
the Board of Rx Intelligence. Ms.&nbsp;Powers earned a BS from
Cornell University&#146;s School of Industrial&nbsp;&#38; Labor
Relations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Randy D.
Rinicella</FONT></I></B><FONT size="2"> has been our Vice
President, General Counsel and Secretary since April 2005. Prior
to that, Mr.&nbsp;Rinicella was a shareholder at the law firm of
Buchanan Ingersoll PC from January&nbsp;2004 until
April&nbsp;2005. From March&nbsp;2002 until January&nbsp;2004,
Mr.&nbsp;Rinicella was a partner at the law firm of
Roetzel&nbsp;&#38;&nbsp;Andress. Previously, Mr.&nbsp;Rinicella
was with the law firm of Reminger&nbsp;&#38;&nbsp;Reminger as a
partner from January 1999 until March&nbsp;2002, and as an
associate from March 1995 to January 1999, and was Senior
Corporate Counsel at Reliance Electric Company from October 1990
until March 1995. Mr.&nbsp;Rinicella earned a BS in Management
from Case Western Reserve University, a JD from the Cleveland
Marshall College of Law and an MBA from Cleveland State
University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">William E. Macaulay
</FONT></I></B><FONT size="2">has been the Chairman of our board
of directors since the acquisition in October 2004.
Mr.&nbsp;Macaulay is the Chairman and Chief Executive Officer of
First Reserve, which he joined in 1983. Prior to joining First
Reserve, Mr.&nbsp;Macaulay was a co-founder of Meridien Capital
Company, a private equity buyout firm. From 1972 to 1982, Mr.
Macaulay was with Oppenheimer&nbsp;&#38;&nbsp;Co.,&nbsp;Inc.,
where he served as Director of Corporate Finance, with
responsibility for investing Oppenheimer&#146;s capital in
private equity transactions, as a General Partner and member of
the Management Committee of Oppenheimer&nbsp;&#38;&nbsp;Co., as
well as President of Oppenheimer Energy Corporation.
Mr.&nbsp;Macaulay serves as Chairman of Foundation Coal
Holdings,&nbsp;Inc., a coal company. He also serves as a
director of Alpha Natural Resources,&nbsp;Inc., a coal company,
Dresser, Inc., an equipment and services company serving the
energy industry, and Weatherford International, Inc., an
oilfield service company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Thomas J.
Sikorski</FONT></I></B><FONT size="2"> has been a member of our
board of directors since the acquisition in October 2004.
Mr.&nbsp;Sikorski is a Managing Director of First Reserve, which
he joined in April 2002. Prior to joining First Reserve,
Mr.&nbsp;Sikorski was a partner with Windward Capital, a New
York-based private equity firm. Windward was initially the
merchant banking arm of CSFB/MetLife. Prior to being a
co-founder of Windward in 1994, Mr.&nbsp;Sikorski was a Director
at MetLife Private Equity Investments and a Vice President in
the CSFB Private Equity Group. Mr.&nbsp;Sikorski also serves as
a director of Dresser, Inc., an equipment and service company
serving the energy industry.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Mark A.
McComiskey</FONT></I></B><FONT size="2"> has been a member of
our board of directors since the acquisition in October 2004.
Mr.&nbsp;McComiskey is a Vice President of First Reserve and
joined that firm in June 2004. Prior to joining First Reserve,
Mr.&nbsp;McComiskey was a principal at Clayton, Dubilier and
Rice Inc., a private equity firm, from June 2000 until May 2004.
Previously, Mr.&nbsp;McComiskey was an attorney at the
international law firm of Debevoise&nbsp;&#38; Plimpton LLP from
October 1997 until June 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Kenneth W.
Moore</FONT></I></B><FONT size="2"> has been a member of our
board of directors since the acquisition in October 2004.
Mr.&nbsp;Moore is a Director of First Reserve and joined that
firm in January 2004. Before joining First Reserve,
Mr.&nbsp;Moore was a Vice President at Morgan Stanley, an
investment bank, from 2000 until 2004. Prior to joining Morgan
Stanley, Mr.&nbsp;Moore was an Associate at Chase Securities
from 1998 until 2000.
</FONT>

<P align="center"><FONT size="2">82
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Composition of the Board of Directors after
this Offering</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors currently consists of five
directors. We expect to add an independent director prior to the
effectiveness of the registration statement of which this
prospectus is a part, another independent director within three
months after the first date the registration statement is
effective and one additional independent director to our board
within twelve&nbsp;months after the registration statement is
effective.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Depending on the size of the offering, we will be
a &#147;controlled company&#148; under the New York Stock
Exchange corporate governance rules if First Reserve continues
to own more than 50% of our common stock after the offering. As
a result, we would be eligible for exemptions from provisions of
these rules requiring a majority of independent directors,
nominating and corporate governance and compensation committees
composed entirely of independent directors and written charters
addressing specified matters. If available, we intend take
advantage of these exemptions. In the event that we cease to be
a controlled company within the meaning of these rules, we will
be required to comply with these provisions within the
transition periods specified in the New York Stock Exchange
corporate governance rules.
</FONT>

<P align="left">
<B><FONT size="2">Committees of the Board of Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors currently has an audit
committee, a compensation committee and a nominating and
corporate governance committee.
</FONT>

<P align="left">
<B><FONT size="2">Audit Committee</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our audit committee currently consists of Mark A.
McComiskey and Kenneth&nbsp;W. Moore. We expect that our current
audit committee will be replaced by three independent directors
within the transition periods specified in Rule&nbsp;10A-3 under
the Exchange Act. Following the offering, the audit committee
will be required to have at least one member who qualifies as an
audit committee &#147;financial expert&#148; as such term is
defined in Item&nbsp;401(h) of Regulation&nbsp;S-K. The audit
committee is governed by a written charter which will be
reviewed, and amended if necessary, on an annual basis. The
audit committee&#146;s responsibilities include
(1)&nbsp;recommending the hiring or termination of independent
auditors and approving any non-audit work performed by such
auditor, (2)&nbsp;approving the overall scope of the audit,
(3)&nbsp;assisting the board in monitoring the integrity of our
financial statements, the independent accountant&#146;s
qualifications and independence, the performance of the
independent accountants and our internal audit function and our
compliance with legal and regulatory requirements,
(4)&nbsp;annually reviewing an independent auditors&#146; report
describing the auditing firms&#146; internal quality-control
procedures, any material issues raised by the most recent
internal quality-control review, or peer review, of the auditing
firm, (5)&nbsp;discussing the annual audited financial and
quarterly statements with management and the independent
auditor, (6)&nbsp;discussing earnings press releases, as well as
financial information and earnings guidance provided to analysts
and rating agencies, (7)&nbsp;discussing policies with respect
to risk assessment and risk management, (8)&nbsp;meeting
separately, periodically, with management, internal auditors and
the independent auditor, (9)&nbsp;reviewing with the independent
auditor any audit problems or difficulties and managements&#146;
response, (10)&nbsp;setting clear hiring policies for employees
or former employees of the independent auditors,
(11)&nbsp;annually reviewing the adequacy of the audit
committee&#146;s written charter, (12)&nbsp;reviewing with
management any legal matters that may have a material impact on
us and (13)&nbsp;reporting regularly to the full board of
directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to consummation of this offering, the audit
committee will approve and adopt a Code of Ethical Business
Conduct for all employees and an additional Officer Code of
Ethics for all of our executives and financial officers, copies
of which will be available at no cost upon written request by
our stockholders at no cost.
</FONT>

<P align="left">
<B><FONT size="2">Compensation Committee</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our current compensation committee consists of
Mark A. McComiskey, who serves as chairman, Kenneth W. Moore and
Vincent R. Volpe Jr. The compensation committee is responsible
for (1)&nbsp;reviewing key employee compensation policies, plans
and programs, (2)&nbsp;reviewing and approving the compensation
of our chief executive officer and other executive officers,
(3)&nbsp;developing and recommending to the board of
</FONT>

<P align="center"><FONT size="2">83
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">directors compensation for board members,
(4)&nbsp;reviewing and approving employment contracts and other
similar arrangements between us and our executive officers,
(5)&nbsp;reviewing and consulting with the chief executive
officer on the selection of officers and evaluation of executive
performance and other related matters, (6)&nbsp;administration
of stock plans and other incentive compensation plans,
(7)&nbsp;overseeing compliance with any applicable compensation
reporting requirements of the SEC, (8)&nbsp;approving the
appointment and removal of trustees and investment managers for
pension fund assets, (9)&nbsp;retaining consultants to advise
the committee on executive compensation practices and policies
and (10)&nbsp;handling such other matters that are specifically
delegated to the compensation committee by the board of
directors from time to time.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Nominating and Corporate Governance
Committee</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our current nominating and corporate governance
committee consists of Mark&nbsp;A. McComiskey, Thomas&nbsp;J.
Sikorski and Vincent&nbsp;R. Volpe&nbsp;Jr. The nominating and
corporate governance committee&#146;s responsibilities include
(1)&nbsp;developing and recommending criteria for selecting new
directors, (2)&nbsp;screening and recommending to the board of
directors individuals qualified to become directors,
(3)&nbsp;overseeing evaluations of the board of directors, its
members and committees of the board of directors and
(4)&nbsp;establishing criteria for and leading the annual
performance self-evaluation of the board of directors and each
committee.
</FONT>

<P align="left">
<B><FONT size="2">Director Compensation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">None of our directors currently receive any
additional compensation for serving as a director or as a member
or chair of a committee of the board of directors. In
conjunction with this offering, we will be adding an independent
director to our board and plan to pay our independent directors
an annual retainer of $36,000 in cash and $30,000 in restricted
stock pursuant to the 2005 Directors Stock Incentive Plan and a
fee for each board meeting and each committee meeting attended.
We also plan to pay independent directors a fee for acting as
committee chairs and to implement the 2005 Directors Stock
Incentive Plan under which they may opt to receive shares of
common stock in lieu of any cash directors&#146; fees.
</FONT>

<P align="left">
<B><FONT size="2">Compensation Committee Interlocks and Insider
Participation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Vincent Volpe&nbsp;Jr., our president and Chief
Executive Officer, has served as a member of our compensation
committee since October 2004. The entire board of directors,
excluding Mr.&nbsp;Volpe, determines Mr.&nbsp;Volpe&#146;s
compensation.
</FONT>

<P align="center"><FONT size="2">84
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Executive Compensation</B>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Summary Compensation Table</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following summary compensation table sets forth information
concerning compensation earned in 2004 and 2003, by our chief
executive officer and our other four most highly compensated
executive officers at the end of the last fiscal year. All
references to stock under &#147;Executive Compensation&#148;
refer to shares of common stock of Ingersoll-Rand and all
references to &#147;plans&#148; refer to executive compensation
plans of Ingersoll-Rand. As of the consummation of the
acquisition, our management ceased to participate in such plans.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Long-Term Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Payouts</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Awards</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Annual Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Long-Term</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Restricted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Incentive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other Annual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Plan</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>All Other</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2" align="center" nowrap><B>Name and Principal Position</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Salary ($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Bonus ($)(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation ($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Award(s) ($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Option/SARs (#)($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Payouts</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation(4)($)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vincent R. Volpe Jr.</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>375,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>865,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>20,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1,300,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    President and Chief</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>349,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>713,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>20,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Executive Officer</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Walter J. Nye</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>224,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>129,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>334,476</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Executive Vice President,</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>211,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>98,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Worldwide Product Services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stephen A. Riordan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>193,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>124,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>283,932</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vice President Finance(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>173,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bradford W. Dickson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>193,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>122,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>284,400</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Executive Vice President,</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>181,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>86,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New Equipment Worldwide</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jean-Francois Chevrier</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>210,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>108,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>302,782</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vice President, European</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>186,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>78,944</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operations(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    This column reflects both amounts earned as annual bonuses and
    under the Performance Share Program. The Performance Share
    Program provides annual awards based on a combination of the
    achievement of strategic initiatives and annual financial
    performance. Payments are made in cash unless previously
    deferred into the Executive Deferral Plan. The Performance Share
    Program was discontinued at December&nbsp;31, 2004. The amounts
    earned as bonuses and under the Performance Share Program were
    as follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Performance Share</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Bonus&nbsp;($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Program&nbsp;($)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vincent R. Volpe Jr</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>440,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>425,493</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>282,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>431,246</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Riordan was Vice President Finance from January 2003
    through October 2004 and acted as the Chief Financial Officer
    from October 2004 through April 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    The average dollar to euro exchange rate for 2003 and 2004 was
    used to reflect earnings and bonus for Mr.&nbsp;Chevrier.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    To reward selected key employees in the event of a successful
    sale of Dresser-Rand Company, Ingersoll-Rand established a sales
    incentive program. Each of Mr.&nbsp;Stephen Riordan,
    Mr.&nbsp;Walter Nye, Mr.&nbsp;Bradford Dickson and
    Mr.&nbsp;Jean-Francois Chevrier received, pursuant to the
    program, payments from Ingersoll-Rand equal to 100% of their
    total cash compensation (annual base salary plus annual target
    bonus amount) as of the date of the acquisition. In addition,
    all participants in the program had their unvested stock
    options, or stock equivalency rights for non-U.S. employees, in
    Ingersoll-Rand vest immediately as of October&nbsp;29, 2004, the
    date of the acquisition. In addition, Mr.&nbsp;Volpe received
    payments from Ingersoll-Rand pursuant to the sales</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">85
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">incentive program equal to two times his total
    cash compensation (annual base salary plus annual target bonus
    amount) as of the date of the acquisition and his unvested stock
    options vested as of October&nbsp;29, 2004.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock Options and Stock Appreciation Rights
    of Ingersoll-Rand</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth information
concerning the grant of stock options of Ingersoll-Rand to our
Chief Executive Officer and each of our other four most highly
compensated executive officers during the last fiscal year.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Grant Date</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Individual Grants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent of Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options/SARs</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Grant Date</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options/SARs</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Granted to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise or</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Present</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Granted</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Employees in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Base</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value ($)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(#)(a)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fiscal Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price ($/SH)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Expiration Date (b)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(c)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Vincent R. Volpe Jr.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.57</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64.37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">October&nbsp;31, 2007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Walter J. Nye
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64.37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">October&nbsp;31, 2007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Stephen A. Riordan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64.37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">October&nbsp;31, 2007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Bradford W. Dickson
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,130</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64.37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">October&nbsp;31, 2007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Jean-Francois&nbsp;Chevrier
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64.37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">October&nbsp;31, 2007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Options/ SARs issued by Ingersoll-Rand prior to
    the date of the acquisition.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Options became exercisable as of October&nbsp;31,
    2004. Unexercised options/ SARs have no financial impact on us.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(c)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Ingersoll-Rand estimated the average fair value
    of the options granted during the period from January&nbsp;1,
    2004 through October&nbsp;29, 2004 at $22.74 on the date of
    grant, using the Black-Scholes option-pricing model, which
    included the following assumptions:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="40%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Dividend yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.19</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Volatility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Risk-free interest rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.28</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Expected life
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5&nbsp; years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Exercise of Options and Stock Appreciation
    Rights of Ingersoll-Rand</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth information
concerning the exercise of stock options of Ingersoll-Rand
during 2004 by each of our chief executive officer and our other
four most highly compensated executive officers and the
2004&nbsp;year-end value of unexercised options.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Number of Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Underlying Unexercised</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Value of Unexercised</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Options/SARs</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">In-the-Money</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">at Fiscal Year-End</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Options/SARs</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(#)(a)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">at Fiscal Year-End ($) (b)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Acquired on</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise (#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Realized ($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Vincent R. Volpe Jr.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">122,297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,813,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Walter J. Nye
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,115</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">417,301</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,006,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Stephen A. Riordan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">290,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Bradford W. Dickson
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">442,458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,033</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">439,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Jean-Francois Chevrier
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,649</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">335,708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,135</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">351,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Options/ SARs issued by Ingersoll-Rand prior to
    the date of the acquisition.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">(b)
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Unexercised options/ SARs have no financial
    impact on us.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">86
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Pension Plan</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to March&nbsp;31, 1998, our Predecessor
sponsored qualified and nonqualified defined benefit pension
plans for salaried employees. The benefits under these plans
were based on final average pay and service at retirement,
subject to applicable offsets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective March&nbsp;31, 1998, our Predecessor
amended the qualified and nonqualified defined benefit pension
plans to cease benefit accruals as of that date. That is, for
employees hired prior to March&nbsp;31, 1998, their accrued
benefits were frozen and no additional accruals due to service
and or pay were granted. Employees hired after March&nbsp;31,
1998 were not eligible to participate in any defined benefit
pension plans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Messrs.&nbsp;Volpe, Nye and Dickson have
estimated monthly accrued pension benefits of $2,500, $2,100 and
$1,800, respectively. These benefit amounts are payable at
age&nbsp;65 as a single life annuity and represent the benefit
payable from both the qualified and nonqualified defined benefit
pension plans. These benefits amounts are fixed obligations of
the successor and will not increase with future pay and/or
service levels. Messrs.&nbsp;Riordan and Chevrier are not
entitled to any benefits under our qualified or nonqualified
pension plans.
</FONT>

<P align="left">
<B><FONT size="2">Employment Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On October&nbsp;27, 2004, we entered into an
employment agreement with Vincent R. Volpe, pursuant to which
Mr.&nbsp;Volpe serves as our President and Chief Executive
Officer. Mr.&nbsp;Volpe&#146;s employment agreement has an
indefinite term. During the term of his agreement,
Mr.&nbsp;Volpe is entitled to an annual base salary of not less
than $500,000. Mr.&nbsp;Volpe is also eligible to receive a
performance based bonus for each year during the term of his
employment agreement, with a target bonus of up to 100% of his
base salary, payable, at Mr.&nbsp;Volpe&#146;s election, in
cash, shares of common stock or a combination thereof.
Mr.&nbsp;Volpe&#146;s total compensation will be reviewed at
least once every twelve months by our board of directors. For
2004, in addition to his annual bonus, we paid Mr.&nbsp;Volpe a
one-time special bonus equal to the bonus that would have been
paid to Mr.&nbsp;Volpe with respect to such year pursuant to the
Ingersoll-Rand Performance Share Program at the same time as
provided by such program.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If Mr.&nbsp;Volpe&#146;s employment is terminated
by us without &#147;cause&#148; or if Mr.&nbsp;Volpe resigns for
&#147;good reason&#148; (as such terms are defined in the
employment agreement), Mr.&nbsp;Volpe will receive (a)&nbsp;a
severance payment equal to twice his base salary, (b)&nbsp;the
accrued but unpaid salary through the date of termination,
(b)&nbsp;the accrued but unpaid bonus earned for fiscal years
prior to the fiscal year of termination, (c)&nbsp;the maximum
target annual bonus for the fiscal year of termination, prorated
to the amount of time actually employed during such year and
(d)&nbsp;continued medical, dental, disability and life
insurance coverage for two years following the date of
termination. To the extent Mr.&nbsp;Volpe is entitled to receive
severance, he is subject to a provision in his employment
agreement prohibiting him from competing with us. If
Mr.&nbsp;Volpe&#146;s employment is terminated by us for
&#147;cause&#148; or if Mr.&nbsp;Volpe resigns without
&#147;good reason,&#148; we can elect to enforce a provision in
his employment agreement prohibiting him from competing with us
for a period of up to two years following such termination
provided that we pay Mr.&nbsp;Volpe his base salary for such
two-year period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mr.&nbsp;Volpe purchased $1,999,992 of common
units of Dresser-Rand Holdings, LLC at the same price paid per
unit by funds affiliated with First Reserve in connection with
the acquisition. In addition, Mr.&nbsp;Volpe received grants of
profits units of Dresser-Rand Holdings, LLC that permit him to
indirectly share in appreciation in the value of our shares and
which are subject to the terms and conditions of the Amended and
Restated Limited Liability Company Agreement of Dresser-Rand
Holdings, LLC. If Mr.&nbsp;Volpe&#146;s employment is terminated
by us, we may elect to convert his common units to common shares
and if he is terminated for &#147;cause,&#148; resigns without
&#147;good reason&#148;, or in the event of his death, we may
opt to repurchase those shares. If Mr.&nbsp;Volpe resigns for
&#147;good reason&#148; or is terminated without cause and we do
not elect to convert his common units to common shares, he may
require us to do so and require us to repurchase those shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An employment agreement was entered into with
Mr.&nbsp;Jean-Francois Chevrier on July&nbsp;25, 1990, pursuant
to which Mr.&nbsp;Chevrier serves as our Vice
President&nbsp;&#38; General Manager, European Operations and
Chief
</FONT>

<P align="center"><FONT size="2">87
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
Executive Officer for Dresser-Rand S.A. (Le Havre, France),
reporting directly to Dresser-Rand Company&#146;s Chief
Executive Officer. As of December&nbsp;31, 2003,
Mr.&nbsp;Chevrier&#146;s annual base salary was
<FONT face="times new roman,times">&#128;</FONT>168,977.
Mr.&nbsp;Chevrier is also eligible to receive an annual bonus
with a target payment equal to 40% of his annual base salary
(and a maximum payment equal to 60% of his annual base salary)
if certain targets based on our financial results and his
individual performance are met. A company car is also made
available to Mr.&nbsp;Chevrier pursuant to the terms of his
employment agreement. Mr.&nbsp;Chevrier&#146;s employment
agreement is subject to the Engineers and Officers of the Metal
Industry National Bargaining Agreements (Convention Collective
Nationale des Ingenieurs et Cadres de la Metallurgie). Pursuant
to such National Bargaining Agreements, Mr.&nbsp;Chevrier is
entitled to notice in the event that Mr.&nbsp;Chevrier&#146;s
employment is terminated and certain severance payments based on
his age and service with us at the time of termination. Based on
his current age and service, Mr.&nbsp;Chevrier would be entitled
to six months notice prior to a termination of his employment
and an additional severance payment of approximately
<FONT face="times new roman,times">&#128;</FONT>144,798.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Dresser-Rand Holdings, LLC Membership Interests</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to an agreement reached with management prior to our
acquisition by funds affiliated with First Reserve, certain
members of management were offered the opportunity in October
2004 to acquire common units in Dresser-Rand Holdings, LLC at
the same price paid per unit by the funds affiliated with First
Reserve in connection with the acquisition. Executives who
purchased common units were also issued profits units in
Dresser-Rand Holdings, LLC, which permit them to indirectly
share in appreciation in the value of our shares. After a period
of several weeks to evaluate the offer, certain of our executive
officers, including our Chief Executive Officer and each of our
four other most highly compensated executive officers, availed
themselves of this opportunity in November. Our directors were
not offered the opportunity to acquire common units or profit
units in Dresser-Rand Holdings, LLC. The terms of the plan are
set forth in the Amended and Restated Limited Liability Company
Agreement of Dresser-Rand Holdings, LLC which we refer to as the
Holdings LLC Agreement. Under the terms of Holdings LLC
Agreement, managing members whose capital contribution exceeds
$100,000 are subject to a provision not to compete with us
during the period for which they provide services to us and for
a period of two years thereafter. The following contains a
summary of the material terms of the Holdings LLC Agreement.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>General</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Holdings LLC Agreement permits the grant of the right to
purchase common units to members of Dresser-Rand Holdings, LLC
and the grant of profit units, consisting of one initial tranche
of service units and five initial tranches of exit units to
certain management members who own common units. In November
2004, First Reserve, through its affiliated funds, and certain
other members purchased 100,609,829 common units for an
aggregate purchase price of $435.8&nbsp;million.
Messrs.&nbsp;Volpe, Nye, Riordan, Dickson and Chevrier
respectively purchased 461,892, 57,737, 115,473, 115,425 and
60,000 common units in November 2004. In November 2004,
Dresser-Rand Holdings, LLC issued 7,975,000 profit units to
management members, with Messrs.&nbsp;Volpe, Nye, Riordan,
Dickson and Chevrier respectively receiving 4,000,000, 400,000,
700,000, 400,000 and 400,000 of such profit units. During 2005,
three additional management members became members of
Dresser-Rand Holdings, LLC and purchased 303,735 common units
for an aggregate purchase price of $1.3&nbsp;million. These
management members were also issued a total of 1,000,000 profit
units.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Amendment</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
First Reserve may amend the Holdings LLC Agreement, provided
that no amendment is permitted that would adversely affect the
management members as a class without the consent of a majority
in interest, excluding profit units, of the management members.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Units Held by Certain of our Managers</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The units of Dresser-Rand Holdings, LLC consist of common units
and profit units. Each common unit is entitled to receive an
identical share of the profits and losses of Dresser-Rand
Holdings, LLC. Profit units consist of service units and five
tranches of exit units, and are each generally entitled to an
identical share of the profits and losses of Dresser-Rand
Holdings, LLC above the benchmark amount applicable to each
profit
</DIV>

<P align="center" style="font-size: 10pt;">88
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">unit once certain vesting and other agreed-upon
conditions are satisfied. It is not anticipated that this
offering will result in any distribution on the profits units.
As of February 1, 2005, approximately 98.4% of common units were
held by First Reserve, approximately 1.3% were held by certain
members of our management and approximately 0.3% were held by
other investors. The profit units are held exclusively by
members of our management.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Terms of the Common Units, Service Units
    and the Exit Unit Tranches</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a summary of certain terms of
the common units, service units and the five exit unit tranches
and certain rights and restrictions applicable to those units.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A holder of units is entitled to one vote for
each unit outstanding on a given record date, or other date as
applicable, provided that if a management member ceases to
provide services to or for the benefit of Dresser-Rand Holdings,
LLC, the units held by such management member will cease to have
voting rights.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Service units vest in five equal annual
installments on the first five anniversaries of the issuance
date, subject to the management member&#146;s continued service
to or for the benefit of Dresser-Rand Holdings, LLC. All of the
service units will vest immediately prior to the occurrence of a
change of control under the Holdings LLC Agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to the management member&#146;s continued
service to or for the benefit of Dresser-Rand Holdings, LLC and
other agreed upon conditions, management members will receive a
distribution for their exit units upon the occurrence of a
transaction where First Reserve exchanges all or a portion of
its units for cash, cash equivalents or marketable
publicly-traded securities only if the value First Reserve
receives from such transaction exceeds certain multiples of the
initial price paid by First Reserve.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Certain Rights and Restrictions Applicable
    to the Units</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The units held by members are not transferable
for a limited period of time except in certain circumstances. In
addition, the units may be repurchased by Dresser-Rand Holdings,
LLC, and in certain cases, First Reserve, in the event that a
management member is subject to an involuntary transfer of his
or her units or if a management member receives a bona fide
offer to purchase his or her units and such management member
wants to accept such offer. First Reserve has the ability to
force members to sell their units along with First Reserve if
First Reserve decides to sell its units. Under certain
conditions, First Reserve may convert each member&#146;s units
into an economically equivalent amount of security interests of
the successor entity in connection with an initial public
offering under the Holdings LLC Agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The management members that hold units are
entitled to participate in certain sales by First Reserve. In
addition, many of the restrictions on transfer will cease to
apply in the event of an initial public offering under the
Holdings LLC Agreement.
</FONT>

<P align="left">
<B><FONT size="2">2005 Stock Incentive Plan</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors expects to adopt for
stockholder approval, our 2005 Stock Incentive Plan. The 2005
Stock Incentive Plan is administered by our compensation
committee, which has broad discretion to determine the current
or prospective officers, employees and consultants that will
receive awards, the type of awards to be granted, and the terms
of such awards. Awards under the 2005 Stock Incentive Plan may
be of stock options, stock appreciation rights and similar
awards that are measured based on appreciation of our share
price over a threshold level, or other similar awards that are
based on the full value of our shares. No stock options, stock
appreciation rights or other similar awards may be exercisable
later than the tenth anniversary of the award grant date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A total
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock will be available for awards under the 2005
Stock Incentive Plan. As a general rule, only shares that are
actually issued under an award are counted against this limit.
Therefore, if (and to the extent that) an award is forfeited or
terminates unexercised, or if it is settled for cash or
otherwise settled without the issuance of common stock
(including where shares are withheld to satisfy withholding
obligations), the shares underlying the award will again be
available for future awards.
</FONT>

<P align="center"><FONT size="2">89
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our compensation committee will determine the
terms or conditions upon which awards will vest. This may
include vesting based on continuous employment, vesting based on
the attainment of one or more of performance criteria, or
vesting based on such other conditions as our compensation
committee may determine. Our compensation committee may impose
special provisions relating to the treatment of outstanding
awards upon a change in control of our company (as defined in
the 2005 Stock Incentive Plan). Among other things, our
compensation committee may provide for the acceleration of
vesting, for a cash payment in settlement of awards and/or for
the assumption or substitution of awards following the change in
control. Our compensation committee may also determine whether
dividends or equivalent payments will be made with respect to
outstanding awards, whether any such payments will be made in
cash or shares on a current or deferred basis, and whether such
payments are subject to vesting.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A participant&#146;s termination of employment
will typically have important consequences on outstanding awards
under the 2005 Stock Incentive Plan (although our compensation
committee will have broad authority to waive the consequences of
a termination of employment). Unless our compensation committee
determines otherwise, participants will become vested in any
outstanding stock options, stock appreciation rights or other
similar awards based on appreciation of our shares if their
employment terminates by reason of death or disability (as
defined in the 2005 Stock Incentive Plan), and will forfeit any
such unvested awards if their employment terminates for any
other reason. Unless our compensation committee determines
otherwise, participants will become vested in a pro-rata portion
(based on the number of days employed during the vesting period)
of any award of shares or similar awards if their employment
terminates by reason of death or disability (as defined in the
2005 Stock Incentive Plan), and will forfeit outstanding awards
of shares or similar awards if their employment terminates for
any other reason. Participants will forfeit vested and unvested
awards if their employment is terminated for cause (as defined
in the 2005 Stock Incentive Plan). If any award is held by a
participant in the 2005 Stock Incentive Plan who the
compensation committee believes is a &#147;specified
employee&#148; under Section&nbsp;409A of the Code, payment or a
settlement of any award may be delayed for six months and one
day after the termination of employment of the participant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with any stock dividend, stock
split, share combination, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination, exchange of shares or other
event similarly affecting our common stock, our compensation
committee will, in a manner it deems appropriate, equitably
adjust any or all of (i)&nbsp;the number and type of shares that
are available under the 2005 Stock Incentive Plan or that are
subject to outstanding options or other awards, (ii)&nbsp;the
grant or exercise price of outstanding awards and (iii)&nbsp;the
performance period or performance criteria applicable to any
outstanding awards. In addition, our compensation committee may
also provide for a cash payment in settlement of outstanding
awards as a result of such transactions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Awards under the 2005 Stock Incentive Plan will
generally not be assignable or transferable other than by will
or by the laws of descent and distribution, although our
compensation committee may permit certain transfers to the
participant&#146;s family members or to certain entities
controlled by the participant or his or her family members.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2005 Stock Incentive Plan will expire on the
day prior to the first meeting of our stockholders in 2009 at
which directors will be elected, and our board of directors or
our compensation committee may at any time, and from time to
time, amend, modify or terminate the 2005 Stock Incentive Plan
with any amendment, subject to stockholder approval if required
by law. An amendment or termination of the 2005 Stock Incentive
Plan may not materially adversely affect any outstanding award
held by a participant without the participant&#146;s consent.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Section&nbsp;162(m) of the
Code.</FONT></I><FONT size="2"> Section&nbsp;162(m) of the Code
generally limits the ability of a public corporation to deduct
compensation greater than $1,000,000 paid with respect to a
particular year to an individual who is, on the last day of that
year, the corporation&#146;s chief executive officer or one of
its four other most highly compensated executive officers, other
than compensation that is &#147;performance based&#148; within
the meaning of Section&nbsp;162(m). Under a special rule that
applies to corporations that become public through an initial
public offering, this limitation generally will not apply to
compensation that is paid pursuant to the 2005 Stock Incentive
Plan before the first meeting of our stockholders in 2009 at
which directors will be elected.
</FONT>

<P align="center"><FONT size="2">90
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">2005 Directors Stock Incentive Plan</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors expects to adopt for
stockholder approval, our 2005&nbsp;Directors Plan for our
directors who are not also our officers or employees, or
officers or employees of the First Reserve Corporation. The
2005&nbsp;Directors Plan is administered by our board of
directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A total
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock will be available for awards under the
2005&nbsp;Directors Plan. Shares subject to awards that are
forfeited will again be available for future awards under the
2005&nbsp;Directors Plan. In connection with any stock dividend,
stock split, share combination, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination, exchange of shares or other
event similarly affecting our common stock, our board of
directors will, in a manner it deems appropriate, equitably
adjust the number and type of shares that are available under
the 2005&nbsp;Directors Plan or that are subject to outstanding
awards. In addition, our board of directors may also provide for
a cash payment in settlement of outstanding awards as a result
of such transactions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There will be two types of awards of shares under
the 2005&nbsp;Directors Plan. Eligible directors will receive a
grant of shares effective upon the consummation of this offering
and an annual grant immediately following the first regular
meeting of our board of directors in any year the
2005&nbsp;Directors Plan is in effect. Shares subject to this
annual grant will become vested in four equal installments on
the first day of each of the first four calendar quarters
following the grant date, subject to the director remaining in
office on each vesting date. Shares subject to the annual grant
will also become vested upon a director&#146;s death or
disability (as defined in the 2005&nbsp;Directors Plan), or upon
a change in control of our Company (as defined in the
2005&nbsp;Directors Plan). The aggregate value of the shares
subject to the annual grant is initially expected to be $30,000,
although our board of directors (or an authorized committee
thereof) may increase or decrease the value of the annual grant
from time to time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Eligible directors may also elect to have any
portion of their cash fees for services as a director paid in
shares under the 2005&nbsp;Directors Plan. Such elective awards
will be fully vested, and will contain such other terms as
determined by our board of directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dividends or equivalent payments will be made
with respect to all shares subject to awards under the
2005&nbsp;Directors Plan, and our board of directors will
determine whether and to what extent such payments will be paid
currently to, or credited to an account of the eligible
directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event of a change in control of our
Company (as defined in the 2005&nbsp;Directors Plan), our board
of directors may provide for a cash payment in settlement of
awards, or for the assumption or substitution of awards
following the change in control.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Awards under the 2005&nbsp;Directors Plan will
generally not be assignable or transferable other than by will
or by the laws of descent and distribution, except that our
board of directors may permit certain transfers to eligible
director&#146;s family members or to certain entities controlled
by the eligible director or his or her family members.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors may at any time, and from
time to time, amend, modify or terminate the
2005&nbsp;Director&#146;s Plan, as long as such actions do not
materially adversely affect any outstanding award held by an
eligible director without the director&#146;s consent. Our board
of directors will determine whether stockholder approval of any
amendments to the 2005&nbsp;Directors Plan will be required, and
will seek such approval if necessary.
</FONT>

<P align="left">
<B><FONT size="2">Annual Incentive Plan</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors expects to adopt,
effective immediately prior to the consummation of this
offering, an annual performance incentive plan that will provide
for the award of incentive bonuses to our named executive
officers and certain of our other officers and employees. The
annual incentive plan will be administered by our compensation
committee, which may delegate its authority except to the extent
that it relates to the compensation of any of our executive
officers or other individuals whose compensation the board of
directors or the compensation committee reasonably believes may
become subject to Section&nbsp;162(m) of the
</FONT>

<P align="center"><FONT size="2">91
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">Code. The determination of the compensation
committee on all matters relating to the annual incentive plan
will be final and binding on us, participants and all other
interested parties.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each year our compensation committee will select
the eligible participants in the annual incentive plan and
establish target incentive bonuses and performance objectives
for a participant or group of participants. The actual bonus
payable to a participant&nbsp;&#151; which may equal, exceed or
be less than the target bonus&nbsp;&#151; will be determined
based on whether the applicable performance objectives are met,
exceeded or not met. Performance objectives may be based on one
or more of the following criteria: (i)&nbsp;revenue growth;
(ii)&nbsp;earnings before interest, taxes, depreciation and
amortization; (iii)&nbsp;earnings before interest, taxes and
amortization; (iv)&nbsp;operating income; (v)&nbsp;pre-or
after-tax income; (vi)&nbsp;cash flow; (vii)&nbsp;cash flow per
share; (viii)&nbsp;net earnings; (ix)&nbsp;earnings per share;
(x)&nbsp;return on equity; (xi)&nbsp;return on invested capital;
(xii)&nbsp;return on assets; (xiii)&nbsp;economic value added
(or an equivalent metric); (xiv)&nbsp;share price performance;
(xv)&nbsp;total stockholder return; (xvi)&nbsp;improvement in or
attainment of expense levels; (xvii)&nbsp;improvement in or
attainment of working capital levels; (xviii)&nbsp;debt
reduction; or (xix)&nbsp;any other criteria our compensation
committee in its sole discretion deems appropriate. The maximum
bonus payable under the plan to a participant in any year is
$3,000,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Bonuses will generally be payable as soon as
practicable after the compensation committee certifies that the
applicable performance criteria have been obtained. Bonuses will
generally be payable only if the participant remains employed
with us through the date of payment, subject to the discretion
of the compensation committee to provide for the payment of full
or partial bonuses upon certain terminations of employment and
to any rights individual participants may have under their
employment agreements to receive an annual bonus for the year
their employment terminates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the compensation committee may
require that a portion of a participant&#146;s annual incentive
bonus be payable in shares of common stock, options or other
stock-based awards granted under our 2005 Stock Incentive Plan
described above, which awards may also be subject to forfeiture,
vesting or other restrictions determined by the compensation
committee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The annual incentive plan will expire on the day
prior to the date of the first meeting of our stockholders in
2009 at which directors will be elected. However, the
compensation committee may at any time amend, suspend,
discontinue or terminate the annual incentive plan, provided
that any such amendment, suspension, discontinuance or
termination does not adversely affect participants&#146; rights
to, or interest in, any award granted prior to the date of such
action without their written consent.
</FONT>

<P align="center"><FONT size="2">92
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">PRINCIPAL STOCKHOLDERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table and accompanying footnotes
show information regarding the beneficial ownership of our
common stock before this offering and after this offering, by
(i)&nbsp;each person known by us to beneficially own more than
5% of the outstanding common stock, (ii)&nbsp;each of our
directors, (iii)&nbsp;each named executive officer and
(iv)&nbsp;all directors and executive officers as a group.
Unless otherwise indicated, the address of each person named in
the table below is c/o&nbsp;Dresser-Rand Group Inc., Paul Clark
Drive, Olean, New York 14760.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of shares and percentages of
beneficial ownership before the offering set forth below are
based on shares of our common stock issued and outstanding as of
May 2, 2005 and after giving effect to the stock split. The
number of shares and percentages of beneficial ownership after
the offering are based
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock to be issued and outstanding immediately
after this offering,
including &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
that will be either dividended to our existing stockholders
assuming no exercise of the underwriters&#146; over-allotment
option or sold to the underwriters pursuant to their
over-allotment option assuming full exercise of that option.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="40%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Shares Beneficially Owned</FONT></B></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Immediately Prior to</FONT></B></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Percentage of Shares Beneficially</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">This Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Owned After This Offering(1)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Assuming the</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Assuming the</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Underwriters&#146; Option</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Underwriters&#146; Option</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Is Exercised in</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Is Not Exercised(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Full(1)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name of Beneficial Owner</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">First Reserve Fund&nbsp;X, L.P.(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,021,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59.3%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">First Reserve Fund&nbsp;IX, L.P.(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,244,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Vincent R. Volpe Jr.(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">461,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Leonard M. Anthony(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">221,299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Stephen A. Riordan(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">115,472</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Walter J. Nye(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,737</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Bradford W. Dickson(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">115,424</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Christopher Rossi(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">115,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Jean-Francois Chevrier(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Elizabeth C. Powers(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">207,851</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Randy D. Rinicella(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">William E. Macaulay(5)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Thomas J. Sikorski(5)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Mark A. McComiskey(5)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Kenneth W. Moore(5)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Directors and executive officers as a group (13
    persons)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,426,106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">*</FONT></TD>
    <TD align="left">
    <FONT size="2">Less than 1% of outstanding common stock
    (excluding in the case of Directors and executive officers as a
    group, common stock beneficially owned by First Reserve
    Fund&nbsp;IX, L.P. (&#147;Fund&nbsp;IX&#148;) and First Reserve
    Fund&nbsp;X, L.P. (&#147;Fund&nbsp;X&#148;)).
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We will grant the underwriters an option to
    purchase up to an
    additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    in this offering. Immediately prior to the consummation of this
    offering, we will declare a stock dividend, the terms of which
    will require that shortly after the expiration of the
    underwriters&#146; over-allotment option (assuming the option is
    not exercised in full) we issue to our existing stockholders the
    number of shares equal to (x)&nbsp;the number of additional
    shares the underwriters have an option to purchase minus
    (y)&nbsp;the actual number of shares the underwriters purchase
    from us pursuant to that option.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes beneficial ownership of shares of common
    stock of Dresser-Rand Group Inc. by Fund&nbsp;X. First Reserve
    GP&nbsp;X, L.P. (&#147;GP&nbsp;X&#148;) is the general partner
    of Fund&nbsp;X. First Reserve GP&nbsp;X, Inc.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">93
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">(&#147;GP&nbsp;X,&nbsp;Inc.&#148;) is the general
    partner of GP&nbsp;X. First Reserve Corporation is the adviser
    to Fund&nbsp;X. The address of GP&nbsp;X, Inc., GP&nbsp;X,
    Fund&nbsp;X and First Reserve Corporation is c/o&nbsp;First
    Reserve Corporation, One Lafayette Place, Greenwich, CT 06830.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes beneficial ownership of shares of common
    stock of Dresser-Rand Group Inc. by Fund&nbsp;IX. First Reserve
    GP&nbsp;IX, L.P. (&#147;GP&nbsp;IX&#148;) is the general partner
    of Fund&nbsp;IX. First Reserve GP&nbsp;IX, Inc.
    (&#147;GP&nbsp;IX&nbsp;Inc.&#148;) is the general partner of
    GP&nbsp;IX. First Reserve Corporation is the adviser to
    Fund&nbsp;IX. The address of GP&nbsp;IX, Inc., GP&nbsp;IX,
    Fund&nbsp;IX and First Reserve Corporation is c/o First Reserve
    Corporation, One Lafayette Place, Greenwich, CT 06830.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Because members of senior management hold their
    interests in common units of Dresser-Rand Holdings, LLC, which
    is controlled by First Reserve, they may not be deemed to
    beneficially own the common stock of Dresser-Rand Group Inc. in
    which they have an economic interest.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Mr.&nbsp;Macaulay is the Chairman, Chief
    Executive Officer and a member of the board of directors of
    First Reserve Corporation, GP&nbsp;IX, Inc. and GP&nbsp;X, Inc.
    Mr.&nbsp;Sikorski is a Managing Director of First Reserve
    Corporation, GP&nbsp;IX, Inc. and GP&nbsp;X, Inc. Mr.&nbsp;Moore
    is a Director of First Reserve Corporation, GP&nbsp;IX, Inc. and
    GP&nbsp;X, Inc. Mr.&nbsp;McComiskey is a Vice President of First
    Reserve Corporation, GP&nbsp;IX, Inc. and GP&nbsp;X, Inc.
    Messrs.&nbsp;Macaulay, Sikorski, Moore and McComiskey all
    disclaim beneficial ownership of any common stock owned by such
    entities or their affiliates. The address of GP&nbsp;IX, Inc.,
    GP&nbsp;X, Inc., GP&nbsp;IX, GP&nbsp;X, Fund&nbsp;IX,
    Fund&nbsp;X, William E. Macaulay, Thomas J. Sikorski, Mark A.
    McComiskey and Kenneth W. Moore is c/o First Reserve
    Corporation, One&nbsp;Lafayette Place, Greenwich, CT 06830.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">94
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='113'></A>
</DIV>

<!-- link1 "CERTAIN RELATED PARTY TRANSACTIONS" -->

<P align="center">
<B><FONT size="2">CERTAIN RELATED PARTY TRANSACTIONS</FONT></B>

<P align="left">
<B><FONT size="2">Amended and Restated Limited Liability Company
Agreement of Dresser-Rand Holdings, LLC</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the acquisition, Dresser-Rand
Holdings, LLC, our indirect parent, amended and restated its
limited liability company agreement, governing, among other
things, the terms under which senior management acquired common
units in Dresser-Rand Holdings, LLC. For a summary of the
material terms of the Holdings LLC Agreement, see
&#147;Management&nbsp;&#151; Dresser-Rand Holdings, LLC
Membership Interests.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Stockholders Agreement</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have entered into a stockholders agreement
with First Reserve and certain management stockholders that
governs the terms and conditions under which the management
stockholders may transfer their shares of our common stock, in
addition to other stockholder matters. The stockholders
agreement provides that First Reserve will designate all of the
nominees for election to our board of directors. Our board of
directors currently consists of our Chief Executive Officer and
four other directors nominated by First Reserve and may be
subsequently expanded by vote of the board. All significant
decisions involving us require the approval of First Reserve.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The stockholders agreement provides that First
Reserve will have the ability to require us to register its
shares of our common stock. In addition, in connection with
other registered offerings by us, holders of shares of our
common stock will have the ability to exercise certain piggyback
registration rights with respect to such shares. Furthermore any
proposed transfers of our common stock by a management
stockholder (other than affiliates of First Reserve) will be
subject to a right of first refusal by us and First Reserve. The
stockholders agreement grants to management stockholders
&#147;tag-along&#148; rights, and to First Reserve,
&#147;drag-along&#148; rights, in each case in connection with
transfers by First Reserve of our common stock.
</FONT>

<P align="left">
<B><FONT size="2">Transition Services Agreement</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the acquisition, we and
Ingersoll-Rand entered into a transition services agreement as
of the closing to facilitate consistent service and satisfaction
for our clients. Ingersoll-Rand provides services as requested
by us, including, among others, compensation delivery services,
health and welfare administration, pension administration, legal
services and other services, and agreed upon between the
parties. All third-party costs associated with the services are
our responsibility, whether paid by Ingersoll-Rand or passed
directly on to us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The provision of services commenced on the
closing date and will terminate on the first anniversary of the
closing date; provided, however, that we may cancel any service
upon 30&nbsp;days&#146; written notice of cancellation and
Ingersoll-Rand may cease to provide a service upon 90 days&#146;
written notice to us if Ingersoll-Rand ceases to provide such
services to all of Ingersoll-Rand&#146;s subsidiaries, divisions
and business units.
</FONT>

<P align="left">
<B><FONT size="2">Supply Agreement</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We entered into a supply agreement with
Ingersoll-Rand, expiring on December&nbsp;31, 2009, whereby we
supply Ingersoll-Rand with certain assembly units (an
&#147;FRG&#148;) for Ingersoll-Rand&#146;s &#147;PET
Star&nbsp;4&#148; product. There are no minimum order quantities
under this agreement.
</FONT>

<P align="left">
<B><FONT size="2">License Agreement</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As contemplated by the equity purchase agreement,
Dresser-Rand Company and Dresser-Rand A.S., each an indirect
wholly-owned subsidiary of the issuer, agreed to certain
covenants with and granted intellectual property rights related
to the development of Ingersoll-Rand&#146;s 250&nbsp;kilowatt
microturbine to Ingersoll-Rand Energy Systems Corporation and
the Energy Systems Division of Ingersoll-Rand. Pursuant to the
terms of the license agreement, Energy Systems was granted a
non-exclusive, worldwide right and license (without the right to
sublicense) to practice and use any intellectual property owned
by Dresser-Rand
</FONT>

<P align="center"><FONT size="2">95
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">Company or Dresser-Rand A.S. relating to the
250&nbsp;Kilowatt microturbines, and to manufacture, use, market
and sell microturbines with a generating capacity of
1,000&nbsp;kilowatts or less. The license was granted without
royalties.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Dresser Name</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our company&#146;s name and principal mark is a
combination of the names of our founder companies, Dresser
Industries, Inc. and Ingersoll-Rand. We have acquired perpetual
rights to use the &#147;Rand&#148; portion of our principal mark
from Ingersoll-Rand as part of the sale agreement. The rights to
use the &#147;Dresser&#148; portion of our name in perpetuity
were acquired from Dresser, Inc., an affiliate of First Reserve
for consideration of $1&nbsp;million plus an additional
$4&nbsp;million payable over the next 9&nbsp;years.
</FONT>

<P align="center"><FONT size="2">96
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='114'></A>
</DIV>

<!-- link1 "DESCRIPTION OF INDEBTEDNESS" -->

<P align="center">
<B><FONT size="2">DESCRIPTION OF INDEBTEDNESS</FONT></B>

<P align="left">
<B><FONT size="2">Senior Secured Credit Facility</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Overview</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the transactions, we entered
into a senior secured credit facility with Citicorp North
America, Inc., as administrative agent, Citigroup Global Markets
Inc., as joint lead arranger and joint book manager, Morgan
Stanley Senior Funding, Inc., as joint lead arranger, joint book
manager and co-syndication agent, UBS Securities LLC, as joint
lead arranger, joint book manager and co-syndication agent, and
each lender party thereto.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The senior secured credit facility provides
senior secured financing of $695&nbsp;million, consisting of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a $395&nbsp;million term loan facility (with a
    <FONT face="times new roman,times">&#128;</FONT>78.5&nbsp;million
    sub-facility);&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a $300&nbsp;million revolving credit facility
    (with a sub-facility denominated in euros in an amount not to
    exceed the equivalent of $200&nbsp;million and in sterling in an
    amount not to exceed the equivalent of $75&nbsp;million).
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The term loan portion of our senior secured
credit facility was fully funded and on March&nbsp;31, 2005 we
had approximately $125&nbsp;million of borrowing capacity under
the revolving portion of our senior secured credit facility,
subject to certain conditions, after giving effect to
approximately $175&nbsp;million of outstanding letters of credit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the occurrence of certain events, we may
request an increase to the existing term loan facility and/or
the existing revolving credit facility in an aggregate amount
not to exceed $200&nbsp;million, subject to receipt of
commitments by existing lenders or other financial institutions
reasonably acceptable to the administrative agent.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We and certain of our foreign subsidiaries are
the borrowers for the term loan facility and the revolving
credit facility. The foreign subsidiary borrowers are referred
to herein as Euro Borrowers. The revolving credit facility
includes borrowing capacity available for letters of credit and
for borrowings on same-day notice, referred to as swingline
loans.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Interest Rate and Fees</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The U.S.&nbsp;dollar denominated borrowings under
the senior secured credit facility bear interest at a rate equal
to an applicable margin plus, at our option, either (a)&nbsp;a
base rate determined by reference to the highest of (1)&nbsp;the
rate that the administrative agent announces from time to time
as its prime or base commercial lending rate, (2)&nbsp;the three
month certificate of deposit rate plus 1/2 of 1% and
(3)&nbsp;the federal funds rate plus 1/2 of 1% or (b)&nbsp;a
LIBOR rate determined by reference to the costs of funds for
deposits in U.S.&nbsp;dollars for the interest period relevant
to such borrowing adjusted for certain additional costs. Euro
borrowings under the senior secured credit facility bear
interest at a rate equal to an applicable margin plus, a EURIBOR
rate determined by reference to the costs of funds for deposits
in euros for the interest period relevant to such borrowing
adjusted for certain additional costs. Borrowings in a foreign
currency, other than Euros under the senior secured credit
facility, bear interest at a rate equal to an applicable margin,
plus a LIBOR rate determined by reference to the costs of funds
for deposits in the currency of such borrowing for the interest
period relevant to such borrowings adjusted for certain
additional costs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The initial applicable margin for borrowings
under the revolving credit facility is 1.50% with respect to
base rate borrowings and 2.50% with respect to LIBOR and EURIBOR
borrowings (which margin will be reduced to 1.25% and 2.25%,
respectively if our leverage ratio is less than 5.0 to 1.0 but
greater than or equal to 4.0 to 1.0, and to 1.00% and 2.00%,
respectively if our leverage ratio is less than 4.0 to 1.0). The
initial applicable margin for base rate borrowings under the
term loan facility is 1.00%. The initial applicable margin
</FONT>

<P align="center"><FONT size="2">97
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">for LIBOR borrowings and EURIBOR borrowings under
the term loan facility is 2.00% and 2.50%, respectively.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to paying interest on outstanding
principal under the senior secured credit facility, we are
required to pay a commitment fee to the lenders under the
revolving credit facility in respect of the unutilized
commitments thereunder. The initial commitment fee rate is
0.50%&nbsp;per annum (which fee will be reduced to
0.375%&nbsp;per annum if our leverage ratio is less than 4.0 to
1.0). We also have to pay letter of credit fees equal to the
applicable margin then in effect with respect to LIBOR loans
under the revolving credit facility on the face amount of each
such letter of credit. We also have to pay to each bank issuing
a letter of credit fees equal to 1/4 of 1% on the face amount of
each letter of credit and other customary documentary and
processing charges.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Prepayments</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The senior secured credit facility requires us to
prepay outstanding term loans, subject to certain exceptions,
with:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">beginning in the year ending December&nbsp;31,
    2005, 75% (which percentage will be reduced to 50% if our
    leverage ratio is equal to or less than 5.00 to 1.00 and greater
    than 4.00 to 1.00, and to 25% if our leverage ratio is equal to
    or less than 4.00 to 1.00 and greater than 3.00 to 1.00, and to
    0% if our leverage ratio is equal to or less than 3.00 to 1.00)
    of our annual excess cash flow;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">100% of the net cash proceeds in excess of an
    agreed upon amount from non-ordinary course asset sales and
    casualty and condemnation events, if we do not reinvest or
    contract to reinvest those proceeds within twelve&nbsp;months,
    subject to certain limitations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">100% of the net cash proceeds of any incurrence
    of debt, other than certain debt permitted under the senior
    secured credit facility;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">100% of amounts in excess of an aggregate amount
    of $5.0&nbsp;million in respect of certain claims arising out of
    the Acquisition, subject to certain exceptions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The foregoing mandatory prepayments other than
from excess cash flow will be applied to the remaining
installments of the term loan facility on a pro rata basis.
Mandatory prepayments from excess cash flow and optional
prepayments will be applied to the remaining installments of the
term loan facility at our direction. Each lender has the right
to decline any mandatory prepayment of its term loans in which
case the amount of such prepayment will be retained by us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may voluntarily prepay outstanding loans under
the senior secured credit facility at any time without premium
or penalty, other than customary &#147;breakage&#148; costs with
respect to LIBOR or EURIBOR loans.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Amortization</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are required to repay installments on the
loans under the term loan facility in quarterly principal
amounts equal to one quarter of 1.00% of their funded total
principal amount for the first six years and six months, with
the remaining amount payable on the date that is seven years
from the date of the closing of the senior secured credit
facility.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Principal amounts outstanding under the revolving
credit facility will be due and payable in full at maturity,
five years from the date of the closing of the senior secured
credit facility.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Guarantee and Security</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All our obligations and the obligations of the
Euro Borrowers under the senior secured credit facility are
unconditionally guaranteed by each of our existing and future
domestic wholly-owned subsidiaries (subject to exceptions with
respect to immaterial subsidiaries and with respect to any
guaranty that could create
</FONT>

<P align="center"><FONT size="2">98
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">materially adverse tax consequences), and our
direct parent, D-R Interholding, LLC, referred to, collectively,
as Domestic Guarantors.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All our obligations under the senior secured
credit facility, our guarantee of the obligations of the Euro
Borrowers under the senior secured credit facility, and the
guarantees of our obligations and the obligations of the Euro
Borrowers under the senior secured credit facility by the
Domestic Guarantors, are secured by substantially all our assets
and the assets of each Domestic Guarantor, including, but not
limited to, the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">subject to certain exceptions, a pledge of 100%
    of our capital stock and the capital stock of each direct,
    material domestic subsidiary owned by us or a Domestic Guarantor
    (other than subsidiaries substantially all of whose assets
    consist of stock in controlled foreign corporations) and 65% of
    the capital stock of each direct, material foreign subsidiary
    owned by us or a Domestic Guarantor and of each direct, material
    domestic subsidiary owned by us or a Domestic Guarantor
    substantially all of whose assets consist of stock in controlled
    foreign corporations;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">subject to certain exceptions, a security
    interest in substantially all of the tangible and intangible
    assets owned by us and each Domestic Guarantor.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All obligations of each Euro Borrower under the
senior secured credit facility are also unconditionally
guaranteed by certain of our existing and future wholly-owned
foreign subsidiaries (subject to exceptions with respect to
immaterial subsidiaries and with respect to any guaranty that
could create materially adverse tax or legal consequences)
referred to, collectively, as Foreign Guarantors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, all obligations of each Euro
Borrower under the senior secured credit facility, and the
guarantees of those obligations by the applicable Foreign
Guarantors, are secured by substantially all the assets of such
Euro Borrower and the applicable Foreign Guarantors, including,
but not limited to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">subject to certain exceptions, a pledge of 100%
    of the capital stock of each direct, material subsidiary of such
    Euro Borrower and the applicable Foreign Guarantors (subject to
    exceptions with respect to any pledge that could create
    materially adverse tax or legal consequences);&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">subject to certain exceptions and limitations
    under applicable law, a security interest in substantially all
    of the tangible and intangible assets of such Euro Borrower and
    the applicable Foreign Guarantors.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Certain Covenants and Events of
    Default</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The senior secured credit facility contains a
number of covenants that, among other things, restrict, subject
to certain exceptions, our ability, the ability of our parent
D-R Interholding, LLC, and each of its subsidiaries to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">sell assets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">incur additional indebtedness;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">prepay, redeem or repurchase other indebtedness;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">pay dividends and distributions or repurchase
    capital stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">create liens on assets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make investments, loans or advances;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make capital expenditures;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make amendments to any corporate documents that
    would be materially adverse to the lenders;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make certain acquisitions;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">99
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">engage in mergers or consolidations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">engage in certain transactions with affiliates;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">amend certain material agreements governing
    indebtedness;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">change the business conducted by D-R
    Interholding, LLC and its subsidiaries;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into agreements that restrict dividends
    from subsidiaries;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into sale and lease-back
    transactions;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into swap agreements.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the senior secured credit facility
requires us to maintain the following financial covenants:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a maximum consolidated net leverage
    ratio;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a minimum interest coverage ratio.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The senior secured credit facility also contains
certain customary affirmative covenants and events of default.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We were briefly not in compliance with our
obligation under the senior secured credit facility to provide
the lenders with financial statements for the year ended
December&nbsp;31, 2004 no later than 120 days after the end of
that year. This non-compliance was remedied by delivery of the
financial statements within the 30-day cure period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to seek an amendment to our senior
secured credit facility prior to the consummation of this
offering to remove certain restrictions on our ability to
consummate the offering and use the proceeds as described in
&#147;Use of Proceeds.&#148;
</FONT>

<P align="left">
<B><FONT size="2">7 3/8%&nbsp;Senior Subordinated Notes due
2014</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In October 2004, we issued the 7 3/8%&nbsp;senior
subordinated notes that mature on November&nbsp;1, 2014 in an
aggregate principal amount of $420.0&nbsp;million in a private
transaction not subject to the registration requirements under
the Securities Act. The net proceeds from that financing were
used to finance the acquisition and pay related fees and
expenses.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Guarantees</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The notes are guaranteed, on a senior
subordinated, unsecured basis, by each of our direct and
indirect wholly-owned subsidiaries that were domestic
subsidiaries on the issue date.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ranking</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The notes are general unsecured senior
subordinated obligations of the issuer that rank junior to the
issuer&#146;s existing and future senior indebtedness, including
obligations under the senior secured credit facility, equally in
right of payment with all of the issuer&#146;s future senior
subordinated debt and senior in right of payment to all of our
future subordinated debt. They are effectively subordinated in
right of payment to all of the issuer&#146;s existing and future
secured debt to the extent of the value of the assets securing
such debt, and are structurally subordinated to all obligations
of our subsidiaries that are not guarantors.
</FONT>

<P align="center"><FONT size="2">100
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Optional
Redemption</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At any time prior to November&nbsp;1, 2007, the
issuer may on any one or more occasions redeem up to 35% of the
aggregate principal amount of notes issued under the indenture
(including any additional notes issued after the issue date) at
a redemption price of 107.375% of the principal amount, plus
accrued and unpaid interest and additional interest, if any, to,
but not including, the redemption date, with the net cash
proceeds of one or more equity offerings; provided that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(1)&nbsp;at least 65% of the aggregate principal
    amount of notes issued under the indenture (excluding notes held
    by us and our subsidiaries) remains outstanding immediately
    after the occurrence of such redemption;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;the redemption occurs within
    180&nbsp;days of the date of the closing of such equity offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except pursuant to the preceding paragraph or as
otherwise set forth below, the notes will not be redeemable at
the issuer&#146;s option prior to November&nbsp;1, 2009. We are
not, however, prohibited from acquiring the notes by means other
than a redemption, whether pursuant to a tender offer, open
market purchase or otherwise, so long as the acquisition does
not violate the terms of the indenture.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On or after November&nbsp;1, 2009, the issuer may
redeem all or a part of the notes at the redemption prices
(expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and additional interest, if
any, on the notes to be redeemed, to, but not including, the
applicable redemption date, if redeemed during the twelve month
period beginning on November&nbsp;1 of the years indicated
below, subject to the rights of holders on the relevant record
date to receive interest on the relevant interest payment date:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="82%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2009
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103.688%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2010
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102.458%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2011
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101.229%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2012 and thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.000%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, at any time prior to
November&nbsp;1, 2009, the issuer may also redeem all or a part
of the notes at a redemption price equal to 100% of the
principal amount of notes to be redeemed, plus the applicable
premium as of, and accrued and unpaid interest and additional
interest, if any, to, but not including, the redemption date,
subject to the rights of holders on the relevant record date to
receive interest due on the relevant interest payment date.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change of
Control</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event of a change of control, which is
defined in the indenture governing the notes, each holder of the
notes will have the right to require the issuer to repurchase
all or any part of such holder&#146;s notes at a purchase price
in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Covenants</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The indenture governing the notes contains
certain covenants that, among other things, limit our ability
and the ability of some of our subsidiaries to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">incur additional debt or issue certain preferred
    shares;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">pay dividends on or make distributions in respect
    of our or any of our restricted subsidiaries&#146; capital stock
    or make other restricted payments;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make certain investments;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">101
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">sell certain assets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">create liens on certain debt without securing the
    notes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">consolidate, merge, sell or otherwise dispose of
    all or substantially all of our assets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into certain transactions with our
    affiliates;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">designate our subsidiaries as unrestricted
    subsidiaries.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Events of
Default</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The indenture governing the notes also provides
for events of default which, if any of them occurs, would permit
or require the principal of and accrued interest on such notes
to become or to be declared to be due and payable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of May&nbsp;1, 2005 we were in compliance in
all material respects with all covenants and provisions
contained under the indenture governing the notes.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exchange
Offer</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are obligated to use commercially reasonable
efforts to register the notes under the Securities Act and
consummate an exchange offer no later than August&nbsp;25, 2005.
If this requirement is not met, then the annual interest on the
notes will increase by (1)&nbsp;0.25% for the first 90&nbsp;days
following the end of such period and (2)&nbsp;0.25% at the
beginning of each subsequent 90&nbsp;day period, up to a maximum
of 1.0% until all such registration defaults are cured.
</FONT>

<P align="center"><FONT size="2">102
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">DESCRIPTION OF CAPITAL STOCK</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">The following is a description of the material
terms of our amended and restated certificate of incorporation
and amended and restated bylaws that will be in effect
immediately prior to this offering. We refer you to the form of
our amended and restated certificate of incorporation and
amended and restated bylaws, copies of which have been filed as
exhibits to the registration statement of which this prospectus
forms a part.</FONT></I>

<P align="left">
<B><FONT size="2">Authorized Capitalization</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our authorized capital stock consists
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, par value $0.01&nbsp;per share, of
which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
were issued and outstanding immediately prior to this offering
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of preferred stock, par value
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, of which no shares are currently issued and outstanding.
Immediately following the completion of this offering, we will
have &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding
(including &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
that will be dividended to our stockholders existing immediately
prior to this offering, consisting of affiliates of First
Reserve and certain members of senior management, assuming the
underwriters do not exercise their over-allotment option).
Immediately following completion of the offering, there will be
no shares of preferred stock outstanding.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Common Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Voting Rights.</FONT></I><FONT size="2">
Holders of common stock are entitled to one vote per share on
all matters to be voted upon by the stockholders. The holders of
common stock do not have cumulative voting rights in the
election of directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dividend Rights.</FONT></I><FONT size="2">
Subject to the rights of the holders of any preferred stock that
may be outstanding, holders of our common stock are entitled to
receive dividends as may be declared by our Board of Directors
out of funds legally available to pay dividends. Dividends upon
the common stock of the corporation may be declared by the board
of directors at any regular or special meeting, and may be paid
in cash, in property, or in shares of capital stock. Before
payment of any dividend, there may be set aside out of any of
our funds available for dividends, such sums as the board of
directors deems proper as reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any of our
property, or for any proper purpose, and the board of directors
may modify or abolish any such reserve. Our senior secured
credit facility and the indenture governing the senior
subordinated notes impose restrictions on our ability to declare
dividends with respect to our common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Liquidation Rights.</FONT></I><FONT size="2">
Upon liquidation, dissolution or winding up, any business
combination or a sale or disposition of all or substantially all
of the assets, the holders of common stock are entitled to
receive ratably the assets available for distribution to the
stockholders after payment of liabilities and the liquidation
preference of any of our outstanding preferred stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Other Matters.</FONT></I><FONT size="2"> The
common stock has no preemptive or conversion rights and is not
subject to further calls or assessment by us. There are no
redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of our common stock, including the
common stock offered in this offering, are fully paid and
non-assessable.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;Preferred Stock</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our amended and restated certificate of
incorporation authorizes our board of directors to establish one
or more series of preferred stock and to determine, with respect
to any series of preferred stock, the terms and rights of that
series, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the designation of the series;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the number of shares of the series, which our
    board may, except where otherwise provided in the preferred
    stock designation, increase or decrease, but not below the
    number of shares then outstanding;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">103
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">whether dividends, if any, will be cumulative or
    non-cumulative and the dividend rate of the series;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the dates at which dividends, if any, will be
    payable;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the redemption rights and price or prices, if
    any, for shares of the series;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the terms and amounts of any sinking fund
    provided for the purchase or redemption of shares of the series;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the amounts payable on shares of the series in
    the event of any voluntary or involuntary liquidation,
    dissolution or winding-up of the affairs of our company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">whether the shares of the series will be
    convertible into shares of any other class or series, or any
    other security, of our company or any other corporation, and, if
    so, the specification of the other class or series or other
    security, the conversion price or prices or rate or rates, any
    rate adjustments, the date or dates as of which the shares will
    be convertible and all other terms and conditions upon which the
    conversion may be made;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">restrictions on the issuance of shares of the
    same series or of any other class or series;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the voting rights, if any, of the holders of the
    series.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Anti-Takeover Effects of Certain Provisions of
Delaware Law and our Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain provisions of our amended and restated
certificate of incorporation and amended and restated bylaws,
which are summarized in the following paragraphs, may have an
anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in
its best interest, including those attempts that might result in
a premium over the market price for the shares held by
stockholders.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Removal of Directors;
    Vacancies</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our amended and restated certificate of
incorporation and amended and restated bylaws provide that
unless otherwise provided in the stockholders agreement,
(i)&nbsp;prior to the date on which First Reserve ceases to own
at least 40% of all the then outstanding shares of stock,
directors may be removed for any reason upon the affirmative
vote of holders of at least a majority of the voting power of
all the then outstanding shares of stock entitled to vote
generally in the election of directors, voting together as a
single class and (ii)&nbsp;on and after the date First Reserve
ceases to own at least 40% of all the then outstanding shares of
stock, directors may be removed only for cause and only upon the
affirmative vote of holders of at least 75% of the voting power
of all the then outstanding shares of stock entitled to vote
generally in the election of directors, voting together as a
single class. In addition, our amended and restated certificate
of incorporation and amended and restated bylaws also provide
that unless otherwise provided in the stockholders agreement,
any vacancies on our board of directors will be filled only by
the affirmative vote of a majority of the remaining directors,
although less than a quorum.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">No Cumulative Voting</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Delaware General Corporation Law
(&#147;DGCL&#148;) provides that stockholders are not entitled
to the right to cumulate votes in the election of directors
unless our amended and restated certificate of incorporation
provides otherwise. Our amended and restated certificate of
incorporation does not expressly provide for cumulative voting.
</FONT>

<P align="center"><FONT size="2">104
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Calling of Special Meetings of
    Stockholders</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our amended and restated bylaws provide that
special meetings of our stockholders may be called at any time
by the board of directors or a committee of the board of
directors which has been designated by the board of directors.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stockholder Action by Written
    Consent</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The DGCL permits stockholder action by written
consent unless otherwise provided by amended and restated
certificate of incorporation. Our amended and restated
certificate of incorporation precludes stockholder action by
written consent after the date on which First Reserve ceases to
own at least 40% of all the then outstanding shares of stock.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Advance Notice Requirements for Stockholder
    Proposals and Director Nominations</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our amended and restated bylaws provide that
stockholders seeking to nominate candidates for election as
directors or to bring business before an annual meeting of
stockholders must provide timely notice of their proposal in
writing to the corporate secretary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Generally, to be timely, a stockholder&#146;s
notice must be received at our principal executive offices not
less than 90&nbsp;days nor more than 120&nbsp;days prior to the
date on which we first mailed our proxy materials for the
preceding year&#146;s annual meeting. Our amended and restated
bylaws also specify requirements as to the form and content of a
stockholder&#146;s notice. These provisions may impede
stockholders&#146; ability to bring matters before an annual
meeting of stockholders or make nominations for directors at an
annual meeting of stockholders.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Supermajority Provisions</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The DGCL provides generally that the affirmative
vote of a majority of the outstanding shares entitled to vote is
required to amend a corporation&#146;s certificate of
incorporation or bylaws, unless the certificate of incorporation
requires a greater percentage. Our amended and restated
certificate of incorporation provides that the following
provisions in the amended and restated certificate of
incorporation and amended and restated bylaws may be amended
only by a vote of at least 75% of the voting power of all of the
outstanding shares of our stock entitled to vote:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the removal of directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the limitation on stockholder action by written
    consent;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the ability to call a special meeting of
    stockholders being vested solely in our board of directors and
    any committee of the board of directors which has been
    designated by the board of directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the advance notice requirements for stockholder
    proposals and director nominations;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the amendment provision requiring that the above
    provisions be amended only with a 75% supermajority vote.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, our amended and restated certificate
of incorporation grants our board of directors the authority to
amend and repeal our amended and restated bylaws without a
stockholder vote in any manner not inconsistent with the laws of
the State of Delaware or our amended and restated certificate of
incorporation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Limitations on Liability and
    Indemnification of Officers and Directors</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The DGCL authorizes corporations to limit or
eliminate the personal liability of directors to corporations
and their stockholders for monetary damages for breaches of
directors&#146; fiduciary duties. Our amended and
</FONT>

<P align="center"><FONT size="2">105
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">restated certificate of incorporation includes a
provision that eliminates the personal liability of directors
for monetary damages for actions taken as a director,
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for breach of duty of loyalty;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for acts or omissions not in good faith or
    involving intentional misconduct or knowing violation of law;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">under Section&nbsp;174 of the DGCL (unlawful
    dividends);&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for transactions from which the director derived
    improper personal benefit.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our amended and restated certificate of
incorporation and amended and restated bylaws provide that we
must indemnify our directors and officers to the fullest extent
authorized by the DGCL. We are also expressly authorized to
carry directors&#146; and officers&#146; insurance providing
indemnification for our directors, officers and certain
employees for some liabilities. We believe that these
indemnification provisions and insurance are useful to attract
and retain qualified directors and executive officers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The limitation of liability and indemnification
provisions in our amended and restated certificate of
incorporation and amended and restated bylaws may discourage
stockholders from bringing a lawsuit against directors for
breach of their fiduciary duty. These provisions may also have
the effect of reducing the likelihood of derivative litigation
against directors and officers, even though such an action, if
successful, might otherwise benefit us and our stockholders. In
addition, your investment may be adversely affected to the
extent we pay the costs of settlement and damage awards against
directors and officers pursuant to these indemnification
provisions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There is currently no pending material litigation
or proceeding involving any of our directors, officers or
employees for which indemnification is sought.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Delaware Anti-takeover
    Statute</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have opted out of Section&nbsp;203 of the
DGCL. Subject to specified exceptions, Section&nbsp;203
prohibits a publicly held Delaware corporation from engaging in
a &#147;business combination&#148; with an &#147;interested
stockholder&#148; for a period of three years after the date of
the transaction in which the person became an interested
stockholder. &#147;Business combinations&#148; include mergers,
asset sales and other transactions resulting in a financial
benefit to the &#147;interested stockholder.&#148; Subject to
various exceptions, an &#147;interested stockholder&#148; is a
person who together with his or her affiliates and associates,
owns, or within three years did own, 15% or more of the
corporation&#146;s outstanding voting stock. These restrictions
generally prohibit or delay the accomplishment of mergers or
other takeover or change-in-control attempts.
</FONT>

<P align="left">
<B><FONT size="2">Transfer Agent and Registrar</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Citibank, N.A. will be the transfer agent and
registrar for our common stock.
</FONT>

<P align="left">
<B><FONT size="2">Listing</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to apply to list our common stock on
the New York Stock Exchange under the symbol &#147;DRC.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Authorized but Unissued Capital
Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The DGCL does not require stockholder approval
for any issuance of authorized shares. However, the listing
requirements of the New York Stock Exchange, which would apply
so long as our common stock is listed on the New York Stock
Exchange, require stockholder approval of certain issuances
equal to or exceeding 20% of the then outstanding voting power
or then outstanding number of shares of common stock.
</FONT>

<P align="center"><FONT size="2">106
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">These additional shares may be used for a variety
of corporate purposes, including future public offerings, to
raise additional capital or to facilitate acquisitions.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">One of the effects of the existence of unissued
and unreserved common stock may be to enable our board of
directors to issue shares to persons friendly to current
management, which issuance could render more difficult or
discourage an attempt to obtain control of our company by means
of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of our management and possibly
deprive the stockholders of opportunities to sell their shares
of common stock at prices higher than prevailing market prices.
</FONT>

<P align="center"><FONT size="2">107
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">SHARES ELIGIBLE FOR FUTURE SALE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has not been any
public market for our common stock, and we cannot predict what
effect, if any, market sales of shares of common stock or the
availability of shares of common stock for sale will have on the
market price of our common stock. Nevertheless, sales of
substantial amounts of common stock in the public market, or the
perception that such sales could occur, could materially and
adversely affect the market price of our common stock and could
impair our future ability to raise capital through the sale of
our equity or equity-related securities at a time and price that
we deem appropriate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the closing of this offering, we will have
outstanding an aggregate of
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares of common stock, including an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
that may be issued upon the exercise of the underwriters&#146;
over-allotment option. Of the outstanding shares, the shares
sold in this offering will be freely tradable without
restriction or further registration under the Securities Act,
except that any shares held by our &#147;affiliates,&#148; as
that term is defined under Rule&nbsp;144 of the Securities Act,
may be sold only in compliance with the limitations described
below. The remaining outstanding shares of common stock will be
deemed &#147;restricted securities&#148; as that term is defined
under Rule&nbsp;144. Restricted securities may be sold in the
public market only if registered or if they qualify for an
exemption from registration under Rule&nbsp;144 or 144(k) under
the Securities Act, which are summarized below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under our Stockholders Agreement, we may be
required to register the sale of our shares held by First
Reserve and certain management stockholders. Under the
Stockholders Agreement, First Reserve has the right to request
us to register the sale of its shares and may require us to make
available shelf registration statements permitting sales of
shares into the market from time to time over an extended
period. In addition, First Reserve and certain management
stockholders will have the ability to exercise certain piggyback
registration rights in connection with registered offerings
requested by First Reserve or initiated by us. Immediately after
this offering, First Reserve will
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares entitled to these registration rights and management will
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares entitled to these registration rights. See &#147;Certain
Related Party Transactions&nbsp;&#151; Stockholders
Agreement.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Registration Rights Agreement</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The registration rights agreement provides that,
in connection with a public offering and sale, First Reserve
will, in certain circumstances, have the ability to require us
to register its shares of our common stock. In addition, in
connection with other registered offerings by us, existing
holders of shares of our common stock will have the ability to
exercise certain piggyback registration rights with respect to
such shares.
</FONT>

<P align="left">
<B><FONT size="2">Rule&nbsp;144</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to the lock-up agreements described below
and the volume limitations and other conditions under
Rule&nbsp;144, additional shares of our common stock will be
available for sale in the public market pursuant to exemptions
from registration requirements as follows:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">After &nbsp;&nbsp;&nbsp;days from the date of
    this prospectus (subject to volume limitations and other
    conditions under Rule&nbsp;144)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, under Rule&nbsp;144 as currently in
effect, a person (or persons whose shares are required to be
aggregated), including an affiliate, who has beneficially owned
shares of our common stock for at least one year is entitled to
sell in any three-month period a number of shares that does not
exceed the greater of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">1% of the then-outstanding shares of common
    stock;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the average weekly reported volume of trading in
    the common stock on the New York Stock Exchange during the four
    calendar weeks preceding the date on which notice of sale is
    filed, subject to restrictions.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">108
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Sales under Rule&nbsp;144 are also subject to
manner of sale provisions and notice requirements and to the
availability of current public information about us.
</FONT>

<P align="left">
<B><FONT size="2">Rule&nbsp;144(k)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, a person who is not deemed to have
been an affiliate of ours at any time during the 90&nbsp;days
preceding a sale and who has beneficially owned the shares
proposed to be sold for at least two years, would be entitled to
sell those shares under Rule&nbsp;144(k) without regard to the
manner of sale, public information, volume limitation or notice
requirements of Rule&nbsp;144. To the extent that our affiliates
sell their shares, other than pursuant to Rule&nbsp;144 or a
registration statement, the purchaser&#146;s holding period for
the purpose of effecting a sale under Rule&nbsp;144 commences on
the date of transfer from the affiliate. For so long as
D-R&nbsp;Interholding, LLC controls us, it will be deemed to be
our affiliate under Rule&nbsp;144(k) and may not rely on the
exemption from registration under Rule&nbsp;144(k).
</FONT>

<P align="left">
<B><FONT size="2">Lock-Up Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with this offering, we,
D-R&nbsp;Interholding, LLC and all of our stockholders existing
prior to this offering have agreed with the underwriters,
subject to certain exceptions, not to sell, dispose of or hedge
any of our common stock or securities convertible into or
exchangeable for shares of common stock, during the period
ending 180&nbsp;days after the date of this prospectus, except
with the prior written consent of Morgan Stanley&nbsp;&#38; Co.
Incorporated and Citigroup Global Markets Inc. See
&#147;Underwriting.&#148;
</FONT>

<P align="center"><FONT size="2">109
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">CERTAIN UNITED STATES FEDERAL INCOME AND
ESTATE TAX</FONT></B>

<DIV align="center">
<B><FONT size="2">CONSEQUENCES TO
NON-U.S.&nbsp;HOLDERS</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following discussion is a summary of certain
United States federal income and estate tax consequences of the
purchase, ownership and disposition of our common stock as of
the date hereof. Except where noted, this summary deals only
with common stock that is held as a capital asset by a
non-U.S.&nbsp;holder.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A &#147;non-U.S.&nbsp;holder&#148; means a
beneficial owner of our common stock (other than a partnership)
that is not for United States federal income tax purposes any of
the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an individual citizen or resident of the United
    States;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a corporation (or any other entity treated as a
    corporation for United States federal income tax purposes)
    created or organized in or under the laws of the United States,
    any state thereof or the District of Columbia;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an estate the income of which is subject to
    United States federal income taxation regardless of its
    source;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a trust if it (1)&nbsp;is subject to the primary
    supervision of a court within the United States and one or more
    United States persons have the authority to control all
    substantial decisions of the trust or (2)&nbsp;has a valid
    election in effect under applicable United States Treasury
    regulations to be treated as a United States person.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This discussion is based upon provisions of the
Internal Revenue Code of 1986, as amended (the
&#147;Code&#148;), and regulations, rulings and judicial
decisions as of the date hereof. Those authorities may be
changed, perhaps retroactively, so as to result in United States
federal income and estate tax consequences different from those
summarized below. This summary does not address all aspects of
United States federal income and estate taxes and does not deal
with foreign, state, local or other tax considerations that may
be relevant to non-U.S.&nbsp;holders in light of their personal
circumstances. In addition, it does not represent a detailed
description of the United States federal income and estate tax
consequences applicable to you if you are subject to special
treatment under the United States federal income tax laws
(including if you are a United States expatriate,
&#147;controlled foreign corporation,&#148; &#147;passive
foreign investment company,&#148; corporation that accumulates
earnings to avoid United States federal income tax or an
investor in a partnership or other pass-through entity). We
cannot assure you that a change in law will not alter
significantly the tax considerations that we describe in this
summary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If a partnership holds our common stock, the tax
treatment of a partner will generally depend upon the status of
the partner and the activities of the partnership. If you are a
partner of a partnership holding our common stock, you should
consult your tax advisors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">If you are considering the purchase of our
common stock, you should consult your own tax advisors
concerning the particular United States federal income and
estate tax consequences to you of the ownership of the common
stock, as well as the consequences to you arising under the laws
of any other taxing jurisdiction.</FONT></B>

<P align="left">
<B><FONT size="2">Dividends</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If distributions are paid on shares of our common
stock, such distributions will constitute dividends for United
States federal income tax purposes to the extent paid from our
current or accumulated earnings and profits, as determined under
United States federal income tax principles. If a distribution
exceeds our current and accumulated earnings and profits, it
will constitute a return of capital that is applied against and
reduces, but not below zero, a non-U.S.&nbsp;Holder&#146;s
adjusted tax basis in our common stock. Any remainder will
constitute gain on the common stock. See &#147;&#151;&nbsp;Gain
on Disposition of Common Stock.&#148; Dividends paid to a
non-U.S.&nbsp;holder of our common stock generally will be
subject to withholding of United States federal income tax at a
30% rate or such lower rate as may be specified by an applicable
income tax treaty. However, dividends that are effectively
connected with the conduct of a trade or business by the
non-U.S.&nbsp;holder within the United States (and, where a tax
treaty applies, are attributable to a United States permanent
</FONT>

