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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>As filed with the Securities and Exchange Commission on
January&nbsp;26, 2006</B>
</DIV>

<DIV align="right" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Registration
<FONT style="white-space: nowrap">No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<HR size="4" noshade color="#000000" style="margin-top: -5px">
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<HR size="1" noshade color="#000000" style="margin-top: -10px">
</DIV>

<DIV align="center" style="font-size: 14pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

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

<DIV align="center" style="font-size: 18pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<FONT style="white-space: nowrap"><B>Form&nbsp;S-1</B></FONT>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>UNDER</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center" style="font-size: 24pt;color: #000000; background: #ffffff;">
<B>Dresser-Rand Group Inc.</B>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
<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="34%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Delaware</B></TD>
    <TD align="center" valign="top">
    <B>3511</B></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 align="center" valign="top">
    <I>(Primary Standard Industrial<BR>
    Classification Code Number)</I></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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Paul Clark Drive</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Olean, New York 14760</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(716)&nbsp;375-3000</B>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Executive Vice President and</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Chief Financial Officer</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Paul Clark Drive</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Olean, New York 14760</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(716) 375-3000</B>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Edward P. Tolley&nbsp;III,&nbsp;Esq.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Simpson Thacher&nbsp;&#38; Bartlett LLP</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>425 Lexington Avenue</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>New York, New York 10017-3954</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Tel: (212) 455-2000</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Fax: (212) 455-2502</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 2pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;Approximate date of commencement of
proposed sale of the securities to the public:</B> As soon as
practicable after this Registration Statement becomes effective.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
&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: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
&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: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
&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: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
&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="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt;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="56%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>


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


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

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Proposed Maximum</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Title of Each Class&nbsp;of</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Aggregate Offering</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Amount of</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Securities to be Registered</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Price(1)</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Registration Fee</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&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">
    Common Stock, par value $.01&nbsp;per share</DIV>
    </TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $400,000,000</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $42,800.00</TD>
</TR>

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

</TR>

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

</TR>

</TABLE>
</CENTER>

<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: 9pt;color: #000000; background: #ffffff;">

<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;), based on the average
    of the high and low prices of the common stock on
    January&nbsp;25, 2006, as reported on the New York Stock
    Exchange.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 9pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
&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;color: #000000; background: #ffffff; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 100%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 2.0pt solid 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="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>PROSPECTUS (Subject to Completion)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;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;,
2006</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>&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;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="y16020y1602025.gif" alt="(Dresser-Rand Logo)">
</DIV>

<DIV align="center" style="font-size: 24pt;color: #000000; background: #ffffff;">
<B>Dresser-Rand Group Inc.</B>
</DIV>

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

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
D-R Interholding, LLC, the selling stockholder, is
selling &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock. The selling stockholder will grant the
underwriters an option to purchase up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of common stock to cover over-allotments. We will not
receive any proceeds from the sale of shares in this offering.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our common stock is listed on the New York Stock Exchange under
the symbol &#147;DRC&#148;.
On &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006, the last reported sale price of our common stock was
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share.
</DIV>

<DIV align="left" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Investing in the common stock involves risks. See &#147;Risk
Factors&#148; beginning on page&nbsp;13.</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="42%">&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="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&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>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 the Selling Stockholder</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">
    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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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;,
2006.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006
</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;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>[ART WORK]</B>
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">

</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<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='#102'>Risk Factors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>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>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Market and Industry Data</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>The Transactions</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='#106'>Use of Proceeds</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Dividend Policy</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Price Range of Our Common Stock</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>Capitalization</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='#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>33</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>38</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>41</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>68</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>72</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>85</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Principal and Selling Stockholders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</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>102</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 Indebtedness</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Description of Capital Stock</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='#120'>Shares Eligible for Future Sale</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</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. Holders</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='#122'>Underwriting</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>119</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>122</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>122</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>122</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="y16020exv21w1.txt">EX-21.1: LIST OF SUBSIDIARIES</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y16020exv23w2.txt">EX-23.2: CONSENT OF PRICEWATERHOUSECOOPERS LLP</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<!-- /TOC -->
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">i
<!-- 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;color: #000000; background: #ffffff;">
<A name='101'></A>
</DIV>

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

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

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

<TR valign="top">
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I>This summary highlights information contained elsewhere in
    this prospectus. This summary 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 combined financial statements and related notes,
    before investing in our common stock.</I></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 to the predecessors of the issuer
(Dresser-Rand Company and its direct and indirect subsidiaries,
Dresser-Rand Canada, Inc. and Dresser-Rand GmbH), (iv)&nbsp;the
term &#147;Ingersoll-Rand&#148; refers to Ingersoll-Rand Company
Limited, a Bermuda corporation, and its predecessors, which sold
its 51% interest in the Dresser-Rand Entities in the acquisition
described in &#147;The Transactions&#148; and (v)&nbsp;the term
&#147;initial public offering&#148; refers to our initial public
offering of common stock which was completed on August&nbsp;10,
2005.</I>
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 38% of the total
installed base of equipment in operation. 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 Royal Dutch Shell, Exxon Mobil, BP, Statoil,
Chevron, Petrobras, Pemex, PDVSA, Conoco, Lukoil, Marathon and
Dow Chemical.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We operate globally with manufacturing facilities in the United
States, France, Germany, Norway, India and Brazil and have 24
service and support centers worldwide. We have one of the
broadest sales and services networks in the industry, with
locations in all of the major international energy markets and
established coverage of 105 countries. 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 September&nbsp;30, 2004 and
September&nbsp;30, 2005, our backlog was $586.2&nbsp;million and
$872.8&nbsp;million, respectively. For the nine months ended
September&nbsp;30, 2004 and September&nbsp;30, 2005, we
generated net income of $37.7&nbsp;million and
$4.9&nbsp;million, respectively, and EBITDA of
$60.6&nbsp;million and $108.1&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,
respectively, 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; These results reflect the impact of both our
growth-oriented business realignment and our continued focus on
operating efficiency.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">1

<!-- PAGEBREAK -->
<P><HR noshade><P>
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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="y16020y1602000.gif" alt="(PIE CHART)">
</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;color: #000000; background: #ffffff;">

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a leading manufacturer of highly-engineered turbo and
reciprocating compression equipment and steam turbines. Our
products are custom-designed to client specifications for
long-life, critical applications. We are the market leader in
North America in new unit sales of turbo and reciprocating
compressors and have consistently ranked in the top three in
worldwide market share.
</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;color: #000000; background: #ffffff;">

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We offer a comprehensive range of aftermarket parts and
services, including installation, maintenance, monitoring,
operation, repairs, overhauls and upgrades. 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.
</DIV>

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

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

<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>Global Presence and Market Leadership.</I> We operate
    globally and provide coverage in 105&nbsp;countries worldwide.
    We believe we are a leading provider of rotating equipment
    solutions in most of the markets we serve. We believe that
    rotating equipment solutions providers with global scale are
    positioned to disproportionately share in future industry growth
    as customers shift their business to the handful of companies
    with the ability to fulfill the full range of their equipment
    and service needs worldwide.</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;
    <I>Largest Installed Base in the Industry.</I> 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 38% 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 the
    opportunity to significantly grow our aftermarket parts and
    services business in light of an industry outsourcing trend, a
    substantial source of stable, recurring, high-margin aftermarket
    revenue, 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.</TD>
</TR>

</TABLE>
</DIV>

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<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>Largest Network of Service and Support Centers.</I> 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
    for both our own and other OEM&#146;s equipment. Our coverage
    area of service centers servicing both turbo and reciprocating
    compressors is approximately 50% larger than that of our next
    closest competitor. 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.</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;
    <I>Leading Technology Platform.</I> Our research efforts center
    around leading technologies that maximize operating performance
    by increasing efficiency, durability, reliability and
    versatility. For example, we spent approximately five years and
    over $60&nbsp;million to develop our DATUM turbo compressor
    platform. 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.</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;
    <I>Fastest Cycle Time.</I> We believe we generally have the
    fastest cycle time (time from order booking to unit delivery) in
    the industry among manufacturers in our product range. 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
    <FONT style="white-space: nowrap">start-up</FONT> of the
    production equipment.</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;
    <I>Substantial Investment in Systems.</I> We have invested
    substantial resources to develop a number of key proprietary
    systems. These systems enable us to reduce costs, shorten cycle
    times, monitor our own and some of our competitors&#146;
    installed bases, 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.</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;
    <I>Strong and Experienced Management Team.</I> Our 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.</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;
    <I>Attractive Business Model.</I> Our business model has several
    attractive features, including:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Strong, Stable Cash Flow with Low Growth Capital
    Requirements.</I> 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.</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>Visibility.</I> We have a high degree of visibility into our
    forecasted financial performance because a substantial portion
    of our new unit orders is booked six to nine months in advance
    of delivery. At September&nbsp;30, 2005, our new units backlog
    was $687.3&nbsp;million or 64.5% above the new units backlog at
    September&nbsp;30, 2004.</TD>
</TR>

</TABLE>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 in these
sectors. Specifically, we intend to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<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>Increase Sales of Aftermarket Parts and Services to Existing
    Installed Base.</I> We are implementing a proactive approach to
    aftermarket parts and services sales that capitalizes on our
    newly created proprietary database of the installed base of our
    own and our competitors&#146; equipment.</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;
    <I>Expand Aftermarket Parts and Services Business to
    Non-Dresser-Rand OEM Equipment.</I> 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. We intend to</TD>
</TR>

</TABLE>
</DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    capitalize on our expertise, 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.</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;
    <I>Grow Alliances.</I> 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.</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;
    <I>Expand our Performance-Based Long-Term Service Contracts.</I>
    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.</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;
    <I>Introduce New and Innovative Products and Technologies.</I>
    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. 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.</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;
    <I>Continue to Improve Profitability.</I> Since the fourth
    quarter of 2002, we have implemented a number of productivity
    improvement programs across our entire company that have
    permitted us to streamline our operations. From
    September&nbsp;30, 2002 through December&nbsp;31, 2004, we
    consolidated eight facilities and reduced headcount from 5,942
    to 4,631&nbsp;employees, and have significantly increased our
    profitability. 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.</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;
    <I>Selectively Pursue Acquisitions.</I> We intend to continue
    our disciplined pursuit of acquisition opportunities that fit
    our business strategy.</TD>
</TR>

</TABLE>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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
risks 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;13 of this prospectus.
</DIV>

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

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;30, 2005, we announced that we had entered into an
asset purchase agreement with Tuthill Corporation whereby we
agreed to purchase certain assets of its Tuthill Energy Systems
division&nbsp;(TES). Tuthill Energy Systems is an international
manufacturer of single- and multi-stage steam turbines and
portable ventilators and manufactures under the Coppus, Murray
and Nadrowski brands. The aggregate purchase price for the
acquisition was approximately $58.7&nbsp;million. We financed
this acquisition with our available cash and/or borrowings under
our senior secured credit facility and the acquisition closed on
September&nbsp;8, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We recently completed our initial public offering. In
September&nbsp;2005, a portion of the proceeds from the initial
public offering were used to redeem $50&nbsp;million aggregate
principal amount of the notes.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;26, 2005, we increased the availability under the
revolving credit portion of our senior secured credit facility
from $300&nbsp;million to $350&nbsp;million.
</DIV>

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

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

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

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR>
    <TD valign="top">
    Selling stockholder</TD>
    <TD></TD>
    <TD valign="top">
    D-R Interholding, LLC.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Shares of common stock offered by the selling stockholder</TD>
    <TD></TD>
    <TD valign="top">
    &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: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Shares of common stock outstanding after this offering</TD>
    <TD></TD>
    <TD valign="top"><br>
    85,446,482&nbsp;shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Over-allotment option</TD>
    <TD></TD>
    <TD valign="top">
    &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: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Use of proceeds</TD>
    <TD></TD>
    <TD valign="top">
    We will not receive any of the proceeds from the sale of shares
    by the selling stockholder. The selling stockholder will receive
    all the net proceeds from the sale of shares of common stock
    offered by this prospectus.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless we specifically state otherwise, all information in this
prospectus:
</DIV>

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<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">
    assumes no exercise by the underwriters of their option to
    purchase additional shares; 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">
    excludes [4,270,660]&nbsp;shares of common stock reserved for
    issuance under our 2005 Stock Incentive Plan and our
    2005&nbsp;Directors Stock Incentive Plan.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">6

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 information as of December&nbsp;31,
2003 and for the years ended December&nbsp;31, 2002 and 2003 and
for the period from January&nbsp;1, 2004 through
October&nbsp;29, 2004 has 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 has 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 Dresser-Rand Entities&#146; unaudited
summary historical financial information for the
nine&nbsp;months ended September&nbsp;30, 2004 has been derived
from the Dresser-Rand Entities&#146; unaudited combined
financial statements and related notes which are included
elsewhere in this prospectus, and reflect all adjustments,
consisting of normal, recurring adjustments, which are, in the
opinion of management, necessary for a fair presentation of the
Dresser-Rand Entities&#146; financial position, results of
operations and cash flows as of and for the period presented.
Dresser-Rand Group Inc.&#146;s unaudited summary historical
financial information as of and for the nine months ended
September&nbsp;30, 2005 has been derived from Dresser-Rand Group
Inc.&#146;s unaudited consolidated financial statements and
related notes which are included elsewhere in this prospectus,
and reflect all adjustments, consisting of normal, recurring
adjustments, which are, in the opinion of management, necessary
for a fair presentation of Dresser-Rand Group Inc.&#146;s
financial position, results of operations and cash flows as of
and for the period presented. Dresser-Rand Group Inc.&#146;s
results of operations for the nine&nbsp;months ended
September&nbsp;30, 2005 are not necessarily indicative of our
results of operations for the full year. The following summary
unaudited pro forma statements of operations information for the
year ended December&nbsp;31, 2004 and for the nine months ended
September&nbsp;30, 2005 have been prepared to give pro forma
effect to the initial public offering, the use of proceeds
therefrom and the transactions as if they had occurred on
January&nbsp;1, 2004. 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 our historical consolidated and combined financial
statements and the notes thereto included elsewhere in this
prospectus.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;">

<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="21%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD><!-- Left VRule -->
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    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="6" 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>
</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 style="border-left:1.5pt solid #000000;">&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>&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="3">&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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>Nine&nbsp;Months</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&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>Nine&nbsp;Months</B></TD><TD></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>Nine Months</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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>Ended</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&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>
    <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>
</TR>

<TR style="font-size: 7pt;">
    <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&nbsp;29,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&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>September&nbsp;30,</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>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</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>2005</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 style="border-left:1.5pt solid #000000;">&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>&nbsp;</TD>
    <TD colspan="30" align="center" nowrap><B>(In
thousands)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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>657,494</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>846,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>915,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>846,237</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>499,208</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>657,845</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>652,751</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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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>158,286</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>188,392</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>193,486</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>110,493</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>118,331</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>118,331</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>4,695</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>4,745</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,745</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>
    <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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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>43,098</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>65,316</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70,410</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>2,306</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>(44,619</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(50,103</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39,989</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">
    Early redemption premium on debt</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 style="border-left:1.5pt solid #000000;">&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>(3,688</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">
    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>(2,754</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>(1,558</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,558</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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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 (loss) 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>42,650</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>15,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,863</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Benefit) 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>4,918</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>10,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,845</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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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 (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">$</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,732</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>4,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,963</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,018</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 style="border-left:1.5pt solid #000000;">&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: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="24%">&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="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="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><!-- Left VRule -->
    <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>
    <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>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="6" 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>
</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 style="border-left:1.5pt solid #000000;">&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>&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="3">&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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>Nine Months</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&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>Nine Months</B></TD><TD></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>Nine Months</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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>Ended</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&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>
    <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>
</TR>

<TR style="font-size: 7pt;">
    <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>September&nbsp;30,</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&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>September&nbsp;30,</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>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</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>2005</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 style="border-left:1.5pt solid #000000;">&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>&nbsp;</TD>
<TD colspan="30" align="center" nowrap><B>(In thousands except share
and per share
data)&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD 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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">
    Basic and diluted 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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">
    Net 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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.06</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,793,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,178,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84,843,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,314,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD 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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">
    Cash flows provided by (used in) operating activities</DIV>
    </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">$</TD>
    <TD align="right" valign="bottom" nowrap>57,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>64,484</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>222,384</TD>
    <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">
    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>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>(1,772</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>(57,721</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>
</TR>

<TR>
    <TD 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>(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>(50,772</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>(161,141</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>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Other financial 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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">
    EBITDA(6)(7)(8)</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">$</TD>
    <TD align="right" valign="bottom" nowrap>73,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>60,628</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>108,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>127,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>116,897</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <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>20,284</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>48,045</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,045</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD 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>13,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,532</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,747</TD>
    <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>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">8

<!-- 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" style="font-size: 8pt; margin-top: 6pt; ">

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


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="6" 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="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="6" 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="2" align="center" nowrap><B>As of</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of</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="2" align="center" nowrap><B>December 31,</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&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>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</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 style="border-left:1.5pt solid #000000;">&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="10" 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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>41,537</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>109,504</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">
    Property, plant and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101,438</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>233,598</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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>1,063,875</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</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>1,660,373</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>10,214</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>399,286</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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">
    Short-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,716</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>63</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, including current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>213</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>400,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>229,148</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>370,000</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>3,929</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>823,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>599,211</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>565,035</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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">
    Stockholders&#146; equity</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-left:1.5pt solid #000000;">&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>486,529</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<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
    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.</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 have 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 (loss) per share
    is calculated by dividing net earnings by the weighted average
    shares outstanding adjusted to reflect the
    <FONT style="white-space: nowrap">1,006,092.87-for</FONT>-one
    stock split effected in February 2005 and the
    <FONT style="white-space: nowrap">0.537314-for</FONT>-one
    reverse stock split effected in August 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 data
    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 include 31,050,000&nbsp;shares of our common
    stock offered in our initial public offering.</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 (loss) 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</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD align="left">
    equipment (affecting relative depreciation expense). The
    following table reconciles EBITDA to net income (loss):</TD>
</TR>

</TABLE>

<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="18%">&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="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="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&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="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>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" 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>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" 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="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="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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="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="3">&nbsp;</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>Nine</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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>Nine Months</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>Nine Months</B></TD><TD></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>Months</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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>Ended</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>
    <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>
</TR>

<TR style="font-size: 7pt;">
    <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>September&nbsp;30,</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>September&nbsp;30,</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>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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 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>2005</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>2005</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 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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="31" 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 (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">$</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,732</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>4,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,963</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,018</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision (benefit) for income taxes</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>4,918</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>10,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,845</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 (income) 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>(2,306</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>44,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,989</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>20,284</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>48,045</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,045</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 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>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>73,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>60,628</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>108,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>127,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>116,897</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 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>
    <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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
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 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;color: #000000; background: #ffffff;">

<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: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="17%">&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="2%">&nbsp;</TD>
    <TD width="1%">&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>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&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="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: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" 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>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" 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="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="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&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="3">&nbsp;</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>Nine</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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>Nine Months</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>Nine Months</B></TD><TD></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>Months</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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>Ended</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>
    <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>
</TR>

<TR style="font-size: 7pt;">
    <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>September&nbsp;30,</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>September&nbsp;30,</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>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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 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>2005</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>2005</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 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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="31" 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 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">$</TD>
    <TD align="right" valign="bottom" nowrap>9,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,397</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>
    <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>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,913</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>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>
</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>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,994</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>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>
</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>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,632</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>1,085</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">
    Compensation adjustment(e)</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>(112</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>
    <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-cash compensation(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>&#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 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>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,152</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>3,152</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 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>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>1,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,824</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,152</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 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>
    <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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<FONT style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="width: 18%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</FONT>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<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>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">10

<!-- 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;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></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 CEO compensation adjustment of $150,000 annually.</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(f)&nbsp;</TD>
    <TD align="left">
    Reflects employee non-cash equity compensation.</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;color: #000000; background: #ffffff;">

<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: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="20%">&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="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="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><!-- Left VRule -->
    <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="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: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="6" 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>
</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 style="border-left:1.5pt solid #000000;">&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>&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="3">&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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>Nine Months</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&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>Nine Months</B></TD><TD></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>Nine Months</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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>Ended</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&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>
    <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>
</TR>

<TR style="font-size: 7pt;">
    <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>September&nbsp;30,</B></TD><TD></TD>
    <TD style="border-left:1.5pt solid #000000;">&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>September&nbsp;30,</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>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</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>2005</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 style="border-left:1.5pt solid #000000;">&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="30" 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">
    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 style="border-left:1.5pt solid #000000;">&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>4,841</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,617</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">
    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>5,935</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>&#151;</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>
    <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">
    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 style="border-left:1.5pt solid #000000;">&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">
    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>3,000</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>2,100</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>
</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 style="border-left:1.5pt solid #000000;">&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">
    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>1,010</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>819</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>
</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 style="border-left:1.5pt solid #000000;">&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>(4,500</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>
</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>970</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>
</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>
    <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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>5,094</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>5,094</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>(192</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-left:1.5pt solid #000000;">&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>(266</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(266</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Note premium(l)</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 style="border-left:1.5pt solid #000000;">&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>3,688</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>3,688</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hedge (gains) losses(m)</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>(1,095</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</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,077</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,957</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension loss amortization(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>&#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 style="border-left:1.5pt solid #000000;">&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>187</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>187</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Franchise taxes(o)</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 style="border-left:1.5pt solid #000000;">&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>707</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>707</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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>8,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,059</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,927</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 style="border-left:1.5pt solid #000000;">&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;color: #000000; background: #ffffff;">
<FONT style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="width: 18%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</FONT>
</DIV>

<DIV style="margin-top: 10pt; 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;color: #000000; background: #ffffff;">

<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: 9pt">&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: 6pt">&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: 9pt">&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: 9pt">&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: 9pt">&nbsp;</TD>
</TR>

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

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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: 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;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></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: 9pt">&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: 9pt">&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: 9pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(j)</TD>
    <TD align="left">
    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 and $5.1&nbsp;million was
    expensed in the nine months ended September&nbsp;30, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 9pt">&nbsp;</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>

<TR>
    <TD style="font-size: 9pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(l)</TD>
    <TD align="left">
    Reflects premium paid on early redemption of $50&nbsp;million
    aggregate principal amount of the notes.</TD>
</TR>

<TR>
    <TD style="font-size: 9pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(m)</TD>
    <TD align="left">
    Reflects (gains) losses due to hedging of foreign currencies.</TD>
</TR>

<TR>
    <TD style="font-size: 9pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(n)</TD>
    <TD align="left">
    Reflects pension loss amortization.</TD>
</TR>

<TR>
    <TD style="font-size: 9pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(o)</TD>
    <TD align="left">
    Reflects franchise taxes.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='102'></A>
</DIV>

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

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

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

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

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

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

</TABLE>

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

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

<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">
    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;</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 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;</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 need to develop a tax department;</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 need to develop a risk management department;</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 need to establish an internal audit department; 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 need to enhance our documentation of our systems and
    controls.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We have already taken a number of actions to begin to address
the items identified including:
</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;color: #000000; background: #ffffff;">

<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">
    hiring, in the third quarter of 2005, an Assistant
    Controller-Director Tax Worldwide;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changing the organizational relationship of the worldwide
    accounting organization so that the Controllers of the operation
    units report directly to our Vice-President, Controller and
    Chief Accounting Officer;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    outsourcing a substantial portion of our tax functions to a
    professional service firm; 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">
    engaging external resources to supplement our Section 404
    evaluation efforts.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While we have taken actions to address the items identified,
additional measures will be necessary and these measures, along
with other measures we expect to take to improve our internal
controls over financial reporting, may not be sufficient to
address the issues identified by our independent auditors or
ensure that our internal controls over financial reporting are
effective. If we are unable to provide reliable and timely
financial external reports, our business and prospects could
suffer material adverse effects. In addition, we may in the
future identify further material weaknesses or significant
deficiencies in our internal control over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 over financial reporting. 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
would result in us receiving something other than an unqualified
report from our auditors with respect to our internal controls
over financial reporting. 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 would result in the inability of our
external auditors to deliver an unqualified report, or any
report, on our internal controls over financial reporting.
Inferior internal controls over financial reporting could cause
investors to lose confidence in our reported financial
information, which could have a negative effect on the trading
price of our securities.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While a division of our prior owner, we had two &#147;reportable
conditions&#148; in our internal financial controls:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<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">
    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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The initial public offering resulted 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.
However, we may need to supplement our financial, administrative
and other resources, and we may have underestimated the
difficulties and costs of
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">14

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
obtaining any required resources and successfully operating as
an independent company. 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. Further, if
we are late in filing certain SEC reports, it could constitute a
default under our indenture and senior secured credit facility.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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

</TABLE>

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

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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&#151;Business
Strategy.&#148;
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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

</TABLE>

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

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">15

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 materially and adversely affect our business,
operating results and financial condition. The acquisition and
integration of companies involve a number of risks, including:
</DIV>

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<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">
    use of available cash, new borrowings or borrowings under our
    senior secured credit facility to consummate the acquisition;</TD>
</TR>

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

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

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

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

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

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

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

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

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

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

</TABLE>

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

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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

</TABLE>

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

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<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">
    changes in foreign currency exchange rates;</TD>
</TR>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">16

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From time to time, certain of our foreign subsidiaries operate
in countries that are or have previously been subject to
sanctions and embargoes imposed by the U.S.&nbsp;government and
the United Nations, including Iraq, Iran, Libya, Sudan and
Syria. Those foreign subsidiaries sell compressors, turbines and
related parts and accessories to customers including enterprises
controlled by government agencies of these countries in the oil,
gas, petrochemical and power production industries. 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, some of these countries, including those named in
the preceding paragraph, are or previously have been identified
by the State Department as terrorist-sponsoring states. Because
certain of our foreign subsidiaries have contact with and
transact business in such countries, including sales to
enterprises controlled by agencies of the governments of such
countries, our reputation may suffer due to our association with
these countries. Further, certain U.S. states have recently
enacted legislation regarding investments by pension funds and
other retirement systems in companies that have business
activities or contacts with countries that have been identified
as terrorist-sponsoring states and similar legislation may be
pending in other states. As a result, pension funds and other
retirement systems may be subject to reporting requirements with
respect to investments in companies such as ours or may be
subject to limits or prohibitions with respect to those
investments.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 U.S.&nbsp;dollars, if we generate sales
or earnings in other currencies the translation of those results
into U.S.&nbsp;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
<FONT style="white-space: nowrap">U.S.&nbsp;dollar-denominated</FONT>
debt, including the notes and the
<FONT style="white-space: nowrap">U.S.&nbsp;dollar-denominated</FONT>
borrowings under the senior secured credit facility.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, fluctuations in currencies relative to currencies
in which our earnings are generated may make it more difficult
to perform
<FONT style="white-space: nowrap">period-to</FONT>-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.
</DIV>

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

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
continue to experience economic loss and a negative impact on
earnings as a result of foreign currency exchange rate
fluctuations.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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    <TD></TD>
    <TD>
    <B><I>In the past, our Brazilian subsidiary has engaged in
    business transactions involving a Cuban entity that could
    subject us to potential sanctions.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the enhanced compliance processes implemented by
us shortly prior to and following the acquisition of the Company
from Ingersoll-Rand in October 2004, we have recently discovered
that our Brazilian subsidiary engaged in a number of
transactions that resulted in steam turbine parts and services
being provided to Moa Nickel S.A., a Cuban mining company
jointly owned by the Government of Cuba and Sherritt
International Corp., a Canadian company. Our revenues from these
transactions were approximately $4.0&nbsp;million in the
aggregate since December 1999, when we acquired a controlling
interest in the Brazilian subsidiary. This amount represents
approximately 0.08% of our consolidated revenues from 2000
through September&nbsp;30, 2005. Of the $4.0&nbsp;million,
approximately $2.5&nbsp;million in revenues were in connection
with the sale of a spare part ordered in October 2003, which was
delivered and installed in Cuba, with the assistance of non-U.S.
employees of our Brazilian subsidiary, in May 2005. When these
transactions came to our attention, we instructed our Brazilian
subsidiary in July 2005 to cease dealings with Cuba. These
transactions were apparently in violation of the U.S. Treasury
Department&#146;s Office of Foreign Assets Control&#146;s
regulations with respect to Cuba. We have informed the U.S.
Treasury Department of these matters and are currently engaged
in preliminary discussions with the Department. Our inquiry into
these transactions is continuing and the Department&#146;s
review of this matter is in a very preliminary stage. Cuba is
subject to economic sanctions administered by the U.S. Treasury
Department&#146;s Office of Foreign Assets Control, and is
identified by the U.S. State Department as a
terrorist-sponsoring state. To the extent we violated any
regulations with respect to Cuba or the Department determines
that other violations have occurred, we will be subject to fines
or other sanctions, including possible criminal penalties, with
related business consequences. In addition, the
Department&#146;s investigation into our activities with respect
to Cuba may result in additional scrutiny of our activities with
respect to other countries that are the subject of sanctions. We
do not expect these matters to have a material adverse effect on
our financial performance.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our operations and properties are subject to stringent U.S. and
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.
</DIV>

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

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
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 U.S. and foreign, federal, state
and local environmental laws and regulations. Such liability may
be imposed without regard to the 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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&#151;Environmental and Government
Regulation.&#148;
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our U.S.&nbsp;clients are heavily regulated by the Occupational
Safety&nbsp;&#38; Health Administration, or OSHA, concerning
workplace 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 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, BP, 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of September&nbsp;30, 2005, we had 5,139&nbsp;employees
worldwide. Of our employees, approximately 65% are located in
the United States. Approximately 35% of our employees in the
United States are covered by collective bargaining agreements. A
new collective bargaining agreement with IAM Moore Lodge
#&nbsp;1580 that represents employees at our Wellsville, New
York facility was recently ratified. None of our material
collective bargaining agreements will expire through the end of
2006, and one will expire in each of 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&#146; prior written
notice. Our operations in the following locations are unionized:
Le Havre, France; Oberhausen, Germany; Kongsberg, Norway; and
Naroda, India. Additionally, approximately 35% of our employees
outside of the United States 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
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">19

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
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.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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%, it will continue
to be able to strongly influence or effectively control our
decisions.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>If we continue to be a &#147;controlled company&#148;
    within the meaning of the New York Stock Exchange rules we
    intend to rely on exemptions from certain corporate governance
    requirements.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, if First Reserve continues to
control a majority of our outstanding common stock, we will
continue to be 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 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. We are currently
utilizing these exemptions. As a result, we do not have a
majority of independent directors nor do our nominating and
corporate governance and compensation committees consist
entirely of independent directors.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our historical financial information may not be comparable
    to future periods and some of it has not been audited or
    reviewed.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
The historical financial information included in this prospectus
for the one month period ended January&nbsp;31, 2000 and the
eleven month period ended December&nbsp;31, 2000 has not been
audited or reviewed by an independent accountant.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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</TR>

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    <TD></TD>
    <TD>
    <B><I>We did not have a recent operating history as a
    stand-alone company prior to the acquisition.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

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

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</TR>

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

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

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

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

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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. In
addition, press and other third-party announcements or rumors
relating to any of these unaffiliated companies may adversely
affect the 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.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">21

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<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: 10pt;color: #000000; background: #ffffff;">

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

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

</TABLE>

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

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

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our financial performance could be affected by our substantial
indebtedness. As of September&nbsp;30, 2005, our total
indebtedness was approximately $599.2&nbsp;million. In addition,
we had $171.3&nbsp;million of letters of credit outstanding and
additional borrowings available under the revolving portion of
our senior secured credit facility of $178.7&nbsp;million. We
may also incur additional indebtedness in the future.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our high level of indebtedness could have important
consequences, including, but not limited 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;color: #000000; background: #ffffff;">