<P align="center"><FONT size="2">110
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">establishment of the non-U.S.&nbsp;holder) are
not subject to the withholding tax, provided that certain
certification and disclosure requirements are satisfied.
Instead, such dividends are generally subject to United States
federal income tax on a net income basis in the same manner as
if the non-U.S.&nbsp;holder were a United States person as
defined under the Code. Any such effectively connected dividends
received by a foreign corporation may be subject to an
additional &#147;branch profits tax&#148; at a 30% rate or such
lower rate as may be specified by an applicable income tax
treaty.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A non-U.S.&nbsp;holder of our common stock who
wishes to claim the benefit of an applicable treaty rate and
avoid backup withholding, as discussed below, for dividends will
be required to (a)&nbsp;complete Internal Revenue Service
Form&nbsp;W-8BEN (or other applicable form) and certify under
penalty of perjury that such holder is not a United States
person as defined under the Code or (b)&nbsp;if our common stock
is held through certain foreign intermediaries, satisfy the
relevant certification requirements of applicable United States
Treasury regulations. Special certification and other
requirements apply to certain non-U.S.&nbsp;holders that are
entities rather than individuals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A non-U.S.&nbsp;holder of our common stock
eligible for a reduced rate of United States withholding tax
pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for
refund with the Internal Revenue Service.
</FONT>

<P align="left">
<B><FONT size="2">Gain on Disposition of Common Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any gain realized on the disposition of our
common stock generally will not be subject to United States
federal income or withholding tax unless:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the gain is effectively connected with a trade or
    business of the non-U.S.&nbsp;holder in the United States, and,
    if required by an applicable income tax treaty, is attributable
    to a United States permanent establishment of the
    non-U.S.&nbsp;holder;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the non-U.S.&nbsp;holder is an individual who is
    present in the United States for 183&nbsp;days or more in the
    taxable year of that disposition, and certain other conditions
    are met;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we are or have been a &#147;United States real
    property holding corporation&#148; for United States federal
    income tax purposes.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An individual non-U.S.&nbsp;holder described in
the first bullet point immediately above will be subject to tax
on the net gain derived from the sale under regular graduated
United States federal income tax rates. An individual
non-U.S.&nbsp;holder described in the second bullet point
immediately above will be subject to a flat 30% tax on the gain
derived from the sale, which may be offset by United States
source capital losses, even though the individual is not
considered a resident of the United States. If a
non-U.S.&nbsp;holder that is a foreign corporation falls under
the first bullet point immediately above, it will be subject to
tax on its net gain in the same manner as if it were a United
States person as defined under the Code and, in addition, may be
subject to the branch profits tax equal to 30% of its
effectively connected earnings and profits or at such lower rate
as may be specified by an applicable income tax treaty.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe we are not and do not anticipate
becoming a &#147;United States real property holding
corporation&#148; for United States federal income tax purposes.
</FONT>

<P align="left">
<B><FONT size="2">Federal Estate Tax</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Common stock held by an individual
non-U.S.&nbsp;holder at the time of death will be included in
such holder&#146;s gross estate for United States federal estate
tax purposes, unless an applicable estate tax or other treaty
provides otherwise.
</FONT>

<P align="left">
<B><FONT size="2">Information Reporting and Backup
Withholding</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We must report annually to the Internal Revenue
Service and to each non-U.S.&nbsp;holder the amount of dividends
paid to such holder and the tax withheld with respect to such
dividends, regardless of whether withholding was required.
Copies of the information returns reporting such dividends and
withholding may
</FONT>

<P align="center"><FONT size="2">111
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">also be made available to the tax authorities in
the country in which the non-U.S.&nbsp;holder resides under the
provisions of an applicable income tax treaty.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A non-U.S.&nbsp;holder will be subject to backup
withholding for dividends paid to such non-U.S.&nbsp;holder
unless such holder certifies under penalty of perjury that it is
a non-U.S.&nbsp;holder, and the payor does not have actual
knowledge or reason to know that such holder is a United States
person as defined under the Code, or such holder otherwise
establishes an exemption.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Information reporting and, depending on the
circumstances, backup withholding will apply to the proceeds of
a sale of our common stock within the United States or conducted
through certain United States-related financial intermediaries,
unless the beneficial owner certifies under penalty of perjury
that it is a non-U.S.&nbsp;holder (and the payor does not have
actual knowledge or reason to know that the beneficial owner is
a United States person as defined under the Code) or such owner
otherwise establishes an exemption.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any amounts withheld under the backup withholding
rules may be allowed as a refund or a credit against a
non-U.S.&nbsp;holder&#146;s United States federal income tax
liability provided the required information is timely furnished
to the Internal Revenue Service.
</FONT>

<P align="center"><FONT size="2">112
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">UNDERWRITING</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms and subject to the conditions
contained in an underwriting agreement dated the date of this
prospectus, each of the underwriters named below have severally
agreed to purchase, and we have agreed to sell to them,
severally, the number of shares indicated in the table below.
Morgan Stanley&nbsp;&#38; Co. Incorporated and Citigroup Global
Markets Inc. are acting as joint book-running managers and,
together
with &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
are acting as representatives of the underwriters named below.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Underwriters</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Morgan Stanley&nbsp;&#38; Co. Incorporated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Citigroup Global Markets Inc.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters are offering the common stock
subject to their acceptance of the shares from us and subject to
prior sale. The underwriting agreement provides that the
obligations of the several underwriters to pay for and accept
delivery of the common stock offered by this prospectus are
subject to the approval of certain legal matters by their
counsel and to certain other conditions. The underwriters are
obligated to take and pay for all of the common stock offered by
this prospectus if any such shares are taken. However, the
underwriters are not required to take or pay for the shares
covered by the underwriters&#146; over-allotment option
described below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters initially propose to offer part
of the shares of common stock directly to the public at the
public offering price listed on the cover page of this
prospectus and part to certain dealers at a price that
represents a concession not in excess of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
share under the public offering price. After the initial
offering of the shares of common stock, the offering price and
other selling terms may from time to time be varied by the
representatives.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have granted to the underwriters an option,
exercisable for 30&nbsp;days from the date of this prospectus,
to purchase up to an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of common stock at the public offering price listed on
the cover page of this prospectus, less underwriting discounts
and commissions. The underwriters may exercise this option
solely for the purpose of covering over-allotments, if any, made
in connection with the offering of the shares of common stock
offered by this prospectus. To the extent the option is
exercised, each underwriter will become obligated, subject to
specified conditions, to purchase approximately the same
percentage of additional shares of common stock as the number
listed next to the underwriter&#146;s name in the preceding
table bears to the total number of shares of common stock listed
next to the names of all underwriters in the preceding table.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows the per share and total
underwriting discounts and commissions to be paid to the
underwriters by Dresser-Rand Group Inc. Such amounts are shown
assuming both no exercise and full exercise by the underwriters
of their over-allotment option.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Paid by Dresser-Rand Group Inc.</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">No Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Full Exercise</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Per Share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The expenses of this offering payable by us, not
including the underwriting discounts and commissions, are
estimated at
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters have informed us that they do
not intend sales to accounts over which any such underwriter
exercises discretionary authority to exceed five percent of the
total number of shares of common stock offered by them.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to apply to list the common stock on
the New York Stock Exchange under the symbol &#147;DRC&#148;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, D-R Interholding, LLC and all of our
stockholders existing prior to this offering have agreed that,
without the prior written consent of Morgan Stanley&nbsp;&#38;
Co. Incorporated and Citigroup Global Markets Inc.
</FONT>

<P align="center"><FONT size="2">113
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">on behalf of the underwriters, none of us will,
during the period ending 180&nbsp;days after the date of this
prospectus:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend,
    or otherwise transfer or dispose of, directly or indirectly, any
    share of common stock or any securities convertible into or
    exercisable or exchangeable for common stock or file any
    registration statement under the Securities Act of 1933 with
    respect to the foregoing;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The restrictions described in the previous
paragraph do not apply to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale of shares to the underwriters pursuant
    to the underwriting agreement;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance by us of shares of common stock upon
    the exercise of an option or a warrant or the conversion of a
    security outstanding on the date of this prospectus of which the
    underwriters have been advised in writing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">grants, issuances, or exercises under our
    existing employee benefits plans;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance of common stock in connection with
    the acquisition of, or joint venture with, another company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transactions by any person other than us relating
    to shares of common stock or other securities acquired in open
    market transactions after the completion of the offering of the
    shares;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transfers by any person other than us of shares
    of common stock or any security convertible, exchangeable for or
    exercisable into common stock as a bona fide gift or gifts as a
    result of operation of law or testate or in testate succession,
    provided that such transferee agrees to be bound by the
    restrictions described in the previous paragraph;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transfers by any person other than us to a trust,
    partnership, limited liability company or other entity, all of
    the beneficial interests of which are held, directly, or
    indirectly by such person, provided that such transferee agrees
    to be bound by the restrictions described in the previous
    paragraph;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">distributions by any person other than us of
    shares of common stock or any security convertible, exchangeable
    for or exercisable into common stock to limited partners or
    stockholders of such person, provided that such distributee
    agrees to be bound by the restrictions described in the previous
    paragraph.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has been no public
market for the common stock. The initial public offering will be
negotiated between us and the representatives of the
underwriters. The factors to be considered in determining the
initial public offering price of the shares, in addition to
prevailing market conditions, will be Dresser-Rand Group
Inc.&#146;s historical performance, the business prospects of
Dresser-Rand Group Inc., an assessment of Dresser-Rand Group
Inc.&#146;s management and the consideration of the above
factors in relation to market valuation of companies in related
businesses, and the price-earnings ratios, market prices of
securities and other quantitative and qualitative data relating
to such businesses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to facilitate the offering of the common
stock, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of the common
stock. Specifically, the underwriters may sell more shares than
they are obligated to purchase under the underwriting agreement,
creating a short position. A short sale is &#147;covered&#148;
if the short position is no greater than the number of shares
available for purchase by the underwriters under the
over-allotment option. The underwriters can close out a covered
short sale by exercising the over-allotment option or purchasing
shares in the open market. In determining the source of shares
to close out a covered short sale, the underwriters will
consider, among other things, the open market price of shares
compared to the price available under the over-allotment option.
The underwriters may also sell shares in excess of the
over-allotment option, creating a &#147;naked&#148; short
position. The underwriters must close
</FONT>

<P align="center"><FONT size="2">114
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">out any naked short position by purchasing shares
in the open market. A naked short position is more likely to be
created if the underwriters are concerned that there may be
downward pressure on the price of the common stock in the open
market after pricing that could adversely affect investors who
purchase in the offering. As an additional means of facilitating
the offering, the underwriters may bid for, and purchase, common
stock in the open market to stabilize the price of the common
stock. The underwriting syndicate may also reclaim selling
concessions allowed to an underwriter or a dealer for
distributing common stock in the offering, if the syndicate
repurchases previously distributed common stock to cover
syndicate short positions, or to stabilize the price of the
common stock. These activities may raise or maintain the market
price of the common stock above independent market levels or
prevent or retard a decline in the market price of our common
stock. The underwriters are not required to engage in these
activities and may end any of these activities at any time.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters may also impose a penalty bid.
This occurs when a particular underwriter repays to the
underwriters a portion of the underwriting discount received by
it because the representatives have repurchased shares of common
stock sold by or for the account of such underwriter in
stabilizing or short covering transactions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Purchases to cover a short position and
stabilizing transactions may have the effect of preventing or
retarding a decline in the market price of Dresser-Rand Group
Inc.&#146;s stock, and together with the imposition of the
penalty bid, may stabilize, maintain or otherwise affect the
market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might
exist in the open market. If these activities are commenced,
they may be discontinued at any time. These transactions may be
effected on the New York Stock Exchange, in the over-the-counter
market or otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each underwriter has represented, warranted and
agreed that: (i)&nbsp;it has not offered or sold and, prior to
the expiry of a period of six months from the closing of the
offering, will not offer or sell any shares of common stock to
persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public
in the United Kingdom within the meaning of the public Offers of
Securities Regulations 1995; (ii)&nbsp;it has only communicated
or caused to be communicated and will only communicate or cause
to be communicated any invitation or inducement to engage in
investment activity (within the meaning of section&nbsp;21 of
the Financial Services and Markets Act 2000 (&#147;FSMA&#148;))
received by it in connection with the issue or sale of any
shares in circumstances in which section&nbsp;21(1) of the FSMA
does not apply to Dresser-Rand Group Inc.; and (iii)&nbsp;it has
complied and will comply with all applicable provisions of the
FSMA with respect to anything done by it in relation to the
shares in, from or otherwise involving the United Kingdom.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The shares may not be offered or sold,
transferred or delivered, as part of their initial distribution
or at any time thereafter, directly or indirectly, to any
individual or legal entity in the Netherlands other than to
individuals or legal entities who or which trade or invest in
securities in the conduct of their profession or trade, which
includes banks, securities intermediaries, insurance companies,
pension funds, other institutional investors and commercial
enterprises which, as an ancillary activity, regularly trade or
invest in securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A prospectus in electronic format may be made
available by one or more underwriters. The underwriters may
agree to allocate a number of shares to underwriters for sale to
their online brokerage account holders. Internet distributions
will be allocated by the lead manager to underwriters that may
make distributions on the same basis as other allocations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From time to time, some of the underwriters and
their affiliates have provided, and may continue to provide,
investment banking and commercial banking services to us for
fees and commissions that we believe are customary. Citicorp
North America, Inc. acts as administrative agent, Citigroup
Global Markets Inc. acts as joint lead arranger and joint book
manager and Morgan Stanley Senior Funding, Inc. acts as joint
lead arranger, joint book manager and co-syndication agent under
our senior secured credit facility.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the
Securities Act.
</FONT>

<P align="center"><FONT size="2">115
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='119'></A>
</DIV>

<!-- link1 "VALIDITY OF THE SHARES" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>VALIDITY OF THE SHARES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The validity of the issuance of the shares of common stock to be
sold in this offering will be passed upon for us by Simpson
Thacher &#38; Bartlett LLP, New York, New York. Shearman &#38;
Sterling LLP, New York, New York will act as counsel to the
underwriters.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='120'></A>
</DIV>

<!-- link1 "EXPERTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EXPERTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated financial statements as of December&nbsp;31,
2004 and for the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004, and the combined financial statements as
of December&nbsp;31, 2003 and for the period from
January&nbsp;1, 2004 through October&nbsp;29, 2004 and for each
of the two years in the period ended December&nbsp;31, 2003
included in this prospectus have been so included in reliance on
the reports of PricewaterhouseCoopers LLP, an independent
registered public accounting firm, given on the authority of
said firm as experts in auditing and accounting.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='121'></A>
</DIV>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have filed with the Securities and Exchange Commission (the
&#147;SEC&#148;) a registration statement on Form S-1 under the
Securities Act with respect to the issuance of shares of our
common stock being offered hereby. This prospectus, which forms
a part of the registration statement, does not contain all of
the information set forth in the registration statement and
exhibits and schedules. For further information with respect to
us and the shares of our common stock, reference is made to the
registration statement. Statements contained in this prospectus
as to the contents of any contract or other document are not
necessarily complete. We are not currently subject to the
informational requirements of the Exchange Act. After the
offering of the shares of our common stock, we will be subject
to the informational requirements of the Exchange Act, and, in
accordance therewith, will file reports and other information
with the SEC. The registration statement and the exhibits and
schedules to the registration statement, such reports and other
information can be inspected and copied at the Public Reference
Room of the SEC located at 100&nbsp;F Street, N.E., Washington
D.C. 20549. Copies of such materials, including copies of all or
any portion of the registration statement, can be obtained from
the Public Reference Room of the SEC at prescribed rates. You
can call the SEC at 1-800-SEC-0330 to obtain information on the
operation of the Public Reference Room. Such materials may also
be accessed electronically by means of the SEC&#146;s home page
on the Internet (http://www.sec.gov).
</DIV>

<P align="center" style="font-size: 10pt;">116

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Index to Consolidated Financial Statements (Successor)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>and Combined Financial Statements (Predecessor)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Report of Independent Registered Public Accounting Firm</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Report of Independent Registered Public Accounting Firm</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated Financial Statements and Predecessor Combined
    Financial Statements</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Statement of Operations (Successor) for the period
    from October&nbsp;30, 2004 through December&nbsp;31, 2004 and
    Combined Statements of Operations (Predecessor) for the period
    from January&nbsp;1, 2004 through October&nbsp;29, 2004 and for
    the years ended December&nbsp;31, 2003 and 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Balance Sheet (Successor) at December&nbsp;31, 2004
    and Combined Balance Sheet (Predecessor) at December&nbsp;31,
    2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Statement of Cash Flows (Successor) for the period
    from October&nbsp;30, 2004 through December&nbsp;31, 2004 and
    Combined Statements of Cash Flows (Predecessor) for the period
    from January&nbsp;1, 2004 through October&nbsp;29, 2004 and for
    the years ended December&nbsp;31, 2003 and 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Statement of Changes in Stockholders&#146; Equity
    (Successor) for the period from October&nbsp;30, 2004 through
    December&nbsp;31, 2004 and Combined Statements of Changes in
    Ingersoll-Rand Company Limited Partnership&nbsp;Interest
    (Predecessor) for the period from January&nbsp;1, 2004 through
    October&nbsp;29, 2004 and for the years ended December&nbsp;31,
    2003 and 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes to Consolidated and Combined Financial Statements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-9</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-1

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Directors and Stockholders of
</DIV>

<DIV align="left" style="font-size: 10pt;">
Dresser-Rand Group Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the consolidated balance sheet and the related
consolidated statements of operations, changes in
stockholders&#146; equity and cash flows present fairly, in all
material respects, the financial position of Dresser-Rand Group
Inc. (Successor) at December&nbsp;31, 2004 and the consolidated
results of its operations and cash flows for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004 in
conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the
financial statement schedule for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004 listed in
the index appearing under item&nbsp;16 presents fairly, in all
material respects, the information set forth therein when read
in conjunction with the related consolidated financial
statements. These financial statements and financial statement
schedule are the responsibility of the Company&#146;s
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on
our audit. We conducted our audit of these statements in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company&#146;s internal control over
financial reporting. Accordingly we express no such opinion. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
/s/ <FONT style="font-variant:SMALL-CAPS">PricewaterhouseCoopers
LLP
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Buffalo, New York
</DIV>

<DIV align="left" style="font-size: 10pt;">
May&nbsp;12, 2005
</DIV>

<P align="center" style="font-size: 10pt;">F-2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Directors and Stockholders of
</DIV>

<DIV align="left" style="font-size: 10pt;">
Dresser-Rand Group Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 42pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the combined balance sheet and the related
combined statements of operations, changes in Ingersoll-Rand
Company Limited partnership interest and cash flows present
fairly, in all material respects, the financial position of
Dresser-Rand Company (Predecessor), a wholly owned partnership
of Ingersoll-Rand Company Limited, at December&nbsp;31, 2003 and
the combined results of their operations and cash flows for the
period from January&nbsp;1, 2004 through October&nbsp;29, 2004
and for the years ended December&nbsp;31, 2003 and 2002 in
conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the
financial statement schedule for the period from January&nbsp;1,
2004 through October&nbsp;29, 2004 and for the years ended
December&nbsp;31, 2003 and 2002 listed in the index appearing
under item&nbsp;16 presents fairly, in all material respects,
the information set forth therein when read in conjunction with
the related combined financial statements. These financial
statements and financial statement schedule are the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with
the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company&#146;s
internal control over financial reporting. Accordingly we
express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
/s/ <FONT style="font-variant:SMALL-CAPS">PricewaterhouseCoopers
LLP
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Buffalo, New York
</DIV>

<DIV align="left" style="font-size: 10pt;">
May&nbsp;12, 2005
</DIV>

<P align="center" style="font-size: 10pt;">F-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENT OF OPERATIONS (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>AND COMBINED STATEMENTS OF OPERATIONS (PREDECESSOR)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30 through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;1 through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center" nowrap><B>(In thousands of dollars, except per share information)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales of products to third parties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>155,993</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>544,794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,124,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>837,417</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales of services to third parties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,914</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>207,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>189,336</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,841</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other operating revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,759</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>199,907</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>715,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,335,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,031,353</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of products sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>117,991</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>411,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>971,893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>722,308</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of services sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,573</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>142,313</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of products sold, affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,237</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total cost of products and services sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>149,564</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>538,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,132,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>865,858</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross Profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,343</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>165,495</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,499</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138,484</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,040</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,044</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of purchased in-process research and development assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,185</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,004</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,782</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,654</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(776</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,846</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,202</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,504</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,006</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,275</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,910</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,229</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,096</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares outstanding&nbsp;&#151; basic and
    diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,115,080</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.07</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying notes are an integral part of the consolidated
and combined financial statements
</DIV>

<P align="center" style="font-size: 10pt;">F-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED BALANCE SHEET (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>AND COMBINED BALANCE SHEET (PREDECESSOR)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands of dollars</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>except for shares)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>ASSETS</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>111,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>41,537</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Marketable securities at market</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,037</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, less allowance for doubtful accounts of
    $15,110 and $12,427 at 2004 and 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>264,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>242,021</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133,425</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,665</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due from affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105,346</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loans due from affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122,841</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,498</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>574,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>672,370</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investments in and advances to partially owned equity companies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,059</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>226,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101,438</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>423,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,214</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>479,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>254,412</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,565</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,817</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,063,875</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY/PARTNERSHIP
    INTEREST</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable and accruals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>271,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>291,830</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer advance payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,081</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loans due to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,811</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loans payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,716</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current maturities of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>329,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>336,138</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Postemployment and other employee benefit liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147,852</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>396,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>213</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior subordinated notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other noncurrent liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,637</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,298,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>498,840</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies<BR>
    (Notes&nbsp;12,&nbsp;13, 14,&nbsp;15, 17 and 21)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; Equity/ Partnership Interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Partnership interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>631,640</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $0.01&nbsp;par value, 101,200,000&nbsp;shares
    authorized, 100,908,116&nbsp;shares issued and outstanding,
    respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>436,175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(66,605</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity/partnership interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>565,035</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity/partnership
    interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,063,875</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying notes are an integral part of the consolidated
and combined financial statements
</DIV>

<P align="center" style="font-size: 10pt;">F-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENT OF CASH FLOW (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>AND COMBINED STATEMENTS OF CASH FLOW (PREDECESSOR)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30 through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1 through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,096</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to arrive at net cash provided by operating
    activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,704</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,822</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Gain)/loss on sale of property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,031</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(31</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(642</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on insurance recoveries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,145</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for losses on accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,473</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision (net adjustment) for losses on inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write off of purchased in-process research and development assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interest, net of dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,247</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(110</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(555</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity (earnings)/losses, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(194</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,150</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,235</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(974</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,901</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>945</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Increase) decrease in:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30,377</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,324</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,173</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(37,818</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>127,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,647</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current and noncurrent assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,469</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,287</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,976</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,835</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,487</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current and noncurrent liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,408</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(77,440</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,478</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,029</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,791</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,701</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,590</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,670</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,125,148</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from insurance recoveries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,145</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sales of property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,487</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Increase) decrease in marketable securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,851</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,126,939</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,907</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,089</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,813</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from short-term borrowings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,073</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments of short-term borrowings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(993</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of
    7<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">8</FONT>%&nbsp;Senior
    Notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>395,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for debt issuance costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33,498</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from revolver</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments of revolver</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,013</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(520</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>437,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in due to (from)&nbsp;unconsolidated affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(532</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45,918</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(63,429</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,120</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,097</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,175</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,217,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(52,030</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(63,487</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,759</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of exchange rate changes on cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,159</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,082</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,242</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, beginning of the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,377</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>111,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>44,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>41,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,619</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying notes are an integral part of the consolidated
and combined financial statements
</DIV>

<P align="center" style="font-size: 10pt;">F-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS&#146;
EQUITY (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>AND COMBINED STATEMENTS OF CHANGES IN INGERSOLL-RAND COMPANY
LIMITED PARTNERSHIP&nbsp;INTEREST (PREDECESSOR)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additional</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Retained</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid-in Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Earnings</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Income (Loss)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Income (Loss)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Successor</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    At October&nbsp;30, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of 100,609,287&nbsp;shares of common stock to D-R
    Interholdings LLC (adjusted to reflect the 1,006,092.87 to 1
    stock split effected February&nbsp;11, 2005)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>434,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>435,812</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of 298,829&nbsp;shares of common stock to employees
    (adjusted to reflect the 1,006,092.87 to 1 stock split effected
    February&nbsp;11, 2005)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,297</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock based employee compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability, net of tax of $590</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(922</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(922</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Currency translation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,713</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    At December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>436,175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>452,897</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying notes are an integral part of the consolidated
and combined financial statements
</DIV>

<P align="center" style="font-size: 10pt;">F-7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS&#146;
EQUITY (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>AND COMBINED STATEMENTS OF CHANGES IN INGERSOLL-RAND COMPANY
LIMITED PARTNERSHIP&nbsp;INTEREST (PREDECESSOR)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Partnership</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Interest</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Income (Loss)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Income (Loss)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Predecessor</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    At January&nbsp;1, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>603,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(14,904</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>588,450</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,175</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,175</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability, net of tax of $4,217</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(77,692</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(77,692</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Currency translation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Derivatives qualifying as cash flow hedges, net of tax of $387</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(53,565</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(53,565</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    At December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>611,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(84,565</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>526,710</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability, net of tax of $1,199</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Currency translation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Derivatives qualifying as cash flow hedges, net of tax of $16</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(53</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(53</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>38,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,325</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    At December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>631,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(66,605</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>565,035</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,097</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,097</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability, net of tax of $577</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,973</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,973</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Currency translation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Derivatives qualifying as cash flow hedges, net of tax of $230</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(694</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(694</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,066</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    At October&nbsp;29, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>668,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(60,690</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>608,004</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying notes are an integral part of the consolidated
and combined financial statements
</DIV>

<P align="center" style="font-size: 10pt;">F-8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Business Activities and Basis of Presentation</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Successor</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Dresser-Rand Group Inc., a company incorporated on
October&nbsp;1, 2004 in the State of Delaware and its
subsidiaries (the &#147;Company&#148; or the
&#147;Successor&#148;), commenced operations on October&nbsp;30,
2004. The Company is engaged in the design, manufacture,
services, sale and servicing of gas compressors, gas and steam
turbines, gas expanders and associated control panels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is a majority-owned subsidiary of D-R Interholding,
LLC, which is a wholly-owned subsidiary of Dresser-Rand
Holdings, LLC. Dresser-Rand Holdings, LLC is owned by First
Reserve Fund&nbsp;IX, L.P., and First Reserve Fund&nbsp;X, L.P.
(collectively &#147;First Reserve&#148;) and certain members of
management.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Predecessor</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Dresser-Rand Company (the &#147;Predecessor&#148;) was initially
formed on December&nbsp;31, 1986, when Dresser Industries, Inc.
and Ingersoll-Rand entered into a partnership agreement for the
formation of Dresser-Rand Company, a New York general
partnership owned 50% by Dresser Industries, Inc. and 50% by
Ingersoll-Rand. On October&nbsp;1, 1992, Dresser Industries,
Inc. purchased a 1% equity interest from Dresser-Rand Company.
In September 1999, Dresser Industries, Inc. merged with
Halliburton Industries. On February&nbsp;2, 2000, a wholly owned
subsidiary of Ingersoll-Rand purchased Halliburton
Industries&#146; 51% interest in Dresser-Rand Company.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>The Acquisition</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;29, 2004, pursuant to a purchase agreement with
Dresser-Rand Holdings, LLC, dated August&nbsp;25, 2004 (the
&#147;Equity Purchase Agreement&#148;), the Company acquired
from Ingersoll-Rand Company Limited (&#147;IR&#148;)
Dresser-Rand Company and the operations of Dresser-Rand Canada,
Inc. and Dresser-Rand GmbH for cash consideration of
$1,125.1&nbsp;million (the &#147;Acquisition&#148;), including
estimated direct costs of the Acquisition of $10.4&nbsp;million
relating to investment banking, legal and other directly related
charges. As of December&nbsp;31, 2004, the Company had not yet
received $32.9&nbsp;million from IR relating to purchase price
adjustments and had not yet paid $3.4&nbsp;million relating to
transaction costs, both of which are recorded on our balance
sheet as of December&nbsp;31, 2004 in accounts receivable and
accounts payable and accruals, respectively. Subsequent to
December&nbsp;31, 2004, the Company collected all but
$2.4&nbsp;million of the receivable and paid substantially all
of the accrued liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Equity Purchase Agreement contains customary provisions
including representations and warranties as well as the terms on
which the initial aggregate purchase price will be adjusted
following the closing of the Acquisition. As of April&nbsp;26,
2005, the Predecessor provided a Closing Working Capital
Statement, which resulted in an estimated purchase price
reduction of $2.4&nbsp;million, which is subject to final
approval and agreement from the Successor and is included in the
purchase price estimate of $1,125.1&nbsp;million. We anticipate
the final agreement on the purchase price adjustment will be
reached sometime during the second quarter of 2005. The purchase
price was financed by (i)&nbsp;a $430&nbsp;million equity
investment from the Company&#146;s parent company, Dresser-Rand
Holdings, LLC, (ii)&nbsp;$395&nbsp;million of term loans (see
Note&nbsp;11) and (iii)&nbsp;$420&nbsp;million of senior
subordinated notes (see Note&nbsp;11).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company accounted for the Acquisition using the purchase
method of accounting in accordance with Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;141,
&#147;Business Combinations&#148; and accordingly, the
Acquisition resulted in a new basis of accounting for the
Successor. The Company allocated the estimated
</DIV>

<P align="center" style="font-size: 10pt;">F-9
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
purchase price based on the fair value of the assets acquired
and liabilities assumed at the Acquisition date as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Assets acquired:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>193,944</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,863</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173,313</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,387</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>225,654</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>408,424</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>490,519</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,156</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets acquired</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,553,260</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="6">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Liabilities assumed:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94,898</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159,984</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short term loans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,731</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44,920</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125,579</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities assumed</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>428,112</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash paid for Acquisition</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,125,148</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The excess of the cost of the Company&#146;s Acquisition of the
Predecessor over the fair value of the net tangible and
intangible assets acquired of $408.4&nbsp;million has been
allocated to goodwill, of which $272.2&nbsp;million will not be
deductible for income tax purposes. In accordance with
SFAS&nbsp;No.&nbsp;142, this goodwill will not be amortized but
will be reviewed annually for impairment beginning in the third
quarter of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company used expectations of future cash flows and other
methods to estimate the fair values and the estimated useful
lives of the acquired intangible assets. The appraisal was
completed in the second quarter of 2005. Of the
$490.5&nbsp;million of acquired intangible assets,
(i)&nbsp;$224.8&nbsp;million was assigned based on earnings
yield by customer to customer relationships that have an
estimated weighted average useful life of 40&nbsp;years;
(ii)&nbsp;$119.1&nbsp;million was assigned using the relief from
royalty method to existing technologies that have an estimated
weighted average useful life of 25&nbsp;years;
(iii)&nbsp;$82.7&nbsp;million was assigned using the relief from
royalty method to trademarks that have an estimated weighted
average useful life of 40&nbsp;years;
(iv)&nbsp;$30.6&nbsp;million was assigned based on replacement
cost to internally developed software that has an estimated
weighted average useful life of 10&nbsp;years;
(v)&nbsp;$24.8&nbsp;million was assigned using the income
approach to order backlog that has an estimated weighted average
useful life of 15&nbsp;months; (vi)&nbsp;$4.4&nbsp;million was
assigned to a non-compete agreement that has an estimated
weighted average useful life of 2&nbsp;years by estimating the
potential income losses that would result from the employee
diverting sales to competitors; (vii)&nbsp;$2.3&nbsp;million was
allocated based on future income to a royalty agreement that has
an estimated weighted average useful life of 14&nbsp;months; and
(viii)&nbsp;$1.8&nbsp;million was assigned using a discounted
future earnings
</DIV>

<P align="center" style="font-size: 10pt;">F-10

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
analysis to purchased in-process research and development that
was written off immediately after the Acquisition. The estimated
useful lives are based on the period on which the intangible
assets are expected to contribute to the future cash flows. The
fair value of inventory was determined by the Company to exceed
the Predecessor&#146;s historical basis by $7.4&nbsp;million,
which has been reflected in the purchase price allocation and
will be written off over eight months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the Acquisition, IR agreed to pay the
Successor for certain unfunded pension plans and retain certain
other post-retirement obligations. The amount to be paid with
respect to such pension plans was equal to the excess, if any,
of the aggregate liabilities (based on certain assumptions as
agreed between IR and the Successor) of the pension plans over
the aggregate fair market value of the assets of the pension
plans, each as determined on the date of the Acquisition. As of
December&nbsp;31, 2004, a receivable from IR of
$25.8&nbsp;million was recorded by the Company with respect to
such pension plans. This amount was subsequently collected in
2005. Additionally, IR retained the post-retirement medical
liability for all retirees and those employees who were
retirement-eligible as of October&nbsp;29, 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>IR Transition Services Agreement</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the Acquisition, the Company and IR entered
into a transition services agreement as of the closing to
facilitate the delivery of consistent services. In conjunction
with the agreement, IR provides services as requested by the
Company, including, amongst others, compensation delivery
services, health and welfare administration, pension
administration, legal services and other services, as agreed
upon between the parties. All third party costs associated with
the services are the Company&#146;s responsibility, whether paid
by IR or passed directly on to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The provision of services commenced on October&nbsp;30, 2004 and
will terminate on the first anniversary of the closing date;
provided, however, that the Company may cancel any service upon
30&nbsp;days&#146; written notice of cancellation and IR may
cease to provide a service upon 90&nbsp;days&#146; written
notice to us if IR ceases to provide such services to all of
IR&#146;s subsidiaries, divisions and business units. In the
period from October&nbsp;30, 2004 through December&nbsp;31,
2004, IR charged the Company $0.1&nbsp;million for transition
services covered under the agreement.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Supply Agreement</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company entered into a supply agreement with IR, expiring on
December&nbsp;31, 2009, whereby the Company supplies IR with
certain assembly units (an &#147;FRG&#148;) for IR&#146;s
&#147;PET Star 4&#148; product. There are no minimum order
quantities under this agreement.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>License Agreement</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As contemplated by the equity purchase agreement, the Company
and Dresser-Rand S.A. agreed to certain covenants with and
granted intellectual property rights related to the development
of IR&#146;s 250-kilowatt micro-turbine to IR Energy Systems
Corporation and the Energy Systems Division of IR. Pursuant to
the terms of the license agreement, Energy Systems was granted a
perpetual, fully paid up, non-exclusive, worldwide right and
license (without the right to sublicense) to practice and use
any intellectual property owned by the Company or Dresser-Rand
S.A. relating to the 250 kilowatt micro-turbines, and to
manufacture, use, market and sell micro-turbines with a
generating capacity of 1,000 kilowatts or less.
</DIV>

<P align="center" style="font-size: 10pt;">F-11
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Basis of Presentation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying financial statements for the periods prior to
the Acquisition are labeled as &#147;Predecessor&#148; and the
period subsequent to the Acquisition is labeled as
&#147;Successor&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Successor consolidated financial statements include the
operating results of the following entities:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Legal Entities</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Country</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    D-R Central Service GmbH&nbsp;&#38; Co. KG</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Germany</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    D-R Holdings (France) S.A.S.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    France</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    D-R Holdings (Germany) GmbH</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Germany</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    D-R Holdings (Netherlands) B.V.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Netherlands</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    D-R Holdings Norway AS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Norway</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    D-R Management GmbH</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Germany</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand&nbsp;&#38; Enserv Services Sdn. Bhd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Malaysia</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand (Nigeria) Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Nigeria</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand (SEA)&nbsp;Pte. Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Singapore</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand (SEA)&nbsp;Pte. Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Australia</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand (U.K.) Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    UK</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand AS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Norway</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Asia Pacific Sdn. Bhd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Malaysia</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Asia Pacific Sdn. Bhd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Singapore</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand B.V.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Netherlands</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Canada, Inc.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Canada</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand CIS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Moscow</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Comercio e Industria Ltda.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Brazil</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Company</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Company Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    UK</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Compressor (Suzhou) Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    PRC</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Compressor Co., Ltd. Shanghai (60% owned)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    PRC</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand de Mexico S.A. de C.V.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mexico</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand de Venezuela, S.A.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Venezuela</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand do Brasil, Ltda. (75% owned)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Brazil</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Global Services, LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand GmbH</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Germany</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Holding (Delaware) LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Holding Company</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Venezuela</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Holdings (U.K.) Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    UK</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand India Private Limited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    India</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand International B.V.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Netherlands</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Italia S.r.1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Italy</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Japan Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Japan</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Machinery Repair Belgie N.V.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Belgium</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-12

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Legal Entities</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Country</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Overseas Sales Company Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Power LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand S.A.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    France</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand S.A. Representative Office (Moscow)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Moscow</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand S.A. Representative Office (Uzbekistan)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Uzbekistan</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand s.r.o</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Czech Republic</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Sales Company S.A.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Switzerland</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Services B.V.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Netherlands</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Services, S. de R.L. de C.V.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mexico</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Services, S.a.r.1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Switzerland</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Multiphase Power and Processing Technologies, LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paragon Engineers Services, Inc.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    PT Dresser-Rand Services Indonesia</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indonesia</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Turbodyne Electric Power Corporation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    UZ-DR Service Center (51% owned)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Uzbekistan</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying consolidated financial statements include fair
value adjustments to assets and liabilities, including
inventory, goodwill, other intangible assets and property, plant
and equipment. Also included is the corresponding effect these
adjustments had to cost of sales, depreciation and amortization
expenses. All revenues, costs, assets and liabilities directly
attributable to the Company, along with the equity investments
in Multiphase Power and Processing Technologies, LLC
(USA)&nbsp;and Dresser-Rand&nbsp;&#38; Enserv Services Sdn. Bhd.
(Malaysia) have also been included in the consolidated financial
statements.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Predecessor</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Predecessor combined financial statements include the
accounts of all wholly-owned and majority-owned subsidiaries of
Dresser-Rand Company, as well as the operations of Dresser-Rand
Canada, Inc. and Dresser-Rand GmbH, which were owned by IR, but
were managed and operated by the Predecessor.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Legal Entities</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Country</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Company</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Canada, Inc.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Canada</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Compressor Co., Ltd. Shanghai (60% owned)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    China</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand de Mexico, S.A.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mexico</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Global Services, LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Holding Company</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Asia Pacific Sdn. Bhd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Malaysia</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand B.V.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Netherlands</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Compressor (Suzhou) Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    China</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand de Venezuela, S.A.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Venezuela</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Japan, Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Japan</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Overseas Sales Company</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Company Ltd.-UK</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United Kingdom</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand (UK)&nbsp;Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United Kingdom</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Sales Company S.A.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Switzerland</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-13

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Legal Entities</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Country</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Services, S.a.r.l</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Switzerland</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Turbodyne Electric Power Corporation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand India Private Limited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    India</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand International B.V.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Netherlands</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Italia S.r.l</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Italy</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Machinery Repair Belgie N.V.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Belgium</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Power, Inc.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    United States of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand A/ S</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Norway</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Comercio e Industria Ltda.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Brazil</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand (SEA)&nbsp;Pte. Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Singapore</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand S.A.&nbsp;&#151; France</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    France</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Services B.V.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Netherlands</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand s.r.o.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Czech Republic</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    PT Dresser-Rand Services Indonesia</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indonesia</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Services S.de R.L.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mexico</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand do Brasil, Ltda. (75% owned)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Brazil</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand Ltd.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Nigeria</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    UZ-DR Service Center Uzneftegazmash (51% owned)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Uzbekistan</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dresser-Rand GmbH</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Germany</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Predecessor combined financial statements include all
revenues, costs, assets and liabilities directly attributable to
the Predecessor, along with the equity investments in Multiphase
Power and Processing Technologies, LLC (USA)&nbsp;and
Dresser-Rand&nbsp;&#38; Enserv Services Sdn. Bhd. (Malaysia).
Allocation of costs for facilities, functions and certain
services performed by IR on behalf of the Predecessor, including
environmental and other risk management, internal audit,
transportation services, administration of benefit and insurance
programs and certain tax, legal, accounting and treasury
functions have been made on the basis described in Note&nbsp;3.
All of the allocations and estimates in the combined financial
statements are based on assumptions that the management of the
Company and IR believe are reasonable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain reclassifications have been made to the financial
statements to ensure consistency in reporting and conformity
between periods as follows: (i)&nbsp;the revenue and cost of
sales to third parties was further classified as either sales of
products or sales of services; and (ii)&nbsp;within cost of
sales section, research and development expenses have been
reclassified below gross profit.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Summary of Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A summary of significant accounting policies used in the
preparation of the accompanying financial statements follows:
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Principles of Consolidation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated financial statements include the accounts and
activities of the Company and its subsidiaries. Partially owned
equity companies are accounted for under the equity method. All
material intercompany transactions between entities included in
the consolidated financial statements have been eliminated.
</DIV>

<P align="center" style="font-size: 10pt;">F-14

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Principles of Combination</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements include the accounts and
activities of the Predecessor. Partially owned equity companies
are accounted for under the equity method. All material
intercompany transactions between entities included in the
combined financial statements have been eliminated. Transactions
between the Predecessor and IR and its affiliates are herein
referred to as &#147;related party&#148; or
&#147;affiliated&#148; transactions. Such transactions have not
been eliminated.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Use of Estimates</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In conformity with accounting principles generally accepted in
the United States of America, management has used estimates and
assumptions that affect the reported amount of assets,
liabilities, revenues and expenses, and the disclosure of
contingent assets and liabilities. Significant estimates include
reserves for doubtful accounts, depreciation and amortization,
inventory adjustments related to lower of cost or market,
valuation of assets including goodwill and other intangible
assets, product warranties, sales allowances, taxes, pensions,
post employment benefits, contract losses, penalties,
environmental, product liability, self insurance programs and
other contingencies. Actual results could differ from those
estimates.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Cash and Cash Equivalents</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company considers all highly liquid investments with a
remaining maturity of three months or less at the time of
purchase to be cash equivalents. These cash equivalents consist
principally of money market accounts.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Marketable Securities</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s marketable securities have historically
consisted of equity securities, all of which are held for
varying and indefinite periods of time, pursuant to maturity
dates, market conditions and other factors. It is the
Company&#146;s intent to maintain a liquid portfolio to take
advantage of investment opportunities; therefore, all marketable
securities are considered available for sale and are classified
as current assets. Accordingly, the securities are stated at
fair value, which at December&nbsp;31, 2003 approximated the
carrying value of the securities. Actual sales of securities
resulting in realized gains and losses on marketable securities
are included in the statement of income, as a component of
&#147;Other income (expense)&#148; and are derived using the
specific identification method for determining the cost of
securities.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Allowance for Doubtful Accounts</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company establishes an allowance for estimated bad debts by
applying specified percentages to the adjusted receivable aging
categories. The percentage applied against the aging categories
increases as the accounts become further past due. Accounts in
excess of 360&nbsp;days past due are generally fully reserved.
In addition, the reserves are periodically reviewed for specific
customer accounts identified as known collection problems due to
insolvency, disputes or other collection issues.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Inventories</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories are stated at cost, which is not in excess of net
realizable value. Cost is based on the first-in, first-out,
(FIFO)&nbsp;method. Provision is made for slow-moving, obsolete
or unusable inventory.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Property, Plant and Equipment</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property, plant and equipment are stated at cost, less
accumulated depreciation. Depreciation expense is computed
principally using the straight-line method over the estimated
useful lives of the assets. The useful
</DIV>

<P align="center" style="font-size: 10pt;">F-15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
lives of buildings range from 30&nbsp;years to 50&nbsp;years;
the useful lives of machinery and equipment range from
5&nbsp;years to 12&nbsp;years. Maintenance and repairs are
expensed as incurred.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Impairment of Long-Lived Assets</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 2001, the Financial Accounting Standards Board
(&#147;FASB&#148;) issued SFAS&nbsp;No.&nbsp;144,
&#147;Accounting for the Impairment or Disposal of Long Lived
Assets&#148;. This standard requires that long-lived assets,
such as property and equipment and purchased intangibles subject
to amortization, be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets is
measured by a comparison of the carrying amount of an asset
group to the estimated undiscounted future cash flows expected
to be generated by the asset group. If the carrying amount of an
asset group exceeds its estimated future cash flows, an
impairment charge is recognized in the amount by which the
carrying amount of the asset group exceeds the fair value of the
asset group. Under this standard, the Predecessor and the
Successor have not been required to recognize impairment of
long-lived assets.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Intangible Assets</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective January&nbsp;1, 2002, the Predecessor adopted
SFAS&nbsp;No.&nbsp;142, &#147;Goodwill and Other Intangible
Assets.&#148; Under the provisions of this standard, goodwill
and intangible assets deemed to have indefinite lives are no
longer subject to amortization, but rather are tested for
impairment at least annually. SFAS&nbsp;No.&nbsp;142 requires a
two-step goodwill impairment test whereby the first step, used
to identify potential impairment, compares the fair value of a
reporting unit with its carrying amount including goodwill. If
the fair value of a reporting unit exceeds its carrying amount,
goodwill of the reporting unit is considered not impaired and
the second test is not performed. The second step of the
impairment test is performed when required and compares the
implied fair value of the reporting unit goodwill with the
carrying amount of that goodwill. If the carrying amount of the
reporting unit goodwill exceeds the implied fair value of that
goodwill, an impairment loss shall be recognized in an amount
equal to that excess. SFAS&nbsp;No.&nbsp;142 requires the
carrying value of nonamortizable intangible assets to be
compared to the fair value, with any excess of carrying value
over fair value to be recognized as an impairment loss in
continuing operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the adoption of SFAS&nbsp;No.&nbsp;142, the
Predecessor recognized no impairment of goodwill or intangible
assets with indefinite lives. The Predecessor performed its
annual assessment during the third quarters of 2003 and 2004,
using two reporting units for the goodwill test. The Successor
will perform its annual assessment of its goodwill,
approximately $423.3&nbsp;million, during the third quarter of
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company amortizes its intangible assets with finite lives
over their estimated useful lives and reviews them for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable
pursuant to SFAS&nbsp;No.&nbsp;144. See Note&nbsp;8 for
additional details regarding the components of intangible assets.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Income Taxes</I></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Successor:</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Successor is a U.S.&nbsp;corporation holding 100% of the
interest in the former partnership. All of the Successor&#146;s
operations are subject to tax in either the U.S.&nbsp;or a
foreign jurisdiction. In preparing its consolidated financial
statements, the Successor determined the tax provision for each
of its operations on a country-by-country basis. Deferred taxes
are provided on operating loss and credit carryforwards and
temporary differences between assets and liabilities for
financial reporting and tax purposes as measured by enacted tax
rates expected to apply when temporary differences are settled
or realized. A valuation allowance is established for deferred
tax assets when it is more likely than not that a portion of the
assets will not be realized.
</DIV>

<P align="center" style="font-size: 10pt;">F-16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Predecessor:</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Predecessor is a partnership and generally did not provide
for U.S.&nbsp;incomes taxes since all partnership income and
losses were allocated to IR for inclusion in its income tax
returns; however, a substantial portion of the
Predecessor&#146;s operations were subject to U.S.&nbsp;or
foreign income taxes. In preparing its combined financial
statements, the Predecessor determined the tax provision for
those operations on a separate return basis. Deferred taxes were
provided on operating loss and credit carryforwards and
temporary differences between assets and liabilities for
financial reporting and tax purposes as measured by enacted tax
rates expected to apply when temporary differences are settled
or realized. A valuation allowance was established for deferred
tax assets when it was more likely than not that a portion of
the assets would not be realized.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Product Warranty</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Warranty accruals are recorded at the time the products are sold
and are estimated based upon product warranty terms and
historical experience. Warranty accruals are adjusted for known
or anticipated warranty claims as new information becomes
available.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Environmental Costs</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Environmental expenditures relating to current operations are
expensed or capitalized as appropriate. Expenditures relating to
existing conditions caused by past operations, which do not
contribute to current or future revenues, are expensed. Costs to
prepare environmental site evaluations and feasibility studies
are accrued when the Company commits to perform them.
Liabilities for remediation costs are recorded when they are
probable and reasonably estimable, generally no later than the
completion of feasibility studies or the Company commitment to a
plan of action. The assessment of this liability, which is
calculated based on existing technology, does not reflect any
offset for possible recoveries from insurance companies and is
not discounted.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Revenue Recognition</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A significant portion of the Company&#146;s sales are made
pursuant to written contractual arrangements to design, develop,
manufacture and/or modify complex products to the specifications
of its customers, or to provide services related to the
performance of such contracts. These contracts are accounted for
in accordance with American Institute of Certified Public
Accountants Statement of Position 81-1, &#147;Accounting for the
Performance of Construction-Type and certain Production-Type
Contracts,&#148; and revenues and profits recognized using the
completed contract method of accounting. Under this method,
revenue and profits on contracts are recorded when the contracts
are complete or substantially complete. Provisions for
anticipated losses on contracts are recorded in the period in
which they become evident. Contracts normally take between nine
and twelve months to complete. Revenue from field services is
recognized as the service is performed. Revenue from repair
services is recognized when the repaired unit is shipped and
title and risk of loss are transferred to the customer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company recognizes revenue and related cost of goods sold on
a gross basis for equipment purchased as specified by the
customer that is installed into the Company&#146;s new units in
accordance with Emerging Issues Task Force No.&nbsp;99-19
&#147;Reporting Revenue Gross as a Principal versus Net as an
Agent.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Customer progress payments in excess of the related investment
in inventory are held as customer advance payments in accounts
payable and accruals.
</DIV>

<P align="center" style="font-size: 10pt;">F-17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Research and Development Costs</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Research and development expenditures, including qualifying
engineering costs, are expensed when incurred.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Distribution and Shipping Costs</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Amounts billed to customers for shipping and handling are
classified as net sales of products and other operating
revenues. Amounts incurred for shipping and handling are
included in costs of products sold.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Comprehensive Income (Loss)</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Comprehensive income (loss) includes net income and other
comprehensive income (loss), which includes, foreign currency
translation adjustments, amounts relating to cash flow hedges,
net of tax, and additional minimum pension liability
adjustments, net of tax.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Foreign Currency</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Assets and liabilities of non-U.S.&nbsp;entities, where the
local currency is the functional currency, are translated at
year-end exchange rates and income and expenses are translated
using average-for-the-year exchange rates. Adjustments resulting
from translation are recorded in accumulated other comprehensive
income and are included in net earnings only upon sale or
liquidation of the underlying foreign investment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For non-U.S.&nbsp;entities where the U.S.&nbsp;dollar is the
functional currency, inventory and property balances and related
income statement accounts are translated using historical
exchange rates, and resulting gains and losses are credited or
charged to net earnings.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Stock-based Compensation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with, but shortly after, the closing of the
Acquisition, several of the Company&#146;s executive officers
acquired common units in Dresser-Rand Holdings, LLC at the same
price paid per unit by funds affiliated with First Reserve in
connection with the Acquisition. Executives who purchased common
units were also issued profit units (see Note&nbsp;16) in
Dresser-Rand Holdings, LLC, which permit them to share in
appreciation in the value of the Company&#146;s shares. The
accounting for the profit units is defined and described more
fully in Note&nbsp;16, Incentive Stock Plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company recognizes compensation cost for awards with only
service conditions that have graded vesting schedule on a
straight-line basis over the requisite service period for the
entire award. However, the amount of compensation cost
recognized at any date is at least equal to the portion of the
grant-date value of the award that is vested at that date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Predecessor participated in several of IR&#146;s stock-based
employee compensation plans, which are described more fully in
Note&nbsp;16. IR accounted for these plans under the recognition
and measurement principles of Accounting Principles Board
Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to
Employees.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table illustrates the effect on net income of the
Predecessor if IR had applied the fair value recognition
provisions of SFAS&nbsp;No.&nbsp;123, &#147;Accounting for
Stock-Based Compensation,&#148; in accordance with
SFAS&nbsp;No.&nbsp;148, &#147;Accounting for Stock-Based
Compensation-Transition and Disclosure&#148;, to stock-based
</DIV>

<P align="center" style="font-size: 10pt;">F-18

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
employee compensation. Stock options granted by the Predecessor
to employees were for the purchase of Class&nbsp;A common stock
of IR and remained obligations solely of IR following the
transaction.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,096</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Add: Stock-based employee compensation expense included in
    reported net income, net of tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deduct: Total stock-based employee compensation expense
    determined under fair value method for all awards, net of tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,640</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,885</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,990</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Credit Facilities</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Credit facilities have been arranged with banks whereby certain
of the Company&#146;s subsidiaries may borrow on an overdraft or
short-term note basis or issue bank guarantees. Such borrowings,
if collateralized, are primarily secured by D-R Interholding,
LLC, the Company&#146;s parent and various of the Company&#146;s
subsidiaries&#146; guarantees and carry variable interest rates
ranging from 3.4% to 4.6% at December&nbsp;31, 2004. The unused
portion of these facilities was $156.6&nbsp;million at
December&nbsp;31, 2004. In addition $5.0&nbsp;million was drawn
on the revolver at the time of acquisition, but was subsequently
paid in November 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Deferred Financing Costs</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company amortizes deferred financing costs to interest
expense over the term of the related financing agreement using
the straight-line method for costs associated with financing
having a single payoff date and using a declining balance method
for costs associated with financing having scheduled payoffs,
each of which approximates the effective yield method (See
Note&nbsp;11).
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>New Accounting Standards</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB released SFAS&nbsp;123R, Share-Based
Payments, that is a revision of SFAS&nbsp;No.&nbsp;123,
&#147;Accounting for Stock-Based Compensation.&#148; This
Statement supersedes APB Opinion No.&nbsp;25, &#147;Accounting
for Stock Issued to Employees,&#148; and its related
implementation guidance. SFAS&nbsp;123R focuses primarily on
accounting for transactions in which an entity obtains employee
services in share-based payment transactions. The Company has
elected to early adopt the provisions of SFAS&nbsp;123R as of
October&nbsp;30, 2004. As a result, the Company recognized
compensation cost in relation to share-based compensation
arrangements of $75 thousand for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2004, the FASB released Staff Position
No.&nbsp;FAS&nbsp;106-2 (FSP FAS&nbsp;106-2) entitled,
Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug Improvement and Modernization Act of 2003 (the
Act). The current accounting rules require a company to consider
current changes in applicable laws when measuring its
postretirement benefit costs and accumulated postretirement
benefit obligations. The Predecessor adopted FSP FAS&nbsp;106-2
as of April&nbsp;1, 2004, the beginning of its second quarter.
The Predecessor and its actuarial advisors determined that most
benefits provided by its plan were at least actuarially
equivalent to Medicare Part D. The Predecessor re-measured the
effects of the Act on the accumulated projected benefit
obligation as of April&nbsp;1, 2004. The effect of the federal
subsidy to which the
</DIV>

<P align="center" style="font-size: 10pt;">F-19

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Company was entitled was accounted for as an actuarial gain of
$13.7&nbsp;million in April 2004. The subsidy had no effect on
postretirement expense for 2003 or prior years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the FASB issued SFAS&nbsp;No.&nbsp;151,
&#147;Inventory Costs, an Amendment of Accounting Research
Bulletin&nbsp;No.&nbsp;43, Chapter&nbsp;4&#148;.
SFAS&nbsp;No.&nbsp;151 clarifies that abnormal amounts of idle
facility expense, freight handling costs and wasted materials
(spoilage) should be recognized as current-period charges and
require the allocation of fixed production overheads to
inventory based on the normal capacity of the production
facilities. The guidance in this statement is effective for
inventory costs incurred during fiscal years beginning after
June&nbsp;15, 2005. The adoption of this statement is not
expected to have a material impact to the Company&#146;s
financial reporting and disclosures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;153,
&#147;Exchanges of Nonmonetary Assets, an Amendment of APB
Opinion No.&nbsp;29, &#147;Accounting for Nonmonetary
Transactions&#148;. SFAS&nbsp;No.&nbsp;153 eliminates the
exception from fair value measurement for nonmonetary exchanges
of similar productive assets in paragraph&nbsp;21 (b)&nbsp;of
APB Opinion No.&nbsp;29 and replaces it with an exception for
exchanges that do not have commercial substance.
SFAS&nbsp;No.&nbsp;153 specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange.
This statement is effective for fiscal years beginning after
June&nbsp;15, 2005. The adoption of this statement is not
expected to have a material impact on the Company&#146;s
financial reporting and disclosures.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Related Party Transactions</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Successor</I></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Dresser Name</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s name and principal mark is a combination of
the names of the Company&#146;s founder companies, Dresser
Industries, Inc. and IR. The Predecessor acquired rights to use
the &#147;Rand&#148; portion of our principal mark from IR as
part of the sale agreement. The rights to use the
&#147;Dresser&#148; portion of the name in perpetuity were
acquired from Dresser, Inc. (the successor company to Dresser
Industries, Inc.), an affiliate of First Reserve in October
2004. Total consideration is $5.0&nbsp;million of which
$1.0&nbsp;million was paid in October 2004. The remaining
balance will be paid in equal annual installments of
$0.4&nbsp;million through October 2013. Expense is recognized
ratably over the life of the agreement.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Predecessor</I></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Intercompany Activities</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
IR provided the Predecessor with certain environmental and other
risk management services, internal audit, legal, tax,
accounting, pension fund management, transportation services,
cash management and other treasury services. Many of these
activities have been transferred over time from the Predecessor
to IR since IR acquired 100% ownership in the Predecessor. In
addition, as discussed below and in Notes&nbsp;12, 13
and&nbsp;16, most of the Company&#146;s employees were eligible
to participate in certain IR employee benefit programs that were
sponsored and/or administered by IR or its affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Predecessor&#146;s use of these services and its
participation in these employee benefit plans generated costs to
the Predecessor. Costs and benefits relating to the services and
benefit plans were charged/ credited to the Predecessor and were
included in cost of goods sold, and selling and administrative
expenses. Costs were allocated to the Predecessor using
allocation methods that management of IR and the Predecessor
believe are reasonable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements reflect these costs through a
corporate overhead allocation. These costs amounted to
$15.3&nbsp;million, $15.1&nbsp;million and $1.3&nbsp;million for
the period from January&nbsp;1, 2004 through October&nbsp;31,
2004, and for the years ended December&nbsp;31, 2003 and 2002,
respectively. These allocations reflect
</DIV>

<P align="center" style="font-size: 10pt;">F-20

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
the growing use of IR services by the Predecessor from 2002 to
2004. The 2002 amounts include amounts for IR Sector support
only. During 2003, the Predecessor began the process of
integrating numerous functions with IR. Therefore, the 2003
amounts include services such as treasury and cash management,
internal audit services, tax planning and compliance, risk
management services, workers compensation administration,
post-retirement plan administration, payroll deposit services
and strategic sourcing support. Further integration took place
in 2004 with additional services added such as legal counsel
support, IR University training, medical plan administration and
other human resource functions. Some of the allocation were
based on specifically classified expenses of IR while others
were allocated based on a multi-part formula utilizing common
business measures such as headcount, total payroll dollars and
total assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As mentioned above IR, provided centralized treasury functions
and financing, including substantially all investing and
borrowing activities for the Predecessor. As part of this
practice, surplus cash was remitted to IR and IR advanced cash,
as necessary, to the Predecessor. No interest was charged or
paid on the net IR investment amount. Interest was charged or
credited on certain notes receivable and notes payable from/to
IR affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2003, the Predecessor had outstanding
receivables due from IR affiliates of $105.3&nbsp;million.
Intercompany receivables are treated as current since they are
due upon demand. Intercompany receivables were settled at the
time of Acquisition.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Employee Benefit Administration</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Predecessor&#146;s employees participated in tax-qualified
defined benefit pension plans and defined contribution savings
plans sponsored and/or administered by IR or its affiliates. IR
charged to the Predecessor its pro-rata share of administration
and funding expenses incurred by IR in the operation of these
plans for the benefit of employees of the Predecessor. The
Predecessor is responsible for the cost of funding pension and
savings plan benefits accrued by its employees. Welfare benefit
programs are generally self-insured and experience-rated on the
basis of Predecessor employees without regard to the claims
experience of employees of other affiliated companies.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Other Related Party Transactions</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Predecessor recorded sales of $1.8&nbsp;million,
$1.4&nbsp;million and $1.8&nbsp;million to IR and its affiliates
in the period from January&nbsp;1, 2004 through October&nbsp;29,
2004 and in the years ended December&nbsp;31, 2003 and 2002,
respectively. For the period from January&nbsp;1, 2004 through
October&nbsp;29, 2004 and the year ended December&nbsp;31, 2002,
the Predecessor paid dividends of $5.1&nbsp;million and
$8.2&nbsp;million, respectively, to IR by Dresser-Rand GmbH.
This amount was recorded against IR&#146;s investment included
in the Predecessor&#146;s equity.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Earnings per share</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Successor</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Earnings per share are calculated as net income divided by the
weighted average number of common shares outstanding during the
period. Weighted average common shares of 100,115,080 were used
to calculate earnings per share as of December&nbsp;31, 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Predecessor</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Earnings per share for the Predecessor periods, is not presented
as the Predecessor did not operate as a separate legal entity of
IR with its own legal structure.
</DIV>

<P align="center" style="font-size: 10pt;">F-21

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Inventories</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Successor)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Predecessor)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Raw materials and supplies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>60,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>62,207</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Work-in-process and finished goods</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>209,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>142,050</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>269,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>204,257</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Progress payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(94,102</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(70,832</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>175,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>133,425</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Progress payments represent payments from customers based on
milestone completion schedules. Any payments received in excess
of inventory investment are reclassified to &#147;Customer
Advance Payments&#148; in the current liabilities section of the
balance sheet.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Investments In Partially Owned Equity Companies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company and Predecessor had two investments that operated in
similar lines of business at December&nbsp;31, 2004 and 2003.
The investments in and amounts due from partially owned equity
companies in which the Company&#146;s and Predecessor&#146;s
ownership interest ranged from 40% to 50%, amounted to
$10.0&nbsp;million and $3.0&nbsp;million, respectively at
December&nbsp;31, 2004 and $5.5&nbsp;million and
$3.6&nbsp;million, respectively, at December&nbsp;31, 2003. The
equity in the net earnings (losses) of partially owned equity
companies was $0.2&nbsp;million in the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004,
$(1.0)&nbsp;million in the period from January&nbsp;1, 2004
through October&nbsp;29, 2004 and $(0.1)&nbsp;million and
$(0.5)&nbsp;million for the years ended December&nbsp;31, 2003
and 2002, respectively and is recorded in other income/expense,
net in the accompanying statements of income. The Company and
Predecessor received no distributions from these investments in
2004, 2003, and 2002. Sales from the Company or Predecessor to
the partially owned equity companies were not significant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Summarized financial information for these partially owned
equity companies follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,460</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>56,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>56,953</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,725</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,596</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income/(loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>596</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,849</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(518</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-22
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 24pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Successor)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Predecessor)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,855</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,748</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,925</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,528</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,813</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,878</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total owners&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,837</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and owners&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,528</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Property, Plant and Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property, plant and equipment were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Successor)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Predecessor)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,213</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Buildings and improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>46,719</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Machinery and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128,363</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>230,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>180,295</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Accumulated depreciation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,960</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(78,857</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property plant and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>226,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>101,438</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Depreciation expense for the period from October&nbsp;30, 2004
through December&nbsp;31, 2004, the period from January&nbsp;1,
2004 through October&nbsp;29, 2004 and the years ended
December&nbsp;31, 2003 and 2002 was $4.0&nbsp;million,
$16.6&nbsp;million, $21.8&nbsp;million and $27.0&nbsp;million,
respectively.
</DIV>

<P align="center" style="font-size: 10pt;">F-23

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>Intangible Assets and Goodwill</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the weighted average useful life,
gross amount and accumulated amortization of intangible assets:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31, 2003</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gross</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gross</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Useful Lives</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortization</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Useful Lives</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortization</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade names</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>82,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Indefinite</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer Relationships</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>227,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>235,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,657</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Software</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,704</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Existing technology</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>119,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Order backlog</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15&nbsp;months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-compete agreement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Royalty agreement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14&nbsp;months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>491,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>281,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,361</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Intangible asset amortization expense for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004, the period
from January&nbsp;1, 2004 through October&nbsp;29, 2004 and the
years ended December&nbsp;31, 2003 and 2002 was
$12.3&nbsp;million, $6.1&nbsp;million, $7.3&nbsp;million and
$6.8&nbsp;million, respectively. Estimated intangible asset
amortization expense for each of the next five fiscal years is
expected to be $33.8&nbsp;million in 2005, $19.0&nbsp;million in
2006, $15.5&nbsp;million in 2007, $15.5&nbsp;million in 2008,
and $15.5&nbsp;million in 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table represents the change in goodwill:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>408,424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,214</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dispositions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(377</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Translation adjustments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ending balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>423,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,214</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The disposition of goodwill represents adjustments related to
the recognition of acquired tax benefits for which a valuation
allowance was recorded at the acquisition date.
</DIV>

<P align="center" style="font-size: 10pt;">F-24

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>9.</B></TD>
    <TD>
    <B>Accounts Payable and Accruals</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accounts payable and accruals were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Successor)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Predecessor)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>103,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>104,835</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accruals:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payroll and benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,061</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension and Postretirement benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,849</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contract reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,359</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Warranties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,699</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Taxes other than income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,763</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Legal, audit and consulting</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,344</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>554</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Third party commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,362</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Insurance and claims</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,095</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,909</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total accounts payable and accruals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>271,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>291,830</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>10.</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Earnings before income taxes were taxed within the following
jurisdictions:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,562</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7,619</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,198</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-U.S.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,066</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,204</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,504</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>54,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,006</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-25

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The provision for income taxes was as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>883</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(933</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,367</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-U.S.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,366</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,598</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,249</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,965</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,707</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(404</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-U.S.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(974</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,497</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>943</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total deferred</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(974</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,901</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>945</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,275</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,910</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The provision for income taxes differs from the amount of income
taxes determined by applying the applicable U.S.&nbsp;statutory
income tax rate to pretax income, as a result of the following
differences:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Statutory U.S.&nbsp;rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in rates resulting from:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-U.S.&nbsp;operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4.3</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7.5</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State and local income taxes, net of U.S.&nbsp;tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.2</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowances</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10.7</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nontaxable partnership income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18.7</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11.1</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4.5</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effective tax rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-26
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">DRESSER-RAND GROUP INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A summary of the deferred tax accounts follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Successor)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Predecessor)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(In thousands of dollars)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Current deferred assets and (liabilities)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Differences between book and tax bases of
    inventories and receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,199</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,826</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Differences between book and tax expense for
    other employee related benefits and allowances
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">403</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other reserves and valuation allowances versus
    tax deductions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,769</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other differences between tax and financial
    statement values
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,461</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Gross current deferred tax assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,445</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,498</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Noncurrent deferred tax assets and (liabilities)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Tax net operating loss carryforwards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,216</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,476</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Pension contributions in excess of book expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,986</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Book depreciation/amortization versus tax
    depreciation/amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(37,343</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,194</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Gross noncurrent deferred tax assets (liabilities)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,294</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Less: valuation allowances
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,993</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,091</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total net deferred tax assets (liabilities)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,842</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2004 and
December&nbsp;31, 2003&nbsp;net operating loss carryforwards of
approximately $27.9&nbsp;million and $27.3&nbsp;million,
respectively, were available to offset taxable income in future
years. A portion of these carryforwards will begin to expire in
2007, while the remainder generally have unlimited carry forward
periods. Valuation allowances as of December&nbsp;31, 2004 and
December&nbsp;31, 2003 of $9.1&nbsp;million and
$6.1&nbsp;million, respectively, have been recorded for certain
carryforwards, which will likely not be realized.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of the purchase of the Successor,
deferred taxes have been recorded to reflect the difference
between the purchase price allocation to the foreign reporting
entities and their underlying tax basis. For operating loss
carryforwards and other acquired tax benefits for which a
valuation allowance was established at the acquisition date,
when subsequently recognized, the acquired tax benefit will
first reduce goodwill, then other noncurrent intangible assets
on a prospective basis. Once these assets are reduced to zero,
the benefit is included in income as a reduction of the income
tax expense. Acquired tax benefits not recognized at the
acquisition date amount to $7.2&nbsp;million. During the period
October&nbsp;30, 2004 through December&nbsp;31, 2004, the
reduction in goodwill related to the recognition of such
acquired tax benefits was $0.4&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of the sale of the Predecessor, all
previously undistributed foreign earnings were deemed
distributed to IR as part of the Acquisition. At
December&nbsp;31, 2004, deferred taxes have not been provided on
undistributed foreign earnings of $11.2&nbsp;million, since
these earnings have been, and under current plans, will continue
to be permanently reinvested in these subsidiaries. It is not
practicable to estimate the amount of additional taxes which may
be payable upon future distribution.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The American Jobs Creation Act of 2004 introduced
a one-time provision allowing U.S.&nbsp;corporations to
repatriate accumulated income earned abroad by providing an 85%
dividend-received deduction for certain dividends from
controlled foreign corporations. Due to the interplay of this
benefit and the Company&#146;s overall tax position, the Company
does not currently expect to avail itself of this provision.
</FONT>

<P align="center"><FONT size="2">F-27
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">DRESSER-RAND GROUP INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the predecessor periods, the tax expense
reflected in the Combined Statement of Income related to
Dresser-Rand UK Ltd., a United Kingdom (UK) incorporated entity,
has been presented on a separate company basis as though
Dresser-Rand UK Ltd. had filed stand-alone income tax returns.
Under operation of UK tax law, tax losses incurred by IR
subsidiaries may be surrendered to Dresser-Rand UK Ltd. since
they are part of a UK affiliated group. To the extent the losses
surrendered to Dresser-Rand UK Ltd. have reduced the actual tax
liability, the amount is presented on the Combined Balance Sheet
at December&nbsp;31, 2003 as an intercompany payable, not a
government tax payable. No formal tax sharing agreement existed
between the Predecessor and IR.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">11.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Long&#150;Term Debt</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Senior Secured Credit
    Facility</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the Acquisition, the Company
and certain of its foreign subsidiaries entered into the Senior
Secured Credit Facility with a syndicate of lenders. The
obligations of the Company under the Senior Secured Credit
Facility have been guaranteed by the direct material domestic
subsidiaries of the Company and the Company&#146;s direct
parent, D-R Interholding, LLC and the obligations of each
foreign subsidiary borrower under the Senior Secured Credit
Facility have been guaranteed by the Company, the Company&#146;s
direct parent, D-R Interholding, LLC, the direct material
subsidiaries of such foreign subsidiary borrower and the direct
material domestic subsidiaries of the Company. The Senior
Secured Credit Facility consists of a $395.0&nbsp;million term
loan facility
(<FONT face="times new roman,times">&#128;</FONT>78.5&nbsp;million
of which is denominated in Euros) and a $300.0&nbsp;million
revolving credit facility. The term loan facility requires
interest to be paid not less frequently than quarterly. In
addition, at the end of each quarter the Company is required to
make principal payments equal to one-quarter of one percent
(0.25%) of the initial principal balance of such loans. The
principal amount outstanding under the revolving credit facility
is due and payable in full at maturity, at October&nbsp;29,
2009. The term loan facility carried an average interest rate of
4.56% at December&nbsp;31, 2004. There were no borrowings under
the revolving credit facility at December&nbsp;31, 2004. As of
December&nbsp;31, 2004, the Company had issued
$143.4&nbsp;million of letters of credit under the revolver.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dollar-denominated revolving borrowings under the
Senior Secured Credit Facility bear interest, at the
Company&#146;s election, at either (x)&nbsp;a rate equal to an
applicable margin ranging from 2.0% to 2.5%, depending on the
Company&#146;s leverage ratio, plus a LIBOR rate determined by
reference to the costs of funds for deposits in
U.S.&nbsp;dollars for the interest period relevant to such
borrowing adjusted for certain additional costs or (y)&nbsp;a
rate equal to an applicable margin ranging from 1.0% to 1.5%,
depending on the Company&#146;s leverage ratio plus a base rate
determined by reference to the highest of (1)&nbsp;the rate that
the administrative agent announces from time to time as its
prime or base commercial lending rate, (2)&nbsp;the three month
certificate of deposit rate plus 1/2 of 1% and (3)&nbsp;the
federal funds rate plus 1/2 of 1%. Euro-denominated revolving
borrowings under the Senior Secured Credit Facility bear
interest at a rate equal to an applicable margin ranging from
2.0% to 2.5%, depending on the Company&#146;s leverage ratio,
plus a EURIBOR rate determined by reference to the costs of
funds for deposits in the currency of such borrowings for the
interest period relevant to such borrowings adjusted for certain
additional costs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to paying interest on outstanding
principal under the Senior Secured Credit Facility, the Company
is required to pay a commitment fee to the lenders under the
revolving credit facility in respect of the un-utilized
commitments at a rate ranging from 0.375% to 0.5%&nbsp;per annum
depending on the Company&#146;s leverage ratio. The Company will
also pay letter of credit fees equal to the applicable margin
then in effect with respect to LIBOR loans under the revolving
credit facility on the face amount of each such letter of credit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, the Senior Credit Facility requires
that certain net proceeds related to the asset sales, incurrence
of additional debt, casualty settlements and condemnation awards
and excess cash flow may be required to be used to pay down the
outstanding balance. The Company may voluntarily prepay
outstanding
</FONT>

<P align="center"><FONT size="2">F-28
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">DRESSER-RAND GROUP INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<FONT size="2">loans under the Senior Secured Credit Facility at
any time without premium or penalty, other than customary
brokerage costs. The Senior Secured Credit Facility contains
normal and customary covenants including the provision of
periodic financial information, financial tests, (including
maximum net leverage and a minimum interest coverage ratio) and
certain other limitations governing, among others, such matters
as Company&#146;s ability to incur additional debt, grant liens
on assets, make investments, acquisitions or mergers, dispose of
assets, make capital expenditures, engage in transactions with
affiliates, make amendments to corporate documents that would be
materially adverse to lenders, and pay dividends and
distributions or repurchase capital stock. The Company was
temporarily out of compliance of its obligation under the senior
credit facility to provide lenders financial statements for the
year ended December&nbsp;31, 2004 no later than 120&nbsp;days
after the end of that year. This was remedied by delivery of the
financial statements within the 30-day cure period as provided
for in the terms and conditions of the Senior Secured Credit
Facility.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To fund part of the Acquisition, the Company and
the foreign subsidiary borrowers borrowed the entire
$395.0&nbsp;million under the term loan facility. Approximately
$5&nbsp;million of the revolver was borrowed at the time of the
acquisition. This amount was repaid prior to year end. At the
time of the acquisition, the Company issued $127.7&nbsp;million
of letters of credit under the revolver pursuant to its
obligations under the Acquisition Agreement to indemnify IR with
respect to any liability incurred in connection with certain
letters of credit issued by IR on behalf of the Company.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Senior Subordinated Notes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In conjunction with the Acquisition, the Company
issued $420.0&nbsp;million of 7 3/8%&nbsp;senior subordinated
notes. The Senior Subordinated Notes mature on November&nbsp;1,
2014 and bear interest at a rate of 7 3/8%&nbsp;per annum, which
is payable semi-annually in arrears on May&nbsp;1 and
November&nbsp;1 of each year, beginning with the first payment
due on May&nbsp;1, 2005. The Company may redeem any of the notes
beginning on November&nbsp;1, 2009 at a redemption price of
103.688% of their principal amount, plus accrued interest. The
redemption price will decline each year after 2009 and will be
100% of their principal amount, plus accrued interest, beginning
on November&nbsp;1, 2012. The Company may also redeem any of the
notes at any time prior to November&nbsp;1, 2009, at a
redemption price equal to 100% of the principal amount of notes
to be redeemed, plus a premium (based on a formula set forth in
senior subordinate indenture) and accrued interest. In addition,
at any time prior to November&nbsp;1, 2007, the Company may
redeem up to 35% of the notes at a redemption price of 107.375%
of their principal amount plus accrued interest, using the
proceeds from sales of certain kinds of capital stock. The
Company may make such a redemption only if, after such
redemption, at least 65% of the aggregate principal amount of
notes originally issued under the indenture governing the notes
remains outstanding.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Senior Subordinated Notes are general
unsecured obligations and are guaranteed on a senior
subordinated basis by certain of the Company&#146;s domestic
subsidiaries and rank secondary to the Company&#146;s senior
credit facility. The Senior Subordinated Notes contain customary
covenants including certain limitations and restrictions on the
Company&#146;s ability to incur additional indebtedness, create
liens, pay dividends and make distributions in respect of
capital stock, redeem capital stock, make investments or certain
other restricted payments, sell assets, issue or sell stock of
restricted subsidiaries, enter into transactions with affiliates
and effect consolidations or mergers. The Senior Subordinated
Notes also contain covenants requiring the Company to submit to
the Trustee or holders of the notes certain financial reports
that would be required to be filed with the SEC.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is obligated to use commercially
reasonable efforts to register the senior subordinated notes
under the Securities Act and consummate an exchange offer no
later than 300&nbsp;days after the closing of the offering of
the senior subordinated notes. If this requirement is not met,
then the annual interest on the Senior Subordinated Notes will
increase by (1)&nbsp;0.25%&nbsp;per annum for the first
90&nbsp;days following the end of
</FONT>

<P align="center"><FONT size="2">F-29
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
such period and (2)&nbsp;0.25%&nbsp;per annum at the beginning
of each subsequent 90-day period, up to a maximum of
1.0%&nbsp;per annum until all such registration defaults are
cured.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Long-term debt at each respective date consisted of the
following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Successor)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Predecessor)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior Subordinated Notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>420,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior Secured Credit Facility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>400,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>213</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total long term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>820,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>213</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,015</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total non current long term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>816,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>213</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, the Company&#146;s total long-term
debt principal maturities were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Senior</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Senior</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subordinated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Secured Credit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Notes</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Facility*</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Debt</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,015</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,177</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,058</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,015</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,015</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2010 and after</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>380,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>800,399</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>420,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>400,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>820,679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    Through May&nbsp;11, 2005 the Company has made payments of
    $111.7&nbsp;million on the Senior Secured Credit Facility, as a
    result of which no further principal amortization payments are
    required prior to maturity of the facility on October&nbsp;29,
    2011.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s interest expense for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004, the period
from January&nbsp;1, 2004 through October&nbsp;29, 2004 and for
the years ended December&nbsp;31, 2003 and 2002 was
$10.0&nbsp;million, $2.0&nbsp;million, $2.8 and
$4.3&nbsp;million, respectively. Included in these amounts are
intercompany interest expense charges recognized by the
Predecessor, paid to IR, for the period from January&nbsp;1,
2004 through October&nbsp;29, 2004 and for the years ended
December&nbsp;31, 2003 and 2002 of $1.2&nbsp;million, $1.2 and
$1.4&nbsp;million, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>12.</B></TD>
    <TD>
    <B>Pension Plans</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The defined benefit plan covering salaried and hourly employees
was frozen effective March&nbsp;31, 1998. The plan was replaced
with a defined contribution plan. The Company&#146;s
U.S.&nbsp;salaried plans generally provide benefits based on a
final average earnings formula. The Company&#146;s hourly
pension plans provide benefits under flat formulas.
Non-U.S.&nbsp;plans provide benefits based on earnings and years
of service. Most of the non-U.S.&nbsp;plans require employee
contributions based on the employee&#146;s earnings. The
Company&#146;s policy is to fund an amount, which could be in
excess of the pension cost expensed, subject to the limitations
imposed by current statutes or tax regulations.
</DIV>

<P align="center" style="font-size: 10pt;">F-30

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Information regarding the Company&#146;s and the
Predecessor&#146;s pension plans is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Successor)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Predecessor)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in benefit obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation at beginning of the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>308,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>310,172</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,643</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,704</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employee contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>291</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expenses paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(207</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actuarial losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,328</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,464</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,176</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign exchange impact</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,995</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation at end of the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>317,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>344,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value at beginning of the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>240,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>237,201</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actual return on assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,813</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Company contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,383</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employee contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>291</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expenses paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(207</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,464</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,533</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign exchange impact</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,726</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of assets at end of the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>243,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>272,674</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Successor)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Predecessor)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Funded status</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Plan assets less than benefit obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(74,366</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(72,076</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net transition obligation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior service costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Plan net losses (gains)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90,567</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net amount recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(70,550</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,498</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Costs included in the balance sheet</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid benefit cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued benefit liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(72,061</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64,311</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82,449</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net amount recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(70,550</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,498</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-31

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 24pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Successor)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Predecessor)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted-average assumptions used, benefit obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;plans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.750</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-U.S.&nbsp;plans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.308</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.75%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rate of compensation increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;plans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-U.S.&nbsp;plans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.75%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The components of the pension related expense (income) include
the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,871</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,067</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,207</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,173</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19,329</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,462</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net amortization of unrecognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transition amount</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior Service Cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Plan net losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>403</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net pension expense (income)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(120</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted-average assumptions used, net periodic pension cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;plans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.750</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-U.S.&nbsp;plans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.308</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rate of compensation increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;plans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-U.S.&nbsp;plans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.750</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;plans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.500</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-U.S.&nbsp;plans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.094</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-32

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for pension plans were
$317.5&nbsp;million, $306.2&nbsp;million and
$243.1&nbsp;million, respectively, as of December&nbsp;31, 2004;
and $344.8&nbsp;million, $335.3&nbsp;million and
$272.7&nbsp;million, respectively, as of December&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company uses an annual measurement date of November&nbsp;30
for substantially all of its pension plans for the years
presented. The expected long-term rates of return on plan assets
are determined as of the measurement date. The expected
long-term rates of return are projected to be the rates of
return to be earned over the period until the benefits are paid.
Accordingly, the long-term rates of return should reflect the
rates of return on present investments, expected contributions
to be received during the current year and on reinvestments over
the period. The rates of return utilized reflect the expected
rates of return during the periods for which the payment of
benefits is deferred. The expected long-term rate of return on
plan assets used is based on what is realistically achievable
based on the types of assets held by the plans and the
plan&#146;s investment policy. Historical asset return trends
for the larger plans are reviewed over fifteen, ten and five
years. The actual rate of return for plan assets over the last
ten-and fifteen-year periods have exceeded the expected rate of
return used. The Company reviews each plan and its historical
returns and asset allocations to determine the appropriate
expected long-term rate of return on plan assets to be used.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The weighted average asset allocations of the Company&#146;s and
the Predecessor&#146;s pension plans by asset category are as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Successor)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Predecessor)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asset category*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other (including cash)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    Reflects weighted average percentage allocations of U.S. and
    non-U.S.&nbsp;plans.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s investment objectives in managing its defined
benefit plan assets are to ensure that present and future
benefit obligations to all participants and beneficiaries are
met as they become due; to provide a total return that, over the
long-term, maximizes the ratio of the plan assets to
liabilities, while minimizing the present value of required
Company contributions, at the appropriate levels of risk; and to
meet any statutory requirements, laws and local regulatory
agencies requirements. Key investment decisions reviewed
regularly are asset allocations, investment manager structure,
investment managers, investment advisors and trustees or
custodians. An asset/liability modeling study is used as the
basis for global asset allocation decisions and updated
approximately every five years or as required. The
Company&#146;s current strategic global asset allocation for its
pension plans is 60% in equities securities and 40% in debt
securities and cash. The Company sets upper limits and lower
limits of plus or minus 5%. The rebalancing strategy is reviewed
quarterly if cash flows are not sufficient to rebalance the
plans and appropriate action is taken to bring the plans within
the strategic allocation ranges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Predecessor contributed an additional $30&nbsp;million in
the first quarter of 2004, $9&nbsp;million of which was
required. The Company&#146;s policy is to contribute the minimum
required amount, as defined by law, and additional discretionary
amounts up to the limitations imposed by the applicable tax
codes. The Company currently projects that it will contribute
approximately $10&nbsp;million to its plans worldwide in 2005.
Most of the non-U.S.&nbsp;plans require employee contributions
based on the employees&#146; earnings.
</DIV>