<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">
    making it more difficult for us to pay interest and satisfy our
    debt obligations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    limiting our flexibility in planning for, or reacting to,
    changes in our business and in our industry;&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">
    placing us at a competitive disadvantage.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our net cash flow generated from operating activities was
$42.0&nbsp;million, $51.0&nbsp;million, $57.7 million,
$17.9&nbsp;million and $222.4&nbsp;million for 2002, 2003, the
period January 1, 2004 through October 29, 2004, the period
October 30, 2004 through December 31, 2004 and for the nine
months ended September&nbsp;30, 2005, respectively. Our high
level of indebtedness requires that we use a substantial portion
of our cash flow from operating activities to pay principal of
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.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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, including the exchange notes. These alternative
measures may not be successful and may not permit us to meet our
scheduled debt service obligations.
</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;color: #000000; background: #ffffff;">

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

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

</TABLE>

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

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">22

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
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 our senior subordinated notes, on commercially
reasonable terms.
</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;color: #000000; background: #ffffff;">

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our senior secured credit facility and the indenture governing
our senior subordinated notes contain a number of significant
restrictions and covenants that limit our ability to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<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">
    incur liens;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    engage in affiliate transactions;&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">
    restrict dividends or other payments from restricted
    subsidiaries.</TD>
</TR>

</TABLE>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 our
senior subordinated notes and/or the senior secured credit
facility. If there were an event of default under the indenture
governing our senior subordinated 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.
</DIV>

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

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

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

</TABLE>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, the selling stockholder and each of our directors and
executive officers 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
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">23

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
of this prospectus continuing through the date that
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;days
after the date of this prospectus, except with the prior written
consent of the representatives. See &#147;Underwriters.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After this offering, we will have approximately
85,466,482&nbsp;million shares of common stock outstanding. Of
those shares, the 31,050,000&nbsp;shares of common stock sold in
our initial public offering are freely tradeable and
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares being offered hereby will be freely tradable.
The &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares that were not sold in our initial public offering and
this offering will be eligible for resale from time to time
after the expiration of the
<FONT style="white-space: nowrap">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-day</FONT>
<FONT style="white-space: nowrap">lock-up</FONT> 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 limitation
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
may currently be sold subject to volume, manner of sale and
other conditions of Rule&nbsp;144. After the expiration of the
<FONT style="white-space: nowrap">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-day</FONT>
<FONT style="white-space: nowrap">lock-up</FONT> 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 holders of our unregistered common
stock will be able to participate in such registration.
</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;color: #000000; background: #ffffff;">

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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. You may be unable to resell your shares of our
common stock at or above the offering price. Among other factors
that could affect our stock price are:
</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;color: #000000; background: #ffffff;">

<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">
    actual or anticipated variations in operating results;</TD>
</TR>

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

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

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

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

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

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

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

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

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</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;color: #000000; background: #ffffff;">

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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;
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">24

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='103'></A>
</DIV>

<!-- link1 "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</B>
</DIV>

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

<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">
    material weaknesses in our internal controls;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    economic or industry downturns;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our inability to implement our business strategy to increase our
    aftermarket parts and services revenue;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    competition in our markets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    failure to complete, or achieve the expected benefits from, any
    future acquisitions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    economic, political, currency and other risks associated with
    our international sales and operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    loss of our senior management;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our brand name may be confused with others;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    environmental compliance costs and liabilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    failure to maintain safety performance acceptable to our clients;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    failure to negotiate new collective bargaining agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our ability to operate as a stand-alone company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    unexpected product claims or regulations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    infringement on our intellectual property or our infringement on
    others&#146; intellectual property;&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">
    other factors described in this prospectus.</TD>
</TR>

</TABLE>

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

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">25

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='104'></A>
</DIV>

<!-- link1 "MARKET AND INDUSTRY DATA" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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, the International Energy Agency 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 such sources may have obtained their data 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.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">26

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='105'></A>
</DIV>

<!-- link1 "THE TRANSACTIONS" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following contains summaries of the terms of the 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.</I>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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. The
purchase price was adjusted 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>

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<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Ingersoll-Rand has provided all three closing statements,
resulting in a purchase price reduction of $3.2&nbsp;million, of
which $2.4&nbsp;million has been reflected in the historical
financial information included in this prospectus. The remaining
$0.8&nbsp;million will be reflected in the first quarter of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the following additional amounts were paid to
Dresser-Rand Holdings, LLC at, or following, the closing date:
(1)&nbsp;$17.0&nbsp;million, which amount equals certain retiree
welfare benefits less certain overdue receivables,
(2)&nbsp;$25.9&nbsp;million with respect to defined benefit
pension fund deficiencies in defined pension plans and
(3)&nbsp;$4.6&nbsp;million for supplemental management
compensation earned during the first ten&nbsp;months of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 profit 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&nbsp;2004 and
invested cash equity in Dresser-Rand Holdings, LLC, which
commensurately reduced First Reserve&#146;s 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>

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<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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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>

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

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

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<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">
    any losses arising from the inaccuracy or breach of certain
    representations and warranties of the sellers contained in the
    equity purchase agreement;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any claim related to the sale or use of products containing
    asbestos;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    specified pre-closing taxes;&nbsp;and</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    specified environmental liabilities.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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;minimis 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&nbsp;million 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<FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">3</FONT>%
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;minimis 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.
</DIV>

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

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

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

<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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The parties have entered into agreements governing several of
their relationships following the closing, including a supply
agreement and license agreement. Funds affiliated with First
Reserve and certain management employees have entered into 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. First
Reserve and certain management stockholders have also entered
into a stockholders&#146; agreement. See &#147;Certain Related
Party Transactions.&#148;
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 <FONT style="white-space: nowrap">D-R</FONT>
Interholding, LLC, which in turn owned 100% of the issuer&#146;s
outstanding shares of capital stock (before giving effect to
subsequent purchases of shares by certain management employees).
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 consisted 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.
On August&nbsp;26, 2005, we increased the $300&nbsp;million
revolving portion of our senior secured credit facility to
$350&nbsp;million. As of September&nbsp;30, 2005, we had
approximately $178.7&nbsp;million of borrowing capacity under
the revolving portion of our senior secured credit facility,
subject to certain conditions, after giving effect to
approximately $171.3&nbsp;million of outstanding letters of
credit.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&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="5" 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="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>



<TR style="font-size: 8pt;">
    <TD colspan="12" 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 colspan="2" 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">$</TD>
    <TD align="right" valign="bottom" nowrap>5.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Dresser-Rand Entities(3)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 colspan="2" align="left" valign="top">
    Cash</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91.4</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 colspan="2" 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 colspan="2" align="left" valign="top">
    Financing fees and expenses</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33.5</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 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">
    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 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>
</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 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 Sources of Funds</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,252.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    Total Uses of Funds</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 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: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<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 September&nbsp;30, 2005, we had approximately
    $178.7&nbsp;million available for borrowing under the revolving
    portion of the senior secured credit facility, subject to
    certain conditions, after giving effect to approximately
    $171.3&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.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">29
<!-- 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;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Equity Sponsor</B>
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following chart summarizes our current corporate structure.
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="y16020y1602001.gif" alt="(FLOWCHART)">
</DIV>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    D-R Interholding, LLC owns 63.5% of Dresser-Rand Group
    Inc.&#146;s outstanding shares of capital stock.</TD>
</TR>

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

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    There are nine domestic subsidiaries of which seven are
    operating subsidiaries.</TD>
</TR>

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

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    There are 44 foreign subsidiaries of which 36 are operating
    subsidiaries.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<A name='106'></A>
</DIV>

<!-- link1 "USE OF PROCEEDS" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT style="white-space: nowrap">D-R&nbsp;Interholding,</FONT>
LLC, the selling stockholder, will receive all the net proceeds
from the sale of our common stock in this offering. We will not
receive any of the proceeds from the sale of common stock in
this offering. The selling stockholder will distribute all of
the net proceeds it receives from this offering to its direct
parent, Dresser-Rand Holdings, LLC. Dresser-Rand Holdings, LLC
will then distribute such proceeds in accordance with the terms
of the Amended and Restated Limited Liability Company Agreement
of Dresser-Rand Holdings, LLC to its members, consisting of
affiliates of First Reserve, certain of our executive officers
and other management employees. Accordingly, approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
be received by affiliates of First Reserve, approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
be received by certain of our executive officers, consisting of
Mr.&nbsp;Volpe ($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;),
Mr.&nbsp;Anthony ($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;),
Mr.&nbsp;Riordan ($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;), Mr.&nbsp;Nye
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;), Mr.&nbsp;Dickson
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;), Mr.&nbsp;Rossi
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;), Mr.&nbsp;Chevrier
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;), Ms.&nbsp;Powers
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;) and Mr.&nbsp;Rinicella
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;), and approximately
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;) will be received by the other
management members of Dresser-Rand Holdings, LLC in the
aggregate.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event the underwriters fully exercise their
over-allotment option, approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
the net proceeds will be received by affiliates of First
Reserve. In addition, approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
be received by certain of our executive officers, consisting of
Mr.&nbsp;Volpe ($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;),
Mr.&nbsp;Anthony ($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;),
Mr.&nbsp;Riordan ($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;), Mr.&nbsp;Nye
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;), Mr.&nbsp;Dickson
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;), Mr.&nbsp;Rossi
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;), Mr.&nbsp;Chevrier
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;), Ms.&nbsp;Powers
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;) and Mr.&nbsp;Rinicella
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;), and approximately
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;) will be received by the other
management members of Dresser-Rand Holdings, LLC in the
aggregate.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='107'></A>
</DIV>

<!-- link1 "DIVIDEND POLICY" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our initial public offering, we distributed
approximately $557.8&nbsp;million ($10.26&nbsp;per share) of the
net proceeds to pay a dividend to our stockholders existing
immediately prior to the initial public offering, consisting of
affiliates of First Reserve and certain members of senior
management. Affiliates of First Reserve received approximately
$544.3&nbsp;million, and the management members of Dresser-Rand
Holdings, LLC received approximately $11.8&nbsp;million in the
aggregate consisting of Mr.&nbsp;Volpe ($3,779,192),
Mr.&nbsp;Anthony ($1,462,726), Mr.&nbsp;Riordan ($851,303),
Mr.&nbsp;Nye ($441,237), Mr.&nbsp;Dickson ($757,544),
Mr.&nbsp;Rossi ($760,697), Mr.&nbsp;Chevrier ($453,645),
Ms.&nbsp;Powers ($1,264,329), Mr.&nbsp;Rinicella ($417,366) and
the other management members of Dresser-Rand Holdings, LLC in
the aggregate ($1,605,880). In addition, dividends of
$8.2&nbsp;million and $5.1&nbsp;million were paid in 2002 and in
the period from January&nbsp;1 through October&nbsp;29, 2004,
respectively.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='108'></A>
</DIV>

<!-- link1 "PRICE RANGE OF OUR COMMON STOCK" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Trading in our common stock commenced on the New York Stock
Exchange on August&nbsp;5, 2005 under the symbol
&#147;DRC&#148;. The following table sets forth, for the periods
indicated, the high and low sales prices per share of our common
stock reported in the New York Stock Exchange consolidated tape.
</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="79%">&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="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>High</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Low</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>2005</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">
    Quarter ended September&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20.10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Quarter ended December&nbsp;31, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19.05</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2006</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">
    Quarter ended March&nbsp;31, 2006
    (through &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2006)</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>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='109'></A>
</DIV>

<!-- link1 "CAPITALIZATION" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The information in this table should be read in conjunction with
&#147;The Transactions,&#148; &#147;Selected Historical
Financial Information,&#148; &#147;Management&#146;s Discussion
and Analysis of Financial Condition and Results of
Operations,&#148; &#147;Description of Indebtedness&#148; and
our historical consolidated and combined financial statements
and accompanying notes thereto included elsewhere in this
prospectus. The table excludes cash and cash equivalents as of
September&nbsp;30, 2005 of $109.5&nbsp;million.
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of September&nbsp;30,</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>2005</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>
</TR>


<TR style="font-size: 8pt;">
    <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="2" 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>
</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>
</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>
</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>229.0</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>370.0</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</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total debt(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>599.2</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>

</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>
</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, 250,000,000&nbsp;shares
    authorized, 85,444,897&nbsp;shares issued and outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>.9</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>492.2</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">
    Retained earnings (accumulated deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.1</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 loss</DIV>
    </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>
</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>

</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>486.5</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: 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>1,085.7</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>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    As of September&nbsp;30, 2005, we had approximately
    $178.7&nbsp;million available for borrowing under the revolving
    portion of the senior secured credit facility, subject to
    certain conditions, after giving effect to approximately
    $171.3&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;color: #000000; background: #ffffff;">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="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='110'></A>
</DIV>

<!-- link1 "UNAUDITED PRO FORMA FINANCIAL INFORMATION" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 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 and as of
and for the nine months ended September&nbsp;30, 2005. The
unaudited pro forma statements of operations for the year ended
December&nbsp;31, 2004 and the nine months ended
September&nbsp;30, 2005 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 initial public offering and the
estimated use of proceeds therefrom, as if they had been
consummated on January&nbsp;1, 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 our historical consolidated and combined
financial statements and the notes thereto included elsewhere in
this prospectus.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>UNAUDITED PRO FORMA STATEMENT OF OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<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="5%">&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="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 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>
    <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 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>
    <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 style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&nbsp;</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 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="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 style="border-right:1.5pt solid #000000;">&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>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 style="border-right:1.5pt solid #000000;">&nbsp;</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 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>
    <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="7" 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">$</TD>
    <TD align="right" valign="bottom" nowrap>715,495</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>&#151;</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 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>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>&#151;</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 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>(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 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>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 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>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 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>(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 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>
    <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 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>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>&#151;</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 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>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>&#151;</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 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>(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 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>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 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>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 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>1,040</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>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 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>1,800</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>&#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" 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>
    <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 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>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>&#151;</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 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 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>3,901</TD>
    <TD align="left" valign="bottom" nowrap>(j)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(50,103</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 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>(1,846</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>&#151;</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 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>
    <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) 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 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>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>3,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,034</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Benefit) 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 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>(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>1,482</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>15,997</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>
    <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(loss)</DIV>
    </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">$</TD>
    <TD align="right" valign="bottom" nowrap>(56,762</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,963</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>
    <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 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>
    <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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.06</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 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">&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>

<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 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>53,793,188</TD>
    <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>84,843,188</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff;">34

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<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;color: #000000; background: #ffffff;">

<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: 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;color: #000000; background: #ffffff;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</TD>
    <TD align="left">
    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: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</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: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</TD>
    <TD align="left">
    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: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</TD>
    <TD align="left">
    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: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</TD>
    <TD align="left">
    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: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</TD>
    <TD align="left">
    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 certain of our
    executives who acquired common units in
    <FONT style="white-space: nowrap">Dresser-Rand</FONT> Holdings,
    LLC 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: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</TD>
    <TD align="left">
    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;color: #000000; background: #ffffff;">35

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<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;color: #000000; background: #ffffff;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)</TD>
    <TD align="left">
    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">$</TD>
    <TD align="right" valign="bottom" nowrap>3,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,987</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitment fee on our revolving credit facility (at 0.5%)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>653</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 our Term Loan B (at 4.3%)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,365</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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 valign="bottom" bgcolor="#cceeff">
    <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>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>56,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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: 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;color: #000000; background: #ffffff;">

<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    Interest expense on average outstanding letters of credit of
    $133.4&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 our new revolving credit facility and term loan B would
    change annual interest expense by $497.</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;color: #000000; background: #ffffff;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)</TD>
    <TD align="left">
    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 U.S. 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: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)</TD>
    <TD align="left">
    In connection with the initial public offering, we used
    approximately $55.0&nbsp;million of the net proceeds to redeem
    $50.0&nbsp;million of the $420&nbsp;million aggregate principal
    amount of our notes due 2014, including the payment of the
    applicable redemption premium and accrued interest. The
    annualized interest savings resulting from the redemption will
    be $3.7&nbsp;million, the annualized reduction in amortization
    of deferred financing fees will be $0.2&nbsp;million, and we
    incurred a one-time charge of $1.9 million from the write-off of
    deferred financing fees and incurred prepayment penalties of
    $3.7&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;color: #000000; background: #ffffff;">