<P align="center" style="font-size: 10pt;">F-33

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pension benefit payments, which reflect future service, as
appropriate, are expected to be paid as follows:
$15.7&nbsp;million in 2005, $16.5&nbsp;million in 2006,
$17.4&nbsp;million in 2007, $18.4&nbsp;million in 2008,
$19.6&nbsp;million in 2009 and $111.7&nbsp;million for the years
2010 to 2014.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Defined Contribution Plans</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most of the Company&#146;s U.S.&nbsp;employees are covered by
savings and other defined contribution plans. Employer
contributions and costs are determined based on criteria
specific to the individual plans and amounted to approximately
$1.9&nbsp;million, $7.9&nbsp;million, $8.8&nbsp;million and
$11.4&nbsp;million for the period from October&nbsp;30, 2004
through December&nbsp;31, 2004, the period from January&nbsp;1,
2004 through October&nbsp;29, 2004, and the years ended
December&nbsp;31, 2003 and 2002, respectively. The
Company&#146;s and Predecessor&#146;s costs relating to
non-U.S.&nbsp;defined contribution plans, insured plans and
other non-U.S.&nbsp;benefit plans were $0.1&nbsp;million,
$0.3&nbsp;million, $0.9&nbsp;million and $0.5&nbsp;million for
the period from October&nbsp;30, 2004 through December&nbsp;31,
2004, the period from January&nbsp;1, 2004 through
October&nbsp;29, 2004, and the years ended December&nbsp;31,
2003 and 2002, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>13.</B></TD>
    <TD>
    <B>Postretirement Benefits other than Pensions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company sponsors postretirement plans that cover certain
eligible U.S.&nbsp;employees. These plans provide for health
care benefits and in some instances, life insurance benefits.
Postretirement health plans generally are contributory and
adjusted annually. Life insurance plans are non-contributory. In
1997, the Predecessor amended its postretirement benefit plans
for salaried and hourly employees. The amendment eliminated
medical benefit coverage for all future retirees except for
grandfathered employees. An eligible retiree&#146;s health care
benefit coverage is coordinated with Medicare. The Company funds
the postretirement benefit costs principally on a pay-as-you-go
basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Summary information on the Company&#146;s and the
Predecessor&#146;s plans was as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Successor)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Predecessor)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in benefit obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation at beginning of the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>46,818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>189,183</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,935</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,907</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amendments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,300</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actuarial losses (gains)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,196</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,544</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation at end of the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>200,377</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Funded status</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Plan assets less than benefit obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(47,568</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(200,377</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior service gains</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,042</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Plan net losses*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83,157</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued costs in the balance sheet</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(47,568</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(126,262</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    Plan net losses in 2003 arose primarily from changes in discount
    rate and medical cost trend assumptions.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">F-34

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The components of net periodic postretirement benefits cost were
as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,172</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,108</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net amortization of unrecognized prior service gains</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(861</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(258</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net amortization of loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>732</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic postretirement benefits cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,012</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Benefit payments for postretirement benefits, which reflect
future service and are net of expected Medicare Part&nbsp;D
subsidy, as appropriate, are expected to be paid as follows:
$0.0&nbsp;million in 2005, $0.1&nbsp;million in 2006,
$0.2&nbsp;million in 2007, $0.5&nbsp;million in 2008,
$0.8&nbsp;million in 2009 and $10.9&nbsp;million for the years
2010 to 2014.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company uses an annual measurement date of November&nbsp;30
for substantially all of its postretirement benefit plans for
all years presented. The sale of an IR business in February 2003
was deemed to be a significant event and required a
remeasurement of the postretirement benefit plan. The
weighted-average assumptions used in the February 2003
remeasurement due to the sale were a discount rate of 6.50% and
increases in per capita cost of covered health care benefits of
11.00% for the year, gradually reducing to 5.25% by 2009. In the
fourth quarter of 2002, IR amended its postretirement benefit
plans for U.S.&nbsp;non-bargaining employees and retirees,
effective January&nbsp;1, 2003. The amendments eliminated
subsidized life insurance for all future retirees. The
weighted-average assumptions used in the fourth quarter of 2002
remeasurement due to plan amendments were a discount rate of
6.75% and increases in per capita cost of covered health care
benefits of 11.00% for the year, gradually reducing to 5.25% by
2009.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted-average discount rate assumption used to determine</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligations at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic benefit cost for the periods ended
    February&nbsp;15, 2003 and October 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic benefit cost for the remaining period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed health care cost trend rates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current year medical inflation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ultimate inflation rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year that the rate reaches the ultimate trend rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2009</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-35

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A 1% change in the medical trend rate assumed for postretirement
benefits would have the following effects for the period from
October&nbsp;30 through December&nbsp;31, 2004 and at
December&nbsp;31, 2004, respectively:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1% Increase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1% Decrease</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect on total service and interest cost compenents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(130</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of postretirement benefit obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,014</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>14.</B></TD>
    <TD>
    <B>Financial Instruments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company and the Predecessor maintained significant
operations in countries other than the United States. As a
result of these global activities, the Company and the
Predecessor were exposed to changes in foreign currency exchange
rates which affected the results of operations and financial
condition. The Company and the Predecessor managed exposure to
changes in foreign currency exchange rates through their normal
operating and financing activities, as well as through the use
of financial instruments. Generally, the only financial
instruments the Company and the Predecessor utilized were
forward exchange contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The purpose of the Company&#146;s and the Predecessor&#146;s
currency hedging activities was to mitigate the impact of
changes in foreign currency exchange rates. The Company and the
Predecessor attempted to hedge transaction exposures through
natural offsets. To the extent that this was not practicable,
major exposure areas considered for hedging included foreign
currency denominated receivables and payables, firm committed
transactions, and forecasted sales and purchases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SFAS&nbsp;133, &#147;Accounting for Derivative Instruments and
Hedging Activities,&#148; and its amendments, became effective
for the Predecessor on January&nbsp;1, 2001. The statement
requires all derivatives to be recognized as assets or
liabilities on the balance sheet and measured at fair value. The
effective portion of the hedging instrument&#146;s gain or loss
is reported to Stockholders&#146; Equity (as a component of
Other Comprehensive Income) and is reclassified to earnings in
the period during which the transaction being hedged
affect&#146;s income. Gains or losses reclassified from
Stockholders&#146; Equity to income are classified in accordance
with income treatment of the hedged transaction. The ineffective
portion of a hedging derivative&#146;s fair value change, where
that derivative is used in a cash flow hedge, is recorded in
current income. Classification in the Statement of Income of the
ineffective portion of the hedging instrument&#146;s gain or
loss is based on the income statement classification of the
transaction being hedged. If a derivative instrument does not
qualify as a hedge under the applicable guidance, the change in
the fair value of the derivative is immediately recognized in
the Statement of Income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The counterparties to the Company&#146;s and the
Predecessor&#146;s forward contracts comprised a number of major
international financial institutions. The Company and the
Predecessor could be exposed to loss in the event of
non-performance by the counterparties. However, credit ratings
and concentration of risk of these financial institutions were
monitored on a continuing basis and presented no significant
credit risk to the Company or the Predecessor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The carrying value of cash, accounts receivable, short-term
borrowings and accounts payable were a reasonable estimate of
their fair value due to the short-term nature of these
instruments. The carrying value of debt obligations approximates
fair value.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>15.</B></TD>
    <TD>
    <B>Commitments and Contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In late 2000, the Predecessor entered into a contract with Shell
Petroleum Development Corporation (SPDC)&nbsp;for the
refurbishment of 20-year old compressor stations for the
Nigerian Gas Company (NGC). These stations are located in the
Warri district in the western part of Nigeria.
</DIV>

<P align="center" style="font-size: 10pt;">F-36

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 2003, for the safety of personnel, all of the
Predecessor&#146;s employees were evacuated from Warri following
consultation with independent security advisors, and as such,
exercised a force majure clause in the contract with SPDC,
effectively canceling the project. As a result, the Predecessor
and SPDC entered into negotiations to settle all claims and
costs associated with the contract. The settlement process was
brought forth to the SPDC Main Tender Board. At
December&nbsp;31, 2004, the gross outstanding accounts
receivable balance with SPDC related to the NGC contract was
$15.8&nbsp;million. In April 2005, Shell confirmed that the SPDC
Major Tender Board had approved the Company&#146;s claim. The
receivable is classified as a current asset in trade accounts
receivable as the Company expects to liquidate the receivable in
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is involved in various litigation, claims and
administrative proceedings, including environmental matters,
arising in the normal course of business. In assessing its
potential environmental liability, the Company bases its
estimates on current technologies and does not discount its
liability or assume any insurance recoveries. Amounts recorded
for identified contingent liabilities are estimates, which are
regularly reviewed and adjusted to reflect additional
information when it becomes available. Subject to the
uncertainties inherent in estimating future costs for contingent
liabilities, management believes that recovery or liability with
respect to these matters would not have a material effect on the
financial condition, results of operations, liquidity or cash
flows of the Company or Predecessor for any year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Equity Purchase Agreement provides that, with the exception
of non-Superfund off-site liabilities and non-asbestos
environmental tort claims which have a three year limit for a
claim to be filed, IR will remain responsible without time
limitations for known environmental conditions as of the Closing
Date that meet certain requirements set forth in the Equity
Purchase Agreement. The most important of these requirements is
that with regard to environmental contamination, regulatory
authorities would be expected to require investigation or
remediation if they knew about the contamination. The Company
and IR have agreed on many, but not all, of the matters for
which IR will remain responsible.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is contingently liable for customs duties in certain
non-U.S.&nbsp;countries which totaled $0.8&nbsp;million at
December&nbsp;31, 2004. In the normal course of business, the
Company has issued several direct and indirect guarantees to
foreign governments related to import/export duties. Management
believes these guarantees will not adversely affect the
consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain office and warehouse facilities, transportation vehicles
and data processing equipment are leased. Total rental expense
was $1.5&nbsp;million for the period from October&nbsp;30, 2004
through December&nbsp;31, 2004, $10.8&nbsp;million for the
period from January&nbsp;1, 2004 through October&nbsp;29, 2004,
$11.9&nbsp;million in 2003 and $14.1&nbsp;million in 2002.
Minimum lease payments required under non-cancelable operating
leases with terms in excess of one year for the next five years
and thereafter are as follows: $7.1&nbsp;million in 2005,
$5.4&nbsp;million in 2006, $2.4&nbsp;million in 2007,
$0.8&nbsp;million in 2008, and $0.0&nbsp;million thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The product warranty liability represents estimated future
claims for equipment, parts and services covered during a
warranty period. A warranty reserve is provided for at the time
of revenue recognition based on historical experience. Reserves
are adjusted as required.
</DIV>

<P align="center" style="font-size: 10pt;">F-37

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table represents the changes in the product
warranty liability:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,424</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reductions for payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,224</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,487</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,050</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Translation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,896</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in accrual during current period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,429</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ending balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,699</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>16.</B></TD>
    <TD>
    <B>Incentive Plans</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Successor Incentive Plan</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;31, 2004, the Company&#146;s share-based
compensation arrangements represent profit units issued to
certain of the Company&#146;s executives in connection with the
acquisition, which is described below. The compensation cost
that has been charged against income for these arrangements was
approximately $75 thousand for the period from October&nbsp;30,
2004 through December&nbsp;31, 2004. No income tax benefit was
recognized in the income statement for share-based compensation
arrangements for the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amended and restated limited liability company agreement of
Dresser-Rand Holdings, LLC (&#147;Dresser-Rand Holdings, LLC
Agreement&#148;) permits the grant of the right to purchase
common units to management members of Dresser-Rand Holdings, LLC
and the grant of service units and exit units (collectively
referred to as &#147;profit units&#148;), consisting of one
initial tranche of service units and five initial tranches of
exit units to certain management members who own common units.
On November&nbsp;22, 2004, and in connection with the closing of
the Acquisition, several of the Company&#146;s executive
officers, including the Chief Executive Officer and four other
of the most highly compensated executive officers, acquired
common units in Dresser-Rand Holdings, LLC at $4.33&nbsp;per
unit by funds affiliated with First Reserve in connection with
the Acquisition. Executives who purchased common units were also
issued a total of 2,392,500 service units and five tranches of
exit units totaling 5,582,500 exit units in Dresser-Rand
Holdings, LLC, which permit them to share in appreciation in the
value of the Company&#146;s shares. The Company accounted for
the transactions between Dresser-Rand Holdings, LLC and the
Company&#146;s executives in accordance with Staff Accounting
Bulletin&nbsp;Topic 5T, which requires the Company to record
expense for services paid by the stockholder for the benefit of
the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The service units were granted without any remuneration. The
service units vest over a period of 5&nbsp;years and have
10&nbsp;year contractual terms. The service units provide for
accelerated vesting if there is a change in control, as defined
in the Dresser-Rand Holdings, LLC Agreement. Vested service
units convert to common units of Dresser-Rand Holdings, LLC upon
termination for any reason, death or disability. In certain
circumstances, unvested service units will also convert into
common units of Dresser-Rand Holdings, LLC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The fair value of each service unit is estimated on the date of
grant using the Black-Scholes option valuation model that uses
the assumptions noted in the following table for the period
ended December&nbsp;31, 2004. Expected volatilities are based on
historical volatilities of several comparable guideline
companies in the oil and gas compressor and turbine
manufacturing industries. The Company utilized First
Reserve&#146;s historical experience to estimate the expected
term within the valuation model. The risk-free interest rate is
based on
</DIV>

<P align="center" style="font-size: 10pt;">F-38

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
the rate currently available for zero coupon
U.S.&nbsp;Government issues in effect at the time of grant with
a remaining term equal to the expected life of the service units
being valued.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="89%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected volatility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36.20</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected dividend yield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected term (in years)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Risk-free interest rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.18</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, there was $3.3&nbsp;million of
total unrecognized compensation cost related to the service
units. The cost is expected to be recognized over a
weighted-average period of 4.9&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The exit units were granted in a series of five tranches. Exit
units are eligible for vesting upon the occurrence of certain
exit events, as defined in the Dresser-Rand Holdings, LLC
Agreement, including (i)&nbsp;funds affiliated with First
Reserve receiving an amount of cash in respect of their
ownership interest in Dresser-Rand Holdings, LLC that exceeds
specified multiples of the equity those funds have invested in
the Company, or (ii)&nbsp;there is both (a)&nbsp;a change in
control, certain terminations of employment, death or
disability, and (b)&nbsp;the fair value of the common units at
the time of such an event is such that were the common units
converted to cash, funds affiliated with First Reserve would
receive an amount of cash that exceeds specified multiples of
the equity those funds have invested in the Company. Vested exit
units convert to common units of Dresser-Rand Holdings, LLC. The
Company is unable to determine the fair value of the exit units,
and therefore, as defined by SFAS&nbsp;123R, there has not yet
been a mutual understanding between the issuer and the holders
of the exit units of the key terms and conditions of the exit
units. As such, in substance, no grant has yet occurred.
Consequently, no amount is recorded as compensation cost in the
Company&#146;s financial statements for the period from
October&nbsp;30, 2004 through December&nbsp;31, 2004. The
Company will recognize compensation expense for the exit units
at the time that the key terms and conditions of the exit units
can be determined.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Predecessor Stock Incentive Plan</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain employees of the Predecessor were eligible to
participate in stock option plans of IR. The plans granted
employees options to purchase Class&nbsp;A common shares of IR
at prices not less than the fair market value at the date of the
grant. Options become exercisable ratably over a three-year
period from their date of grant and expire at the end of ten
years. The plans, approved in 1998, also authorized stock
appreciation rights (SARs) and stock awards, which resulted in
compensation expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under SFAS&nbsp;No.&nbsp;123, compensation cost for the
applicable provisions of the Predecessor incentive stock plans
would be determined based upon the fair value at the grant date
for awards issued. The average fair
</DIV>

<P align="center" style="font-size: 10pt;">F-39

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
values of the options granted during the period from
January&nbsp;1, 2004 through October&nbsp;29, 2004, and the
years ended December&nbsp;31, 2003, and 2002 were estimated at,
$22.74, $13.10, and $14.96, respectively, on the date of grant,
using the Black-Scholes option-pricing model, which included the
following assumptions:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividend yield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.19</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.61</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Volatility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.34</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.83</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38.85</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Risk-free interest rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.28</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.12</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.69</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected life</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5&nbsp; years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5&nbsp; years</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Changes in options outstanding under the plans were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares Subject</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Option Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted Average</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>to Option</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Range per Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Predecessor</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    December&nbsp;31, 2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>465,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40.75-53.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>45.94</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41.81-41.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41.81</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,233</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40.25-40.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40.75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cancelled</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(650</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53.03-53.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33.03</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>592,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33.67-53.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45.04</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>162,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.05</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(117,634</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33.67-53.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45.35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cancelled</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,222</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.05-53.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42.91</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>613,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.05-53.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44.25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46.96</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(82,299</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.05-53.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46.14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cancelled</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(107,272</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.05-64.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47.84</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    October&nbsp;29, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>560,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39.05-64.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47.77</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stock options granted to employees were for the purchase of
Class&nbsp;A common stock of IR and remained obligations solely
of IR following the Acquisition.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>17.</B></TD>
    <TD>
    <B>Significant Customers and Concentration of Credit Risk</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company supplies equipment and services to the oil and gas
industry, which is comprised of a relatively small number of
consumers. Within any given year, sales can vary greatly due to
the large projects that might be underway with any given oil and
gas producer. During the periods from October&nbsp;30, 2004
through December&nbsp;31, 2004 and from January&nbsp;1, 2004
through October&nbsp;29, 2004 no one customer comprised more
than 10% of the sales volume. In 2003, the Predecessor had one
customer, whose sales were approximately 11% of total sales. In
2002 no one customer comprised more than 10% of the
Predecessor&#146;s total sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has operations and or does business in various
non-U.S.&nbsp;countries. It is possible that political
instability, foreign currency devaluations or other
unanticipated adverse events could materially affect
</DIV>

<P align="center" style="font-size: 10pt;">F-40

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
the operations of the Company. The Company believes that it has
controls and processes in place to minimize the impact such
events, should they occur in the future.
</DIV>

<P align="center" style="font-size: 10pt;">F-40.1
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>18.</B></TD>
    <TD>
    <B>Other Income (Expense)</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other income (expense)&nbsp;includes the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New York State Grant</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,289</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity earnings (losses) in partially owned affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,013</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(133</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(479</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency gains (losses)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,406</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,131</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Insurance claims</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,145</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Casualty losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,017</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(624</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,535</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other income/(expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,846</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9,202</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Casualty losses in 2003 primarily represent a loss the
Predecessor experienced as a result of a fire at a warehouse in
Nigeria.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2002, the Predecessor received $10.0&nbsp;million of grant
funds from the New York State Empire Development Corporation
(ESDC). The grants were designated to provide resources for
workforce development and capital equipment. The Predecessor
recorded $8.0&nbsp;million of these grants as income in other
income (expense)&nbsp;and $2.0&nbsp;million as a reduction in
basis of acquired property and equipment in the 2002 accounts.
The grant vests over a five-year period beginning in 2001 based
on three criteria. First, the Predecessor was required to keep
three factories open in New York State. Second, the Predecessor
was required to relocate its headquarters to Olean, New York.
Third, the Predecessor would commit to certain employment levels
at each year end. The grant vests ratably over a five year
period commencing in 2001 (a retroactive component of the grant)
and concluding in 2005. Prior to the end of 2003, the
Predecessor and ESDC restructured the grant to reflect the then
existing business environment. As a result of this negotiation,
the committed employment levels were adjusted from 2,500 to
2,200 and the grant was reduced from the original
$10.0&nbsp;million to $8.4&nbsp;million. On the basis of the
adjusted grant level, the Predecessor agreed to reimburse ESDC
in the amount of $1.6&nbsp;million, ratably, over a three-year
period, beginning in December 2003. The Predecessor has recorded
in the 2003 accounts $1.3&nbsp;million of this reimbursement as
a component of other income (expense)&nbsp;and $0.3&nbsp;million
as an adjustment to the related property and equipment. At
December&nbsp;31, 2004, the Company&#146;s New York State
employment level was 2,208. Management believes that the
required employment levels will be maintained during 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2002, the Predecessor settled an insurance claim associated
with patterns destroyed in a fire at a supplier&#146;s facility.
The fire occurred in April 2000. The settlement resulted in a
$10.1&nbsp;million gain recognized in 2002.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>19.</B></TD>
    <TD>
    <B>Restructuring</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 2002, the Predecessor
recorded restructuring charges totaling $5.2&nbsp;million for
employee termination benefits in connection with reductions in
workforce, closing of several non-manufacturing locations and
realignment of the Predecessor&#146;s regional structure. No
additional restructuring charges were recorded in 2004 or 2003.
As of December&nbsp;31, 2004, the restructuring programs have
resulted in the closure of non-manufacturing facilities,
including sales offices, with a workforce reduction
</DIV>

<P align="center" style="font-size: 10pt;">F-41

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
of 388 employees. The provision remaining at December&nbsp;31,
2003 relates to final severance payments and facility exit costs
and was paid in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A reconciliation of the restructuring reserve program is as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Employee</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Facility</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Termination</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Predecessor</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at January&nbsp;1, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,189</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,485</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,485</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,704</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,104</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(341</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,445</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>259</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(100</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(159</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(259</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at October&nbsp;29, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>20.</B></TD>
    <TD>
    <B>Supplemental Cash Flow Information</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid during the period for interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,244</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes paid, net of refunds</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,603</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest income includes $2.6&nbsp;million, $1.7&nbsp;million
and $0.8&nbsp;million of net interest income from IR affiliates
in the period from January&nbsp;1, 2004 through October&nbsp;29,
2004 and the years ended December&nbsp;31, 2003 and 2002,
respectively. The amounts shown as cash paid for interest
include payments on third-party borrowings only.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>21.</B></TD>
    <TD>
    <B>Royalty Agreement</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September of 2000, the Predecessor sold to Volvo Aero
Corporation (&#147;Volvo&#148;) the rights to provide
aftermarket support for certain gas turbine engines, and certain
related equipment, inventory and know-how needed for Volvo to
operate the acquired aftermarket business. Under the purchase
agreement, Volvo pays royalties based on revenues Volvo earns
from operation of aftermarket business until December&nbsp;31,
2005. The royalty agreement states that Volvo shall pay 25% of
the net revenues of Volvo&#146;s &#147;990&#148; aftermarket
business, commencing January&nbsp;1, 2002. A similar royalty was
and will be paid for 2003 (25%), 2004 (30%) and 2005 (30%). Due
to the nature of this agreement, an intangible was recorded on
the Successor accounts in the amount of $2.3&nbsp;million at the
acquisition date. Pursuant to the agreement, the Predecessor
recorded revenue and income of $1.2&nbsp;million in the period
from January&nbsp;1, 2004 through October&nbsp;29, 2004,
$1.7&nbsp;million in the year ended December&nbsp;31, 2003 and
$2.8&nbsp;million in the year ended December&nbsp;31, 2002. This
revenue is recorded within the caption &#147;Other operating
revenue&#148; in the accompanying combined income statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-42

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>22.</B></TD>
    <TD>
    <B>Segment Information:</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has two reportable segments based on the engineering
and production processes, and the products and services provided
by each segment, identified as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    1)&nbsp;New Units&nbsp;&#151; are highly engineered solutions to
    new customer requests. The segment includes engineering,
    manufacturing, sales and administrative support.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    2)&nbsp;Aftermarket Parts and Services&nbsp;&#151; consist of
    aftermarket support solutions for the existing population of
    installed equipment. The segment includes engineering,
    manufacturing, sales and administrative support.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We evaluate performance based on the operating income from each
segment. Operating income excludes interest, other expense such
as currency losses and equity losses, and taxes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A third category, &#147;unallocable&#148; is also disclosed.
This category is for expenses and assets that do not belong to
either reportable segment because of the nature of the expense
or asset. Expenses included as &#147;unallocable&#148; are all
IR allocations, shared services, research and development
expenses, and restructuring charges, none of which are directly
allocable to either of the two reportable segments. The only
assets that are directly allocable to either of the two
reportable segments are trade accounts receivable, net
inventories, and goodwill. All other assets such as cash,
prepaid expenses, deferred taxes, and long term assets are not
directly allocable to either of the two reportable segments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
D-R had one customer with sales amounting to 10.8% of 2003
revenues. Revenues were in both New Units and Aftermarket Parts
and Services. Supplemental information on geographic sales and
long-lived assets is also provided.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>77,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>267,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>792,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>498,791</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aftermarket parts and services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>447,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>542,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>532,562</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>199,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>715,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,335,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,031,353</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Operating Income (Loss)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(464</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,445</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(32,850</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aftermarket parts and services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,696</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unallocable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,134</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,492</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47,647</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39,064</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Operating Income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,782</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Depreciation and Amortization</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,758</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aftermarket parts and services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,064</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Depreciation and Amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,822</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-43

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;1</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>through</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Goodwill</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>123,831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aftermarket parts and services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>299,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>423,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Assets (including Goodwill)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>270,563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>144,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aftermarket parts and services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>564,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>246,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unallocable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>916,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>673,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,063,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues by Destination(a)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>77,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>275,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>547,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>437,199</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Latin America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>139,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>121,527</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>331,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>207,769</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asia-Pacific</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159,964</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Middle East, Africa</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>220,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,894</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>199,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>715,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,335,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,031,353</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Long-Lived Assets by Geographic Area</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>159,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Latin America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,617</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asia-Pacific</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Middle East, Africa</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Long-Lived Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>226,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>101,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    In the period from October&nbsp;30, 2004 through
    December&nbsp;31, 2004, the sales to customers in Canada,
    Venezuela and Russia comprised 6.0%, 8.5% and 5.5%,
    respectively, of total revenues. In the period from
    January&nbsp;1, 2004 through October&nbsp;29, 2004, sales to
    customers in Brazil and Venezuela comprised 6.7% and 6.8%,
    respectively, of total revenues. In 2003, sales to customers in
    Norway and Libya comprised 9.6% and 5.3%, respectively, of total
    revenues and in 2002 sales to customers in France generated 6.1%
    of total revenues. No other sales within individual countries
    exceeded 5% of the total revenues in any year presented.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>23.</B></TD>
    <TD>
    <B>Subsequent events</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;19, 2005, the Company sold its interests in a
partially-owned affiliate for proceeds of approximately
$10&nbsp;million. The carrying value of this investment as of
the date of sale was approximately $10&nbsp;million.
</DIV>

<P align="center" style="font-size: 10pt;">F-44

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<HR size="4" noshade color="#000000" style="margin-top: -5px">
</DIV>

<DIV align="left" style="font-size: 10pt;">
<HR size="1" noshade color="#000000" style="margin-top: -10px">
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y08819s1y0881920.gif" alt="(DRESSER RAND LOGO)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 35pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<HR size="1" noshade color="#000000" style="margin-top: -2px">
</DIV>

<DIV align="left" style="font-size: 10pt;">
<HR size="4" noshade color="#000000" style="margin-top: -10px">
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;II</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.</B></TD>
    <TD>
    <B><I>Other Expenses of Issuance and Distribution.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the costs and expenses payable in
connection with the distribution of the securities being
registered. All amounts are estimated except the Securities and
Exchange Commission registration fee.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Securities and Exchange Commission Registration Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,080</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NYSE Listing Fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Printing and Engraving Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Blue Sky Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Legal Fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounting Fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Registrar and Transfer Agent Fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NASD Filing Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.</B></TD>
    <TD>
    <B><I>Indemnification of Directors and Officers.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;145 of the Delaware General Corporation Law (the
&#147;DGCL&#148;) grants each corporation organized thereunder
the power to indemnify any person who is or was a director,
officer, employee or agent of a corporation or enterprise,
against expenses, including attorneys&#146; fees, judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, other than an action by or in
the right of the corporation, by reason of being or having been
in any such capacity, if he acted in good faith in a manner
reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action, or proceeding, had no reasonable cause to believe his
conduct was unlawful.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;102(b)(7) of the DGCL enables a corporation in its
certificate of incorporation or an amendment thereto or
eliminate or limit the personal liability of a director to the
corporation or its stockholders of monetary damages for
violations of the directors&#146; fiduciary duty of care, except
(i)&nbsp;for any breach of the director&#146;s duty of loyalty
to the corporation or its stockholders, (ii)&nbsp;for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii)&nbsp;pursuant to
Section&nbsp;174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock
purchases or redemptions) or (iv)&nbsp;for any transaction from
which a director derived an improper personal benefit. The
Certificate of Incorporation and By-Laws for Dresser-Rand Group,
Inc. provide for such limitations on liability.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.</B></TD>
    <TD>
    <B><I>Recent Sales of Unregistered Securities.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since our incorporation in October 2004, we have issued
unregistered securities in the transactions described below.
These securities were offered and sold in reliance upon the
exemptions provided for in Section&nbsp;4(2) of the Securities
Act, relating to sales not involving any public offering,
Rule&nbsp;506 of the Securities Act relating to sales to
accredited investors and Rule&nbsp;701 of the Securities Act
relating to a compensatory benefit plan. The sales were made
without the use of an underwriter and any certificates
representing the securities sold contain a restrictive legend
that prohibits transfer without registration or an applicable
exemption.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2004, Dresser-Rand Group Inc. (the
&#147;issuer&#148;) was formed and issued 100&nbsp;shares of its
common stock to D-R Interholding, LLC for an aggregate price of
$430.0&nbsp;million. In November 2004, the
</DIV>

<P align="center" style="font-size: 10pt;">II-1

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
issuer received a capital contribution of $5.8&nbsp;million from
its indirect parent, Dresser-Rand Holdings, LLC, as a result of
certain members of senior management purchasing common units in
Dresser-Rand Holdings, LLC that permit such individuals to
indirectly share in the value of the issuer&#146;s shares. In
December 2004, certain of our non-executive officers purchased a
total of 321,924 shares of the issuer&#146;s common stock for an
aggregate price of $1.4 million (this purchase of shares
reflects the issuer&#146;s stock split described in the next
sentence). In February&nbsp;2005, the issuer declared a
1,006,092.87 for one stock split that resulted in D-R
Interholding, LLC owning 100,609,287&nbsp;shares of the
issuer&#146;s common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, the issuer issued 303,735 shares of its common
stock to D-R Interholding, LLC for an aggregate price of
$1.3&nbsp;million as a result of certain members of senior
management purchasing common units in Dresser-Rand Holdings, LLC
that permit such individuals to indirectly share in the value of
the issuer&#146;s shares.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;16.</B></TD>
    <TD>
    <B><I>Exhibits and Financial Statement Schedules.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp;Exhibits
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated Certificate of Incorporation of
    Dresser-Rand Group Inc.</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated By-Laws of Dresser-Rand Group Inc.</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of certificate of Dresser-Rand Group Inc. common stock</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture dated as of October&nbsp;29, 2004 among Dresser-Rand
    Group Inc., the guarantors party thereto and Citibank, N.A., as
    trustee</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated as of October&nbsp;29,
    2004, among Dresser-Rand Group Inc., Dresser-Rand LLC,
    Dresser-Rand Company, Dresser-Rand Power LLC, Dresser-Rand
    Global Services, LLC and Morgan Stanley&nbsp;&#38; Co.
    Incorporated, Citigroup Global Markets Inc., UBS Securities LLC,
    Bear, Stearns&nbsp;&#38; Co. Inc., Natexis Bleichroeder Inc.,
    Sovereign Securities Corporation, LLC and Daiwa Securities
    America Inc. as placement agents</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Simpson Thacher&nbsp;&#38; Bartlett LLP</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Equity Purchase Agreement, dated as of August&nbsp;25, 2004, by
    and among FRC&nbsp;Acquisition LLC and Ingersoll-Rand Company
    Limited</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Credit Agreement dated as of October&nbsp;29, 2004, among D-R
    Interholding, LLC, Dresser-Rand Group Inc., D-R Holdings (UK)
    LTD, D-R Holdings S.A.S., the lenders party thereto, Citicorp
    North America, Inc. as administrative agent and collateral
    agent, Morgan Stanley Senior Funding, Inc. and UBS Securities
    LLC, each as co-syndication agent, Citigroup Global Markets
    Inc., Morgan Stanley Senior Fundings, Inc. and UBS Securities
    LLC, as joint lead arrangers and joint book managers and Bear
    Stearns Corporate Lending Inc. and Natexis Banques Populaires as
    co-documentation agents</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 to the Credit Agreement</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Domestic Guarantee and Collateral Agreement, dated and effective
    as of October&nbsp;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</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Transition Services Agreement, dated as of October&nbsp;29, 2004
    by and between Ingersoll-Rand Company Limited and Dresser-Rand
    Group Inc.</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Supply Agreement, dated October&nbsp;31, 2004, by and between
    Dresser-Rand Company and Ingersoll-Rand Company</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    License Agreement, dated as of October&nbsp;26, 2004, by and
    between Dresser, Inc. and Dresser-Rand Group Inc.</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    License Agreement, dated as of October&nbsp;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</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Limited Liability Company Agreement of
    Dresser-Rand Holdings, LLC, effective as of October&nbsp;29, 2004</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, dated October&nbsp;27, 2004, by and among
    Vincent R. Volpe&nbsp;Jr., Dresser-Rand Holdings, LLC and
    Dresser-Rand Group Inc.</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, dated July&nbsp;25, 1990, by and between
    Jean-Francois Chevrier and Dresser-Rand S.A.</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Stockholder Agreement</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Dresser-Rand Group Inc. Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Subscription Agreement</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Management Stock Subscription Agreement</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of 2005 Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Annual Incentive Plan</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of 2005 Directors Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    List of Subsidiaries</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Simpson Thacher&nbsp;&#38; Bartlett LLP (included as
    part of its opinion filed as Exhibit&nbsp;5.1 hereto)</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of PricewaterhouseCoopers LLP</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Powers of Attorney (included in signature pages of this
    Registration Statement)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    To be filed by amendment</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp;<I>Financial Statement Schedule</I>
</DIV>

<P align="center" style="font-size: 10pt;">II-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Schedule&nbsp;II&nbsp;&#151; Valuation and Qualifying
Accounts and Reserves</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Dresser-Rand Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the years ended December&nbsp;31, 2002 and 2003, the
period from January&nbsp;1, 2004 through October&nbsp;29, 2004,
and the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Successor</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Additions</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Beginning</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Charges to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Charges to</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ending</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Costs and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>10/30/2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expenses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Accounts</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deductions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>12/31/2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for Doubtful Accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(300</TD>
    <TD align="left" valign="bottom" nowrap>)(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,110</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Notes:</I>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;&#151;</TD>
    <TD align="left">
    Impact of translation of (420) and write-off of Bad Debts of 120.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Predecessor</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Additions</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Beginning</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Charges to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Charges to</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ending</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Costs and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>01/01/2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expenses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Accounts</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deductions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>10/29/2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for Doubtful Accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,083</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,483</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Notes:</I>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;&#151;</TD>
    <TD align="left">
    Impact of translation of (175) and write-off of Bad Debts of
    1,258.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Additions</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Beginning</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Charges to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Charges to</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ending</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Costs and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>01/01/2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expenses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Accounts</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deductions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>12/31/2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for Doubtful Accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>364</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,427</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Notes:</I>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;&#151;</TD>
    <TD align="left">
    Impact of translation of (787) and write-off of Bad Debts of
    1,151.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Additions</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Beginning</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Charges to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Charges to</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ending</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Costs and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>01/01/2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expenses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Accounts</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deductions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>12/31/2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for Doubtful Accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>548</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,790</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Notes:</I>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;&#151;</TD>
    <TD align="left">
    Impact of translation of (300) and write-off of Bad Debts of 848.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">II-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;17.</B></TD>
    <TD>
    <B><I>Undertakings.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers,
or controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrants will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned registrant hereby undertakes that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (1)&nbsp;For purposes of determining any liability under the
    Securities Act of 1933, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance upon Rule&nbsp;430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it was declared effective.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (2)&nbsp;For the purpose of determining any liability under the
    Securities Act of 1933, each post-effective amendment that
    contains a form of prospectus shall be deemed to be a new
    registration statement relating to the securities offered
    therein, and the offering of such securities at that time shall
    be deemed to be the initial bona fide offering thereof.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
</DIV>

<P align="center" style="font-size: 10pt;">II-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Olean, State of New York, on
May&nbsp;16, 2005.
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT style="font-variant:SMALL-CAPS">Dresser-Rand Group Inc.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="center">
    /s/ <FONT style="font-variant:SMALL-CAPS">Vincent R. Volpe Jr.
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Name:&nbsp;Vincent R. Volpe Jr.</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="8%"></TD>
    <TD width="52%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>Title:</TD>
    <TD align="left">
    President, Chief Executive <BR>
     Officer and Director</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURES AND POWERS OF ATTORNEY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each person whose signature appears below authorizes Stephen A.
Riordan and Randy D. Rinicella and each of them, as his
attorney-in-fact and agent, with full power of substitution and
resubstitution, to execute, in his name and on his behalf, in
any and all capacities, this Registration Statement on
Form&nbsp;S-1 and any and all amendments thereto (and any
additional registration statement related thereto permitted by
Rule&nbsp;462(b) promulgated under the Securities Act of 1933
(and all further amendments including post-effective amendments
thereto)) necessary or advisable to enable the registrant to
comply with the Securities Act of 1933, and any rules,
regulations and requirements of the Securities and Exchange
Commission, in respect thereof, in connection with the
registration of the securities which are the subject of such
registration statement, which amendments may make such changes
in such registration statement as such attorney-in-fact may deem
appropriate, and with full power and authority to perform and do
any and all acts and things, whatsoever which any such
attorney-in-fact or substitute may deem necessary or advisable
to be performed or done in connection with any or all of the
above-described matters, as fully as each of the undersigned
could do if personally present and acting, hereby ratifying and
approving all acts of any such attorney-in-fact or substitute.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Vincent R. Volpe
    Jr.<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Vincent
    R. Volpe Jr.&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    President, Chief Executive Officer and<BR>
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    May 16, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Leonard M. Anthony<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Leonard
    M. Anthony</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Executive Vice President and Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    May 16, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Stephen A. Riordan<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Stephen
    A. Riordan</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Vice President Finance</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    May 16, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">William E. Macaulay<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>William
    E. Macaulay</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Chairman of the Board of Directors</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    May 16, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Thomas J. Sikorski<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Thomas
    J. Sikorski</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    May 16, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Mark A. McComiskey<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Mark
    A. McComiskey</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    May&nbsp;16, 2005</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Kenneth W. Moore<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Kenneth
    W. Moore</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    May&nbsp;16, 2005</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-7
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='123'></A>
</DIV>

<!-- link1 "EXHIBIT INDEX" -->

<P align="center">
<B><FONT size="2">EXHIBIT INDEX</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="80%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit No.</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description of Exhibit</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Certificate of
    Incorporation of Dresser-Rand Group Inc.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated By-Laws of
    Dresser-Rand Group Inc.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of certificate of Dresser-Rand Group Inc.
    common stock
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Indenture dated as of October&nbsp;29, 2004 among
    Dresser-Rand Group Inc., the guarantors party thereto and
    Citibank, N.A., as trustee
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Registration Rights Agreement, dated as of
    October&nbsp;29, 2004, among Dresser-Rand Group Inc.,
    Dresser-Rand LLC, Dresser-Rand Company, Dresser-Rand Power LLC,
    Dresser-Rand Global Services, LLC and Morgan Stanley&nbsp;&#38;
    Co. Incorporated, Citigroup Global Markets Inc., UBS Securities
    LLC, Bear, Stearns&nbsp;&#38; Co. Inc., Natexis Bleichroeder
    Inc., Sovereign Securities Corporation, LLC and Daiwa Securities
    America Inc. as placement agents
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Simpson Thacher&nbsp;&#38; Bartlett LLP
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Equity Purchase Agreement, dated as of
    August&nbsp;25, 2004, by and among FRC&nbsp;Acquisition LLC and
    Ingersoll-Rand Company Limited
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Credit Agreement dated as of October&nbsp;29,
    2004, among D-R&nbsp;Interholding, LLC, Dresser-Rand Group Inc.,
    D-R&nbsp;Holdings (UK) LTD, D-R&nbsp;Holdings S.A.S., the
    lenders party thereto, Citicorp North America, Inc. as
    administrative agent and collateral agent, Morgan Stanley Senior
    Funding, Inc. and UBS Securities LLC, each as co-syndication
    agent, Citigroup Global Markets Inc., Morgan Stanley Senior
    Fundings, Inc. and UBS Securities LLC, as joint lead arrangers
    and joint book managers and Bear Stearns Corporate Lending Inc.
    and Natexis Banques Populaires as co-documentation agents
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment No.&nbsp;1 to the Credit Agreement
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Domestic Guarantee and Collateral Agreement,
    dated and effective as of October&nbsp;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
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Transition Services Agreement, dated as of
    October&nbsp;29, 2004 by and between Ingersoll-Rand Company
    Limited and Dresser-Rand Group Inc.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Supply Agreement, dated October&nbsp;31, 2004, by
    and between Dresser-Rand Company and Ingersoll-Rand Company
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License Agreement, dated as of October&nbsp;26,
    2004, by and between Dresser, Inc. and Dresser-Rand Group Inc.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License Agreement, dated as of October&nbsp;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
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Limited Liability Company
    Agreement of Dresser-Rand Holdings, LLC, effective as of
    October&nbsp;29, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated October&nbsp;27,
    2004, by and among Vincent R. Volpe&nbsp;Jr., Dresser-Rand
    Holdings, LLC and Dresser-Rand Group Inc.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated July&nbsp;25, 1990,
    by and between Jean-Francois Chevrier and Dresser-Rand S.A.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Stockholder Agreement
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Dresser-Rand Group Inc. Stock Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Subscription Agreement
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Management Stock Subscription Agreement
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="80%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit No.</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description of Exhibit</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.16*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of 2005 Stock Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.17*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Annual Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.18*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of 2005 Directors Stock Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">List of Subsidiaries
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Simpson Thacher&nbsp;&#38; Bartlett
    LLP (included as part of its opinion to be filed by amendment as
    Exhibit&nbsp;5.1)
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of PricewaterhouseCoopers LLP
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap>&nbsp;<FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Powers of Attorney (included in signature pages
    of this Registration Statement)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment
    </FONT></TD>
</TR>

</TABLE>
</BODY>
</HTML>
[{"type": "S-1", "sequence": "1", "filename": "y08819s1sv1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1875578}]
{"company-data": {"conformed-name": "Dresser-Rand Group Inc.", "cik": "0001316656", "assigned-sic": "3510", "irs-number": "201780492", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-124963", "film-number": "05833744"}, "business-address": {"street1": "PAUL CLARK DRIVE", "city": "OLEAN", "state": "NY", "zip": "14760", "phone": "(716) 375-3000"}, "mail-address": {"street1": "PAUL CLARK DRIVE", "city": "OLEAN", "state": "NY", "zip": "14760"}}
FORM S-1
Table of Contents
As filed with the Securities and Exchange Commission on
May 16, 2005
Registration
No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DRESSER-RAND GROUP INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
3511
20-1780492
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
Paul Clark Drive
Olean, New York 14760
(716) 375-3000
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Leonard M. Anthony
Executive Vice President and
Chief Financial Officer
Paul Clark Drive
Olean, New York 14760
(716) 375-3000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copies to:
Edward P. Tolley III, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017-3954
Tel: (212) 455-2000
Fax: (212) 455-2502
James S. Scott Sr., Esq.
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022-6069
Tel: (212) 848-4000
Fax: (212) 848-7179
Approximate
date of commencement of proposed sale of the securities to the
public:
As soon as practicable after
this Registration Statement becomes effective.
If any of
the securities being registered on this form are being offered
on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act, check the following
box.
o
If this
form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.
o
If this
form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this
form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If
delivery of the prospectus is expected to be made pursuant to
Rule 434, check the following
box.
o
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Amount Of
Title Of Each Class Of
Aggregate
Registration
Securities To Be Registered
Offering Price(1)
Fee
Common Stock, par value $.01 per share
$400,000,000
$47,080
(1)
Estimated solely for the purpose of calculating the registration
    fee under Rule 457(o) of the Securities Act of 1933, as
    amended (the "Securities Act").
The
registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
Table of Contents
The information
in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and we are
not soliciting offers to buy these securities in any state where
the offer or sale is not
permitted.
PROSPECTUS (Subject to
Completion)
Issued                     ,
2005
Shares
Dresser-Rand Group Inc.
Common Stock
Dresser-Rand Group Inc. is offering shares of its common stock.
All of
the                      shares
of common stock are being sold by us. We intend to use
approximately
$                     million
of the net proceeds from the sale of the shares being sold in
this offering to repay certain of our indebtedness and
approximately
$                     million
of the net proceeds to pay a dividend to our stockholders
existing immediately prior to this offering, consisting of
affiliates of First Reserve and certain members of senior
management.
This is our initial public offering and no public market
currently exists for our shares. We anticipate that the initial
public offering price will be between
$                    and
$                     per
share. We intend to apply to list the common stock on the New
York Stock Exchange under the symbol "DRC."
The underwriters have the option to purchase up to an
additional                      shares
of common stock from us at the initial public offering price
less the underwriting discount to cover over-allotments. We
intend to use the proceeds we receive from any shares sold
pursuant to the underwriters' over-allotment option to pay
an additional dividend to our existing stockholders.
Investing in the common stock involves risks. See "Risk
Factors" beginning on page 14.
Proceeds,
Initial Public
Underwriting
before expenses,
Offering Price
Discount
to Company
Per Share
$
$
$
Total
$
$
$
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The underwriters expect to deliver the shares to purchasers
on                     ,
2005.
Morgan Stanley
Citigroup
,
2005
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
14
Special Note Regarding Forward-Looking
    Statements
27
The Transactions
28
Use of Proceeds
32
Dividend Policy
32
Capitalization
33
Dilution
34
Unaudited Pro Forma Financial
    Information
35
Selected Historical Financial
    Information
40
Management's Discussion and Analysis
    of Financial Condition and Results of Operations
42
Industry Overview
63
Business
67
Management
80
Principal Stockholders
93
Certain Related Party Transactions
95
Description of Indebtedness
97
Description of Capital Stock
103
Shares Eligible For Future Sale
108
Certain United States Federal Income and
    Estate Tax Consequences to Non-U.S. Holders
110
Underwriting
113
Validity of the Shares
116
Experts
116
Where You Can Find More Information
116
Index to Financial Statements
F-1
EX-4.2: INDENTURE
EX-4.3: REGISTRATION RIGHTS AGREEMENT
EX-10.1: EQUITY PURCHASE AGREEMENT
EX-10.2: CREDIT AGREEMENT
EX-10.4: DOMESTIC GUARANTEE AND COLLATERAL AGREEMENT
EX-10.5: TRANSITION SERVICES AGREEMENT
EX-10.6: SUPPLY AGREEMENT
EX-10.7: LICENSE AGREEMENT
EX-10.8: LICENSE AGREEMENT
EX-10.9: AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
EX-10.10: EMPLOYMENT AGREEMENT
EX-10.11: EMPLOYMENT AGREEMENT
EX-10.12: FORM OF STOCKHOLDER AGREEMENT
EX-10.13: STOCK INCENTIVE PLAN
EX-10.14: FORM OF SUBSCRIPTION AGREEMENT
EX-10.15: FORM OF MANAGEMENT STOCK SUBSCRIPTION AGREEMENT
EX-21.1: LIST OF SUBSIDIARIES
EX-23.2: CONSENT OF PRICEWATERHOUSECOOPERS LLP
You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with
information different from that contained in this prospectus. We
are offering to sell shares of common stock and seeking offers
to buy shares of common stock, only in jurisdictions where
offers and sales are permitted. The information contained in
this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this
prospectus or any sale of the shares of common stock.
Through and
including                     ,
2005 (the 25th day after the date of this prospectus), all
dealers that buy, sell or trade shares, whether or not
participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
i
Table of Contents
MARKET AND INDUSTRY DATA
The data included in this prospectus regarding
industry size and relative industry position are based on a
variety of sources, including company research, third-party
studies and surveys, industry and general publications and
estimates based on our knowledge and experience in the industry
in which we operate. These sources include publications by the
International Compressed Air and Allied Machinery Committee, the
National Electrical Manufacturers Association, the Gas
Processors Association, the Gas Processors Suppliers
Association, the Hydrocarbon Processing Industry, the Energy
Information Administration, the National Petroleum Council, the
National Petrochemical and Refiners Association, the American
Petroleum Institute, Oil & Gas Journal magazine, Diesel
and Gas Turbine World magazine, as well as information derived
from our technology enabled selling system, D-R Avenue, and our
CRM system, Client Interface Response System. Our estimates have
been based on information obtained from our clients, suppliers,
trade and business organizations and other contacts in the
industry. We believe these estimates to be reliable as of the
respective date of each report and as of the date of this
prospectus. However, this information may prove to be inaccurate
due to the method by which we obtained some of the data for our
estimates or because this information cannot always be verified
with complete certainty due to the limits on the availability
and reliability of raw data, the voluntary nature of the data
gathering process and other limitations and uncertainties.
Forecasts are particularly likely to be inaccurate, especially
over long periods of time. As an example of the unpredictable
nature of these forecasts, in 1983, the U.S. Department of
Energy forecast that oil would cost $74 per barrel in 1995;
however, the price of oil in 1995 was actually $17 per
barrel. In addition, we do not know what assumptions regarding
general economic growth were used in preparing the forecasts we
cite. As a result, you should be aware that industry data
included in this prospectus, and estimates and beliefs based on
that data, may not be reliable.
ii
Table of Contents
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in
this prospectus. This summary is not complete and may not
contain all of the information that is important to you. We urge
you to read this entire prospectus including the "Risk
Factors" section and the consolidated and combined
financial statements and notes thereto, before investing in our
common stock.
Unless the context otherwise indicates, as used in this
prospectus, (i) the terms "we," "our,"
"us" and similar terms refer to Dresser-Rand Group
Inc. and its consolidated subsidiaries after giving effect to
the consummation of the acquisition and financing thereof as
described in "The Transactions," (ii) the term
"issuer" refers to Dresser-Rand Group Inc. and not to
any of its subsidiaries, (iii) the term "Dresser-Rand
Entities" refers collectively, to Dresser-Rand Company and
its direct and indirect subsidiaries, Dresser-Rand Canada, Inc.
and Dresser-Rand GmbH and (iv) the term
"Ingersoll-Rand" refers to Ingersoll-Rand Company
Limited, a Bermuda corporation, and its predecessors.
Dresser-Rand Group Inc.
Our Business
We are among the largest global suppliers of rotating equipment
solutions to the worldwide oil, gas, petrochemical and process
industries. In 2004, approximately 94% of our combined revenues
were generated from oil and gas infrastructure spending. Our
services and products are used for a wide range of applications,
including oil and gas production, high-pressure field injection
and enhanced oil recovery, pipelines, refinery processes,
natural gas processing, and petrochemical production. We believe
we have the largest installed base in the world of the classes
of equipment we manufacture, with approximately 40% of the total
installed base of equipment in operation. Our installed base
includes such well-recognized brand names as Dresser-Rand,
Dresser-Clark, Worthington, Turbodyne and Terry. We provide a
full range of aftermarket parts and services to this installed
base through our global network of 24 service and support
centers covering 105 countries. Our extensive and diverse
client base consists of most major and independent oil and gas
producers and distributors worldwide, national oil and gas
companies, and chemical and industrial companies. Our clients
include BP, ChevronTexaco, Statoil, ExxonMobil, Lukoil, Sinopec,
Shell Chemical, Duke Energy and the U.S. and certain foreign
governments. No single client has represented more than 5% of
our total revenues over any consecutive two-year period.
We operate globally with manufacturing facilities in the United
States, France, Germany, Norway, India and Brazil. We have one
of the broadest sales and services networks in the industry,
with locations in all of the major international energy markets,
established coverage of 105 countries, and over 4,600 employees.
We believe our recent financial performance demonstrates our
ability to improve our results through on-going commitment to
operational excellence, as well as through the growth of our
services-centered, solutions-based business model. At
December 31, 2003 and December 31, 2004, our backlog was
$419.9 million and $637.6 million, respectively. For
the year ended December 31, 2003, the period from January 1,
2004 through October 29, 2004 and the period from October 30,
2004 through December 31, 2004, we generated net income of
$20.4 million, $42.2 million and $7.2 million and
EBITDA of $59.0 million, $73.7 million and
$40.4 million, respectively. EBITDA is defined, reconciled
and its importance explained in note 6 to
"— Summary Historical and Pro Forma Financial
Information." This reflects the impact of both our
growth-oriented business realignment and our continued focus on
operating efficiency.
We continue to grow our business through a solutions-based
service strategy that combines our industry-leading technology,
proprietary worldwide service center network and deep product
expertise. This approach drives our growth as we offer
integrated service solutions that help our clients maximize
returns on their production and processing equipment. We believe
our business model and alliance-based approach align us with our
clients who are shifting from purchasing isolated units and
services on a transactional basis to choosing service providers
that can help optimize performance over the entire life cycle of
their equipment. Our alliance program encompasses both the
provision of new units and/or services, and we offer our clients
a
1
Table of Contents
dedicated team, streamlined engineering and
procurement process and a life cycle approach to manufacturing,
operating and maintaining their equipment, whether originally
manufactured by us or by a third party.
Our business operates in two segments: new units
and aftermarket parts and services. The following charts show
the proportion of our revenue generated by segment, geography
and end market for the periods indicated:
New Units
We are a leading manufacturer of
highly-engineered turbo and reciprocating compression equipment
and steam turbines, and also manufacture special-purpose gas
turbines. In new unit sales of turbo and reciprocating
compressors, we are the market leader in North America, and have
consistently ranked in the top three in worldwide market share.
We build custom-designed products to client specifications for
long-life, critical applications.
We believe clients are increasingly choosing
their suppliers based upon the capability to custom engineer,
manufacture and deliver reliable high-performance products, with
the lowest total cost of ownership, in the shortest cycle time,
and to provide timely, locally based service and support. Our
client alliance sales have increased substantially as a result
of our ability to meet these client requirements. For example,
the proportion of our combined core centrifugal and process
reciprocating new unit revenues from client alliances has
increased from approximately $17 million in 2000 to
approximately $98 million in 2004.
Aftermarket Parts and
    Services
The aftermarket parts and services segment
provides us with long-term growth opportunities and a steady
stream of recurring revenues and cash flow. With a typical
operating life of 30 years or more, rotating equipment
requires substantial aftermarket parts and services over its
operating life. The cumulative revenues from these aftermarket
activities often significantly exceed the initial purchase price
of a unit, which in many cases can be as low as five percent of
the total life-cycle cost of the unit to the client.
Given the critical role played by the equipment
we sell, customers place a great deal of importance on a
supplier's ability to provide rapid, comprehensive service,
and we believe that the aftermarket parts and services business
represents a significant long-term growth opportunity. We offer
a comprehensive range of aftermarket parts and services,
including installation, maintenance, monitoring, operation,
repairs, overhauls and upgrades. We provide our solutions to our
clients through a proprietary network of 24 service and support
centers in 14 countries, employing approximately 1,000 service
personnel, servicing our own and other OEMs' turbo and
reciprocating compressors as well as steam and gas turbines. Our
coverage area of service centers servicing both turbo and
reciprocating compressors is approximately twice as large as
that of our next closest competitor.
We believe we have the largest installed base of
the classes of equipment we manufacture and the largest
associated aftermarket parts and services business in the
industry. We provide parts and aftermarket services to the
majority of our installed base of equipment, and estimate that
we capture approximately 50% of the
2
Table of Contents
supplier-provided aftermarket revenue generated
by our installed base. We focus on a global offering of
technologically advanced aftermarket products and services, and
as a result, our aftermarket activities tend to be concentrated
on the provision of higher value-added parts and upgrades and
the delivery of sophisticated operating, repair, and overhaul
services. Smaller independent companies tend to focus on local
markets and have a more basic aftermarket offering.
The steady demand from our installed base for
parts and aftermarket services represents a stable source of
recurring revenues and cash flow. Moreover, with our value-based
solutions strategy, we have a demonstrated track record of
growth in this segment as a result of our focus on expanding our
service offerings into new areas, including servicing other
OEMs' installed base of equipment, developing new
technology upgrades and increasing our penetration of higher
value-added services to our own installed base.
Our Industry
The rotating equipment and services industry
manufactures and services a wide range of technologically
advanced equipment, including centrifugal and reciprocating
compressors, steam and gas turbines, expanders and control
systems. The rotating equipment industry includes manufacturing
and servicing a wide and diverse range of products, which can be
grouped into two distinct categories:
•
"standard" equipment used for
    low-horsepower, lower-pressure and lower-volume applications; and
•
custom-engineered equipment, built to customer
    specifications, engineered for the specific operating
    environment and application in which it will be put to use. This
    equipment is generally used in high-pressure/volume
    applications, typically consists of large equipment packages,
    and is generally used in large scale production operations.
Most of our revenues are generated from the sale
and servicing of this second category of rotating equipment.
Demand for these products and services comes from a wide variety
of large end markets, including companies in the three major
segments of the oil and gas industries (upstream, involving the
production of oil and gas; midstream, involving the preparation
and transportation of natural gas and liquids for future use;
and downstream, involving refining), and in the petrochemical,
chemical, general industrial and power industries. We estimate
that the worldwide aggregate annual value of new unit sales of
the classes of equipment we manufacture and the aftermarket
parts and services needs of the installed base of such equipment
(both in-house and outsourced) is approximately $10 billion.
We believe that the rotating equipment and
services industry will continue to demonstrate significant
growth due to the following factors:
•
natural gas consumption increased worldwide at an
    average rate of 2.4% per year as a result of worldwide
    economic growth and the recognition of natural gas as a
    clean-air fuel;
•
increased demand for forecasted natural gas is
    driving substantial growth in spending on liquefied natural gas
    infrastructure; forecast spending on LNG plant equipment for
    2005-2008 is $13.4 billion, 155% more than was spent from
    1964-2004;
•
decline rates associated with maturing natural
    gas fields in the United States and other countries have
    resulted in increased requirements for compression products and
    services to maintain commercially viable levels of production;
•
the refining sector continues to experience
    increasing demand pressures as current refinery capacity is
    reaching a peak;
•
environmental laws such as the Clean Air Act and
    the curtailing of the practice of flaring gas increase the
    demand for compression products and services;
•
the production of natural gas and oil worldwide
    will continue to grow as a result of increasing demand for
    fossil fuels; and
3
Table of Contents
•
continued development of pipeline infrastructure,
    particularly in Asia and Latin America, and increased
    privatization of state-owned energy producers internationally,
    are leading to increased outsourcing of compression services.
We believe that rotating equipment solutions
providers with global scale will be well positioned to
participate in a disproportionately high share of the future
growth in this industry as customers increasingly shift their
business to the handful of companies with the ability to fulfill
the full range of their equipment and service needs worldwide.
Competitive Strengths
Global Presence and Market
    Leadership.
We believe that our broad
    portfolio of products and services, global presence, strong
    brand recognition, track record of innovation and reputation for
    quality and performance, combined with established coverage of
    105 countries, provide us with a significant advantage in
    competition for business from large, multinational customers. We
    operate in all the world's significant energy markets and
    believe that we are a leading provider in most of the markets we
    serve.
Largest Installed Base in the
    Industry.
As of December 31,
    2004, we estimate that there were more than 77,000 of our units
    in operation. We believe this represents approximately 40% of
    all the units in our classes of products that are currently in
    operation and is the largest installed base of such equipment in
    the industry. This significant scale advantage offers a number
    of competitive benefits, including:
•
a significant opportunity to grow our aftermarket
    parts and services business as a result of the portion of our
    installed base currently serviced by clients in-house, combined
    with an industry trend toward outsourcing;
•
a substantial source of stable, recurring,
    high-margin aftermarket revenue from the significant parts and
    services requirements of units over their long operational lives
    and our clients' general preference for OEM parts and
    services; and
•
the capacity to support both a high level of
    reinvestment in research and development and a global service
    center network that is difficult for competitors with a smaller
    installed base to match.
Largest Network of Service and Support
    Centers.
We have 24 service and
    support centers employing approximately 1,000 service personnel
    in 14 countries, providing coverage in 105 countries and
    offering a broad range of support services. Because many
    aftermarket parts and services sales decisions are made by
    clients at the local plant level, on the basis of supplier
    expertise, local presence and response time, we believe that our
    global network protects our existing aftermarket activity and
    positions us for future growth in this business.
Leading Technology
    Platform.
We have a long history of
    technology leadership and innovation in our industry. Our
    research efforts center around leading technologies that
    maximize operating performance by increasing efficiency,
    durability, reliability and versatility. For example, in the
    mid-1990s we spent approximately five years and over
    $60 million to develop our DATUM turbo compressor platform
    offerings. We believe this platform is more efficient than
    competing offerings, offers clients the lowest total cost of
    ownership, reduces emissions and noise levels and improves ease
    and speed of maintenance.
Fastest Cycle Time.
We believe we generally have the fastest cycle time in the
    industry among manufacturers in our product range. Our short
    cycle time, the time from order booking to unit delivery, is
    valuable to the client and provides us with a competitive
    advantage. On a typical oil and gas project, our fast cycle time
    can reduce unit delivery time by as much as twelve weeks,
    thus reducing project costs and providing earlier start-up of
    the production equipment.
Substantial Investment in
    Systems.
We view systems and processes
    as key elements in providing rapid, high-quality, differentiated
    service. We have invested substantial resources to develop a
    number of key proprietary systems. These systems automate
    portions of the engineering and design phases of a product,
    track information on our and our competitors' installed
    base of equipment, and allow clients to log any technical
    support or service requests they have into our system and
    automatically be directed to
4
Table of Contents
the most appropriate subject-matter expert in our
    company. These proprietary systems enable us to reduce costs,
    shorten cycle times, better serve our clients and grow our
    aftermarket parts and services business, as well as allow us to
    effectively monitor and manage our responsiveness to client
    requests and manage the entire sales cycle from lead generation
    to order booking on a global basis.
Strong and Experienced Management
    Team.
Our management team has a
    demonstrated track record of financial and operational
    achievement. The management team has an average of 17 years
    experience with us, including our CEO who has been with us for
    24 years, and has extensive industry experience and
    longstanding customer relationships. This management team has
    been responsible for the successful services revenue growth and
    cost reduction initiatives that have driven our increased
    profitability.
Attractive Business
    Model.
Our business model has several
    attractive features, including:
•
Strong, Stable Cash Flow with Low Growth
    Capital Requirements.
As a result of
    the recurring revenue from our aftermarket parts and services
    business, progress payments from customers that limit our need
    for additional working capital as we grow, and the moderate
    capital expenditures needed to support our services-based growth
    model, our business generates strong, recurring cash flows. Our
    cash flow from operations was $51.0 million, $57.7 million
    and $17.9 million, for the year ended December 31, 2003,
    the period from January 1, 2004 through October 29, 2004
    and the period from October 30, 2004 through December 31,
    2004, respectively.
•
Visibility.
We have
    a high degree of visibility into our forecasted financial
    performance. A substantial portion of our new unit orders is
    booked six to nine months in advance of delivery. As of December
    31, 2004, our new units backlog was $489.3 million or 70.0%
    above the new units backlog at December 31, 2003. Since December
    2000, our new units backlog has consistently exceeded 80% of our
    next twelve month new units revenues. Customers may cancel an
    order at any time. Upon cancellation, customers are
    contractually obligated to pay us an amount sufficient to cover
    all costs and commitments incurred through the date of
    cancellation, plus a profit margin. Since 2003, only two orders
    have been cancelled.
Business Strategy
In 2004, approximately 94% of our combined
revenues were generated from energy infrastructure and oilfield
spending. Additionally, 62% of our total combined revenues were
generated by our aftermarket parts and services business. We
intend to continue to focus on the oilfield, natural gas and
energy sectors and thus expect to capitalize on the expected
long-term growth in equipment and services investment,
especially related to natural gas, in these sectors.
Specifically, we intend to:
Increase Sales of Aftermarket Parts and
    Services to Existing Installed Base.
The substantial portion of the aftermarket parts and services
    needs of our existing installed base of equipment that we
    currently do not, or only partially service represents a
    significant opportunity for growth. We believe the market has a
    general preference for aftermarket OEM parts and services. We
    are implementing a proactive approach to aftermarket parts and
    services sales that capitalizes on our knowledge of the
    installed base of our own and our competitors' equipment.
    We believe our premium service level will result in continued
    growth of sales of aftermarket parts and services.
Expand Aftermarket Parts and Services Business
    to Non-Dresser-Rand OEM Equipment.
We
    believe the aftermarket parts and services market for
    non-Dresser-Rand equipment represents a significant growth
    opportunity that we have only just begun to pursue on a
    systematic basis. As a result of the knowledge and expertise
    derived from our long history and experience servicing the
    largest installed base in the industry, combined with our
    extensive investment in technology, we have a proven process of
    applying our technology and processes to improve the operating
    efficiency and performance of our competitors' products. We
    intend to capitalize on our knowledge, our broad network of
    service centers, flexible technology and existing client
    relationships with most major industry participants to grow our
    aftermarket parts and services solutions for non-Dresser-Rand
    equipment.
5
Table of Contents
Grow Alliances.
As a
    result of the need to improve efficiency in a competitive global
    economy, oil and gas companies are frequently consolidating
    their supplier relationships and seeking alliances with
    suppliers, shifting from purchasing units and services on an
    individual transactional basis to choosing service providers
    that can help them optimize performance over the entire life
    cycle of their equipment. In the past three years, we have seen
    a high level of interest among our clients in seeking alliances
    with us, and we have entered into agreements with more than 30
    of our major clients. We plan to leverage our market leadership,
    global presence and comprehensive range of products and services
    to continue to take advantage of this trend by pursuing new
    client alliances as well as strengthening our existing alliances.
Expand our Performance-Based Long-Term Service
    Contracts.
We are growing the
    outsourced services market with our performance-based operations
    and maintenance solutions (known as our
Availability+
program), which are designed to offer clients significant
    value (improved equipment performance, decreased life cycle cost
    and higher availability levels) versus the traditional services
    and products approach. These contracts generally represent
    multiyear, recurring revenue opportunities for us that typically
    include a performance-based element to the service provided. We
    offer these contracts for most of the markets that we serve.
Introduce New and Innovative Products and
    Technologies.
We believe we are an
    industry leader in introducing new, value-added technology.
    Product innovation has historically provided, and we believe
    will continue to provide, significant opportunities to increase
    revenues from both new product sales and upgrades to our, and
    other OEMs', installed base of equipment. Examples of
    recent new offerings include adapting the DATUM compressor
    platform for the revamping of other OEM equipment, a new design
    of dry-gas seals and bearings, a new generation of multi-phase
    turbo separators and a complete line of remote-monitoring and
    control instrumentation that offers significant performance
    benefits to clients and enhances our operations and maintenance
    services offerings. We plan to continue developing innovative
    products, including new compressor platforms for subsea and
    underground applications, which would further open up new
    markets to us.
Continue to Improve
    Profitability.
We continually seek to
    improve our financial and operating performance through cost
    savings and productivity improvements. Since the fourth quarter
    of 2002, we adopted a number of cost savings programs across our
    entire company. An important element in these programs was
    process innovation that permitted us to streamline our
    operations. As a result, from September 30, 2002 through
    December 31, 2004, we consolidated eight facilities and
    reduced headcount from 5,849 to 4,631 employees. As a
    result of our business realignment toward our aftermarket parts
    and services segment, our lean manufacturing initiatives and our
    decision to begin charging customers a margin on third-party
    equipment they ask us to package with our own units, our
    operating income per employee (based on the average number of
    employees in each period) for the year ended December 31,
    2004 improved substantially as compared to the year ended
    December 31, 2003. We are focused on continuing to improve
    our cost position in every area of our business, and we believe
    there is substantial opportunity to further increase our
    productivity in the future.
Selectively Pursue
    Acquisitions.
We intend to continue
    our disciplined pursuit of acquisition opportunities that fit
    our business strategy. We expect to make acquisitions within the
    energy sector that add new products or technologies to our
    portfolio, provide us with access to new markets or enhance our
    current market positions. Given our size and the large number of
    small companies in our industry and related industries, we
    believe we are well positioned to be an industry consolidator
    over time.
Risk Factors
Investing in our common stock involves
substantial risk. You should carefully consider all the
information in this prospectus prior to investing in our common
stock. Our ability to execute our strategy is subject to the
risks that are generally associated with the rotating equipment
and services industry. For example, our profitability could
decline due to a significant downturn in our clients'
markets, decrease in the consumption of oil, gas or
petrochemicals, as well as unanticipated operating conditions,
loss of customers and other factors that are not within our
control. Our operations and properties are subject to stringent
environmental laws and
6
Table of Contents
regulations that impose significant actual and potential costs
on us, and future regulations could increase those costs.
Furthermore, the heavily regulated nature of our clients'
industries imposes significant safety performance requirements
on us, and we could lose the opportunity to bid on certain
clients' contracts if we do not meet those requirements.
We are also subject to a number of risks related to our
competitive position and business strategies. For example, our
acquisitive business strategy exposes us to the risks involved
in consummating and integrating acquisitions, including the risk
that in a future acquisition we could incur additional debt and
contingent liabilities which could adversely affect our
operating results. For additional risks relating to our business
and the offering, see "Risk Factors" beginning on
page 14 of this prospectus.
The Acquisition
On August 25, 2004, Dresser-Rand Holdings, LLC, our
indirect parent and an affiliate of First Reserve Corporation
("First Reserve"), entered into an equity purchase
agreement with Ingersoll-Rand to purchase all of the equity
interests in the Dresser-Rand Entities for approximately
$1.13 billion. The acquisition closed on October 29,
2004. In connection with the acquisition, funds affiliated with
First Reserve contributed $430 million in cash as equity to
Dresser-Rand Holdings, LLC, which used this cash to fund a
portion of the purchase price for the Dresser-Rand Entities. The
remainder of the cash needed to finance the acquisition,
including related fees and expenses, was provided by funds
raised by the offering of our $420 million senior
subordinated notes due 2014 (the "notes") and
borrowings under our $695 million senior secured credit
facility. The senior secured credit facility consists of a
$395 million term loan portion and a $300 million
revolving portion. See "The Transactions."
Company Information
Dresser-Rand Group Inc. is a Delaware corporation formed in
October 2004. Our principal executive offices are located at
Paul Clark Drive, Olean, New York 14760 and our telephone number
is (716) 375-3000.
Our predecessor company was initially formed on
December 31, 1986, when Dresser Industries, Inc. and
Ingersoll-Rand entered into a partnership agreement for the
formation of Dresser-Rand Company, a New York general
partnership owned 50% by Dresser Industries, Inc. and 50% by
Ingersoll-Rand. On October 1, 1992, Dresser Industries,
Inc. purchased a 1% equity interest from Dresser-Rand Company.
In September 1999, Dresser Industries, Inc. merged with
Halliburton Industries, and Dresser Industries, Inc.'s
ownership interest in Dresser-Rand Company transferred to
Halliburton Industries. On February 2, 2000, a wholly-owned
subsidiary of Ingersoll-Rand purchased Halliburton
Industries' 51% interest in Dresser-Rand Company.
7
Table of Contents
The Offering
Shares of common stock offered by Dresser-Rand
    Group Inc.
shares.
Shares of common stock to be outstanding after
    this offering
shares.
Over-allotment option
shares.
Use of proceeds
We estimate that the net proceeds to us from this
    offering, after deducting underwriting discounts and estimated
    offering expenses, will be approximately
    $           million.
    We intend to use approximately
    $           million
    of the net proceeds
    ($           million
    in the event the underwriters exercise their over-allotment
    option) to repay certain indebtedness. We intend to use the
    remaining net proceeds of approximately
    $           million,
    assuming an initial public offering price per share of
    $          ,
    to pay a dividend to our stockholders existing immediately prior
    to the offering, consisting of affiliates of First Reserve and
    certain members of senior management. See "Use of
    Proceeds." We also intend to use the proceeds we receive
    from any shares sold pursuant to the underwriters'
    over-allotment option to pay an additional dividend to our
    existing stockholders.
Proposed New York Stock Exchange symbol
"DRC"
Unless we specifically state otherwise, all
information in this prospectus:
•
assumes no exercise by the underwriters of their
    over-allotment option;
•
gives effect to the 1,006,092.87 for one stock
    split effected in February 2005;
•
assumes that we issue an
    additional                      shares
    of our common stock to our existing stockholders pursuant to a
    stock dividend that we will declare prior to the consummation of
    this offering, the terms of which will require that shortly
    after the expiration of the underwriters' over-allotment
    option (assuming the option is not exercised in full), we issue
    to our existing stockholders the number of shares equal to
    (x) the number of additional shares the underwriters have
    an option to purchase minus (y) the actual number of shares
    the underwriters purchase from us pursuant to that
    option; and
•
excludes                      shares
    of common stock reserved for issuance in connection with
    currently outstanding options under our Stock Incentive Plan, of
    which                     have
    been granted as of the date of this prospectus.
8
Table of Contents
Summary Historical and Pro Forma Financial Information
Prior to the closing of the transactions on October 29,
2004, Dresser-Rand Group Inc. did not have any assets,
liabilities or results of operations. Therefore, the following
summary historical financial data as of and for the years ended
December 31, 2003 and 2002 and for the period from
January 1, 2004 through October 29, 2004 have been
derived from the audited combined financial statements of the
Dresser-Rand Entities (the predecessors to Dresser-Rand Group
Inc.), which have been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm. The summary
historical financial information as of December 31, 2004
and for the period from October 30, 2004 (our date of
inception) to December 31, 2004 have been derived from the
audited consolidated financial statements of Dresser-Rand Group
Inc. The audited financial statements for the years ended
December 31, 2002 and 2003, for the period from
January 1, 2004 through October 29, 2004, for the
period from October 30, 2004 through December 31, 2004
and as of December 31, 2003 and 2004 are included elsewhere
in this prospectus. The following summary unaudited pro forma
combined financial information for the year ended
December 31, 2004 has been prepared to give pro forma
effect to the transactions as if they had occurred on
January 1, 2004. The pro forma adjustments used in
preparing the pro forma financial information reflect our
estimates of the purchase price allocation, which may change
upon finalization of our analysis. The pro forma financial
information is for informational purposes only and should not be
considered indicative of actual results that would have been
achieved had the transactions actually been consummated on the
dates indicated and do not purport to indicate balance sheet
information or results of operations as of any future date or
any future period. This information is only a summary and should
be read in conjunction with "Unaudited Pro Forma Financial
Information," "Selected Historical Financial
Information," "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
and the consolidated and combined financial statements and the
notes thereto included elsewhere in this prospectus.
Predecessor
Successor
Pro Forma
Year Ended
Period January 1
Period October 30
Year
December 31,
through
through
Ended
October 29,
December 31,
December 31,
2002
2003
2004
2004
2004
(In thousands)
Statement of Operations Data:
Total revenues
$
1,031,353
$
1,335,350
$
715,495
$
199,907
$
915,402
Cost of goods sold
865,858
1,132,047
538,042
149,564
704,497
Gross profit
165,495
203,303
177,453
50,343
210,905
Selling and administrative expenses
138,484
156,129
122,700
21,499
143,094
Research and development expenses
8,044
8,107
5,670
1,040
6,710
Write-off of purchased in-process research and development assets
—
—
—
1,800
—
Restructuring charges(1)
5,185
—
—
—
—
Operating income
13,782
39,067
49,083
26,004
61,101
Interest income (expense), net
(776
)
1,938
3,156
(9,654
)
(54,004
)
Other income (expense), net
15,000
(9,202
)
1,882
(1,846
)
36
Income before income taxes
28,006
31,803
54,121
14,504
7,133
Provision for income taxes(2)
11,910
11,438
11,970
7,275
14,515
Net income
$
16,096
$
20,365
$
42,151
$
7,229
$
(7,382
)
9
Table of Contents
Predecessor
Successor
Pro Forma
Year Ended December
Period January 1
Period October 30
Year
31,
through
through
Ended
October 29,
December 31,
December 31,
2002
2003
2004
2004
2004
(In thousands, except share and per share data)
Earnings per share data(3)(4)(5):
Basic and diluted earnings (loss) per share:
Net income
$
0.07
Weighted average shares
100,115,080
Cash flow data:
Cash flows provided by operating activities
$
42,029
$
50,963
$
57,729
$
17,948
Cash flows provided by (used in) investing
    activities
3,813
(7,089
)
(4,907
)
(1,126,939
)
Cash flows provided by (used in) financing
    activities
(18,759
)
(63,487
)
(52,030
)
1,217,099
Other financial data:
EBITDA(6)(7)(8)
$
62,604
$
58,974
$
73,680
$
40,427
$
127,413
Depreciation and amortization
33,822
29,109
22,715
16,269
66,276
Capital expenditures
13,670
7,590
7,701
1,791
Predecessor
Successor
As of
As of
December 31,
December 31,
2003
2004
(In thousands)
Balance Sheet Data:
Cash and cash equivalents
$
41,537
$
111,500
Property, plant and equipment, net
101,438
226,764
Total assets
1,063,875
1,751,074
Goodwill
10,214
423,330
Debt:
Short-term debt
3,716
2,734
Long-term debt, including current maturities
213
400,679
Senior subordinated notes
—
420,000
Total debt
3,929
823,413
Partnership interest
565,035
—
Stockholders' equity
—
452,897
(1)
Includes severance expenses and facility exit
    costs associated with our corporate restructuring activities.
(2)
On the closing date of the transactions we became
    a corporation subject to corporate income taxes in the United
    States. In the United States, we were a partnership during the
    Predecessor periods presented. The data presented does not give
    effect to income taxes we would have been required to recognize
    if we were organized as a corporation, except with regard to the
    pro forma period.
(3)
Historical basic and diluted earnings per share
    data has not been presented for the Predecessor because the
    Predecessor did not operate as a separate legal entity from
    Ingersoll-Rand.
(4)
For the Successor, basic and diluted earnings per
    share is calculated by dividing net earnings by the weighted
    average shares outstanding adjusted to reflect the 1,006,092.87
    for one stock split effected in February 2005.
10
Table of Contents
(5)
Unaudited pro forma basic and diluted earnings per share have
    been calculated in accordance with the SEC rules for initial
    public offerings. These rules require that the weighted average
    share calculation give retroactive effect to any changes in our
    capital structure as well as the number of shares whose sale
    proceeds would be necessary to repay any debt or to pay any
    dividend as reflected in the pro forma adjustments. Therefore,
    pro forma weighted average shares for purposes of the unaudited
    pro forma basic and diluted earnings per share calculation, has
    been adjusted to reflect the stock dividend
    of                      shares
    to our existing stockholders that will be made shortly after the
    expiration of the underwriters' over-allotment option
    assuming no exercise of that option, and is comprised of
    approximately                      shares
    of our common stock outstanding immediately prior to this
    offering
    plus                      shares
    of our common stock being offered hereby and the stock dividend
    of                      shares.
(6)
EBITDA is defined as net income before interest, taxes,
    depreciation and amortization. EBITDA is not intended to
    represent cash flow from operations as defined by GAAP and
    should not be used as an alternative to net income as an
    indicator of operating performance or to cash flow as a measure
    of liquidity. While EBITDA is frequently used as a measure of
    operations and the ability to meet debt service requirements, it
    is not necessarily comparable to other similarly titled captions
    of other companies due to potential inconsistencies in the
    method of calculation. We present EBITDA because we consider it
    an important supplemental measure of our performance and believe
    it is frequently used by our investors and other interested
    parties, as well as by our management, in the evaluation of
    companies in our industry, many of which present EBITDA when
    reporting their results. In addition, EBITDA provides additional
    information used by our management and board of directors to
    facilitate internal comparisons to historical operating
    performance of prior periods. Further, management believes
    EBITDA facilitates their operating performance comparisons from
    period to period because it excludes potential differences
    caused by variations in capital structures (affecting interest
    expense), tax positions (such as impact of changes in effective
    tax rates or net operating losses) and the age and book
    depreciation of facilities and equipment (affecting relative
    depreciation expense). The following table reconciles EBITDA to
    net income:
Predecessor
Successor
Period
Pro Forma
Year Ended
Period January 1
October 30
Year
December 31,
through
through
Ended
October 29,
December 31,
December 31,
2002
2003
2004
2004
2004
(In thousands)
Net income (loss)
$
16,096
$
20,365
$
42,151
$
7,229
$
(7,382
)
Income tax expense
11,910
11,438
11,970
7,275
14,515
Interest income (expense), net
776
(1,938
)
(3,156
)
9,654
54,004
Depreciation and amortization
33,822
29,109
22,715
16,269
66,276
EBITDA
$
62,604
$
58,974
$
73,680
$
40,427
$
127,413
EBITDA is different from Adjusted EBITDA, which is a measure
used in certain covenants contained in our debt instruments. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations — Covenant
Compliance" for a discussion of this measure and the
covenants in which it is used.
11
Table of Contents
(7)
The following table provides supplemental information as to
    identified expenses that are reflected in EBITDA that are
    expected to be either reduced or increased, as applicable, due
    to the change in ownership of Dresser-Rand Group Inc. as a
    result of the acquisition:
Predecessor
Successor
Period
Pro Forma
Year Ended
Period January 1
October 30
Year
December 31,
through
through
Ended
October 29,
December 31,
December 31,
2002
2003
2004
2004
2004
(In thousands)
Net reduction in SFAS 106 expense(a)
$
8,512
$
10,033
$
9,322
$
—
$
—
Excess (additional) corporate allocation(b)
(4,876
)
3,816
2,122
—
2,122
Removal of incremental corporate overhead(c)
—
5,091
8,025
—
8,025
Pension(d)
(2,317
)
8,079
1,529
—
1,085
Compensation adjustment(e)
(832
)
(832
)
(693
)
—
—
$
487
$
26,187
$
20,305
$
—
$
11,232
(a)
Reflects the adjustment to historical expense for the change in
    postretirement benefits other than pension expense due to
    Ingersoll-Rand's retention of the obligations for all
    employees who are retired or eligible to retire as well as the
    results of actuarial valuations performed as of the transaction
    date for the portion retained by us.
(b)
Reflects the difference between the corporate overhead expenses
    allocated to us by Ingersoll-Rand and our estimated annual
    stand-alone expenses.
(c)
Reflects adjustment for removal of incremental corporate
    allocation initiated in 2003 by Ingersoll-Rand.
(d)
Reflects an adjustment for additional funding of certain pension
    plans and the elimination of actuarial losses through purchase
    accounting.
(e)
Reflects compensation expense related to the management equity
    program of $682,000 annually and CEO compensation adjustment of
    $150,000 annually.
12
Table of Contents
(8)
The following table provides supplemental information as to
    unusual and other items that are reflected in EBITDA:
Predecessor
Successor
Period
Period
Pro Forma
Year Ended
January 1
October 30
Year
December 31,
through
through
Ended
October 29,
December 31,
December 31,
2002
2003
2004
2004
2004
(In thousands)
Restructuring costs
$
5,185
$
—
$
—
$
—
$
—
Productivity measures(a)
—
11,696
4,679
(62
)
4,617
Nigeria loss contract(b)
—
4,843
6,437
206
6,643
Nigeria casualty losses(c)
—
2,750
—
—
—
Provision for obsolete material(d)
—
3,300
2,100
—
2,100
New York State grant(e)
(8,000
)
1,289
—
—
—
Equity (earnings) losses(f)
479
133
1,013
(194
)
819
Insurance claim(g)
(10,145
)
—
—
—
—
Settlement of product liability claim(h)
—
—
(4,500
)
—
(4,500
)
China receivables(i)
—
—
970
—
970
Write-off of purchased in-process research and development assets
—
—
—
1,800
—
Inventory step-up write off(j)
—
—
—
2,281
—
Other expense (income)(k)
1,535
(2,976
)
(826
)
1,017
191
$
(10,946
)
$
21,035
$
9,873
$
5,048
$
10,840
(a)
Reflects severance expenses associated with our efficiency
    initiatives. These expenses were included in cost of goods sold
    and selling and administrative expenses. See
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations."
(b)
Reflects losses under (i) a contract imposed on the
    business by Halliburton Industries terminated at the end of
    2004, and (ii) a contract in Nigeria we were forced to exit
    because of force majeure.
(c)
Reflects losses of inventory stocks resulting from a fire in a
    warehouse in Nigeria.
(d)
Offsets impact of decision to increase obsolete and slow moving
    inventory reserve level. See "Management's Discussion
    and Analysis of Financial Condition and Results of
    Operations."
(e)
Reflects one-time income from a New York State grant for the
    year ended December 31, 2002, and one-time charge related
    to refunding a portion of the grant in the year ended
    December 31, 2003. See "Management's Discussion
    and Analysis of Financial Condition and Results of
    Operations."
(f)
Non-cash (gains) losses in joint ventures.
(g)
Reflects gains from the settlement of an insurance claim
    relating to a fire that occurred in 2000.
(h)
Reflects one-time gain from settlement of a legal claim. See
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations."
(i)
Reflects write-off of receivables related to business closure.
(j)
As a result of the transaction, we wrote up inventory in the
    amount of $7.4 million. Of this amount, $2.3 million
    was expensed in the two-month period from October 30, 2004
    through December 31, 2004.
(k)
Non-operating income and expense and other non-cash charges and
    credits. See "Management's Discussion and Analysis of
    Financial Condition and Results of Operations."
13
Table of Contents
RISK FACTORS
Investing in our common stock involves
substantial risk. You should carefully consider all the
information in this prospectus prior to investing in our common
stock. In particular, we urge you to consider carefully the
factors set forth under the heading "Risk
Factors."
Risks Related to Our Business
We have identified material weaknesses in
    our internal controls, which could affect our ability to ensure
    timely and reliable financial reports and the ability of our
    auditors to attest to the effectiveness of our internal
    controls.
In June 2004, the Public Company Accounting
Oversight Board, or PCAOB, adopted rules for purposes of
implementing Section 404 of the Sarbanes-Oxley Act of 2002,
which included revised definitions of material weaknesses and
significant deficiencies in internal control over financial
reporting. The PCAOB defines a material weakness as "a
significant deficiency, or a combination of significant
deficiencies, that results in more than a remote likelihood that
a material misstatement of the annual or interim financial
statements will not be prevented or detected." The new
rules describe certain circumstances as being both significant
deficiencies and strong indicators that a material weakness in
internal control over financial reporting exists.
As a result of our transition from a subsidiary
of a multinational company to a stand alone entity, we have
identified a number of factors contributing to our conclusion
that we have a material weakness, including the following:
•
identification by our auditors of misstatements
    in internal drafts of our financial statements that were not
    initially identified by our internal control process, indicating
    a weakness with respect to our ability to properly monitor and
    account for non-routine transactions, and to apply GAAP in
    transactions subject to new or complex accounting pronouncements;
•
the need for a Chief Financial Officer with SEC
    reporting experience, a Director of Financial Reporting with
    strong accounting and SEC reporting experience and additional
    skilled accounting and SEC experienced personnel to enhance the
    accounting department to remedy insufficient experience in
    public company accounting and periodic reporting matters among
    our existing staff;
•
the need to develop a tax department;
•
the need to develop a risk management department;
•
the need to establish an internal audit
    department; and
•
the need to enhance our documentation of our
    systems and controls.
We have already taken a number of actions to
begin to address the items identified including:
•
recently hiring an experienced Chief Financial
    Officer with broad finance and SEC reporting experience, a
    Director of Financial Reporting with strong accounting and SEC
    reporting experience, a Director of Risk Management, a Director
    of Internal Audit and a General Counsel.
•
engaging additional outside personnel to assist
    our internal personnel with audit work and SEC reporting;
•
outsourcing our tax functions to a professional
    service firm;
•
evaluating external resources to supplement our
    Section 404 evaluation efforts; and
While we have taken actions to address the items
identified, additional measures will be necessary, including the
hiring of a Chief Accounting Officer, and these measures along
with other measures we expect to take to improve our internal
controls may not be sufficient to address the issues identified
by our independent auditors or ensure that our internal controls
are effective. If we are unable to provide reliable and timely
financial reports our business and prospects could suffer
material adverse effects and our share price could be
14
Table of Contents
adversely affected. In addition, we may in the
future identify further material weaknesses or significant
deficiencies in our internal control over financial reporting.
Beginning with the year ending December 31, 2006,
pursuant to Section 404 of the Sarbanes-Oxley Act, our
management will be required to deliver a report that assesses
the effectiveness of our internal control over financial
reporting, and our auditors will be required to deliver an
attestation report on management's assessment of and
operating effectiveness of internal controls. We have
substantial effort ahead of us to complete documentation of our
internal control system and financial processes, information
systems, assessment of their design, remediation of control
deficiencies identified in these efforts and management testing
of the design and operation of internal controls. We may not be
able to complete the required management assessment by our
reporting deadline. An inability to complete and document this
assessment could result in us receiving something other than an
unqualified report from our auditors with respect to our
internal controls. In addition, if material weaknesses are
identified and not remediated with respect to our internal
control over financial reporting, we would not be able to
conclude that our internal controls over financial reporting
were effective, which could result in the inability of our
external auditors to deliver an unqualified report, or any
report, on our internal controls. Inferior internal controls
could cause investors to lose confidence in our reported
financial information, which could have a negative effect on the
trading price of our securities.
While a division of our prior owner, we had two
"reportable conditions" in our internal financial
controls:
•
During the third quarter of 2003, a management
    review identified an issue relating to work-in-process inventory
    at two of our manufacturing locations. It was determined that
    certain work-in-process inventory had not been properly relieved
    upon shipment during the time period from 1999 through 2003,
    resulting in an overstatement of inventory. Management
    immediately began an extensive, in-depth review of our accounts
    and records. As a consequence of these problems, we implemented
    an internal review of the functions and processes at the two
    plants that were involved, identified gaps in our internal
    controls and put in place remedial measures. At the end of this
    review and remediation process, our auditors determined that we
    had successfully eliminated the weakness in our inventory
    controls.
•
During June 2004, management uncovered an issue
    relating to payroll fraud at our U.S. Shared Services Unit
    in Olean, NY. It was determined that the payroll supervisor had
    misappropriated funds through the payroll system from February
    1994 to June 2004. A thorough investigation was undertaken
    involving Dresser-Rand Company personnel, Ingersoll-Rand
    Internal Audit and the forensic investigations section of an
    independent accounting firm. The review of past payroll records
    from both Oracle (2/01 - 6/04) and GEAC (1/90 - 12/00)
    systems revealed that $1.042 million had been illegally
    processed through payroll and diverted to the payroll
    supervisor's bank account. As part of the investigation,
    steps were taken to ensure that proper segregation of duties
    exist such that no one in the payroll, human resources or
    information technology areas has update capability for both the
    payroll and the human resources systems.
We will soon be subject to financial
    reporting and other requirements for which our accounting and
    other management systems and resources may not be adequately
    prepared.
This registration will result in our becoming
subject to reporting and other obligations under the Exchange
Act. These reporting and other obligations will place
significant demands on our management, administrative and
operational resources, including our accounting resources. Since
the transactions, we have continued to upgrade our systems,
implement additional financial and management controls,
reporting systems and procedures and hire additional accounting
and finance staff. If we are unable to upgrade our financial and
management controls, reporting systems and procedures in a
timely and effective fashion, our ability to comply with our
financial reporting requirements and other rules that apply to
reporting companies could be impaired. If we are late in filing
certain SEC reports, it could constitute a default under our
indenture and senior secured credit facility.
15
Table of Contents
Our operating results could be harmed
    during economic or industry downturns.
The businesses of most of our clients,
particularly oil, gas and petrochemical companies, are, to
varying degrees, cyclical and historically have experienced
periodic downturns. Profitability in those industries is highly
sensitive to supply and demand cycles and volatile product
prices, and our clients in those industries historically have
tended to delay large capital projects, including expensive
maintenance and upgrades, during industry downturns. These
industry downturns have been characterized by diminished product
demand, excess manufacturing capacity and subsequent accelerated
erosion of average selling prices. Demand for our new units and,
to a lesser extent, aftermarket parts and services is driven by
a combination of long-term and cyclical trends, including
increased outsourcing of services, maturing oil and gas fields,
the aging of the installed base of equipment throughout the
industry, gas market growth and the construction of new gas
infrastructure, and regulatory factors. In addition, the growth
of new unit sales is generally linked to the growth of oil and
gas consumption in markets in which we operate. Therefore, any
significant downturn in our clients' markets or in general
economic conditions could result in a reduction in demand for
our services and products and could harm our business and such
downturns, or the perception that they may occur, could have a
significant negative impact on the market price of our stock .
We may not be successful in implementing
    our business strategy to increase our aftermarket parts and
    services revenue.
We estimate that we currently provide
approximately 50% of the supplier-provided aftermarket parts and
services needs of our own manufactured equipment base and less
than two percent of the aftermarket parts and services needs of
the equipment base of other manufacturers. Our future success
depends, in part, on our ability to provide aftermarket parts
and services to both our own and our competitors' equipment
base and our ability to develop and maintain our alliance
relationships. Our ability to implement our business strategy
successfully depends on a number of factors, including the
success of our competitors in servicing the aftermarket parts
and services needs of our clients, the willingness of our
clients to outsource their service needs to us, the willingness
of our competitors' clients to outsource their service
needs to us, and general economic conditions. We cannot assure
you that we will succeed in implementing our strategy. See
"Business — Business Strategy."
We face intense competition that may cause
    us to lose market share and harm our financial
    performance.
We encounter competition in all areas of our
business, principally in the new unit segment. The principal
methods of competition in our markets include product
performance, client service, product lead times, global reach,
brand reputation, breadth of product line, quality of
aftermarket service and support and price. Our clients
increasingly demand more technologically advanced and integrated
products, and we must continue to develop our expertise and
technical capabilities in order to manufacture and market these
products successfully. To remain competitive, we will need to
invest continuously in research and development, manufacturing,
marketing, client service and support and our distribution
networks. In addition, our significant leverage and the
restrictive covenants to which we are subject may harm our
ability to compete effectively. In our aftermarket parts and
services segment, we compete with our major competitors, small
independent local providers and our clients' in-house
service providers. Other OEMs typically have an advantage in
competing for services and upgrades to their own equipment.
Failure to penetrate this market will adversely affect our
ability to grow our business. In addition, our competitors are
increasingly emulating our alliance strategy. Our alliance
relationships are terminable without penalty by either party,
and failure to maintain or enter into new alliance relationships
will adversely affect our ability to grow our business.
We may not be able to complete, or achieve
    the expected benefits from, any future acquisitions, which could
    adversely affect our growth.
We have at times used acquisitions as a means of
expanding our business and expect that we will continue to do
so. If we do not successfully integrate acquisitions, we may not
realize operating advantages and cost savings. Future
acquisitions may require us to incur additional debt and
contingent liabilities, which may
16
Table of Contents
materially and adversely affect our business,
operating results and financial condition. The acquisition and
integration of companies involve a number of risks, including:
•
use of available cash, new borrowings or
    borrowings under our senior secured credit facility to
    consummate the acquisition;
•
demands on management related to the increase in
    our size after an acquisition;
•
diversion of management's attention from
    existing operations to the integration of acquired companies;
•
integration into our existing systems;
•
difficulties in the assimilation and retention of
    employees; and
•
potential adverse effects on our operating
    results.
We may not be able to maintain the levels of
operating efficiency that acquired companies achieved
separately. Successful integration of acquired operations will
depend upon our ability to manage those operations and to
eliminate redundant and excess costs. We may not be able to
achieve the cost savings and other benefits that we would hope
to achieve from acquisitions, which could have a material
adverse effect on our business, financial condition and results
of operations.
Economic, political and other risks
    associated with international sales and operations could
    adversely affect our business.
Since we manufacture and sell our products and
services worldwide, our business is subject to risks associated
with doing business internationally. For the year ended
December 31, 2004, 39% of our net revenue was derived from
North America, 18% from Latin America, 15% from Europe, 13% from
Asia Pacific and 15% from the Middle East and Africa.
Accordingly, our future results could be harmed by a variety of
factors, including:
•
changes in foreign currency exchange rates;
•
exchange controls;
•
changes in a specific country's or
    region's political or economic conditions, particularly in
    emerging markets;
•
civil unrest in any of the countries in which we
    operate;
•
tariffs, other trade protection measures and
    import or export licensing requirements;
•
potentially negative consequences from changes in
    tax laws;
•
difficulty in staffing and managing widespread
    operations;
•
differing labor regulations;
•
requirements relating to withholding taxes on
    remittances and other payments by subsidiaries;
•
different regimes controlling the protection of
    our intellectual property;
•
restrictions on our ability to own or operate
    subsidiaries, make investments or acquire new businesses in
    these jurisdictions;
•
restrictions on our ability to repatriate
    dividends from our subsidiaries;
•
difficulty in collecting international accounts
    receivable;
•
difficulty in enforcement of contractual
    obligations governed by non-U.S. law;
•
unexpected transportation delays or interruptions;
17
Table of Contents
•
unexpected changes in regulatory
    requirements; and
•
the burden of complying with multiple and
    potentially conflicting laws.
Our international operations are affected by
global economic and political conditions. Changes in economic or
political conditions in any of the countries in which we operate
could result in exchange rate movements, new currency or
exchange controls or other restrictions being imposed on our
operations or expropriation. In addition, the financial
condition of foreign clients may not be as strong as that of our
current domestic clients.
Some of the international markets in which we
operate are politically unstable and are subject to occasional
civil and communal unrest, such as Venezuela and Western Africa.
For example, in Nigeria we recently terminated a contract due to
civil unrest. Riots, strikes, the outbreak of war or terrorist
attacks in foreign locations, such as in the Middle East, could
also adversely affect our business.
From time to time, certain of our foreign
subsidiaries operate in countries that are subject to sanctions
and embargoes imposed by the U.S. government and the United
Nations. Although these sanctions and embargoes do not prohibit
those subsidiaries from selling products and providing services
in such countries, they do prohibit the issuer and its domestic
subsidiaries, as well as employees of our foreign subsidiaries
who are U.S. citizens, from participating in, approving or
otherwise facilitating any aspect of the business activities in
those countries. These constraints on our ability to have
U.S. persons, including our senior management, provide
managerial oversight and supervision may negatively affect the
financial or operating performance of such business activities.
Fluctuations in the value of the U.S. dollar
may adversely affect our results of operations. Because our
combined financial results are reported in dollars, if we
generate sales or earnings in other currencies the translation
of those results into dollars can result in a significant
increase or decrease in the amount of those sales or earnings.
In addition, our debt service requirements are primarily in
U.S. dollars, even though a significant percentage of our
cash flow is generated in euros or other foreign currencies.
Significant changes in the value of the euro relative to the
U.S. dollar could have a material adverse effect on our
financial condition and our ability to meet interest and
principal payments on U.S. dollar denominated debt,
including the notes and the U.S. dollar denominated
borrowings under the senior secured credit facility.
In addition, fluctuations in currencies relative
to currencies in which our earnings are generated may make it
more difficult to perform period-to-period comparisons of our
reported results of operations. For purposes of accounting, the
assets and liabilities of our foreign operations, where the
local currency is the functional currency, are translated using
period-end exchange rates, and the revenues and expenses of our
foreign operations are translated using average exchange rates
during each period.
In addition to currency translation risks, we
incur currency transaction risk whenever we or one of our
subsidiaries enters into either a purchase or a sales
transaction using a currency other than the local currency of
the transacting entity. Given the volatility of exchange rates,
we cannot assure you that we will be able to effectively manage
our currency transaction and/or translation risks. Volatility in
currency exchange rates may have a material adverse effect on
our financial condition or results of operations. We have
purchased and may continue to purchase foreign currency hedging
instruments protecting or offsetting positions in certain
currencies to reduce the risk of adverse currency fluctuations.
We have in the past experienced and expect to continue to
experience economic loss and a negative impact on earnings as a
result of foreign currency exchange rate fluctuations.
We might not be able to improve our
    operating efficiencies and productivity as much as we have in
    the past.
Since the fourth quarter of 2002, we have engaged
in restructuring and productivity improvement programs, which
have had a positive impact on our results of operations. We
intend to implement additional measures to enhance our operating
efficiencies and productivity in the future. However, they may
not have as positive an impact on our operating performance as
such prior measures, and it is possible that they could impair
our results of operations.
18
Table of Contents
If we lose our senior management, our
    business may be adversely affected.
The success of our business is largely dependent
on our senior managers, as well as on our ability to attract and
retain other qualified personnel. Six of the top members of our
senior management team have been with us for over 20 years,
including our chief executive officer and president who has been
with us for 24 years. In addition, there is significant
demand in our industry for qualified engineers and mechanics. We
cannot assure you that we will be able to attract and retain the
personnel, including qualified mechanics and engineers,
necessary for the development of our business. The loss of the
services of key personnel or the failure to attract additional
personnel as required could have a material adverse effect on
our business, financial condition and results of operations.
Environmental compliance costs and
    liabilities could affect our financial condition
    adversely.
Our operations and properties are subject to
stringent foreign, federal, state and local laws and regulations
relating to environmental protection, including laws and
regulations governing the investigation and clean up of
contaminated properties as well as air emissions, water
discharges, waste management and disposal and workplace health
and safety. Such laws and regulations affect a significant
percentage of our operations, are continually changing, are
different in every jurisdiction and can impose substantial fines
and sanctions for violations. Further, they may require
substantial clean-up costs for our properties (many of which are
sites of long-standing manufacturing operations) and the
installation of costly pollution control equipment or
operational changes to limit pollution emissions and/or decrease
the likelihood of accidental hazardous substance releases. We
must conform our operations and properties to these laws and
adapt to regulatory requirements in all jurisdictions as these
requirements change.
We routinely deal with natural gas, oil and other
petroleum products. As a result of our fabrication and
aftermarket parts and services operations, we generate, manage
and dispose of or recycle hazardous wastes and substances such
as solvents, thinner, waste paint, waste oil, washdown wastes
and sandblast material. Hydrocarbons or other hazardous
substances or wastes may have been disposed or released on,
under or from properties owned, leased or operated by us or on,
under or from other locations where such substances or wastes
have been taken for disposal. These properties may be subject to
investigatory, clean-up and monitoring requirements under
foreign, federal, state and local environmental laws and
regulations. Such liability may be imposed without regard to
legality of the original actions and without regard to whether
we knew of, or were responsible for, the presence of such
hazardous or toxic substances, and such liability may be joint
and several with other parties. If the liability is joint and
several, we could be responsible for payment of the full amount
of the liability, whether or not any other responsible party
also is liable.
We have experienced, and expect to continue to
experience, both operating and capital costs to comply with
environmental laws and regulations, including the clean-up and
investigation of some of our properties as well as offsite
disposal locations. In addition, although we believe our
operations are in compliance with environmental laws and
regulations and that we will be indemnified by Ingersoll-Rand
for certain contamination and compliance costs (subject to
certain exceptions and limitations), new laws and regulations,
stricter enforcement of existing laws and regulations, the
discovery of previously unknown contamination, the imposition of
new clean-up requirements, new claims for property damage or
personal injury arising from environmental matters, or the
refusal and/or inability of Ingersoll-Rand to meet its
indemnification obligations could require us to incur costs or
become the basis for new or increased liabilities that could
have a material adverse effect on our business, financial
condition and results of operations. For more information on the
limitations of Ingersoll-Rand's indemnity, see
"Business — Environmental and Government
Regulation."
Failure to maintain a safety performance
    that is acceptable to our clients could result in the loss of
    future business.
Our U.S. clients are heavily regulated by
the Occupational Safety & Health Administration, or
OSHA, concerning work place safety and health. Our clients have
very high expectations regarding safety and health issues and
require us to maintain safety performance records for our
worldwide operations, field services, repair centers, sales, and
manufacturing plant units. Our clients often insist that our
safety performance equal or
19
Table of Contents
exceed their safety performance requirements. We
estimate that over 90% of our clients have safety performance
criteria for their suppliers in order to be qualified for their
"approved suppliers" list. For instance, British
Petroleum, one of our largest customers in 2003, requires its
suppliers to have an OSHA Recordable Incident Rate of 2.5 or
less. If we fail to meet a client's safety performance
requirements, we may be removed from that client's approved
suppliers database and precluded from bidding on future business
opportunities with that client.
In response to our clients' requirements
regarding safety performance, we maintain a database to measure
our monthly and annual safety performance and track our incident
rates. Our incident rates help us identify and track accident
trends, determine root causes, formulate corrective actions, and
implement preventive initiatives. Within the past two years, we
have been removed from one client's approved supplier
database for failure to meet the client's safety
performance requirements. We cannot assure you that we will be
successful in maintaining or exceeding our clients'
requirements in this regard or that we will not lose the
opportunity to bid on certain clients' contracts.
Our business could suffer if we are
    unsuccessful in negotiating new collective bargaining
    agreements.
As of December 31, 2004, we had 4,631
employees worldwide. Of our employees, approximately 65% are
located in the United States. Approximately 37% of our employees
in the United States are covered by collective bargaining
agreements. None of our material collective bargaining
agreements will expire through the end of 2005, and one will
expire in each of 2006, 2007 and 2008. In addition, we have an
agreement with the United Brotherhood of Carpenters and Joiners
of America whereby we hire skilled trade workers on a
contract-by-contract basis. Our contract with the United
Brotherhood of Carpenters and Joiners of America can be
terminated by either party with 90 days prior written
notice. Our operations in the following locations are unionized:
Le Havre, France; Oberhausen, Germany; Kongsberg, Norway; and
Naroda, India. Additionally, overseas, approximately 38% of our
employees belong to industry or national labor unions. Although
we believe that our relations with our employees are good, we
cannot assure you that we will be successful in negotiating new
collective bargaining agreements, that such negotiations will
not result in significant increases in the cost of labor or that
a breakdown in such negotiations will not result in the
disruption of our operations.
We are controlled by First Reserve, whose
    interests may not be aligned with yours.
Upon completion of this offering, First Reserve
will continue to control a majority of our capital stock on a
fully diluted basis. As a result, First Reserve has the ability
to control our policies and operations including the appointment
of management, the entering into of mergers, acquisitions, sales
of assets, divestitures and other extraordinary transactions,
future issuances of our common stock or other securities, the
payments of dividends, if any, on our common stock, the
incurrence of debt by us and amendments to our certificate of
incorporation and bylaws. For example, First Reserve could cause
us to make acquisitions that increase our indebtedness or to
sell revenue-generating assets. Additionally, First Reserve is
in the business of making investments in companies and may from
time to time acquire and hold interests in businesses that
compete directly or indirectly with us. First Reserve may also
pursue acquisition opportunities that may be complementary to
our business, and, as a result, those acquisition opportunities
may not be available to us. So long as First Reserve continues
to own a significant amount of our equity, even if such amount
is less than 50%, they will continue to be able to strongly
influence or effectively control our decisions.
We are a "controlled company"
    within the meaning of the New York Stock Exchange rules and, as
    a result, will qualify for, and intend to rely on, exemptions
    from certain corporate governance requirements.
Upon completion of this offering, First Reserve
will continue to control a majority of our outstanding common
stock. As a result, we are a "controlled company"
within the meaning of the New York Stock Exchange corporate
governance standards. Under the New York Stock Exchange rules, a
company of which more than 50% of the voting power is held by
another company is a "controlled company" and may
elect not to comply with certain New York Stock Exchange
corporate governance requirements, including (1) the
requirement that a majority of the board of directors consist of
independent directors, (2) the requirement
20
Table of Contents
that we have a nominating/corporate governance
committee that is composed entirely of independent directors
with a written charter addressing the committee's purpose
and responsibilities and (3) the requirement that we have a
compensation committee that is composed entirely of independent
directors with a written charter addressing the committee's
purpose and responsibilities. Following this offering, we intend
to utilize these exemptions. As a result, we will not have a
majority of independent directors nor will our nominating and
corporate governance and compensation committees consist
entirely of independent directors. Accordingly, you will not
have the same protections afforded to stockholders of companies
that are subject to all of the New York Stock Exchange corporate
governance requirements.
Our historical financial information may
    not be comparable to future periods.
The historical financial information included in
this prospectus may not necessarily reflect our results of
operations, financial position and cash flows in the future or
the results of operations, financial position and cash flows
that would have occurred if we had been a separate, independent
entity during the periods presented. The historical financial
information included in this prospectus does not reflect the
many significant changes that have occurred in our capital
structure, funding and operations as a result of the
transactions or the additional costs we incur in operating as an
independent company. For example, funds required for working
capital and other cash needs historically were obtained from
Ingersoll-Rand on an interest-free, intercompany basis without
any debt service requirement. Furthermore, we were a limited
partnership in the United States until October 29, 2004 and
generally did not pay income taxes, but have since become
subject to income taxes. We may need to supplement our
financial, administrative and other resources, and we may have
underestimated the difficulties and costs of obtaining any
required resources and successfully operating as an independent
company.
We did not have a recent operating history
    as a stand-alone company prior to the acquisition.
Although we have a substantial operating history,
prior to the acquisition we were not operating as a stand-alone
company. As a result of the acquisition, we no longer have
access to the borrowing capacity, cash flow, assets and services
of Ingersoll-Rand and its other affiliates as we did while under
Ingersoll-Rand's control. We are a significantly smaller
company than Ingersoll-Rand, with significantly fewer resources
and less diversified operations. Consequently, our results of
operations are more susceptible than those of Ingersoll-Rand to
competitive and market factors specific to our business.
In addition, we entered into a transition
services agreement with Ingersoll-Rand in connection with the
acquisition whereby Ingersoll-Rand agreed to provide us with
certain services including, among others, compensation delivery
services, health and welfare administration, pension
administration, legal services and other services. Once the
transition periods specified in the transition services
agreement have expired, or if Ingersoll-Rand does not or is
unable to perform its obligations under the transition services
agreement, we will be required to provide these services
ourselves or to obtain substitute arrangements with third
parties. We may be unable to provide these services due to
financial or other constraints or be unable to implement
substitute arrangements on terms that are favorable to us, or at
all.
We may be faced with unexpected product
    claims or regulations as a result of the hazardous applications
    in which our products are used.
Because some of our products are used in systems
that handle toxic or hazardous substances, a failure or alleged
failure of certain of our products have resulted in and in the
future could result in claims against our company for product
liability, including property damage, personal injury damage and
consequential damages. Further, we may be subject to potentially
material liabilities relating to claims alleging personal injury
as a result of hazardous substances incorporated into our
products.
21
Table of Contents
Third parties may infringe our intellectual
    property or we may infringe the intellectual property of third
    parties, and we may expend significant resources enforcing or
    defending our rights or suffer competitive injury.
Our success depends in part on our proprietary
technology. We rely on a combination of patent, copyright,
trademark, trade secret laws, confidentiality provisions and
licensing arrangements to establish and protect our proprietary
rights. If we fail to successfully enforce our intellectual
property rights, our competitive position could suffer, which
could harm our operating results. We may be required to spend
significant resources to monitor and police our intellectual
property rights. Similarly, if we were to infringe on the
intellectual property rights of others, our competitive position
could suffer. Furthermore, we cannot assure you that any pending
patent application or trademark application held by us will
result in an issued patent or registered trademark, or that any
issued or registered patents or trademarks will not be
challenged, invalidated, circumvented or rendered unenforceable.
Also, others may develop technologies that are similar or
superior to our technology, duplicate or reverse engineer our
technology or design around the patents owned or licensed by us.
Litigation may be necessary to enforce our
intellectual property rights and protect our proprietary
information, or to defend against claims by third parties that
our products infringe their intellectual property rights. Any
litigation or claims brought by or against us, whether with or
without merit, or whether successful or not, could result in
substantial costs and diversion of our resources, which could
have a material adverse effect on our business, financial
condition or results of operation. Any intellectual property
litigation or claims against us could result in the loss or
compromise of our intellectual property and proprietary rights,
subject us to significant liabilities, require us to seek
licenses on unfavorable terms, prevent us from manufacturing or
selling products and require us to redesign or, in the case of
trademark claims, rename our products, any of which could have a
material adverse effect on our business, financial condition and
results of operations.
Our brand name may be subject to
    confusion.
Our company's name and principal mark is a
combination of the names of our founder companies, Dresser
Industries, Inc. and Ingersoll-Rand. We have acquired rights to
use the "Rand" portion of our principal mark from
Ingersoll-Rand, and the rights to use the "Dresser"
portion of our name from Dresser, Inc., the successor of Dresser
Industries, Inc., and an affiliate of First Reserve. If we lose
the right to use either the "Dresser" or
"Rand" portion of our name, our ability to build our
brand identity could be negatively affected.
The common stock and certain debt securities of
Ingersoll-Rand and certain debt securities of Dresser, Inc. are
publicly traded in the United States. Acts or omissions by these
unaffiliated companies may adversely affect the value of the
"Dresser" and "Rand" brand names or the
trading prices of our common stock. In addition, press and other
third party announcements or rumors relating to any of these
unaffiliated companies may adversely affect the market prices of
our common stock and demand for our services and products, even
though the events announced or rumored may not relate to us,
which in turn could adversely affect our results of operations
and financial condition.
Natural gas operations entail inherent
    risks that may result in substantial liability to
    us.
We supply products to the natural gas industry,
which is subject to inherent risks, including equipment defects,
malfunctions and failures and natural disasters resulting in
uncontrollable flows of gas or well fluids, fires and
explosions. These risks may expose our clients to liability for
personal injury, wrongful death, property damage, pollution and
other environmental damage. We also may become involved in
litigation related to such matters. If our clients suffer
damages as a result of the occurrence of such events, they may
reduce their orders from us. Our business, consolidated
financial condition, results of operations and cash flows could
be materially adversely affected as a result of such risks.
22
Table of Contents
Risks Related to Our Leverage
Our substantial indebtedness could
    adversely affect our financial condition and prevent us from
    fulfilling our debt service obligations.
Our financial performance could be affected by
our substantial indebtedness. As of December 31, 2004, our total
indebtedness was approximately $821 million. In addition,
we had $143.4 million of letters of credit outstanding and
additional borrowings available under the revolving portion of
our senior secured credit facility of $156.6 million,
subject to certain conditions. We may also incur additional
indebtedness in the future.
Our high level of indebtedness could have
important consequences, including, but not limited to:
•
making it more difficult to generate sufficient
    cash flows to pay interest and satisfy our debt obligations;
•
making it more difficult to self-insure and
    obtain surety bonds or letters of credit;
•
increasing our vulnerability to general adverse
    economic and industry conditions;
•
limiting our ability to obtain additional
    financing to fund future working capital, capital expenditures,
    research and development or other general corporate or business
    requirements;
•
limiting our flexibility in planning for, or
    reacting to, changes in our business and in our
    industry; and
•
placing us at a competitive disadvantage.
Our net cash flow generated from operating
activities was $42.0 million, $51.0 million,
$57.7 million and $17.9 million for 2002, 2003, the
period from January 1, 2004 through October 29, 2004 and the
period from October 30, 2004 through December 31, 2004,
respectively. Our high level of indebtedness requires that we
use a substantial portion of our cash flow from operations to
pay principal of, and interest on, our indebtedness, which will
reduce the availability of cash to fund working capital
requirements, capital expenditures, research and development or
other general corporate or business activities, including future
acquisitions.
In addition, a substantial portion of our
indebtedness bears interest at variable rates. If market
interest rates increase, debt service on our variable-rate debt
will rise, which would adversely affect our cash flow.
If our cash flows and capital resources are
insufficient to fund our debt service obligations, we may be
forced to sell assets, seek additional capital or seek to
restructure or refinance our indebtedness. These alternative
measures may not be successful and may not permit us to meet our
scheduled debt service obligations.
We require a significant amount of cash to
    service our indebtedness. Our ability to generate cash depends
    on many factors beyond our control.
Our ability to make payments on and to refinance
our debt, and to fund planned capital expenditures and research
and development efforts, will depend on our ability to generate
cash. Our ability to generate cash is subject to economic,
financial, competitive, legislative, regulatory and other
factors that may be beyond our control. We cannot assure you
that our business will generate sufficient cash flow from
operations or that future borrowings will be available to us
under our senior secured credit facility or otherwise in an
amount sufficient to enable us to pay our debt, or to fund our
other liquidity needs. We may need to refinance all or a portion
of our debt on or before maturity. We might be unable to
refinance any of our debt, including our senior secured credit
facility or the notes, on commercially reasonable terms.
The covenants in the senior secured credit
    facility and the indenture governing the notes impose
    restrictions that may limit our operating and financial
    flexibility.
Our senior secured credit facility and the
indenture governing the notes contain a number of significant
restrictions and covenants that limit our ability to:
•
incur liens;
•
borrow money, guarantee debt and, in the case of
    restricted subsidiaries, sell preferred stock;
23
Table of Contents
•
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;
•
engage in affiliate transactions; and
•
restrict dividends or other payments from
    restricted subsidiaries.
The senior secured credit facility also requires
us to comply with specified financial ratios and tests,
including but not limited to, a maximum consolidated net
leverage ratio and a minimum consolidated interest coverage
ratio.
These covenants could materially and adversely
affect our ability to finance our future operations or capital
needs. Furthermore, they may restrict our ability to expand,
pursue our business strategies and otherwise conduct our
business. Our ability to comply with these covenants may be
affected by circumstances and events beyond our control, such as
prevailing economic conditions and changes in regulations, and
we cannot be sure that we will be able to comply. A breach of
these covenants could result in a default under the indenture
governing the notes and/or the senior secured credit facility.
If there were an event of default under the indenture governing
the notes and/or the senior secured credit facility, the
affected creditors could cause all amounts borrowed under these
instruments to be due and payable immediately. Additionally, if
we fail to repay indebtedness under our senior secured credit
facility when it becomes due, the lenders under the senior
secured credit facility could proceed against the assets and
capital stock which we have pledged to them as security. Our
assets and cash flow might not be sufficient to repay our
outstanding debt in the event of a default.
Because most of the proceeds from this
    offering will be used to pay a dividend to our current
    stockholders, only a small portion of the proceeds will be used
    to repay our existing debt and none of such proceeds will be
    used to further invest in our business.
We estimate that the net proceeds from the sale
by us of the shares of common stock being offered hereby, after
deducting underwriting discounts and estimated offering
expenses, will be approximately
$           million.
We intend to use approximately
$           million
of the net proceeds to repay certain indebtedness. We intend to
use the remaining net proceeds of approximately
$           million,
assuming an initial public offering price per share of
$          ,
to pay a dividend to our stockholders existing immediately prior
to the offering. This leaves no proceeds to further invest in
and grow our business. See "Use of Proceeds."
Risks Related To This Offering
There is no existing market for our common
    stock, and we do not know if one will develop to provide you
    with adequate liquidity.
Prior to this offering, there has not been a
public market for our common stock. We intend to apply to list
our common stock on the New York Stock Exchange. However, we
cannot predict the extent to which investor interest in our
company will lead to the development of a trading market on the
New York Stock Exchange or otherwise or how liquid that market
might become. If an active trading market does not develop, you
may have difficulty selling any of our common stock that you
buy. The initial public offering price for the shares will be
determined by negotiations between us and the representatives of
the underwriters based on numerous factors that we discuss in
the "Underwriting" section of this prospectus and may
not be indicative of
24
Table of Contents
prices that will prevail in the open market
following this offering. Consequently, you may not be able to
sell our common stock at prices equal to or greater than the
price you paid in this offering.
Future sales of our shares could depress
    the market price of our common stock.
The market price of our common stock could
decline as a result of sales of a large number of shares of
common stock in the market after the offering or the perception
that such sales could occur. These sales, or the possibility
that these sales may occur, also might make it more difficult
for us to sell equity securities in the future at a time and at
a price that we deem appropriate.
We, D-R Interholding, LLC and all of our
stockholders existing prior to this offering have agreed with
the underwriters not to sell, dispose of or hedge any shares of
our common stock or securities convertible into or exchangeable
for shares of our common stock, subject to specified exceptions,
during the period from the date of this prospectus continuing
through the date that is 180 days after the date of this
prospectus, except with the prior written consent of Morgan
Stanley & Co. Incorporated and Citigroup Global Markets
Inc. See "Underwriting."
After this offering, we will
have            million
shares of common stock outstanding. Of those shares,
the                     million
shares we are offering will be freely tradable.
The                     million
shares that were outstanding immediately prior to this offering
will be eligible for resale from time to time after the
expiration of the 180-day lock-up period, subject to contractual
and Securities Act restrictions. None of those shares may
currently be resold under Rule 144(k) without regard to
volume limitations and no shares may currently be sold subject
to volume, manner of sale and other conditions of Rule 144.
After the expiration of the 180-day lock-up period, First
Reserve and their affiliates, which collectively beneficially
own            million
shares, will have the ability to cause us to register the resale
of their shares and certain other holders of our unregistered
common stock will be able to participate in such registration.
The market price of our common stock may be
    volatile, which could cause the value of your investment to
    decline.
Securities markets worldwide experience
significant price and volume fluctuations. This market
volatility, as well as general economic, market or political
conditions, could reduce the market price of our common stock in
spite of our operating performance. In addition, our operating
results could be below the expectations of securities analysts
and investors, and in response, the market price of our common
stock could decrease significantly. As a result, the market
price of our common stock could decline below the initial public
offering price. You may be unable to resell your shares of our
common stock at or above the initial public offering price.
Among other factors that could affect our stock price are:
•
actual or anticipated variations in operating
    results;
•
changes in financial estimates by research
    analysts;
•
actual or anticipated changes in economic,
    political or market conditions, such as recessions or
    international currency fluctuations;
•
actual or anticipated changes in the regulatory
    environment affecting our industry;
•
changes in the market valuations of our industry
    peers;
•
announcements by us or our competitors of
    significant acquisitions, strategic partnerships, divestitures,
    joint ventures or other strategic initiatives.
In the past, following periods of volatility in
the market price of a company's securities, stockholders
have often instituted class action securities litigation against
those companies. Such litigation, if instituted, could result in
substantial costs and a diversion of management attention and
resources, which could significantly harm our profitability and
reputation.
25
Table of Contents
The book value of shares of common stock
    purchased in the offering will be immediately diluted and may be
    subject to additional dilution in the future.
The initial public offering price per share of
our common stock is substantially higher than our pro forma net
tangible book value per common share immediately after the
offering. As a result, you may pay a price per share that
substantially exceeds the book value of our assets after
subtracting our liabilities. Investors who purchase common stock
in the offering will be diluted by
$           per
share after giving effect to the sale of shares of common stock
in this offering at an assumed initial public offering price of
$           per
share, the mid-point of the estimated price range on the cover
of this prospectus, and the sale of up
to            million
shares to the underwriters pursuant to their over-allotment
option. If we grant options in the future to our employees, and
those options are exercised or other issuances of common stock
are made, there will be further dilution.
Provisions in our amended and restated
    certificate of incorporation and amended and restated bylaws and
    Delaware law may discourage a takeover attempt.
Provisions contained in our amended and restated
certificate of incorporation and amended and restated bylaws and
Delaware law could make it more difficult for a third party to
acquire us. Provisions of our amended and restated certificate
of incorporation and amended and restated bylaws and Delaware
law impose various procedural and other requirements, which
could make it more difficult for stockholders to effect certain
corporate actions. For example, our amended and restated
certificate of incorporation authorizes our board of directors
to determine the rights, preferences, privileges and
restrictions of unissued series of preferred stock, without any
vote or action by our stockholders. Thus, our board of directors
can authorize and issue shares of preferred stock with voting or
conversion rights that could adversely affect the voting or
other rights of holders of our common stock. These rights may
have the effect of delaying or deterring a change of control of
our company. These provisions could limit the price that certain
investors might be willing to pay in the future for shares of
our common stock. See "Description of Capital Stock."
26
Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus includes "forward-looking
statements." These forward looking statements include
statements concerning our plans, objectives, goals, strategies,
future events, future revenue or performance, capital
expenditure, financing needs, plans or intentions relating to
acquisitions, business trends and other information that is not
historical information. When used in this prospectus, the words
"anticipates," "believes,"
"expects," "intends" and similar expressions
identify such forward-looking statements. Although we believe
that such statements are based on reasonable assumptions, these
forward-looking statements are subject to numerous factors,
risks and uncertainties that could cause actual outcomes and
results to be materially different from those projected. These
factors, risks and uncertainties include, among others, the
following:
•
material weaknesses in our internal controls;
•
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 and other risks associated
    with our international sales and operations;
•
loss of our senior management;
•
environmental compliance costs and liabilities;
•
failure to maintain safety performance acceptable
    to our clients;
•
failure to negotiate new collective bargaining
    agreements;
•
our ability to operate as a stand-alone company;
•
unexpected product claims or regulations;
•
infringement on our intellectual property or our
    infringement on others' intellectual property; and
•
other factors described in this prospectus.
Our actual results, performance or achievements
could differ materially from those expressed in, or implied by,
the forward-looking statements. We can give no assurances that
any of the events anticipated by the forward-looking statements
will occur or, if any of them does, what impact they will have
on our results of operations and financial condition. We
undertake no obligation to update or revise forward-looking
statements which may be made to reflect events or circumstances
that arise after the date made or to reflect the occurrence of
unanticipated events.
27
Table of Contents
THE TRANSACTIONS
The following contains summaries of the terms of certain
material agreements that were entered into in connection with
the acquisition. The descriptions of such agreements do not
purport to be complete and are qualified in their entirety by
reference to such agreements. Such agreements have been filed as
exhibits to the registration statement of which this prospectus
is a part.
The Acquisition
General
On August 25, 2004, Dresser-Rand Holdings, LLC entered into
an equity purchase agreement with Ingersoll-Rand to purchase all
of the equity interests in the Dresser-Rand Entities for
approximately $1.13 billion. The acquisition closed on
October 29, 2004.
In order to determine the post-closing purchase price
adjustments, the agreement required that Ingersoll-Rand deliver
to Dresser-Rand Holdings, LLC, shortly before the closing date,
an estimated net cash statement and an estimated client
prepayments statement, and within 90 days of the closing
date, a closing working capital statement, a closing net cash
statement, and a closing client prepayments statement. If the
parties do not agree on the appropriate adjustments within a
specified time period, the determination will be referred to an
independent accounting firm for resolution. The purchase price
will be increased or decreased to account for any difference
between:
•
the final net working capital amount and $149,677,999;
•
the final net cash amount and the estimated net cash
    amount; and
•