<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 have 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-one
    stock split effected in February 2005 and the 0.537314-for-one
    reverse stock split effected in August&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 data
    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
    includes 31,050,000&nbsp;shares of our common stock offered in
    our initial public offering.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">36

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<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;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>UNAUDITED PRO FORMA STATEMENT OF OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Nine Months Ended September&nbsp;30, 2005</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="33%">&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>
    <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 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="2" align="center" nowrap><B>Offering</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="3">&nbsp;</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>and Other</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>Historical(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</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 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">$</TD>
    <TD align="right" valign="bottom" nowrap>846,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>846,237</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>657,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,094</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>652,751</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 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>188,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,094</TD>
    <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>193,486</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>118,331</TD>
    <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>118,331</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>4,745</TD>
    <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>4,745</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">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,094</TD>
    <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>70,410</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 expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44,619</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>4,630</TD>
    <TD align="left" valign="bottom" nowrap>(c)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39,989</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">
    Early redemption premium on debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,688</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>3,688</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 expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,558</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>(1,558</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>
    <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>15,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,863</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>10,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(272</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>(443</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>9,845</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 income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,018</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>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Basic and Diluted Earnings Per Share Data(3)(4)</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>&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">$</TD>
    <TD align="right" valign="bottom" nowrap>0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.22</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">
    Weighted average shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,178,986</TD>
    <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>85,314,700</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<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 Group Inc., the successor, from January 1, 2005
    through September&nbsp;30, 2005.</TD>
</TR>

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

<TR valign="top">
    <TD>(2)&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%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<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 a $5.1&nbsp;million 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 January 1, 2005 through
    September&nbsp;30, 2005.</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 income tax effect of our pro forma adjustments to
    the income statement. We used an effective tax rate based on the
    estimated effective consolidated income tax rate for the year
    ended December&nbsp;31, 2005, after giving effect to the pro
    forma adjustments for the entire year 2005 which provides a
    benefit for U.S. tax loss carryforwards not previously
    recognized.</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(c)&nbsp;</TD>
    <TD align="left">
    In connection with the initial public offering, we used
    approximately $55.0&nbsp;million of the net proceeds to redeem
    $50.0&nbsp;million of the $420 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 and accrued interest. The
    annualized interest savings resulting from the redemption will
    be $3.7&nbsp;million, the annualized reduction in amortization
    of deferred financing fee will be $0.2 million, and we incurred
    a one-time charge of $1.9&nbsp;million&nbsp;from the write-off
    of deferred financing fees and incurred prepayment penalties of
    $3.7&nbsp;million.</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    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 and the
    <FONT style="white-space: nowrap">0.537314-for-one</FONT> stock
    split effected August 2005.</TD>
</TR>

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

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Unaudited pro forma basic and diluted earnings per share data
    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
    includes 31,050,000&nbsp;shares of our common stock offered in
    our initial public offering.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">37

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<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;color: #000000; background: #ffffff;">
<A name='111'></A>
</DIV>

<!-- link1 "SELECTED HISTORICAL FINANCIAL INFORMATION" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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
years ended December&nbsp;31, 2001, 2002, and 2003 and the
period from January&nbsp;1, 2004 through October&nbsp;29, 2004
has 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 has
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 have been derived from the
Dresser-Rand Entities&#146; 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 the Dresser-Rand
Entities&#146; unaudited combined financial statements, which
are not included in this prospectus. The selected historical
combined financial information for the nine&nbsp;months ended
September&nbsp;30, 2004 and the selected financial information
for the quarters ended March&nbsp;31, June&nbsp;30 and
September&nbsp;30, 2003 and 2004, the quarter ended
December&nbsp;31, 2003 and the period from October&nbsp;1, 2004
through October&nbsp;29, 2004 have been derived from the
Dresser-Rand Entities&#146; unaudited combined financial
statements included elsewhere in this prospectus, which have
been prepared on a basis consistent with the audited financials
included elsewhere in this prospectus. The selected historical
consolidated financial information as of and for the
nine&nbsp;months ended September&nbsp;30, 2005 and the selected
financial information for the period from October&nbsp;30, 2004
through December&nbsp;31, 2004 and the quarters ended
March&nbsp;31, June&nbsp;30 and September&nbsp;30, 2005 have
been derived from Dresser-Rand Group Inc.&#146;s unaudited
consolidated financial statements included elsewhere in this
prospectus which have been prepared on a basis consistent with
the audited financials included elsewhere 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 our historical
consolidated and combined financial statements and the notes
thereto included elsewhere in this prospectus.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">38

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</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="27" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</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="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD colspan="22" 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="6" 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="3">&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></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="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1 Month</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</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>Nine Months</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>Nine Months</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</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>Ended</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>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;31,</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&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>September&nbsp;30,</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>September&nbsp;30,</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 style="border-right:1.5pt solid #000000;">&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>
    <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>2005</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 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>
    <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 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>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="36" 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 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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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 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>
</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">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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">$</TD>
    <TD align="right" valign="bottom" nowrap>654,541</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>199,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>846,237</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 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>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>1,639</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>
</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 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>&#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>1,314</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>
</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 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" align="left" style="border-top: 1pt solid #000000;">&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 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>&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 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>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>657,494</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>199,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>846,237</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 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>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>499,208</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>149,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>657,845</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 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" align="left" style="border-top: 1pt solid #000000;">&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 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 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 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>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>158,286</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>50,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188,392</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 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>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>110,493</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>21,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>118,331</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 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>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>4,695</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>1,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,745</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 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>&#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>&#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>1,800</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 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 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>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>
    <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 colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&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" align="left" style="border-top: 1pt solid #000000;">&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 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 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 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>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>43,098</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>26,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,316</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 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>(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>2,306</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>(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>(44,619</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">
    Early redemption premium on 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 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>&#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>&#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>(3,688</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>&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>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>(2,754</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>(1,846</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,558</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 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" align="left" style="border-top: 1pt solid #000000;">&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 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 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 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>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>42,650</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>14,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,451</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 (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 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>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>4,918</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>10,560</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 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" align="left" style="border-top: 1pt solid #000000;">&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 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 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 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>(20,331</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>37,732</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>7,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,891</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">
    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 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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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 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>
</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 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>&#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>&#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>
</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 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>&#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>&#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>
</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 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" align="left" style="border-top: 1pt solid #000000;">&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 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 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">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,577</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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">$</TD>
    <TD align="right" valign="bottom" nowrap>37,732</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>4,891</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 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" 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 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>

<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):</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 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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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 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>
</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 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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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 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>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <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">&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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.08</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" 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 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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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 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>53,793,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,178,986</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 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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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 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>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows provided by (used in) 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 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">$</TD>
    <TD align="right" valign="bottom" nowrap>57,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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">$</TD>
    <TD align="right" valign="bottom" nowrap>64,484</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>222,384</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 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>(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>(1,772</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>(1,126,939</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,721</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 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>(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>(50,772</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>1,217,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(161,141</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">39

<!-- 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; margin-top: 12pt; ">

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


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</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="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" 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="6" 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="14" align="center" nowrap><B>As of December&nbsp;31,</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <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 style="border-right:1.5pt solid #000000;">&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>September&nbsp;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>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 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>2005</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 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: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>(In
thousands)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>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 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>
</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 style="border-right:1.5pt solid #000000;">&nbsp;</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>109,504</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 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>1,751,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,660,373</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 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>
</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 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>6,749</TD>
    <TD>&nbsp;</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>&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 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>396,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>229,148</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 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>420,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>370,000</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 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>823,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>599,211</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 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>
    <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 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>452,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>486,529</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<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 $15,997. 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 have 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-one
    stock split effected in February 2005 and the
    <FONT style="white-space: nowrap">0.537314-for-one</FONT>
    reverse stock split effected in August 2005.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Selected Unaudited Quarterly Financial Data:</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="18%">&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="4%">&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="4%">&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="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="30" 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="30" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="27">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;1</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</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>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</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>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>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>
    <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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="30" 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">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>278,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>337,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>379,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>340,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>170,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>269,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>217,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>58,001</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>39,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,167</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">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,419</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="44%">&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="4%">&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="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" 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>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&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="10" align="center" nowrap><B>Three Months 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="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>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</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>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</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, except per share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <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>234,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>302,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>309,759</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>50,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,905</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>7,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,018</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,525</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,434</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings per share basic and diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.07</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.03</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.15</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='112'></A>
</DIV>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>AND RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 our historical consolidated and combined
financial statements and notes included elsewhere in this
prospectus.</I>
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 57 global locations in 11
U.S.&nbsp;states and 24 countries. Our total combined revenues
by geographic region for the year 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%).
For the nine months ended September&nbsp;30, 2005, our revenue
by geographic region consisted of North America (41%), Latin
America (12%), Europe (20%), Asia Pacific (12%) and the Middle
East and Africa (15%).
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 which
consisted of a $395&nbsp;million term loan portion and a
$300&nbsp;million revolving portion. On August&nbsp;26, 2005, we
increased the $300&nbsp;million revolving portion of our senior
secured credit facility to $350&nbsp;million.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the time of the acquisition, our equity capitalization
consisted of 100 shares of common stock at an initial cost of
$4.3&nbsp;million per share. This high per share price made
certain contemplated management investment and incentive
arrangements difficult to effectuate; therefore, in February
2005, we gave effect to a
<FONT style="white-space: nowrap">1,006,092.87-for-one</FONT>
stock split to achieve a price per share equivalent to price per
unit of Dresser-Rand Holdings, LLC as of the date of the
acquisition. In connection with the completion of the initial
public offering, the board of directors approved a
0.537314-for-one reverse stock split. As a result of this stock
split and reverse stock split, we had 85,444,897&nbsp;shares
outstanding at September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated financial statements reflect our financial
position as of September&nbsp;30, 2005 and December&nbsp;31,
2004 and our results of operations and cash flows for the nine
months ended September&nbsp;30, 2005 and for the period from
October&nbsp;30, 2004 to December&nbsp;31, 2004, and the
financial position of our predecessor entity, on a combined
basis, as of September&nbsp;30, 2004 and December&nbsp;31, 2003
and its results of operations and cash flows for the nine months
ended September&nbsp;30, 2004, for the period from
January&nbsp;1, 2004 to October&nbsp;29, 2004 and for the years
ended December&nbsp;31, 2003 and 2002.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 $33.5&nbsp;million. See
&#147;The Transactions.&#148;
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 September&nbsp;30, 2002, our
worldwide headcount was 5,942 employees. From September&nbsp;30,
2002 to December&nbsp;31, 2003, we reduced our headcount, on a
worldwide basis, by 1,061&nbsp;employees. By December&nbsp;31,
2004, we had reduced our headcount by an additional
250&nbsp;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.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
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.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
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.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cost of sales includes raw materials and plant and related work
force costs, freight and warehousing, as well as product
engineering.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Selling and Administrative Expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Selling expenses consist of costs associated with marketing and
sales. Administrative expenses are primarily management,
accounting, corporate allocations and legal costs.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Non-cash Compensation Expense</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, three members of senior management purchased
303,735 common units of Dresser-Rand Holdings, LLC for an
aggregate purchase price of $1.3&nbsp;million and were also
granted 1,000,000 profit units (comprised of 300,000 service
units and 700,000 exit units). The sale of these common units
and the grant of the profit units may have been made at below
market prices. As a result, we incurred additional charges
related to the sale of the common units and granting of the
service units of $2.7&nbsp;million in the second quarter. We
expect to incur an additional $0.5&nbsp;million of non-cash
compensation expense per year over the five-year vesting period
of the service units. No additional charges related to the
granting of the exit units are anticipated for 2005 due to
inherent limiting factors related to the exit unit plan.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, as a result of certain members
of our management receiving proceeds from the selling
stockholder for their exit units, we will incur a pre-tax and
after-tax, non-cash compensation expense of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in
the period in which this offering is consummated. In the event
the underwriters fully exercise their over-allotment option, we
will incur an additional
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;pre-tax
and after-tax, non-cash compensation expense.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Charges Related to Deferred Financing Fees</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We incurred a one-time charge of $1.9&nbsp;million from the
write-off of deferred financing fees and incurred prepayment
penalties of $3.7&nbsp;million in the third quarter of 2005 as a
result of the redemption of $50.0&nbsp;million aggregate
principal amount of our notes with the use of a portion of the
proceeds from the initial public offering.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Research and Development Expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Other Income (Expense)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
improvements that extend the life of the asset are generally
capitalized. Intangible assets primarily consist of amounts
allocated to customer relationships, software and technology,
trade names and other intangibles. All of the intangible assets
are amortized over their estimated useful lives.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 nine months ended September&nbsp;30, 2005 and
for the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004 and will affect our results in the future.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

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

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 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.
</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;color: #000000; background: #ffffff;">

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

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Letters of Credit, Bank Guarantees and Surety Bonds</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 $350&nbsp;million
of letters of credit outstanding at any time, subject to certain
conditions.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 are labeled as
&#147;Successor.&#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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our consolidated financial statements for the nine months ended
September&nbsp;30, 2005 and for the period from October&nbsp;30,
2004 through December&nbsp;31, 2004 include the accounts of
Dresser-Rand Group Inc. and its wholly-owned subsidiaries.
Included in these periods 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.
</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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements for the nine&nbsp;months ended
September&nbsp;30, 2004, 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;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Fourth Quarter 2005 Inventory Charge</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have recently discovered an inventory discrepancy at our
Brazilian subsidiary as result of errors in a new computer
system being installed at our Brazilian operations in 2005. We
have done a physical inventory in Brazil and have reconciled the
physical results with those in the computer and accounting
records. We expect to record a write-off of inventory in the
fourth quarter of 2005 of about $1,885,000 after income taxes.
We have implemented additional manual reviews and controls to
provide reasonable assurance that inventory in Brazil is
properly accounted for until the problems with the computer
system are resolved.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">45

<!-- 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;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Results of Operations</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;color: #000000; background: #ffffff;">

<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: 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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Nine&nbsp;Months Ended September&nbsp;30, 2005 (Successor)
    Compared to the Nine Months Ended September&nbsp;30, 2004
    (Predecessor)</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents selected historical financial
information for the nine months ended September&nbsp;30, 2005
and September&nbsp;30, 2004. Amounts are also presented as a
percentage of total revenues. The two columns under
<FONT style="white-space: nowrap">period-to</FONT>-period change
show the dollar change and percentage change from the nine
months ended September&nbsp;30, 2004 to the nine months ended
September&nbsp;30, 2005.
</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="41%">&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="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="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="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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B></B></TD><TD></TD>
<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">&nbsp;</TD><TD></TD>
</TR>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Period to Period</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended</B></TD><TD></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="6">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6">&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="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004 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>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</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">$</TD>
    <TD align="right" valign="bottom" nowrap>657.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>846.2</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>188.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28.7</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>499.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>657.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158.6</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>
</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>158.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19.0</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>110.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>118.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.1</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>4.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.7</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>0.0</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>
</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">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</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>22.2</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>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest (expense) income, net</DIV>
    </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>0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44.6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47.0</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/M</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Early redemption premium on debt</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>(3.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</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>(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>(0.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(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>(0.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46.4</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 valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.5</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>(27.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(63.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Benefit) provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.0</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>10.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114.7</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 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">$</TD>
    <TD align="right" valign="bottom" nowrap>37.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4.9</TD>
    <TD>&nbsp;</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">$</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>(87.0</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: 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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Total revenues.</I> The demand for oil and gas products
continues to increase in 2005 driving strong demand for our
products and services. Total revenues increased by
$188.7&nbsp;million, or 28.7% for the nine months ended
September&nbsp;30, 2005, compared to the same period in 2004.
Our backlog at December&nbsp;31, 2004, increased 51.8% compared
to December&nbsp;31, 2003, which contributed to increased
revenues during this 2005 period.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cost of goods sold.</I> As a percentage of revenues, cost of
goods sold increased to 77.7% for the nine months ended
September&nbsp;30, 2005 from 75.9% for the same period in 2004.
Cost of goods sold increased by $34.4&nbsp;million for
adjustments related to purchase accounting which were recognized
during 2005, reflecting additional depreciation and amortization
and the purchase accounting value of inventory sold.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling and administrative expenses.</I> Selling and
administrative expenses increased by $7.8&nbsp;million for the
nine months ended September&nbsp;30, 2005 from the same period
in 2004, but decreased as a percentage of sales. Establishing
corporate functions for the stand-alone company was the
principal cause of a $14.8&nbsp;million direct increase in
expenses during the nine months ended September&nbsp;30, 2005,
compared to $14.6&nbsp;million of administrative expenses
allocated to us from Ingersoll-Rand during the same period in
2004. Third party commissions increased $1.2&nbsp;million over
2004 due to the increase in sales. An additional
$1.7&nbsp;million of increases were the result of the
consolidation of TES and expenses related to the acquisition.
Other costs increased to support current and future growth.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Research and development.</I> Research and development
expenses for the nine months ended September&nbsp;30, 2005 and
2004 were $4.7&nbsp;million and $4.7&nbsp;million, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating income.</I> Operating income increased by
$22.2&nbsp;million to $65.3&nbsp;million for the nine months
ended September&nbsp;30, 2005 from $43.1&nbsp;million for the
same period in 2004 primarily attributable to the factors
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">46