the final client prepayments amount and the estimated client
    prepayments amount.
As of April 11, 2005, Ingersoll-Rand had provided all three
closing statements, resulting in a purchase price reduction of
$2.4 million, which is subject to final approval and
agreement from Dresser-Rand Holdings, LLC and has been reflected
in the historical financial information included in this
prospectus. We anticipate final agreement on the purchase price
adjustment will be reached sometime during the second quarter of
2005.
In addition, the following additional amounts were paid to
Dresser-Rand Holdings, LLC at closing:
(1) $17.0 million, which amount equals certain retiree
welfare benefits less certain overdue receivables,
(2) $25.8 million with respect to defined benefit
pension fund deficiencies in defined pension plans.
In connection with the acquisition, funds affiliated with First
Reserve contributed an aggregate of $430.0 million to
Dresser-Rand Holdings, LLC, our indirect parent, in exchange for
all the membership interests in Dresser-Rand Holdings, LLC.
Pursuant to an agreement reached with management prior to our
acquisition by funds affiliated with First Reserve, certain
members of management were offered the opportunity in October
2004 to acquire common units in Dresser-Rand Holdings, LLC at
the same price per unit paid by the funds affiliated with First
Reserve in connection with the acquisition. Executives who
purchased common units were also issued profits units in
Dresser-Rand Holdings, LLC, which permit them to indirectly
share in appreciation in the value of our shares. After a period
of several weeks to evaluate the offer, certain of our executive
officers, including our Chief Executive Officer and each of our
four other most highly compensated executive officers availed
themselves of this opportunity in November and invested cash
equity in Dresser-Rand Holdings, LLC, which commensurately
reduced First Reserve's indirect percentage interest in
Dresser-Rand Holdings, LLC. Dresser-Rand Holdings, LLC used
First Reserve's equity contribution, borrowings under the
senior secured credit facility and the proceeds from the notes
offering to fund the acquisition and to pay fees and expenses
related to the transactions.
The Equity Purchase Agreement
The equity purchase agreement contains customary seller
representations and warranties, customary buyer representations
and warranties, and customary covenants and other agreements
between the sellers and Dresser-Rand Holdings, LLC.
28
Table of Contents
The equity purchase agreement provides for
indemnification for losses relating to specified events,
circumstances and matters. The sellers have agreed to indemnify
Dresser-Rand Holdings, LLC for certain liabilities, including:
•
any losses arising from the inaccuracy or breach
    of certain representations and warranties of the sellers
    contained in the equity purchase agreement;
•
any losses arising from breaches or defaults in
    the performance of any covenant, undertaking or other agreement
    or obligation of the sellers pursuant to the equity purchase
    agreement;
•
any claim related to the sale or use of products
    containing asbestos;
•
any claim for personal injury or property damage
    alleging defect in design, manufacture, materials or
    workmanship, or an alleged failure to exercise reasonable care
    in repair, service or maintenance, or failure to warn or provide
    adequate warning relating to the Dresser-Rand Entities'
    products shipped prior to the closing;
•
specified pre-closing taxes; and
•
specified environmental liabilities.
The equity purchase agreement does not allow
Dresser-Rand Holdings, LLC to make a claim for indemnification
for any loss relating to a breach of a representation or
warranty or covenant unless the losses for any claim or series
of related claims exceed a de minimus limitation of $50,000
(other than for losses relating to several specified
representations and warranties not subject to the
de minimus limitation). The sellers' indemnification
obligations with respect to breaches of representations and
warranties and covenants are subject to a "basket" of
$18,000,000 in damages (other than for losses relating to
several specified representations and warranties and covenants
not subject to this basket). After Dresser-Rand Holdings, LLC
has incurred damages as a result of breaches of representations
and warranties contained in the equity purchase agreement that
are in excess of the basket, the sellers are required to
indemnify Dresser-Rand Holdings, LLC up to a cap of 33 1/3% of
the purchase price (other than for losses relating to several
specified representations and warranties and covenants not
subject to the cap). Asbestos liability and products liability
are not subject to the cap or basket, and taxes are not subject
to either the cap, the basket or the de minimus limitation.
Claims for breach of representations and warranties generally
expire after 18 months, although breaches of the
environmental and tax representations and warranties expired at
closing, and several specified representations and warranties
survive without limitations.
The equity purchase agreement provides that, with
the exception of non-Superfund off-site liabilities and
non-asbestos environmental tort cases, which have a three-year
time limit for a claim to be filed, Ingersoll-Rand will remain
responsible without time limit for certain specified known
environmental liabilities that exist as of the closing date.
Each of these liabilities is to be placed on The Environmental
Remediation and Compliance Schedule to the equity purchase
agreement (the "Final Schedule"). We will be
responsible for all liabilities that were not identified prior
to the closing date and placed on the Final Schedule. To
determine which matters will be included on the Final Schedule,
we conducted Phase I and Phase II assessments at 30
Dresser-Rand Entity facilities.
The equity purchase agreement provides that the
Final Schedule will include all noncompliance and contamination
matters identified in the Phase I and Phase II
assessments that the parties agree should be included thereon. A
contamination matter will be included on the Final Schedule if
it meets one of several standards, the most important of which
is that if such contamination matter were known by the
applicable governmental authority, that authority would be
expected to require a response action (which is broadly defined
to include not only cleanup, but investigation and monitoring).
For purposes of inclusion on the Final Schedule, contamination
matters are broadly defined to include each known point of
contamination plus all additional contamination associated with,
or identified during an investigation of, such known point of
contamination. Pursuant to the equity purchase agreement,
Ingersoll-Rand is responsible for all response actions
associated with the contamination matters and must perform such
response actions diligently. However, to the extent
contamination at leased properties was caused by a third party
and to the extent
29
Table of Contents
contamination at owned properties resulted from the migration of
releases caused by a third party, Ingersoll-Rand is only
required to conduct response actions after being ordered to do
so by a governmental authority.
If the parties cannot agree whether a noncompliance or
contamination matter should be included on the Final Schedule,
they shall resolve the issue pursuant to an arbitration
provision that is included in the equity purchase agreement. To
date, the parties have resolved all but a small number of
outstanding issues with respect to what should be included on
the Final Schedule. We do not believe any of the outstanding
items are material.
Ancillary Agreements
The parties have entered into agreements governing several of
their relationships following the closing. These agreements
include a transition services agreement, supply agreement and
license agreement, as well as an amended and restated limited
liability company agreement which governs the rights of the
funds affiliated with First Reserve with respect to their
limited liability company interests in Dresser-Rand Holdings,
LLC, and provides specific rights to the management investors of
Dresser-Rand Holdings, LLC. The parties also entered into a
stockholders' agreement. See "Certain Related Party
Transactions."
The Financing
In connection with the acquisition, funds affiliated with First
Reserve contributed $430 million in cash to Dresser-Rand
Holdings, LLC, which used this cash to fund a portion of the
purchase price of the equity interests in the Dresser-Rand
Entities. Immediately following the consummation of the
transactions, Dresser-Rand Holdings, LLC, a holding company
owned by funds affiliated with First Reserve, owned all of the
capital stock of D-R Interholding, LLC, which in turn owns 99.7%
of the issuer's outstanding shares of capital stock. The
remainder of the cash needed to finance the acquisition,
including related fees and expenses, was provided by the
offering of the notes and the borrowings under the senior
secured credit facility provided by affiliates of the
underwriters, as joint bookrunners, lead arrangers or lenders,
and a syndicate of banks and other financial institutions. Our
senior secured credit facility consists of a $395 million
term loan portion and a $300 million revolving portion.
Following the closing date of the transactions, the term loan
portion of the senior secured credit facility was fully funded
and as of March 31, 2005 we had approximately
$125 million of borrowing capacity under the revolving
portion of our senior secured credit facility, subject to
certain conditions, after giving effect to approximately
$175 million of outstanding letters of credit.
The following table illustrates the approximate sources and uses
for the acquisition.
Sources
Uses
(In millions)
Senior secured credit facility:(1)
Purchase of equity interests of the
Revolving credit facility(2)
$
5.0
Dresser-Rand Entities(3)
$
1,125.1
Term Loan B
395.0
Cash(3)
81.0
Senior subordinated notes
420.0
Existing indebtedness
2.9
Existing indebtedness
2.9
Transaction fees and expenses
43.9
Equity invested by First Reserve
430.0
Total Sources of Funds
$
1,252.9
Total Uses of Funds
$
1,252.9
(1)
Of the $395 million Term Loan B facility,
€
78.5 million
    is denominated in Euros.
(2)
As of March 31, 2005, we had approximately
    $125 million available for borrowing under the revolving
    portion of the senior secured credit facility, subject to
    certain conditions, after giving effect to approximately
    $175 million of outstanding letters of credit.
(3)
First Reserve and Ingersoll-Rand agreed to a gross cash purchase
    price of $1.2 billion for the acquisition, subject to
    working capital and other post-closing adjustments. The parties
    also agreed that, subject to certain closing adjustments, we
    were to have approximately $81.0 million of cash on hand
    upon consummation of the acquisition, resulting in the net
    purchase price reflected herein.
30
Table of Contents
Equity Sponsor
First Reserve Corporation is the leading private equity firm
specializing in the energy industry with $4.7 billion under
management in four active funds. Founded in 1980, First Reserve
was the first private equity investment firm to actively pursue
building a broadly diversified investment portfolio within the
energy and energy-related sectors and has made investments
totaling over $3.0 billion in over 80 principal
transactions. The current management team has been in place
since 1983, and First Reserve's investment team
collectively has over 250 years of energy investment
experience. Other past and present First Reserve portfolio
companies include Alpha Natural Resources, Cal Dive
International, Chicago Bridge & Iron, Dresser, Inc.,
Foundation Coal Corporation, Maverick Tube Corporation, National
Oilwell, Natural Resource Partners, Pride International,
Superior Energy Services and Weatherford International.
31
Table of Contents
USE OF PROCEEDS
We estimate that the net proceeds from the sale
by us of the shares of common stock being offered hereby, after
deducting underwriting discounts and estimated offering
expenses, will be approximately
$           million,
assuming an initial public offering price of
$               .
We intend to use approximately
$           million
of the net proceeds to redeem a portion of the $420 million
aggregate principal amount of our 7 3/8% senior
subordinated notes due 2014, including the payment of the
applicable redemption premium. The proceeds from the 7
3/8% senior subordinated notes were used, together with
other related financings, to finance the acquisition and to pay
related transaction fees and expenses incurred in connection
with the acquisition and the related financings. We intend to
use the remaining net proceeds of approximately
$           million
(assuming an initial public offering price per share of
$          ),
to pay a dividend to our stockholders existing immediately prior
to the offering, consisting of affiliates of First Reserve and
certain members of senior management. We also intend to use the
proceeds we receive from any shares sold pursuant to the
underwriters' over-allotment option to pay an additional
dividend to our existing stockholders. In the event the
underwriters exercise their over-allotment option, the amount
available to repay debt would be reduced to
$           million
as a result of payment by us of the underwriting discount.
DIVIDEND POLICY
Immediately prior to the consummation of this
offering, we intend to declare three dividends, which will be
payable to our stockholders existing prior to the offering.
•
The first dividend will be a cash dividend of
    $           million,
    assuming an initial public offering price per share of
    $          ,
    which we will pay to our existing stockholders out of a portion
    of the net proceeds from this offering.
•
The second dividend will be a cash dividend of up
    to
    $           million,
    assuming an initial public offering price per share of
    $          ,
    which we will pay to our existing stockholders with all of the
    proceeds we receive from the shares sold pursuant to the
    underwriters' over-allotment option, if exercised.
•
The third dividend will be a stock dividend of up
    to                 shares
    of our common stock, which we will pay to our existing
    stockholders, the terms of which will require that shortly after
    the expiration of the underwriters' over-allotment option
    (assuming the option is not exercised in full), we issue to our
    existing stockholders the number of shares equal to (x) the
    number of additional shares the underwriters have an option to
    purchase minus (y) the actual number of shares the
    underwriters purchase from us pursuant to that option.
Other than the dividends described above, we do
not currently intend to pay any cash dividends on our common
stock, and instead intend to retain earnings, if any, for future
operations and debt reduction. The amounts available to us to
pay cash dividends will be restricted by our senior secured
credit facility. The indenture governing the senior subordinated
notes also limits our ability to pay dividends. We intend to
seek an amendment to our senior secured credit facility prior to
the consummation of this offering to remove certain restrictions
on our ability to consummate the offering and use the proceeds
as described in "Use of Proceeds." Any decision to
declare and pay dividends in the future will be made at the
discretion of our board of directors and will depend on, among
other things, our results of operations, financial condition,
cash requirements, contractual restrictions and other factors
that our board of directors may deem relevant.
32
Table of Contents
CAPITALIZATION
The following table sets forth our capitalization as of
December 31, 2004 (1) on an actual basis and
(2) on an as adjusted basis to reflect:
•
the sale by us of
    approximately                      shares
    of our common stock in this offering at an assumed initial
    public offering price of
    $           per
    share, the mid-point of the estimated price range shown on the
    cover page of this prospectus, after deducting underwriting
    discounts and estimated offering expenses;
•
the application of the estimated net proceeds as described in
    "Use of Proceeds";
•
the 1,006,092.87 for one stock split effected in February 2005;
    and
•
the stock dividend
    of                     additional
    shares to our existing stockholders shortly after the expiration
    of the underwriters' over-allotment option, assuming no
    exercise of that option.
The information in this table should be read in conjunction with
"The Transactions," "Unaudited Pro Forma
Financial Information," "Management's Discussion
and Analysis of Financial Condition and Results of
Operations" and our historical consolidated and combined
financial statements and accompanying notes thereto appearing
elsewhere in this prospectus. The table excludes cash and cash
equivalents as of December 31, 2004 of $111.5 million,
on an actual basis and as adjusted basis.
As of December 31, 2004
Actual
As Adjusted
(Unaudited)
(In millions)
Debt:
Senior secured credit facility:
Revolving credit facility(1)
$
—
$
Term loan facility
400.7
Senior subordinated notes due 2014
420.0
Other debt
2.7
Total debt
823.4
Stockholders' equity:
Common stock, par value $0.01 per
    share,       shares
    authorized,       shares issued
    and outstanding, actual
    and       shares issued and
    outstanding, as adjusted for the offering and the stock splits
1.0
Additional paid-in capital
436.2
Retained earnings
7.2
Accumulated other comprehensive earnings (loss)
8.5
Total stockholders' equity
452.9
Total capitalization
$
1,276.3
$
(1)
As of December 31, 2004, we had $156.6 million available
    for borrowing under the revolving portion of the senior secured
    credit facility, subject to certain conditions, after giving
    effect to $143.4 million of letters of credit outstanding
    thereunder. See "The Transactions" and
    "Description of Indebtedness."
33
Table of Contents
DILUTION
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the initial public
offering price per share and the net tangible book value per
share after this offering. The net tangible book value per share
presented below is equal to the amount of our total tangible
assets (total assets less intangible assets) less total
liabilities as of December 31, 2004, divided by the number
of shares of our common stock that would have been held by our
existing stockholders had the stock dividend
of                      additional
shares to our existing stockholders shortly after the expiration
of the underwriters' over-allotment option, assuming no
exercise of that option, been made as
of                     ,
2005. As of December 31, 2004, we had a net tangible book
deficit of
$           million,
or
$           per
share. On a pro forma basis, after giving effect to:
•
the sale
    of                      shares
    of common stock in this offering at an assumed initial public
    offering price of
    $           per
    share, the mid-point of the price range on the cover of this
    prospectus; and
•
the payment of the
    $           million
    dividend that we intend to declare prior to the consummation of
    this offering to the existing stockholders,
our pro forma net tangible book value as of December 31,
2004 would have been
$           million,
or
$           per
share of common stock. This represents an immediate increase in
net tangible book value (or a decrease in net tangible book
deficit) of
$           per
share to existing stockholders and an immediate dilution in net
tangible book value of
$           per
share to new investors.
The following table illustrates this dilution on a per share
basis:
Assumed initial public offering price per share
$
Net tangible book deficit per share at December 31, 2004
$
Increase in net tangible book value per share attributable to
    this offering
$
Pro forma net tangible book deficit per share after the offering
Dilution per share to new investors
$
We will reduce the number of shares that we will issue to our
existing stockholders in the stock dividend described in the
first paragraph above by the number of shares sold to the
underwriters pursuant to their over-allotment option. We will
also pay to our existing stockholders a cash dividend equal to
all proceeds we receive from any such sale to the underwriters.
As a result, our pro forma net tangible book value will not be
affected by the underwriters' exercise of their
over-allotment option.
The following table summarizes, on the same pro forma basis as
of December 31, 2004, the total number of shares of common
stock purchased from us, the total consideration paid to us and
the average price per share paid by the existing stockholders
and by new investors purchasing shares in this offering:
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing stockholders
New investors
Total
Total consideration and average price per share paid by the
existing stockholders in the table above give effect to the
$           million
dividend we intend to pay to the existing stockholders in
connection with this offering. As the table indicates, the total
consideration for the existing stockholders' shares is
$           million,
with an average share price of
$                    ,
which means that the existing stockholders in the aggregate will
have received
$           million
more than they originally invested.
34
Table of Contents
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information has been
derived by the application of pro forma adjustments to the
historical combined financial statements as of December 31,
2004 and for the period from January 1, 2004 through
October 29, 2004 and our consolidated financial statements
for the period from October 30, 2004 through
December 31, 2004. The unaudited pro forma statement of
operations give effect to (i) the purchase of the
Dresser-Rand Entities, (ii) the notes offering of
October 29, 2004, (iii) the other related financing
transactions and (iv) the offering and the estimated use of
proceeds therefrom, as if they had been consummated on
January 1, 2004. The unaudited pro forma balance sheet as
of December 31, 2004 gives effect to this offering as if it
had occurred on December 31, 2004. The adjustments
necessary to fairly present this pro forma financial information
have been made based on available information and in the opinion
of management are reasonable and are described in the
accompanying notes. The unaudited pro forma financial
information should not be considered indicative of actual
results that would have been achieved had these transactions
been consummated on the respective dates indicated and do not
purport to indicate results of operations as of any future date
or for any future period. We cannot assure you that the
assumptions used in the preparation of the unaudited pro forma
financial information will prove to be correct. You should read
the unaudited pro forma financial information together with
"Risk Factors," "Use of Proceeds,"
"Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated and combined financial
statements and the notes thereto, included elsewhere in this
prospectus.
35
Table of Contents
DRESSER-RAND GROUP INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 2004
Offering
Historical
Adjustments
Pro Forma
(In thousands)
Assets
Current Assets
Cash and cash equivalents
$
111,500
$
—
$
Accounts and notes receivable, net
264,938
—
Inventories
175,873
—
Prepaid expenses
14,256
—
Deferred income taxes
7,445
—
Total current assets
574,012
—
Investments in and advances with partially owned equity companies
12,989
—
Property, plant & equipment, net
226,764
—
Goodwill
423,330
—
Other intangible assets, net
479,587
—
Other assets
34,392
(a)
Total assets
$
1,751,074
$
—
$
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accruals
$
271,275
$
—
$
Customer advance payments
38,661
—
Income taxes payable
12,977
—
Loans
2,734
—
Current maturities of long term debt
4,015
—
Total current liabilities
329,662
—
Deferred income taxes
27,287
—
Postemployment and other benefit liabilities
111,640
—
Long-term debt
396,664
—
Senior subordinated notes
420,000
(a)
Other noncurrent liabilities
12,924
—
Total liabilities
1,298,177
—
Stockholders' equity
452,897
(a)(b)
Total liabilities and stockholders' equity
$
1,751,074
$
—
$
(a)
Reflects the use of the proceeds to us of this offering, net of
    fees and expenses, to repay
    $                million
    of our senior subordinated notes and the related estimated write
    off of
    $                million
    of unamortized deferred debt issuance costs and incur prepayment
    penalties of
    $               .
    See "Use of Proceeds."
(b)
Reflects the assumed gross proceeds of
    $                million
    from the issuance of new shares, net of fees and expenses of
    $                million.
    Approximately
    $                million
    of the net proceeds from the offering is assumed to be used to
    pay a dividend to the existing stockholders. See "Use of
    Proceeds."
36
Table of Contents
DRESSER-RAND GROUP INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Year Ended December 31, 2004
Predecessor
Successor
For the Period
For the Period
January 1
October 30
Pro Forma
through
through
Offering and
Year Ended
October 29,
December 31,
Pro Forma
Other
December 31,
2004(1)
2004(2)
Adjustments(3)
Adjustments(3)
2004
(In thousands except share and per share data)
Total revenues
$
715,495
$
199,907
$
—
$
$
915,402
Cost of goods sold
538,042
149,564
(508
)(a)
704,497
(7,458
)(b)
2,918
(c)
24,220
(d)
(2,281
)(e)
Gross profit
177,453
50,343
(16,891
)
210,905
Selling and administrative expenses
122,700
21,499
(127
)(a)
143,094
(1,864
)(b)
154
(c)
732
(f)
Research and development expenses
5,670
1,040
6,710
Write-off of purchased in-process research and development assets
—
1,800
(1,800
)(g)
—
Operating income
49,083
26,004
(13,986
)
61,101
Interest income (expense), net
3,156
(9,654
)
(47,506
)(h)
(j)(k)
(54,004
)
Other income (expense), net
1,882
(1,846
)
—
36
Income before income taxes
54,121
14,504
(61,492
)
7,133
Provision for income taxes
11,970
7,275
(4,730
)(i)
(i)
14,515
Net income
$
42,151
$
7,229
$
(56,762
)
$
$
(7,382
)
Basic and Diluted Earnings Per Share Data(4)(5)(6)
Earnings per share
$
0.07
Weighted average shares
100,115,080
Our capital structure changed significantly as a result of the
October 29, 2004 acquisition and the concurrent refinancing
of debt. Due to required purchase accounting adjustments
relating to such transaction the consolidated financial and
other information for the period subsequent to the acquisition
(the "Successor" period) is not comparable to such
information for the periods prior to the acquisition (the
"Predecessor" periods). The pro forma information,
including the allocation of the purchase price, is based on
management's estimates and valuations of the tangible and
intangible assets being acquired.
(1)
The amounts in this column represent the reported results of
    Dresser-Rand Company, our predecessor company, from
    January 1, 2004 through October 29, 2004.
37
Table of Contents
(2)
The amounts in this column represent the reported results of
    Dresser-Rand Group, Inc., the successor, from October 30,
    2004 through December 31, 2004.
(3)
The amounts in these columns represent the adjustments to
    reflect the pro forma impact of the transactions.
(a)
Reflects the adjustment to historical expense for the change in
    pension expense due to Ingersoll-Rand's retention of
    pension assets and obligations for one pension plan that was
    reflected in our historical combined statements as well as the
    results of actuarial valuations performed as of the transaction
    date for the portion retained by us.
(b)
Reflects the adjustment to historical expense for the change in
    postretirement benefits other than pension expense due to
    Ingersoll-Rand's retention of the obligations for all
    employees who are retired or eligible to retire as well as the
    results of actuarial valuations performed as of the transaction
    date for the portion retained by us.
(c)
Reflects the adjustment to historical expense for the change in
    depreciation expense due to the revaluation of our property,
    plant and equipment in purchase accounting. Annual depreciation
    expense under the new basis of accounting is estimated to be
    $23,574, of which $3,929 was recognized during the period from
    October 30, 2004 through December 31, 2004.
    Depreciation expense under the old basis of accounting of
    $16,573 was recognized during the period from January 1,
    2004 through October 29, 2004, resulting in a pro forma
    adjustment of $3,072. We estimate that 95% of our depreciation
    expense is recorded in cost of goods sold, and 5% of our
    depreciation expense is recorded in selling, general and
    administrative expenses.
(d)
Reflects the adjustment to historical expense for the change in
    amortization expense due to the revaluation of our identifiable
    intangible assets in purchase accounting. Annual amortization
    expense under the new basis of accounting is estimated to be
    $42,702, of which $12,340 was recognized during the period from
    October 30, 2004 through December 31, 2004.
    Amortization expense under the old basis of accounting of $6,142
    was recognized during the period from January 1, 2004
    through October 29, 2004, resulting in a pro forma
    adjustment of $24,220 to cost of goods sold.
(e)
Reflects a $2,281 reduction in cost of goods sold relating to
    the non-recurring amortization of the step-up in inventory basis
    to fair market value, for inventory that was sold during the
    period from October 30, 2004 through December 31, 2004.
(f)
Reflects the adjustment to historical expense for new
    compensation contracts with management. In conjunction with the
    transactions, we entered into a new employment agreement with
    our President and Chief Executive Officer, and our executives
    were issued profit units in Dresser-Rand Holdings, LLC, which
    permit them to indirectly share in appreciation in the value of
    our shares. The new employment agreement increases the annual
    compensation of our President and Chief Executive Officer by
    $150, $25 of which was reflected in the period from
    October 30, 2004 through December 31, 2004. The annual
    compensation expense associated with the profit units is $682,
    $75 of which was reflected in the period from October 30,
    2004 through December 31, 2004.
(g)
Reflects a $1,800 reduction in selling, general and
    administrative expenses relating to the non-recurring write-off
    of the value allocated to purchased in-process research and
    development, which was recognized during the period from
    October 30, 2004 through December 31, 2004.
38
Table of Contents
(h)
The adjustment to interest expense reflects the following:
Adjustment for Period
Annual
January 1, 2004 through
Expense
October 29, 2004
Interest expense on letters of credit issued with our new
    revolving credit facility (at 2.5%)
$
3,675
$
3,063
Interest expense on our new revolving credit facility (at 4.67%)
234
195
Commitment fee on our new revolving credit facility (at 0.5%)
740
617
Interest expense on our new Term Loan B (at 4.29%)
16,956
14,130
Interest expense on the notes (at 7.375%)
30,975
25,813
Amortization of debt issuance costs
4,425
3,688
Total interest adjustment
$
57,005
$
47,506
Interest expense on average outstanding letters of credit of
    $147 million in 2004 was 2.5%. A change of
1
/
8
percentage
    point in interest rates on the aggregate amount outstanding
    under the new revolving credit facility and term loan B would
    change annual interest expense by $500.
(i)
Reflects the income tax effect of our pro forma adjustments to
    the income statement. We used a statutory tax rate of 38% for
    adjustments recorded at United States entities and the statutory
    tax rate of each foreign country for adjustments recorded at
    foreign entities. However, the pro forma income tax expense also
    reflects a full valuation allowance on the net income tax
    benefit generated in the United States.
(j)
In 2005, through May 11, we made $111.7 million of
    principal payments on our senior secured credit facility. The
    annualized interest savings at interest rates in effect at
    December 31, 2004 of these prepayments was
    $5.1 million. As a result of these payments, we will incur
    a one-time charge of approximately $2.5 million from the
    write-off of deferred financing fees.
(k)
In connection with the offering, we intend to use approximately
    $           million
    of the net proceeds to redeem
    $          of
    the $420 million aggregate principal amount of our
    7
3
/
8
%
    senior subordinated notes due 2014, including the payment of the
    applicable redemption premium. The annualized interest savings
    resulting from the redemption would be
    $          ,
    and we will incur a one-time charge of
    $          from
    the write-off of deferred financing fees and incur prepayment
    penalties of
    $                    .
(4)
Historical basic and diluted earnings per share data has not
    been presented for the Predecessor because the Predecessor did
    not operate as a separate legal entity from Ingersoll-Rand.
(5)
For the Successor, basic and diluted earnings per share is
    calculated by dividing net earnings by the weighted average
    shares outstanding adjusted to reflect the 1,006,092.87 for 1
    stock split effected in February 2005.
(6)
Unaudited pro forma basic and diluted earnings per share have
    been calculated in accordance with the SEC rules for initial
    public offerings. These rules require that the weighted average
    share calculation give retroactive effect to any changes in our
    capital structure as well as the number of shares whose sale
    proceeds would be necessary to repay any debt or to pay any
    dividend as reflected in the pro forma adjustments. Therefore,
    pro forma weighted average shares for purposes of the unaudited
    pro forma basic and diluted earnings per share calculation, has
    been adjusted to reflect the stock dividend
    of                      shares
    to our existing stockholders that will be made shortly after the
    expiration of the underwriters' over-allotment option
    assuming no exercise of that option, and is comprised of
    approximately                      shares
    of our common stock outstanding immediately prior to this
    offering
    plus                      shares
    of our common stock being offered hereby and the stock dividend
    of                      shares.
39
Table of Contents
SELECTED HISTORICAL FINANCIAL INFORMATION
Prior to the closing of the transactions on October 29,
2004, Dresser-Rand Group Inc. did not have any assets,
liabilities or results of operations. Therefore, the selected
historical combined financial information as of and for the
three years ended December 31, 2003 and the period from
January 1, 2004 through October 29, 2004 have been
derived from the audited combined financial statements of the
Dresser-Rand Entities (the predecessor to Dresser-Rand Group
Inc.), which have been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm. The selected
historical consolidated financial information as of
December 31, 2004 and for the period from October 30,
2004 (our date of inception) through December 31, 2004 have
been derived from the audited consolidated financial statements
of Dresser-Rand Group Inc. The audited financial statements for
the years ended December 31, 2002 and 2003, for the period
from January 1, 2004 through October 29, 2004, for the
period from October 30, 2004 through December 31, 2004
and as of December 31, 2003 and 2004 are included elsewhere
in this prospectus. The selected historical combined balance
sheet information as of December 31, 2001 and the selected
historical combined statement of operations information for the
year ended December 31, 2001 has been derived from
Dresser-Rand Company's audited combined financial
statements, which are not included in this prospectus. The
selected historical combined balance sheet information as of
December 31, 2000 and the selected historical combined
statement of operations information for the one month ended
January 31, 2000 and the eleven months ended
December 31, 2000 have been derived from Dresser-Rand
Entities' unaudited combined financial statements, which
are not included in this prospectus. In the opinion of
management, such unaudited financial information reflects all
adjustments, consisting only of normal and recurring
adjustments, necessary for a fair presentation of the results
for those periods. Prior to February 2000, Dresser-Rand Company
was jointly owned by Ingersoll-Rand (49%) and Halliburton
Industries (51%) under the terms of a joint venture agreement.
Halliburton exercised a put option in the joint venture
agreement which required Ingersoll-Rand to purchase
Halliburton's 51% interest in Dresser-Rand Company. The
purchase was completed on February 2, 2000. Accordingly,
the results of operations are separately stated for the eleven
months ended December 31, 2000 to reflect the new ownership
structure and related changes in the underlying accounts of the
Dresser-Rand Entities resulting from the purchase transaction.
You should read the following table together with
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated
and combined financial statements and the notes thereto,
included elsewhere in this prospectus.
Predecessor
Successor
Period
Period
1 Month
11 Months
January 1
October 30
Ended
Ended
Year Ended December 31,
through
through
January 31,
December 31,
October 29,
December 31,
2000
2000
2001
2002
2003
2004
2004
(In thousands, except share and per share data)
Statement of Operations Data:
Net sales, third parties
$
$
$
873,885
$
1,026,753
$
1,332,242
$
712,483
$
199,907
Net sales to affiliates
2,837
1,841
1,439
1,845
—
Other operating revenue
—
2,759
1,669
1,167
—
Total revenues
42,690
777,754
876,722
1,031,353
1,335,350
715,495
199,907
Cost of goods sold
714,093
865,858
1,132,047
538,042
149,564
Gross profit
162,629
165,495
203,303
177,453
50,343
Selling and administrative expenses
132,755
138,484
156,129
122,700
21,499
Research and development expenses
6,969
8,044
8,107
5,670
1,040
Write-off of purchased in-process research and development assets
—
—
—
—
1,800
Restructuring charges(1)
2,137
5,185
—
—
—
Operating income
20,768
13,782
39,067
49,083
26,004
Interest income (expense), net
(302
)
(776
)
1,938
3,156
(9,654
)
Other income (expense), net
3,150
15,000
(9,202
)
1,882
(1,846
)
Income (loss) from continuing operations before income taxes
23,616
28,006
31,803
54,121
14,504
Provision (benefit) for income taxes(2)
14,781
11,910
11,438
11,970
7,275
Income (loss) from continuing operations
(12,498
)
(20,331
)
8,835
16,096
20,365
42,151
7,229
40
Table of Contents
Predecessor
Successor
Period
Period
1 Month
11 Months
January 1
October 30
Ended
Ended
Year Ended December 31,
through
through
January 31,
December 31,
October 29,
December 31,
2000
2000
2001
2002
2003
2004
2004
(In thousands, except share and per share data)
Discontinued Operations:
Earnings from discontinued operations, net
Gain on disposal of discontinued operations, net
Net income (loss)
$
(11,577
)
$
33,939
$
8,835
$
16,096
$
20,365
$
42,151
$
7,229
Earnings per share data(3)(4)(5):
Basic earnings (loss) per share:
Net income
$
0.07
Weighted average shares
100,115,080
Cash flow data:
Cash flows provided by operating activities
$
57,837
$
42,029
$
50,963
$
57,729
17,948
Cash flows provided by (used in) investing activities
(15,896
)
3,813
(7,089
)
(4,907
)
(1,126,939
)
Cash flows provided by (used in) financing activities
(42,937
)
(18,759
)
(63,487
)
(52,030
)
1,217,099
Predecessor
Successor
As of December 31,
As of
December 31,
2000
2001
2002
2003
2004
(In thousands)
Balance Sheet Data:
Cash and cash equivalents
$
$
31,377
$
59,619
$
41,537
$
111,500
Total assets
1,030,072
1,052,741
1,119,464
1,063,875
1,751,074
Debt:
Current portion of long-term debt
52
2,631
3,716
6,749
Long-term debt, net of current maturities
260
1,254
213
396,664
Senior subordinated notes
—
—
—
420,000
Total debt
4,685
312
3,885
3,929
823,413
Partnership interest
588,450
526,710
565,035
—
Stockholders' equity
—
—
—
452,897
(1)
Includes severance expenses and facility exit costs associated
    with our corporate restructuring activities.
(2)
On the closing date of the transactions we became a corporation.
    Prior to that time, in the United States, we were a partnership.
    The information presented does not give effect to the income
    taxes we would have been required to recognize if we were
    organized as a corporation. Pro forma tax expense for the year
    ended December 31, 2004 was $14,515. Pro forma tax expense
    reflects income tax expense that we would have been required to
    pay if we were organized as a corporation during these periods
    and also includes other pro forma adjustments related to the
    acquisition of Dresser-Rand Company by First Reserve on
    October 29, 2004.
(3)
Historical basic and diluted earnings per share data has not
    been presented for the Predecessor because the Predecessor did
    not operate as a separate legal entity from Ingersoll-Rand.
(4)
For the Successor, basic and diluted earnings per share is
    calculated by dividing net earnings by the weighted average
    shares outstanding adjusted to reflect the 1,006,092.87 for 1
    stock split effected in February 2005.
(5)
Unaudited pro forma basic and diluted earnings per share have
    been calculated in accordance with the SEC rules for initial
    public offerings. These rules require that the weighted average
    share calculation give retroactive effect to any changes in our
    capital structure as well as the number of shares whose sale
    proceeds would be necessary to repay any debt or pay any
    dividend as reflected in the pro forma adjustments. Therefore,
    pro forma weighted average shares for purposes of the unaudited
    pro forma basic and diluted earnings per share calculation, has
    been adjusted to reflect the stock dividend
    of                      shares
    to our existing stockholders that will be made shortly after the
    expiration of the underwriters' over-allotment option,
    assuming no exercise of that option and is comprised of
    approximately                      shares
    of our common stock outstanding immediately prior to this
    offering
    plus                      shares
    of our common stock being offered hereby and the stock dividend
    of                      shares.
41
Table of Contents
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
The statements in this discussion regarding the industry
outlook, our expectations regarding the future performance of
our business, and the other non-historical statements in this
discussion are forward-looking statements. These forward-looking
statements are subject to numerous risks and uncertainties,
including, but not limited to, the risks and uncertainties
described in the "Risk Factors" section. You should
read the following discussion together with the sections
entitled "Forward-Looking Statements," "Risk
Factors" and the consolidated and combined financial
statements and notes thereto of the Dresser-Rand Entities
included elsewhere in this prospectus.
Overview
We are among the largest global suppliers of rotating equipment
solutions to the worldwide oil, gas, petrochemical and
industrial process industries. Our segments are new units and
aftermarket parts and services. Our services and products are
used for a wide range of applications, including oil and gas
production, refinery processes, natural gas processing,
pipelines, petrochemical production, high-pressure field
injection and enhanced oil recovery. We also serve general
industrial markets including paper, steel, sugar, distributed
power and government markets.
We operate globally with manufacturing facilities in the United
States, France, Germany, Norway, India and Brazil. We provide a
wide array of products and services to our worldwide client base
in over 105 countries from our 61 global locations in 11
U.S. states and 25 countries. Our total combined revenues
by geographic region for the twelve months ended
December 31, 2004 consisted of North America (39%), Latin
America (18%), Europe (15%), Asia Pacific (13%) and the Middle
East and Africa (15%).
Corporate History
On December 31, 1986, Dresser Industries, Inc. and
Ingersoll-Rand (collectively, the partners) entered into a
partnership agreement for the formation of Dresser-Rand Company,
a New York general partnership owned 50% by Dresser Industries,
Inc. and 50% by Ingersoll-Rand. The partners contributed
substantially all of the operating assets and certain related
liabilities, which comprised their worldwide reciprocating
compressor, steam turbine and turbo-machinery businesses. The
net assets contributed by the partners were recorded by
Dresser-Rand Company at amounts approximating their historical
values. Dresser-Rand Company commenced operations on
January 1, 1987. On October 1, 1992 Dresser
Industries, Inc. acquired a 1% equity interest from Dresser-Rand
Company to increase its ownership to 51% of Dresser-Rand Company.
In September 1999, Dresser Industries, Inc. merged with
Halliburton Industries. Accordingly, Dresser Industries,
Inc.'s ownership interest in Dresser-Rand Company
transferred to Halliburton Industries on that date. On
February 2, 2000, a wholly-owned subsidiary of
Ingersoll-Rand purchased Halliburton Industries' 51%
interest in Dresser-Rand Company for a net purchase price of
approximately $543 million. Dresser-Rand Company's
combined financial statements reflect Ingersoll-Rand's
additional basis in Dresser-Rand Company. Dresser-Rand Company
formerly operated as an operating business unit of
Ingersoll-Rand.
On August 25, 2004, Dresser-Rand Holdings, LLC, our
indirect parent and an affiliate of First Reserve, entered into
an equity purchase agreement with Ingersoll-Rand to purchase all
of the equity interests in the Dresser-Rand Entities for
$1.13 billion. The acquisition closed on October 29,
2004. In connection with the acquisition, funds affiliated with
First Reserve contributed $430 million in cash as equity to
Dresser-Rand Holdings, LLC, which used this cash to fund a
portion of the purchase price for the Dresser-Rand Entities. The
remainder of the cash needed to finance the acquisition,
including related fees and expenses, was provided by borrowings
of $420 million in senior subordinated notes due 2014 and
under a $695 million senior secured credit facility. The
senior secured credit facility consists of a $395 million
term loan portion and a $300 million revolving portion.
The consolidated financial statements reflect our financial
position as of December 31, 2004 and our results of
operations and cash flows for the period from October 30,
2004 to December 31, 2004, and the
42
Table of Contents
financial position of our predecessor entity, on
a combined basis, as of December 31, 2003 and its results
of operations and cash flows for the period from January 1,
2004 to October 29, 2004 and for the years ended
December 31, 2003 and 2002.
The consolidated and combined financial
statements included in this prospectus include the accounts of
all wholly-owned and majority-owned subsidiaries of Dresser-Rand
Company as well as the operations of Dresser-Rand Canada, Inc.
and Dresser-Rand GmbH.
The preparation of the Predecessor financial
statements was based on certain assumptions and estimates,
including allocations of costs from Ingersoll-Rand, which the
Predecessor believed were reasonable. This financial information
may not, however, necessarily reflect the results of operations,
financial positions and cash flows that would have occurred if
our Predecessor had been a separate, stand-alone entity during
the periods presented.
In connection with the transactions, we incurred
substantial indebtedness, interest expense and repayment
obligations. The interest expense relating to this debt will
adversely affect our net income. In addition, we accounted for
the acquisition under the purchase method of accounting, which
resulted in an increase in depreciation and amortization above
historical levels. As a result of the transactions, we incurred
a number of one-time fees and expenses of approximately
$43.9 million. See "The Transactions."
Streamlining Actions
Since the fourth quarter of 2002, we adopted a
number of restructuring and productivity improvement programs
across our entire company. An important element in these
programs was headcount reductions. As of December 31, 2002,
our worldwide headcount was 5,849 employees. For the year ended
December 31, 2003, we reduced our headcount, on a worldwide
basis, by 968 employees. By December 31, 2004, we had
reduced our headcount by an additional 250 employees to 4,631.
An additional element of our restructuring plan was our
streamlining of administrative functions. For example, we
consolidated the management of three of our factories in New
York under one management team. We continue to seek and
implement cost-saving measures on an on-going basis.
Effects of Currency Fluctuations
We conduct operations in over 105 countries.
Therefore, our results of operations are subject to both
currency transaction risk and currency translation risk. We
incur currency transaction risk whenever we or our subsidiaries
enter into either a large purchase or sales transaction using a
currency other than the local currency of the transacting
entity. With respect to currency translation risk, our financial
condition and results of operations are measured and recorded in
the relevant local currency and then translated into
U.S. dollars for inclusion in our historical consolidated
financial statements. Exchange rates between these currencies
and U.S. dollars in recent years have fluctuated
significantly and may continue to do so in the future. The
majority of our revenues and costs are denominated in
U.S. dollars, with euro-related revenues and costs also
being significant. The net appreciation of the euro against the
U.S. dollar over the 2002 to 2004 period has had the impact
of increasing sales, cost of sales and selling and
administrative expenses, as reported in U.S. dollars in our
historical consolidated and combined financial statements.
Historically, we have engaged in hedging strategies from time to
time to reduce the effect of currency fluctuations on specific
transactions. However, we have not sought to hedge currency
translation risk. We expect to continue to engage in hedging
strategies going forward. These strategies do not qualify for
hedge accounting treatment and therefore, significant declines
in the value of the euro relative to the U.S. dollar could
have a material adverse effect on our financial condition and
our ability to meet interest and principal payments on
U.S. dollar denominated debt, including the notes and
borrowings under the senior secured credit facility.
Revenues
Our revenues are primarily generated through the
sale of new units and aftermarket parts and services. Revenues
from the sale of new units and revamps (the overhauling of
installed units) are recognized under the completed contract
method. Under this method, revenue and profits on contracts are
recognized when the
43
Table of Contents
contracts are completed or substantially
complete. Revenues from aftermarket parts and services are
recognized as the parts are shipped and services are rendered.
Revenues have historically been driven by volume, rather than
price, and are sensitive to foreign currency fluctuations.
Cost of Sales
Cost of sales includes raw materials and plant
and related work force costs, freight and warehousing, as well
as product engineering.
Selling and Administrative Expenses
Selling expenses consist of costs associated with
marketing and sales. Administrative expenses are primarily
management, accounting, corporate allocations and legal costs.
Research and Development Expenses
Research and development expenses include
payroll, employee benefits, and other labor related costs,
facilities, workstations and software costs associated with
product development. These costs are expensed as incurred.
Expenses for major projects are carefully evaluated to manage
return on investment requirements. We expect that our research
and development spending will continue in line with historical
levels.
Other Income (Expense)
Other income (expense) includes those items
that are non-operating in nature. Examples of items reported as
other income (expense) are insurance proceeds, equity in
earnings in partially-owned affiliates, casualty losses,
government grants and the impact of currency fluctuations.
Depreciation and Amortization
Property, plant and equipment is reported at cost
less accumulated depreciation, which is generally provided using
the straight-line method over the estimated useful lives of the
assets. Expenditures for improvements that extend the life of
the asset are generally capitalized. Intangible assets primarily
consist of amounts allocated to the customer relationships,
software and technology, trade names and other intangibles. All
of the intangible assets are amortized over their estimated
useful lives.
Income Taxes
For the Predecessor periods presented, certain of
the Dresser-Rand Entities were accounted for as a partnership
and were not required to provide for income taxes, since all
partnership income and losses were allocated to the partners for
inclusion in their respective financial statements. In
connection with the transactions, the assets of the former
partnership are now subject to corporate income taxes. For
income tax purposes, the former partnership assets have been
recorded at, and will be depreciated based upon their fair
market value at the time of the transaction instead of the
historical amount. On October 29, 2004, our business became
subject to income tax, which has impacted our results of
operations for the period from October 30, 2004 through
December 31, 2004 and will affect our results in the future.
For the Predecessor periods presented and prior
to the transactions, certain of our operations were subject to
U.S. or foreign income taxes. After the transactions, all
of our operations are subject to U.S. or foreign income
taxes. In preparing our financial statements, we have determined
the tax provision of those operations on a separate company
basis.
Bookings and Backlog
New Units
Bookings represent orders placed during the
period, whether or not filled. The elapsed time from booking to
completion of performance may be up to 15 months (or longer
for less frequent major projects). The
44
Table of Contents
backlog of unfilled orders includes amounts based
on signed contracts as well as agreed letters of authorization
which management has determined are likely to be performed.
Although backlog represents only business that is considered
firm, cancellations or scope adjustments may occur. In certain
cases, cancellation of a contract provides us with the
opportunity to bill for certain incurred costs and penalties.
Backlog is adjusted to reflect project cancellations, deferrals,
currency fluctuations and revised project scope.
Aftermarket Parts and
    Services
Bookings represent orders placed during the
period, whether or not filled. Backlog primarily consists of
unfilled parts orders, with open repair and field service orders
comprising a small part of the backlog. The cancellation of an
order for parts can generally be made without penalty.
Controls over Inventory
During the third quarter of 2003, a management
review identified an issue relating to work-in-process inventory
at two of our manufacturing locations. It was determined that
certain work-in-process inventory had not been properly relieved
upon shipment during the time period from 1999 through 2003,
resulting in an overstatement of inventory. Management
immediately began an extensive, in-depth review of our accounts
and records. As a consequence of these problems, we implemented
an internal review of the functions and processes at the two
plants that were involved, identified gaps in our internal
controls and put in place remedial measures. At the end of this
review and remediation process, our auditors determined that we
had successfully eliminated the weakness in our inventory
controls.
Letters of Credit, Bank Guarantees and Surety
Bonds
In the ordinary course of our business, we make
use of letters of credit, bank guarantees and surety bonds. We
use both performance bonds, ensuring the performance of our
obligations under various contracts to which we are a party, and
advance payments bonds, which ensure that clients that place
purchase orders with us and make advance payments under such
contracts are reimbursed to the extent we fail to deliver under
the contract. Under the revolving portion of our senior secured
credit facility, we are entitled to have up to $300 million
of letters of credit outstanding at any time, subject to certain
conditions.
Basis of Presentation
The acquisition of the Dresser–Rand Entities
was accounted for under the purchase method of accounting. As a
result, the financial data presented for 2004 include a
predecessor period from January 1, 2004 through
October 29, 2004 and a successor period from
October 30, 2004 through December 31, 2004. As a
result of the acquisition, the consolidated statement of
operations for the successor period includes interest and
amortization expense resulting from the notes and senior secured
credit facility, and, depreciation of plant and equipment and
amortization of intangible assets related to the acquisition.
Further, as a result of purchase accounting, the fair values of
our assets on the date of the acquisition became their new cost
basis. Results of operations for the successor period is
affected by the newly established cost basis of these assets. We
allocated the acquisition consideration to the tangible and
intangible assets acquired and liabilities assumed by us based
upon their respective fair values as of the date of the
acquisition, which resulted in a significant change in our
annual depreciation and amortization expenses.
The accompanying financial statements for the
periods prior to the acquisition are labeled as
"Predecessor" and the period subsequent to the
acquisition are labeled as "Successor."
Successor
Our consolidated financial statements for the
period from October 30, 2004 through December 31, 2004
include the accounts of the Dresser-Rand and its wholly-owned
subsidiaries. Included in this period are fair value adjustments
to assets and liabilities, including inventory, goodwill, other
intangible assets and property, plant and equipment. Also
included is the corresponding effect that these adjustments had
to cost of sales, depreciation and amortization expenses.
45
Table of Contents
Predecessor
The combined financial statements for the period from
January 1, 2004 through October 29, 2004 and for the
years ended December 31, 2003 and 2002 include the accounts
and activities of the Predecessor. Partially-owned companies
have been accounted for under the equity method.
Dresser-Rand's financial statements reflect costs that have
been allocated by Ingersoll-Rand prior to the consummation of
the acquisition. As a result of recording these amounts, our
predecessor's combined financial statements for these
periods may not be indicative of the results that would be
presented if we had operated as an independent, stand-alone
entity.
Results of Operations
Total Company
For the Period from October 30, 2004 through
    December 31, 2004 (Successor) and for the Period from
    January 1, 2004 through October 29, 2004 (Predecessor)
    Compared to the Year Ended December 31, 2003
    (Predecessor)
The following table presents selected historical financial
information for the period from October 30, 2004 through
December 31, 2004, for the period from January 1, 2004
through October 29, 2004 and for the year ended
December 31, 2003. Amounts are also presented as a
percentage of total revenues.
Predecessor
Successor
For the Period
January 1
For the Period
Year Ended
through
October 30 through
December 31, 2003
October 29, 2004
December 31, 2004
(Dollars in millions)
Statement of Operations Data:
Total revenues
$
1,335.4
100.0
%
$
715.5
100.0
%
$
199.9
100.0
%
Cost of goods sold
1,132.1
84.8
538.0
75.2
149.6
74.8
Gross profit
203.3
15.2
177.5
24.8
50.3
25.2
Selling and administrative expenses
156.1
11.7
122.7
17.1
21.5
10.8
Research and development expenses
8.1
0.6
5.7
0.8
1.0
0.5
Write-off of purchased in-process research and development
0.0
0.0
0.0
0.0
1.8
0.9
Operating income
39.1
2.9
49.1
6.9
26.0
13.0
Interest income (expense), net
1.9
0.1
3.1
0.4
(9.7
)
(4.9
)
Other income (expense), net
(9.2
)
(0.7
)
1.9
0.3
(1.8
)
(0.9
)
Income before income taxes
31.8
2.4
54.1
7.6
14.5
7.3
Provision for income taxes
11.4
0.9
11.9
1.7
7.3
3.7
Net income
$
20.4
1.5
%
$
42.2
5.9
%
$
7.2
3.6
%
Total Revenues.
Total revenues were $199.9 million
for the period from October 30, 2004 through
December 31, 2004 and $715.5 million for the period
from January 1, 2004 through October 29, 2004 compared
to $1,335.4 million for the year ended December 31,
2003. The sales volume decrease of $420.0 million was
primarily from new units segment and was attributable to the
following factors: (1) our decision to start charging
customers a margin with respect to third party equipment that we
had been purchasing on their behalf on a cost only basis (we
refer to such purchases as "buyouts") resulting in
certain customers purchasing such equipment directly; this led
to reduction in revenue for buyouts of $12.4 million and
$55.4 million for the period from October 30, 2004
through December 31, 2004 and for the period from
January 1, 2004 through October 29, 2004,
respectively, from $263.8 million for the year ended
December 31, 2003 and (2) volume decreases in units
sold due to an unusually high level of orders shipped in the
prior year which was in part due to the large backlog of orders
at the end of 2002. This backlog consisted of large orders
46
Table of Contents
for North Sea and Gulf of Mexico projects as well as large
orders for the U.S. Government. The oil and gas
industry can be very cyclical with regards to sales of units
caused by the price of oil and the buying cycles of our larger
clients for major projects. The decrease in units was offset by
the aftermarket parts and services segment revenues which were
$570.1 million in 2004 compared to $542.4 in 2003.
Cost of goods sold.
Cost of goods sold was
$149.6 million, $538.0 million and
$1,132.1 million for the period from October 30, 2004
through December 31, 2004, the period from January 1,
2004 through October 29, 2004, and the year ended
December 31, 2003, respectively. Cost of goods sold as a
percentage of revenues decreased 10.0 percentage points to
74.8% for the period from October 30, 2004 through
December 31, 2004, and decreased 9.6 percentage points
to 75.2% for the period from January 1, 2004 through
October 29, 2004, from 84.8% for the year ended
December 31, 2003. This improvement in 2004 was primarily
due to three factors. First, we began charging customers a
margin on third-party equipment referred to as buyouts. This
change resulted in the cost of goods sold declining as a
percentage of revenues. Second, higher-margin aftermarket parts
and services revenues increased for the two periods in 2004
compared to the year ended December 31, 2003. Third,
manufacturing efficiencies were achieved through workforce
reductions, supply chain management initiatives and capacity
rationalization efforts. As mentioned previously, we embarked on
a series of headcount reductions since the fourth quarter of
2002. During 2004, total headcount decreased by 250, or 5.1%.
Also impacting 2004 results were the workforce reductions
initiated in 2003. These reductions amounted to 968 employees,
from 5,849 to 4,881, or 16.5%. The year-over-year savings
associated with workforce reductions are reflected in the
financial statements beginning in the month following the
reduction. Supply chain management efforts resulted in
year-over-year savings of approximately 2.0%. Concerning
capacity rationalization, our results reflect the closure of two
under-performing repair centers as well as the continued
improvement of the New York State factories now under common
management. Our results also improved due to the settlement of a
product liability lawsuit in an appellate court judgment
reversing the initial ruling against us of $4.5 million,
which was credited to cost of goods sold in the period from
January 1, 2004 through October 29, 2004. Partially
offsetting these factors were additional costs related to
purchase accounting adjustments which increased costs by
$14.6 million for the period from October 30, 2004
through December 31, 2004, and an additional
$2.1 million reserve for obsolete and slow moving inventory
recognized in the period from January 1, 2004 through
October 29, 2004, which was sold for scrap in the same
period.
Gross Profit.
Gross profit was 25.2% for the period from
October 30, 2004 through December 31, 2004 and 24.8%
for the period from January 1, 2004 through
October 29, 2004 compared to 15.2% for the year ended
December 31, 2003. The increase is attributable to the
factors mentioned above.
Selling and administrative expenses.
Selling and
administrative expenses of $21.5 million and
$122.7 million, respectively, for the period from
October 30, 2004 through December 31, 2004 and for the
period from January 1, 2004 through October 29, 2004,
decreased from $156.1 million in the year ended
December 31, 2003 as a result of our efforts to streamline
our administrative operations by reducing headcount, and, a
reduction in third party commissions due to decreased revenues.
In addition, information technology costs allocated to selling
and administrative expenses decreased in the period from
October 30, 2004 through December 31, 2004 and the
period from January 1, 2004 through October 29, 2004.
Research and development expenses.
Total research and
development expenses were $1.0 million for the period from
October 30, 2004 through December 31, 2004 and
$5.7 million for the period from January 1, 2004
through October 29, 2004 compared to $8.1 million for
the year ended December 31, 2003. This decrease was due to
the allocation of resources to production jobs due to the
increased incoming order activity during 2004.
Write-off of purchased in-process research and development
assets.
As a result of the transactions, we wrote off
$1.8 million of purchased in-process research and
development assets in the period from October 30, 2004
through December 31, 2004. This write-off was a one-time
event and is not comparable to past or future periods.
Operating income.
Operating income for the period from
October 30, 2004 through December 31, 2004 and for the
period from January 1, 2004 through October 29, 2004
increased as a percentage of revenues to
47
Table of Contents
13.0% and 6.9%, respectively, compared to 2.9% the year ended
December 31, 2003. The increase is primarily attributable
to the factors contributing to the increased gross margin and
decreased selling and administrative expenses, as discussed
above.
Interest income (expense), net.
Net interest income
(expense) was ($9.7) million for the period from
October 30, 2004 through December 31, 2004 and
$3.1 million for the period from January 1, 2004
through October 29, 2004 compared to $1.9 million for
the year ended December 31, 2003. Interest expense of
$10.0 million was incurred for the period from
October 30, 2004 through December 31, 2004 on the
outstanding principal of the senior secured credit facility and
long-term debt. Interest income of $3.9 million and
$3.5 million for the period from January 1, 2004
through October 29, 2004 and the year ended
December 31, 2003, respectively, was earned on loans to the
predecessor parent company, which was offset by interest expense
on outstanding loans.
Other income (expense), net.
Other income (expense), net
was $(1.8) million for the period from October 30,
2004 through December 31, 2004, $1.9 million for the
period from January 1, 2004 through October 29, 2004,
and $(9.2) million for the year ended December 31,
2003. The decrease in expense for the two periods in 2004 was
primarily the result of $2.8 million of casualty losses in
2003 (which did not occur in 2004), related to a fire at a
warehouse in Nigeria, and lower currency losses for the period
from October 30, 2004 through December 31, 2004 and a
currency gain for the period from January 1, 2004 through
October 29, 2004.
The following table depicts the components of other income
(expense), net for the periods presented.
Predecessor
Successor
January 1, 2004
October 30, 2004
Year Ended
through
through
December 31, 2003
October 29, 2004
December 31, 2004
(In millions)
Currency gains (losses)
$
(4.4
)
$
2.1
$
(1.0
)
Equity earnings
(0.1
)
(1.0
)
0.2
Casualty losses
(2.8
)
—
—
New York State grant
(1.3
)
—
—
All other
(0.6
)
0.8
(1.0
)
Total other income (expense), net
$
(9.2
)
$
1.9
$
(1.8
)
Provision for income taxes.
The provision for income
taxes was $7.3 million for the period from October 30,
2004 through December 31, 2004, $11.9 million for the
period from January 1, 2004 through October 29, 2004,
and $11.4 million for the year ended December 31,
2003, resulting in an effective rate of 50.2%, 22.1% and 36.0%,
respectively. For the period from October 30, 2004 through
December 31, 2004, the effective tax rate of 50.2% differed
from the statutory U.S. rate of 35% primarily due to the
valuation allowance recorded by U.S. operations, state and
local income taxes and foreign tax rate differences. For the
period from January 1, 2004 through October 29, 2004
and the year ended December 31, 2003, the effective tax
rate differed from the statutory U.S. rate of 35% primarily
due to partnership income or loss not taxed, foreign tax rate
differences, and changes in the valuation allowance recorded by
certain foreign operations. The change in the effective tax rate
was primarily due to the relationship of nontaxable partnership
income or loss to total income in each period.
Bookings and backlog.
Bookings represent orders placed
during the period, whether or not filled. Backlog as of any date
represents the number of orders left unfilled as of that date.
Bookings during the year ended December 31, 2004 were
$1,119.2 million, 24.2% above bookings for the year ended
December 31, 2003, and backlog at December 31, 2004
was $637.6 million compared to $419.9 million at
December 31, 2003, a 51.8% increase. The bookings increase
was seen in revenue components and was driven by strong oil and
gas market activity.
48
Table of Contents
Year Ended December 31, 2003 Compared to the Year
    Ended December 31, 2002
The following table presents selected historical financial
information for the years ended December 31, 2003 and
December 31, 2002. Amounts are also presented as a
percentage of total revenues. The two columns under year-to-year
change show the dollar change and percentage change from 2002 to
2003.
Year-to-Year
Change
Year Ended
Year Ended
2002 to
December 31, 2002
December 31, 2003
2003
Change
(Dollars in Millions)
Statement of Operations Data:
Total revenues
$
1,031.4
100.0
%
$
1,335.4
100.0
%
$
304.0
29.5
%
Cost of goods sold
865.9
84.0
1,132.1
84.8
266.2
30.7
Gross profit
165.5
16.0
203.3
15.2
37.8
22.8
Selling and administrative expenses
138.5
13.4
156.1
11.7
17.6
12.7
Research and development expenses
8.0
0.8
8.1
0.6
0.1
1.3
Restructuring charges
5.2
0.5
0.0
0.0
(5.2
)
(100.0
)
Operating income
13.8
1.3
39.1
2.9
25.3
183.3
Interest income (expense), net
(0.8
)
(0.1
)
1.9
0.2
2.7
337.5
Other income (expense), net
15.0
1.5
(9.2
)
(0.7
)
(24.2
)
(161.3
)
Income before income taxes
28.0
2.7
31.8
2.4
3.8
13.6
Provision for income taxes
11.9
1.1
11.4
0.9
(0.5
)
(4.2
)
Net income
$
16.1
1.6
%
$
20.4
1.5
%
$
4.3
26.7
Total Revenues.
Total revenues increased by
$304.0 million, or 29.5%, to $1,335.4 million in 2003
from $1,031.4 million in 2002. The sales volume increase
was almost entirely attributable to sales by the new units
segments, which experienced a $294.2 million increase. This
increase resulted from increases in new units sales of
$149.0 million, buyouts of $112.0 million and revamps
of $33.0 million. The high invoicing levels were primarily
for products delivered from Le Havre, Norway and Olean that were
in backlog at the end of 2002. This backlog consisted of large
orders for North Sea and Gulf of Mexico projects as well as
large orders for the U.S. Government. The oil and gas
industry can be very cyclical with regards to sales of units,
caused by the price of oil and the buying cycles of our larger
clients for major projects.
Cost of goods sold.
Cost of goods sold as a percentage of
revenues increased slightly to 84.8% in 2003 from 84.0% in 2002.
This increase was primarily due to (i) the mix shift caused
by the dramatic increase in new unit shipments as mentioned
above, (ii) severance costs incurred related to headcount
reductions in 2003 of $6.3 million. The large mix shift was
offset by improvements in the individual cost of goods sold
components due to increased manufacturing efficiencies achieved
through workforce reductions (5,849 to 4,881, or 16.5%) and
favorable material costs achieved through supply chain
management efforts.
Gross profit.
Gross profit increased by
$37.8 million, or 22.8%, to $203.3 million in 2003
from $165.5 million in 2002 and decreased to 15.2% of
revenues in 2003 from 16.0% in 2002, due to the factors
mentioned above.
Selling and administrative expenses.
Selling and
administrative expenses were $156.1 million and
$138.5 million for 2003 and 2002, respectively. This
increase was primarily attributable to corporate overhead
allocations from Ingersoll-Rand which increased
$13.8 million from the 2002 amount of $1.3 million to
the 2003 amount of $15.1 million. During 2003, we began the
process of integrating numerous functions with Ingersoll-Rand
Services provided by Ingersoll-Rand in 2003 included treasury
and cash management, internal audit services, tax planning and
compliance, risk management services and various payroll and
benefits services.
49
Table of Contents
Research and development expenses.
Total research and
development expenses of $8.1 million in 2003 were virtually
unchanged from $8.0 million in 2002.
Restructuring charges.
At the end of 2002, we incurred
restructuring charges of $5.2 million. The 2002 charges,
primarily for workforce reductions, resulted in 2003 savings
were $18.5 million in cost of sales and $1.9 million
in selling and administrative expenses. No charges were incurred
in 2003.
Operating income.
Operating income increased by
$25.3 million, or 183.3%, to $39.1 million in 2003
from $13.8 million in 2002. The increase is primarily
attributable to increased volume as well as the factors
contributing to the increased gross margin, as discussed above.
Interest income (expense), net.
Net interest income
(expense) was $1.9 million in 2003 compared to
($0.8) million in 2002. The interest income in 2003 was
attributable to interest earned on receivables from
Ingersoll-Rand.
Other income (expense), net.
Other income (expense), net
was ($9.2) million in 2003, or $24.2 million less than
the $15.0 million other income reported in 2002 as depicted
in the table below. During 2003, we suffered two casualty
losses. The casualty losses amounted to $2.8 million, which
was primarily due to a fire at our inventory warehouse in
Nigeria resulting in the loss of $2.3 million. At the end
of 2002, we received a training and capital grant from the New
York State Empire Development Corporation, which resulted in
other income of $8.0 million. In late 2003, we agreed to
repay a portion of the grant due to lower-than-anticipated
employment levels resulting in other expense of
$1.3 million. During 2002, we received insurance proceeds
as a result of a fire that destroyed a third-party facility,
which warehoused patterns we use in the production process.
The following table depicts the components of other income
(expense), net for the periods presented and the period over
period change for each component.
2002
2003
Change
(In millions)
Currency losses
$
(1.1
)
$
(4.4
)
$
(3.3
)
Equity losses
(0.5
)
(0.1
)
0.4
Casualty losses
—
(2.8
)
(2.8
)
New York State grant
8.0
(1.3
)
(9.3
)
Insurance claims
10.1
—
(10.1
)
Other
(1.5
)
(0.6
)
0.9
Total other income (expense), net
$
15.0
$
(9.2
)
$
(24.2
)
Provision for income taxes.
Provision for income taxes
for the year ended December 31, 2003 was $11.4 million
resulting in an effective rate of 36.0%. This compares to an
income tax provision of $11.9 million in 2002 resulting in
an effective rate of 42.5%. Our effective tax rate differed from
the statutory U.S. rate of 35% primarily due to partnership
income or loss not taxed, foreign tax rate differences, and
changes in the valuation allowance recorded by certain foreign
operations. Our effective tax rate was 36.0% and 42.5% for the
years ended December 31, 2003 and 2002, respectively. The
change in our effective tax rate was primarily due to the
relationship of nontaxable partnership income or loss to total
income in each period.
Bookings and backlog.
Bookings during the year ended
December 31, 2003 of $901.0 million were 13.4% below
bookings for the year ended December 31, 2002, and backlog
at the end of 2003 was $419.9 million compared to
$826.4 million at the end of 2002, a 49.2% decrease. The
decreased bookings, combined with the high revenue achieved,
resulted in the decrease in backlog.
50
Table of Contents
Segment Analysis
Period from October 30, 2004 through
    December 31, 2004 (Successor) and for the Period from
    January 1, 2004 through October 29, 2004 (Predecessor)
    Compared to the Year Ended December 31, 2003
    (Predecessor)
The following table presents selected historical financial
information regarding both of our segments for the period from
October 30, 2004 through December 31, 2004, for the
period from January 1, 2004 through October 29, 2004 and
for the year ended December 31, 2003. Amounts are also
presented as a percentage of total revenues.
Predecessor
Successor
Period from
Period from
Year Ended
January 1 through
October 30 through
December 31, 2003
October 29, 2004
December 31, 2004
(In millions)
Revenues
New units
$
793.0
59.4
%
$
267.7
37.4
%
$
77.6
38.8
%
Aftermarket parts and services
542.4
40.6
447.8
62.6
122.3
61.2
Total revenues
1,335.4
100.0
%
715.5
100.0
%
199.9
100.0
%
Gross Profit
New units
39.4
32.3
9.8
Aftermarket parts and services
163.9
145.2
40.5
Total gross profit
203.3
177.5
50.3
Operating Income (Loss)
New units
(11.4
)
(0.5
)
3.6
Aftermarket parts and services
98.1
85.1
30.5
Unallocated corporate expense
(47.6
)
(35.5
)
(8.1
)
Total operating income
$
39.1
$
49.1
$
26.0
New Units
Revenues.
Revenues in the new units segment were
$77.6 million, $267.7 million and $793.0 million
for the period from October 30, 2004 through
December 31, 2004, for the period from January 1, 2004
through October 29, 2004, and for the year ended
December 31, 2003, respectively, and were 38.8%, 37.4% and
59.4%, respectively, as a percentage of total revenues. The
decreases in revenues as a percentage of total revenues for the
two periods in 2004 were primarily due to (1) our decision
to start charging customers a margin on buyouts, resulting in
certain customers purchasing such equipment directly; this led
to reduction in buyout revenue of $12.4 million in the
period from October 30, 2004 through December 31,
2004, and $55.4 million in the period from January 1,
2004 through October 29, 2004, from $263.8 million for
the year ended December 31, 2003, and (2) volume
decreases in units sold due to an unusually high level of orders
shipped in the prior year, which was in part due to the large
backlog of orders at the end of 2002. This backlog consisted of
large orders for North Sea and Gulf of Mexico projects as well
as large orders for the U.S. Government. The oil and
gas industry can be very cyclical with regards to sales of units
caused by the price of oil and the buying cycles of our larger
clients for major projects. Invoicings in any given year are
typically highly dependent on the beginning of the year backlog.
See "Bookings and backlog" discussions below for
current trends.
Gross profit.
Gross profit for new units as a percentage
of new unit segment revenues increased to 12.6% for the period
from October 30, 2004 through December 31, 2004 and to
12.1% for the period from January 1, 2004 through
October 29, 2004 from 5.0% for the year ended
December 31, 2003. This improvement was primarily due to
the two factors discussed above. First, we began charging
customers a margin on third-party equipment referred to as
buyouts. Second, manufacturing efficiencies were achieved
through productivity
51
Table of Contents
initiatives, workforce and capacity rationalization efforts
including a reduction in headcount and cost reductions in supply
chain management.
Operating income.
Operating income (loss) was
$3.6 million, ($0.5) million and ($11.4) million for the
period from October 30, 2004 through December 31,
2004, for the period from January 1, 2004 through
October 29, 2004, and for the year ended December 31,
2003, respectively. As a percentage of segment revenues,
operating income (loss) improved compared to the year ended
December 31, 2003 primarily due to the increase in the
gross profit percentage over 2003 and was partially offset by
higher selling and administrative expenses as a percentage of
revenues for the period from January 1, 2004 through
October 29, 2004. Selling and administrative expenses
increased as a percentage of revenues due to the decline in
revenues.
Bookings and backlog.
Bookings for the twelve months
ended December 31, 2004 were $536.9 million, 38.2%
above the bookings in 2003, and backlog at December 31,
2004 was $489.3 million, or 70.0% above the backlog at
December 31, 2003. As previously mentioned, bookings were
favorably impacted by the strong oil and gas market. This fact,
coupled with the low invoicings level during 2004, resulted in a
large increase in backlog.
Aftermarket Parts & Services
Revenues.
Revenues were $122.3 million, from
$447.8 million and $542.4 million for the period from
October 30, 2004 through December 31, 2004, for the
period from January 1, 2004 through October 29, 2004,
and for the year ended December 31, 2003, respectively, and
were 61.2%, 62.6% and 40.6%, respectively, as a percentage of
total revenues. Total combined revenues in 2004 increased by
$27.7 million, or 5.1%, from $542.4 million for the
year ended December 31, 2003 primarily due to an increase
in parts sales, which accounted for $24.2 million of the
increase. Services revenue increased slightly by
$3.5 million; however, after discounting the affect of the
$20.2 million turn-key project in 2003 (see 2003 compared
to 2002 below), services increased approximately 12.5%. This
segment's revenues are primarily generated through the
large installed base of equipment worldwide and, therefore, are
not subject to the fluctuations in volume to the same extent as
the New Units segment, which is dependent on new projects from
major oil and gas clients. The increase in revenues was driven
by a combination of factors including (i) annual price
increases; (ii) proactive marketing of new aftermarket
solutions; and (iii) improved on-line delivery performance
and reduced lead times to delivery.
Gross profit.
Gross profit as a percentage of aftermarket
parts and services segment revenues increased to 33.1% for the
period from October 30, 2004 through December 31, 2004
and to 32.4% for the period from January 1, 2004 through
October 29, 2004, from 30.2% for the year ended
December 31, 2003, as a result of the increase in sales
volume and the improvement in gross margins partially achieved
through price increases, and due to a more favorable product mix
(as parts has a greater margin than services), the price
realizations mentioned above and the headcount reductions
previously discussed.
Operating income.
Operating income was
$30.5 million, $85.0 million and $98.2 million
for the period from October 30, 2004 through
December 31, 2004, for the period from January 1, 2004
through October 29, 2004, and for the year ended
December 31, 2003, respectively. Operating income as a
percentage of aftermarket parts and services segment revenues
increased to 24.9% for the period from October 30, 2004
through December 31, 2004 and to 19.0% for the period from
January 1, 2004 through October 29, 2004 from 18.1%
for the year ended December 31, 2003 due to improvements in
gross profit in both periods in 2004, in addition to reduced
selling and administrative expenses. The majority of selling and
administrative expenses are fixed and, as revenue decreases, the
expenses increase as a percentage of revenue.
Bookings and backlog.
Bookings during the
twelve months ended December 31, 2004 were
$582.3 million, 13.6% above bookings for the same period in
2003, and backlog at December 31, 2004 was
$148.3 million, or 12.2% above the backlog at
December 31, 2003. This increase in bookings in 2004 is a
result of our increased emphasis on aftermarket parts and
services sales and the impact of economic and political unrest
in Nigeria, Venezuela and the Middle East, which depressed
bookings in this segment in the 2003 period. During 2004, the
spare parts business in Venezuela and the Middle East returned
to normal levels. Civil unrest continues to depress the repairs
business in Nigeria.
52
Table of Contents
Year Ended December 31, 2003 Compared to the Year
    Ended December 31, 2002
The following table presents selected historical financial
information regarding both of our segments for each of the years
ended December 31, 2003 and 2002, respectively. Revenues by
segments show dollars in millions and are also presented as a
percentage of total revenues. The two columns under year-to-year
change show the dollar and percentage change from 2002 to 2003.
Year-to-Year
Change
2002 to
2002
%
2003
%
2003
Change
Revenues
New units
$
498.8
48.4
%
$
793.0
59.4
%
$
294.2
59.0
%
Aftermarket parts and services
532.6
51.6
542.4
40.6
9.8
1.8
Total revenues
$
1,031.4
100.0
%
$
1,335.4
100.0
%
$
304.0
29.5
Gross Profit
New units
$
7.7
$
39.4
$
31.7
411.7
%
Aftermarket parts and services
157.8
163.9
6.1
3.9
Total gross profit
$
165.5
$
203.3
$
37.8
22.8
Operating Income (loss)
New units
$
(32.8
)
$
(11.4
)
$
21.4
65.2
%
Aftermarket parts and services
85.7
98.1
12.4
14.5
Unallocated corporate expense
(39.1
)
(47.6
)
(8.5
)
(21.7
)
Total operating income (loss)
$
13.8
$
39.1
$
25.3
183.3
New Units.
Revenues.
Revenues increased by $294.2 million, or
59.0%, to $793.0 million in 2003 from $498.8 million
in 2002 due to strong shipments resulting from large bookings
achieved in 2001 and 2002. Buyouts accounted for
$112.2 million of the increase. For buyout orders booked
before 2003, no margin was earned.
Gross profit.
Gross profit increased by
$31.7 million, or 411.7%, to $39.4 million in 2003
from $7.7 million in 2002. As a percentage of segment
revenues, gross profit increased to 5.0% in 2003 from 1.5% in
2002 primarily due to improved operating efficiencies incurred
as a result of headcount reduction.
Operating income (loss).
Operating loss decreased by
$21.4 million, to a loss of $(11.4) million in 2003
from a loss of $(32.8) million in 2002. As a percentage of
segment revenues, operating income improved primarily due to the
factors mentioned above.
Bookings and backlog.
Bookings during the year ended
December 31, 2003 were $388.5 million, or 22.2% below
bookings for 2002, and backlog at December 31, 2003 was
$287.7 million, or 56% below the unusually high level in
2002 of $656.9 million. As mentioned previously, the new
units business is driven by the dynamics of the oil and gas
industry, which is driven by the price of oil and gas and
consequent changes in capital expenditures by the major oil and
gas companies worldwide. Our strong new units bookings in 2001
and 2002 were invoiced in 2003. The high invoicing level
combined with the lull in booking due to political unrest in
Venezuela, Nigeria and the Middle East resulted in a much lower
backlog at year end 2003 as compared to 2002.
Aftermarket Parts and Services
Revenues.
Revenues increased by $9.8 million, or
1.8%, to $542.4 million in 2003 from $532.6 million in
2002. This increase was attributable to the large increase in
field service activity due to an increase of $28.3 million
primarily due to a $20 million service agreement in 2003.
These revenues were offset by
53
Table of Contents
decreases in parts of $8.3 million and repair of
$12.7 million due to the delay in orders as a result of
political and economic unrest in Nigeria, Venezuela and the
Middle East.
Gross profit.
Gross profit increased by
$6.1 million, or 3.9%, to $163.9 million in 2003 from
$157.8 million in 2002 as a result of the increase in
volume and the improvement of gross margins. As a percentage of
revenues, gross profit increased to 30.2% in 2003 from 29.6% in
2002 due to a more favorable product mix, price realization and
increased manufacturing efficiencies.
Operating income.
Operating income increased by
$12.4 million, or 14.5%, to $98.1 million in 2003 from
$85.7 million in 2002. Despite the modest increase in
revenues, operating income as a percentage of revenues increased
to 18.1% in 2003 from 16.1% in 2002 due to cost control
initiatives, manufacturing and operating efficiencies and a more
favorable product mix.
Bookings and backlog.
Bookings during the twelve month
period ended December 31, 2003 were $512.5 million,
5.3% below 2002, and backlog at December 31, 2003 was
$132.2 million, or 22.0% below 2002. The 2003 bookings were
adversely impacted by geopolitical issues in Venezuela, the
Middle East and Nigeria. The slowdown in bookings combined with
the accelerated shipments of backlog resulted in lower backlog
levels at year end 2003 compared to 2002.
Liquidity and Capital Resources
Historically, our primary source of cash has been from
operations. Prior to the closing of the transactions, our
Predecessor participated in Ingersoll-Rand's centralized
treasury management system whereby, in certain countries, our
Predecessor's cash receipts were remitted to Ingersoll-Rand
and Ingersoll-Rand funded our Predecessor's cash
disbursements. Our Predecessor's primary cash disbursements
were for capital expenditures and working capital. Following the
consummation of the transactions, we initially relied upon a
transition services agreement with Ingersoll-Rand to provide
these services until we could establish our own cash management
system. As of April 2, 2005, we were no longer reliant upon
Ingersoll-Rand for any cash management services.
Net cash flows provided by operating activities were
$17.9 million, $57.7 million, $51.0 million, and
$42.0 million for the period from October 30, 2004
through December 31, 2004, the period from January 1,
2004 through October 29, 2004, and the years ended
December 31, 2003 and 2002, respectively, mainly due to
profitable results of operations and changes in working capital.
Changes in working capital was primarily affected by accounts
receivable, inventories, predecessor affiliated loans and
receivables, customer advance payments, and accounts payable and
accrued liabilities.
Accounts receivable increased $22.9 million to
$264.9 million at December 31, 2004 from
$242.0 million at December 31, 2003 primarily due to
pension and other receivables from Ingersoll-Rand of
$32.9 million recorded as a result of the transactions. The
offsetting decrease in accounts receivable is primarily due to
lower revenues in the fourth quarter of 2004 compared to 2003
for the Norway operations, and due to a reduction in the
year-end accounts receivable balance for Nigeria. Inventories
increased by $42.4 million or 31.8% to $175.9 million
at December 31, 2004 compared to $133.4 million at
December 31, 2003 for the following reasons:
(1) finished goods and work-in-progress inventories on hand
at year-end were $209.2 million at December 31, 2004
compared to $142.1 million at December 31, 2003, an
increase of $67.1 million or 47.2% primarily due to the
large increase in backlog; and (2) raw materials
inventories decreased $1.5 million as a result of our
continued efforts to reduce slow moving inventories and dispose
of obsolete inventories. Loans and receivables due from
Ingersoll-Rand of $228.2 million and loans payable to
Ingersoll-Rand of $14.8 million at December 31, 2003
were extinguished as a result of the transactions. Accounts
payable and accruals decreased $20.6 million primarily due
to the retention by Ingersoll-Rand of a portion of the liability
for post retirement benefits for those employees who were
retired and retirement-eligible employees.
Inventories decreased by $121.6 million to
$133.4 million at December 31, 2003 compared to
$255.0 million at December 31, 2002 due to a decrease
in the number of bookings in 2003 compared to 2002, and due to
increased sales in 2003 resulting in a higher relief of
inventories than replenishment. Loans and receivables due from
Ingersoll-Rand of $228.2 million at December 31, 2003
increased from $153.2 million at
54
Table of Contents
December 31, 2002 as a result of transferring funds to
Ingersoll-Rand for cash management purposes discussed above.
Customer advance payments decreased by $74.8 million at
December 31, 2003 compared to December 31, 2002
because work-in-progress and finished goods inventories
decreased thereby reducing the need for customers to advance
funds on in-progress orders.
For the period from October 30, 2004 through
December 31, 2004, the period from January 1, 2004
through October 29, 2004, and the years ended
December 31, 2003 and 2002, net cash flows provided by
(used in) investing activities were $(1,126.9) million,
$(4.9) million, $(7.1) million and $3.8 million,
respectively, partly as a result of capital expenditures of
$1.8 million, $7.7 million, $7.6 million and
$13.7 million, respectively. The acquisition was
$1,125.1 million in the period from October 30, 2004
through December 31, 2004. These results were also
favorably affected in 2002 by the receipt of insurance proceeds
of $10.1 million.
For the period from October 30 through December 31,
2004, net cash flow provided by financing activities was
$1,217.1 million, $420.0 million of which was from the
proceeds from the offering of the notes, $395.0 million of
which was from additional long-term debt, and
$437.1 million of which was from proceeds from the issuance
of common units and common stock. For the period from January 1
through October 29, 2004, and the years ended
December 31, 2003 and 2002, net cash flows used in
financing activities were $52.0 million,
$63.5 million, and $18.8 million, respectively,
primarily relating to the impact of the net change in
intercompany accounts with Ingersoll-Rand. Additionally,
dividends of $8.2 million and $5.1 million were paid
in 2002 and in the period from January 1 through
October 29, 2004, respectively.
Our Predecessor had approximately $44.3 million of cash on
the closing date, subject to closing adjustments. Our primary
cash uses will be to fund principal and interest payments on our
debt, and for working capital and capital expenditures. Interest
expense was $10.0 million for the period from
October 30, 2004 through December 31, 2004. Our
interest expense, after giving effect to the transactions, for
the twelve month period ended December 31, 2004 would have
been approximately $54.0 million. We expect to fund these
cash needs with operating cash flow and borrowings under the
revolving credit portion of our senior secured credit facility.
As part of the transactions, we incurred debt of
$815.0 million under the notes and the senior secured
credit facility, assumed approximately $3.1 million of debt
in foreign locations, and have additional borrowing capacity of
$300.0 million under the revolving credit portion of the
senior secured credit facility, subject to certain conditions.
At December 31, 2004, of the $300.0 million of
capacity, $143.4 million was used for outstanding letters
of credit. The senior secured credit facility requires, among
other covenants, that a minimum consolidated net interest
coverage ratio and a maximum consolidated net leverage ratio be
maintained.
The interest rates applicable under the Term B and revolving
credit portion of our senior secured credit facility vary based
on LIBOR and EURIBOR and our leverage ratio. The interest rate
on the senior subordinated notes is fixed at
7
3
/
8
%.
The $395.0 million of term loans under the senior secured
credit facility have fixed amortization of principal required to
be repaid quarterly beginning on December 31, 2004 in an
amount equal to
1
/
4
of 1% of the amount of principal outstanding. In addition, we
are is also required to make additional mandatory prepayments of
principal with any excess cash flow (as defined in the senior
secured credit facility), if any. See "Description of
Indebtedness."
Our capital expenditures have averaged $10.3 million per
year over the past three years. We expect that our capital
expenditures going forward will continue to approximate 1.0% of
sales.
Our ability to make payments on and to refinance our
indebtedness, including the notes, and to fund planned capital
expenditures and research and development efforts, will depend
on our ability to generate cash in the future. This, to a
certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are
beyond our control. Based on our current and anticipated levels
of operations and conditions in our markets and industry, we
believe that our cash flow from operations, available cash and
available borrowings under the senior secured credit facility
will be adequate to meet our working capital, capital
expenditures, debt service and other funding requirements in the
foreseeable future.
55
Table of Contents
Quantitative and Qualitative Disclosures About Market Risk
Our results of operations are affected by fluctuations in the
value of local currencies in which we transact business. We
record the effect of non-U.S. dollar currency transactions when
we translate the non-U.S. subsidiaries' financial
statements into U.S. dollars using exchange rates as they
exist at the end of each month. The effect on our results of
operations of fluctuations in currency exchange rates depends on
various currency exchange rates and the magnitude of the
transactions completed in currencies other than the U.S. dollar.
Net foreign currency losses (gains) were $1.0 million,
($2.1) million, $4.4 million and $1.1 million for
the periods from October 30, 2004 through December 31,
2004 and January 1, 2004 through October 29, 2004, and
the years ended December 31, 2003 and 2002, respectively.
We enter into financial instruments to mitigate the impact of
changes in currency exchange rates that may result from
long-term customer contracts where we deem appropriate.
We have interest rate risk related to the term loan portion of
our senior secured credit facility as the interest rate on the
principal outstanding on the loans is variable. A 1% increase in
the interest rate would have the effect of increasing interest
expense by $4.0 million annually (based on the outstanding
principal balance at December 31, 2004).
Contractual Obligations
The following is a summary of our significant future contractual
obligations by year as of December 31, 2004:
Payments Due by Period
Less than
More than
Total
1 Year
1-3 Years
3-5 Years
5 Years
(In thousands)
Long-term debt obligations(1)
$
820,679
$
4,015
$
8,235
$
8,030
$
800,399
Operating lease obligations
15,700
7,100
7,800
800
—
Loans payable
2,734
2,734
—
—
—
License agreement
4,000
444
889
889
1,778
Total
$
843,113
$
14,293
$
16,924
$
9,719
$
802,177
(1)
Principally includes amortization payments required to be made
    under our senior secured credit facility, as well as the notes.
    See "Description of Indebtedness."
Covenant Compliance
We believe that our senior secured credit facility and the
indenture governing our outstanding notes are material
agreements, that the covenants are material terms of these
agreements and that information about the covenants is material
to an investor's understanding of our financial condition
and liquidity. The breach of covenants in the senior secured
credit facility that are tied to ratios based on Adjusted
EBITDA, as defined below, could result in a default under the
senior secured credit facility and the lenders could elect to
declare all amounts borrowed due and payable. Any such
acceleration would also result in a default under our indenture.
Additionally, under the senior secured credit facilities and
indenture, our ability to engage in activities such as incurring
additional indebtedness, making investments and paying dividends
is also tied to ratios based on Adjusted EBITDA.
56
Table of Contents
Covenant levels and pro forma ratios for the four quarters ended
December 31, 2004 are as follows:
December 31,
Covenant Level
2004 Ratio
Senior Secured Credit Facility(1)
Minimum Adjusted EBITDA to cash interest ratio
1.75
x
2.88
x
Maximum total debt to Adjusted EBITDA ratio
6.85
x
4.53
x
Indenture(2)
Minimum pro forma Adjusted EBITDA to pro forma fixed charge
    ratio required to incur additional debt pursuant to ratio
    provisions(3)
2.0
x
2.85
x
(1)
Our senior secured credit facility requires us to maintain an
    Adjusted EBITDA to cash interest ratio starting at a minimum of
    1.75x and a total debt to Adjusted EBITDA ratio starting at a
    maximum of 6.85x. Failure to satisfy these ratio requirements
    would constitute a default under the senior secured credit
    facility. If lenders under the senior secured credit facility
    failed to waive any such default, repayment obligations under
    the senior secured credit facility could be accelerated, which
    would also constitute a default under the indenture.
(2)
Our ability to incur additional debt and make certain restricted
    payments under our indenture, subject to specified exceptions,
    is tied to an Adjusted EBITDA to fixed charge ratio of at least
    2.0 to 1.
(3)
The ratio is calculated giving pro forma effect to the
    acquisition and the incurrences of debt under the indenture and
    the senior secured credit facility.
Adjusted EBITDA as used herein is defined as net income before
interest expense, provision for income taxes, depreciation and
amortization and further adjusted to exclude non-recurring
items, non-cash items and other adjustments permitted in
calculating covenants contained in the related senior secured
credit facility and indenture governing the notes, as shown in
the table below. We believe that the inclusion of supplementary
adjustments to EBITDA applied in presenting Adjusted EBITDA are
appropriate to provide additional information to investors to
demonstrate compliance with financing covenants. The
presentation of Adjusted EBITDA, a non-GAAP financial measure,
and ratios based thereon, do not comply with accounting
principles generally accepted in the United States.
Predecessor
Successor
Period
Period
January 1
October 30
Four Quarters
Year Ended December 31,
through
through
Ended
October 29,
December 31,
December 31,
2002
2003
2004
2004
2004(a)
(In thousands)
Net income
$
16,096
$
20,365
$
42,151
$
7,229
$
49,380
Income tax expense
11,910
11,438
11,970
7,275
19,245
Interest income (expense), net
776
(1,938
)
(3,156
)
9,654
6,498
Depreciation and amortization
33,822
29,109
22,715
16,269
38,984
EBITDA
62,604
58,974
73,680
40,427
114,107
Net reduction in SFAS 106 expense(b)
8,512
10,033
9,322
—
9,322
Excess (additional) corporate allocation(c)
(4,876
)
3,816
2,122
—
2,122
Removal of incremental corporate overhead(d)
—
5,091
8,025
—
8,025
Restructuring severance(e)
5,185
—
—
—
—
Productivity measures(f)
—
11,696
4,679
(62
)
4,617
Pension(g)
(2,317
)
8,079
1,529
—
1,529
57
Table of Contents
Predecessor
Successor
Period
Period
January 1
October 30
Four Quarters
Year Ended December 31,
through
through
Ended
October 29,
December 31,
December 31,
2002
2003
2004
2004
2004(a)
(In thousands)
Nigeria loss contract(h)
—
4,843
6,437
206
6,643
Nigeria casualty losses(i)
—
2,750
—
—
—
Provision for obsolete material(j)
—
3,300
2,100
—
2,100
New York State grant(k)
(8,000
)
1,289
—
—
—
Equity (earnings) losses(l)
479
133
1,013
(194
)
819
Insurance claim(m)
(10,145
)
—
—
—
—
Settlement of product liability claim(n)
—
—
(4,500
)
—
(4,500
)
China receivables(o)
—
—
970
—
970
Write-off of purchased in-process research and development assets
—
—
—
1,800
1,800
Inventory step-up write-off(p)
—
—
—
2,281
2,281
Other expense (income)(q)
1,535
(2,976
)
(826
)
1,017
191
Compensation adjustment(r)
(150
)
(150
)
(125
)
—
(125
)
Adjusted EBITDA
$
52,827
$
106,878
$
104,426
$
45,475
$
149,901
(a)
Reflects the combination of financial information for the
    Predecessor and Successor periods as required by the covenants
    of our senior secured credit facility and the indenture
    governing the notes.
(b)
Reflects the adjustment to historical expense for the change in
    postretirement benefits other than pension expense due to
    Ingersoll-Rand's retention of the obligations for all
    employees who are retired or eligible to retire as well as the
    results of actuarial valuations performed as of the transaction
    date for the portion retained by us.
(c)
Reflects the difference between the corporate overhead expenses
    allocated to us by Ingersoll-Rand and our estimated annual
    stand-alone expenses.
(d)
Reflects adjustment for removal of incremental corporate
    allocation initiated in 2003 by Ingersoll-Rand.
(e)
Reflects severance expenses associated with our efficiency
    initiatives. Subsequent to 2002, these expenses were included in
    cost of goods sold and selling and administrative expenses. See
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations."
(f)
Reflects severance expenses associated with our efficiency
    initiatives. The expenses were included in the cost of goods
    sold and selling and administrative expenses. See
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations."
(g)
Reflects an adjustment for additional funding of certain pension
    plans and the elimination of actuarial losses through purchase
    accounting.
(h)
Reflects losses under (i) a contract imposed on the
    business by Halliburton Industries terminated at the end of
    2004, and (ii) a contract in Nigeria we were forced to exit
    because of force majeure.
(i)
Reflects losses of inventory stocks resulting from a fire in a
    warehouse in Nigeria.
(j)
Offsets impact of decision to increase obsolete and slow moving
    inventory reserve level. See "Management's Discussion
    and Analysis of Financial Condition and Results of
    Operations."
(k)
Reflects one-time income from a New York State grant for the
    year ended December 31, 2002, and one-time charge related
    to refunding a portion of the grant in the year ended
    December 31, 2003. See "Management's Discussion
    and Analysis of Financial Condition and Results of
    Operations."
(l)
Non-cash (gains) losses in joint ventures.
(m)
Reflects gains from the settlement of an insurance claim
    relating to a fire that occurred in 2000.
58
Table of Contents
(n)
Reflects one-time gain from settlement of a legal claim. See
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations."
(o)
Reflects write-off of receivables related to business closure.
(p)
As a result of the transactions, we wrote up inventory in the
    amount of $7.4 million. Of this amount, $2.3 million
    was expensed in the two-month period from October 30, 2004
    through December 31, 2004.
(q)
Non-operating income and expense and other non-cash charges and
    credits. See "Management's Discussion and Analysis of
    Financial Condition and Results of Operations."
(r)
Reflects increased compensation expense for our Chief Executive
    Officer.
Recent Accounting Pronouncements
In December 2004, the FASB released SFAS 123R, Share-Based
Payments, that is a revision of SFAS No. 123,
"Accounting for Stock-Based Compensation." This
statement supersedes APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and its related
implementation guidance. SFAS 123R focuses primarily on
accounting for transactions in which an entity obtains employee
services in share-based payment transactions. We have elected to
early adopt the provisions of SFAS 123R as of
October 30, 2004. As a result, we recognized compensation
cost in relation to share-based compensation arrangements of $75
thousand for the period from October 30, 2004 through
December 31, 2004.
In November 2004, the FASB issued SFAS No. 151,
"Inventory Costs, an Amendment of Accounting Research
Bulletin No. 43, Chapter 4".
SFAS No. 151 clarifies that abnormal amounts of idle
facility expense, freight handling costs and wasted materials
(spoilage) should be recognized as current-period charges
and require the allocation of fixed production overheads to
inventory based on the normal capacity of the production
facilities. The guidance in this statement is effective for
inventory costs incurred during fiscal years beginning after