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<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;color: #000000; background: #ffffff;">
discussed above regarding increased sales and gross profit
partially offset by high selling and administrative expenses.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interest (expense) income, net.</I> Interest expense was
$44.6&nbsp;million for the nine months ended September&nbsp;30,
2005 compared to interest income of $2.4&nbsp;million for the
same period in 2004. The difference was primarily from interest
on the outstanding principal of the senior secured credit
facility and senior subordinated notes issued in connection with
the transactions. Additionally, 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. We were not able to register the notes by
that date. Accordingly, the annual interest on the notes
increased by (1)&nbsp;.25% for the first 90&nbsp;days following
August&nbsp;25, 2005, increasing our interest expense by about
$90,000 during the nine months ended September&nbsp;30, 2005,
and (2)&nbsp;will increase by .25% at the beginning of each
subsequent 90-day period, up to a maximum of 1% until all such
registration defaults are cured. We will now be required to
incorporate financial information through September&nbsp;30,
2005, into any registration statement filed with the SEC.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Early redemption premium on debt.</I> We used a portion of
the proceeds from our initial public offering to prepay
$50&nbsp;million of our notes incurring a premium payment of
$3.7&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Provision for income taxes.</I> Provision for income taxes
for the nine months ended September&nbsp;30, 2005 was
$10.6&nbsp;million and results in an effective tax rate that
differs from the U.S.&nbsp;Federal statutory rate of 35%
principally because of current and forecasted net operating
losses in certain tax jurisdictions. As a result, we have
provided for a valuation allowance for that deferred tax asset
on the basis that it is more likely than not we will not realize
that asset. The effective tax rate for the nine months ended
September&nbsp;30, 2004, differs from the U.S.&nbsp;Federal
statutory rate of 35% primarily because the Predecessor period
reflected the non-taxable partnership structure in existence for
most of the domestic operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Bookings and backlog.</I> Bookings during the nine months
ended September&nbsp;30, 2005 were $1,036.0&nbsp;million, 26.6%
higher than the $818.2&nbsp;million in bookings for the same
period in 2004. The backlog at September&nbsp;30, 2005 was
$872.8&nbsp;million, or 48.9% above the $586.2&nbsp;million
backlog at September&nbsp;30, 2004. The increase is attributable
to increased worldwide demand in the new units segment.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">47

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<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: 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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&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 style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&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="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the Period</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&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="23" 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 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>
</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 style="border-right:1.5pt solid #000000;">&nbsp;</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 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>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 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 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 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>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 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>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 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>1.0</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 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>1.8</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 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 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 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>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 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>(9.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4.8</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>(0.6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>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 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>(1.8</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 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">
    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 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>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 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>7.3</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 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">
    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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.2</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 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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 decrease in revenues of $420.0&nbsp;million was
primarily from the 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;revenue decreases in other
new units sold totaling $251.7&nbsp;million 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 which were shipped in 2003. The invoicing
of these projects in 2003 created a low backlog at the end of
2003, a 48% reduction from 2002, thereby reducing shipments in
2004. The shipments of orders is largely dependent on the timing
of the completion of the order, and therefore this volume
decrease in new units revenues in 2004 is not necessarily
indicative of future trends. Additionally, the oil and gas
industry can be cyclical with regard to sales of units caused by
the price of oil and the buying cycles of our larger clients for
major projects. The decrease in revenues from new units was
offset by the aftermarket parts and services segment revenues
which were $570.1&nbsp;million in 2004 compared to
$542.4&nbsp;million in 2003. This increase in revenue reflects
our continuing efforts to expand the breadth of aftermarket
services available to our customers.
</DIV>

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

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
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 of goods
sold by $15.6&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 $5.2&nbsp;million
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
and $4.8&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&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 style="border-right:1.5pt solid #000000;">&nbsp;</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 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>
</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 style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&nbsp;</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 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>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" 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">
    Foreign 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 style="border-right:1.5pt solid #000000;">&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 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>&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 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>
</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 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>
</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 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>(1.0</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 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>

</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 style="border-right:1.5pt solid #000000;">&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 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>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">50

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<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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
<FONT style="white-space: nowrap">year-to</FONT>-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 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">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 $112.2&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 and (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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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, including 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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">

<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: 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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Nine Months Ended September&nbsp;30, 2005 (Successor)
    Compared to Nine Months Ended September&nbsp;30, 2004
    (Predecessor)</I></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="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&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="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="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Period to Period</B></TD><TD></TD>
</TR>

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

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD colspan="7" align="left" 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" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD colspan="7" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

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

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD colspan="7" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD colspan="2" align="center" nowrap><B>2004 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="7" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD colspan="7" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Change</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></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>
</TR>



<TR style="font-size: 8pt;">
    <TD colspan="3">&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 colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Sales, net</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">$</TD>
    <TD align="right" valign="bottom" nowrap>256.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>399.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>142.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55.5</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>400.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>447.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.5</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: 1pt solid #000000;">&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 colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>657.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>846.2</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>188.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28.7</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: 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">$</TD>
    <TD align="right" valign="bottom" nowrap>31.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40.4</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>8.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27.4</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>126.6</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148.0</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</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>16.9</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">$</TD>
    <TD align="right" valign="bottom" nowrap>158.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>188.4</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>30.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19.0</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">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4.7</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>2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>134.8</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>72.9</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>93.2</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>20.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27.9</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>(31.8</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">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32.6</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>(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>2.6</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 colspan="3" 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">$</TD>
    <TD align="right" valign="bottom" nowrap>43.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>65.3</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>22.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51.6</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">&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: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>New Units</I>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues.</I> Revenues in the new units segment increased
$142.4&nbsp;million for the nine months ended September&nbsp;30,
2005, compared to the same period in 2004. The increase is
primarily attributable to higher backlog coming into the period,
as orders typically have lead times from as little as three
months to over twelve months depending on the complexity of the
configuration. Improved new order rates also contributed. Our
operations in North America, France and Norway accounted for
most of this increase.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross profit.</I> Gross profit increased by $8.7&nbsp;million
for the nine months ended September&nbsp;30, 2005 compared to
the same period in 2004. As a percentage of segment revenues,
gross profit decreased to 10.1% for the period in 2005 from
12.4% for the same period in 2004. The decrease was due to
higher allocations including the additional costs related to
purchase accounting recognized in the period for higher
depreciation and amortization and the purchase accounting value
of inventory sold.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating income.</I> Operating income increased by
$2.7&nbsp;million for the nine months ended September&nbsp;30,
2005 compared to the same period in 2004. This increase is
attributable to the $8.7&nbsp;million increase in gross profit
mentioned above, less a $6.0&nbsp;million increase in the
allocation of costs and expenses due to the increase in sales.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Bookings.</I> Bookings for the nine months ended
September&nbsp;30, 2005 were $558.3&nbsp;million, 45.2% higher
than the $384.5&nbsp;million in bookings for the same period in
2004.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Aftermarket Parts and Services</I>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues.</I> Revenues increased by $46.3&nbsp;million, or
11.5%, for the nine months ended September&nbsp;30, 2005
compared to the same period in 2004 primarily from higher parts
sales.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross profit.</I> Gross profit increased by
$21.4&nbsp;million for the nine months ended September&nbsp;30,
2005 compared to the same period in 2004 as a result of the
increases in volume. As a percentage of revenues, gross profit
increased to 33.1% for the nine months ended September&nbsp;30,
2005, from 31.6% for the same period in
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
2004, due to a more favorable product mix from increased parts
revenue and lower allocations from stronger growth in new units.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating income (loss).</I> Operating income increased by
$20.3&nbsp;million, or 27.9% for the nine months ended
September&nbsp;30, 2005, compared to the same period in 2004.
This increase is mainly attributable to the change in gross
profit mentioned above.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Bookings.</I> Bookings for the nine months ended
September&nbsp;30, 2005 were $477.7&nbsp;million, 10.2% above
bookings for the same period in 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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&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 style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&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="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Period from</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&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="23" align="center" nowrap><B>(Dollars 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>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 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>
</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 style="border-right:1.5pt solid #000000;">&nbsp;</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 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>122.3</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="3" align="left" style="border-top: 1pt 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="3" align="left" style="border-top: 1pt solid #000000;">&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="3" align="left" style="border-top: 1pt solid #000000;">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>1,335.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-right:1.5pt solid #000000;">&nbsp;</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" 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 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>

<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 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>
</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">$</TD>
    <TD align="right" valign="bottom" nowrap>39.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 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>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 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">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>203.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 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">&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 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>
</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">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 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>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 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>(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 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">&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 style="border-right:1.5pt solid #000000;">&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 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">&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;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>New Units</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;revenue
decreases in other new units sold totaling $251.7&nbsp;million
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 which were shipped in 2003. The
invoicing of these projects in 2003 created a low backlog at the
end of 2003, a 48% reduction from 2002, thereby reducing
shipments in 2004. The
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">54

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<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;color: #000000; background: #ffffff;">
shipments of orders is largely dependent on the timing of the
completion of the order, and therefore this volume decrease in
new units revenues in 2004 is not necessarily indicative of
future trends. Additionally, the oil and gas industry can be
cyclical with regard 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 70.1% 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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues.</I> Revenues were $122.3&nbsp;million,
$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
$3.6&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 12.6%. 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating income.</I> Operating income was
$30.5&nbsp;million, $85.1&nbsp;million and $98.1&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
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 was 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>

<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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
<FONT style="white-space: nowrap">year-to</FONT>-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 style="font-size: 8pt;">
    <TD colspan="3">&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 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 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">&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 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">&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 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">&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;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>New Units.</I></TD>
</TR>

</TABLE>

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

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 decreases in parts of
$8.9&nbsp;million and repair of $12.6&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Liquidity and Capital Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by operating activities for the nine months
ended September&nbsp;30, 2005 was $222.4&nbsp;million compared
to $64.5&nbsp;million for the same period in 2004. The increase
of $157.9&nbsp;million in net cash provided by operating
activities was mainly from a reduction in inventories and an
increase in customer advance payments. Inventories-net declined
$13.0&nbsp;million and customer advance payments increased
$75.8&nbsp;million from December&nbsp;31, 2004, a result of our
increased efforts to collect customer payments in line with or
ahead of the costs of inventory work-in-process. In addition,
other current and noncurrent liabilities increased
$26.4&nbsp;million for the nine months ended September&nbsp;30,
2005, compared to a decrease of $18.9&nbsp;million for the nine
months ended September&nbsp;30, 2004. This change over the
periods is primarily attributable to accrued interest on new
debt and other accruals related to being a stand-alone company
compared to being a division of Ingersoll-Rand.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash flow provided by investing activities for the nine
months ended September&nbsp;30, 2005 was $57.7&nbsp;million,
compared to net cash used in investing activities of
$1.8&nbsp;million for the same period in 2004.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
Capital expenditures for the nine months ended
September&nbsp;30, 2005, were $10.7&nbsp;million. We sold our
investment in a partially owned entity in the first quarter of
2005 for $10&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;8, 2005, we acquired from Tuthill Corporation
certain assets of its TES. TES is an international manufacturer
of single and multi-stage steam turbines and portable
ventilators under the Coppus, Murray and Nadrowski brands which
complement our steam turbine business. The current estimated
cost of TES is approximately $57.0&nbsp;million, net of
$4.0&nbsp;million cash acquired, subject to future adjustments
for agreement on the final working capital at the closing date
and other related matters. We have preliminarily allocated the
cost based on current estimates of the fair value of assets
acquired and liabilities assumed as follows (in thousands):
</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">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,458</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory&nbsp;&#151;&nbsp;net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,690</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD 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>208</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>

<TR>
    <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>21,356</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <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">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,319</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets and goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,414</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>

<TR valign="bottom" bgcolor="#cceeff">
    <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>70,089</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>

<TR>
    <TD 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">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,570</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD 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>2,501</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>

<TR>
    <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>13,071</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>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid&nbsp;&#151;&nbsp;net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,018</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>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The above amounts are estimates as final appraisals and other
required information to determine final cost and assign fair
values have not been received. Also, certain restructuring of
operations will be necessary to obtain appropriate synergies in
the combined steam turbine business. Accordingly, the above
amounts may be revised when all required information is obtained
and the restructuring plan is finalized which is expected to be
accomplished during the first quarter of 2006. Pro forma
financial information, assuming that TES had been acquired at
the beginning of each period for which an income statement is
presented, has not been presented because the effect on our
results for these periods was not considered material. TES
results have been included in our financial results since
September&nbsp;8, 2005, and were not material to the results of
operations for the nine months ended September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the third quarter of 2005, we purchased the other 50% of
our Multiphase Power and Processing Technologies (MppT) joint
venture for a payment of $200,000 and an agreement to pay
$300,000 on April&nbsp;1, 2006, and $425,000 on April&nbsp;1,
2007. The net present value of the total consideration is
$876,000, bringing our total investment in MppT to
$2.9&nbsp;million at the date of purchase. MppT owns patents and
technology for inline, compact, gas-liquid scrubbers.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in financing activities was $161.1&nbsp;million
for the nine months ended September&nbsp;30, 2005, related
primarily to our initial public offering and payments on
long-term debt, compared to $50.8&nbsp;million for the nine
months ended September&nbsp;30, 2004, related primarily to the
impact of the net change in intercompany accounts with
Ingersoll-Rand.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;10, 2005, we completed our initial public
offering of 31,050,000&nbsp;shares of our common stock for net
proceeds of approximately $608.9&nbsp;million. On
September&nbsp;12, 2005, we used approximately
$55.0&nbsp;million of the net proceeds to redeem
$50.0&nbsp;million face value 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
$3.7&nbsp;million applicable redemption premium and
$1.3&nbsp;million accrued interest to the redemption date. Our
board of directors approved the payment of a dividend on
August&nbsp;11, 2005, of the remaining net proceeds, excluding
certain costs, of approximately $557.7&nbsp;million ($10.26 per
share) to our stockholders existing immediately prior to the
offering, consisting of affiliates of
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
First Reserve and certain members of senior management. In
addition, we have paid $211.2&nbsp;million in long-term debt and
$2.6&nbsp;million in short-term debt for a total debt reduction
during 2005 of $213.8&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;26, 2005, we increased the availability under the
revolving credit portion of our senior credit facility from
$300&nbsp;million to $350&nbsp;million. As of September&nbsp;30,
2005, we had a cash balance of $109.5&nbsp;million and the
ability to borrow $178.7&nbsp;million under our
$350&nbsp;million senior secured revolving credit facility, as
$171.3&nbsp;million was used for outstanding letters of credit.
Although there can be no assurances, 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
revolving credit facility will be adequate to meet our working
capital, capital expenditures, debt service and other funding
requirements for the next twelve months and our long-term future
contractual obligations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 were 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 $42.5&nbsp;million, or 31.9%, 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
<FONT style="white-space: nowrap">work-in</FONT>-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 $6.6&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 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
<FONT style="white-space: nowrap">work-in</FONT>-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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 cost of 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
$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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 $53.4&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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of the transactions, we incurred debt of
$820.0&nbsp;million under the notes and the senior secured
credit facility, assumed approximately $2.9&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 September&nbsp;30, 2005, of the $350.0&nbsp;million of
capacity, $171.3&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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our capital expenditures have averaged $10.3&nbsp;million per
year over the past three years. Capital expenditures for the
nine months ended September&nbsp;30, 2005, were
$10.7&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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. We are currently not aware of any
significant restrictions on the ability of the issuer&#146;s
subsidiaries to distribute cash to the issuer. As of
September&nbsp;30, 2005, we had cash of $109.5&nbsp;million,
working capital, including cash, of $112.2&nbsp;million, and the
ability to borrow approximately $178.7&nbsp;million. From time
to time based on market conditions, we may repurchase a portion
of the notes at market prices which may result in purchase
prices in excess of par. In connection with the matters
described in &#147;Risk Factors&nbsp;&#151; Risks Related to Our
Business&nbsp;&#151; In the past, our Brazilian subsidiary has
engaged in business transactions involving a Cuban entity that
could subject us to potential sanctions,&#148; to the extent we
violated any regulations, we may be subject to fines. We do not
expect any such fines to be material to our liquidity or
financial condition. Although we cannot assure you that we will
continue to generate comparable levels of cash and working
capital from operations, 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 for
the next twelve months and our long-term future contractual
obligations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Quantitative and Qualitative Disclosures About Market Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 for
the nine months ended September&nbsp;30, 2005 compared to
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">60

<!-- 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;color: #000000; background: #ffffff;">
$1.9&nbsp;million for the nine months ended September&nbsp;30,
2004. 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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 $2.3&nbsp;million annually (based on the outstanding
principal balance at September&nbsp;30, 2005).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Contractual Obligations</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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; ">

<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;color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<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 Other Indebtedness.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Covenant Compliance</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Covenant levels and ratios for the four quarters ended
September&nbsp;30, 2005 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="59%">&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="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&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>September&nbsp;30, 2005</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>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 colspan="2" align="center" valign="bottom">1.87x</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" valign="bottom">3.7x</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;</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 colspan="2" align="center" valign="bottom">6.50x</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" valign="bottom">2.7x</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;</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 colspan="2" align="center" valign="bottom">2.0x</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" valign="bottom">3.8x</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<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
    1.87x and a total debt to Adjusted EBITDA ratio starting at a
    maximum of 6.50x. 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,</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD align="left">
    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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="22%">&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="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>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&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="5%">&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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" 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="14" 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="6" 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="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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Four</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>Nine Months</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&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Quarters</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,</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>
    <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>
    <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>September&nbsp;30,</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>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</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 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>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005(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 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>
    <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="27" 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 (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">$</TD>
    <TD align="right" valign="bottom" nowrap>42,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,732</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>4,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,539</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Benefit) provision for income taxes</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>4,918</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>10,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,887</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>(2,306</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>44,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,423</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>20,284</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>48,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,745</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 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 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>60,628</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>40,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,594</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 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 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>8,397</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>925</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>1,913</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>209</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>7,994</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>31</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 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 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>4,841</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>(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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(224</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">
    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>1,632</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>(103</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <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>5,935</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>206</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>708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <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 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 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>3,000</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>(900</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">
    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 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 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>1,010</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>(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>560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>369</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <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 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 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>(4,500</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>
    <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">
    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>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>&#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>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">62

<!-- 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: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="22%">&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="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>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&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="5%">&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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" 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="14" 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="6" 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="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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Four</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>Nine Months</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&nbsp;30</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Quarters</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,</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>
    <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>
    <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>September&nbsp;30,</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>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</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 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>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005(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 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>
    <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="27" 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">
    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>&#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>1,800</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>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>&#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>2,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,375</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>(192</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>1,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(266</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>117</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>(112</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13</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">
    Note premium(s)</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 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>3,688</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>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash compensation(t)</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 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>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,227</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hedge (gains) losses(u)</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>(1,095</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</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>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>885</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension loss amortization(v)</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 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>187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>187</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Franchise taxes(w)</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 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>707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>707</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 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 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">$</TD>
    <TD align="right" valign="bottom" nowrap>103,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>91,511</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>45,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>123,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>180,582</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 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: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 1pt; 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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff;">63

<!-- 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;color: #000000; background: #ffffff;">

<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, and $5.1&nbsp;million was
    expensed in the nine months ended September&nbsp;30, 2005.</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>

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

<TR>
    <TD valign="top">
    (s)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects premium paid on early redemption of $50&nbsp;million
    aggregate principal amount of the notes.</TD>
</TR>

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

<TR>
    <TD valign="top">
    (t)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects employee non-cash equity compensation.</TD>
</TR>

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

<TR>
    <TD valign="top">
    (u)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects (gains) losses due to hedging of foreign currencies.</TD>
</TR>

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

<TR>
    <TD valign="top">
    (v)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects pension loss amortization.</TD>
</TR>

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

<TR>
    <TD valign="top">
    (w)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects franchise taxes.</TD>
</TR>

</TABLE>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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
$75,000 for the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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, 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2005, the FASB released FASB Interpretation
No.&nbsp;47, entitled &#147;Accounting for Conditional Asset
Retirement Obligations.&#148; This Interpretation is effective
no later than our December&nbsp;31, 2005 financial statements.
We are currently assessing the impact the Interpretation will
have on our financial position and results of operation.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, the FASB issued SFAS No.&nbsp;154, &#147;Accounting
Changes and Error Corrections.&#148; SFAS No.&nbsp;154 provides
guidance on the accounting for and reporting of accounting
changes and error corrections. This statement is effective for
fiscal years beginning after December&nbsp;15, 2005.
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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, $0.5 million
from the period from October&nbsp;30, 2004 through
December&nbsp;31, 2004 and $9.6 million for the nine months
ended September&nbsp;30, 2005. 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pension benefit payments were $17.7&nbsp;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 was $2.4&nbsp;million
for the nine months ended September&nbsp;30, 2005, $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>

<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Critical Accounting Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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: 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;color: #000000; background: #ffffff;">

<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
    <FONT style="white-space: nowrap">percentage-of</FONT>-completion
    method which recognizes revenue as the contract progresses. If
    we use the
    <FONT style="white-space: nowrap">percentage-of</FONT>-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: 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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">The completed contract method requires the use of estimates as
    to the future costs that will be incurred relating to any
    contract that might result in a loss. 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: 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;color: #000000; background: #ffffff;">

<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: 3pt">&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</TD>
</TR>

</TABLE>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<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 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 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 our obligations under our plans are reasonable based
    on input from our actuaries, outside investment advisors, and
    information as to assumptions used by plan sponsors.</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">
    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:</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="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&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>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Effect on total service and interest cost components</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Effect of postretirement benefit obligations</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: 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;color: #000000; background: #ffffff;">

<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>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;&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>

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

</TABLE>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<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">
    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 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.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='113'></A>
</DIV>

<!-- link1 "INDUSTRY OVERVIEW" -->

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The rotating equipment industry includes a wide and diverse
range of products, which can be grouped into two distinct
categories:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <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">
    &#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</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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.</TD>
</TR>

</TABLE>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our industry is typically divided into two segments: new unit
sales and aftermarket parts and services.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New unit sales includes the engineering, manufacturing and sales
of reciprocating and centrifugal compressors, steam and gas
turbines, expanders and control systems.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <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">
    <B><I>Reciprocating Compressors.</I></B> 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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Centrifugal Compressors.</I></B> 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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Turbines.</I></B> Steam and gas turbines are typically
    used as prime movers for mechanical and electrical drive
    applications including compressors, pumps, fans, blowers, and
    electrical generators.</TD>
</TR>

</TABLE>

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

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

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

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
provider, clients typically seek suppliers who can provide
responsive and reliable service and solutions, from locally
based service centers, across their entire installed base.
</DIV>

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

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

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <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">
    natural gas consumption worldwide is forecasted to increase at
    an annual average growth rate of 2.4%&nbsp;per year from
    2001-2030 as a result of worldwide economic growth and the
    recognition of natural gas as a clean air fuel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="y16020y1602004.gif" alt="(Graph)">
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <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 refining sector continues to experience demand pressures as
    current refinery capacity is reaching a peak;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</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 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</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="y16020y1602005.gif" alt="(Graph)">
</DIV>

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    <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">
    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.</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="y16020y1602006.gif" alt="(Graph)">
</DIV>

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

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

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

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    <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 demand for rotating equipment solutions is tied primarily to
    oil and natural gas consumption, which is generally less
    cyclical in nature than exploration activities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</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 customer base for rotating equipment solutions covers a wide
    range of end markets; 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">
    demand for rotating equipment and services is geographically
    diversified.</TD>
</TR>

</TABLE>

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

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

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<A name='114'></A>
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 38% 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 Royal Dutch Shell, ExxonMobil, BP, Statoil, Chevron,
Petrobras, Pemex, PDVSA, Conoco, Lukoil, Marathon and Dow
Chemical. 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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. For the
nine months ended September&nbsp;30, 2004 and September&nbsp;30,
2005, we generated net income of $37.7&nbsp;million and
$4.9&nbsp;million and EBITDA of $60.6&nbsp;million and
$108.1&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
$586.2&nbsp;million at September&nbsp;30, 2004 to
$872.8&nbsp;million at September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 units 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>

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    <TD>&#149;&nbsp;</TD>
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    lower clients&#146; total cost of ownership and improve
    equipment performance;</TD>
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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    lower our and our clients&#146; transaction costs;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    better forecast our future revenues;&nbsp;and</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    develop a broad, continuing
    <FONT style="white-space: nowrap">business-to</FONT>-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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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>

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$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:
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    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the trend to increased outsourcing of equipment maintenance and
    operation;</TD>
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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the maturation of producing fields worldwide, which requires
    increasing use of compression equipment to maintain production
    levels;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the substantial increase in demand for natural gas, which is
    driving growth in gas production, storage and transmission
    infrastructure;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    regulatory and environmental initiatives, including clean fuel
    legislation and stricter emissions controls worldwide;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the aging installed base of equipment, which is increasing
    demand for aftermarket parts and services, revamps and upgrades;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    increasing construction of natural gas production, storage and
    transportation infrastructure;&nbsp;and</TD>
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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the increased worldwide demand for fuel and feedstock resulting
    from economic growth.</TD>
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<B>Competitive Strengths</B>
</DIV>

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<I>Global Presence and Market Leadership.</I> 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.
</DIV>

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<I>Largest Installed Base in the Industry.</I> 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 38% 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:
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    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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.</TD>
</TR>

</TABLE>

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<I>Largest Network of Service and Support Centers.</I> 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.
</DIV>

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<I>Leading Technology Platform.</I> 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
</DIV>

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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.
</DIV>

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<I>Fastest Cycle Time.</I> 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.
</DIV>

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<I>Substantial Investment in Systems.</I> 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:
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    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Configurator.</I> 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.</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>D-R Avenue.</I> 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.</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Client Interface and Response System (CIRS).</I> 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.</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Skills Registry.</I> 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.</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>TEST.</I> We use a Siebel-based technology enabled selling
    tool (TEST), 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.</TD>
</TR>

</TABLE>

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<I>Strong and Experienced Management Team.</I> 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.
</DIV>

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<I>Attractive Business Model.</I> Our business model has several
attractive features, including:
</DIV>

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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Strong, Stable Cash Flow with Low Growth Capital
    Requirements.</I> 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</TD>
</TR>

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    <TD></TD>
    <TD align="left">
    flow from operations was $222.4&nbsp;million for the nine months
    ended September&nbsp;30, 2005 compared to $64.5&nbsp;million for
    the same period in 2004. Our cash 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.</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Visibility.</I> 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 September&nbsp;30, 2005 and September&nbsp;30,
    2004, our new units backlog was $687.3&nbsp;million and
    $417.8&nbsp;million, respectively, representing a 64.5%
    increase. As of December&nbsp;31, 2004 and December&nbsp;31,
    2003, our new units backlog was $489.3&nbsp;million and $287.7
    million, respectively, representing a 70.1% 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 for a net aggregate amount of approximately
    $733,000.</TD>
</TR>

</TABLE>

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<B>Business Strategy</B>
</DIV>

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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:
</DIV>

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<I>Increase Sales of Aftermarket Parts and Services to Existing
Installed Base.</I> 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Expand Aftermarket Parts and Services Business to
Non-Dresser-Rand OEM Equipment.</I> 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.
</DIV>

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<I>Grow Alliances.</I> 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,
</DIV>

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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
partner for rotating equipment with Statoil, Marathon Ashland
Petroleum and Shell Chemicals (USA). In addition, we are a
preferred, non-exclusive supplier to other alliance partners,
including BP, ConocoPhillips, ExxonMobil and Duke Energy.
</DIV>

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<I>Expand our Performance-Based Long-Term Service Contracts.</I>
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.
</DIV>

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<I>Introduce New and Innovative Products and Technologies.</I>
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Continue to Improve Profitability.</I> 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 5,942 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 nine months ended
September&nbsp;30, 2005 and the year ended December&nbsp;31,
2004 improved substantially as compared to the nine months ended
September&nbsp;30, 2004 and 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.
</DIV>

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<I>Selectively Pursue Acquisitions.</I> 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.
</DIV>

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<B>Services and Products</B>
</DIV>

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

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<IMG src="y16020y1602000.gif" alt="(PIE CHART)">
</DIV>

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

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

</TABLE>

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

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<IMG src="y16020y0216008.gif" alt="(PRODUCT TABLE)">
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Turbo Products.</I> 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.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
Applications for our turbo products include gas lift and
injection, gas gathering, storage and transmission, synthetic
fuels, ethylene, fertilizer, refineries and chemical production.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Reciprocating Compressors.</I> 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Steam Turbines.</I> 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 kilowatts 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.
</DIV>

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Revamp/Upgrade Opportunities</I></TD>
</TR>

</TABLE>

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

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

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

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
components such as governors, bearings, seals, pistons,
electronic control devices, and retrofitting of existing
lubrication, sealing and control systems with newer technology.
</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>New Product Development</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
<FONT style="white-space: nowrap">first-in</FONT>-class products
opening up new markets.
</DIV>

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

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

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

</TABLE>

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

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    <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">
    Replacement Parts</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Equipment Repair&nbsp;&#38; Rerates</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Field Service Turnaround</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Equipment Installation</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    U.S.&nbsp;Navy Service&nbsp;&#38; Repair</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Applied Technology</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Operation and Maintenance Contracts</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Long-Term Service Agreements</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Rotor Storage</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Special Coatings/ Weldings</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Condition Monitoring</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Product Training</TD>
</TR>

</TABLE>

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<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">
    Controls Retrofit</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Turnkey Installation/ Project Management</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Equipment Technology Upgrades</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Site/ Reliability Audits</TD>
</TR>

</TABLE>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 50% larger than that of our next
closest competitor.
</DIV>

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

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

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

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

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
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, India, Germany and Brazil.
</DIV>

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

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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, Chevron, 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, BP represented 10.8% of our total revenues.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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, non-exclusive supplier alliances with ConocoPhillips,
ExxonMobil, Duke Energy and BP.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
<FONT style="white-space: nowrap">non-U.S.&nbsp;companies.</FONT>
The principal methods of competition in these markets relate to
product performance, client service, product lead times, global
reach, brand
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">81