June 15, 2005. The adoption of this statement is not
expected to have a material impact on our financial reporting
and disclosures.
In December 2004, the FASB issued SFAS No. 153,
"Exchanges of Nonmonetary Assets, an Amendment of APB
Opinion No. 29, "Accounting for Nonmonetary
Transactions". SFAS No. 153 eliminates the
exception from fair value measurement for nonmonetary exchanges
of similar productive assets in paragraph 21 (b) of
APB Opinion No. 29 and replaces it with an exception for
exchanges that do not have commercial substance.
SFAS No. 153 specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange.
This statement is effective for fiscal years beginning after
June 15, 2005. The adoption of this statement is not
expected to have a material impact on our financial reporting
and disclosures.
Employee Benefit Plans
Pensions
We contributed a discretionary amount of $14.4 million to
our pension plans in 2003, $33.3 million for the period from
January 1, 2004 through October 29, 2004 and $0.5
million from the period from October 30, 2004 through
December 31, 2004. We contributed approximately
$3.6 million to our non U.S. plans during 2004. Our
policy is to fund an amount, which could be in excess of the
pension cost expensed, subject to the limitations imposed by
current tax regulations.
Pension benefit payments for 2004 were $17.7 million for the
period from January 1, 2004 through October 29, 2004
and $2.5 million for the period from October 30, 2004
through December 31, 2004. Pension expense for 2004 was
$3.4 million for the period from January 1, 2004 through
October 29, 2004 and $0.5 million for the period from
October 30, 2004 through December 31, 2004.
59
Table of Contents
Postretirement Benefits Other Than Pensions
We fund postretirement benefit costs principally on a
pay-as-you-go basis. Benefit payments for postretirement
benefits, which reflect future service, as appropriate, are
expected to be paid as follows: $22,000 in 2005, $82,000 in
2006, $213,000 in 2007, $491,000 in 2008, and $11.7 million
for the years 2009 through 2014.
In connection with the transactions, Ingersoll-Rand has agreed
to retain all postretirement benefit obligations with respect to
our employees who were retired or were eligible to retire on or
prior to the consummation of the transactions. Our
postretirement benefit obligations decreased by approximately
67% as a result of Ingersoll-Rand's retention of these
obligations.
Critical Accounting Policies
The notes to the financial statements include a summary of
significant accounting policies and methods used in the
preparation of the consolidated financial statements and the
following summarizes what we believe are the critical accounting
policies and methods we use:
•
Revenue recognition
— We use the completed
    contract method for recognizing revenue for our long-term
    contracts. This method recognizes revenue when the contract is
    substantially completed as opposed to the
    percentage-of-completion method which recognizes revenue as the
    contract progresses. If we use the percentage-of-completion
    method to recognize revenue, revenue would be recognized in
    periods prior to substantial completion of the contract.
The completed contract method requires the use of estimates as
    to the future costs that will be incurred related to the
    contract. These costs include material, labor and overhead.
    Factors influencing these future costs include the availability
    of materials and skilled laborers.
•
Inventories
— We purchase materials for the
    manufacture of components for use in our contracts and for use
    by our aftermarket parts and services business. The decision to
    purchase a set quantity of a particular item is influenced by
    several factors including: current and projected cost; future
    estimated availability; existing and projected contracts to
    produce certain items; and the estimated needs for our
    aftermarkets parts and services business. We value our inventory
    at the lower of cost or market value. We estimate the net
    realizable value of our inventories and establish reserves to
    reduce the carrying amount of these inventories as necessary.
•
Employee benefit plans
— We provide a range of
    benefits to employees and retired employees, including pensions,
    postretirement, postemployment and health care benefits.
    Determining the cost associated with such benefits is dependent
    on various actuarial assumptions, including discount rates,
    expected return on plan assets, compensation increases, employee
    mortality and turnover rates, and health care cost trend rates.
    Independent actuaries perform the required calculations to
    determine expense in accordance with U.S. generally
    accepted accounting principles. Actual results may differ from
    the actuarial assumptions and are generally accumulated and
    amortized over future periods. We review our actuarial
    assumptions at each measurement date and make modifications to
    the assumptions based on then current rates and trends if
    appropriate to do so. The discount rate, the rate of
    compensation increase and the expected long-term rates of return
    on plan assets are determined as of the measurement date. The
    discount rate reflects a rate at which pension benefits could be
    effectively settled. The discount rate is established and based
    primarily on the yields of high-quality fixed-income investments
    available and expected to be available during the period to
    maturity of the pension and postretirement benefits. We also
    review the yields reported by Moody's on AA corporate bonds
    as of the measurement date. The rate of compensation increase is
    dependent on expected future compensation levels. The expected
    long-term rates of return are projected to be the rates of
    return to be earned over the period until the benefits are paid.
    Accordingly, the long-term rates of return should reflect the
    rates of return on present investments, expected contributions
    to be received during the current year and on reinvestments over
    the period. The rates of return utilized reflect the expected
    rates of return during the periods for which the payment of
    benefits is deferred. The expected long-term rate
60
Table of Contents
of return on plan assets used is based on what is realistically
    achievable based on the types of assets held by the plans and
    the plan's investment policy. We review each plan and its
    returns and asset allocations to determine the appropriate
    expected long-term rate of return on plan assets to be used. At
    the end of 2002, we believed a revision to our long-term
    expectations for returns was necessary based upon the market
    performance experienced in 2001 and 2002. We believe that the
    assumptions utilized in recording its obligations under its
    plans are reasonable based on input from its actuaries, outside
    investment advisors, and information as to assumptions used by
    plan sponsors.
Stockholders' equity for the periods from October 30,
    2004 through December 31, 2004, from January 1, 2004
    through October 29, 2004, and for the year ended
    December 31, 2003, include a reduction for a minimum
    liability adjustment net of tax of $0.9 million, $5.0 million
    and $(0.9) million, respectively. The reason for the increase in
    the minimum liability adjustment year-over-year is primarily due
    to the change in the discount rates.
Changes in any of the assumptions that were used in computing
    the net periodic pension cost or postretirement cost could have
    an impact on the various components that comprise these costs.
    Estimated sensitivities to the U.S. net periodic pension cost of
    a 0.25% rate decrease in the two basic assumptions are a
    follows: the discount rate would increase expense by
    approximately $1.0 million, and the estimated return on
    assets assumption would increase expense by approximately
    $0.6 million. A 0.25% rate decrease in the discount rate
    for postretirement benefits would increase net periodic
    postretirement benefit cost by $0.3 million and a 1.0%
    increase in the health care cost trend rate would increase the
    cost by approximately $2.8 million.
•
Commitments and contingencies
— We are involved
    in various litigations, claims and administrative proceedings,
    including environmental matters, arising in the normal course of
    business. We have recorded reserves in the financial statements
    related to these matters which are developed based on
    consultation with legal counsel and internal and external
    consultants and engineers, depending on the nature of the
    reserve. We provide for environmental reserves when, in
    conjunction with our internal and external counsel, we determine
    that a liability is both probable and estimable. In many cases,
    the liability is not fixed or capped when we first record a
    liability for a particular site. Factors that affect the
    recorded amount of the liability in future years include: our
    participation percentage due to a settlement by or bankruptcy of
    other potentially responsible parties; a change in the
    environmental laws requiring more stringent requirements; a
    change in the estimate of future costs that will be incurred to
    remediate the site; and changes in technology related to
    environmental remediation. We have property and casualty
    insurance to cover such liabilities, but there is no guarantee
    that the coverage will be sufficient.
We have accrued liabilities for product liability claims,
    including workers' compensation matters and product
    warranty issues. We have recorded reserves in the financial
    statements related to these matters, which are developed using
    input derived from actuarial estimates and historical and
    anticipated experience data depending on the nature of the
    reserve. We believe our estimated reserves are reasonable. If
    the level of claims changes or if the cost to provide the
    benefits related to these claims should change, our estimate of
    the underlying liability may change.
•
Goodwill and other intangible assets
— We have
    significant goodwill and other intangible assets on our balance
    sheet. The valuation and classification of these assets and the
    assignment of amortization lives involves significant judgments
    and the use of estimates. The testing of these intangible assets
    under established accounting guidelines for impairment also
    requires significant use of judgment and assumptions,
    particularly as it relates to the identification of reporting
    units and the determination of fair market value. These
    estimated fair market values are based on estimates of future
    cash flows of our businesses. Factors affecting these future
    cash flows include: the continued market acceptance of the
    products and services offered by our businesses; the development
    of new products and services by our businesses and the
    underlying cost of development; the future cost structure of our
    businesses; and future technological changes. Our goodwill and
    other intangible assets are tested and reviewed for impairment
    on an annual basis or when there is a significant change in
    circumstances. We believe that
61
Table of Contents
our use of estimates and assumptions are
    reasonable and comply with generally accepted accounting
    principles. Changes in business conditions could potentially
    require future adjustments to these valuations.
The preparation of all financial statements
includes the use of estimates and assumptions that affect a
number of amounts included in our financial statements. If
actual amounts are ultimately different from previous estimates,
the revisions are included in our results for the period in
which the actual amounts become known. Historically, the
aggregate differences, if any, between our estimates and actual
amounts in any year, have not had a significant impact on the
consolidated financial statements.
62
Table of Contents
INDUSTRY OVERVIEW
Compression is a process whereby a volume of gas
or liquid at an existing pressure is moved to a desired higher
pressure. Compression is required at many steps of the oil and
natural gas production and processing cycle: at the wellhead, at
gathering lines, in pipelines, in storage systems, and at
refineries and processing facilities.
Upstream
Over the life of an oil and gas well, reservoir
pressure and deliverability typically decline as reserves are
extracted. With respect to gas, as the natural reservoir
pressure of the well declines below the line pressure of the gas
gathering or pipeline system used to transport the product, gas
no longer flows naturally in those facilities. At this time
compression equipment is applied to increase and overcome the
pressure into the system. Compression is also used for enhanced
oil production via secondary or tertiary recovery techniques,
such as by re-injecting gas to lift oil or maintain reservoir
pressure, increasing the reservoir production rate and yield.
Midstream
Midstream applications involve the transmission
and storage of hydrocarbons. As gas is transported through a
pipeline, compressor units are applied along the pipeline to
manage the flow of natural gas through the pipeline to its
destination.
Upon reaching a processing facility, crude oil
and natural gas are generally impure and not marketable as
produced at the wellhead. Processing equipment is used to
separate oil, gas and water and to remove various contaminants
in preparation for further processing. This processing involves
chemical reactions at specific temperatures, volumes and
pressures. Compression is integral to affect these processes.
Compression is also used in gas storage projects
to inject gas into underground reservoirs during off-peak
seasons for withdrawal later during periods of high demand.
Downstream/ Industrial
In refining and petrochemical applications, oil
and gas are further treated to create a wide range of fuels,
industrial gases and chemicals. In refineries, compression is
integral to producing fuels such as gasoline, jet fuel, diesel
and heating oil from crude oil.
In late 1999, the Clean Air & Water Act
was legislated with a Tier 2 revision to reduce the sulfur
content of gasoline and diesel by mid-2006. The Clean Air Act,
Tier 2 impacts all domestic refiners and international
suppliers who ship to the U.S. with respect to sulfur, toxins,
diesel and gasoline fuels emissions, and air and water purity.
These regulations are driving increased use of compression
equipment in the refinery industry as such products are integral
to the processes that allow the production of fuels that meet
the more stringent emissions standards set forth by the
U.S. Environmental Protection Agency.
Other downstream compression applications are
found in the petrochemical industry where hydrocarbon raw
material (primarily crude oil and natural gas) are processed
into products such as ethylene, propylene, ammonia or methanol
for the production of end use products like fertilizer, plastics
and fibers.
Rotating Equipment Industry
The rotating equipment and services industry
manufactures and services a wide range of technologically
advanced equipment, including centrifugal and reciprocating
compressors, steam and gas turbines, expanders and control
systems. Demand for these solutions comes from a wide variety of
large end markets, including the three major segments of the oil
and gas industries (upstream, involving the production of oil
and gas; midstream, involving the preparation and transportation
of natural gas and liquids for future use; and downstream,
involving refining), and the petrochemical, chemical, general
industrial and power industries.
63
Table of Contents
The rotating equipment industry includes a wide
and diverse range of products, which can be grouped into two
distinct categories:
•
"standard" equipment, based on a
    single, non-custom design, used for low-horsepower,
    lower-pressure and lower-volume applications in wellhead
    production from onshore or shallow-water offshore platform
    production; and
•
custom-engineered equipment, built to customer
    specifications, engineered for the specific operating
    environment and application in which it will be put to use. This
    equipment is generally used in high-pressure/volume
    applications, typically consists of large equipment packages,
    and is generally used in large scale production operations
    including mission-critical applications in deepwater offshore
    sites, major pipeline and storage systems and large processing
    and refining facilities and liquefying natural gas.
Most of our revenues are generated from the sale
and servicing of this second category of rotating equipment. We
estimate that the worldwide aggregate annual value of new unit
sales of the classes of equipment we manufacture and the
aftermarket parts and services needs of the installed base of
such equipment (both in-house and outsourced) is approximately
$10 billion.
Our industry is typically divided into two
segments: new unit sales and aftermarket parts and services.
New Units
New unit sales includes the engineering,
manufacturing and sales of reciprocating and centrifugal
compressors, steam and gas turbines, expanders and control
systems.
•
Reciprocating
    Compressors.
Reciprocating
    compressors use traditional piston and cylinder design to
    increase pressure within a chamber. Typically, reciprocating
    compressors are used in lower volume/higher compression ratio
    applications, including refinery processes, natural gas
    gathering and processing, extraction of natural gas liquids,
    chemical and refrigeration processes, and natural gas, ethylene,
    carbon dioxide and natural gas pipelines.
•
Centrifugal
    Compressors.
Centrifugal
    compressors are a class of turbomachinery that uses a series of
    graduated impellers to increase pressure. Centrifugal
    compressors are typically used in a variety of
    higher-volume/lower compression ratio, and low and high pressure
    applications, including oil and gas production, liquid natural
    gas, gas to liquid, synfuels, and process applications similar
    to reciprocating compressors.
•
Turbines.
Steam and gas turbines are typically used as prime movers for
    mechanical and electrical drive applications including
    compressors, pumps, fans, blowers, and electrical generators.
Since many of the units we sell are placed in
critical applications for clients, it is important that this
equipment functions efficiently, reliably and at a low cost. For
this reason we believe that clients are focused on reducing the
total cost of ownership throughout the life cycle of the
equipment, and typically seek the most advanced technology in
order to increase operating efficiency. Additionally, with units
having a typical operating life of 30 years or more, units
have substantial long term parts and services needs over their
operating lives. For this reason we also believe clients
consider quality and breadth of aftermarket support in selecting
a supplier of rotating equipment.
Aftermarket Parts and Services
With operational lives measured in decades, there
is a substantial installed base of compressors and related
equipment in operation worldwide. Over their operating life
cycle, these units have substantial parts and servicing needs.
In addition, the units are typically completely revamped on a
periodic basis. Clients purchase parts and upgrades either from
the OEM or third-party providers. Repair, maintenance, and
revamp service needs are met through a combination of client
inhouse resources, OEMs and third-party service providers.
Clients are increasingly outsourcing their services, as
outsourcing affords clients greater financial and operating
flexibility by reducing their investment in maintenance
personnel while providing them technically proficient service
resources with strong product experience. When selecting an
aftermarket service
64
Table of Contents
provider, clients typically seek suppliers who
can provide responsive and reliable service and solutions, from
locally based service centers, across their entire installed
base.
Industry Conditions
Overall demand for compression products and
services is generally linked to oil and natural gas consumption,
both domestically and internationally. We believe that the
rotating equipment and aftermarket services industry continues
to have significant growth potential due to the following
factors:
•
natural gas consumption increased worldwide at an
    average rate of 2.4% per year as a result of worldwide
    economic growth and the recognition of natural gas as a clean
    air fuel;
•
increased demand for forecasted natural gas is
    driving substantial growth in spending on liquefied natural gas
    infrastructure; forecast spending on LNG plant equipment for
    2005-2008 is $13.4 billion, 155% more than was spent on
    such equipment from 1964-2004;
•
decline rates associated with maturing natural
    gas fields in the United States (as reflected in the graph
    below) and other countries have resulted in increased
    requirements for compression products and services to maintain
    commercially viable levels of production;
•
the refining sector continues to experience
    demand pressures as current refinery capacity is reaching a peak;
•
environmental laws such as the Clean Air Act and
    the curtailing of the prior practice of flaring gas will
    increase the demand for compression products and services;
•
the production of natural gas and oil worldwide,
    as reflected in the graph below, will continue to grow as a
    result of increasing demand for fossil fuels; and
65
Table of Contents
•
continued development of pipeline infrastructure,
    as reflected in the graph below, particularly in Asia and Latin
    America, and increased privatization of state-owned energy
    producers internationally, are leading to increased outsourcing
    of compression services.
We believe that rotating equipment solutions
providers with global scale will be well positioned to
participate in a disproportionately high share of the future
growth in this industry as customers increasingly shift their
business to the handful of companies with the ability to fulfill
the full range of equipment and service needs worldwide.
Industry Stability
Demand for compressors and related products and
aftermarket services is generally less affected by short-term
market cycles and oil and gas price volatility than the
financial performance of companies operating in other sectors of
the oilfield services industry because:
•
the demand for rotating equipment solutions is
    tied primarily to oil and natural gas consumption, which is
    generally less cyclical in nature than exploration activities;
•
rotating equipment is typically required for
    (i) oil and gas to be delivered from the wellhead to
    end-users, and (ii) end users to be able to process the oil
    and gas;
•
the customer base for rotating equipment
    solutions covers a wide range of end markets; and
•
demand for rotating equipment and services is
    geographically diversified.
Adding to this stability is the fact that, while
rotating equipment often must be specifically engineered or
reconfigured to meet the unique demands of our customers, the
fundamental technology of compression equipment has not
experienced significant technological change.
The foregoing information includes projections,
or "forward-looking statements." Projections are
inherently uncertain; actual events will differ from the
projections. Forecasts are particularly likely to be inaccurate,
especially over long periods of time. See "Risk
Factors" for factors that could cause actual results to
vary from results referred to in the forward-looking statements
above. See "Market and Industry Data."
66
Table of Contents
BUSINESS
We are among the largest global suppliers of rotating equipment
solutions to the worldwide oil, gas, petrochemical and process
industries. In 2004, approximately 94% of our combined revenues
were generated from oil and gas infrastructure spending and 62%
of our total combined revenues were generated by our aftermarket
parts and services segment, with the remainder generated by our
new units segment. Our services and products are used for a wide
range of applications, including oil and gas production,
high-pressure field injection and enhanced oil recovery,
pipelines, refinery processes, natural gas processing, and
petrochemical production. We believe we have the largest
installed base in the world of the classes of equipment we
manufacture, with approximately 40% of the total installed base
of equipment in operation. Our installed base of equipment
includes such well-recognized brand names as Dresser-Rand,
Dresser-Clark, Worthington, Turbodyne and Terry. We provide a
full range of aftermarket parts and services to this installed
base through our global network of 24 service and support
centers covering 105 countries. Our extensive and diverse
client base consists of most major independent oil and gas
producers and distributors worldwide, national oil and gas
companies, and chemical and industrial companies. Our clients
include BP, ChevronTexaco, Statoil, ExxonMobil, Lukoil, Sinopec,
Shell Chemical, Duke Energy and the U.S. and certain foreign
governments. No single client has represented more than 5% of
our total revenues over any consecutive two-year period.
We operate globally with manufacturing facilities in the United
States, France, Germany, Norway, India and Brazil. We have one
of the broadest sales and services networks in the industry,
with locations in all of the major international energy markets,
established coverage of 105 countries, and over
4,600 employees worldwide. We believe our recent financial
performance demonstrates our ability to improve our results
through on-going commitment to operational excellence, as well
as through the growth of our services-centered, solutions-based
business model. For the year ended December 31, 2003 we
generated net income of $20.4 million and EBITDA of
$59.0 million. For the period from January 1, 2004
through October 29, 2004 and the period from
October 30, 2004 through December 31, 2004 we
generated net income of $42.2 million and
$7.2 million, respectively, and EBITDA of
$73.7 million and $40.4 million, respectively. This
reflects the impact of both our growth-oriented business
realignment and our continued focus on operating efficiency. Our
backlog at December 31, 2004 was $637.6 million
compared to $419.9 million at December 31, 2003. Our
backlog increased from $520.0 million at March 31,
2004 to $841.8 million at March 31, 2005, of which we
expect $250.1 million not to be filled by December 31,
2005.
We continue to evolve our business toward a solutions-based
service offering that combines our industry-leading technology,
proprietary worldwide service center network and deep product
expertise. This approach drives our growth as we offer
integrated service solutions that help our clients maximize
returns on their production and processing equipment. We believe
our business model and alliance-based approach align us with our
clients who are shifting from purchasing isolated units and
services on a transactional basis to choosing service providers
that can help optimize performance over the entire life cycle of
their equipment. Our alliance program encompasses both the
provision of new unit and/or services, and we offer our clients
a dedicated team, streamlined engineering and procurement
process and a life cycle approach to manufacturing, operating
and maintaining their equipment, whether originally manufactured
by us or by a third party. In our alliances, we are either the
exclusive or preferred supplier of equipment and aftermarket
parts and services to a client. Our alliances enable us to:
•
lower clients' total cost of ownership and improve
    equipment performance;
•
lower our and our clients' transaction costs;
•
better forecast our future revenues; and
•
develop a broad, continuing business-to-business relationship
    with our clients that often results in a substantial increase in
    the level of activity with those clients.
The markets in which we operate are large and fragmented. We
estimate that the worldwide aggregate annual value of new unit
sales of the classes of equipment we manufacture and the
aftermarket parts and services needs of the installed base of
such equipment (both in-house and outsourced) is approximately
67
Table of Contents
$10 billion. We believe that we are well
positioned to benefit from a variety of long-term trends driving
demand in our industry, including:
•
the trend to increased outsourcing of equipment
    maintenance and operation;
•
the maturation of producing fields worldwide,
    which requires increasing use of compression equipment to
    maintain production levels;
•
the substantial increase in demand for natural
    gas, which is driving growth in gas production, storage and
    transmission infrastructure;
•
regulatory and environmental initiatives,
    including clean fuel legislation and stricter emissions controls
    worldwide;
•
the aging installed base of equipment, which is
    increasing demand for aftermarket parts and services, revamps
    and upgrades;
•
increasing construction of natural gas
    production, storage and transportation infrastructure; and
•
the increased worldwide demand for fuel and
    feedstock resulting from economic growth.
Competitive Strengths
Global Presence and Market
Leadership.
We believe that our broad
portfolio of products and services, global presence, strong
brand recognition, track record of innovation and reputation for
quality and performance, combined with established coverage of
105 countries, provide us with a significant advantage in
competition for business from large, multinational customers. We
operate in all of the world's significant energy markets
and believe that we are a leading provider in most of the
markets we serve.
Largest Installed Base in the
Industry.
As of December 31,
2004, we estimate that there were more than 77,000 of our units
in operation. We believe this represents approximately 40% of
all the units in our classes of products that are currently in
operation, and is the largest installed base of such equipment
in the industry. This significant scale advantage offers a
number of competitive benefits, including:
•
a significant opportunity to grow our aftermarket
    parts and services business as a result of the portion of our
    installed base currently serviced by clients in-house, combined
    with an industry trend toward outsourcing;
•
a substantial source of stable, recurring,
    defensible high-margin aftermarket revenue from the significant
    parts and services requirements of units over their long
    operational lives and clients' general preference for OEM
    parts and services; and
•
the capacity to support both a high level of
    reinvestment in research and development and a global service
    center network that is difficult for competitors with a smaller
    installed base to match.
Largest Network of Service and Support
Centers.
We have 24 service and
support centers employing approximately 1,000 service personnel
in 14 countries, providing coverage in 105 countries and
offering a broad range of support services. Because many
aftermarket parts and services sales decisions are made by
clients at the local plant level, on the basis of supplier
expertise, local presence and response time, we believe that our
global network puts us in position to win aftermarket business
by responding quickly to client service needs with local
resources and OEM product knowledge and experience. This network
helps us to protect and grow our aftermarket parts and services
business.
Leading Technology
Platform.
We have a long history of
technology leadership and innovation in our industry. Our
research efforts center around leading technologies that
maximize operating performance by increasing efficiency,
durability, reliability and versatility. We are focused on
developing new platform products, enhancing our existing
platforms, and developing upgrades that can be offered to our
existing installed base of units. For example, in the mid-1990s
we spent approximately five years and over $60 million to
develop our DATUM turbo compressor platform offerings. We
believe this platform is more efficient than competing
offerings, offers clients the lowest total cost of ownership,
reduces emissions and noise levels and
68
Table of Contents
improves ease and speed of maintenance. In
addition, we have brought to market numerous upgrades to our
installed base in the past several years, including emission
control equipment, performance and maintenance enhancers, and a
suite of remote monitoring instrumentation.
Fastest Cycle Time.
We believe we generally have the fastest cycle time in the
industry among manufacturers in our product range. Our short
cycle time, the time from order booking to unit delivery, is
valuable to the client and provides us with a competitive
advantage. For example, the rules based design of our DATUM
compressor platform, combined with our proprietary product
Configurator software, allow us to shorten the front-end
specification, design and engineering phases of the
manufacturing process typically by one-third, thereby reducing
the overall delivery time to our clients. On a typical oil and
gas project, this can reduce unit delivery time by as much as
twelve weeks, thus reducing project costs and providing
earlier start-up of the production equipment.
Substantial Investment in
Systems.
We view systems and processes
as key elements in providing rapid, high-quality, differentiated
service. We have invested substantial resources to develop a
number of key proprietary systems, including:
•
Configurator.
Our
    proprietary system for automating the preliminary engineering
    phase of designing a product to client specifications and
    automatically generating design drawings and bills of materials,
    which enables us to reduce costs and reduce by more than two
    months the typical industry cycle time of 12-14 months.
•
D-R Avenue.
Part of
    our Client Relationship Management (CRM) system, D-R Avenue is a
    recently deployed proprietary database with information on our
    installed base of equipment as well as the equipment of some of
    our competitors, including type, location, age, application, and
    maintenance history. This database positions us to better serve
    our clients and grow our aftermarket parts and services business
    by leveraging our knowledge and resources through a proactive
    sales approach.
•
Client Interface and Response System
    (CIRS).
Part of our CRM system, this
    proprietary client relationship system allows clients to log any
    technical support or service requests they have into our system,
    automatically directs the request to both our field-based
    account manager and the most appropriate subject-matter expert
    in our company, and tracks our follow up on the client request.
    This provides the client with rapid access to the most
    knowledgeable personnel in our organization, and allows us to
    effectively monitor and manage our responsiveness to client
    requests.
•
Skills Registry.
This database contains profiles of our service personnel,
    including education, training, experience, performance and
    safety records, and language skills. We frequently provide
    clients with profiles of our proposed service personnel,
    allowing them the opportunity to preapprove members of their
    service team.
•
TES.
We use a
    Siebel-based technology enabled selling tool (TES), which allows
    us to systematically manage the entire sales cycle from lead
    generation to order booking on a global basis. This system
    provides productivity gains in our business processes associated
    with opportunity management, data collection and analysis,
    market intelligence, and communication associated with our
    clients and markets.
Strong and Experienced Management
Team.
Our management team has a
demonstrated track record of financial and operational
achievement. The management team has an average of 17 years
experience with us, including our CEO who has been with us for
24 years, and has extensive industry experience and
longstanding customer relationships. This management team has
been responsible for the successful services revenue growth and
cost reduction initiatives that have driven our increased
profitability.
Attractive Business
Model.
Our business model has several
attractive features, including:
•
Strong, Stable Cash Flow with Low Growth
    Capital Requirements.
As a result of
    the recurring revenue from our aftermarket parts and services
    business, progress payments from customers that limit our need
    for additional working capital as we grow, and the moderate
    capital expenditures needed to support our services-based growth
    model, our business generates strong, recurring cash flows. Our
    cash
69
Table of Contents
flow from operations was $51.0 million,
    $57.7 million and $17.9 million, for the year ended
    December 31, 2003, the period from January 1, 2004
    through October 29, 2004 and the period from
    October 30, 2004 through December 31, 2004,
    respectively.
•
Visibility.
We have
    a high degree of visibility into our forecasted financial
    performance. A substantial portion of our new unit orders is
    booked six to nine months in advance of delivery. As of
    December 31, 2004 and December 31, 2003, our new units
    backlog was $488.9 million and $287.7 million,
    respectively, representing a 69.9% increase. Since December
    2000, our new units backlog has consistently exceeded 80% of our
    next twelve month new units revenues. Customers may cancel an
    order at any time. Upon cancellation, customers are
    contractually obligated to pay us an amount sufficient to cover
    our costs and commitments incurred through the date of
    cancellation, plus a profit margin. Since 2003, only two orders
    have been cancelled.
Business Strategy
In 2004, approximately 94% of our combined
revenues were generated from energy infrastructure and oilfield
spending. Additionally, 62% of our total combined revenues were
generated by our aftermarket parts and services business. We
intend to continue to focus on the oilfield, natural gas and
energy sectors and thus expect to capitalize on the expected
long-term growth in equipment and services investment,
especially related to natural gas, in these sectors.
Specifically, we intend to:
Increase Sales of Aftermarket Parts and
Services to Existing Installed Base.
The substantial portion of the aftermarkets parts and services
needs of our existing installed base of equipment that we
currently do not, or only partially, service represents a
significant opportunity for growth. We believe the market has a
general preference for aftermarket OEM parts and services. We
are implementing a proactive approach to aftermarket parts and
services sales that capitalizes on our knowledge of the
installed base of our own and our competitors' equipment.
By using D-R Avenue, we are in a position to be able to identify
technology upgrades that improve the performance of our
clients' assets and to proactively suggest upgrade and
revamp projects that clients may not have considered. We are
upgrading our service response by integrating the expertise of
our factory-based product engineers with the client-oriented
service personnel in the field through our CIRS system. The CIRS
system significantly enhances our ability to rapidly and
accurately respond to any technical support or service request
from our clients. We believe our premium service level will
result in continued growth of sales of aftermarket parts and
services.
Expand Aftermarket Parts and Services Business
to Non-Dresser-Rand OEM Equipment.
We
believe the aftermarket parts and services market for
non-Dresser-Rand equipment represents a significant growth
opportunity that we have only just begun to pursue on a
systematic basis. As a result of the knowledge and expertise
derived from our long history and experience servicing the
largest installed base in the industry, combined with our
extensive investment in technology, we have a proven process of
applying our technology and processes to improve the operating
efficiency and performance of our competitors' products.
Additionally, with the largest global network of full-capability
service centers, we are often in a position to provide quick
response to clients and to offer local service. We believe these
are important service differentiators for our clients. Through
the D-R Avenue project, we have assembled a significant amount
of data on competitors' installed equipment base, and we
intend to capitalize on our knowledge, our broad network of
service centers, flexible technology and existing relationships
with most major industry participants to grow our aftermarket
parts and services solutions for non-Dresser-Rand equipment.
Grow Alliances.
As a
result of the need to improve efficiency in a competitive global
economy, oil and gas companies are frequently consolidating
their supplier relationships and seeking alliances with
suppliers, shifting from purchasing units and services on an
individual transactional basis to choosing service providers
that can help them optimize performance over the entire life
cycle of their equipment. In the past three years, we have seen
a high level of interest among our clients in seeking alliances
with us, and we have entered into agreements with more than 30
of our major clients. We plan to leverage our market leadership,
global presence and comprehensive range of products and services
to continue to take advantage of this trend by pursuing new
client alliances as well as strengthening our existing
alliances. We currently are the only alliance
70
Table of Contents
partner for rotating equipment with Statoil,
Marathon Ashland Petroleum, Shell Chemicals (USA) and
others. In addition, we are a preferred, non-exclusive supplier
to other alliance partners, including British Petroleum,
ConocoPhillips, ExxonMobil and Duke Energy.
Expand our Performance-Based Long-Term Service
Contracts.
We are growing the
outsourced services market with our performance-based operations
and maintenance solutions (known as our
Availability+
program), which are designed to offer clients significant
value (improved equipment performance, decreased life cycle cost
and higher availability levels) versus the traditional services
and products approach. These contracts generally represent
multiyear, recurring revenue opportunities for us that typically
include a performance-based element to the service provided. We
offer these contracts for most of the markets that we serve.
Introduce New and Innovative Products and
Technologies.
We believe we are an
industry leader in introducing new, value-added technology.
Product innovation has historically provided, and we believe
will continue to provide, significant opportunities to increase
revenues from both new product sales and upgrades to our, and
other OEMs', installed base of equipment. Many of our
products utilize innovative technology that lowers operating
costs, improves convenience and increases reliability and
performance. Examples of recent new offerings include adapting
the DATUM compressor platform for the revamping of other OEM
equipment, a new design of dry-gas seals and bearings, and a new
generation of multiphase turbo separators. We recently have
introduced a complete line of remote-monitoring and control
instrumentation that offers significant performance benefits to
clients and enhances our operations and maintenance services
offering. We plan to continue developing innovative products,
including new compressor platforms for subsea and underground
applications, which would further open up new markets to us.
Continue to Improve
Profitability.
We continually seek to
improve our financial and operating performance through cost
savings and productivity improvements. Since the fourth quarter
of 2002, we adopted a number of restructuring programs across
our entire company. An important element in these programs was
process innovation that permitted us to streamline our
operations. As a result, from September 30, 2002 through
December 31, 2004, we consolidated eight facilities and
reduced headcount from 5,849 to 4,631 employees. As a
result of our business realignment toward our aftermarket parts
and services segment, our lean manufacturing initiatives and our
decision to begin charging customers a margin on third-party
equipment they ask us to package with our own units, our
operating income per employee (based on the average number of
employees in each period) for the year ended December 31,
2004 improved substantially as compared to the year ended
December 31, 2003. We are focused on continuing to improve
our cost position in every area of our business, and we believe
there is substantial opportunity to further increase our
productivity in the future.
Selectively Pursue
Acquisitions.
We intend to continue
our disciplined pursuit of acquisition opportunities that fit
our business strategy. We expect to make acquisitions within the
energy sector that add new products or technologies to our
portfolio, provide us with access to new markets or enhance our
current market positions. Given our size and the large number of
small companies in our industry and related industries, we
believe we are well positioned to be an industry consolidator
over time.
71
Table of Contents
Services and Products
We design, manufacture and market highly
engineered rotating equipment and services sold primarily to the
worldwide oil, gas, petrochemical and industrial process
industries. Our segments are new units and aftermarket parts and
services. The following charts show the proportion of our
revenue generated by segment, geography and end market for the
periods indicated:
New Units
We are a leading manufacturer of
highly-engineered turbo and reciprocating compression equipment
and steam turbines and also manufacture special-purpose gas
turbines. Our new unit products are built to client
specifications for long-life, critical applications. The
following is a description of the new unit products that we
currently offer.
Turbo Products.
We
are a leading supplier of turbomachinery for the oil and gas
industries worldwide. In 2004, in North America new unit
turbomachinery sales, we were the leader, and continued to rank
in the top three in worldwide market share. Turbo products sales
represented 48.7%, 62.5% and 53.4% of our total revenues for the
fiscal years ended 2004, 2003 and 2002, respectively.
Centrifugal compressors utilize turbomachinery technology that
employs a series of graduated impellers to increase pressure.
Generally, these centrifugal compressors are used to re-inject
natural gases into petroleum fields to increase field pressures
for added petroleum recovery. In addition, centrifugal
compression is used to separate the composition of various gases
in process applications to extract specific gases. These
compressors are also used to provide the compression needed to
increase pressures required to transport gases between gas
sources through pipelines.
72
Table of Contents
Applications for our turbo products include gas
lift and injection, gas gathering, storage and transmission,
synthetic fuels, ethylene, fertilizer, refineries and chemical
production.
In 1995, we introduced the DATUM product line,
which incorporates enhanced engineering features that provide
significant operating and maintenance benefits for our clients.
The DATUM is a comprehensive line of radial and axial split,
modular and scalable construction, for flows to 500,000 cubic
feet per minute(CFM), and discharge pressures to over 10,000
pounds per square inch gauge (psig). In some applications, a
single DATUM compressor can compress greater flows per frame
size than a comparable existing product offering, resulting in
the capability to handle the same pressure ratio with less
frames. The DATUM product line also offers improved rotor
stability characteristics. DATUM compressors are available in 14
frame sizes. In addition to the DATUM centrifugal compressor
line, we manufacture a line of axial flow compressors, legacy
centrifugal compressors, hot-gas expanders, gas and power
turbines and control systems.
In addition, we offer a variety of gas turbines
ranging in power capacity from approximately 1.5 to
60 megawatts (MW), which support driver needs for various
centrifugal compressor product lines, as well as for power
generation applications.
Reciprocating
Compressors.
We are a leading supplier
of reciprocating compressors, offering products ranging from
medium to high speed separable units driven by engines to large
slow speed motor driven process reciprocating compressors. In
2004, in North America new unit reciprocating compressor sales,
we were the clear leader, and continued to rank in the top three
in worldwide market share. Reciprocating compressor sales
represented 32.3%, 23.1% and 28.8% of our total revenues for the
fiscal years ended 2004, 2003 and 2002, respectively.
Reciprocating compressors use a traditional piston and cylinder
design engine to increase pressure within a chamber. Typically,
reciprocating compressors are used in lower volume/higher
compression ratio applications. We offer 11 models of process
reciprocating compressors, with power capacity ranging from 5 to
45,000 HP, and pressures ranging from vacuum to 60,000 psig. We
offer six models of separable compressors, with power ratings to
10,500 HP. Applications for our reciprocating compressors
include refiner processes, natural gas transmission and
processing, high pressure injection, pipelines, production,
natural gas liquid recovery, gas gathering, gas lift, gas
reinjection and fuel gas booster.
Steam Turbines.
We
are a leading supplier of standard and engineered mechanical
drive steam turbines and turbine generator sets. Steam turbines
represented 19.0%, 14.4% and 17.8% of our total revenues for the
fiscal years ended 2004, 2003 and 2002, respectively. Steam
turbines use steam from power plant or process applications and
expand it through nozzles and fixed and rotating vanes,
converting the steam energy into mechanical energy of rotation.
We are one of the few remaining North American manufacturers of
standard and engineered multi-stage steam turbines. Our
mechanical drive steam turbine models have power capacity
ranging from 2 to 75,000 HP and are used primarily to drive
pumps, fans, blowers and compressors. Our models that have power
capacity up to 75,000 kW are used to drive electrical
generators. Our steam turbines are used in a variety of
industries, including oil and gas, refining, petrochemical,
chemical, pulp and paper, electrical power production and
utilities, sugar and palm oil. We also build equipment for
universities, municipalities and hospitals. We are the sole
supplier to the United States Navy of steam turbines for
aircraft carrier propulsion.
Revamp/Upgrade Opportunities
In addition to supplying new rotating units,
there are significant opportunities for us to supply engineered
revamp and upgrade services to the installed base of rotating
equipment.
Revamp services involve significant improvement
of the aerodynamic performance of rotating machinery by
incorporating newer technology to enhance equipment efficiency,
durability or capacity. For example, steam turbine revamps
involve modifying the original steam flow path components to
match new operating specifications such as horsepower, speed and
steam condition.
Upgrade services are offered on all our lines of
rotating equipment, either in conjunction with revamps or on a
stand alone basis. Upgrades are offered to provide the latest
applicable technology components for the equipment to improve
durability, reliability, and/or availability. Typical upgrades
include replacement of
73
Table of Contents
components such as governors, bearings, seals,
pistons, electronic control devices, and retrofitting of
existing lubrication, sealing and control systems with newer
technology.
Our proactive efforts to educate our clients on
improved revamp technologies to our DATUM line has proven to
offer significant growth potential with attractive margins. We
have the support systems in place, including our technology
platform and service facilities and our cost effective
Configurator platform, for preparing accurate proposals, to take
advantage of the growth potential in this market. In addition,
we believe our alliance relationships will allow us to create
new revamp opportunities.
New Product Development
New product development is an important part of
our business. We believe we are an industry leader in
introducing new, value-added technology. Our investment in
research and development has resulted in numerous technology
upgrades focused on aftermarket parts and services growth. Our
recent new product development includes adapting the DATUM
compressor platform for revamping of other OEM equipment, a new
design of dry-gas seals and bearings, and a new generation of
multiphase turbo separators. We have recently introduced a
complete suite package of remote monitoring and control
instrumentation that offers significant performance benefits to
clients and enhances our operations and maintenance services
offering. We plan to continue developing innovative products,
including new compressor platforms for subsea and underground
applications, which would be first-in-class products opening up
new markets.
We believe clients are increasingly choosing
their suppliers based upon capability to custom engineer,
manufacture and deliver reliable high-performance products, with
the lowest total cost of ownership, in the shortest cycle time,
and to provide timely, locally based service and support. Our
client alliance sales have increased substantially as a result
of our ability to meet these client requirements. For example,
the proportion of our combined core centrifugal and process
reciprocating new unit revenues from client alliances has
increased from approximately $17 million in 2000 to
approximately $98 million in 2004.
Aftermarket Parts and
    Services
The aftermarket parts and services segment
provides us with long-term growth opportunities and a steady
stream of recurring revenues and cash flow. With a typical
operating life of 30 years or more, rotating equipment
requires substantial aftermarket parts and services needs over
its operating life. Parts and services activities tend to
realize higher margins than new unit sales. Additionally, the
cumulative revenues from these aftermarket activities often
exceed the initial purchase price of the unit, which in many
cases is as low as five percent of the total life cycle cost of
the unit to the client. Our aftermarket parts and services
business offers a range of services designed to enable clients
to maximize their return on assets by optimizing the performance
of their mission-critical rotating equipment. We offer a broad
range of aftermarket parts and services, including:
•
Replacement Parts
•
Equipment Repair & Rerates
•
Field Service Turnaround
•
Equipment Installation
•
U.S. Navy Service & Repair
•
Applied Technology
•
Operation and Maintenance Contracts
•
Long-Term Service Agreements
•
Rotor Storage
•
Special Coatings/ Weldings
74
Table of Contents
•
Condition Monitoring
•
Product Training
•
Controls Retrofit
•
Turnkey Installation/ Project Management
•
Equipment Technology Upgrades
•
Site/ Reliability Audits
We believe we have the largest installed base of
the classes of equipment we manufacture and the largest
associated aftermarket parts and services business in the
industry. Many of the units we manufacture are unique and highly
engineered and require knowledge of their design and performance
characteristics to service. We estimate that we currently
provide approximately 50% of the supplier-provided aftermarket
parts and services needs of our own manufactured equipment base,
and less than two percent of the aftermarket parts and services
needs of the equipment base of other manufacturers. We focus on
a global offering of technologically advanced aftermarket
products and services, and as a result, our aftermarket
activities tend to be concentrated on the provision of
higher-value added parts and upgrades, and the delivery of
sophisticated operating, repair, and overhaul services. Smaller
independent companies tend to focus on local markets and have a
more basic aftermarket offering.
We believe clients generally show a preference
for purchasing aftermarket parts and services from the OEM of a
unit. A significant portion of our installed base is serviced
in-house by our clients. However, we believe there is an
increasing trend for clients to outsource this activity, driven
by declining in-house expertise, cost efficiency and the
superior service levels and operating performance offered by OEM
service providers. We do not believe that a material portion of
our installed base is serviced by any single third-party
provider. The steady demand from our installed base for parts
and aftermarket services represents a stable source of recurring
revenues and cash flow. Moreover, with our value-based solutions
strategy, we have a demonstrated track record of growth in this
segment as a result of our focus on expanding our service
offerings into new areas, including servicing other OEMs'
installed base of equipment, developing new technology upgrades
and increasing our penetration of higher volume-added services
to our own installed base.
Because equipment in our industry typically has a
multi-decade operational life, we believe aftermarket parts and
services capability is a key element in both new unit purchasing
decisions and sales of service contracts. Given the critical
role played by the equipment we sell, customers place a great
deal of importance on a supplier's ability to provide
rapid, comprehensive service, and we believe that the
aftermarket parts and services business represents a significant
long-term growth opportunity. We believe important factors for
our clients include a broad product range servicing capability,
the ability to provide technology upgrades, local presence and
rapid response time. We offer a comprehensive range of
aftermarket parts and services, including installation,
maintenance, monitoring, operation, repairs, overhauls and
upgrades. We provide our solutions to our clients through a
proprietary network of 24 service and support centers in 14
countries, employing approximately 1,000 service personnel,
servicing our own and other OEMs' turbo and reciprocating
compressors as well as steam and gas turbines. Our coverage area
of service centers servicing both turbo and reciprocating
compressors is approximately twice as large as that of our next
closest competitor.
Sales and Marketing
We market our services and products worldwide
through our established sales presence in over
20 countries. In addition, in certain countries in which we
do business, we sell our services and products through
distributors. Our sales force is comprised of over 350 direct
sales/service personnel and a global network of 85 independent
representatives, as well as 24 service and support centers in 14
countries who sell our products and provide service and
aftermarket support to our installed base locally in
105 countries.
75
Table of Contents
Manufacturing and Engineering Design
Our manufacturing processes generally consist of
fabrication, machining, component assembly and testing. Many of
our products are designed, manufactured and produced to order
and are often built to clients' specifications for
long-life, mission-critical applications. To improve quality and
productivity, we are implementing a variety of manufacturing
strategies including focus factories, low cost manufacturing,
and integrated supply chain management. With the introduction of
the Configurator, we have reduced cycle times of engineering
designs by approximately one-third, which we believe to be one
of the lowest cycle times in the industry. In addition, we have
been successful in outsourcing the fabrication of subassemblies
and components of our products, such as lube oil consoles and
gas seal panels, whenever costs are significantly lower and
quality is comparable to our own manufacturing. Our
manufacturing operations are conducted in nine locations around
the world. We have major manufacturing plants outside the United
States in France, Norway and Germany.
We strive to manufacture the highest quality
products and are committed to improve the quality and efficiency
of our products and processes. For example, we have established
a full-time worldwide process innovation team of 80 employees
who work across our various departments, including engineering,
finance, purchasing and others, and who are focused on providing
our clients with faster and improved configured solutions, short
service response times, improved cycle times and
on-time-delivery. The team uses a combination of operational
performance and continuous improvement tools from Lean
Enterprise, 6 Sigma, Value Engineering/ Value Analysis, Total
Quality Management, plus other value-creation and change
management methodologies. Our aggressive focus on product
quality is essential due to the strict performance requirements
for our final products. All of our plants are certified in
compliance with ISO 9001, with several also holding ISO 14001.
We manufacture many of the components included in
our products. The principal raw materials required for the
manufacture of our products are purchased from numerous
suppliers, and we believe that available sources of supply will
generally be sufficient for our needs for the foreseeable future.
Clients
Our clients include most of the world's
major and national oil companies, large, independent refiners,
major energy companies, multinational engineering and
construction companies, process and petrochemical companies, the
United States government, and other businesses operating in
certain process industries. Our extensive and diverse client
base consists of most major public, private and government
energy companies worldwide and includes BP, ChevronTexaco,
Statoil, ExxonMobil, Lukoil, Sinopec, Shell Chemical, Duke
Energy and U.S. and foreign governments. While orders in our
industry tend to be large, no single client has represented more
than 5% of our total revenues over any consecutive two year
period, and only in 2003 has a single client represented greater
than 10% of our total net revenues. In 2003, British Petroleum
represented 10.8% of our total revenues.
We believe our business model aligns us with our
clients who are shifting from purchasing isolated units and
services on an individual transactional basis to choosing
service providers that can help optimize performance over the
entire life cycle of their equipment. We are responding to this
demand by moving to an alliance-based approach. An alliance can
encompass the provision of new units and/or services, whereby we
offer our clients a dedicated, experienced team, streamlined
engineering and procurement processes, and a life cycle approach
to operating and maintaining their equipment. Pursuant to the
terms of an alliance agreement, we become the client's
exclusive or preferred supplier of rotating equipment and
aftermarket parts and services which gives us an advantage in
obtaining new business from that client. Our client alliance
agreements include frame agreements, preferred supplier
agreements, and blanket purchasing agreements. The alliance
agreements are generally terminable upon 30 days'
notice without penalty, and therefore do not assure a long-term
business relationship. We have so far entered more than 30
significant alliances, and currently are the only alliance
partner for like rotating equipment with exclusive alliances
with Statoil, Marathon Ashland and Shell Chemicals (USA). We
also have preferred supplier alliances with ConocoPhillips,
ExxonMobil and Duke Energy, and non-exclusive agreements with BP
and other clients.
76
Table of Contents
Competition
We encounter competition in all areas of our
business, principally in the new units segment. We compete
against products manufactured by both U.S. and
non-U.S. companies. The principal methods of competition in
these markets relate to product performance, client service,
product lead times, global reach, brand reputation, breadth of
product line, quality of aftermarket service and support and
price. We believe the significant capital required to construct
new manufacturing facilities, the production volumes required to
maintain low unit costs, the need to secure a broad range of
reliable raw material and intermediate material supplies, the
significant technical knowledge required to develop high
performance products, applications and processes and the need to
develop close, integrated relationships with clients serve as
disincentives for new market entrants. Some of our existing
competitors, however, have greater financial and other resources
than we do.
Over the last 20 years, the turbo compressor
industry has consolidated from more than 15 to 8 of our
larger competitors, the reciprocating compressor industry has
consolidated from 12 to 6 of our larger competitors and the
steam turbine industry has consolidated from 18 to 9 of
our larger competitors. Our larger competitors in the new
unit segment of the turbo compressor industry include General
Electric/ Nuovo Pignone, Siemens, Solar Turbines, Inc.,
Rolls-Royce Group plc, Elliott/ Ebara, Mitsubishi Heavy
Industries and Man Turbo (GHH); in the reciprocating compressor
industry include General Electric/ Nuovo Pignone, Burckhardt,
Sulzer, Ltd., Neuman & Esser, Peter Brotherhood Ltd.,
Ariel Corp., Thomassen and Cooper Compression; and in the steam
turbine industry include Elliott, Siemens, General Electric/
Nuovo Pignone, Mitsubishi Heavy Industries, Tuthill Energy
Systems, Shin Nippon and Kühnle, Kopp & Kausch.
In our aftermarket parts and services segment, we
compete with our major competitors as discussed above, small
independent local providers and our clients' in-house
service providers. However, we believe there is an increasing
trend for clients to outsource services, driven by declining
in-house expertise, cost efficiency and the superior service
levels and operating performance offered by OEM knowledgeable
service providers.
Research and Development
We typically spend about one percent of our
revenues on research and development each year. Our research and
development expenses were $5.7 million and
$1.0 million for the period from January 1, 2004
through October 29, 2004 and for the period from
October 30, 2004 through December 31, 2004,
respectively. We believe current expenditures are adequate to
sustain ongoing research and development activities. It is our
policy to make a substantial investment in research and
development each year in order to maintain our product and
services leadership positions. We have developed many of the
technology and product breakthroughs in our markets, and
manufacture some of the most advanced products available in each
of our product lines. We believe we have significant
opportunities for growth by developing new services and products
that offer our clients greater performance and significant cost
savings. We are also actively involved in research and
development programs designed to improve existing products and
manufacturing methods.
Employees
As of December 31, 2004, we had 4,631
employees worldwide. Of our employees, approximately 65% are
located in the United States. Approximately 37% of our employees
in the United States are covered by collective bargaining
agreements. None of our material collective bargaining
agreements will expire through the end of 2005, and one will
expire in each of 2006, 2007 and 2008. In addition, we have an
agreement with the United Brotherhood of Carpenters and Joiners
of America whereby we hire skilled trade workers on a
contract-by-contract basis. Our contract with the United
Brotherhood of Carpenters and Joiners of America can be
terminated by either party with 90 days prior written
notice. Our operations in the following countries are unionized:
Le Havre, France; Oberhausen, Germany; Kongsberg, Norway; and
Naroda, India. Additionally, overseas, approximately 38% of our
employees belong to industry or national labor unions. We
believe that our relations with our employees are good.
77
Table of Contents
Properties and Facilities
Our corporate headquarters are located in Olean,
New York. The following table describes the material facilities
owned or leased by us and our subsidiaries as of
December 31, 2004:
Approx.
Location
Status
Square Feet
Type
Painted Post, New York
Owned/Leased
840,000
Manufacturing and services
Olean, New York
Owned/Leased
970,000
Manufacturing and services
Wellsville, New York
Owned/Leased
380,000
Manufacturing and services
Campinas, Brazil
Owned
103,000
Manufacturing and services
Kongsberg, Norway
Leased
40,000
Manufacturing and services
Le Havre, France
Owned/Leased
650,000
Manufacturing and services
Naroda, India
Leased
730,000
Manufacturing and services
Oberhausen, Germany
Owned
26,000
Manufacturing and services
Houston, Texas
Owned
115,000
Services
Environmental and Government
Regulation
Manufacturers, such as our company, are subject
to extensive environmental laws and regulations concerning,
among other things, emissions to the air, discharges to land,
surface water and subsurface water, the generation, handling,
storage, transportation, treatment and disposal of waste and
other materials, and the remediation of environmental pollution
relating to such companies' (past and present) properties
and operations. Costs and expenses under such environmental laws
incidental to ongoing operations are generally included within
operating budgets. Potential costs and expenses may also be
incurred in connection with the repair or upgrade of facilities
to meet existing or new requirements under environmental laws.
In many instances, the ultimate costs under environmental laws
and the time period during which such costs are likely to be
incurred are difficult to predict. We do not believe that our
liabilities in connection with compliance issues will have a
material adverse effect on us.
Various federal, state and local laws and
regulations impose liability on current or previous real
property owners or operators for the cost of investigating,
cleaning up or removing contamination caused by hazardous or
toxic substances at the property. In addition, such laws impose
liability for such costs on persons who disposed of or arranged
for the disposal of hazardous substances at third-party sites.
Such liability may be imposed without regard to legality of the
original actions and without regard to whether we knew of, or
were responsible for, the presence of such hazardous or toxic
substances, and such liability may be joint and several with
other parties. If the liability is joint and several, we could
be responsible for payment of the full amount of the liability,
whether or not any other responsible party is also liable.
We have sent wastes from our operations to
various third-party waste disposal sites. From time to time we
receive notices from representatives of governmental agencies
and private parties contending that we are potentially liable
for a portion of the investigation and remediation costs and
damages at such third party sites. We do not believe that our
liabilities in connection with such third-party sites, either
individually or in the aggregate, will have a material adverse
effect on us.
The equity purchase agreement provides that, with
the exception of non-Superfund off-site liabilities and
non-asbestos environmental tort cases, which have a three-year
time limit for a claim to be filed, Ingersoll-Rand will remain
responsible without time limit for certain specified known
environmental liabilities that exist as of the closing date.
Each of these liabilities is to be placed on The Environmental
Remediation and Compliance Schedule to the equity purchase
agreement (the "Final Schedule"). We will be
responsible for all liabilities that were not identified prior
to the closing date and placed on the Final Schedule. To
determine which matters will be included on the Final Schedule,
we conducted Phase I and Phase II assessments at 30 of
the Dresser-Rand Entities' facilities. To date, the parties
have resolved all but a small number of outstanding issues with
respect to what should be included on the Final Schedule. We do
not believe any of the outstanding items are material.
78
Table of Contents
The equity purchase agreement provides that the
Final Schedule will include all noncompliance and contamination
matters identified in the Phase I and Phase II
assessments that the parties agree should be included thereon. A
contamination matter will be included on the Final Schedule if
it meets one of several standards, the most important of which
is that if such contamination matter were known by the
applicable governmental authority, that authority would be
expected to require a response action (which is broadly defined
to include not only cleanup, but investigation and monitoring).
For purposes of inclusion on the Final Schedule, contamination
matters are broadly defined to include each known point of
contamination plus all additional contamination associated with,
or identified during an investigation of, such known point of
contamination. Pursuant to the equity purchase agreement,
Ingersoll-Rand is responsible for all response actions
associated with the contamination matters and must perform such
response actions diligently. However, to the extent
contamination at leased properties was caused by a third party
and to the extent contamination at owned properties resulted
from the migration of releases caused by a third party,
Ingersoll-Rand is only required to conduct response actions
after being ordered to do so by a governmental authority.
If the parties cannot agree whether a
noncompliance or contamination matter should be included on the
Final Schedule, they shall resolve the issue pursuant to an
arbitration provision that is included in the equity purchase
agreement. To date, the parties have reached agreement with
respect to the inclusion on the Final Schedule of many of the
matters identified in the Phase I and Phase II
assessments. Ingersoll-Rand, however, has taken the position
that certain identified matters should not be included on the
schedule because, according to Ingersoll-Rand, they do not
constitute violations of law; the violations of law have already
being corrected; or, with respect to contamination matters, the
regulatory authorities would not require a response action if
they knew of such matters. The parties are currently negotiating
to resolve these outstanding matters.
Intellectual Property
We rely on a combination of patent, trademark,
copyright and trade secret laws, employee and third-party
nondisclosure/confidentiality agreements and license agreements
to protect our intellectual property. We sell most of our
products under a number of registered trade names brand names
and registered trademarks which we believe are widely recognized
in the industry.
In addition, many of our products and
technologies are protected by patents. Except for our
company's name and principal mark "Dresser-Rand,"
no single patent, trademark or trade name is material to our
business as a whole. We anticipate we will apply for additional
patents in the future as we develop new products and processes.
Any issued patents that cover our proprietary technology may not
provide us with substantial protection or be commercially
beneficial to us. The issuance of a patent is not conclusive as
to its validity or its enforceability. If we are unable to
protect our patented technologies, our competitors could
commercialize our technologies. Competitors may also be able to
design around our patents. In addition, we may also face claims
that our products, services, or operations infringe patent or
other intellectual property rights of others.
With respect to proprietary know-how, we rely on
trade secret protection and confidentiality agreements.
Monitoring the unauthorized use of our proprietary technology is
difficult, and the steps we have taken may not prevent
unauthorized use of such technology. The proprietary disclosure
or misappropriation of our trade secrets could harm our ability
to protect our rights and our competitive position.
Our company's name and principal mark is a
combination of the names of our founder companies, Dresser
Industries, Inc. and Ingersoll-Rand. We have acquired rights to
use the "Rand" portion of our principal mark from
Ingersoll-Rand, and the rights to use the "Dresser"
portion of our name from Dresser, Inc., the successor of Dresser
Industries, Inc, and an affiliate of First Reserve. If we lose
the right to use either the "Dresser" or
"Rand" portion of our name, our ability to build our
brand identity could be negatively affected.
Legal Proceedings
In the normal course of business, we are involved
in a variety of lawsuits, claims and legal proceedings,
including commercial and contract disputes, employment matters,
product liability claims, environmental liabilities and
intellectual property disputes. In our opinion, pending legal
matters are not expected to have a material adverse effect on
our results of operations, financial condition, liquidity or
cash flows.
79
Table of Contents
MANAGEMENT
Directors and Executive Officers
The following table sets forth the name, age as
of May 1, 2005 and position of each person that serves as
an executive officer or director of our company.
Name
Age
Position
Vincent R. Volpe Jr.
47
President, Chief Executive Officer and Director
Leonard M. Anthony
50
Executive Vice President and
Chief Financial Officer
Stephen A. Riordan
45
Vice President Finance
Walter J. Nye
49
Executive Vice President, Product Services
Bradford W. Dickson
50
Executive Vice President, Worldwide Units
Christopher Rossi
40
Vice President and General Manager,
North American Operations
Jean-Francois Chevrier
58
Vice President and General Manager, European
    Operations
Elizabeth C. Powers
45
Vice President and Chief Administrative Officer
Randy D. Rinicella
47
Vice President, General Counsel and Secretary
William E. Macaulay
59
Chairman of the Board of Directors
Thomas J. Sikorski
44
Director
Mark A. McComiskey
32
Director
Kenneth W. Moore
35
Director
Vincent R. Volpe
Jr.
is our President and Chief
Executive Officer and has served as a member of our board of
directors since the acquisition in October 2004. Mr. Volpe
has been with Dresser-Rand Company and its predecessor companies
since 1981. He has held positions in Engineering, Marketing and
Operations residing and working in various countries, including:
Applications Engineer in Caracas, Venezuela; Vice President
Dresser-Rand Japan in Tokyo, Japan; Vice President Marketing and
Engineering Steam and Turbo Products; and Executive Vice
President European Operations in Le Havre, France and President
Dresser-Rand Europe in London, U.K. Mr. Volpe returned to
Olean in January 1997 and became President of Dresser-Rand
Company's Turbo Product Division, a position he held until
September 2000. In April 1999, he assumed the additional role of
Chief Operating Officer for Dresser-Rand Company, responsible
for worldwide manufacturing, technology and supply chain
management, serving in that position until September 2000.
Mr. Volpe became President and Chief Executive Officer of
Dresser-Rand Company in September 2000. He is proficient in five
languages. Mr. Volpe earned a BS in Mechanical Engineering
and a BA in German literature, both from Lehigh University.
Leonard M. Anthony
has been our Executive Vice
President and Chief Financial Officer since April 2005.
Prior to that, he served as Chief Financial Officer of
International Steel Group Inc since May 2003. He has over
25 years of financial management experience. He joined
Bethlehem Steel Corporation, an integrated steel producer in
1979 and advanced through increasingly responsible financial
management positions. He served as Corporate Credit Manager of
Bethlehem Steel Corporation from October 1985 to October 1986,
Director of Financial Services from November 1986 to November
1990, Director Risk Management from December 1990 to February
1993, Manager Financial Planning from March 1993 to March 1995,
Assistant Treasurer from March 1995 to March 1998, Vice
President and Treasurer from October 1999 to September 2001 and
Senior Vice President Finance and Chief Financial Officer from
October 2001 to May 2003. In October 2001, Bethlehem Steel
filed for bankruptcy protection under Chapter 11 of the
U.S. Bankruptcy Code. Mr. Anthony earned a BS in Accounting
from Pennsylvania State University, an MBA from the Wharton
School of the University of Pennsylvania and an AMP from the
Harvard Business School.
80
Table of Contents
Stephen A. Riordan
has been our Vice President
Finance since April 2005. Mr. Riordan served as Chief
Financial Officer from October 2004 to April 2005. Prior to
that, Mr. Riordan served as Vice President Finance from January
2003 to October 2004. From January 1998 until December
2002, Mr. Riordan worked as an independent consultant to
numerous Ingersoll-Rand business units both domestically and
internationally. Mr. Riordan joined Ingersoll-Rand in 1981
and spent sixteen years in the finance function in positions of
increasing responsibility. From May 1993 until November 1997,
Mr. Riordan was the Worldwide Division Controller for
Ingersoll-Rand's European Paving Equipment business unit in
Germany. Mr. Riordan earned his CPA and is presently a
Certified Management Accountant. Mr. Riordan possesses a BS
in Accountancy from Bentley College and an MBA from Lehigh
University.
Walter J. Nye
has been our Executive Vice
President, Worldwide Product Services since the acquisition in
October 2004. Mr. Nye has been with Dresser-Rand Company
and its predecessor companies since 1975. He has held numerous
positions of increasing responsibility including Controller,
Turbo Products Division; President, Dresser-Rand Services
Division; and most recently served as Executive Vice President,
Product Services from October 1997 until October 2004. Prior to
this appointment, Mr. Nye served as Controller for
Worldwide Turbo Operations. He has worldwide responsibility for
our aftermarket parts and services business, including sales,
repairs, field technical support, services and solutions. He has
also been active in the involvement in Olean Turbo world class
manufacturing investment program, reengineering, business
strategy and cost reduction. Mr. Nye earned a BA from St.
Bonaventure University and a Certificate in Management
Accounting.
Bradford W. Dickson
has been our Executive Vice
President, New Equipment Worldwide since the acquisition in
October 2004. Mr. Dickson has been with Dresser-Rand
Company and its predecessor companies since 1977. He has held
various leadership positions in International Sales, Marketing,
and Project Management for Dresser-Rand Company and its
predecessors, including three years located in Caracas,
Venezuela managing the Venezuelan and Colombian Operations. From
January 1999 to August 2000, Mr. Dickson served as
Executive Vice President, Latin America, and served as Executive
Vice President, The Americas Region, from August 2000 to
April 2, 2003. From April 2002 to July 2003,
Mr. Dickson served as Executive Vice President, The
Americas and Asia Pacific Regions. From July 2003 to October
2004, he served as Executive Vice President, responsible for all
company new equipment sales worldwide, and also carries
responsibility for Corporate Marketing and the Government
Business Unit. Mr. Dickson has over 27 years of
experience in the global energy industry working with
compressors and turbines for process, oil and gas applications.
Mr. Dickson earned a BS in Engineering from the University
of Illinois and an MBA from the University of Southern
California's Marshall School of Business.
Christopher Rossi
has been our Vice President and
General Manager, North American Operations since the acquisition
in October 2004. Mr. Rossi has been with Dresser-Rand
Company and its predecessor companies since 1987. He has held
various leadership positions within Dresser-Rand Company in the
areas of Engineering, Production, Materials Management, and
Supply Chain Management. From October 2003 to October 2004,
Mr. Rossi was Vice President and General Manager, North
American Operations, responsible for all U.S. plants, and
worldwide Development Engineering. Mr. Rossi served as Vice
President, Supply Chain Management Worldwide from March 1998 to
January 2001, and as Vice President and General Manager Painted
Post Operation from February 2001 to October 2003.
Mr. Rossi earned a BSME from Virginia Tech and an MBA in
Corporate Finance and Operations Management from the University
of Rochester's Simon School of Business.
Jean-Francois Chevrier
has been our Vice President
and General Manager, European Operations since the acquisition
in October 2004. Mr. Chevrier has been with Dresser-Rand
Company and its predecessor companies since 1990. He has held
the positions of Operations Manager in Le Havre, France;
Director, Special Projects in Olean, New York; and General
Manager Turbo Products, Europe. From March 1997 to July 2000, he
held the position of Vice President & General Manager,
French Operations. From August 2000 to October 2004,
Mr. Chevrier served as the Vice President &
General Manager for European Operations in Le Havre, France,
which included responsibility for our businesses and plants in
Oberhausen, Germany, and Kongsberg, Norway. Prior to joining
Dresser-Rand Company, Mr. Chevrier held various leadership
positions
81
Table of Contents
at a Peugeot subsidiary, specializing in military
and aerospace hydraulic equipment. Mr. Chevrier earned a
BSME from Tarbes University in France.
Elizabeth C. Powers
has been our Vice President and
Chief Administrative Officer since April 2005. Prior to
that, Ms. Powers served as Vice President, Human Resources
since the acquisition in October 2004 and as Vice President,
Human Resources of Dresser-Rand Company from October 2004
to April 2004. Ms. Powers was the Vice President for
Ingersoll-Rand's Global Business Service from January 1999
until January 2003. In this capacity, she was responsible for
directing the design of worldwide benefits, as well as
establishing the Human Resource Shared Services organization for
Ingersoll-Rand. Ms. Powers left Ingersoll-Rand on a leave
of absence from January 2003 until March 2004. Ms. Powers
has been with Dresser-Rand Company and its predecessor companies
since 1986. She has held various Human Resource positions in
Dresser-Rand Company since the start of the joint venture and
has also worked as Director and Vice President of Human
Resources in various Ingersoll-Rand businesses. From 1994 to
1998, Ms. Powers served as worldwide Vice President, Human
Resources, Production Equipment Group. She has also served on
the Board of Rx Intelligence. Ms. Powers earned a BS from
Cornell University's School of Industrial & Labor
Relations.
Randy D.
Rinicella
has been our Vice
President, General Counsel and Secretary since April 2005. Prior
to that, Mr. Rinicella was a shareholder at the law firm of
Buchanan Ingersoll PC from January 2004 until
April 2005. From March 2002 until January 2004,
Mr. Rinicella was a partner at the law firm of
Roetzel & Andress. Previously, Mr. Rinicella
was with the law firm of Reminger & Reminger as a
partner from January 1999 until March 2002, and as an
associate from March 1995 to January 1999, and was Senior
Corporate Counsel at Reliance Electric Company from October 1990
until March 1995. Mr. Rinicella earned a BS in Management
from Case Western Reserve University, a JD from the Cleveland
Marshall College of Law and an MBA from Cleveland State
University.
William E. Macaulay
has been the Chairman of our board
of directors since the acquisition in October 2004.
Mr. Macaulay is the Chairman and Chief Executive Officer of
First Reserve, which he joined in 1983. Prior to joining First
Reserve, Mr. Macaulay was a co-founder of Meridien Capital
Company, a private equity buyout firm. From 1972 to 1982, Mr.
Macaulay was with Oppenheimer & Co., Inc.,
where he served as Director of Corporate Finance, with
responsibility for investing Oppenheimer's capital in
private equity transactions, as a General Partner and member of
the Management Committee of Oppenheimer & Co., as
well as President of Oppenheimer Energy Corporation.
Mr. Macaulay serves as Chairman of Foundation Coal
Holdings, Inc., a coal company. He also serves as a
director of Alpha Natural Resources, Inc., a coal company,
Dresser, Inc., an equipment and services company serving the
energy industry, and Weatherford International, Inc., an
oilfield service company.
Thomas J.
Sikorski
has been a member of our
board of directors since the acquisition in October 2004.
Mr. Sikorski is a Managing Director of First Reserve, which
he joined in April 2002. Prior to joining First Reserve,
Mr. Sikorski was a partner with Windward Capital, a New
York-based private equity firm. Windward was initially the
merchant banking arm of CSFB/MetLife. Prior to being a
co-founder of Windward in 1994, Mr. Sikorski was a Director
at MetLife Private Equity Investments and a Vice President in
the CSFB Private Equity Group. Mr. Sikorski also serves as
a director of Dresser, Inc., an equipment and service company
serving the energy industry.
Mark A.
McComiskey
has been a member of
our board of directors since the acquisition in October 2004.
Mr. McComiskey is a Vice President of First Reserve and
joined that firm in June 2004. Prior to joining First Reserve,
Mr. McComiskey was a principal at Clayton, Dubilier and
Rice Inc., a private equity firm, from June 2000 until May 2004.
Previously, Mr. McComiskey was an attorney at the
international law firm of Debevoise & Plimpton LLP from
October 1997 until June 2000.
Kenneth W.
Moore
has been a member of our
board of directors since the acquisition in October 2004.
Mr. Moore is a Director of First Reserve and joined that
firm in January 2004. Before joining First Reserve,
Mr. Moore was a Vice President at Morgan Stanley, an
investment bank, from 2000 until 2004. Prior to joining Morgan
Stanley, Mr. Moore was an Associate at Chase Securities
from 1998 until 2000.
82
Table of Contents
Composition of the Board of Directors after
this Offering
Our board of directors currently consists of five
directors. We expect to add an independent director prior to the
effectiveness of the registration statement of which this
prospectus is a part, another independent director within three
months after the first date the registration statement is
effective and one additional independent director to our board
within twelve months after the registration statement is
effective.
Depending on the size of the offering, we will be
a "controlled company" under the New York Stock
Exchange corporate governance rules if First Reserve continues
to own more than 50% of our common stock after the offering. As
a result, we would be eligible for exemptions from provisions of
these rules requiring a majority of independent directors,
nominating and corporate governance and compensation committees
composed entirely of independent directors and written charters
addressing specified matters. If available, we intend take
advantage of these exemptions. In the event that we cease to be
a controlled company within the meaning of these rules, we will
be required to comply with these provisions within the
transition periods specified in the New York Stock Exchange
corporate governance rules.
Committees of the Board of Directors
Our board of directors currently has an audit
committee, a compensation committee and a nominating and
corporate governance committee.
Audit Committee
Our audit committee currently consists of Mark A.
McComiskey and Kenneth W. Moore. We expect that our current
audit committee will be replaced by three independent directors
within the transition periods specified in Rule 10A-3 under
the Exchange Act. Following the offering, the audit committee
will be required to have at least one member who qualifies as an
audit committee "financial expert" as such term is
defined in Item 401(h) of Regulation S-K. The audit
committee is governed by a written charter which will be
reviewed, and amended if necessary, on an annual basis. The
audit committee's responsibilities include
(1) recommending the hiring or termination of independent
auditors and approving any non-audit work performed by such
auditor, (2) approving the overall scope of the audit,
(3) assisting the board in monitoring the integrity of our
financial statements, the independent accountant's
qualifications and independence, the performance of the
independent accountants and our internal audit function and our
compliance with legal and regulatory requirements,
(4) annually reviewing an independent auditors' report
describing the auditing firms' internal quality-control
procedures, any material issues raised by the most recent
internal quality-control review, or peer review, of the auditing
firm, (5) discussing the annual audited financial and
quarterly statements with management and the independent
auditor, (6) discussing earnings press releases, as well as
financial information and earnings guidance provided to analysts
and rating agencies, (7) discussing policies with respect
to risk assessment and risk management, (8) meeting
separately, periodically, with management, internal auditors and
the independent auditor, (9) reviewing with the independent
auditor any audit problems or difficulties and managements'
response, (10) setting clear hiring policies for employees
or former employees of the independent auditors,
(11) annually reviewing the adequacy of the audit
committee's written charter, (12) reviewing with
management any legal matters that may have a material impact on
us and (13) reporting regularly to the full board of
directors.
Prior to consummation of this offering, the audit
committee will approve and adopt a Code of Ethical Business
Conduct for all employees and an additional Officer Code of
Ethics for all of our executives and financial officers, copies
of which will be available at no cost upon written request by
our stockholders at no cost.
Compensation Committee
Our current compensation committee consists of
Mark A. McComiskey, who serves as chairman, Kenneth W. Moore and
Vincent R. Volpe Jr. The compensation committee is responsible
for (1) reviewing key employee compensation policies, plans
and programs, (2) reviewing and approving the compensation
of our chief executive officer and other executive officers,
(3) developing and recommending to the board of
83
Table of Contents
directors compensation for board members,
(4) reviewing and approving employment contracts and other
similar arrangements between us and our executive officers,
(5) reviewing and consulting with the chief executive
officer on the selection of officers and evaluation of executive
performance and other related matters, (6) administration
of stock plans and other incentive compensation plans,
(7) overseeing compliance with any applicable compensation
reporting requirements of the SEC, (8) approving the
appointment and removal of trustees and investment managers for
pension fund assets, (9) retaining consultants to advise
the committee on executive compensation practices and policies
and (10) handling such other matters that are specifically
delegated to the compensation committee by the board of
directors from time to time.
Nominating and Corporate Governance
Committee
Our current nominating and corporate governance
committee consists of Mark A. McComiskey, Thomas J.
Sikorski and Vincent R. Volpe Jr. The nominating and
corporate governance committee's responsibilities include
(1) developing and recommending criteria for selecting new
directors, (2) screening and recommending to the board of
directors individuals qualified to become directors,
(3) overseeing evaluations of the board of directors, its
members and committees of the board of directors and
(4) establishing criteria for and leading the annual
performance self-evaluation of the board of directors and each
committee.
Director Compensation
None of our directors currently receive any
additional compensation for serving as a director or as a member
or chair of a committee of the board of directors. In
conjunction with this offering, we will be adding an independent
director to our board and plan to pay our independent directors
an annual retainer of $36,000 in cash and $30,000 in restricted
stock pursuant to the 2005 Directors Stock Incentive Plan and a
fee for each board meeting and each committee meeting attended.
We also plan to pay independent directors a fee for acting as
committee chairs and to implement the 2005 Directors Stock
Incentive Plan under which they may opt to receive shares of
common stock in lieu of any cash directors' fees.
Compensation Committee Interlocks and Insider
Participation
Vincent Volpe Jr., our president and Chief
Executive Officer, has served as a member of our compensation
committee since October 2004. The entire board of directors,
excluding Mr. Volpe, determines Mr. Volpe's
compensation.
84
Table of Contents
Executive Compensation
Summary Compensation Table
The following summary compensation table sets forth information
concerning compensation earned in 2004 and 2003, by our chief
executive officer and our other four most highly compensated
executive officers at the end of the last fiscal year. All
references to stock under "Executive Compensation"
refer to shares of common stock of Ingersoll-Rand and all
references to "plans" refer to executive compensation
plans of Ingersoll-Rand. As of the consummation of the
acquisition, our management ceased to participate in such plans.
Long-Term Compensation
Payouts
Awards
Annual Compensation
Long-Term
Restricted
Number of Securities
Incentive
Other Annual
Stock
Underlying
Plan
All Other
Name and Principal Position
Year
Salary ($)
Bonus ($)(1)
Compensation ($)
Award(s) ($)
Option/SARs (#)($)
Payouts
Compensation(4)($)
Vincent R. Volpe Jr.
2004
375,000
865,593
—
—
20,430
—
1,300,000
President and Chief
2003
349,999
713,646
—
—
20,900
—
—
Executive Officer
Walter J. Nye
2004
224,561
129,000
—
—
9,970
—
334,476
Executive Vice President,
2003
211,866
98,500
—
—
9,720
—
—
Worldwide Product Services
Stephen A. Riordan
2004
193,722
124,800
—
—
5,280
—
283,932
Vice President Finance(2)
2003
173,016
100,000
—
—
5,000
—
—
Bradford W. Dickson
2004
193,923
122,100
—
—
7,130
—
284,400
Executive Vice President,
2003
181,290
86,967
—
—
6,820
—
—
New Equipment Worldwide
Jean-Francois Chevrier
2004
210,728
108,300
—
—
6,860
—
302,782
Vice President, European
2003
186,480
78,944
—
—
6,510
—
—
Operations(3)
(1)
This column reflects both amounts earned as annual bonuses and
    under the Performance Share Program. The Performance Share
    Program provides annual awards based on a combination of the
    achievement of strategic initiatives and annual financial
    performance. Payments are made in cash unless previously
    deferred into the Executive Deferral Plan. The Performance Share
    Program was discontinued at December 31, 2004. The amounts
    earned as bonuses and under the Performance Share Program were
    as follows:
Performance Share
Name
Year
Bonus ($)
Program ($)
Vincent R. Volpe Jr
2004
440,100
425,493
2003
282,400
431,246
(2)
Mr. Riordan was Vice President Finance from January 2003
    through October 2004 and acted as the Chief Financial Officer
    from October 2004 through April 2005.
(3)
The average dollar to euro exchange rate for 2003 and 2004 was
    used to reflect earnings and bonus for Mr. Chevrier.
(4)
To reward selected key employees in the event of a successful
    sale of Dresser-Rand Company, Ingersoll-Rand established a sales
    incentive program. Each of Mr. Stephen Riordan,
    Mr. Walter Nye, Mr. Bradford Dickson and
    Mr. Jean-Francois Chevrier received, pursuant to the
    program, payments from Ingersoll-Rand equal to 100% of their
    total cash compensation (annual base salary plus annual target
    bonus amount) as of the date of the acquisition. In addition,
    all participants in the program had their unvested stock
    options, or stock equivalency rights for non-U.S. employees, in
    Ingersoll-Rand vest immediately as of October 29, 2004, the
    date of the acquisition. In addition, Mr. Volpe received
    payments from Ingersoll-Rand pursuant to the sales
85
Table of Contents
incentive program equal to two times his total
    cash compensation (annual base salary plus annual target bonus
    amount) as of the date of the acquisition and his unvested stock
    options vested as of October 29, 2004.
Stock Options and Stock Appreciation Rights
    of Ingersoll-Rand
The following table sets forth information
concerning the grant of stock options of Ingersoll-Rand to our
Chief Executive Officer and each of our other four most highly
compensated executive officers during the last fiscal year.
Grant Date
Individual Grants
Value
Number of
Securities
Percent of Total
Underlying
Options/SARs
Grant Date
Options/SARs
Granted to
Exercise or
Present
Granted
Employees in
Base
Value ($)
Name
(#)(a)
Fiscal Year
Price ($/SH)
Expiration Date (b)
(c)
Vincent R. Volpe Jr.
20,430
0.57
%
$
64.37
October 31, 2007
$
22.74
Walter J. Nye
9,970
0.28
64.37
October 31, 2007
22.74
Stephen A. Riordan
5,280
0.15
64.37
October 31, 2007
22.74
Bradford W. Dickson
7,130
0.20
64.37
October 31, 2007
22.74
Jean-Francois Chevrier
6,860
0.19
64.37
October 31, 2007
22.74
(a)
Options/ SARs issued by Ingersoll-Rand prior to
    the date of the acquisition.
(b)
Options became exercisable as of October 31,
    2004. Unexercised options/ SARs have no financial impact on us.
(c)
Ingersoll-Rand estimated the average fair value
    of the options granted during the period from January 1,
    2004 through October 29, 2004 at $22.74 on the date of
    grant, using the Black-Scholes option-pricing model, which
    included the following assumptions:
Dividend yield
1.19
%
Volatility
39.34
%
Risk-free interest rate
3.28
%
Expected life
5  years
Exercise of Options and Stock Appreciation
    Rights of Ingersoll-Rand
The following table sets forth information
concerning the exercise of stock options of Ingersoll-Rand
during 2004 by each of our chief executive officer and our other
four most highly compensated executive officers and the
2004 year-end value of unexercised options.
Number of Securities
Underlying Unexercised
Value of Unexercised
Options/SARs
In-the-Money
at Fiscal Year-End
Options/SARs
Shares
(#)(a)
at Fiscal Year-End ($) (b)
Acquired on
Value
Name
Exercise (#)
Realized ($)
Exercisable
Unexercisable
Exercisable
Unexercisable
Vincent R. Volpe Jr.
122,297
$
2,813,262
—
—
$
—
$
—
Walter J. Nye
13,115
417,301
34,333
—
1,006,191
—
Stephen A. Riordan
—
—
10,280
—
290,387
—
Bradford W. Dickson
18,600
442,458
13,033
—
439,311
—
Jean-Francois Chevrier
9,649
335,708
14,135
—
351,196
—
(a)
Options/ SARs issued by Ingersoll-Rand prior to
    the date of the acquisition.
(b)
Unexercised options/ SARs have no financial
    impact on us.
86
Table of Contents
Pension Plan
Prior to March 31, 1998, our Predecessor
sponsored qualified and nonqualified defined benefit pension
plans for salaried employees. The benefits under these plans
were based on final average pay and service at retirement,
subject to applicable offsets.
Effective March 31, 1998, our Predecessor
amended the qualified and nonqualified defined benefit pension
plans to cease benefit accruals as of that date. That is, for
employees hired prior to March 31, 1998, their accrued
benefits were frozen and no additional accruals due to service
and or pay were granted. Employees hired after March 31,
1998 were not eligible to participate in any defined benefit
pension plans.
Messrs. Volpe, Nye and Dickson have
estimated monthly accrued pension benefits of $2,500, $2,100 and
$1,800, respectively. These benefit amounts are payable at
age 65 as a single life annuity and represent the benefit
payable from both the qualified and nonqualified defined benefit
pension plans. These benefits amounts are fixed obligations of
the successor and will not increase with future pay and/or
service levels. Messrs. Riordan and Chevrier are not
entitled to any benefits under our qualified or nonqualified
pension plans.
Employment Agreements
On October 27, 2004, we entered into an
employment agreement with Vincent R. Volpe, pursuant to which
Mr. Volpe serves as our President and Chief Executive
Officer. Mr. Volpe's employment agreement has an
indefinite term. During the term of his agreement,
Mr. Volpe is entitled to an annual base salary of not less
than $500,000. Mr. Volpe is also eligible to receive a
performance based bonus for each year during the term of his
employment agreement, with a target bonus of up to 100% of his
base salary, payable, at Mr. Volpe's election, in
cash, shares of common stock or a combination thereof.
Mr. Volpe's total compensation will be reviewed at
least once every twelve months by our board of directors. For
2004, in addition to his annual bonus, we paid Mr. Volpe a
one-time special bonus equal to the bonus that would have been
paid to Mr. Volpe with respect to such year pursuant to the
Ingersoll-Rand Performance Share Program at the same time as
provided by such program.
If Mr. Volpe's employment is terminated
by us without "cause" or if Mr. Volpe resigns for
"good reason" (as such terms are defined in the
employment agreement), Mr. Volpe will receive (a) a
severance payment equal to twice his base salary, (b) the
accrued but unpaid salary through the date of termination,
(b) the accrued but unpaid bonus earned for fiscal years
prior to the fiscal year of termination, (c) the maximum
target annual bonus for the fiscal year of termination, prorated
to the amount of time actually employed during such year and
(d) continued medical, dental, disability and life
insurance coverage for two years following the date of
termination. To the extent Mr. Volpe is entitled to receive
severance, he is subject to a provision in his employment
agreement prohibiting him from competing with us. If
Mr. Volpe's employment is terminated by us for
"cause" or if Mr. Volpe resigns without
"good reason," we can elect to enforce a provision in
his employment agreement prohibiting him from competing with us
for a period of up to two years following such termination
provided that we pay Mr. Volpe his base salary for such
two-year period.
Mr. Volpe purchased $1,999,992 of common
units of Dresser-Rand Holdings, LLC at the same price paid per
unit by funds affiliated with First Reserve in connection with
the acquisition. In addition, Mr. Volpe received grants of
profits units of Dresser-Rand Holdings, LLC that permit him to
indirectly share in appreciation in the value of our shares and
which are subject to the terms and conditions of the Amended and
Restated Limited Liability Company Agreement of Dresser-Rand
Holdings, LLC. If Mr. Volpe's employment is terminated
by us, we may elect to convert his common units to common shares
and if he is terminated for "cause," resigns without
"good reason", or in the event of his death, we may
opt to repurchase those shares. If Mr. Volpe resigns for
"good reason" or is terminated without cause and we do
not elect to convert his common units to common shares, he may
require us to do so and require us to repurchase those shares.
An employment agreement was entered into with
Mr. Jean-Francois Chevrier on July 25, 1990, pursuant
to which Mr. Chevrier serves as our Vice
President & General Manager, European Operations and
Chief
87
Table of Contents
Executive Officer for Dresser-Rand S.A. (Le Havre, France),
reporting directly to Dresser-Rand Company's Chief
Executive Officer. As of December 31, 2003,
Mr. Chevrier's annual base salary was
€
168,977.
Mr. Chevrier is also eligible to receive an annual bonus
with a target payment equal to 40% of his annual base salary
(and a maximum payment equal to 60% of his annual base salary)
if certain targets based on our financial results and his
individual performance are met. A company car is also made
available to Mr. Chevrier pursuant to the terms of his
employment agreement. Mr. Chevrier's employment
agreement is subject to the Engineers and Officers of the Metal
Industry National Bargaining Agreements (Convention Collective
Nationale des Ingenieurs et Cadres de la Metallurgie). Pursuant
to such National Bargaining Agreements, Mr. Chevrier is
entitled to notice in the event that Mr. Chevrier's
employment is terminated and certain severance payments based on
his age and service with us at the time of termination. Based on
his current age and service, Mr. Chevrier would be entitled
to six months notice prior to a termination of his employment
and an additional severance payment of approximately
€
144,798.
Dresser-Rand Holdings, LLC Membership Interests
Pursuant to an agreement reached with management prior to our
acquisition by funds affiliated with First Reserve, certain
members of management were offered the opportunity in October
2004 to acquire common units in Dresser-Rand Holdings, LLC at
the same price paid per unit by the funds affiliated with First
Reserve in connection with the acquisition. Executives who
purchased common units were also issued profits units in
Dresser-Rand Holdings, LLC, which permit them to indirectly
share in appreciation in the value of our shares. After a period
of several weeks to evaluate the offer, certain of our executive
officers, including our Chief Executive Officer and each of our
four other most highly compensated executive officers, availed
themselves of this opportunity in November. Our directors were
not offered the opportunity to acquire common units or profit
units in Dresser-Rand Holdings, LLC. The terms of the plan are
set forth in the Amended and Restated Limited Liability Company
Agreement of Dresser-Rand Holdings, LLC which we refer to as the
Holdings LLC Agreement. Under the terms of Holdings LLC
Agreement, managing members whose capital contribution exceeds
$100,000 are subject to a provision not to compete with us
during the period for which they provide services to us and for
a period of two years thereafter. The following contains a
summary of the material terms of the Holdings LLC Agreement.
General
The Holdings LLC Agreement permits the grant of the right to
purchase common units to members of Dresser-Rand Holdings, LLC
and the grant of profit units, consisting of one initial tranche
of service units and five initial tranches of exit units to
certain management members who own common units. In November
2004, First Reserve, through its affiliated funds, and certain
other members purchased 100,609,829 common units for an
aggregate purchase price of $435.8 million.
Messrs. Volpe, Nye, Riordan, Dickson and Chevrier
respectively purchased 461,892, 57,737, 115,473, 115,425 and
60,000 common units in November 2004. In November 2004,
Dresser-Rand Holdings, LLC issued 7,975,000 profit units to
management members, with Messrs. Volpe, Nye, Riordan,
Dickson and Chevrier respectively receiving 4,000,000, 400,000,
700,000, 400,000 and 400,000 of such profit units. During 2005,
three additional management members became members of
Dresser-Rand Holdings, LLC and purchased 303,735 common units
for an aggregate purchase price of $1.3 million. These
management members were also issued a total of 1,000,000 profit
units.
Amendment
First Reserve may amend the Holdings LLC Agreement, provided
that no amendment is permitted that would adversely affect the
management members as a class without the consent of a majority
in interest, excluding profit units, of the management members.
Units Held by Certain of our Managers
The units of Dresser-Rand Holdings, LLC consist of common units
and profit units. Each common unit is entitled to receive an
identical share of the profits and losses of Dresser-Rand
Holdings, LLC. Profit units consist of service units and five
tranches of exit units, and are each generally entitled to an
identical share of the profits and losses of Dresser-Rand
Holdings, LLC above the benchmark amount applicable to each
profit
88
Table of Contents
unit once certain vesting and other agreed-upon
conditions are satisfied. It is not anticipated that this
offering will result in any distribution on the profits units.
As of February 1, 2005, approximately 98.4% of common units were
held by First Reserve, approximately 1.3% were held by certain
members of our management and approximately 0.3% were held by
other investors. The profit units are held exclusively by
members of our management.
Terms of the Common Units, Service Units
    and the Exit Unit Tranches
The following is a summary of certain terms of
the common units, service units and the five exit unit tranches
and certain rights and restrictions applicable to those units.
A holder of units is entitled to one vote for
each unit outstanding on a given record date, or other date as
applicable, provided that if a management member ceases to
provide services to or for the benefit of Dresser-Rand Holdings,
LLC, the units held by such management member will cease to have
voting rights.
Service units vest in five equal annual
installments on the first five anniversaries of the issuance
date, subject to the management member's continued service
to or for the benefit of Dresser-Rand Holdings, LLC. All of the
service units will vest immediately prior to the occurrence of a
change of control under the Holdings LLC Agreement.
Subject to the management member's continued
service to or for the benefit of Dresser-Rand Holdings, LLC and
other agreed upon conditions, management members will receive a
distribution for their exit units upon the occurrence of a
transaction where First Reserve exchanges all or a portion of
its units for cash, cash equivalents or marketable
publicly-traded securities only if the value First Reserve
receives from such transaction exceeds certain multiples of the
initial price paid by First Reserve.
Certain Rights and Restrictions Applicable
    to the Units
The units held by members are not transferable
for a limited period of time except in certain circumstances. In
addition, the units may be repurchased by Dresser-Rand Holdings,
LLC, and in certain cases, First Reserve, in the event that a
management member is subject to an involuntary transfer of his
or her units or if a management member receives a bona fide
offer to purchase his or her units and such management member
wants to accept such offer. First Reserve has the ability to
force members to sell their units along with First Reserve if
First Reserve decides to sell its units. Under certain
conditions, First Reserve may convert each member's units
into an economically equivalent amount of security interests of
the successor entity in connection with an initial public
offering under the Holdings LLC Agreement.
The management members that hold units are
entitled to participate in certain sales by First Reserve. In
addition, many of the restrictions on transfer will cease to
apply in the event of an initial public offering under the
Holdings LLC Agreement.
2005 Stock Incentive Plan
Our board of directors expects to adopt for
stockholder approval, our 2005 Stock Incentive Plan. The 2005
Stock Incentive Plan is administered by our compensation
committee, which has broad discretion to determine the current
or prospective officers, employees and consultants that will
receive awards, the type of awards to be granted, and the terms
of such awards. Awards under the 2005 Stock Incentive Plan may
be of stock options, stock appreciation rights and similar
awards that are measured based on appreciation of our share
price over a threshold level, or other similar awards that are
based on the full value of our shares. No stock options, stock
appreciation rights or other similar awards may be exercisable
later than the tenth anniversary of the award grant date.
A total
of                      shares
of our common stock will be available for awards under the 2005
Stock Incentive Plan. As a general rule, only shares that are
actually issued under an award are counted against this limit.
Therefore, if (and to the extent that) an award is forfeited or
terminates unexercised, or if it is settled for cash or
otherwise settled without the issuance of common stock
(including where shares are withheld to satisfy withholding
obligations), the shares underlying the award will again be
available for future awards.
89
Table of Contents
Our compensation committee will determine the
terms or conditions upon which awards will vest. This may
include vesting based on continuous employment, vesting based on
the attainment of one or more of performance criteria, or
vesting based on such other conditions as our compensation
committee may determine. Our compensation committee may impose
special provisions relating to the treatment of outstanding
awards upon a change in control of our company (as defined in
the 2005 Stock Incentive Plan). Among other things, our
compensation committee may provide for the acceleration of
vesting, for a cash payment in settlement of awards and/or for
the assumption or substitution of awards following the change in
control. Our compensation committee may also determine whether
dividends or equivalent payments will be made with respect to
outstanding awards, whether any such payments will be made in
cash or shares on a current or deferred basis, and whether such
payments are subject to vesting.
A participant's termination of employment
will typically have important consequences on outstanding awards
under the 2005 Stock Incentive Plan (although our compensation
committee will have broad authority to waive the consequences of
a termination of employment). Unless our compensation committee
determines otherwise, participants will become vested in any
outstanding stock options, stock appreciation rights or other
similar awards based on appreciation of our shares if their
employment terminates by reason of death or disability (as
defined in the 2005 Stock Incentive Plan), and will forfeit any
such unvested awards if their employment terminates for any
other reason. Unless our compensation committee determines
otherwise, participants will become vested in a pro-rata portion
(based on the number of days employed during the vesting period)
of any award of shares or similar awards if their employment
terminates by reason of death or disability (as defined in the
2005 Stock Incentive Plan), and will forfeit outstanding awards
of shares or similar awards if their employment terminates for
any other reason. Participants will forfeit vested and unvested
awards if their employment is terminated for cause (as defined
in the 2005 Stock Incentive Plan). If any award is held by a
participant in the 2005 Stock Incentive Plan who the
compensation committee believes is a "specified
employee" under Section 409A of the Code, payment or a
settlement of any award may be delayed for six months and one
day after the termination of employment of the participant.
In connection with any stock dividend, stock
split, share combination, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination, exchange of shares or other
event similarly affecting our common stock, our compensation
committee will, in a manner it deems appropriate, equitably
adjust any or all of (i) the number and type of shares that
are available under the 2005 Stock Incentive Plan or that are
subject to outstanding options or other awards, (ii) the
grant or exercise price of outstanding awards and (iii) the
performance period or performance criteria applicable to any
outstanding awards. In addition, our compensation committee may
also provide for a cash payment in settlement of outstanding
awards as a result of such transactions.
Awards under the 2005 Stock Incentive Plan will
generally not be assignable or transferable other than by will
or by the laws of descent and distribution, although our
compensation committee may permit certain transfers to the
participant's family members or to certain entities
controlled by the participant or his or her family members.
The 2005 Stock Incentive Plan will expire on the
day prior to the first meeting of our stockholders in 2009 at
which directors will be elected, and our board of directors or
our compensation committee may at any time, and from time to
time, amend, modify or terminate the 2005 Stock Incentive Plan
with any amendment, subject to stockholder approval if required
by law. An amendment or termination of the 2005 Stock Incentive
Plan may not materially adversely affect any outstanding award
held by a participant without the participant's consent.
Section 162(m) of the
Code.
Section 162(m) of the Code
generally limits the ability of a public corporation to deduct
compensation greater than $1,000,000 paid with respect to a
particular year to an individual who is, on the last day of that
year, the corporation's chief executive officer or one of
its four other most highly compensated executive officers, other
than compensation that is "performance based" within
the meaning of Section 162(m). Under a special rule that
applies to corporations that become public through an initial
public offering, this limitation generally will not apply to
compensation that is paid pursuant to the 2005 Stock Incentive
Plan before the first meeting of our stockholders in 2009 at
which directors will be elected.
90
Table of Contents
2005 Directors Stock Incentive Plan
Our board of directors expects to adopt for
stockholder approval, our 2005 Directors Plan for our
directors who are not also our officers or employees, or
officers or employees of the First Reserve Corporation. The
2005 Directors Plan is administered by our board of
directors.
A total
of                      shares
of our common stock will be available for awards under the
2005 Directors Plan. Shares subject to awards that are
forfeited will again be available for future awards under the
2005 Directors Plan. In connection with any stock dividend,
stock split, share combination, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination, exchange of shares or other
event similarly affecting our common stock, our board of
directors will, in a manner it deems appropriate, equitably
adjust the number and type of shares that are available under
the 2005 Directors Plan or that are subject to outstanding
awards. In addition, our board of directors may also provide for
a cash payment in settlement of outstanding awards as a result
of such transactions.
There will be two types of awards of shares under
the 2005 Directors Plan. Eligible directors will receive a
grant of shares effective upon the consummation of this offering
and an annual grant immediately following the first regular
meeting of our board of directors in any year the
2005 Directors Plan is in effect. Shares subject to this
annual grant will become vested in four equal installments on
the first day of each of the first four calendar quarters
following the grant date, subject to the director remaining in
office on each vesting date. Shares subject to the annual grant
will also become vested upon a director's death or
disability (as defined in the 2005 Directors Plan), or upon
a change in control of our Company (as defined in the
2005 Directors Plan). The aggregate value of the shares
subject to the annual grant is initially expected to be $30,000,
although our board of directors (or an authorized committee
thereof) may increase or decrease the value of the annual grant
from time to time.
Eligible directors may also elect to have any
portion of their cash fees for services as a director paid in
shares under the 2005 Directors Plan. Such elective awards
will be fully vested, and will contain such other terms as
determined by our board of directors.
Dividends or equivalent payments will be made
with respect to all shares subject to awards under the
2005 Directors Plan, and our board of directors will
determine whether and to what extent such payments will be paid
currently to, or credited to an account of the eligible
directors.
In the event of a change in control of our
Company (as defined in the 2005 Directors Plan), our board
of directors may provide for a cash payment in settlement of
awards, or for the assumption or substitution of awards
following the change in control.
Awards under the 2005 Directors Plan will
generally not be assignable or transferable other than by will
or by the laws of descent and distribution, except that our
board of directors may permit certain transfers to eligible
director's family members or to certain entities controlled
by the eligible director or his or her family members.
Our board of directors may at any time, and from
time to time, amend, modify or terminate the
2005 Director's Plan, as long as such actions do not
materially adversely affect any outstanding award held by an
eligible director without the director's consent. Our board
of directors will determine whether stockholder approval of any
amendments to the 2005 Directors Plan will be required, and
will seek such approval if necessary.
Annual Incentive Plan
Our board of directors expects to adopt,
effective immediately prior to the consummation of this
offering, an annual performance incentive plan that will provide
for the award of incentive bonuses to our named executive
officers and certain of our other officers and employees. The
annual incentive plan will be administered by our compensation
committee, which may delegate its authority except to the extent
that it relates to the compensation of any of our executive
officers or other individuals whose compensation the board of
directors or the compensation committee reasonably believes may
become subject to Section 162(m) of the
91
Table of Contents
Code. The determination of the compensation
committee on all matters relating to the annual incentive plan
will be final and binding on us, participants and all other
interested parties.
Each year our compensation committee will select
the eligible participants in the annual incentive plan and
establish target incentive bonuses and performance objectives
for a participant or group of participants. The actual bonus
payable to a participant — which may equal, exceed or
be less than the target bonus — will be determined
based on whether the applicable performance objectives are met,
exceeded or not met. Performance objectives may be based on one
or more of the following criteria: (i) revenue growth;
(ii) earnings before interest, taxes, depreciation and
amortization; (iii) earnings before interest, taxes and
amortization; (iv) operating income; (v) pre-or
after-tax income; (vi) cash flow; (vii) cash flow per
share; (viii) net earnings; (ix) earnings per share;
(x) return on equity; (xi) return on invested capital;
(xii) return on assets; (xiii) economic value added
(or an equivalent metric); (xiv) share price performance;
(xv) total stockholder return; (xvi) improvement in or
attainment of expense levels; (xvii) improvement in or
attainment of working capital levels; (xviii) debt
reduction; or (xix) any other criteria our compensation
committee in its sole discretion deems appropriate. The maximum
bonus payable under the plan to a participant in any year is
$3,000,000.
Bonuses will generally be payable as soon as
practicable after the compensation committee certifies that the
applicable performance criteria have been obtained. Bonuses will
generally be payable only if the participant remains employed
with us through the date of payment, subject to the discretion
of the compensation committee to provide for the payment of full
or partial bonuses upon certain terminations of employment and
to any rights individual participants may have under their
employment agreements to receive an annual bonus for the year
their employment terminates.
In addition, the compensation committee may
require that a portion of a participant's annual incentive
bonus be payable in shares of common stock, options or other
stock-based awards granted under our 2005 Stock Incentive Plan
described above, which awards may also be subject to forfeiture,
vesting or other restrictions determined by the compensation
committee.
The annual incentive plan will expire on the day
prior to the date of the first meeting of our stockholders in
2009 at which directors will be elected. However, the
compensation committee may at any time amend, suspend,
discontinue or terminate the annual incentive plan, provided
that any such amendment, suspension, discontinuance or
termination does not adversely affect participants' rights
to, or interest in, any award granted prior to the date of such
action without their written consent.
92
Table of Contents
PRINCIPAL STOCKHOLDERS
The following table and accompanying footnotes
show information regarding the beneficial ownership of our
common stock before this offering and after this offering, by
(i) each person known by us to beneficially own more than
5% of the outstanding common stock, (ii) each of our
directors, (iii) each named executive officer and
(iv) all directors and executive officers as a group.
Unless otherwise indicated, the address of each person named in
the table below is c/o Dresser-Rand Group Inc., Paul Clark
Drive, Olean, New York 14760.
The number of shares and percentages of
beneficial ownership before the offering set forth below are
based on shares of our common stock issued and outstanding as of
May 2, 2005 and after giving effect to the stock split. The
number of shares and percentages of beneficial ownership after
the offering are based
on                      shares
of our common stock to be issued and outstanding immediately
after this offering,
including                      shares
that will be either dividended to our existing stockholders
assuming no exercise of the underwriters' over-allotment
option or sold to the underwriters pursuant to their
over-allotment option assuming full exercise of that option.
Shares Beneficially Owned
Immediately Prior to
Percentage of Shares Beneficially
This Offering
Owned After This Offering(1)
Assuming the
Assuming the
Underwriters' Option
Underwriters' Option
Is Exercised in
Is Not Exercised(1)
Full(1)
Percent
Percent
Percent
of
of
of
Common
Common
Common
Name of Beneficial Owner
Number
Stock
Number
Stock
Number
Stock
First Reserve Fund X, L.P.(2)
60,021,609
59.3%
First Reserve Fund IX, L.P.(3)
39,244,898
38.8
Vincent R. Volpe Jr.(4)
461,890
*
Leonard M. Anthony(4)
221,299
*
Stephen A. Riordan(4)
115,472
*
Walter J. Nye(4)
57,737
*
Bradford W. Dickson(4)
115,424
*
Christopher Rossi(4)
115,999
*
Jean-Francois Chevrier(4)
60,000
*
Elizabeth C. Powers(4)
207,851
*
Randy D. Rinicella(4)
70,435
*
William E. Macaulay(5)
—
—
Thomas J. Sikorski(5)
—
—
Mark A. McComiskey(5)
—
—
Kenneth W. Moore(5)
—
—
Directors and executive officers as a group (13
    persons)
1,426,106
1.4%
*
Less than 1% of outstanding common stock
    (excluding in the case of Directors and executive officers as a
    group, common stock beneficially owned by First Reserve
    Fund IX, L.P. ("Fund IX") and First Reserve
    Fund X, L.P. ("Fund X")).
(1)
We will grant the underwriters an option to
    purchase up to an
    additional                      shares
    in this offering. Immediately prior to the consummation of this
    offering, we will declare a stock dividend, the terms of which
    will require that shortly after the expiration of the
    underwriters' over-allotment option (assuming the option is
    not exercised in full) we issue to our existing stockholders the
    number of shares equal to (x) the number of additional
    shares the underwriters have an option to purchase minus
    (y) the actual number of shares the underwriters purchase
    from us pursuant to that option.
(2)
Includes beneficial ownership of shares of common
    stock of Dresser-Rand Group Inc. by Fund X. First Reserve
    GP X, L.P. ("GP X") is the general partner
    of Fund X. First Reserve GP X, Inc.
93
Table of Contents
("GP X, Inc.") is the general
    partner of GP X. First Reserve Corporation is the adviser
    to Fund X. The address of GP X, Inc., GP X,
    Fund X and First Reserve Corporation is c/o First
    Reserve Corporation, One Lafayette Place, Greenwich, CT 06830.
(3)
Includes beneficial ownership of shares of common
    stock of Dresser-Rand Group Inc. by Fund IX. First Reserve
    GP IX, L.P. ("GP IX") is the general partner
    of Fund IX. First Reserve GP IX, Inc.
    ("GP IX Inc.") is the general partner of
    GP IX. First Reserve Corporation is the adviser to
    Fund IX. The address of GP IX, Inc., GP IX,
    Fund IX and First Reserve Corporation is c/o First Reserve
    Corporation, One Lafayette Place, Greenwich, CT 06830.
(4)
Because members of senior management hold their
    interests in common units of Dresser-Rand Holdings, LLC, which
    is controlled by First Reserve, they may not be deemed to
    beneficially own the common stock of Dresser-Rand Group Inc. in
    which they have an economic interest.
(5)
Mr. Macaulay is the Chairman, Chief
    Executive Officer and a member of the board of directors of
    First Reserve Corporation, GP IX, Inc. and GP X, Inc.
    Mr. Sikorski is a Managing Director of First Reserve
    Corporation, GP IX, Inc. and GP X, Inc. Mr. Moore
    is a Director of First Reserve Corporation, GP IX, Inc. and
    GP X, Inc. Mr. McComiskey is a Vice President of First
    Reserve Corporation, GP IX, Inc. and GP X, Inc.
    Messrs. Macaulay, Sikorski, Moore and McComiskey all
    disclaim beneficial ownership of any common stock owned by such
    entities or their affiliates. The address of GP IX, Inc.,
    GP X, Inc., GP IX, GP X, Fund IX,
    Fund X, William E. Macaulay, Thomas J. Sikorski, Mark A.
    McComiskey and Kenneth W. Moore is c/o First Reserve
    Corporation, One Lafayette Place, Greenwich, CT 06830.
94
Table of Contents
CERTAIN RELATED PARTY TRANSACTIONS
Amended and Restated Limited Liability Company
Agreement of Dresser-Rand Holdings, LLC
In connection with the acquisition, Dresser-Rand
Holdings, LLC, our indirect parent, amended and restated its
limited liability company agreement, governing, among other
things, the terms under which senior management acquired common
units in Dresser-Rand Holdings, LLC. For a summary of the
material terms of the Holdings LLC Agreement, see
"Management — Dresser-Rand Holdings, LLC
Membership Interests."
Stockholders Agreement
We have entered into a stockholders agreement
with First Reserve and certain management stockholders that
governs the terms and conditions under which the management
stockholders may transfer their shares of our common stock, in
addition to other stockholder matters. The stockholders
agreement provides that First Reserve will designate all of the
nominees for election to our board of directors. Our board of
directors currently consists of our Chief Executive Officer and
four other directors nominated by First Reserve and may be
subsequently expanded by vote of the board. All significant
decisions involving us require the approval of First Reserve.
The stockholders agreement provides that First
Reserve will have the ability to require us to register its
shares of our common stock. In addition, in connection with
other registered offerings by us, holders of shares of our
common stock will have the ability to exercise certain piggyback
registration rights with respect to such shares. Furthermore any
proposed transfers of our common stock by a management
stockholder (other than affiliates of First Reserve) will be
subject to a right of first refusal by us and First Reserve. The
stockholders agreement grants to management stockholders
"tag-along" rights, and to First Reserve,
"drag-along" rights, in each case in connection with
transfers by First Reserve of our common stock.
Transition Services Agreement
In connection with the acquisition, we and
Ingersoll-Rand entered into a transition services agreement as
of the closing to facilitate consistent service and satisfaction
for our clients. Ingersoll-Rand provides services as requested
by us, including, among others, compensation delivery services,
health and welfare administration, pension administration, legal
services and other services, and agreed upon between the
parties. All third-party costs associated with the services are
our responsibility, whether paid by Ingersoll-Rand or passed
directly on to us.
The provision of services commenced on the
closing date and will terminate on the first anniversary of the
closing date; provided, however, that we may cancel any service
upon 30 days' written notice of cancellation and
Ingersoll-Rand may cease to provide a service upon 90 days'
written notice to us if Ingersoll-Rand ceases to provide such
services to all of Ingersoll-Rand's subsidiaries, divisions
and business units.
Supply Agreement
We entered into a supply agreement with
Ingersoll-Rand, expiring on December 31, 2009, whereby we
supply Ingersoll-Rand with certain assembly units (an
"FRG") for Ingersoll-Rand's "PET
Star 4" product. There are no minimum order quantities
under this agreement.
License Agreement
As contemplated by the equity purchase agreement,
Dresser-Rand Company and Dresser-Rand A.S., each an indirect
wholly-owned subsidiary of the issuer, agreed to certain
covenants with and granted intellectual property rights related
to the development of Ingersoll-Rand's 250 kilowatt
microturbine to Ingersoll-Rand Energy Systems Corporation and
the Energy Systems Division of Ingersoll-Rand. Pursuant to the
terms of the license agreement, Energy Systems was granted a
non-exclusive, worldwide right and license (without the right to
sublicense) to practice and use any intellectual property owned
by Dresser-Rand
95
Table of Contents
Company or Dresser-Rand A.S. relating to the
250 Kilowatt microturbines, and to manufacture, use, market
and sell microturbines with a generating capacity of
1,000 kilowatts or less. The license was granted without
royalties.
Dresser Name
Our company's name and principal mark is a
combination of the names of our founder companies, Dresser
Industries, Inc. and Ingersoll-Rand. We have acquired perpetual
rights to use the "Rand" portion of our principal mark
from Ingersoll-Rand as part of the sale agreement. The rights to
use the "Dresser" portion of our name in perpetuity
were acquired from Dresser, Inc., an affiliate of First Reserve
for consideration of $1 million plus an additional
$4 million payable over the next 9 years.
96
Table of Contents
DESCRIPTION OF INDEBTEDNESS
Senior Secured Credit Facility
Overview
In connection with the transactions, we entered
into a senior secured credit facility with Citicorp North
America, Inc., as administrative agent, Citigroup Global Markets
Inc., as joint lead arranger and joint book manager, Morgan
Stanley Senior Funding, Inc., as joint lead arranger, joint book
manager and co-syndication agent, UBS Securities LLC, as joint
lead arranger, joint book manager and co-syndication agent, and
each lender party thereto.
The senior secured credit facility provides
senior secured financing of $695 million, consisting of:
•
a $395 million term loan facility (with a
€
78.5 million
    sub-facility); and
•
a $300 million revolving credit facility
    (with a sub-facility denominated in euros in an amount not to
    exceed the equivalent of $200 million and in sterling in an
    amount not to exceed the equivalent of $75 million).
The term loan portion of our senior secured
credit facility was fully funded and on March 31, 2005 we
had approximately $125 million of borrowing capacity under
the revolving portion of our senior secured credit facility,
subject to certain conditions, after giving effect to
approximately $175 million of outstanding letters of credit.
Upon the occurrence of certain events, we may
request an increase to the existing term loan facility and/or
the existing revolving credit facility in an aggregate amount
not to exceed $200 million, subject to receipt of
commitments by existing lenders or other financial institutions
reasonably acceptable to the administrative agent.
We and certain of our foreign subsidiaries are
the borrowers for the term loan facility and the revolving
credit facility. The foreign subsidiary borrowers are referred
to herein as Euro Borrowers. The revolving credit facility
includes borrowing capacity available for letters of credit and
for borrowings on same-day notice, referred to as swingline
loans.
Interest Rate and Fees
The U.S. dollar denominated borrowings under
the senior secured credit facility bear interest at a rate equal
to an applicable margin plus, at our option, either (a) a
base rate determined by reference to the highest of (1) the
rate that the administrative agent announces from time to time
as its prime or base commercial lending rate, (2) the three
month certificate of deposit rate plus 1/2 of 1% and
(3) the federal funds rate plus 1/2 of 1% or (b) a
LIBOR rate determined by reference to the costs of funds for
deposits in U.S. dollars for the interest period relevant
to such borrowing adjusted for certain additional costs. Euro
borrowings under the senior secured credit facility bear
interest at a rate equal to an applicable margin plus, a EURIBOR
rate determined by reference to the costs of funds for deposits
in euros for the interest period relevant to such borrowing
adjusted for certain additional costs. Borrowings in a foreign
currency, other than Euros under the senior secured credit
facility, bear interest at a rate equal to an applicable margin,
plus a LIBOR rate determined by reference to the costs of funds
for deposits in the currency of such borrowing for the interest
period relevant to such borrowings adjusted for certain
additional costs.
The initial applicable margin for borrowings
under the revolving credit facility is 1.50% with respect to
base rate borrowings and 2.50% with respect to LIBOR and EURIBOR
borrowings (which margin will be reduced to 1.25% and 2.25%,
respectively if our leverage ratio is less than 5.0 to 1.0 but
greater than or equal to 4.0 to 1.0, and to 1.00% and 2.00%,
respectively if our leverage ratio is less than 4.0 to 1.0). The
initial applicable margin for base rate borrowings under the
term loan facility is 1.00%. The initial applicable margin
97
Table of Contents
for LIBOR borrowings and EURIBOR borrowings under
the term loan facility is 2.00% and 2.50%, respectively.
In addition to paying interest on outstanding
principal under the senior secured credit facility, we are
required to pay a commitment fee to the lenders under the
revolving credit facility in respect of the unutilized
commitments thereunder. The initial commitment fee rate is
0.50% per annum (which fee will be reduced to
0.375% per annum if our leverage ratio is less than 4.0 to
1.0). We also have to pay letter of credit fees equal to the
applicable margin then in effect with respect to LIBOR loans
under the revolving credit facility on the face amount of each
such letter of credit. We also have to pay to each bank issuing
a letter of credit fees equal to 1/4 of 1% on the face amount of
each letter of credit and other customary documentary and
processing charges.
Prepayments
The senior secured credit facility requires us to
prepay outstanding term loans, subject to certain exceptions,
with:
•
beginning in the year ending December 31,
    2005, 75% (which percentage will be reduced to 50% if our
    leverage ratio is equal to or less than 5.00 to 1.00 and greater
    than 4.00 to 1.00, and to 25% if our leverage ratio is equal to
    or less than 4.00 to 1.00 and greater than 3.00 to 1.00, and to
    0% if our leverage ratio is equal to or less than 3.00 to 1.00)
    of our annual excess cash flow;
•
100% of the net cash proceeds in excess of an
    agreed upon amount from non-ordinary course asset sales and
    casualty and condemnation events, if we do not reinvest or
    contract to reinvest those proceeds within twelve months,
    subject to certain limitations;
•
100% of the net cash proceeds of any incurrence
    of debt, other than certain debt permitted under the senior
    secured credit facility; and
•
100% of amounts in excess of an aggregate amount
    of $5.0 million in respect of certain claims arising out of
    the Acquisition, subject to certain exceptions.
The foregoing mandatory prepayments other than
from excess cash flow will be applied to the remaining
installments of the term loan facility on a pro rata basis.
Mandatory prepayments from excess cash flow and optional
prepayments will be applied to the remaining installments of the
term loan facility at our direction. Each lender has the right
to decline any mandatory prepayment of its term loans in which
case the amount of such prepayment will be retained by us.
We may voluntarily prepay outstanding loans under
the senior secured credit facility at any time without premium
or penalty, other than customary "breakage" costs with
respect to LIBOR or EURIBOR loans.
Amortization
We are required to repay installments on the
loans under the term loan facility in quarterly principal
amounts equal to one quarter of 1.00% of their funded total
principal amount for the first six years and six months, with
the remaining amount payable on the date that is seven years
from the date of the closing of the senior secured credit
facility.
Principal amounts outstanding under the revolving
credit facility will be due and payable in full at maturity,
five years from the date of the closing of the senior secured
credit facility.
Guarantee and Security
All our obligations and the obligations of the
Euro Borrowers under the senior secured credit facility are
unconditionally guaranteed by each of our existing and future
domestic wholly-owned subsidiaries (subject to exceptions with
respect to immaterial subsidiaries and with respect to any
guaranty that could create
98
Table of Contents
materially adverse tax consequences), and our
direct parent, D-R Interholding, LLC, referred to, collectively,
as Domestic Guarantors.
All our obligations under the senior secured
credit facility, our guarantee of the obligations of the Euro
Borrowers under the senior secured credit facility, and the
guarantees of our obligations and the obligations of the Euro
Borrowers under the senior secured credit facility by the
Domestic Guarantors, are secured by substantially all our assets
and the assets of each Domestic Guarantor, including, but not
limited to, the following:
•
subject to certain exceptions, a pledge of 100%
    of our capital stock and the capital stock of each direct,
    material domestic subsidiary owned by us or a Domestic Guarantor
    (other than subsidiaries substantially all of whose assets
    consist of stock in controlled foreign corporations) and 65% of
    the capital stock of each direct, material foreign subsidiary
    owned by us or a Domestic Guarantor and of each direct, material
    domestic subsidiary owned by us or a Domestic Guarantor
    substantially all of whose assets consist of stock in controlled
    foreign corporations; and
•
subject to certain exceptions, a security
    interest in substantially all of the tangible and intangible
    assets owned by us and each Domestic Guarantor.
All obligations of each Euro Borrower under the
senior secured credit facility are also unconditionally
guaranteed by certain of our existing and future wholly-owned
foreign subsidiaries (subject to exceptions with respect to
immaterial subsidiaries and with respect to any guaranty that
could create materially adverse tax or legal consequences)
referred to, collectively, as Foreign Guarantors.
In addition, all obligations of each Euro
Borrower under the senior secured credit facility, and the
guarantees of those obligations by the applicable Foreign
Guarantors, are secured by substantially all the assets of such
Euro Borrower and the applicable Foreign Guarantors, including,
but not limited to:
•
subject to certain exceptions, a pledge of 100%
    of the capital stock of each direct, material subsidiary of such
    Euro Borrower and the applicable Foreign Guarantors (subject to
    exceptions with respect to any pledge that could create
    materially adverse tax or legal consequences); and
•
subject to certain exceptions and limitations
    under applicable law, a security interest in substantially all
    of the tangible and intangible assets of such Euro Borrower and
    the applicable Foreign Guarantors.
Certain Covenants and Events of
    Default
The senior secured credit facility contains a
number of covenants that, among other things, restrict, subject
to certain exceptions, our ability, the ability of our parent
D-R Interholding, LLC, and each of its subsidiaries to:
•
sell assets;
•
incur additional indebtedness;
•
prepay, redeem or repurchase other indebtedness;
•
pay dividends and distributions or repurchase
    capital stock;
•
create liens on assets;
•
make investments, loans or advances;
•
make capital expenditures;
•
make amendments to any corporate documents that
    would be materially adverse to the lenders;
•
make certain acquisitions;
99
Table of Contents
•
engage in mergers or consolidations;
•
engage in certain transactions with affiliates;
•
amend certain material agreements governing
    indebtedness;
•
change the business conducted by D-R
    Interholding, LLC and its subsidiaries;
•
enter into agreements that restrict dividends
    from subsidiaries;
•
enter into sale and lease-back
    transactions; and
•
enter into swap agreements.
In addition, the senior secured credit facility
requires us to maintain the following financial covenants:
•
a maximum consolidated net leverage
    ratio; and
•
a minimum interest coverage ratio.
The senior secured credit facility also contains
certain customary affirmative covenants and events of default.
We were briefly not in compliance with our
obligation under the senior secured credit facility to provide
the lenders with financial statements for the year ended
December 31, 2004 no later than 120 days after the end of
that year. This non-compliance was remedied by delivery of the
financial statements within the 30-day cure period.
We intend to seek an amendment to our senior
secured credit facility prior to the consummation of this
offering to remove certain restrictions on our ability to
consummate the offering and use the proceeds as described in
"Use of Proceeds."
7 3/8% Senior Subordinated Notes due
2014
General
In October 2004, we issued the 7 3/8% senior
subordinated notes that mature on November 1, 2014 in an
aggregate principal amount of $420.0 million in a private
transaction not subject to the registration requirements under
the Securities Act. The net proceeds from that financing were
used to finance the acquisition and pay related fees and
expenses.
Guarantees
The notes are guaranteed, on a senior
subordinated, unsecured basis, by each of our direct and
indirect wholly-owned subsidiaries that were domestic
subsidiaries on the issue date.
Ranking
The notes are general unsecured senior
subordinated obligations of the issuer that rank junior to the
issuer's existing and future senior indebtedness, including
obligations under the senior secured credit facility, equally in
right of payment with all of the issuer's future senior
subordinated debt and senior in right of payment to all of our
future subordinated debt. They are effectively subordinated in
right of payment to all of the issuer's existing and future
secured debt to the extent of the value of the assets securing
such debt, and are structurally subordinated to all obligations
of our subsidiaries that are not guarantors.
100
Table of Contents
Optional
Redemption
At any time prior to November 1, 2007, the
issuer may on any one or more occasions redeem up to 35% of the
aggregate principal amount of notes issued under the indenture
(including any additional notes issued after the issue date) at
a redemption price of 107.375% of the principal amount, plus
accrued and unpaid interest and additional interest, if any, to,
but not including, the redemption date, with the net cash
proceeds of one or more equity offerings; provided that:
(1) at least 65% of the aggregate principal
    amount of notes issued under the indenture (excluding notes held
    by us and our subsidiaries) remains outstanding immediately
    after the occurrence of such redemption; and
(2) the redemption occurs within
    180 days of the date of the closing of such equity offering.
Except pursuant to the preceding paragraph or as
otherwise set forth below, the notes will not be redeemable at
the issuer's option prior to November 1, 2009. We are
not, however, prohibited from acquiring the notes by means other
than a redemption, whether pursuant to a tender offer, open
market purchase or otherwise, so long as the acquisition does
not violate the terms of the indenture.
On or after November 1, 2009, the issuer may
redeem all or a part of the notes at the redemption prices
(expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and additional interest, if
any, on the notes to be redeemed, to, but not including, the
applicable redemption date, if redeemed during the twelve month
period beginning on November 1 of the years indicated
below, subject to the rights of holders on the relevant record
date to receive interest on the relevant interest payment date:
Year
Percentage
2009
103.688%
2010
102.458%
2011
101.229%
2012 and thereafter
100.000%
In addition, at any time prior to
November 1, 2009, the issuer may also redeem all or a part
of the notes at a redemption price equal to 100% of the
principal amount of notes to be redeemed, plus the applicable
premium as of, and accrued and unpaid interest and additional
interest, if any, to, but not including, the redemption date,
subject to the rights of holders on the relevant record date to
receive interest due on the relevant interest payment date.
Change of
Control
In the event of a change of control, which is
defined in the indenture governing the notes, each holder of the
notes will have the right to require the issuer to repurchase
all or any part of such holder's notes at a purchase price
in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase.
Covenants
The indenture governing the notes contains
certain covenants that, among other things, limit our ability
and the ability of some of our subsidiaries to:
•
incur additional debt or issue certain preferred
    shares;
•
pay dividends on or make distributions in respect
    of our or any of our restricted subsidiaries' capital stock
    or make other restricted payments;
•
make certain investments;
101
Table of Contents
•
sell certain assets;
•
create liens on certain debt without securing the
    notes;
•
consolidate, merge, sell or otherwise dispose of
    all or substantially all of our assets;
•
enter into certain transactions with our
    affiliates; and
•
designate our subsidiaries as unrestricted
    subsidiaries.
Events of
Default
The indenture governing the notes also provides
for events of default which, if any of them occurs, would permit
or require the principal of and accrued interest on such notes
to become or to be declared to be due and payable.
As of May 1, 2005 we were in compliance in
all material respects with all covenants and provisions
contained under the indenture governing the notes.
Exchange
Offer
We are obligated to use commercially reasonable
efforts to register the notes under the Securities Act and
consummate an exchange offer no later than August 25, 2005.
If this requirement is not met, then the annual interest on the
notes will increase by (1) 0.25% for the first 90 days
following the end of such period and (2) 0.25% at the
beginning of each subsequent 90 day period, up to a maximum
of 1.0% until all such registration defaults are cured.
102
Table of Contents
DESCRIPTION OF CAPITAL STOCK
The following is a description of the material
terms of our amended and restated certificate of incorporation
and amended and restated bylaws that will be in effect
immediately prior to this offering. We refer you to the form of
our amended and restated certificate of incorporation and
amended and restated bylaws, copies of which have been filed as
exhibits to the registration statement of which this prospectus
forms a part.
Authorized Capitalization
Our authorized capital stock consists
of                      shares
of common stock, par value $0.01 per share, of
which                      shares
were issued and outstanding immediately prior to this offering
and            shares
of preferred stock, par value
$          per
share, of which no shares are currently issued and outstanding.
Immediately following the completion of this offering, we will
have                      shares
of common stock outstanding
(including                      shares
that will be dividended to our stockholders existing immediately
prior to this offering, consisting of affiliates of First
Reserve and certain members of senior management, assuming the
underwriters do not exercise their over-allotment option).
Immediately following completion of the offering, there will be
no shares of preferred stock outstanding.
Common Stock
Voting Rights.
Holders of common stock are entitled to one vote per share on
all matters to be voted upon by the stockholders. The holders of
common stock do not have cumulative voting rights in the
election of directors.
Dividend Rights.
Subject to the rights of the holders of any preferred stock that
may be outstanding, holders of our common stock are entitled to
receive dividends as may be declared by our Board of Directors
out of funds legally available to pay dividends. Dividends upon
the common stock of the corporation may be declared by the board
of directors at any regular or special meeting, and may be paid
in cash, in property, or in shares of capital stock. Before
payment of any dividend, there may be set aside out of any of
our funds available for dividends, such sums as the board of
directors deems proper as reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any of our
property, or for any proper purpose, and the board of directors
may modify or abolish any such reserve. Our senior secured
credit facility and the indenture governing the senior
subordinated notes impose restrictions on our ability to declare
dividends with respect to our common stock.
Liquidation Rights.
Upon liquidation, dissolution or winding up, any business
combination or a sale or disposition of all or substantially all
of the assets, the holders of common stock are entitled to
receive ratably the assets available for distribution to the
stockholders after payment of liabilities and the liquidation
preference of any of our outstanding preferred stock.
Other Matters.
The
common stock has no preemptive or conversion rights and is not
subject to further calls or assessment by us. There are no
redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of our common stock, including the
common stock offered in this offering, are fully paid and
non-assessable.
Preferred Stock
Our amended and restated certificate of
incorporation authorizes our board of directors to establish one
or more series of preferred stock and to determine, with respect
to any series of preferred stock, the terms and rights of that
series, including:
•
the designation of the series;
•
the number of shares of the series, which our
    board may, except where otherwise provided in the preferred
    stock designation, increase or decrease, but not below the
    number of shares then outstanding;
103
Table of Contents
•
whether dividends, if any, will be cumulative or
    non-cumulative and the dividend rate of the series;
•
the dates at which dividends, if any, will be
    payable;
•
the redemption rights and price or prices, if
    any, for shares of the series;
•
the terms and amounts of any sinking fund
    provided for the purchase or redemption of shares of the series;
•
the amounts payable on shares of the series in
    the event of any voluntary or involuntary liquidation,
    dissolution or winding-up of the affairs of our company;
•
whether the shares of the series will be
    convertible into shares of any other class or series, or any
    other security, of our company or any other corporation, and, if
    so, the specification of the other class or series or other
    security, the conversion price or prices or rate or rates, any
    rate adjustments, the date or dates as of which the shares will
    be convertible and all other terms and conditions upon which the
    conversion may be made;
•
restrictions on the issuance of shares of the
    same series or of any other class or series; and
•
the voting rights, if any, of the holders of the
    series.
Anti-Takeover Effects of Certain Provisions of
Delaware Law and our Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws
Certain provisions of our amended and restated
certificate of incorporation and amended and restated bylaws,
which are summarized in the following paragraphs, may have an
anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in
its best interest, including those attempts that might result in
a premium over the market price for the shares held by
stockholders.
Removal of Directors;
    Vacancies
Our amended and restated certificate of
incorporation and amended and restated bylaws provide that
unless otherwise provided in the stockholders agreement,
(i) prior to the date on which First Reserve ceases to own
at least 40% of all the then outstanding shares of stock,
directors may be removed for any reason upon the affirmative
vote of holders of at least a majority of the voting power of
all the then outstanding shares of stock entitled to vote
generally in the election of directors, voting together as a
single class and (ii) on and after the date First Reserve
ceases to own at least 40% of all the then outstanding shares of
stock, directors may be removed only for cause and only upon the
affirmative vote of holders of at least 75% of the voting power
of all the then outstanding shares of stock entitled to vote
generally in the election of directors, voting together as a
single class. In addition, our amended and restated certificate
of incorporation and amended and restated bylaws also provide
that unless otherwise provided in the stockholders agreement,
any vacancies on our board of directors will be filled only by
the affirmative vote of a majority of the remaining directors,
although less than a quorum.
No Cumulative Voting
The Delaware General Corporation Law
("DGCL") provides that stockholders are not entitled
to the right to cumulate votes in the election of directors
unless our amended and restated certificate of incorporation
provides otherwise. Our amended and restated certificate of
incorporation does not expressly provide for cumulative voting.
104
Table of Contents
Calling of Special Meetings of
    Stockholders
Our amended and restated bylaws provide that
special meetings of our stockholders may be called at any time
by the board of directors or a committee of the board of
directors which has been designated by the board of directors.
Stockholder Action by Written
    Consent
The DGCL permits stockholder action by written
consent unless otherwise provided by amended and restated
certificate of incorporation. Our amended and restated
certificate of incorporation precludes stockholder action by
written consent after the date on which First Reserve ceases to
own at least 40% of all the then outstanding shares of stock.
Advance Notice Requirements for Stockholder
    Proposals and Director Nominations
Our amended and restated bylaws provide that
stockholders seeking to nominate candidates for election as
directors or to bring business before an annual meeting of
stockholders must provide timely notice of their proposal in
writing to the corporate secretary.
Generally, to be timely, a stockholder's
notice must be received at our principal executive offices not
less than 90 days nor more than 120 days prior to the
date on which we first mailed our proxy materials for the
preceding year's annual meeting. Our amended and restated
bylaws also specify requirements as to the form and content of a
stockholder's notice. These provisions may impede
stockholders' ability to bring matters before an annual
meeting of stockholders or make nominations for directors at an
annual meeting of stockholders.
Supermajority Provisions
The DGCL provides generally that the affirmative
vote of a majority of the outstanding shares entitled to vote is
required to amend a corporation's certificate of
incorporation or bylaws, unless the certificate of incorporation
requires a greater percentage. Our amended and restated
certificate of incorporation provides that the following
provisions in the amended and restated certificate of
incorporation and amended and restated bylaws may be amended
only by a vote of at least 75% of the voting power of all of the
outstanding shares of our stock entitled to vote:
•
the removal of directors;
•
the limitation on stockholder action by written
    consent;
•
the ability to call a special meeting of
    stockholders being vested solely in our board of directors and
    any committee of the board of directors which has been
    designated by the board of directors;
•
the advance notice requirements for stockholder
    proposals and director nominations; and
•
the amendment provision requiring that the above
    provisions be amended only with a 75% supermajority vote.
In addition, our amended and restated certificate
of incorporation grants our board of directors the authority to
amend and repeal our amended and restated bylaws without a
stockholder vote in any manner not inconsistent with the laws of
the State of Delaware or our amended and restated certificate of
incorporation.
Limitations on Liability and
    Indemnification of Officers and Directors
The DGCL authorizes corporations to limit or
eliminate the personal liability of directors to corporations
and their stockholders for monetary damages for breaches of
directors' fiduciary duties. Our amended and
105
Table of Contents
restated certificate of incorporation includes a
provision that eliminates the personal liability of directors
for monetary damages for actions taken as a director,
•
for breach of duty of loyalty;
•
for acts or omissions not in good faith or
    involving intentional misconduct or knowing violation of law;
•
under Section 174 of the DGCL (unlawful
    dividends); or
•
for transactions from which the director derived
    improper personal benefit.
Our amended and restated certificate of
incorporation and amended and restated bylaws provide that we
must indemnify our directors and officers to the fullest extent
authorized by the DGCL. We are also expressly authorized to
carry directors' and officers' insurance providing
indemnification for our directors, officers and certain
employees for some liabilities. We believe that these
indemnification provisions and insurance are useful to attract
and retain qualified directors and executive officers.
The limitation of liability and indemnification
provisions in our amended and restated certificate of
incorporation and amended and restated bylaws may discourage
stockholders from bringing a lawsuit against directors for
breach of their fiduciary duty. These provisions may also have
the effect of reducing the likelihood of derivative litigation
against directors and officers, even though such an action, if
successful, might otherwise benefit us and our stockholders. In
addition, your investment may be adversely affected to the
extent we pay the costs of settlement and damage awards against
directors and officers pursuant to these indemnification
provisions.
There is currently no pending material litigation
or proceeding involving any of our directors, officers or
employees for which indemnification is sought.
Delaware Anti-takeover
    Statute
We have opted out of Section 203 of the
DGCL. Subject to specified exceptions, Section 203
prohibits a publicly held Delaware corporation from engaging in
a "business combination" with an "interested
stockholder" for a period of three years after the date of
the transaction in which the person became an interested
stockholder. "Business combinations" include mergers,
asset sales and other transactions resulting in a financial
benefit to the "interested stockholder." Subject to
various exceptions, an "interested stockholder" is a
person who together with his or her affiliates and associates,
owns, or within three years did own, 15% or more of the
corporation's outstanding voting stock. These restrictions
generally prohibit or delay the accomplishment of mergers or
other takeover or change-in-control attempts.
Transfer Agent and Registrar
Citibank, N.A. will be the transfer agent and
registrar for our common stock.
Listing
We intend to apply to list our common stock on
the New York Stock Exchange under the symbol "DRC."
Authorized but Unissued Capital
Stock
The DGCL does not require stockholder approval
for any issuance of authorized shares. However, the listing
requirements of the New York Stock Exchange, which would apply
so long as our common stock is listed on the New York Stock
Exchange, require stockholder approval of certain issuances
equal to or exceeding 20% of the then outstanding voting power
or then outstanding number of shares of common stock.
106
Table of Contents
These additional shares may be used for a variety
of corporate purposes, including future public offerings, to
raise additional capital or to facilitate acquisitions.
One of the effects of the existence of unissued
and unreserved common stock may be to enable our board of
directors to issue shares to persons friendly to current
management, which issuance could render more difficult or
discourage an attempt to obtain control of our company by means
of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of our management and possibly
deprive the stockholders of opportunities to sell their shares
of common stock at prices higher than prevailing market prices.
107
Table of Contents
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any
public market for our common stock, and we cannot predict what
effect, if any, market sales of shares of common stock or the
availability of shares of common stock for sale will have on the
market price of our common stock. Nevertheless, sales of
substantial amounts of common stock in the public market, or the
perception that such sales could occur, could materially and
adversely affect the market price of our common stock and could
impair our future ability to raise capital through the sale of
our equity or equity-related securities at a time and price that
we deem appropriate.
Upon the closing of this offering, we will have
outstanding an aggregate of
approximately            million
shares of common stock, including an
additional                      shares
that may be issued upon the exercise of the underwriters'
over-allotment option. Of the outstanding shares, the shares
sold in this offering will be freely tradable without
restriction or further registration under the Securities Act,
except that any shares held by our "affiliates," as
that term is defined under Rule 144 of the Securities Act,
may be sold only in compliance with the limitations described
below. The remaining outstanding shares of common stock will be
deemed "restricted securities" as that term is defined
under Rule 144. Restricted securities may be sold in the
public market only if registered or if they qualify for an
exemption from registration under Rule 144 or 144(k) under
the Securities Act, which are summarized below.
Under our Stockholders Agreement, we may be
required to register the sale of our shares held by First
Reserve and certain management stockholders. Under the
Stockholders Agreement, First Reserve has the right to request
us to register the sale of its shares and may require us to make
available shelf registration statements permitting sales of
shares into the market from time to time over an extended
period. In addition, First Reserve and certain management
stockholders will have the ability to exercise certain piggyback
registration rights in connection with registered offerings
requested by First Reserve or initiated by us. Immediately after
this offering, First Reserve will
own            million
shares entitled to these registration rights and management will
own            million
shares entitled to these registration rights. See "Certain
Related Party Transactions — Stockholders
Agreement."
Registration Rights Agreement
The registration rights agreement provides that,
in connection with a public offering and sale, First Reserve
will, in certain circumstances, have the ability to require us
to register its shares of our common stock. In addition, in
connection with other registered offerings by us, existing
holders of shares of our common stock will have the ability to
exercise certain piggyback registration rights with respect to
such shares.
Rule 144
Subject to the lock-up agreements described below
and the volume limitations and other conditions under
Rule 144, additional shares of our common stock will be
available for sale in the public market pursuant to exemptions
from registration requirements as follows:
Number of Shares
Date
After    days from the date of
    this prospectus (subject to volume limitations and other
    conditions under Rule 144)
In general, under Rule 144 as currently in
effect, a person (or persons whose shares are required to be
aggregated), including an affiliate, who has beneficially owned
shares of our common stock for at least one year is entitled to
sell in any three-month period a number of shares that does not
exceed the greater of:
•
1% of the then-outstanding shares of common
    stock; and
•
the average weekly reported volume of trading in
    the common stock on the New York Stock Exchange during the four
    calendar weeks preceding the date on which notice of sale is
    filed, subject to restrictions.
108
Table of Contents
Sales under Rule 144 are also subject to
manner of sale provisions and notice requirements and to the
availability of current public information about us.
Rule 144(k)
In addition, a person who is not deemed to have
been an affiliate of ours at any time during the 90 days
preceding a sale and who has beneficially owned the shares
proposed to be sold for at least two years, would be entitled to
sell those shares under Rule 144(k) without regard to the
manner of sale, public information, volume limitation or notice
requirements of Rule 144. To the extent that our affiliates
sell their shares, other than pursuant to Rule 144 or a
registration statement, the purchaser's holding period for
the purpose of effecting a sale under Rule 144 commences on
the date of transfer from the affiliate. For so long as
D-R Interholding, LLC controls us, it will be deemed to be
our affiliate under Rule 144(k) and may not rely on the
exemption from registration under Rule 144(k).
Lock-Up Agreements
In connection with this offering, we,
D-R Interholding, LLC and all of our stockholders existing
prior to this offering have agreed with the underwriters,
subject to certain exceptions, not to sell, dispose of or hedge
any of our common stock or securities convertible into or
exchangeable for shares of common stock, during the period
ending 180 days after the date of this prospectus, except
with the prior written consent of Morgan Stanley & Co.
Incorporated and Citigroup Global Markets Inc. See
"Underwriting."
109
Table of Contents
CERTAIN UNITED STATES FEDERAL INCOME AND
ESTATE TAX
CONSEQUENCES TO
NON-U.S. HOLDERS
The following discussion is a summary of certain
United States federal income and estate tax consequences of the
purchase, ownership and disposition of our common stock as of
the date hereof. Except where noted, this summary deals only
with common stock that is held as a capital asset by a
non-U.S. holder.
A "non-U.S. holder" means a
beneficial owner of our common stock (other than a partnership)
that is not for United States federal income tax purposes any of
the following:
•
an individual citizen or resident of the United
    States;
•
a corporation (or any other entity treated as a
    corporation for United States federal income tax purposes)
    created or organized in or under the laws of the United States,
    any state thereof or the District of Columbia;
•
an estate the income of which is subject to
    United States federal income taxation regardless of its
    source; or
•
a trust if it (1) is subject to the primary
    supervision of a court within the United States and one or more
    United States persons have the authority to control all
    substantial decisions of the trust or (2) has a valid
    election in effect under applicable United States Treasury
    regulations to be treated as a United States person.
This discussion is based upon provisions of the
Internal Revenue Code of 1986, as amended (the
"Code"), and regulations, rulings and judicial
decisions as of the date hereof. Those authorities may be
changed, perhaps retroactively, so as to result in United States
federal income and estate tax consequences different from those
summarized below. This summary does not address all aspects of
United States federal income and estate taxes and does not deal
with foreign, state, local or other tax considerations that may
be relevant to non-U.S. holders in light of their personal
circumstances. In addition, it does not represent a detailed
description of the United States federal income and estate tax
consequences applicable to you if you are subject to special
treatment under the United States federal income tax laws
(including if you are a United States expatriate,
"controlled foreign corporation," "passive
foreign investment company," corporation that accumulates
earnings to avoid United States federal income tax or an
investor in a partnership or other pass-through entity). We
cannot assure you that a change in law will not alter
significantly the tax considerations that we describe in this
summary.
If a partnership holds our common stock, the tax
treatment of a partner will generally depend upon the status of
the partner and the activities of the partnership. If you are a
partner of a partnership holding our common stock, you should
consult your tax advisors.
If you are considering the purchase of our
common stock, you should consult your own tax advisors
concerning the particular United States federal income and
estate tax consequences to you of the ownership of the common
stock, as well as the consequences to you arising under the laws
of any other taxing jurisdiction.
Dividends
If distributions are paid on shares of our common
stock, such distributions will constitute dividends for United
States federal income tax purposes to the extent paid from our
current or accumulated earnings and profits, as determined under
United States federal income tax principles. If a distribution
exceeds our current and accumulated earnings and profits, it
will constitute a return of capital that is applied against and
reduces, but not below zero, a non-U.S. Holder's
adjusted tax basis in our common stock. Any remainder will
constitute gain on the common stock. See "— Gain
on Disposition of Common Stock." Dividends paid to a
non-U.S. holder of our common stock generally will be
subject to withholding of United States federal income tax at a
30% rate or such lower rate as may be specified by an applicable
income tax treaty. However, dividends that are effectively
connected with the conduct of a trade or business by the
non-U.S. holder within the United States (and, where a tax
treaty applies, are attributable to a United States permanent
110
Table of Contents
establishment of the non-U.S. holder) are
not subject to the withholding tax, provided that certain
certification and disclosure requirements are satisfied.
Instead, such dividends are generally subject to United States
federal income tax on a net income basis in the same manner as
if the non-U.S. holder were a United States person as
defined under the Code. Any such effectively connected dividends
received by a foreign corporation may be subject to an
additional "branch profits tax" at a 30% rate or such
lower rate as may be specified by an applicable income tax
treaty.
A non-U.S. holder of our common stock who
wishes to claim the benefit of an applicable treaty rate and
avoid backup withholding, as discussed below, for dividends will
be required to (a) complete Internal Revenue Service
Form W-8BEN (or other applicable form) and certify under
penalty of perjury that such holder is not a United States
person as defined under the Code or (b) if our common stock
is held through certain foreign intermediaries, satisfy the
relevant certification requirements of applicable United States
Treasury regulations. Special certification and other
requirements apply to certain non-U.S. holders that are
entities rather than individuals.
A non-U.S. holder of our common stock
eligible for a reduced rate of United States withholding tax
pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for
refund with the Internal Revenue Service.
Gain on Disposition of Common Stock
Any gain realized on the disposition of our
common stock generally will not be subject to United States
federal income or withholding tax unless:
•
the gain is effectively connected with a trade or
    business of the non-U.S. holder in the United States, and,
    if required by an applicable income tax treaty, is attributable
    to a United States permanent establishment of the
    non-U.S. holder;
•
the non-U.S. holder is an individual who is
    present in the United States for 183 days or more in the
    taxable year of that disposition, and certain other conditions
    are met; or
•
we are or have been a "United States real
    property holding corporation" for United States federal
    income tax purposes.
An individual non-U.S. holder described in
the first bullet point immediately above will be subject to tax
on the net gain derived from the sale under regular graduated
United States federal income tax rates. An individual
non-U.S. holder described in the second bullet point
immediately above will be subject to a flat 30% tax on the gain
derived from the sale, which may be offset by United States
source capital losses, even though the individual is not
considered a resident of the United States. If a
non-U.S. holder that is a foreign corporation falls under
the first bullet point immediately above, it will be subject to
tax on its net gain in the same manner as if it were a United
States person as defined under the Code and, in addition, may be
subject to the branch profits tax equal to 30% of its
effectively connected earnings and profits or at such lower rate
as may be specified by an applicable income tax treaty.
We believe we are not and do not anticipate
becoming a "United States real property holding
corporation" for United States federal income tax purposes.
Federal Estate Tax
Common stock held by an individual
non-U.S. holder at the time of death will be included in
such holder's gross estate for United States federal estate
tax purposes, unless an applicable estate tax or other treaty
provides otherwise.
Information Reporting and Backup
Withholding
We must report annually to the Internal Revenue
Service and to each non-U.S. holder the amount of dividends
paid to such holder and the tax withheld with respect to such
dividends, regardless of whether withholding was required.
Copies of the information returns reporting such dividends and
withholding may
111
Table of Contents
also be made available to the tax authorities in
the country in which the non-U.S. holder resides under the
provisions of an applicable income tax treaty.
A non-U.S. holder will be subject to backup
withholding for dividends paid to such non-U.S. holder
unless such holder certifies under penalty of perjury that it is
a non-U.S. holder, and the payor does not have actual
knowledge or reason to know that such holder is a United States
person as defined under the Code, or such holder otherwise
establishes an exemption.
Information reporting and, depending on the
circumstances, backup withholding will apply to the proceeds of
a sale of our common stock within the United States or conducted
through certain United States-related financial intermediaries,
unless the beneficial owner certifies under penalty of perjury
that it is a non-U.S. holder (and the payor does not have
actual knowledge or reason to know that the beneficial owner is
a United States person as defined under the Code) or such owner
otherwise establishes an exemption.
Any amounts withheld under the backup withholding
rules may be allowed as a refund or a credit against a
non-U.S. holder's United States federal income tax
liability provided the required information is timely furnished
to the Internal Revenue Service.
112
Table of Contents
UNDERWRITING
Under the terms and subject to the conditions
contained in an underwriting agreement dated the date of this
prospectus, each of the underwriters named below have severally
agreed to purchase, and we have agreed to sell to them,
severally, the number of shares indicated in the table below.
Morgan Stanley & Co. Incorporated and Citigroup Global
Markets Inc. are acting as joint book-running managers and,
together
with                     ,
are acting as representatives of the underwriters named below.
Underwriters
Number of Shares
Morgan Stanley & Co. Incorporated
Citigroup Global Markets Inc.
Total
The underwriters are offering the common stock
subject to their acceptance of the shares from us and subject to
prior sale. The underwriting agreement provides that the
obligations of the several underwriters to pay for and accept
delivery of the common stock offered by this prospectus are
subject to the approval of certain legal matters by their
counsel and to certain other conditions. The underwriters are
obligated to take and pay for all of the common stock offered by
this prospectus if any such shares are taken. However, the
underwriters are not required to take or pay for the shares
covered by the underwriters' over-allotment option
described below.
The underwriters initially propose to offer part
of the shares of common stock directly to the public at the
public offering price listed on the cover page of this
prospectus and part to certain dealers at a price that
represents a concession not in excess of
$          a
share under the public offering price. After the initial
offering of the shares of common stock, the offering price and
other selling terms may from time to time be varied by the
representatives.
We have granted to the underwriters an option,
exercisable for 30 days from the date of this prospectus,
to purchase up to an aggregate
of           additional
shares of common stock at the public offering price listed on
the cover page of this prospectus, less underwriting discounts
and commissions. The underwriters may exercise this option
solely for the purpose of covering over-allotments, if any, made
in connection with the offering of the shares of common stock
offered by this prospectus. To the extent the option is
exercised, each underwriter will become obligated, subject to
specified conditions, to purchase approximately the same
percentage of additional shares of common stock as the number
listed next to the underwriter's name in the preceding
table bears to the total number of shares of common stock listed
next to the names of all underwriters in the preceding table.
The following table shows the per share and total
underwriting discounts and commissions to be paid to the
underwriters by Dresser-Rand Group Inc. Such amounts are shown
assuming both no exercise and full exercise by the underwriters
of their over-allotment option.
Paid by Dresser-Rand Group Inc.
No Exercise
Full Exercise
Per Share
$
$
Total
$
$
The expenses of this offering payable by us, not
including the underwriting discounts and commissions, are
estimated at
$          .
The underwriters have informed us that they do
not intend sales to accounts over which any such underwriter
exercises discretionary authority to exceed five percent of the
total number of shares of common stock offered by them.
We intend to apply to list the common stock on
the New York Stock Exchange under the symbol "DRC".
We, D-R Interholding, LLC and all of our
stockholders existing prior to this offering have agreed that,
without the prior written consent of Morgan Stanley &
Co. Incorporated and Citigroup Global Markets Inc.
113
Table of Contents
on behalf of the underwriters, none of us will,
during the period ending 180 days after the date of this
prospectus:
•
offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend,
    or otherwise transfer or dispose of, directly or indirectly, any
    share of common stock or any securities convertible into or
    exercisable or exchangeable for common stock or file any
    registration statement under the Securities Act of 1933 with
    respect to the foregoing; or
•
enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock;
whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise.
The restrictions described in the previous
paragraph do not apply to:
•
the sale of shares to the underwriters pursuant
    to the underwriting agreement;
•
the issuance by us of shares of common stock upon
    the exercise of an option or a warrant or the conversion of a
    security outstanding on the date of this prospectus of which the
    underwriters have been advised in writing;
•
grants, issuances, or exercises under our
    existing employee benefits plans;
•
the issuance of common stock in connection with
    the acquisition of, or joint venture with, another company;
•
transactions by any person other than us relating
    to shares of common stock or other securities acquired in open
    market transactions after the completion of the offering of the
    shares;
•
transfers by any person other than us of shares
    of common stock or any security convertible, exchangeable for or
    exercisable into common stock as a bona fide gift or gifts as a
    result of operation of law or testate or in testate succession,
    provided that such transferee agrees to be bound by the
    restrictions described in the previous paragraph;
•
transfers by any person other than us to a trust,
    partnership, limited liability company or other entity, all of
    the beneficial interests of which are held, directly, or
    indirectly by such person, provided that such transferee agrees
    to be bound by the restrictions described in the previous
    paragraph; or
•
distributions by any person other than us of
    shares of common stock or any security convertible, exchangeable
    for or exercisable into common stock to limited partners or
    stockholders of such person, provided that such distributee
    agrees to be bound by the restrictions described in the previous
    paragraph.
Prior to this offering, there has been no public
market for the common stock. The initial public offering will be
negotiated between us and the representatives of the
underwriters. The factors to be considered in determining the
initial public offering price of the shares, in addition to
prevailing market conditions, will be Dresser-Rand Group
Inc.'s historical performance, the business prospects of
Dresser-Rand Group Inc., an assessment of Dresser-Rand Group
Inc.'s management and the consideration of the above
factors in relation to market valuation of companies in related
businesses, and the price-earnings ratios, market prices of
securities and other quantitative and qualitative data relating
to such businesses.
In order to facilitate the offering of the common
stock, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of the common
stock. Specifically, the underwriters may sell more shares than
they are obligated to purchase under the underwriting agreement,
creating a short position. A short sale is "covered"
if the short position is no greater than the number of shares
available for purchase by the underwriters under the
over-allotment option. The underwriters can close out a covered
short sale by exercising the over-allotment option or purchasing
shares in the open market. In determining the source of shares
to close out a covered short sale, the underwriters will
consider, among other things, the open market price of shares
compared to the price available under the over-allotment option.
The underwriters may also sell shares in excess of the
over-allotment option, creating a "naked" short
position. The underwriters must close
114
Table of Contents
out any naked short position by purchasing shares
in the open market. A naked short position is more likely to be
created if the underwriters are concerned that there may be
downward pressure on the price of the common stock in the open
market after pricing that could adversely affect investors who
purchase in the offering. As an additional means of facilitating
the offering, the underwriters may bid for, and purchase, common
stock in the open market to stabilize the price of the common
stock. The underwriting syndicate may also reclaim selling
concessions allowed to an underwriter or a dealer for
distributing common stock in the offering, if the syndicate
repurchases previously distributed common stock to cover
syndicate short positions, or to stabilize the price of the
common stock. These activities may raise or maintain the market
price of the common stock above independent market levels or
prevent or retard a decline in the market price of our common
stock. The underwriters are not required to engage in these
activities and may end any of these activities at any time.
The underwriters may also impose a penalty bid.
This occurs when a particular underwriter repays to the
underwriters a portion of the underwriting discount received by
it because the representatives have repurchased shares of common
stock sold by or for the account of such underwriter in
stabilizing or short covering transactions.
Purchases to cover a short position and
stabilizing transactions may have the effect of preventing or
retarding a decline in the market price of Dresser-Rand Group
Inc.'s stock, and together with the imposition of the
penalty bid, may stabilize, maintain or otherwise affect the
market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might
exist in the open market. If these activities are commenced,
they may be discontinued at any time. These transactions may be
effected on the New York Stock Exchange, in the over-the-counter
market or otherwise.
Each underwriter has represented, warranted and
agreed that: (i) it has not offered or sold and, prior to
the expiry of a period of six months from the closing of the
offering, will not offer or sell any shares of common stock to
persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public
in the United Kingdom within the meaning of the public Offers of
Securities Regulations 1995; (ii) it has only communicated
or caused to be communicated and will only communicate or cause
to be communicated any invitation or inducement to engage in
investment activity (within the meaning of section 21 of
the Financial Services and Markets Act 2000 ("FSMA"))
received by it in connection with the issue or sale of any
shares in circumstances in which section 21(1) of the FSMA
does not apply to Dresser-Rand Group Inc.; and (iii) it has
complied and will comply with all applicable provisions of the
FSMA with respect to anything done by it in relation to the
shares in, from or otherwise involving the United Kingdom.
The shares may not be offered or sold,
transferred or delivered, as part of their initial distribution
or at any time thereafter, directly or indirectly, to any
individual or legal entity in the Netherlands other than to
individuals or legal entities who or which trade or invest in
securities in the conduct of their profession or trade, which
includes banks, securities intermediaries, insurance companies,
pension funds, other institutional investors and commercial
enterprises which, as an ancillary activity, regularly trade or
invest in securities.
A prospectus in electronic format may be made
available by one or more underwriters. The underwriters may
agree to allocate a number of shares to underwriters for sale to
their online brokerage account holders. Internet distributions
will be allocated by the lead manager to underwriters that may
make distributions on the same basis as other allocations.
From time to time, some of the underwriters and
their affiliates have provided, and may continue to provide,
investment banking and commercial banking services to us for
fees and commissions that we believe are customary. Citicorp
North America, Inc. acts as administrative agent, Citigroup
Global Markets Inc. acts as joint lead arranger and joint book
manager and Morgan Stanley Senior Funding, Inc. acts as joint
lead arranger, joint book manager and co-syndication agent under
our senior secured credit facility.
We have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the
Securities Act.
115
Table of Contents
VALIDITY OF THE SHARES
The validity of the issuance of the shares of common stock to be
sold in this offering will be passed upon for us by Simpson
Thacher & Bartlett LLP, New York, New York. Shearman &
Sterling LLP, New York, New York will act as counsel to the
underwriters.
EXPERTS
The consolidated financial statements as of December 31,
2004 and for the period from October 30, 2004 through
December 31, 2004, and the combined financial statements as
of December 31, 2003 and for the period from
January 1, 2004 through October 29, 2004 and for each
of the two years in the period ended December 31, 2003
included in this prospectus have been so included in reliance on
the reports of PricewaterhouseCoopers LLP, an independent
registered public accounting firm, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission (the
"SEC") a registration statement on Form S-1 under the
Securities Act with respect to the issuance of shares of our
common stock being offered hereby. This prospectus, which forms
a part of the registration statement, does not contain all of
the information set forth in the registration statement and
exhibits and schedules. For further information with respect to
us and the shares of our common stock, reference is made to the
registration statement. Statements contained in this prospectus
as to the contents of any contract or other document are not
necessarily complete. We are not currently subject to the
informational requirements of the Exchange Act. After the
offering of the shares of our common stock, we will be subject
to the informational requirements of the Exchange Act, and, in
accordance therewith, will file reports and other information
with the SEC. The registration statement and the exhibits and
schedules to the registration statement, such reports and other
information can be inspected and copied at the Public Reference
Room of the SEC located at 100 F Street, N.E., Washington
D.C. 20549. Copies of such materials, including copies of all or
any portion of the registration statement, can be obtained from
the Public Reference Room of the SEC at prescribed rates. You
can call the SEC at 1-800-SEC-0330 to obtain information on the
operation of the Public Reference Room. Such materials may also
be accessed electronically by means of the SEC's home page
on the Internet (http://www.sec.gov).
116
Table of Contents
DRESSER-RAND GROUP, INC.
Index to Consolidated Financial Statements (Successor)
and Combined Financial Statements (Predecessor)
Page
Report of Independent Registered Public Accounting Firm
F-2
Report of Independent Registered Public Accounting Firm
F-3
Consolidated Financial Statements and Predecessor Combined
    Financial Statements
Consolidated Statement of Operations (Successor) for the period
    from October 30, 2004 through December 31, 2004 and
    Combined Statements of Operations (Predecessor) for the period
    from January 1, 2004 through October 29, 2004 and for
    the years ended December 31, 2003 and 2002
F-4
Consolidated Balance Sheet (Successor) at December 31, 2004
    and Combined Balance Sheet (Predecessor) at December 31,
    2003
F-5
Consolidated Statement of Cash Flows (Successor) for the period
    from October 30, 2004 through December 31, 2004 and
    Combined Statements of Cash Flows (Predecessor) for the period
    from January 1, 2004 through October 29, 2004 and for
    the years ended December 31, 2003 and 2002
F-6
Consolidated Statement of Changes in Stockholders' Equity
    (Successor) for the period from October 30, 2004 through
    December 31, 2004 and Combined Statements of Changes in
    Ingersoll-Rand Company Limited Partnership Interest
    (Predecessor) for the period from January 1, 2004 through
    October 29, 2004 and for the years ended December 31,
    2003 and 2002
F-7
Notes to Consolidated and Combined Financial Statements
F-9
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Directors and Stockholders of
Dresser-Rand Group Inc.
In our opinion, the consolidated balance sheet and the related
consolidated statements of operations, changes in
stockholders' equity and cash flows present fairly, in all
material respects, the financial position of Dresser-Rand Group
Inc. (Successor) at December 31, 2004 and the consolidated
results of its operations and cash flows for the period from
October 30, 2004 through December 31, 2004 in
conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the
financial statement schedule for the period from
October 30, 2004 through December 31, 2004 listed in
the index appearing under item 16 presents fairly, in all
material respects, the information set forth therein when read
in conjunction with the related consolidated financial
statements. These financial statements and financial statement
schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on
our audit. We conducted our audit of these statements in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over
financial reporting. Accordingly we express no such opinion. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
/s/
PricewaterhouseCoopers
LLP
Buffalo, New York
May 12, 2005
F-2
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Directors and Stockholders of
Dresser-Rand Group Inc.
In our opinion, the combined balance sheet and the related
combined statements of operations, changes in Ingersoll-Rand
Company Limited partnership interest and cash flows present
fairly, in all material respects, the financial position of
Dresser-Rand Company (Predecessor), a wholly owned partnership
of Ingersoll-Rand Company Limited, at December 31, 2003 and
the combined results of their operations and cash flows for the
period from January 1, 2004 through October 29, 2004
and for the years ended December 31, 2003 and 2002 in
conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the
financial statement schedule for the period from January 1,
2004 through October 29, 2004 and for the years ended
December 31, 2003 and 2002 listed in the index appearing
under item 16 presents fairly, in all material respects,
the information set forth therein when read in conjunction with
the related combined financial statements. These financial
statements and financial statement schedule are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with
the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly we
express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
/s/
PricewaterhouseCoopers
LLP
Buffalo, New York
May 12, 2005
F-3
Table of Contents
DRESSER-RAND GROUP INC.
CONSOLIDATED STATEMENT OF OPERATIONS (SUCCESSOR)
AND COMBINED STATEMENTS OF OPERATIONS (PREDECESSOR)
Successor
Predecessor
Year Ended
Period from
Period from
December 31,
October 30 through
January 1 through
December 31, 2004
October 29, 2004
2003
2002
(In thousands of dollars, except per share information)
Net sales of products to third parties
$
155,993
$
544,794
$
1,124,267
$
837,417
Net sales of services to third parties
43,914
167,689
207,975
189,336
Net sales to affiliates
—
1,845
1,439
1,841
Other operating revenue
—
1,167
1,669
2,759
Total revenues
199,907
715,495
1,335,350
1,031,353
Cost of products sold
117,991
411,665
971,893
722,308
Cost of services sold
31,573
125,088
159,236
142,313
Cost of products sold, affiliates
—
1,289
918
1,237
Total cost of products and services sold
149,564
538,042
1,132,047
865,858
Gross Profit
50,343
177,453
203,303
165,495
Selling and administrative expenses
21,499
122,700
156,129
138,484
Research and development expenses
1,040
5,670
8,107
8,044
Write-off of purchased in-process research and development assets
1,800
—
—
—
Restructuring charges
—
—
—
5,185
Income from operations
26,004
49,083
39,067
13,782
Interest income (expense), net
(9,654
)
3,156
1,938
(776
)
Other income (expense), net
(1,846
)
1,882
(9,202
)
15,000
Income before income taxes
14,504
54,121
31,803
28,006
Provision for income taxes
7,275
11,970
11,438
11,910
Net income
$
7,229
$
42,151
$
20,365
$
16,096
Weighted average common shares outstanding — basic and
    diluted
100,115,080
Net income per common share
$
0.07
The accompanying notes are an integral part of the consolidated
and combined financial statements
F-4
Table of Contents
DRESSER-RAND GROUP INC.
CONSOLIDATED BALANCE SHEET (SUCCESSOR)
AND COMBINED BALANCE SHEET (PREDECESSOR)
Successor
Predecessor
December 31,
December 31,
2004
2003
(In thousands of dollars
except for shares)
ASSETS
Current assets
Cash and cash equivalents
$
111,500
$
41,537
Marketable securities at market
—
1,037
Accounts receivable, less allowance for doubtful accounts of
    $15,110 and $12,427 at 2004 and 2003
264,938
242,021
Inventories, net
175,873
133,425
Prepaid expenses
14,256
15,665
Due from affiliates
—
105,346
Loans due from affiliates
—
122,841
Deferred income taxes
7,445
10,498
Total current assets
574,012
672,370
Investments in and advances to partially owned equity companies
12,989
9,059
Property, plant and equipment, net
226,764
101,438
Goodwill
423,330
10,214
Intangible assets, net
479,587
254,412
Deferred income taxes
—
14,565
Other assets
34,392
1,817
Total assets
$
1,751,074
$
1,063,875
LIABILITIES AND STOCKHOLDERS' EQUITY/PARTNERSHIP
    INTEREST
Current liabilities
Accounts payable and accruals
$
271,275
$
291,830
Customer advance payments
38,661
18,700
Income taxes payable
12,977
7,081
Loans due to affiliates
—
14,811
Loans payable
2,734
3,716
Current maturities of long-term debt
4,015
—
Total current liabilities
329,662
336,138
Deferred income taxes
27,287
—
Postemployment and other employee benefit liabilities
111,640
147,852
Long-term debt
396,664
213
Senior subordinated notes
420,000
—
Other noncurrent liabilities
12,924
14,637
Total liabilities
1,298,177
498,840
Commitments and contingencies
(Notes 12, 13, 14, 15, 17 and 21)
Stockholders' Equity/ Partnership Interest
Partnership interest
—
631,640
Common stock, $0.01 par value, 101,200,000 shares
    authorized, 100,908,116 shares issued and outstanding,
    respectively
1,009
—
Additional paid-in capital
436,175
—
Retained earnings
7,229
—
Accumulated other comprehensive income (loss)
8,484
(66,605
)
Total stockholders' equity/partnership interest
452,897
565,035
Total liabilities and stockholders' equity/partnership
    interest
$
1,751,074
$
1,063,875
The accompanying notes are an integral part of the consolidated
and combined financial statements
F-5
Table of Contents
DRESSER-RAND GROUP INC.
CONSOLIDATED STATEMENT OF CASH FLOW (SUCCESSOR)
AND COMBINED STATEMENTS OF CASH FLOW (PREDECESSOR)
Predecessor
Successor
Year Ended
Period from
Period from
December 31,
October 30 through
January 1 through
December 31, 2004
October 29, 2004
2003
2002
(In thousands of dollars)
Cash flows from operating activities
Net income
$
7,229
$
42,151
$
20,365
$
16,096
Adjustments to arrive at net cash provided by operating
    activities:
Restructuring charges
—
—
—
3,704
Depreciation and amortization
16,269
22,715
29,109
33,822
(Gain)/loss on sale of property, plant and equipment
—
(1,031
)
(31
)
(642
)
Gain on insurance recoveries
—
—
—
(10,145
)
Provision for losses on accounts receivable
327
3,139
3,001
2,473
Provision (net adjustment) for losses on inventory
1,780
6,953
5,581
5,708
Write off of purchased in-process research and development assets
1,800
—
—
—
Minority interest, net of dividends
51
(1,247
)
(110
)
(555
)
Equity (earnings)/losses, net
(194
)
1,013
(1,150
)
(1,235
)
Deferred income taxes
(974
)
633
(4,901
)
945
Other
452
—
—
—
(Increase) decrease in:
Accounts receivable
(30,377
)
51,074
(15,324
)
(5,173
)
Inventories
600
(37,818
)
127,410
(35,647
)
Other current and noncurrent assets
1,248
(4,469
)
1,288
(10,287
)
Increase (decrease) in:
Accounts payable
4,664
(12,976
)
(36,835
)
27,487
Other current and noncurrent liabilities
15,073
(12,408
)
(77,440
)
15,478
Net cash provided by operating activities
17,948
57,729
50,963
42,029
Cash flows from investing activities
Capital expenditures
(1,791
)
(7,701
)
(7,590
)
(13,670
)
Acquisition
(1,125,148
)
—
—
—
Proceeds from insurance recoveries
—
—
—
10,145
Proceeds from sales of property, plant and equipment
—
1,757
560
4,487
(Increase) decrease in marketable securities
—
1,037
(59
)
2,851
Net cash provided by (used in) investing activities
(1,126,939
)
(4,907
)
(7,089
)
3,813
Cash flows from financing activities
Proceeds from short-term borrowings
—
—
462
3,073
Payments of short-term borrowings
—
(993
)
—
—
Proceeds from issuance of
    7
3
/
8
% Senior
    Notes
420,000
—
—
—
Proceeds from long-term debt
395,033
43
—
463
Cash paid for debt issuance costs
(33,498
)
—
—
—
Proceeds from revolver
5,000
—
—
—
Payments of revolver
(5,000
)
—
—
—
Payments of long-term debt
(1,013
)
(65
)
(520
)
—
Issuance of common stock
437,109
—
—
—
Change in due to (from) unconsolidated affiliates
(532
)
(45,918
)
(63,429
)
(14,120
)
Dividends paid
—
(5,097
)
—
(8,175
)
Net cash provided by (used in) financing activities
1,217,099
(52,030
)
(63,487
)
(18,759
)
Effect of exchange rate changes on cash and cash equivalents
3,392
1,930
1,531
1,159
Net increase (decrease) in cash and cash equivalents
111,500
2,722
(18,082
)
28,242
Cash and cash equivalents, beginning of the period
—
41,537
59,619
31,377
Cash and cash equivalents, end of period
$
111,500
$
44,259
$
41,537
$
59,619
The accompanying notes are an integral part of the consolidated
and combined financial statements
F-6
Table of Contents
DRESSER-RAND GROUP INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY (SUCCESSOR)
AND COMBINED STATEMENTS OF CHANGES IN INGERSOLL-RAND COMPANY
LIMITED PARTNERSHIP INTEREST (PREDECESSOR)
Accumulated
Other
Total
Common
Additional
Retained
Comprehensive
Comprehensive
Stock
Paid-in Capital
Earnings
Income (Loss)
Income (Loss)
Total
(In thousands of dollars)
Successor
At October 30, 2004
$
—
$
—
$
—
$
—
—
$
—
Issuance of 100,609,287 shares of common stock to D-R
    Interholdings LLC (adjusted to reflect the 1,006,092.87 to 1
    stock split effected February 11, 2005)
1,006
434,806
—
—
—
435,812
Issuance of 298,829 shares of common stock to employees
    (adjusted to reflect the 1,006,092.87 to 1 stock split effected
    February 11, 2005)
3
1,294
—
—
—
1,297
Stock based employee compensation
—
75
75
Net income
—
—
7,229
—
$
7,229
—
Other comprehensive income (loss)
Minimum pension liability, net of tax of $590
—
—
—
(922
)
(922
)
—
Currency translation
—
—
—
9,406
9,406
—
Total comprehensive income
—
—
—
—
$
15,713
15,713
At December 31, 2004
$
1,009
$
436,175
$
7,229
$
8,484
$
452,897
The accompanying notes are an integral part of the consolidated
and combined financial statements
F-7
Table of Contents
DRESSER-RAND GROUP INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY (SUCCESSOR)
AND COMBINED STATEMENTS OF CHANGES IN INGERSOLL-RAND COMPANY
LIMITED PARTNERSHIP INTEREST (PREDECESSOR)
Accumulated
Other
Total
Partnership
Comprehensive
Comprehensive
Interest
Income (Loss)
Income (Loss)
Total
(In thousands of dollars)
Predecessor
At January 1, 2002
$
603,354
$
(14,904
)
—
$
588,450
Dividends
(8,175
)
—
—
(8,175
)
Net income
16,096
—
$
16,096
—
Other comprehensive income (loss)
Minimum pension liability, net of tax of $4,217
—
(77,692
)
(77,692
)
—
Currency translation
—
7,284
7,284
—
Derivatives qualifying as cash flow hedges, net of tax of $387
—
747
747
—
Total comprehensive loss
—
—
$
(53,565
)
(53,565
)
At December 31, 2002
611,275
(84,565
)
—
526,710
Net income
20,365
—
$
20,365
—
Other comprehensive income (loss)
Minimum pension liability, net of tax of $1,199
—
939
939
—
Currency translation
—
17,074
17,074
—
Derivatives qualifying as cash flow hedges, net of tax of $16
—
(53
)
(53
)
—
Total comprehensive income
$
38,325
38,325
At December 31, 2003
631,640
(66,605
)
—
565,035
Dividends
(5,097
)
(5,097
)
Net income
42,151
—
$
42,151
—
Other comprehensive income (loss)
Minimum pension liability, net of tax of $577
—
(4,973
)
(4,973
)
—
Currency translation
—
11,582
11,582
—
Derivatives qualifying as cash flow hedges, net of tax of $230
—
(694
)
(694
)
—
Total comprehensive income
—
—
$
48,066
48,066
At October 29, 2004
$
668,694
$
(60,690
)
$
608,004
The accompanying notes are an integral part of the consolidated
and combined financial statements
F-8
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
1.
Business Activities and Basis of Presentation
Successor
Dresser-Rand Group Inc., a company incorporated on
October 1, 2004 in the State of Delaware and its
subsidiaries (the "Company" or the
"Successor"), commenced operations on October 30,
2004. The Company is engaged in the design, manufacture,
services, sale and servicing of gas compressors, gas and steam
turbines, gas expanders and associated control panels.
The Company is a majority-owned subsidiary of D-R Interholding,
LLC, which is a wholly-owned subsidiary of Dresser-Rand
Holdings, LLC. Dresser-Rand Holdings, LLC is owned by First
Reserve Fund IX, L.P., and First Reserve Fund X, L.P.
(collectively "First Reserve") and certain members of
management.
Predecessor
Dresser-Rand Company (the "Predecessor") was initially
formed on December 31, 1986, when Dresser Industries, Inc.
and Ingersoll-Rand entered into a partnership agreement for the
formation of Dresser-Rand Company, a New York general
partnership owned 50% by Dresser Industries, Inc. and 50% by
Ingersoll-Rand. On October 1, 1992, Dresser Industries,
Inc. purchased a 1% equity interest from Dresser-Rand Company.
In September 1999, Dresser Industries, Inc. merged with
Halliburton Industries. On February 2, 2000, a wholly owned
subsidiary of Ingersoll-Rand purchased Halliburton
Industries' 51% interest in Dresser-Rand Company.
The Acquisition
On October 29, 2004, pursuant to a purchase agreement with
Dresser-Rand Holdings, LLC, dated August 25, 2004 (the
"Equity Purchase Agreement"), the Company acquired
from Ingersoll-Rand Company Limited ("IR")
Dresser-Rand Company and the operations of Dresser-Rand Canada,
Inc. and Dresser-Rand GmbH for cash consideration of
$1,125.1 million (the "Acquisition"), including
estimated direct costs of the Acquisition of $10.4 million
relating to investment banking, legal and other directly related
charges. As of December 31, 2004, the Company had not yet
received $32.9 million from IR relating to purchase price
adjustments and had not yet paid $3.4 million relating to
transaction costs, both of which are recorded on our balance
sheet as of December 31, 2004 in accounts receivable and
accounts payable and accruals, respectively. Subsequent to
December 31, 2004, the Company collected all but
$2.4 million of the receivable and paid substantially all
of the accrued liability.
The Equity Purchase Agreement contains customary provisions
including representations and warranties as well as the terms on
which the initial aggregate purchase price will be adjusted
following the closing of the Acquisition. As of April 26,
2005, the Predecessor provided a Closing Working Capital
Statement, which resulted in an estimated purchase price
reduction of $2.4 million, which is subject to final
approval and agreement from the Successor and is included in the
purchase price estimate of $1,125.1 million. We anticipate
the final agreement on the purchase price adjustment will be
reached sometime during the second quarter of 2005. The purchase
price was financed by (i) a $430 million equity
investment from the Company's parent company, Dresser-Rand
Holdings, LLC, (ii) $395 million of term loans (see
Note 11) and (iii) $420 million of senior
subordinated notes (see Note 11).
The Company accounted for the Acquisition using the purchase
method of accounting in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 141,
"Business Combinations" and accordingly, the
Acquisition resulted in a new basis of accounting for the
Successor. The Company allocated the estimated
F-9
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
purchase price based on the fair value of the assets acquired
and liabilities assumed at the Acquisition date as follows:
(In thousands of dollars)
Assets acquired:
Accounts receivable, net
$
193,944
Accounts receivable, other
32,863
Inventories
173,313
Prepaid expenses and other current assets
14,387
Property, plant and equipment
225,654
Goodwill
408,424
Intangible assets
490,519
Other assets
14,156
Total assets acquired
1,553,260
Liabilities assumed:
Accounts payable
94,898
Other current liabilities
159,984
Short term loans
2,731
Tax liabilities
44,920
Other non-current liabilities
125,579
Total liabilities assumed
428,112
Cash paid for Acquisition
$
1,125,148
The excess of the cost of the Company's Acquisition of the
Predecessor over the fair value of the net tangible and
intangible assets acquired of $408.4 million has been
allocated to goodwill, of which $272.2 million will not be
deductible for income tax purposes. In accordance with
SFAS No. 142, this goodwill will not be amortized but
will be reviewed annually for impairment beginning in the third
quarter of 2005.
The Company used expectations of future cash flows and other
methods to estimate the fair values and the estimated useful
lives of the acquired intangible assets. The appraisal was
completed in the second quarter of 2005. Of the
$490.5 million of acquired intangible assets,
(i) $224.8 million was assigned based on earnings
yield by customer to customer relationships that have an
estimated weighted average useful life of 40 years;
(ii) $119.1 million was assigned using the relief from
royalty method to existing technologies that have an estimated
weighted average useful life of 25 years;
(iii) $82.7 million was assigned using the relief from
royalty method to trademarks that have an estimated weighted
average useful life of 40 years;
(iv) $30.6 million was assigned based on replacement
cost to internally developed software that has an estimated
weighted average useful life of 10 years;
(v) $24.8 million was assigned using the income
approach to order backlog that has an estimated weighted average