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Over the last 20&nbsp;years, the turbo compressor industry has
consolidated from more than 15 to 7&nbsp;of our larger
competitors, the reciprocating compressor industry has
consolidated from more than 12 to 7 of our larger competitors
and the steam turbine industry has consolidated from more than
18 to 6 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
Compression, Neuman&nbsp;&#38; Esser, Peter Brotherhood Ltd.,
Ariel Corp., Thomassen and Mitsui; and in the steam turbine
industry include Elliott/Ebara, Siemens, General Electric/ Nuovo
Pignone, Mitsubishi Heavy Industries, Shin Nippon and
K&#252;hnle, Kopp&nbsp;&#38; Kausch.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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, $1.0&nbsp;million and $4.7&nbsp;million
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 for the nine months ended
September&nbsp;30, 2005, 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.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of September&nbsp;30, 2005, we had 5,139&nbsp;employees
worldwide. Of our employees, approximately 65% are located in
the United States. Approximately 35% of our employees in the
United States are covered by collective bargaining agreements. A
new collective bargaining agreement with IAM Moore
Lodge&nbsp;#&nbsp;1580 that represents employees at our
Wellsville, New York facility was recently ratified. None of our
material collective bargaining agreements will expire through
the end of 2006, and one will expire in each of 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 35% of our
employees belong to industry or national labor unions. We
believe that our relations with our employees are good.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">82

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 January&nbsp;1, 2006.
</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="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="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>Approx.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Location</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Status</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Square Feet</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Type</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">
    Painted Post, New York</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Owned/Leased</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>840,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Manufacturing and services</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Olean, New York</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Owned/Leased</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>970,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Manufacturing and services</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Wellsville, New York</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Owned/Leased</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>380,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Manufacturing and services</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Burlington, Iowa</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Owned</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>185,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Manufacturing and services</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Millbury, Massachusetts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Owned</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Manufacturing and services</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Campinas, Brazil</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Owned</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Manufacturing and services</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Kongsberg, Norway</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Leased</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Manufacturing and services</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Le Havre, France</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Owned/Leased</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>866,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Manufacturing and services</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Naroda, India</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Leased</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Manufacturing and services</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Oberhausen, Germany</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Owned</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Manufacturing and services</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bielefeld, Germany</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Owned</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Manufacturing and services</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Houston, Texas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Owned</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Services</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Houston, Texas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Owned</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Controls</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Houston, Texas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>Owned</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>Warehouse and offices</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Environmental and Government Regulation</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 the 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 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.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">83

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 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 been
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 and, to date, the parties
have resolved all but a small number of them. We do not believe
any of the outstanding items are material.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='115'></A>
</DIV>

<!-- link1 "MANAGEMENT" -->

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors currently consists of eight directors. At
the annual meeting of stockholders, directors will be elected to
serve a term of one year and until their successors are duly
elected and qualified.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the name, age as of
January&nbsp;1, 2006 and position of each person that serves as
an executive officer or director of our company.
</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="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="56%">&nbsp;</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>Age</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Position</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 colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></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">
    Vincent R. Volpe Jr.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President, Chief Executive Officer and Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Leonard M. Anthony</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President and Chief Financial Officer</TD>
</TR>

<TR>
    <TD 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>46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President Finance</TD>
</TR>

<TR>
    <TD 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>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President, Worldwide Product Services</TD>
</TR>

<TR>
    <TD 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>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President, New Equipment Worldwide</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher Rossi</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President and General Manager,<BR>
    North American Operations</TD>
</TR>

<TR>
    <TD 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>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President and General Manager, European Operations</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Elizabeth C. Powers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President and Chief Administrative Officer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Randy D. Rinicella</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President, General Counsel and Secretary</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lonnie A. Arnett</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President, Controller and Chief Accounting Officer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William E. Macaulay</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chairman of the Board of Directors</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas J. Sikorski</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mark A. McComiskey</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Kenneth W. Moore</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Michael L. Underwood</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Louis A. Raspino</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Philip R. Roth</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Vincent R. Volpe Jr.</I></B> 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; 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Leonard M. Anthony </I></B>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
</DIV>

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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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;2002. 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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
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 at a Peugeot subsidiary,
specializing in military and aerospace hydraulic equipment.
Mr.&nbsp;Chevrier earned a BSME from Tarbes University in France.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Elizabeth C. Powers </I></B>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 April 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Randy D. Rinicella</I></B> 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Lonnie A. Arnett</I></B> has been our Vice President,
Controller and Chief Accounting Officer since June 2005. Prior
to that, he served as Vice President, Controller and Chief
Accounting Officer for International Steel Group Inc. since
November 2003. From May 1984 to October 2003, Mr.&nbsp;Arnett
served as Vice President, Controller and Chief Accounting
Officer of Bethlehem Steel Corporation. In October 2001,
Bethlehem Steel filed for bankruptcy protection under
Chapter&nbsp;11 of the U.S. Bankruptcy Code. Mr.&nbsp;Arnett
held financial leadership positions in auditing and as Corporate
Controller at Armco from April 1977 to April 1984. He also led a
variety of audit engagements for Deloitte&nbsp;&#38; Co., now
Deloitte and Touche, from June 1968 to March 1977.
Mr.&nbsp;Arnett is a CPA and earned a BS in Accounting from
Western Kentucky University and an AMP from Harvard Business
School.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>William E. Macaulay </I></B>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
<FONT style="white-space: nowrap">co-founder</FONT> 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Thomas J. Sikorski</I></B> 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
<FONT style="white-space: nowrap">co-founder</FONT> 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.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Mark A. McComiskey</I></B> has been a member of our board
of directors since the acquisition in October 2004.
Mr.&nbsp;McComiskey is a Director 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Kenneth W. Moore</I></B> has been a member of our board of
directors since the acquisition in October 2004. Mr.&nbsp;Moore
is a Managing 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Michael L. Underwood</I></B> has been a member of our
board of directors since August 2005. He has over 35 years of
accounting experience. He joined Arthur Andersen LLP in 1968 and
advanced through accounting positions of increasing
responsibility. He served as Staff, Senior or Manager from
February 1968 to September 1978 and he served as Partner from
September 1978 to June 2002 where he led a variety of audit
engagements and served as an advisory partner for public
manufacturing companies. From June 2002 to June 2003,
Mr.&nbsp;Underwood served as Director at Deloitte &#38; Touche
LLP where he conducted
<FONT style="white-space: nowrap">Sarbanes-Oxley</FONT>
training, among other things. Mr.&nbsp;Underwood earned both a
BS and a Masters in Accounting from the University of Illinois.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Louis A. Raspino </I></B>has been a member of our board of
directors since December 2005. He has over 30 years of
experience in the oil and gas exploration production and service
industry. Mr. Raspino has been the President and Chief Executive
Officer of Pride International Inc. since June&nbsp;2005 and was
an Executive Vice President and Chief Financial Officer from
December 2003 until June&nbsp;2005. Before joining Pride
International in December 2003, he was Senior Vice President and
Chief Financial Officer of Grant Prideco, Inc. from July 2001
until December 2003. From December 2000 until April 2001, Mr.
Raspino served as Senior Vice President, Chief Financial Officer
and Chief Operating Officer of JRL Enterprises, Inc. Previously,
he was also Vice President of Finance for Halliburton Company,
Senior Vice President and Chief Financial Officer of The
Louisiana Land&nbsp;&#38;&nbsp;Exploration Company and began his
career with Ernst&nbsp;&#38;&nbsp;Young. Mr. Raspino is a CPA
and earned a BS from Louisiana State University in New Orleans
and an MBA from Loyola University.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Philip R. Roth </I></B>has been a member of our board of
directors since December 2005. He has over 30&nbsp;years of
accounting and finance experience. Mr.&nbsp;Roth was formerly
Vice President, Finance and Chief Financial Officer of Gardner
Denver, Inc., from May&nbsp;1996 until August&nbsp;2004. Prior
to joining Gardner Denver, Mr. Roth was with Emerson Electric
Co. from 1980 until 1996 where he held positions in accounting,
treasury and investor relations at the corporate office, and in
strategic planning and acquisitions, and as a Chief Financial
Officer at the division level. Mr. Roth is a CPA and began his
career with Price Waterhouse. He earned a BS in Accounting and
Business Administration from the University of Missouri and an
MBA from the Olin School of Business at Washington University.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors currently consists of
eight&nbsp;directors, including three&nbsp;independent
directors, Messrs.&nbsp;Underwood, Raspino and Roth.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If First Reserve owns more than 50% of our common stock upon
completion of this offering, we will continue to be a
&#147;controlled company&#148; under the New York Stock Exchange
corporate governance rules. As a result, we would continue to 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. We are currently utilizing these exemptions. In the
event First Reserve owns less than a majority of our common
stock upon completion of this offering, we will cease to be a
controlled company within the meaning of these rules and we will
be required to comply with these provisions within one year
following completion of this offering.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors currently has an audit committee, a
compensation committee and a nominating and corporate governance
committee.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our audit committee currently consists of Mark A. McComiskey,
Kenneth&nbsp;W. Moore, Louis&nbsp;A. Raspino, Philip&nbsp;R.
Roth and Michael L. Underwood. Messrs. Raspino, Roth and
Underwood are independent members and Mr. Underwood is a
&#147;financial expert&#148; as such term is defined in
Item&nbsp;401(h) of the
<FONT style="white-space: nowrap">Regulation&nbsp;S-K.</FONT> We
expect to have only independent directors on our audit committee
within the transition period specified in
<FONT style="white-space: nowrap">Rule&nbsp;10A-3</FONT> under
the Exchange Act. 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 management&#146;s
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The board of directors has approved and adopted a Code of
Business Conduct for all employees and an additional 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.
</DIV>

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

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

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

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

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">89

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
(4)&nbsp;establishing criteria for and leading the annual
performance self-evaluation of the board of directors and each
committee.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None of our non-independent directors currently receives any
additional compensation for serving as a director or as a member
or chair of a committee of the board of directors. In connection
with and following our initial public offering, we have added
independent directors to our board. We plan to pay our
independent directors an annual retainer of $36,000 in cash and
$30,000 in annual grants of restricted stock pursuant to the
2005 Directors Stock Incentive Plan. We also plan to pay
independent directors a fee of $10,000 for acting as committee
chairs ($15,000 for serving as audit committee chair). For each
of the first six board or committee meetings our independent
directors attend in person during any year, they will earn a fee
of $4,000, and for any additional meetings they attend in person
or for any meeting they attend telephonically, they will be paid
a fee of $1,000. In addition, our independent directors may opt
to receive shares of our common stock in lieu of any cash
directors&#146; fees under our 2005 Directors Stock Incentive
Plan.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Compensation Committee Interlocks and Insider
Participation</B>
</DIV>

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

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 2004 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>1,330,000</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>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">90

<!-- 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: 9pt; ">

<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>
    <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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<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="center" valign="bottom" nowrap>440,100&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>

<TD align="center" valign="bottom" nowrap>425,493&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>

<TD align="center" valign="bottom" nowrap>282,400&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>

<TD align="center" valign="bottom" nowrap>431,246&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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;color: #000000; background: #ffffff;">

<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>

<TR>
    <TD style="font-size: 3pt">&nbsp;</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 Messrs.&nbsp;Riordan, Nye, Dickson
    and 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 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.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">91

<!-- 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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Stock Options and Stock Appreciation Rights of
    Ingersoll-Rand</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 2004 fiscal year.
</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="24%">&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="7%">&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>
    <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="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="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Grant Date</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Individual Grants</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value</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="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="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&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>Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&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>Underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options/SARs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Grant Date</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options/SARs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Granted to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise or</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Present</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Granted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Employees in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Base</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value ($)</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>(#)(a)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fiscal Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price ($/SH)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expiration Date (b)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(c)</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>
    <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">
    Vincent R. Volpe Jr.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.57</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>64.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>October&nbsp;31, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22.74</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Walter J. Nye</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.28</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>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>October&nbsp;31, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.74</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stephen A. Riordan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.15</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>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>October&nbsp;31, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.74</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bradford W. Dickson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.20</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>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>October&nbsp;31, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.74</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jean-Francois&nbsp;Chevrier</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.19</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>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>October&nbsp;31, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.74</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Options/ SARs issued by Ingersoll-Rand prior to the date of the
    acquisition.</TD>
</TR>

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

<TR valign="top">
    <TD>(b)&nbsp;</TD>
    <TD align="left">
    Options became exercisable as of October&nbsp;31, 2004.
    Unexercised options/ SARs have no financial impact on us.</TD>
</TR>

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

<TR valign="top">
    <TD>(c)&nbsp;</TD>
    <TD align="left">
    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:</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="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</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>
</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>
</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>
</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>
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Exercise of Options and Stock Appreciation Rights of
    Ingersoll-Rand</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</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="24%">&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="4%">&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="4%">&nbsp;</TD>
    <TD width="3%">&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="4%">&nbsp;</TD>
    <TD width="3%">&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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Number of Securities</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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Underlying Unexercised</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Value of Unexercised</B></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="6" align="center" nowrap><B>Options/SARs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>In-the-Money</B></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="6" align="center" nowrap><B>at Fiscal Year-End</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Options/SARs</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(#)(a)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>at Fiscal Year-End ($) (b)</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Acquired on</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value</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="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</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>Exercise (#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Realized ($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unexercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Unexercisable</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 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="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vincent R. Volpe Jr.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,813,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#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">
    Walter J. Nye</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>417,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,333</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>1,006,191</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">
    Stephen A. Riordan</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>10,280</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>290,387</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">
    Bradford W. Dickson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>442,458</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,033</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>439,311</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">
    Jean-Francois Chevrier</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>335,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,135</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>351,196</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>

</TABLE>
</CENTER>

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

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

<TR valign="top">
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Options/ SARs issued by Ingersoll-Rand prior to the date of the
    acquisition.</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;color: #000000; background: #ffffff;">

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

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    Unexercised options/ SARs have no financial impact on us.</TD>
</TR>

</TABLE>

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

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

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

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

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

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
profit 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, <FONT style="white-space: nowrap">Dresser-Rand</FONT>
Holdings, LLC may elect to liquidate his common units in
exchange for shares of our common stock having an equivalent
total value. If Mr.&nbsp;Volpe resigns for &#147;good
reason&#148; or is terminated without cause and
<FONT style="white-space: nowrap">Dresser-Rand</FONT> Holdings,
LLC does not elect to convert his common units to common shares,
he may require
<FONT style="white-space: nowrap">Dresser-Rand</FONT> Holdings,
LLC to do so and require
<FONT style="white-space: nowrap">Dresser-Rand</FONT> Holdings,
LLC to repurchase those shares.
</DIV>