useful life of 15 months; (vi) $4.4 million was
assigned to a non-compete agreement that has an estimated
weighted average useful life of 2 years by estimating the
potential income losses that would result from the employee
diverting sales to competitors; (vii) $2.3 million was
allocated based on future income to a royalty agreement that has
an estimated weighted average useful life of 14 months; and
(viii) $1.8 million was assigned using a discounted
future earnings
F-10
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
analysis to purchased in-process research and development that
was written off immediately after the Acquisition. The estimated
useful lives are based on the period on which the intangible
assets are expected to contribute to the future cash flows. The
fair value of inventory was determined by the Company to exceed
the Predecessor's historical basis by $7.4 million,
which has been reflected in the purchase price allocation and
will be written off over eight months.
In connection with the Acquisition, IR agreed to pay the
Successor for certain unfunded pension plans and retain certain
other post-retirement obligations. The amount to be paid with
respect to such pension plans was equal to the excess, if any,
of the aggregate liabilities (based on certain assumptions as
agreed between IR and the Successor) of the pension plans over
the aggregate fair market value of the assets of the pension
plans, each as determined on the date of the Acquisition. As of
December 31, 2004, a receivable from IR of
$25.8 million was recorded by the Company with respect to
such pension plans. This amount was subsequently collected in
2005. Additionally, IR retained the post-retirement medical
liability for all retirees and those employees who were
retirement-eligible as of October 29, 2004.
IR Transition Services Agreement
In connection with the Acquisition, the Company and IR entered
into a transition services agreement as of the closing to
facilitate the delivery of consistent services. In conjunction
with the agreement, IR provides services as requested by the
Company, including, amongst others, compensation delivery
services, health and welfare administration, pension
administration, legal services and other services, as agreed
upon between the parties. All third party costs associated with
the services are the Company's responsibility, whether paid
by IR or passed directly on to the Company.
The provision of services commenced on October 30, 2004 and
will terminate on the first anniversary of the closing date;
provided, however, that the Company may cancel any service upon
30 days' written notice of cancellation and IR may
cease to provide a service upon 90 days' written
notice to us if IR ceases to provide such services to all of
IR's subsidiaries, divisions and business units. In the
period from October 30, 2004 through December 31,
2004, IR charged the Company $0.1 million for transition
services covered under the agreement.
Supply Agreement
The Company entered into a supply agreement with IR, expiring on
December 31, 2009, whereby the Company supplies IR with
certain assembly units (an "FRG") for IR's
"PET Star 4" product. There are no minimum order
quantities under this agreement.
License Agreement
As contemplated by the equity purchase agreement, the Company
and Dresser-Rand S.A. agreed to certain covenants with and
granted intellectual property rights related to the development
of IR's 250-kilowatt micro-turbine to IR Energy Systems
Corporation and the Energy Systems Division of IR. Pursuant to
the terms of the license agreement, Energy Systems was granted a
perpetual, fully paid up, non-exclusive, worldwide right and
license (without the right to sublicense) to practice and use
any intellectual property owned by the Company or Dresser-Rand
S.A. relating to the 250 kilowatt micro-turbines, and to
manufacture, use, market and sell micro-turbines with a
generating capacity of 1,000 kilowatts or less.
F-11
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Basis of Presentation
The accompanying financial statements for the periods prior to
the Acquisition are labeled as "Predecessor" and the
period subsequent to the Acquisition is labeled as
"Successor".
The Successor consolidated financial statements include the
operating results of the following entities:
Legal Entities
Country
D-R Central Service GmbH & Co. KG
Germany
D-R Holdings (France) S.A.S.
France
D-R Holdings (Germany) GmbH
Germany
D-R Holdings (Netherlands) B.V.
Netherlands
D-R Holdings Norway AS
Norway
D-R Management GmbH
Germany
Dresser-Rand & Enserv Services Sdn. Bhd.
Malaysia
Dresser-Rand (Nigeria) Ltd.
Nigeria
Dresser-Rand (SEA) Pte. Ltd.
Singapore
Dresser-Rand (SEA) Pte. Ltd.
Australia
Dresser-Rand (U.K.) Ltd.
UK
Dresser-Rand AS
Norway
Dresser-Rand Asia Pacific Sdn. Bhd.
Malaysia
Dresser-Rand Asia Pacific Sdn. Bhd.
Singapore
Dresser-Rand B.V.
Netherlands
Dresser-Rand Canada, Inc.
Canada
Dresser-Rand CIS
Moscow
Dresser-Rand Comercio e Industria Ltda.
Brazil
Dresser-Rand Company
United States of America
Dresser-Rand Company Ltd.
UK
Dresser-Rand Compressor (Suzhou) Ltd.
PRC
Dresser-Rand Compressor Co., Ltd. Shanghai (60% owned)
PRC
Dresser-Rand de Mexico S.A. de C.V.
Mexico
Dresser-Rand de Venezuela, S.A.
Venezuela
Dresser-Rand do Brasil, Ltda. (75% owned)
Brazil
Dresser-Rand Global Services, LLC
United States of America
Dresser-Rand GmbH
Germany
Dresser-Rand Holding (Delaware) LLC
United States of America
Dresser-Rand Holding Company
Venezuela
Dresser-Rand Holdings (U.K.) Ltd.
UK
Dresser-Rand India Private Limited
India
Dresser-Rand International B.V.
Netherlands
Dresser-Rand Italia S.r.1
Italy
Dresser-Rand Japan Ltd.
Japan
Dresser-Rand LLC
United States of America
Dresser-Rand Machinery Repair Belgie N.V.
Belgium
F-12
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Legal Entities
Country
Dresser-Rand Overseas Sales Company Ltd.
United States of America
Dresser-Rand Power LLC
United States of America
Dresser-Rand S.A.
France
Dresser-Rand S.A. Representative Office (Moscow)
Moscow
Dresser-Rand S.A. Representative Office (Uzbekistan)
Uzbekistan
Dresser-Rand s.r.o
Czech Republic
Dresser-Rand Sales Company S.A.
Switzerland
Dresser-Rand Services B.V.
Netherlands
Dresser-Rand Services, S. de R.L. de C.V.
Mexico
Dresser-Rand Services, S.a.r.1
Switzerland
Multiphase Power and Processing Technologies, LLC
United States of America
Paragon Engineers Services, Inc.
United States of America
PT Dresser-Rand Services Indonesia
Indonesia
Turbodyne Electric Power Corporation
United States of America
UZ-DR Service Center (51% owned)
Uzbekistan
The accompanying consolidated financial statements include fair
value adjustments to assets and liabilities, including
inventory, goodwill, other intangible assets and property, plant
and equipment. Also included is the corresponding effect these
adjustments had to cost of sales, depreciation and amortization
expenses. All revenues, costs, assets and liabilities directly
attributable to the Company, along with the equity investments
in Multiphase Power and Processing Technologies, LLC
(USA) and Dresser-Rand & Enserv Services Sdn. Bhd.
(Malaysia) have also been included in the consolidated financial
statements.
Predecessor
The Predecessor combined financial statements include the
accounts of all wholly-owned and majority-owned subsidiaries of
Dresser-Rand Company, as well as the operations of Dresser-Rand
Canada, Inc. and Dresser-Rand GmbH, which were owned by IR, but
were managed and operated by the Predecessor.
Legal Entities
Country
Dresser-Rand Company
United States of America
Dresser-Rand Canada, Inc.
Canada
Dresser-Rand Compressor Co., Ltd. Shanghai (60% owned)
China
Dresser-Rand de Mexico, S.A.
Mexico
Dresser-Rand Global Services, LLC
United States of America
Dresser-Rand Holding Company
United States of America
Dresser-Rand Asia Pacific Sdn. Bhd.
Malaysia
Dresser-Rand B.V.
Netherlands
Dresser-Rand Compressor (Suzhou) Ltd.
China
Dresser-Rand de Venezuela, S.A.
Venezuela
Dresser-Rand Japan, Ltd.
Japan
Dresser-Rand Overseas Sales Company
United States of America
Dresser-Rand Company Ltd.-UK
United Kingdom
Dresser-Rand (UK) Ltd.
United Kingdom
Dresser-Rand Sales Company S.A.
Switzerland
F-13
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Legal Entities
Country
Dresser-Rand Services, S.a.r.l
Switzerland
Turbodyne Electric Power Corporation
United States of America
Dresser-Rand India Private Limited
India
Dresser-Rand International B.V.
Netherlands
Dresser-Rand Italia S.r.l
Italy
Dresser-Rand Machinery Repair Belgie N.V.
Belgium
Dresser-Rand Power, Inc.
United States of America
Dresser-Rand A/ S
Norway
Dresser-Rand Comercio e Industria Ltda.
Brazil
Dresser-Rand (SEA) Pte. Ltd.
Singapore
Dresser-Rand S.A. — France
France
Dresser-Rand Services B.V.
Netherlands
Dresser-Rand s.r.o.
Czech Republic
PT Dresser-Rand Services Indonesia
Indonesia
Dresser-Rand Services S.de R.L.
Mexico
Dresser-Rand do Brasil, Ltda. (75% owned)
Brazil
Dresser-Rand Ltd.
Nigeria
UZ-DR Service Center Uzneftegazmash (51% owned)
Uzbekistan
Dresser-Rand GmbH
Germany
The Predecessor combined financial statements include all
revenues, costs, assets and liabilities directly attributable to
the Predecessor, along with the equity investments in Multiphase
Power and Processing Technologies, LLC (USA) and
Dresser-Rand & Enserv Services Sdn. Bhd. (Malaysia).
Allocation of costs for facilities, functions and certain
services performed by IR on behalf of the Predecessor, including
environmental and other risk management, internal audit,
transportation services, administration of benefit and insurance
programs and certain tax, legal, accounting and treasury
functions have been made on the basis described in Note 3.
All of the allocations and estimates in the combined financial
statements are based on assumptions that the management of the
Company and IR believe are reasonable.
Certain reclassifications have been made to the financial
statements to ensure consistency in reporting and conformity
between periods as follows: (i) the revenue and cost of
sales to third parties was further classified as either sales of
products or sales of services; and (ii) within cost of
sales section, research and development expenses have been
reclassified below gross profit.
2.
Summary of Significant Accounting Policies
A summary of significant accounting policies used in the
preparation of the accompanying financial statements follows:
Principles of Consolidation
The consolidated financial statements include the accounts and
activities of the Company and its subsidiaries. Partially owned
equity companies are accounted for under the equity method. All
material intercompany transactions between entities included in
the consolidated financial statements have been eliminated.
F-14
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Principles of Combination
The combined financial statements include the accounts and
activities of the Predecessor. Partially owned equity companies
are accounted for under the equity method. All material
intercompany transactions between entities included in the
combined financial statements have been eliminated. Transactions
between the Predecessor and IR and its affiliates are herein
referred to as "related party" or
"affiliated" transactions. Such transactions have not
been eliminated.
Use of Estimates
In conformity with accounting principles generally accepted in
the United States of America, management has used estimates and
assumptions that affect the reported amount of assets,
liabilities, revenues and expenses, and the disclosure of
contingent assets and liabilities. Significant estimates include
reserves for doubtful accounts, depreciation and amortization,
inventory adjustments related to lower of cost or market,
valuation of assets including goodwill and other intangible
assets, product warranties, sales allowances, taxes, pensions,
post employment benefits, contract losses, penalties,
environmental, product liability, self insurance programs and
other contingencies. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a
remaining maturity of three months or less at the time of
purchase to be cash equivalents. These cash equivalents consist
principally of money market accounts.
Marketable Securities
The Company's marketable securities have historically
consisted of equity securities, all of which are held for
varying and indefinite periods of time, pursuant to maturity
dates, market conditions and other factors. It is the
Company's intent to maintain a liquid portfolio to take
advantage of investment opportunities; therefore, all marketable
securities are considered available for sale and are classified
as current assets. Accordingly, the securities are stated at
fair value, which at December 31, 2003 approximated the
carrying value of the securities. Actual sales of securities
resulting in realized gains and losses on marketable securities
are included in the statement of income, as a component of
"Other income (expense)" and are derived using the
specific identification method for determining the cost of
securities.
Allowance for Doubtful Accounts
The Company establishes an allowance for estimated bad debts by
applying specified percentages to the adjusted receivable aging
categories. The percentage applied against the aging categories
increases as the accounts become further past due. Accounts in
excess of 360 days past due are generally fully reserved.
In addition, the reserves are periodically reviewed for specific
customer accounts identified as known collection problems due to
insolvency, disputes or other collection issues.
Inventories
Inventories are stated at cost, which is not in excess of net
realizable value. Cost is based on the first-in, first-out,
(FIFO) method. Provision is made for slow-moving, obsolete
or unusable inventory.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less
accumulated depreciation. Depreciation expense is computed
principally using the straight-line method over the estimated
useful lives of the assets. The useful
F-15
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
lives of buildings range from 30 years to 50 years;
the useful lives of machinery and equipment range from
5 years to 12 years. Maintenance and repairs are
expensed as incurred.
Impairment of Long-Lived Assets
In August 2001, the Financial Accounting Standards Board
("FASB") issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long Lived
Assets". This standard requires that long-lived assets,
such as property and equipment and purchased intangibles subject
to amortization, be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets is
measured by a comparison of the carrying amount of an asset
group to the estimated undiscounted future cash flows expected
to be generated by the asset group. If the carrying amount of an
asset group exceeds its estimated future cash flows, an
impairment charge is recognized in the amount by which the
carrying amount of the asset group exceeds the fair value of the
asset group. Under this standard, the Predecessor and the
Successor have not been required to recognize impairment of
long-lived assets.
Intangible Assets
Effective January 1, 2002, the Predecessor adopted
SFAS No. 142, "Goodwill and Other Intangible
Assets." Under the provisions of this standard, goodwill
and intangible assets deemed to have indefinite lives are no
longer subject to amortization, but rather are tested for
impairment at least annually. SFAS No. 142 requires a
two-step goodwill impairment test whereby the first step, used
to identify potential impairment, compares the fair value of a
reporting unit with its carrying amount including goodwill. If
the fair value of a reporting unit exceeds its carrying amount,
goodwill of the reporting unit is considered not impaired and
the second test is not performed. The second step of the
impairment test is performed when required and compares the
implied fair value of the reporting unit goodwill with the
carrying amount of that goodwill. If the carrying amount of the
reporting unit goodwill exceeds the implied fair value of that
goodwill, an impairment loss shall be recognized in an amount
equal to that excess. SFAS No. 142 requires the
carrying value of nonamortizable intangible assets to be
compared to the fair value, with any excess of carrying value
over fair value to be recognized as an impairment loss in
continuing operations.
In connection with the adoption of SFAS No. 142, the
Predecessor recognized no impairment of goodwill or intangible
assets with indefinite lives. The Predecessor performed its
annual assessment during the third quarters of 2003 and 2004,
using two reporting units for the goodwill test. The Successor
will perform its annual assessment of its goodwill,
approximately $423.3 million, during the third quarter of
2005.
The Company amortizes its intangible assets with finite lives
over their estimated useful lives and reviews them for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable
pursuant to SFAS No. 144. See Note 8 for
additional details regarding the components of intangible assets.
Income Taxes
Successor:
The Successor is a U.S. corporation holding 100% of the
interest in the former partnership. All of the Successor's
operations are subject to tax in either the U.S. or a
foreign jurisdiction. In preparing its consolidated financial
statements, the Successor determined the tax provision for each
of its operations on a country-by-country basis. Deferred taxes
are provided on operating loss and credit carryforwards and
temporary differences between assets and liabilities for
financial reporting and tax purposes as measured by enacted tax
rates expected to apply when temporary differences are settled
or realized. A valuation allowance is established for deferred
tax assets when it is more likely than not that a portion of the
assets will not be realized.
F-16
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Predecessor:
The Predecessor is a partnership and generally did not provide
for U.S. incomes taxes since all partnership income and
losses were allocated to IR for inclusion in its income tax
returns; however, a substantial portion of the
Predecessor's operations were subject to U.S. or
foreign income taxes. In preparing its combined financial
statements, the Predecessor determined the tax provision for
those operations on a separate return basis. Deferred taxes were
provided on operating loss and credit carryforwards and
temporary differences between assets and liabilities for
financial reporting and tax purposes as measured by enacted tax
rates expected to apply when temporary differences are settled
or realized. A valuation allowance was established for deferred
tax assets when it was more likely than not that a portion of
the assets would not be realized.
Product Warranty
Warranty accruals are recorded at the time the products are sold
and are estimated based upon product warranty terms and
historical experience. Warranty accruals are adjusted for known
or anticipated warranty claims as new information becomes
available.
Environmental Costs
Environmental expenditures relating to current operations are
expensed or capitalized as appropriate. Expenditures relating to
existing conditions caused by past operations, which do not
contribute to current or future revenues, are expensed. Costs to
prepare environmental site evaluations and feasibility studies
are accrued when the Company commits to perform them.
Liabilities for remediation costs are recorded when they are
probable and reasonably estimable, generally no later than the
completion of feasibility studies or the Company commitment to a
plan of action. The assessment of this liability, which is
calculated based on existing technology, does not reflect any
offset for possible recoveries from insurance companies and is
not discounted.
Revenue Recognition
A significant portion of the Company's sales are made
pursuant to written contractual arrangements to design, develop,
manufacture and/or modify complex products to the specifications
of its customers, or to provide services related to the
performance of such contracts. These contracts are accounted for
in accordance with American Institute of Certified Public
Accountants Statement of Position 81-1, "Accounting for the
Performance of Construction-Type and certain Production-Type
Contracts," and revenues and profits recognized using the
completed contract method of accounting. Under this method,
revenue and profits on contracts are recorded when the contracts
are complete or substantially complete. Provisions for
anticipated losses on contracts are recorded in the period in
which they become evident. Contracts normally take between nine
and twelve months to complete. Revenue from field services is
recognized as the service is performed. Revenue from repair
services is recognized when the repaired unit is shipped and
title and risk of loss are transferred to the customer.
The Company recognizes revenue and related cost of goods sold on
a gross basis for equipment purchased as specified by the
customer that is installed into the Company's new units in
accordance with Emerging Issues Task Force No. 99-19
"Reporting Revenue Gross as a Principal versus Net as an
Agent."
Customer progress payments in excess of the related investment
in inventory are held as customer advance payments in accounts
payable and accruals.
F-17
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Research and Development Costs
Research and development expenditures, including qualifying
engineering costs, are expensed when incurred.
Distribution and Shipping Costs
Amounts billed to customers for shipping and handling are
classified as net sales of products and other operating
revenues. Amounts incurred for shipping and handling are
included in costs of products sold.
Comprehensive Income (Loss)
Comprehensive income (loss) includes net income and other
comprehensive income (loss), which includes, foreign currency
translation adjustments, amounts relating to cash flow hedges,
net of tax, and additional minimum pension liability
adjustments, net of tax.
Foreign Currency
Assets and liabilities of non-U.S. entities, where the
local currency is the functional currency, are translated at
year-end exchange rates and income and expenses are translated
using average-for-the-year exchange rates. Adjustments resulting
from translation are recorded in accumulated other comprehensive
income and are included in net earnings only upon sale or
liquidation of the underlying foreign investment.
For non-U.S. entities where the U.S. dollar is the
functional currency, inventory and property balances and related
income statement accounts are translated using historical
exchange rates, and resulting gains and losses are credited or
charged to net earnings.
Stock-based Compensation
In connection with, but shortly after, the closing of the
Acquisition, several of the Company's executive officers
acquired common units in Dresser-Rand Holdings, LLC at the same
price paid per unit by funds affiliated with First Reserve in
connection with the Acquisition. Executives who purchased common
units were also issued profit units (see Note 16) in
Dresser-Rand Holdings, LLC, which permit them to share in
appreciation in the value of the Company's shares. The
accounting for the profit units is defined and described more
fully in Note 16, Incentive Stock Plans.
The Company recognizes compensation cost for awards with only
service conditions that have graded vesting schedule on a
straight-line basis over the requisite service period for the
entire award. However, the amount of compensation cost
recognized at any date is at least equal to the portion of the
grant-date value of the award that is vested at that date.
The Predecessor participated in several of IR's stock-based
employee compensation plans, which are described more fully in
Note 16. IR accounted for these plans under the recognition
and measurement principles of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to
Employees."
The following table illustrates the effect on net income of the
Predecessor if IR had applied the fair value recognition
provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation," in accordance with
SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure", to stock-based
F-18
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
employee compensation. Stock options granted by the Predecessor
to employees were for the purchase of Class A common stock
of IR and remained obligations solely of IR following the
transaction.
Predecessor
Period from
January 1
Year Ended
through
December 31,
October 29,
2004
2003
2002
(In thousands of dollars)
Net income, as reported
$
42,151
$
20,365
$
16,096
Add: Stock-based employee compensation expense included in
    reported net income, net of tax
446
1,502
143
Deduct: Total stock-based employee compensation expense
    determined under fair value method for all awards, net of tax
(4,640
)
(4,885
)
(2,990
)
Pro forma net income
$
37,957
$
16,982
$
13,249
Credit Facilities
Credit facilities have been arranged with banks whereby certain
of the Company's subsidiaries may borrow on an overdraft or
short-term note basis or issue bank guarantees. Such borrowings,
if collateralized, are primarily secured by D-R Interholding,
LLC, the Company's parent and various of the Company's
subsidiaries' guarantees and carry variable interest rates
ranging from 3.4% to 4.6% at December 31, 2004. The unused
portion of these facilities was $156.6 million at
December 31, 2004. In addition $5.0 million was drawn
on the revolver at the time of acquisition, but was subsequently
paid in November 2004.
Deferred Financing Costs
The Company amortizes deferred financing costs to interest
expense over the term of the related financing agreement using
the straight-line method for costs associated with financing
having a single payoff date and using a declining balance method
for costs associated with financing having scheduled payoffs,
each of which approximates the effective yield method (See
Note 11).
New Accounting Standards
In December 2004, the FASB released SFAS 123R, Share-Based
Payments, that is a revision of SFAS No. 123,
"Accounting for Stock-Based Compensation." This
Statement supersedes APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and its related
implementation guidance. SFAS 123R focuses primarily on
accounting for transactions in which an entity obtains employee
services in share-based payment transactions. The Company has
elected to early adopt the provisions of SFAS 123R as of
October 30, 2004. As a result, the Company recognized
compensation cost in relation to share-based compensation
arrangements of $75 thousand for the period from
October 30, 2004 through December 31, 2004.
In May 2004, the FASB released Staff Position
No. FAS 106-2 (FSP FAS 106-2) entitled,
Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug Improvement and Modernization Act of 2003 (the
Act). The current accounting rules require a company to consider
current changes in applicable laws when measuring its
postretirement benefit costs and accumulated postretirement
benefit obligations. The Predecessor adopted FSP FAS 106-2
as of April 1, 2004, the beginning of its second quarter.
The Predecessor and its actuarial advisors determined that most
benefits provided by its plan were at least actuarially
equivalent to Medicare Part D. The Predecessor re-measured the
effects of the Act on the accumulated projected benefit
obligation as of April 1, 2004. The effect of the federal
subsidy to which the
F-19
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Company was entitled was accounted for as an actuarial gain of
$13.7 million in April 2004. The subsidy had no effect on
postretirement expense for 2003 or prior years.
In November 2004, the FASB issued SFAS No. 151,
"Inventory Costs, an Amendment of Accounting Research
Bulletin No. 43, Chapter 4".
SFAS No. 151 clarifies that abnormal amounts of idle
facility expense, freight handling costs and wasted materials
(spoilage) should be recognized as current-period charges and
require the allocation of fixed production overheads to
inventory based on the normal capacity of the production
facilities. The guidance in this statement is effective for
inventory costs incurred during fiscal years beginning after
June 15, 2005. The adoption of this statement is not
expected to have a material impact to the Company's
financial reporting and disclosures.
In December 2004, the FASB issued SFAS No. 153,
"Exchanges of Nonmonetary Assets, an Amendment of APB
Opinion No. 29, "Accounting for Nonmonetary
Transactions". SFAS No. 153 eliminates the
exception from fair value measurement for nonmonetary exchanges
of similar productive assets in paragraph 21 (b) of
APB Opinion No. 29 and replaces it with an exception for
exchanges that do not have commercial substance.
SFAS No. 153 specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange.
This statement is effective for fiscal years beginning after
June 15, 2005. The adoption of this statement is not
expected to have a material impact on the Company's
financial reporting and disclosures.
3.
Related Party Transactions
Successor
Dresser Name
The Company's name and principal mark is a combination of
the names of the Company's founder companies, Dresser
Industries, Inc. and IR. The Predecessor acquired rights to use
the "Rand" portion of our principal mark from IR as
part of the sale agreement. The rights to use the
"Dresser" portion of the name in perpetuity were
acquired from Dresser, Inc. (the successor company to Dresser
Industries, Inc.), an affiliate of First Reserve in October
2004. Total consideration is $5.0 million of which
$1.0 million was paid in October 2004. The remaining
balance will be paid in equal annual installments of
$0.4 million through October 2013. Expense is recognized
ratably over the life of the agreement.
Predecessor
Intercompany Activities
IR provided the Predecessor with certain environmental and other
risk management services, internal audit, legal, tax,
accounting, pension fund management, transportation services,
cash management and other treasury services. Many of these
activities have been transferred over time from the Predecessor
to IR since IR acquired 100% ownership in the Predecessor. In
addition, as discussed below and in Notes 12, 13
and 16, most of the Company's employees were eligible
to participate in certain IR employee benefit programs that were
sponsored and/or administered by IR or its affiliates.
The Predecessor's use of these services and its
participation in these employee benefit plans generated costs to
the Predecessor. Costs and benefits relating to the services and
benefit plans were charged/ credited to the Predecessor and were
included in cost of goods sold, and selling and administrative
expenses. Costs were allocated to the Predecessor using
allocation methods that management of IR and the Predecessor
believe are reasonable.
The combined financial statements reflect these costs through a
corporate overhead allocation. These costs amounted to
$15.3 million, $15.1 million and $1.3 million for
the period from January 1, 2004 through October 31,
2004, and for the years ended December 31, 2003 and 2002,
respectively. These allocations reflect
F-20
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
the growing use of IR services by the Predecessor from 2002 to
2004. The 2002 amounts include amounts for IR Sector support
only. During 2003, the Predecessor began the process of
integrating numerous functions with IR. Therefore, the 2003
amounts include services such as treasury and cash management,
internal audit services, tax planning and compliance, risk
management services, workers compensation administration,
post-retirement plan administration, payroll deposit services
and strategic sourcing support. Further integration took place
in 2004 with additional services added such as legal counsel
support, IR University training, medical plan administration and
other human resource functions. Some of the allocation were
based on specifically classified expenses of IR while others
were allocated based on a multi-part formula utilizing common
business measures such as headcount, total payroll dollars and
total assets.
As mentioned above IR, provided centralized treasury functions
and financing, including substantially all investing and
borrowing activities for the Predecessor. As part of this
practice, surplus cash was remitted to IR and IR advanced cash,
as necessary, to the Predecessor. No interest was charged or
paid on the net IR investment amount. Interest was charged or
credited on certain notes receivable and notes payable from/to
IR affiliates.
At December 31, 2003, the Predecessor had outstanding
receivables due from IR affiliates of $105.3 million.
Intercompany receivables are treated as current since they are
due upon demand. Intercompany receivables were settled at the
time of Acquisition.
Employee Benefit Administration
The Predecessor's employees participated in tax-qualified
defined benefit pension plans and defined contribution savings
plans sponsored and/or administered by IR or its affiliates. IR
charged to the Predecessor its pro-rata share of administration
and funding expenses incurred by IR in the operation of these
plans for the benefit of employees of the Predecessor. The
Predecessor is responsible for the cost of funding pension and
savings plan benefits accrued by its employees. Welfare benefit
programs are generally self-insured and experience-rated on the
basis of Predecessor employees without regard to the claims
experience of employees of other affiliated companies.
Other Related Party Transactions
The Predecessor recorded sales of $1.8 million,
$1.4 million and $1.8 million to IR and its affiliates
in the period from January 1, 2004 through October 29,
2004 and in the years ended December 31, 2003 and 2002,
respectively. For the period from January 1, 2004 through
October 29, 2004 and the year ended December 31, 2002,
the Predecessor paid dividends of $5.1 million and
$8.2 million, respectively, to IR by Dresser-Rand GmbH.
This amount was recorded against IR's investment included
in the Predecessor's equity.
4.
Earnings per share
Successor
Earnings per share are calculated as net income divided by the
weighted average number of common shares outstanding during the
period. Weighted average common shares of 100,115,080 were used
to calculate earnings per share as of December 31, 2004.
Predecessor
Earnings per share for the Predecessor periods, is not presented
as the Predecessor did not operate as a separate legal entity of
IR with its own legal structure.
F-21
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
5.
Inventories
Inventories were as follows:
December 31,
2004
2003
(Successor)
(Predecessor)
(In thousands of dollars)
Raw materials and supplies
$
60,728
$
62,207
Work-in-process and finished goods
209,247
142,050
269,975
204,257
Less:
Progress payments
(94,102
)
(70,832
)
Total
$
175,873
$
133,425
The Progress payments represent payments from customers based on
milestone completion schedules. Any payments received in excess
of inventory investment are reclassified to "Customer
Advance Payments" in the current liabilities section of the
balance sheet.
6.
Investments In Partially Owned Equity Companies
The Company and Predecessor had two investments that operated in
similar lines of business at December 31, 2004 and 2003.
The investments in and amounts due from partially owned equity
companies in which the Company's and Predecessor's
ownership interest ranged from 40% to 50%, amounted to
$10.0 million and $3.0 million, respectively at
December 31, 2004 and $5.5 million and
$3.6 million, respectively, at December 31, 2003. The
equity in the net earnings (losses) of partially owned equity
companies was $0.2 million in the period from
October 30, 2004 through December 31, 2004,
$(1.0) million in the period from January 1, 2004
through October 29, 2004 and $(0.1) million and
$(0.5) million for the years ended December 31, 2003
and 2002, respectively and is recorded in other income/expense,
net in the accompanying statements of income. The Company and
Predecessor received no distributions from these investments in
2004, 2003, and 2002. Sales from the Company or Predecessor to
the partially owned equity companies were not significant.
Summarized financial information for these partially owned
equity companies follows:
Successor
Predecessor
Period from
Period from
October 30
January 1
Year Ended
through
through
December 31,
December 31,
October 29,
2004
2004
2003
2002
(In thousands of dollars)
Net sales
$
13,460
$
56,271
$
53,337
$
56,953
Gross profit
3,725
17,857
18,890
18,596
Net income/(loss)
596
(1,849
)
310
(518
)
F-22
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31,
2004
2003
(Successor)
(Predecessor)
(In thousands of dollars)
Current assets
$
24,819
$
18,855
Property, plant and equipment, net
2,303
2,748
Other assets
5,353
5,925
Total assets
$
32,475
$
27,528
Current liabilities
$
8,298
$
3,813
Other liabilities
10,594
8,878
Total owners' equity
13,583
14,837
Total liabilities and owners' equity
$
32,475
$
27,528
7.
Property, Plant and Equipment
Property, plant and equipment were as follows:
December 31,
2004
2003
(Successor)
(Predecessor)
(In thousands of dollars)
Land
$
8,156
$
5,213
Buildings and improvements
64,599
$
46,719
Machinery and equipment
157,969
128,363
230,724
180,295
Less: Accumulated depreciation
(3,960
)
(78,857
)
Property plant and equipment, net
$
226,764
$
101,438
Depreciation expense for the period from October 30, 2004
through December 31, 2004, the period from January 1,
2004 through October 29, 2004 and the years ended
December 31, 2003 and 2002 was $4.0 million,
$16.6 million, $21.8 million and $27.0 million,
respectively.
F-23
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
8.
Intangible Assets and Goodwill
The following table sets forth the weighted average useful life,
gross amount and accumulated amortization of intangible assets:
Successor
Predecessor
December 31, 2004
December 31, 2003
Weighted
Weighted
Average
Gross
Accumulated
Average
Gross
Accumulated
Useful Lives
Amount
Amortization
Useful Lives
Amount
Amortization
(In thousands of dollars)
Trade names
40 years
$
82,700
$
344
Indefinite
$
34,935
$
—
Customer Relationships
40 years
227,746
936
40 years
235,824
22,657
Software
10 years
30,553
510
8 years
11,014
4,704
Existing technology
25 years
119,100
794
—
—
Order backlog
15 months
25,095
8,824
—
—
Non-compete agreement
2 years
4,413
366
—
—
Royalty agreement
14 months
2,320
566
—
—
Total
$
491,927
$
12,340
$
281,773
$
27,361
Intangible asset amortization expense for the period from
October 30, 2004 through December 31, 2004, the period
from January 1, 2004 through October 29, 2004 and the
years ended December 31, 2003 and 2002 was
$12.3 million, $6.1 million, $7.3 million and
$6.8 million, respectively. Estimated intangible asset
amortization expense for each of the next five fiscal years is
expected to be $33.8 million in 2005, $19.0 million in
2006, $15.5 million in 2007, $15.5 million in 2008,
and $15.5 million in 2009.
The following table represents the change in goodwill:
Successor
Predecessor
Period from
Period from
October 30
January 1
through
through
Year Ended
December 31,
October 29,
December 31,
2004
2004
2003
(In thousands of dollars)
Beginning balance
$
408,424
$
10,214
$
10,214
Dispositions
(377
)
—
—
Translation adjustments
15,283
—
—
Ending balance
$
423,330
$
10,214
$
10,214
The disposition of goodwill represents adjustments related to
the recognition of acquired tax benefits for which a valuation
allowance was recorded at the acquisition date.
F-24
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
9.
Accounts Payable and Accruals
Accounts payable and accruals were as follows:
December 31,
2004
2003
(Successor)
(Predecessor)
(In thousands of dollars)
Accounts payable
$
103,822
$
104,835
Accruals:
Payroll and benefits
31,289
25,061
Pension and Postretirement benefits
9,706
49,849
Contract reserves
30,702
25,359
Warranties
21,078
23,699
Taxes other than income
25,749
19,763
Legal, audit and consulting
3,718
10,344
Interest
6,216
554
Third party commissions
7,961
9,362
Insurance and claims
7,679
4,095
Other
23,355
18,909
Total accounts payable and accruals
$
271,275
$
291,830
10.
Income Taxes
Earnings before income taxes were taxed within the following
jurisdictions:
Predecessor
Successor
Period
Period from
from
October 30
January 1
Year Ended
through
through
December 31,
December 31,
October 29,
2004
2004
2003
2002
(In thousands of dollars)
United States
$
(3,562
)
$
34,058
$
(7,619
)
$
(2,198
)
Non-U.S.
18,066
20,063
39,422
30,204
Total
$
14,504
$
54,121
$
31,803
$
28,006
F-25
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
The provision for income taxes was as follows:
Successor
Predecessor
Period from
Period from
October 30
January 1
Year Ended
through
through
December 31,
December 31,
October 29,
2004
2004
2003
2002
(In thousands of dollars)
Current tax expense
United States
$
883
$
(933
)
$
1,314
$
2,367
Non-U.S.
7,366
12,270
15,025
8,598
Total current
8,249
11,337
16,339
10,965
Deferred tax expense
United States
—
(2,707
)
(404
)
2
Non-U.S.
(974
)
3,340
(4,497
)
943
Total deferred
(974
)
633
(4,901
)
945
Total provision for income taxes
$
7,275
$
11,970
$
11,438
$
11,910
The provision for income taxes differs from the amount of income
taxes determined by applying the applicable U.S. statutory
income tax rate to pretax income, as a result of the following
differences:
Successor
Predecessor
Period from
Period from
October 30
January 1
Year Ended
through
through
December 31,
December 31,
October 29,
2004
2004
2003
2002
Statutory U.S. rate
35.0
%
35.0
%
35.0
%
35.0
%
Increase (decrease) in rates resulting from:
Non-U.S. operations
(4.3
)%
9.9
%
5.5
%
(7.5
)%
State and local income taxes, net of U.S. tax
4.0
%
(0.2
)%
1.1
%
0.4
%
Valuation allowances
11.0
%
7.2
%
(10.7
)%
6.5
%
Nontaxable partnership income
—
(18.7
)%
9.6
%
6.6
%
Other
4.5
%
(11.1
)%
(4.5
)%
1.5
%
Effective tax rate
50.2
%
22.1
%
36.0
%
42.5
%
F-26
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
A summary of the deferred tax accounts follows:
December 31,
2004
2003
(Successor)
(Predecessor)
(In thousands of dollars)
Current deferred assets and (liabilities)
Differences between book and tax bases of
    inventories and receivables
$
3,199
$
1,826
Differences between book and tax expense for
    other employee related benefits and allowances
—
403
Other reserves and valuation allowances versus
    tax deductions
3,769
3,808
Other differences between tax and financial
    statement values
477
4,461
Gross current deferred tax assets
7,445
10,498
Noncurrent deferred tax assets and (liabilities)
Tax net operating loss carryforwards
9,216
7,476
Pension contributions in excess of book expense
12,833
10,986
Book depreciation/amortization versus tax
    depreciation/amortization
(37,343
)
2,194
Gross noncurrent deferred tax assets (liabilities)
(15,294
)
20,656
Less: valuation allowances
(11,993
)
(6,091
)
Total net deferred tax assets (liabilities)
$
(19,842
)
$
25,063
As of December 31, 2004 and
December 31, 2003 net operating loss carryforwards of
approximately $27.9 million and $27.3 million,
respectively, were available to offset taxable income in future
years. A portion of these carryforwards will begin to expire in
2007, while the remainder generally have unlimited carry forward
periods. Valuation allowances as of December 31, 2004 and
December 31, 2003 of $9.1 million and
$6.1 million, respectively, have been recorded for certain
carryforwards, which will likely not be realized.
As a result of the purchase of the Successor,
deferred taxes have been recorded to reflect the difference
between the purchase price allocation to the foreign reporting
entities and their underlying tax basis. For operating loss
carryforwards and other acquired tax benefits for which a
valuation allowance was established at the acquisition date,
when subsequently recognized, the acquired tax benefit will
first reduce goodwill, then other noncurrent intangible assets
on a prospective basis. Once these assets are reduced to zero,
the benefit is included in income as a reduction of the income
tax expense. Acquired tax benefits not recognized at the
acquisition date amount to $7.2 million. During the period
October 30, 2004 through December 31, 2004, the
reduction in goodwill related to the recognition of such
acquired tax benefits was $0.4 million.
As a result of the sale of the Predecessor, all
previously undistributed foreign earnings were deemed
distributed to IR as part of the Acquisition. At
December 31, 2004, deferred taxes have not been provided on
undistributed foreign earnings of $11.2 million, since
these earnings have been, and under current plans, will continue
to be permanently reinvested in these subsidiaries. It is not
practicable to estimate the amount of additional taxes which may
be payable upon future distribution.
The American Jobs Creation Act of 2004 introduced
a one-time provision allowing U.S. corporations to
repatriate accumulated income earned abroad by providing an 85%
dividend-received deduction for certain dividends from
controlled foreign corporations. Due to the interplay of this
benefit and the Company's overall tax position, the Company
does not currently expect to avail itself of this provision.
F-27
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
For the predecessor periods, the tax expense
reflected in the Combined Statement of Income related to
Dresser-Rand UK Ltd., a United Kingdom (UK) incorporated entity,
has been presented on a separate company basis as though
Dresser-Rand UK Ltd. had filed stand-alone income tax returns.
Under operation of UK tax law, tax losses incurred by IR
subsidiaries may be surrendered to Dresser-Rand UK Ltd. since
they are part of a UK affiliated group. To the extent the losses
surrendered to Dresser-Rand UK Ltd. have reduced the actual tax
liability, the amount is presented on the Combined Balance Sheet
at December 31, 2003 as an intercompany payable, not a
government tax payable. No formal tax sharing agreement existed
between the Predecessor and IR.
11.
Long–Term Debt
Senior Secured Credit
    Facility
In connection with the Acquisition, the Company
and certain of its foreign subsidiaries entered into the Senior
Secured Credit Facility with a syndicate of lenders. The
obligations of the Company under the Senior Secured Credit
Facility have been guaranteed by the direct material domestic
subsidiaries of the Company and the Company's direct
parent, D-R Interholding, LLC and the obligations of each
foreign subsidiary borrower under the Senior Secured Credit
Facility have been guaranteed by the Company, the Company's
direct parent, D-R Interholding, LLC, the direct material
subsidiaries of such foreign subsidiary borrower and the direct
material domestic subsidiaries of the Company. The Senior
Secured Credit Facility consists of a $395.0 million term
loan facility
(
€
78.5 million
of which is denominated in Euros) and a $300.0 million
revolving credit facility. The term loan facility requires
interest to be paid not less frequently than quarterly. In
addition, at the end of each quarter the Company is required to
make principal payments equal to one-quarter of one percent
(0.25%) of the initial principal balance of such loans. The
principal amount outstanding under the revolving credit facility
is due and payable in full at maturity, at October 29,
2009. The term loan facility carried an average interest rate of
4.56% at December 31, 2004. There were no borrowings under
the revolving credit facility at December 31, 2004. As of
December 31, 2004, the Company had issued
$143.4 million of letters of credit under the revolver.
Dollar-denominated revolving borrowings under the
Senior Secured Credit Facility bear interest, at the
Company's election, at either (x) a rate equal to an
applicable margin ranging from 2.0% to 2.5%, depending on the
Company's leverage ratio, plus a LIBOR rate determined by
reference to the costs of funds for deposits in
U.S. dollars for the interest period relevant to such
borrowing adjusted for certain additional costs or (y) a
rate equal to an applicable margin ranging from 1.0% to 1.5%,
depending on the Company's leverage ratio plus a base rate
determined by reference to the highest of (1) the rate that
the administrative agent announces from time to time as its
prime or base commercial lending rate, (2) the three month
certificate of deposit rate plus 1/2 of 1% and (3) the
federal funds rate plus 1/2 of 1%. Euro-denominated revolving
borrowings under the Senior Secured Credit Facility bear
interest at a rate equal to an applicable margin ranging from
2.0% to 2.5%, depending on the Company's leverage ratio,
plus a EURIBOR rate determined by reference to the costs of
funds for deposits in the currency of such borrowings for the
interest period relevant to such borrowings adjusted for certain
additional costs.
In addition to paying interest on outstanding
principal under the Senior Secured Credit Facility, the Company
is required to pay a commitment fee to the lenders under the
revolving credit facility in respect of the un-utilized
commitments at a rate ranging from 0.375% to 0.5% per annum
depending on the Company's leverage ratio. The Company will
also pay letter of credit fees equal to the applicable margin
then in effect with respect to LIBOR loans under the revolving
credit facility on the face amount of each such letter of credit.
In general, the Senior Credit Facility requires
that certain net proceeds related to the asset sales, incurrence
of additional debt, casualty settlements and condemnation awards
and excess cash flow may be required to be used to pay down the
outstanding balance. The Company may voluntarily prepay
outstanding
F-28
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
loans under the Senior Secured Credit Facility at
any time without premium or penalty, other than customary
brokerage costs. The Senior Secured Credit Facility contains
normal and customary covenants including the provision of
periodic financial information, financial tests, (including
maximum net leverage and a minimum interest coverage ratio) and
certain other limitations governing, among others, such matters
as Company's ability to incur additional debt, grant liens
on assets, make investments, acquisitions or mergers, dispose of
assets, make capital expenditures, engage in transactions with
affiliates, make amendments to corporate documents that would be
materially adverse to lenders, and pay dividends and
distributions or repurchase capital stock. The Company was
temporarily out of compliance of its obligation under the senior
credit facility to provide lenders financial statements for the
year ended December 31, 2004 no later than 120 days
after the end of that year. This was remedied by delivery of the
financial statements within the 30-day cure period as provided
for in the terms and conditions of the Senior Secured Credit
Facility.
To fund part of the Acquisition, the Company and
the foreign subsidiary borrowers borrowed the entire
$395.0 million under the term loan facility. Approximately
$5 million of the revolver was borrowed at the time of the
acquisition. This amount was repaid prior to year end. At the
time of the acquisition, the Company issued $127.7 million
of letters of credit under the revolver pursuant to its
obligations under the Acquisition Agreement to indemnify IR with
respect to any liability incurred in connection with certain
letters of credit issued by IR on behalf of the Company.
Senior Subordinated Notes
In conjunction with the Acquisition, the Company
issued $420.0 million of 7 3/8% senior subordinated
notes. The Senior Subordinated Notes mature on November 1,
2014 and bear interest at a rate of 7 3/8% per annum, which
is payable semi-annually in arrears on May 1 and
November 1 of each year, beginning with the first payment
due on May 1, 2005. The Company may redeem any of the notes
beginning on November 1, 2009 at a redemption price of
103.688% of their principal amount, plus accrued interest. The
redemption price will decline each year after 2009 and will be
100% of their principal amount, plus accrued interest, beginning
on November 1, 2012. The Company may also redeem any of the
notes at any time prior to November 1, 2009, at a
redemption price equal to 100% of the principal amount of notes
to be redeemed, plus a premium (based on a formula set forth in
senior subordinate indenture) and accrued interest. In addition,
at any time prior to November 1, 2007, the Company may
redeem up to 35% of the notes at a redemption price of 107.375%
of their principal amount plus accrued interest, using the
proceeds from sales of certain kinds of capital stock. The
Company may make such a redemption only if, after such
redemption, at least 65% of the aggregate principal amount of
notes originally issued under the indenture governing the notes
remains outstanding.
The Senior Subordinated Notes are general
unsecured obligations and are guaranteed on a senior
subordinated basis by certain of the Company's domestic
subsidiaries and rank secondary to the Company's senior
credit facility. The Senior Subordinated Notes contain customary
covenants including certain limitations and restrictions on the
Company's ability to incur additional indebtedness, create
liens, pay dividends and make distributions in respect of
capital stock, redeem capital stock, make investments or certain
other restricted payments, sell assets, issue or sell stock of
restricted subsidiaries, enter into transactions with affiliates
and effect consolidations or mergers. The Senior Subordinated
Notes also contain covenants requiring the Company to submit to
the Trustee or holders of the notes certain financial reports
that would be required to be filed with the SEC.
The Company is obligated to use commercially
reasonable efforts to register the senior subordinated notes
under the Securities Act and consummate an exchange offer no
later than 300 days after the closing of the offering of
the senior subordinated notes. If this requirement is not met,
then the annual interest on the Senior Subordinated Notes will
increase by (1) 0.25% per annum for the first
90 days following the end of
F-29
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
such period and (2) 0.25% per annum at the beginning
of each subsequent 90-day period, up to a maximum of
1.0% per annum until all such registration defaults are
cured.
Long-term debt at each respective date consisted of the
following:
December 31,
2004
2003
(Successor)
(Predecessor)
(In thousands of dollars)
Senior Subordinated Notes
$
420,000
$
—
Senior Secured Credit Facility
400,474
—
Other debt
205
213
Total long term debt
820,679
213
Less: current maturities
(4,015
)
—
Total non current long term debt
$
816,664
$
213
At December 31, 2004, the Company's total long-term
debt principal maturities were as follows:
Senior
Senior
Subordinated
Secured Credit
Other
Notes
Facility*
Debt
Total
(In thousands of dollars)
2005
$
—
$
4,015
$
—
$
4,015
2006
—
4,015
162
4,177
2007
—
4,015
43
4,058
2008
—
4,015
—
4,015
2009
—
4,015
—
4,015
2010 and after
420,000
380,399
—
800,399
$
420,000
$
400,474
$
205
$
820,679
*
Through May 11, 2005 the Company has made payments of
    $111.7 million on the Senior Secured Credit Facility, as a
    result of which no further principal amortization payments are
    required prior to maturity of the facility on October 29,
    2011.
The Company's interest expense for the period from
October 30, 2004 through December 31, 2004, the period
from January 1, 2004 through October 29, 2004 and for
the years ended December 31, 2003 and 2002 was
$10.0 million, $2.0 million, $2.8 and
$4.3 million, respectively. Included in these amounts are
intercompany interest expense charges recognized by the
Predecessor, paid to IR, for the period from January 1,
2004 through October 29, 2004 and for the years ended
December 31, 2003 and 2002 of $1.2 million, $1.2 and
$1.4 million, respectively.
12.
Pension Plans
The defined benefit plan covering salaried and hourly employees
was frozen effective March 31, 1998. The plan was replaced
with a defined contribution plan. The Company's
U.S. salaried plans generally provide benefits based on a
final average earnings formula. The Company's hourly
pension plans provide benefits under flat formulas.
Non-U.S. plans provide benefits based on earnings and years
of service. Most of the non-U.S. plans require employee
contributions based on the employee's earnings. The
Company's policy is to fund an amount, which could be in
excess of the pension cost expensed, subject to the limitations
imposed by current statutes or tax regulations.
F-30
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Information regarding the Company's and the
Predecessor's pension plans is as follows:
December 31,
2004
2003
(Successor)
(Predecessor)
(In thousands of dollars)
Change in benefit obligations
Benefit obligation at beginning of the period
$
308,712
$
310,172
Service cost
870
4,643
Interest cost
2,884
19,704
Employee contributions
62
291
Expenses paid
—
(207
)
Actuarial losses
3,035
19,328
Benefits paid
(2,464
)
(17,176
)
Foreign exchange impact
4,399
7,995
Benefit obligation at end of the period
$
317,498
$
344,750
Change in plan assets
Fair value at beginning of the period
$
240,025
$
237,201
Actual return on assets
2,460
32,813
Company contributions
495
14,383
Employee contributions
62
291
Expenses paid
—
(207
)
Benefits paid
(2,464
)
(16,533
)
Foreign exchange impact
2,554
4,726
Fair value of assets at end of the period
$
243,132
$
272,674
December 31,
2004
2003
(Successor)
(Predecessor)
(In thousands of dollars)
Funded status
Plan assets less than benefit obligations
$
(74,366
)
$
(72,076
)
Unrecognized
Net transition obligation
—
3
Prior service costs
—
4
Plan net losses (gains)
3,816
90,567
Net amount recognized
$
(70,550
)
$
18,498
Costs included in the balance sheet
Prepaid benefit cost
$
—
$
360
Accrued benefit liability
(72,061
)
(64,311
)
Accumulated other comprehensive income
1,511
82,449
Net amount recognized
$
(70,550
)
$
18,498
F-31
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31,
2004
2003
(Successor)
(Predecessor)
Weighted-average assumptions used, benefit obligations
Discount rate
U.S. plans
5.750
%
6.00%
Non-U.S. plans
5.308
%
5.75%
Rate of compensation increase
U.S. plans
N/A
4.00%
Non-U.S. plans
3.75
%
3.75%
The components of the pension related expense (income) include
the following:
Successor
Predecessor
Period from
Period from
October 30
January 1
Year Ended
through
through
December 31,
December 31,
October 29,
2004
2004
2003
2002
(In thousands of dollars)
Service cost
$
870
$
3,801
$
4,643
$
3,871
Interest cost
2,884
16,903
19,704
19,067
Expected return on plan assets
(3,207
)
(21,173
)
(19,329
)
(23,462
)
Net amortization of unrecognized
Transition amount
—
1
—
—
Prior Service Cost
—
453
1
1
Plan net losses
—
3,375
5,257
403
Net pension expense (income)
$
547
$
3,360
$
10,276
$
(120
)
Successor
Predecessor
Period from
Period from
October 30
January 1
Year Ended
through
through
December 31,
December 31,
October 29,
2004
2004
2003
2002
Weighted-average assumptions used, net periodic pension cost
Discount rate
U.S. plans
5.750
%
6.00
%
6.75
%
7.25
%
Non-U.S. plans
5.308
%
5.75
%
5.75
%
6.00
%
Rate of compensation increase
U.S. plans
N/A
N/A
4.00
%
5.00
%
Non-U.S. plans
3.750
%
3.75
%
3.00
%
3.00
%
Expected return on plan assets
U.S. plans
8.500
%
8.75
%
8.75
%
9.00
%
Non-U.S. plans
7.094
%
7.50
%
7.50
%
7.50
%
F-32
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for pension plans were
$317.5 million, $306.2 million and
$243.1 million, respectively, as of December 31, 2004;
and $344.8 million, $335.3 million and
$272.7 million, respectively, as of December 31, 2003.
The Company uses an annual measurement date of November 30
for substantially all of its pension plans for the years
presented. The expected long-term rates of return on plan assets
are determined as of the measurement date. The expected
long-term rates of return are projected to be the rates of
return to be earned over the period until the benefits are paid.
Accordingly, the long-term rates of return should reflect the
rates of return on present investments, expected contributions
to be received during the current year and on reinvestments over
the period. The rates of return utilized reflect the expected
rates of return during the periods for which the payment of
benefits is deferred. The expected long-term rate of return on
plan assets used is based on what is realistically achievable
based on the types of assets held by the plans and the
plan's investment policy. Historical asset return trends
for the larger plans are reviewed over fifteen, ten and five
years. The actual rate of return for plan assets over the last
ten-and fifteen-year periods have exceeded the expected rate of
return used. The Company reviews each plan and its historical
returns and asset allocations to determine the appropriate
expected long-term rate of return on plan assets to be used.
The weighted average asset allocations of the Company's and
the Predecessor's pension plans by asset category are as
follows:
December 31,
2004
2003
(Successor)
(Predecessor)
Asset category*
Equity securities
58.1
%
59.7
%
Debt securities
35.0
%
27.1
%
Other (including cash)
6.9
%
13.2
%
Total
100.0
%
100.0
%
*
Reflects weighted average percentage allocations of U.S. and
    non-U.S. plans.
The Company's investment objectives in managing its defined
benefit plan assets are to ensure that present and future
benefit obligations to all participants and beneficiaries are
met as they become due; to provide a total return that, over the
long-term, maximizes the ratio of the plan assets to
liabilities, while minimizing the present value of required
Company contributions, at the appropriate levels of risk; and to
meet any statutory requirements, laws and local regulatory
agencies requirements. Key investment decisions reviewed
regularly are asset allocations, investment manager structure,
investment managers, investment advisors and trustees or
custodians. An asset/liability modeling study is used as the
basis for global asset allocation decisions and updated
approximately every five years or as required. The
Company's current strategic global asset allocation for its
pension plans is 60% in equities securities and 40% in debt
securities and cash. The Company sets upper limits and lower
limits of plus or minus 5%. The rebalancing strategy is reviewed
quarterly if cash flows are not sufficient to rebalance the
plans and appropriate action is taken to bring the plans within
the strategic allocation ranges.
The Predecessor contributed an additional $30 million in
the first quarter of 2004, $9 million of which was
required. The Company's policy is to contribute the minimum
required amount, as defined by law, and additional discretionary
amounts up to the limitations imposed by the applicable tax
codes. The Company currently projects that it will contribute
approximately $10 million to its plans worldwide in 2005.
Most of the non-U.S. plans require employee contributions
based on the employees' earnings.
F-33
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Pension benefit payments, which reflect future service, as
appropriate, are expected to be paid as follows:
$15.7 million in 2005, $16.5 million in 2006,
$17.4 million in 2007, $18.4 million in 2008,
$19.6 million in 2009 and $111.7 million for the years
2010 to 2014.
Defined Contribution Plans
Most of the Company's U.S. employees are covered by
savings and other defined contribution plans. Employer
contributions and costs are determined based on criteria
specific to the individual plans and amounted to approximately
$1.9 million, $7.9 million, $8.8 million and
$11.4 million for the period from October 30, 2004
through December 31, 2004, the period from January 1,
2004 through October 29, 2004, and the years ended
December 31, 2003 and 2002, respectively. The
Company's and Predecessor's costs relating to
non-U.S. defined contribution plans, insured plans and
other non-U.S. benefit plans were $0.1 million,
$0.3 million, $0.9 million and $0.5 million for
the period from October 30, 2004 through December 31,
2004, the period from January 1, 2004 through
October 29, 2004, and the years ended December 31,
2003 and 2002, respectively.
13.
Postretirement Benefits other than Pensions
The Company sponsors postretirement plans that cover certain
eligible U.S. employees. These plans provide for health
care benefits and in some instances, life insurance benefits.
Postretirement health plans generally are contributory and
adjusted annually. Life insurance plans are non-contributory. In
1997, the Predecessor amended its postretirement benefit plans
for salaried and hourly employees. The amendment eliminated
medical benefit coverage for all future retirees except for
grandfathered employees. An eligible retiree's health care
benefit coverage is coordinated with Medicare. The Company funds
the postretirement benefit costs principally on a pay-as-you-go
basis.
Summary information on the Company's and the
Predecessor's plans was as follows:
December 31,
2004
2003
(Successor)
(Predecessor)
(In thousands of dollars)
Change in benefit obligations
Benefit obligation at beginning of the period
$
46,818
$
189,183
Service cost
301
1,935
Interest cost
449
11,907
Amendments
—
(9,300
)
Actuarial losses (gains)
—
18,196
Benefits paid
—
(11,544
)
Benefit obligation at end of the period
$
47,568
$
200,377
Funded status
Plan assets less than benefit obligations
$
(47,568
)
$
(200,377
)
Unrecognized
Prior service gains
—
(9,042
)
Plan net losses*
—
83,157
Accrued costs in the balance sheet
$
(47,568
)
$
(126,262
)
*
Plan net losses in 2003 arose primarily from changes in discount
    rate and medical cost trend assumptions.
F-34
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
The components of net periodic postretirement benefits cost were
as follows:
Successor
Predecessor
Period from
Period from
October 30
January 1
Year Ended
through
through
December 31,
December 31,
October 29,
2004
2004
2003
2002
(In thousands of dollars)
Service cost
$
301
$
1,599
$
1,935
$
1,172
Interest cost
449
9,323
11,907
11,108
Net amortization of unrecognized prior service gains
—
(861
)
(258
)
—
Net amortization of loss
—
3,011
949
732
Net periodic postretirement benefits cost
$
750
$
13,072
$
14,533
$
13,012
Benefit payments for postretirement benefits, which reflect
future service and are net of expected Medicare Part D
subsidy, as appropriate, are expected to be paid as follows:
$0.0 million in 2005, $0.1 million in 2006,
$0.2 million in 2007, $0.5 million in 2008,
$0.8 million in 2009 and $10.9 million for the years
2010 to 2014.
The Company uses an annual measurement date of November 30
for substantially all of its postretirement benefit plans for
all years presented. The sale of an IR business in February 2003
was deemed to be a significant event and required a
remeasurement of the postretirement benefit plan. The
weighted-average assumptions used in the February 2003
remeasurement due to the sale were a discount rate of 6.50% and
increases in per capita cost of covered health care benefits of
11.00% for the year, gradually reducing to 5.25% by 2009. In the
fourth quarter of 2002, IR amended its postretirement benefit
plans for U.S. non-bargaining employees and retirees,
effective January 1, 2003. The amendments eliminated
subsidized life insurance for all future retirees. The
weighted-average assumptions used in the fourth quarter of 2002
remeasurement due to plan amendments were a discount rate of
6.75% and increases in per capita cost of covered health care
benefits of 11.00% for the year, gradually reducing to 5.25% by
2009.
Successor
Predecessor
Period from
Period from
October 30
January 1
Year Ended
through
through
December 31,
December 31,
October 29,
2004
2004
2003
2002
Weighted-average discount rate assumption used to determine
Benefit obligations at end of period
5.75
%
6.00
%
6.00
%
6.75
%
Net periodic benefit cost for the periods ended
    February 15, 2003 and October 2002
N/A
N/A
6.75
%
7.25
%
Net periodic benefit cost for the remaining period
5.75
%
6.00
%
6.50
%
6.75
%
Assumed health care cost trend rates
Current year medical inflation
11.00
%
11.00
%
11.00
%
11.00
%
Ultimate inflation rate
5.00
%
5.25
%
5.25
%
5.25
%
Year that the rate reaches the ultimate trend rate
2010
2010
2010
2009
F-35
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
A 1% change in the medical trend rate assumed for postretirement
benefits would have the following effects for the period from
October 30 through December 31, 2004 and at
December 31, 2004, respectively:
1% Increase
1% Decrease
(In thousands of dollars)
Effect on total service and interest cost compenents
$
166
$
(130
)
Effect of postretirement benefit obligations
10,144
(8,014
)
14.
Financial Instruments
The Company and the Predecessor maintained significant
operations in countries other than the United States. As a
result of these global activities, the Company and the
Predecessor were exposed to changes in foreign currency exchange
rates which affected the results of operations and financial
condition. The Company and the Predecessor managed exposure to
changes in foreign currency exchange rates through their normal
operating and financing activities, as well as through the use
of financial instruments. Generally, the only financial
instruments the Company and the Predecessor utilized were
forward exchange contracts.
The purpose of the Company's and the Predecessor's
currency hedging activities was to mitigate the impact of
changes in foreign currency exchange rates. The Company and the
Predecessor attempted to hedge transaction exposures through
natural offsets. To the extent that this was not practicable,
major exposure areas considered for hedging included foreign
currency denominated receivables and payables, firm committed
transactions, and forecasted sales and purchases.
SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities," and its amendments, became effective
for the Predecessor on January 1, 2001. The statement
requires all derivatives to be recognized as assets or
liabilities on the balance sheet and measured at fair value. The
effective portion of the hedging instrument's gain or loss
is reported to Stockholders' Equity (as a component of
Other Comprehensive Income) and is reclassified to earnings in
the period during which the transaction being hedged
affect's income. Gains or losses reclassified from
Stockholders' Equity to income are classified in accordance
with income treatment of the hedged transaction. The ineffective
portion of a hedging derivative's fair value change, where
that derivative is used in a cash flow hedge, is recorded in
current income. Classification in the Statement of Income of the
ineffective portion of the hedging instrument's gain or
loss is based on the income statement classification of the
transaction being hedged. If a derivative instrument does not
qualify as a hedge under the applicable guidance, the change in
the fair value of the derivative is immediately recognized in
the Statement of Income.
The counterparties to the Company's and the
Predecessor's forward contracts comprised a number of major
international financial institutions. The Company and the
Predecessor could be exposed to loss in the event of
non-performance by the counterparties. However, credit ratings
and concentration of risk of these financial institutions were
monitored on a continuing basis and presented no significant
credit risk to the Company or the Predecessor.
The carrying value of cash, accounts receivable, short-term
borrowings and accounts payable were a reasonable estimate of
their fair value due to the short-term nature of these
instruments. The carrying value of debt obligations approximates
fair value.
15.
Commitments and Contingencies
In late 2000, the Predecessor entered into a contract with Shell
Petroleum Development Corporation (SPDC) for the
refurbishment of 20-year old compressor stations for the
Nigerian Gas Company (NGC). These stations are located in the
Warri district in the western part of Nigeria.
F-36
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
In August 2003, for the safety of personnel, all of the
Predecessor's employees were evacuated from Warri following
consultation with independent security advisors, and as such,
exercised a force majure clause in the contract with SPDC,
effectively canceling the project. As a result, the Predecessor
and SPDC entered into negotiations to settle all claims and
costs associated with the contract. The settlement process was
brought forth to the SPDC Main Tender Board. At
December 31, 2004, the gross outstanding accounts
receivable balance with SPDC related to the NGC contract was
$15.8 million. In April 2005, Shell confirmed that the SPDC
Major Tender Board had approved the Company's claim. The
receivable is classified as a current asset in trade accounts
receivable as the Company expects to liquidate the receivable in
2005.
The Company is involved in various litigation, claims and
administrative proceedings, including environmental matters,
arising in the normal course of business. In assessing its
potential environmental liability, the Company bases its
estimates on current technologies and does not discount its
liability or assume any insurance recoveries. Amounts recorded
for identified contingent liabilities are estimates, which are
regularly reviewed and adjusted to reflect additional
information when it becomes available. Subject to the
uncertainties inherent in estimating future costs for contingent
liabilities, management believes that recovery or liability with
respect to these matters would not have a material effect on the
financial condition, results of operations, liquidity or cash
flows of the Company or Predecessor for any year.
The Equity Purchase Agreement provides that, with the exception
of non-Superfund off-site liabilities and non-asbestos
environmental tort claims which have a three year limit for a
claim to be filed, IR will remain responsible without time
limitations for known environmental conditions as of the Closing
Date that meet certain requirements set forth in the Equity
Purchase Agreement. The most important of these requirements is
that with regard to environmental contamination, regulatory
authorities would be expected to require investigation or
remediation if they knew about the contamination. The Company
and IR have agreed on many, but not all, of the matters for
which IR will remain responsible.
The Company is contingently liable for customs duties in certain
non-U.S. countries which totaled $0.8 million at
December 31, 2004. In the normal course of business, the
Company has issued several direct and indirect guarantees to
foreign governments related to import/export duties. Management
believes these guarantees will not adversely affect the
consolidated financial statements.
Certain office and warehouse facilities, transportation vehicles
and data processing equipment are leased. Total rental expense
was $1.5 million for the period from October 30, 2004
through December 31, 2004, $10.8 million for the
period from January 1, 2004 through October 29, 2004,
$11.9 million in 2003 and $14.1 million in 2002.
Minimum lease payments required under non-cancelable operating
leases with terms in excess of one year for the next five years
and thereafter are as follows: $7.1 million in 2005,
$5.4 million in 2006, $2.4 million in 2007,
$0.8 million in 2008, and $0.0 million thereafter.
The product warranty liability represents estimated future
claims for equipment, parts and services covered during a
warranty period. A warranty reserve is provided for at the time
of revenue recognition based on historical experience. Reserves
are adjusted as required.
F-37
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
The following table represents the changes in the product
warranty liability:
Successor
Predecessor
Period from
Period from
October 30
January 1
through
through
Year Ended
December 31,
October 29,
December 31,
2004
2004
2003
(In thousands of dollars)
Beginning balance
$
20,319
$
23,699
$
21,424
Reductions for payments
(2,224
)
(12,487
)
(17,050
)
Translation
1,400
483
1,896
Changes in accrual during current period
1,583
8,624
17,429
Ending balance
$
21,078
$
20,319
$
23,699
16.
Incentive Plans
Successor Incentive Plan
On December 31, 2004, the Company's share-based
compensation arrangements represent profit units issued to
certain of the Company's executives in connection with the
acquisition, which is described below. The compensation cost
that has been charged against income for these arrangements was
approximately $75 thousand for the period from October 30,
2004 through December 31, 2004. No income tax benefit was
recognized in the income statement for share-based compensation
arrangements for the period from October 30, 2004 through
December 31, 2004.
The amended and restated limited liability company agreement of
Dresser-Rand Holdings, LLC ("Dresser-Rand Holdings, LLC
Agreement") permits the grant of the right to purchase
common units to management members of Dresser-Rand Holdings, LLC
and the grant of service units and exit units (collectively
referred to as "profit units"), consisting of one
initial tranche of service units and five initial tranches of
exit units to certain management members who own common units.
On November 22, 2004, and in connection with the closing of
the Acquisition, several of the Company's executive
officers, including the Chief Executive Officer and four other
of the most highly compensated executive officers, acquired
common units in Dresser-Rand Holdings, LLC at $4.33 per
unit by funds affiliated with First Reserve in connection with
the Acquisition. Executives who purchased common units were also
issued a total of 2,392,500 service units and five tranches of
exit units totaling 5,582,500 exit units in Dresser-Rand
Holdings, LLC, which permit them to share in appreciation in the
value of the Company's shares. The Company accounted for
the transactions between Dresser-Rand Holdings, LLC and the
Company's executives in accordance with Staff Accounting
Bulletin Topic 5T, which requires the Company to record
expense for services paid by the stockholder for the benefit of
the Company.
The service units were granted without any remuneration. The
service units vest over a period of 5 years and have
10 year contractual terms. The service units provide for
accelerated vesting if there is a change in control, as defined
in the Dresser-Rand Holdings, LLC Agreement. Vested service
units convert to common units of Dresser-Rand Holdings, LLC upon
termination for any reason, death or disability. In certain
circumstances, unvested service units will also convert into
common units of Dresser-Rand Holdings, LLC.
The fair value of each service unit is estimated on the date of
grant using the Black-Scholes option valuation model that uses
the assumptions noted in the following table for the period
ended December 31, 2004. Expected volatilities are based on
historical volatilities of several comparable guideline
companies in the oil and gas compressor and turbine
manufacturing industries. The Company utilized First
Reserve's historical experience to estimate the expected
term within the valuation model. The risk-free interest rate is
based on
F-38
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
the rate currently available for zero coupon
U.S. Government issues in effect at the time of grant with
a remaining term equal to the expected life of the service units
being valued.
Expected volatility
36.20
%
Expected dividend yield
0
%
Expected term (in years)
4.9
Risk-free interest rate
3.18
%
As of December 31, 2004, there was $3.3 million of
total unrecognized compensation cost related to the service
units. The cost is expected to be recognized over a
weighted-average period of 4.9 years.
The exit units were granted in a series of five tranches. Exit
units are eligible for vesting upon the occurrence of certain
exit events, as defined in the Dresser-Rand Holdings, LLC
Agreement, including (i) funds affiliated with First
Reserve receiving an amount of cash in respect of their
ownership interest in Dresser-Rand Holdings, LLC that exceeds
specified multiples of the equity those funds have invested in
the Company, or (ii) there is both (a) a change in
control, certain terminations of employment, death or
disability, and (b) the fair value of the common units at
the time of such an event is such that were the common units
converted to cash, funds affiliated with First Reserve would
receive an amount of cash that exceeds specified multiples of
the equity those funds have invested in the Company. Vested exit
units convert to common units of Dresser-Rand Holdings, LLC. The
Company is unable to determine the fair value of the exit units,
and therefore, as defined by SFAS 123R, there has not yet
been a mutual understanding between the issuer and the holders
of the exit units of the key terms and conditions of the exit
units. As such, in substance, no grant has yet occurred.
Consequently, no amount is recorded as compensation cost in the
Company's financial statements for the period from
October 30, 2004 through December 31, 2004. The
Company will recognize compensation expense for the exit units
at the time that the key terms and conditions of the exit units
can be determined.
Predecessor Stock Incentive Plan
Certain employees of the Predecessor were eligible to
participate in stock option plans of IR. The plans granted
employees options to purchase Class A common shares of IR
at prices not less than the fair market value at the date of the
grant. Options become exercisable ratably over a three-year
period from their date of grant and expire at the end of ten
years. The plans, approved in 1998, also authorized stock
appreciation rights (SARs) and stock awards, which resulted in
compensation expense.
Under SFAS No. 123, compensation cost for the
applicable provisions of the Predecessor incentive stock plans
would be determined based upon the fair value at the grant date
for awards issued. The average fair
F-39
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
values of the options granted during the period from
January 1, 2004 through October 29, 2004, and the
years ended December 31, 2003, and 2002 were estimated at,
$22.74, $13.10, and $14.96, respectively, on the date of grant,
using the Black-Scholes option-pricing model, which included the
following assumptions:
Predecessor
Period from
January 1
Year Ended
through
December 31,
October 29,
2004
2003
2002
Dividend yield
1.19
%
1.75
%
1.61
%
Volatility
39.34
%
39.83
%
38.85
%
Risk-free interest rate
3.28
%
3.12
%
4.69
%
Expected life
5 years
5  years
5  years
Changes in options outstanding under the plans were as follows:
Shares Subject
Option Price
Weighted Average
to Option
Range per Share
Exercise Price
Predecessor
December 31, 2001
465,476
$
40.75-53.03
$
45.94
Granted
128,465
41.81-41.81
41.81
Exercised
(1,233
)
40.25-40.75
40.75
Cancelled
(650
)
53.03-53.03
33.03
December 31, 2002
592,058
33.67-53.03
45.04
Granted
162,220
39.05
39.05
Exercised
(117,634
)
33.67-53.03
45.35
Cancelled
(23,222
)
39.05-53.05
42.91
December 31, 2003
613,422
39.05-53.03
44.25
Granted
136,610
64.37
46.96
Exercised
(82,299
)
39.05-53.03
46.14
Cancelled
(107,272
)
39.05-64.37
47.84
October 29, 2004
560,461
$
39.05-64.37
$
47.77
Stock options granted to employees were for the purchase of
Class A common stock of IR and remained obligations solely
of IR following the Acquisition.
17.
Significant Customers and Concentration of Credit Risk
The Company supplies equipment and services to the oil and gas
industry, which is comprised of a relatively small number of
consumers. Within any given year, sales can vary greatly due to
the large projects that might be underway with any given oil and
gas producer. During the periods from October 30, 2004
through December 31, 2004 and from January 1, 2004
through October 29, 2004 no one customer comprised more
than 10% of the sales volume. In 2003, the Predecessor had one
customer, whose sales were approximately 11% of total sales. In
2002 no one customer comprised more than 10% of the
Predecessor's total sales.
The Company has operations and or does business in various
non-U.S. countries. It is possible that political
instability, foreign currency devaluations or other
unanticipated adverse events could materially affect
F-40
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
the operations of the Company. The Company believes that it has
controls and processes in place to minimize the impact such
events, should they occur in the future.
F-40.1
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
18.
Other Income (Expense)
Other income (expense) includes the following:
Successor
Predecessor
Period from
Period from
October 30
January 1
Year Ended
through
through
December 31,
December 31,
October 29,
2004
2004
2003
2002
(In thousands of dollars)
New York State Grant
$
—
$
—
$
(1,289
)
$
8,000
Equity earnings (losses) in partially owned affiliates
194
(1,013
)
(133
)
(479
)
Foreign currency gains (losses)
(1,023
)
2,069
(4,406
)
(1,131
)
Insurance claims
—
—
—
10,145
Casualty losses
—
—
(2,750
)
—
Other
(1,017
)
826
(624
)
(1,535
)
Total other income/(expense), net
$
(1,846
)
$
1,882
$
(9,202
)
$
15,000
Casualty losses in 2003 primarily represent a loss the
Predecessor experienced as a result of a fire at a warehouse in
Nigeria.
In 2002, the Predecessor received $10.0 million of grant
funds from the New York State Empire Development Corporation
(ESDC). The grants were designated to provide resources for
workforce development and capital equipment. The Predecessor
recorded $8.0 million of these grants as income in other
income (expense) and $2.0 million as a reduction in
basis of acquired property and equipment in the 2002 accounts.
The grant vests over a five-year period beginning in 2001 based
on three criteria. First, the Predecessor was required to keep
three factories open in New York State. Second, the Predecessor
was required to relocate its headquarters to Olean, New York.
Third, the Predecessor would commit to certain employment levels
at each year end. The grant vests ratably over a five year
period commencing in 2001 (a retroactive component of the grant)
and concluding in 2005. Prior to the end of 2003, the
Predecessor and ESDC restructured the grant to reflect the then
existing business environment. As a result of this negotiation,
the committed employment levels were adjusted from 2,500 to
2,200 and the grant was reduced from the original
$10.0 million to $8.4 million. On the basis of the
adjusted grant level, the Predecessor agreed to reimburse ESDC
in the amount of $1.6 million, ratably, over a three-year
period, beginning in December 2003. The Predecessor has recorded
in the 2003 accounts $1.3 million of this reimbursement as
a component of other income (expense) and $0.3 million
as an adjustment to the related property and equipment. At
December 31, 2004, the Company's New York State
employment level was 2,208. Management believes that the
required employment levels will be maintained during 2005.
In 2002, the Predecessor settled an insurance claim associated
with patterns destroyed in a fire at a supplier's facility.
The fire occurred in April 2000. The settlement resulted in a
$10.1 million gain recognized in 2002.
19.
Restructuring
For the year ended December 31, 2002, the Predecessor
recorded restructuring charges totaling $5.2 million for
employee termination benefits in connection with reductions in
workforce, closing of several non-manufacturing locations and
realignment of the Predecessor's regional structure. No
additional restructuring charges were recorded in 2004 or 2003.
As of December 31, 2004, the restructuring programs have
resulted in the closure of non-manufacturing facilities,
including sales offices, with a workforce reduction
F-41
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
of 388 employees. The provision remaining at December 31,
2003 relates to final severance payments and facility exit costs
and was paid in 2004.
A reconciliation of the restructuring reserve program is as
follows:
Employee
Facility
Termination
Exit
Costs
Costs
Total
(In thousands of dollars)
Predecessor
Balance at January 1, 2002
$
—
$
—
$
—
Provision
4,689
500
5,189
Cash payments
(1,485
)
—
(1,485
)
Balance at December 31, 2002
3,204
500
3,704
Cash payments
(3,104
)
(341
)
(3,445
)
Balance at December 31, 2003
100
159
259
Cash payments
(100
)
(159
)
(259
)
Balance at October 29, 2004
$
—
$
—
$
—
20.
Supplemental Cash Flow Information
Successor
Predecessor
Period from
Period from
October 30
January 1
Year Ended
through
through
December 31,
December 31,
October 29,
2004
2004
2003
2002
(In thousands of dollars)
Cash paid during the period for interest
$
2,930
$
888
$
2,195
$
4,244
Income taxes paid, net of refunds
3,337
7,566
8,554
16,603
Interest income includes $2.6 million, $1.7 million
and $0.8 million of net interest income from IR affiliates
in the period from January 1, 2004 through October 29,
2004 and the years ended December 31, 2003 and 2002,
respectively. The amounts shown as cash paid for interest
include payments on third-party borrowings only.
21.
Royalty Agreement
In September of 2000, the Predecessor sold to Volvo Aero
Corporation ("Volvo") the rights to provide
aftermarket support for certain gas turbine engines, and certain
related equipment, inventory and know-how needed for Volvo to
operate the acquired aftermarket business. Under the purchase
agreement, Volvo pays royalties based on revenues Volvo earns
from operation of aftermarket business until December 31,
2005. The royalty agreement states that Volvo shall pay 25% of
the net revenues of Volvo's "990" aftermarket
business, commencing January 1, 2002. A similar royalty was
and will be paid for 2003 (25%), 2004 (30%) and 2005 (30%). Due
to the nature of this agreement, an intangible was recorded on
the Successor accounts in the amount of $2.3 million at the
acquisition date. Pursuant to the agreement, the Predecessor
recorded revenue and income of $1.2 million in the period
from January 1, 2004 through October 29, 2004,
$1.7 million in the year ended December 31, 2003 and
$2.8 million in the year ended December 31, 2002. This
revenue is recorded within the caption "Other operating
revenue" in the accompanying combined income statements.
F-42
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
22.
Segment Information:
The Company has two reportable segments based on the engineering
and production processes, and the products and services provided
by each segment, identified as follows:
1) New Units — are highly engineered solutions to
    new customer requests. 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.
We evaluate performance based on the operating income from each
segment. Operating income excludes interest, other expense such
as currency losses and equity losses, and taxes.
A third category, "unallocable" is also disclosed.
This category is for expenses and assets that do not belong to
either reportable segment because of the nature of the expense
or asset. Expenses included as "unallocable" are all
IR allocations, shared services, research and development
expenses, and restructuring charges, none of which are directly
allocable to either of the two reportable segments. The only
assets that are directly allocable to either of the two
reportable segments are trade accounts receivable, net
inventories, and goodwill. All other assets such as cash,
prepaid expenses, deferred taxes, and long term assets are not
directly allocable to either of the two reportable segments.
D-R had one customer with sales amounting to 10.8% of 2003
revenues. Revenues were in both New Units and Aftermarket Parts
and Services. Supplemental information on geographic sales and
long-lived assets is also provided.
Successor
Predecessor
Period from
Period from
October 30
January 1
through
through
Year Ended December 31,
December 31,
October 29,
2004
2004
2003
2002
(In thousands of dollars)
Revenues
New units
$
77,607
$
267,691
$
792,974
$
498,791
Aftermarket parts and services
122,300
447,804
542,376
532,562
Total Revenues
$
199,907
$
715,495
$
1,335,350
$
1,031,353
Operating Income (Loss)
New units
$
3,567
$
(464
)
$
(11,445
)
$
(32,850
)
Aftermarket parts and services
30,571
85,039
98,159
85,696
Unallocable
(8,134
)
(35,492
)
(47,647
)
(39,064
)
Total Operating Income
$
26,004
$
49,083
$
39,067
$
13,782
Depreciation and Amortization
New units
$
5,775
$
9,201
$
16,678
$
15,758
Aftermarket parts and services
10,494
13,514
12,431
18,064
Total Depreciation and Amortization
$
16,269
$
22,715
$
29,109
$
33,822
F-43
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Successor
Predecessor
Period from
Period from
October 30
January 1
through
through
Year Ended December 31,
December 31,
October 29,
2004
2004
2003
2002
(In thousands of dollars)
Goodwill
New units
$
123,831
$
506
Aftermarket parts and services
299,499
9,708
Total Goodwill
$
423,330
$
10,214
Total Assets (including Goodwill)
New units
$
270,563
$
144,292
Aftermarket parts and services
564,253
246,166
Unallocable
916,258
673,417
Total Assets
$
1,751,074
$
1,063,875
Revenues by Destination(a)
North America
$
77,700
$
275,941
$
547,777
$
437,199
Latin America
30,660
139,898
106,635
121,527
Europe
26,591
113,461
331,366
207,769
Asia-Pacific
21,482
94,291
128,945
159,964
Middle East, Africa
43,474
91,904
220,627
104,894
Total Revenues
$
199,907
$
715,495
$
1,335,350
$
1,031,353
Long-Lived Assets by Geographic Area
North America
$
159,060
$
75,783
Latin America
2,531
1,617
Europe
58,860
18,006
Asia-Pacific
6,313
6,028
Middle East, Africa
—
4
Total Long-Lived Assets
$
226,764
$
101,438
(a)
In the period from October 30, 2004 through
    December 31, 2004, the sales to customers in Canada,
    Venezuela and Russia comprised 6.0%, 8.5% and 5.5%,
    respectively, of total revenues. In the period from
    January 1, 2004 through October 29, 2004, sales to
    customers in Brazil and Venezuela comprised 6.7% and 6.8%,
    respectively, of total revenues. In 2003, sales to customers in
    Norway and Libya comprised 9.6% and 5.3%, respectively, of total
    revenues and in 2002 sales to customers in France generated 6.1%
    of total revenues. No other sales within individual countries
    exceeded 5% of the total revenues in any year presented.
23.
Subsequent events
On January 19, 2005, the Company sold its interests in a
partially-owned affiliate for proceeds of approximately
$10 million. The carrying value of this investment as of
the date of sale was approximately $10 million.
F-44
Table of Contents
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses payable in
connection with the distribution of the securities being
registered. All amounts are estimated except the Securities and
Exchange Commission registration fee.
Securities and Exchange Commission Registration Fee
$
47,080
NYSE Listing Fees
*
Printing and Engraving Expenses
*
Blue Sky Fees and Expenses
*
Legal Fees
*
Accounting Fees
*
Registrar and Transfer Agent Fees
*
NASD Filing Fee
$
40,500
Miscellaneous Expenses
*
*
To be filed by amendment.
Item 14.
Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the
"DGCL") grants each corporation organized thereunder
the power to indemnify any person who is or was a director,
officer, employee or agent of a corporation or enterprise,
against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, other than an action by or in
the right of the corporation, by reason of being or having been
in any such capacity, if he acted in good faith in a manner
reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action, or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 102(b)(7) of the DGCL enables a corporation in its
certificate of incorporation or an amendment thereto or
eliminate or limit the personal liability of a director to the
corporation or its stockholders of monetary damages for
violations of the directors' fiduciary duty of care, except
(i) for any breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock
purchases or redemptions) or (iv) for any transaction from
which a director derived an improper personal benefit. The
Certificate of Incorporation and By-Laws for Dresser-Rand Group,
Inc. provide for such limitations on liability.
Item 15.
Recent Sales of Unregistered Securities.
Since our incorporation in October 2004, we have issued
unregistered securities in the transactions described below.
These securities were offered and sold in reliance upon the
exemptions provided for in Section 4(2) of the Securities
Act, relating to sales not involving any public offering,
Rule 506 of the Securities Act relating to sales to
accredited investors and Rule 701 of the Securities Act
relating to a compensatory benefit plan. The sales were made
without the use of an underwriter and any certificates
representing the securities sold contain a restrictive legend
that prohibits transfer without registration or an applicable
exemption.
In October 2004, Dresser-Rand Group Inc. (the
"issuer") was formed and issued 100 shares of its
common stock to D-R Interholding, LLC for an aggregate price of
$430.0 million. In November 2004, the
II-1
Table of Contents
issuer received a capital contribution of $5.8 million from
its indirect parent, Dresser-Rand Holdings, LLC, as a result of
certain members of senior management purchasing common units in
Dresser-Rand Holdings, LLC that permit such individuals to
indirectly share in the value of the issuer's shares. In
December 2004, certain of our non-executive officers purchased a
total of 321,924 shares of the issuer's common stock for an
aggregate price of $1.4 million (this purchase of shares
reflects the issuer's stock split described in the next
sentence). In February 2005, the issuer declared a
1,006,092.87 for one stock split that resulted in D-R
Interholding, LLC owning 100,609,287 shares of the
issuer's common stock.
In May 2005, the issuer issued 303,735 shares of its common
stock to D-R Interholding, LLC for an aggregate price of
$1.3 million as a result of certain members of senior
management purchasing common units in Dresser-Rand Holdings, LLC
that permit such individuals to indirectly share in the value of
the issuer's shares.
Item 16.
Exhibits and Financial Statement Schedules.
(a) Exhibits
1
.1*
Form of Underwriting Agreement
3
.1*
Form of Amended and Restated Certificate of Incorporation of
    Dresser-Rand Group Inc.
3
.2*
Form of Amended and Restated By-Laws of Dresser-Rand Group Inc.
4
.1*
Form of certificate of Dresser-Rand Group Inc. common stock
4
.2
Indenture dated as of October 29, 2004 among Dresser-Rand
    Group Inc., the guarantors party thereto and Citibank, N.A., as
    trustee
4
.3
Registration Rights Agreement, dated as of October 29,
    2004, among Dresser-Rand Group Inc., Dresser-Rand LLC,
    Dresser-Rand Company, Dresser-Rand Power LLC, Dresser-Rand
    Global Services, LLC and Morgan Stanley & Co.
    Incorporated, Citigroup Global Markets Inc., UBS Securities LLC,
    Bear, Stearns & Co. Inc., Natexis Bleichroeder Inc.,
    Sovereign Securities Corporation, LLC and Daiwa Securities
    America Inc. as placement agents
5
.1*
Opinion of Simpson Thacher & Bartlett LLP
10
.1
Equity Purchase Agreement, dated as of August 25, 2004, by
    and among FRC Acquisition LLC and Ingersoll-Rand Company
    Limited
10
.2
Credit Agreement dated as of October 29, 2004, among D-R
    Interholding, LLC, Dresser-Rand Group Inc., D-R Holdings (UK)
    LTD, D-R Holdings S.A.S., the lenders party thereto, Citicorp
    North America, Inc. as administrative agent and collateral
    agent, Morgan Stanley Senior Funding, Inc. and UBS Securities
    LLC, each as co-syndication agent, Citigroup Global Markets
    Inc., Morgan Stanley Senior Fundings, Inc. and UBS Securities
    LLC, as joint lead arrangers and joint book managers and Bear
    Stearns Corporate Lending Inc. and Natexis Banques Populaires as
    co-documentation agents
10
.3*
Amendment No. 1 to the Credit Agreement
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
10
.5
Transition Services Agreement, dated as of October 29, 2004
    by and between Ingersoll-Rand Company Limited and Dresser-Rand
    Group Inc.
10
.6
Supply Agreement, dated October 31, 2004, by and between
    Dresser-Rand Company and Ingersoll-Rand Company
10
.7
License Agreement, dated as of October 26, 2004, by and
    between Dresser, Inc. and Dresser-Rand Group Inc.
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
10
.9
Amended and Restated Limited Liability Company Agreement of
    Dresser-Rand Holdings, LLC, effective as of October 29, 2004
II-2
Table of Contents
10
.10
Employment Agreement, dated October 27, 2004, by and among
    Vincent R. Volpe Jr., Dresser-Rand Holdings, LLC and
    Dresser-Rand Group Inc.
10
.11
Employment Agreement, dated July 25, 1990, by and between
    Jean-Francois Chevrier and Dresser-Rand S.A.
10
.12
Form of Stockholder Agreement
10
.13
Dresser-Rand Group Inc. Stock Incentive Plan
10
.14
Form of Subscription Agreement
10
.15
Form of Management Stock Subscription Agreement
10
.16*
Form of 2005 Stock Incentive Plan
10
.17*
Form of Annual Incentive Plan
10
.18*
Form of 2005 Directors Stock Incentive Plan
21
.1
List of Subsidiaries
23
.1*
Consent of Simpson Thacher & Bartlett LLP (included as
    part of its opinion filed as Exhibit 5.1 hereto)
23
.2
Consent of PricewaterhouseCoopers LLP
24
Powers of Attorney (included in signature pages of this
    Registration Statement)
*
To be filed by amendment
(b)
Financial Statement Schedule
II-3
Table of Contents
Schedule II — Valuation and Qualifying
Accounts and Reserves
Dresser-Rand Group, Inc.
For the years ended December 31, 2002 and 2003, the
period from January 1, 2004 through October 29, 2004,
and the period from October 30, 2004 through
December 31, 2004
Successor
Additions
Beginning
Charges to
Charges to
Ending
Balance at
Costs and
Other
Balance at
Description
10/30/2004
Expenses
Accounts
Deductions
12/31/2004
Reserve for Doubtful Accounts
$
14,483
$
327
$
—
$
(300
)(a)
$
15,110
Notes:
(a) —
Impact of translation of (420) and write-off of Bad Debts of 120.
Predecessor
Additions
Beginning
Charges to
Charges to
Ending
Balance at
Costs and
Other
Balance at
Description
01/01/2004
Expenses
Accounts
Deductions
10/29/2004
Reserve for Doubtful Accounts
$
12,427
$
3,139
$
—
$
1,083
(a)
$
14,483
Notes:
(a) —
Impact of translation of (175) and write-off of Bad Debts of
    1,258.
Additions
Beginning
Charges to
Charges to
Ending
Balance at
Costs and
Other
Balance at
Description
01/01/2003
Expenses
Accounts
Deductions
12/31/2003
Reserve for Doubtful Accounts
$
9,790
$
3,001
$
—
$
364
(a)
$
12,427
Notes:
(a) —
Impact of translation of (787) and write-off of Bad Debts of
    1,151.
Additions
Beginning
Charges to
Charges to
Ending
Balance at
Costs and
Other
Balance at
Description
01/01/2002
Expenses
Accounts
Deductions
12/31/2002
Reserve for Doubtful Accounts
$
7,865
$
2,473
$
—
$
548
(a)
$
9,790
Notes:
(a) —
Impact of translation of (300) and write-off of Bad Debts of 848.
II-4
Table of Contents
Item 17.
Undertakings.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers,
or controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrants will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
    Securities Act of 1933, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance upon Rule 430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it was declared effective.
(2) For the purpose of determining any liability under the
    Securities Act of 1933, each post-effective amendment that
    contains a form of prospectus shall be deemed to be a new
    registration statement relating to the securities offered
    therein, and the offering of such securities at that time shall
    be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
II-5
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Olean, State of New York, on
May 16, 2005.
Dresser-Rand Group Inc.
By:
/s/
Vincent R. Volpe Jr.
Name: Vincent R. Volpe Jr.
Title:
President, Chief Executive
Officer and Director
SIGNATURES AND POWERS OF ATTORNEY
Each person whose signature appears below authorizes Stephen A.
Riordan and Randy D. Rinicella and each of them, as his
attorney-in-fact and agent, with full power of substitution and
resubstitution, to execute, in his name and on his behalf, in
any and all capacities, this Registration Statement on
Form S-1 and any and all amendments thereto (and any
additional registration statement related thereto permitted by
Rule 462(b) promulgated under the Securities Act of 1933
(and all further amendments including post-effective amendments
thereto)) necessary or advisable to enable the registrant to
comply with the Securities Act of 1933, and any rules,
regulations and requirements of the Securities and Exchange
Commission, in respect thereof, in connection with the
registration of the securities which are the subject of such
registration statement, which amendments may make such changes
in such registration statement as such attorney-in-fact may deem
appropriate, and with full power and authority to perform and do
any and all acts and things, whatsoever which any such
attorney-in-fact or substitute may deem necessary or advisable
to be performed or done in connection with any or all of the
above-described matters, as fully as each of the undersigned
could do if personally present and acting, hereby ratifying and
approving all acts of any such attorney-in-fact or substitute.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
Signature
Title
Date
/s/
Vincent R. Volpe
    Jr.
Vincent
    R. Volpe Jr.
President, Chief Executive Officer and
Director
May 16, 2005
/s/
Leonard M. Anthony
Leonard
    M. Anthony
Executive Vice President and Chief Financial Officer
May 16, 2005
/s/
Stephen A. Riordan
Stephen
    A. Riordan
Vice President Finance
May 16, 2005
/s/
William E. Macaulay
William
    E. Macaulay
Chairman of the Board of Directors
May 16, 2005
/s/
Thomas J. Sikorski
Thomas
    J. Sikorski
Director
May 16, 2005
/s/
Mark A. McComiskey
Mark
    A. McComiskey
Director
May 16, 2005
II-6
Table of Contents
Signature
Title
Date
/s/
Kenneth W. Moore
Kenneth
    W. Moore
Director
May 16, 2005
II-7
Table of Contents
EXHIBIT INDEX
Exhibit No.
Description of Exhibit
1
.1*
Form of Underwriting Agreement
3
.1*
Form of Amended and Restated Certificate of
    Incorporation of Dresser-Rand Group Inc.
3
.2*
Form of Amended and Restated By-Laws of
    Dresser-Rand Group Inc.
4
.1*
Form of certificate of Dresser-Rand Group Inc.
    common stock
4
.2
Indenture dated as of October 29, 2004 among
    Dresser-Rand Group Inc., the guarantors party thereto and
    Citibank, N.A., as trustee
4
.3
Registration Rights Agreement, dated as of
    October 29, 2004, among Dresser-Rand Group Inc.,
    Dresser-Rand LLC, Dresser-Rand Company, Dresser-Rand Power LLC,
    Dresser-Rand Global Services, LLC and Morgan Stanley &
    Co. Incorporated, Citigroup Global Markets Inc., UBS Securities
    LLC, Bear, Stearns & Co. Inc., Natexis Bleichroeder
    Inc., Sovereign Securities Corporation, LLC and Daiwa Securities
    America Inc. as placement agents
5
.1*
Opinion of Simpson Thacher & Bartlett LLP
10
.1
Equity Purchase Agreement, dated as of
    August 25, 2004, by and among FRC Acquisition LLC and
    Ingersoll-Rand Company Limited
10
.2
Credit Agreement dated as of October 29,
    2004, among D-R Interholding, LLC, Dresser-Rand Group Inc.,
    D-R Holdings (UK) LTD, D-R Holdings S.A.S., the
    lenders party thereto, Citicorp North America, Inc. as
    administrative agent and collateral agent, Morgan Stanley Senior
    Funding, Inc. and UBS Securities LLC, each as co-syndication
    agent, Citigroup Global Markets Inc., Morgan Stanley Senior
    Fundings, Inc. and UBS Securities LLC, as joint lead arrangers
    and joint book managers and Bear Stearns Corporate Lending Inc.
    and Natexis Banques Populaires as co-documentation agents
10
.3*
Amendment No. 1 to the Credit Agreement
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
10
.5
Transition Services Agreement, dated as of
    October 29, 2004 by and between Ingersoll-Rand Company
    Limited and Dresser-Rand Group Inc.
10
.6
Supply Agreement, dated October 31, 2004, by
    and between Dresser-Rand Company and Ingersoll-Rand Company
10
.7
License Agreement, dated as of October 26,
    2004, by and between Dresser, Inc. and Dresser-Rand Group Inc.
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
10
.9
Amended and Restated Limited Liability Company
    Agreement of Dresser-Rand Holdings, LLC, effective as of
    October 29, 2004
10
.10
Employment Agreement, dated October 27,
    2004, by and among Vincent R. Volpe Jr., Dresser-Rand
    Holdings, LLC and Dresser-Rand Group Inc.
10
.11
Employment Agreement, dated July 25, 1990,
    by and between Jean-Francois Chevrier and Dresser-Rand S.A.
10
.12
Form of Stockholder Agreement
10
.13
Dresser-Rand Group Inc. Stock Incentive Plan
10
.14
Form of Subscription Agreement
10
.15
Form of Management Stock Subscription Agreement
Table of Contents
Exhibit No.
Description of Exhibit
10
.16*
Form of 2005 Stock Incentive Plan
10
.17*
Form of Annual Incentive Plan
10
.18*
Form of 2005 Directors Stock Incentive Plan
21
.1
List of Subsidiaries
23
.1*
Consent of Simpson Thacher & Bartlett
    LLP (included as part of its opinion to be filed by amendment as
    Exhibit 5.1)
23
.2
Consent of PricewaterhouseCoopers LLP
24
Powers of Attorney (included in signature pages
    of this Registration Statement)
*
To be filed by amendment