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

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
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;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Dresser-Rand Holdings, LLC Membership Interests</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 profit 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&nbsp;2004. 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
the Holdings LLC Agreement, management 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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The only asset of Dresser-Rand Holdings, LLC is its ownership,
through D-R Interholding, LLC, of our shares. 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 October and 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. The proceeds of all
common unit issuances were used to acquire, through D-R
Interholding, LLC, our shares.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The proceeds from the dividends paid to shareholders in
connection with our initial public offering were distributed to
members of Dresser-Rand Holdings, LLC in accordance with the
terms of the Holdings LLC Agreement. Affiliates of First Reserve
received approximately $544.3&nbsp;million, and the management
members of Dresser-Rand Holdings, LLC received approximately
$11.8&nbsp;million in the aggregate, with Messrs.&nbsp;Volpe,
Anthony, Nye, Riordan, Dickson and Chevrier, respectively,
receiving approximately $3,779,192, $1,462,726, $441,237,
$851,303, $757,544 and $453,645.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Dresser-Rand Holdings, LLC currently holds 54,221,932 shares of
our common stock. The amount of proceeds that would be received
by management members of Dresser-Rand Holdings, LLC in connection
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
with a sale by Dresser-Rand Holdings, LLC depends on the amount
of cash proceeds received by First Reserve compared to various
multiples of First Reserve&#146;s cost per share. If
Dresser-Rand Holdings, LLC were to sell all of its shares (in
this offering and one or more other secondary offerings, for
example), then it would generate proceeds equal to the number of
shares of our common stock it holds multiplied by the average
price per share at which the shares were sold. If these sales
were to occur at an average price per share above $14.07, the
management members would be fully vested in their profits units,
and would receive approximately 9.6% of the net proceeds raised
in such sales, with Messrs. Volpe, Anthony, Nye, Riordan,
Dickson and Chevrier, respectively, receiving approximately
4.1%, 0.9%, 0.4%, 0.7%, 0.5% and 0.4% of the net proceeds.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All such payments to management would be from the proceeds of
stock sales by Dresser-Rand Holdings, LLC, which may be effected
through D-R Interholding, LLC, neither of which is consolidated
in our financial statements. Though management would receive no
payment from us in connection with this or any other such
offering, we would record a
<FONT style="white-space: nowrap">pre-tax</FONT> and after-tax,
non-cash compensation expense in connection with the exit units
and an increase in paid-in capital approximately equal to the
amount of proceeds received by management in respect of such
exit units. Neither cash nor total stockholders&#146; equity
would be impacted.
</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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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: 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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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, which it is anticipated will consist solely of
amounts realized with respect to Dresser-Rand Holdings,
LLC&#146;s investment in our shares. Profit units consist of
service units and five tranches of exit units, and, as explained
in more detail below, 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 unit, although the exit units are subject to the
additional condition that the applicable performance-based
conditions are satisfied. The benchmark amount of $4.33 for each
profit unit was set at the initial per unit cost of the common
units, which equated to the value of our shares at the time of
the acquisition. Because the benchmark amount was set at this
amount, profit units will share in distributions from
Dresser-Rand Holdings, LLC only if there is any realized gain in
the value of our shares. It is anticipated that any cash
received by Dresser-Rand Holdings, LLC with respect to our
shares that it owns (including the shares being sold in this
offering) will be promptly distributed to the holders of the
common units and, to the extent applicable, the profit units.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of January&nbsp;1, 2006, approximately 98.4% of common units
were held by First Reserve and approximately 1.6% were held by
certain and former members of our management. The profit units
are held exclusively by members of our management.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Terms of the Common Units, Service Units and the Exit Unit
    Tranches</I></B></TD>
</TR>

</TABLE>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
Holders of profit units generally will not be entitled to
distributions in respect of such units until such time as the
amounts that would otherwise have been distributed in respect of
each such unit equals the benchmark amount described above,
except that Dresser-Rand Holdings, LLC may advance tax
distributions to help cover any allocations of taxable income to
them. Once this benchmark amount is achieved, profit units will
participate proportionately in distributions.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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. The initial public offering
was not considered a change of control under the Holdings LLC
Agreement. Although unvested service units are subject to
forfeiture if a management member&#146;s service terminates,
management members are entitled to receive any distributions of
profits and losses payable with respect to their unvested
service units as long as they are providing services to or for
the benefit of Dresser-Rand Holdings, LLC at the time of the
distribution.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to the management member&#146;s continued service to or
for the benefit of Dresser-Rand Holdings, LLC management members
will be entitled to receive a distribution of profits over and
above the benchmark amount on their exit units upon the
occurrence of a transaction where First Reserve receives cash,
cash equivalents or marketable publicly-traded securities on or
with respect to its common units, if the value First Reserve
receives from the transaction, or the cumulative value resulting
from any prior transactions, exceeds multiples of the initial
price paid by First Reserve for its units ranging from 2.25 to
3.25. Any tranche of exit units that does not become vested in a
transaction described in the preceding sentence that is a change
of control under the Holdings LLC Agreement will automatically
be cancelled and the holder will not be entitled to any
distributions with respect to such cancelled exit units. This
offering will not be a change of control under the
Holdings&nbsp;LLC Agreement. It is anticipated that this
offering will be a transaction that will result in a
distribution on some of the exit units because we expect that
some of the multiples will be achieved.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a management member ceases to provide services to or for the
benefit of Dresser-Rand Holdings, LLC, Dresser-Rand Holdings,
LLC may liquidate the management member&#146;s units in exchange
for shares of our common stock. The actual number of shares of
our common stock that a management member would receive will be
determined at the time, and will have the same total value as
the amount the management member would receive if Dresser-Rand
Holdings, LLC were to sell all of its assets for cash and
distribute the proceeds to its members.
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
    <TD>
    <B><I>Certain Rights and Restrictions Applicable to the
    Units</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The units held by members are not transferable for a limited
period of time except in certain circumstances. In addition,
units held by management members may be repurchased by
Dresser-Rand Holdings,&nbsp;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 any successor entity in connection with an
initial public offering of such successor entity to Dresser-Rand
Holdings, LLC under the Holdings LLC Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 of any successor entity to
Dresser-Rand Holdings, LLC under the Holdings&nbsp;LLC Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>2005 Stock Incentive Plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors has adopted, and our stockholders have
approved, 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.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A total of approximately 4.3&nbsp;million shares of our common
stock are available for awards under the 2005 Stock Incentive
Plan and the 2005 Directors 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.
</DIV>

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

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

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

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

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

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">97

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Section&nbsp;162(m) of the Code.</I> 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>2005 Directors Stock Incentive Plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors has adopted, and our stockholders have
approved, our 2005&nbsp;Directors Plan for our directors who are
not also our officers or employees, or officers or employees of
First Reserve. The 2005&nbsp;Directors Plan is administered by
our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A total of approximately 4.3 million&nbsp;shares of our common
stock are available for awards under the 2005&nbsp;Directors
Plan and the 2005 Stock Incentive 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There will be two types of awards of shares under the
2005&nbsp;Directors Plan. Eligible directors receive an annual
grant with a value of $30,000 immediately following the first
regular meeting of our board of directors in any year the
2005&nbsp;Directors Plan is in effect (the annual grant for 2005
was awarded in connection with our initial public offering).
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 $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. A pro-rata portion of the
annual grant of shares may be awarded to eligible directors who
join our board of directors following the normal grant date.
</DIV>

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

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

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

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

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

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">98

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
approval of any amendments to the 2005&nbsp;Directors Plan will
be required, and will seek such approval if necessary.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors has adopted 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 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.
</DIV>

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

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

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Section&nbsp;162(m) of the Code.</I> 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 Annual
Incentive Plan before the first meeting of our stockholders in
2009 at which directors will be elected.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">99

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
 <A name='116'></A>
</DIV>

<!-- link1 "PRINCIPAL AND SELLING STOCKHOLDERS" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table and accompanying footnotes show information
regarding the beneficial ownership of our common stock, before
this offering and after this offering, held directly 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 may be sold to the underwriters pursuant to their
over-allotment option.
</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="34%">&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="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="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="3%">&nbsp;</TD>
    <TD width="3%">&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="15" align="center" nowrap><B>Shares Beneficially Owned After This Offering</B></TD><TD></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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" 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>Shares Beneficially</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Assuming the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Assuming the</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Owned Immediately</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Underwriters&#146; Option Is</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Underwriters&#146; Option Is</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Prior to this Offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Not Exercised(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Exercised in Full</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD colspan="7" 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>Percent of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name of Beneficial Owner</B></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>Common</B></TD><TD></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>Common</B></TD><TD></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>Common</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>&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>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" 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">
    Dresser-Rand Holdings, LLC(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,221,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63.5</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>&nbsp;</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 align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Michael L. Underwood(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,429</TD>
    <TD>&nbsp;</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">
    Louis A. Raspino</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</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">
    Philip R. Roth</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</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">
    Directors and executive officers as a group (17 persons)(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;</TD>
    <TD align="left">
    Less than 1% of outstanding common stock.</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The selling stockholder will grant the underwriters an option to
    purchase up to an
    additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    in this offering.</TD>
</TR>

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

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    63.5% of our common stock is owned by D-R Interholding, LLC,
    which in turn is 100% owned by Dresser-Rand Holdings, LLC.
    Dresser-Rand Holdings, LLC is controlled 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;). First Reserve GP
    IX, L.P. (&#147;GP IX&#148;) is the general partner of
    Fund&nbsp;IX. First Reserve GP IX, Inc. (&#147;GP IX Inc.&#148;)
    is the general partner of GP IX. First Reserve GP X, L.P.
    (&#147;GP X&#148;) is the general partner of Fund&nbsp;X. First
    Reserve GP X, Inc. (&#147;GP X, Inc.&#148;) is the general
    partner of GP X. First Reserve Corporation is the adviser to
    Fund&nbsp;IX and Fund&nbsp;X. The officers for GP IX, GP IX
    Inc., GP X and GP X Inc. are William E. Macaulay, John A. Hill,
    Ben A. Guill, Thomas R. Denison, J.W.G. (Will) Honeybourne, Alex
    T. Krueger, Thomas J. Sikorski, Jennifer C. Zarrilli, Craig M.
    Jarchow, Kenneth W. Moore, Catia Cesari, Timothy H. Day, Joseph
    Robert Edwards, Mark A. McComiskey, J. Hardy Murchison, Glenn J.
    Payne, Kristin A. Custar, Brian K. Lee, Bingfeng Leng, Timothy
    K. O&#146;Keeffe, Anne E. Gold, Valerie A. Thomason and Damien
    T. J. Harris, who are all employees of First Reserve. Decisions
    with respect to voting and investments are made by the
    Investment Committee of First Reserve, made up of a subset of
    these officers that includes the officers named above except for
    Ms.&nbsp;Thomason and Mr.&nbsp;Harris. With respect to
    investments held by these entities, decisions with respect to
    operations oversight are made by the subset of these officers
    that work most closely on a given investment, which includes
    Messrs.&nbsp;Macaulay, McComiskey, Moore and Sikorski in the
    case of Dresser-Rand Group Inc. The address of GP IX, Inc., GP
    IX, Fund&nbsp;IX, GP X, Inc., GP X, Fund&nbsp;X and First
    Reserve Corporation is c/o&nbsp;First Reserve Corporation, One
    Lafayette Place, Greenwich, CT 06830.</TD>
</TR>

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

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    The address of Messrs.&nbsp;Raspino, Roth and Underwood is c/o
    Dresser-Rand Group Inc., Paul Clark Drive, Olean, New York 14760.</TD>
</TR>

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

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Because members of senior management hold their interests in
    units of Dresser-Rand Holdings, LLC, which is controlled by
    First Reserve, they are not deemed to beneficially own the
    common stock of Dresser-Rand Group Inc. in which they have an
    economic interest.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">100

<!-- 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the beneficial ownership of our common stock set
forth in the table above, First Reserve and certain of our
directors and named executive officers own an economic interest
in our common stock indirectly through membership units in
Dresser-Rand Holdings, LLC. The information in the table below
reflects the number of shares of our common stock that
correspond to each named holder&#146;s economic interest in
common units in
<FONT style="white-space: nowrap">Dresser-Rand&nbsp;Holdings,&nbsp;LLC</FONT>
and does not reflect any economic interest in profit units. The
following table and accompanying footnotes show information
regarding the economic interest of our common stock by
(i)&nbsp;each person known by us to hold an economic interest in
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 Dresser-Rand Group Inc., Paul Clark
Drive, Olean, New York 14760.
</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="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&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="3%">&nbsp;</TD>
    <TD width="1%">&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>
</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="14" align="center" nowrap><B>Economic Interest Held</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="14" align="center" nowrap><B>After This Offering</B></TD><TD></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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" 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>Economic Interest Held</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Assuming the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Assuming the</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Immediately Prior to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Underwriters&#146; Option</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Underwriters&#146; Option</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>This Offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Is Not Exercised(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Is Exercised in Full</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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of</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="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name of Economic Interest Holder</B></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>Stock</B></TD><TD></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>Stock</B></TD><TD></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>Stock</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>&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>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    First Reserve Fund X, L.P.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,250,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&nbsp;&nbsp;</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;&nbsp;&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    First Reserve Fund IX, L.P.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,086,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24.7</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>&nbsp;</TD>
    <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">
    Vincent R. Volpe Jr.</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <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">
    Leonard M. Anthony</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>118,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <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 align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stephen A. Riordan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <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">
    Walter J. Nye</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,022</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <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 align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bradford W. Dickson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <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">
    Christopher Rossi</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <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 align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jean-Francois Chevrier</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <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">
    Elizabeth C. Powers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <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 align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Randy D. Rinicella</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <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">
    Lonnie A. Arnett</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">&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">
    William E. Macaulay(2)</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">&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">
    Thomas J. Sikorski(2)</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">&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">
    Mark A. McComiskey(2)</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">&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">
    Kenneth W. Moore(2)</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">&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">
    Directors and executive officers as a group (17 persons)(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>766,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <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: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD align="left">
    Less than 1% of outstanding common stock.</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The selling stockholder will grant the underwriters an option to
    purchase up to an
    additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    in this offering.</TD>
</TR>

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

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;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.&nbsp;Sikorski is a Managing
    Director of First Reserve Corporation, GP IX, Inc. and GP X,
    Inc. Mr.&nbsp;Moore is a Director of First Reserve Corporation,
    GP IX, Inc. and GP X, Inc. Mr.&nbsp;McComiskey is a Vice
    President of First Reserve Corporation, GP IX, Inc. and GP 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 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.</TD>
</TR>

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

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Excludes 1,585 shares of common stock directly held by Louis A.
    Raspino, Philip R. Roth and Michael L. Underwood as set forth in
    the previous table.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">101

<!-- 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;color: #000000; background: #ffffff;">
<A name='117'></A>
</DIV>

<!-- link1 "CERTAIN RELATED PARTY TRANSACTIONS" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Amended and Restated Limited Liability Company Agreement of
Dresser-Rand Holdings, LLC</B>
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the acquisition, we entered into a
stockholders agreement with First Reserve and certain management
stockholders, which was amended and restated in connection with
the initial public offering. The stockholders agreement provides
that our board of directors consist of six members. The board
may be subsequently expanded by vote of the board to include
additional directors, including such additional independent
directors as may be required by applicable securities laws or
the rules of any exchange on which shares of our common stock
are traded. The stockholders agreement provides that for so long
as First Reserve holds at least 5% of the outstanding shares of
our common stock, it may designate all of the nominees for
election to our board of directors other than any independent
directors. All stockholders that are a party to the stockholders
agreement are obligated to vote their shares in favor of such
nominees. Independent directors will be designated for
nomination by our board of directors, however such independent
nominees must be reasonably acceptable to First Reserve for so
long as its holds at least 5% of the outstanding shares of our
common stock. Our board of directors currently consists of our
Chief Executive Officer, four other directors nominated by First
Reserve, Louis A. Raspino, Philip R. Roth and Michael&nbsp;L.
Underwood.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For so long as First Reserve holds at least 20% of the
outstanding shares of our common stock, many significant
decisions involving us require the approval of a majority of our
board of directors and at least one director designated for
nomination by First Reserve who is also an officer of First
Reserve Corporation. For example, the following transactions are
subject to such approval requirements: any acquisition or sale
of assets involving amounts in excess of one percent of sales
during any twelve month period, or any acquisition of another
business or any equity of another entity; any merger,
consolidation, substantial sale of assets or dissolution
involving us or any of our material subsidiaries; any
declaration of dividends; the issuance of common stock or other
securities of us or any of our material subsidiaries; and any
amendment to our amended and restated certificate of
incorporation or comparable organizational documents of our
material subsidiaries. Although state law is ambiguous regarding
the extent to which fiduciary duties can be waived by contract,
to the extent permitted by law, First Reserve has no implied or
express duty to us or you regarding the approval or disapproval
of these transactions. In addition, to the extent permitted by
law, the stockholders agreement specifically provides that First
Reserve and its affiliates may engage in material business
transactions with us, pursue acquisition opportunities that may
be complementary to us or make investments in companies that
compete directly or indirectly against us, and will not be
deemed to breach any fiduciary duty.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The stockholders agreement provides that First Reserve will have
the ability to require us to register its shares of our common
stock and may also 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,
in connection with other registered offerings by us, holders of
shares of our common stock who are parties to the stockholders
agreement will have the ability to exercise certain piggyback
registration rights with respect to their shares. Also, we are
obligated to pay the fees associated with any public offering of
shares held by First Reserve and management stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The stockholders agreement has an indefinite term. The
stockholders agreement may generally be terminated or amended
with the written consent of the stockholders holding a majority
of the shares of our common stock subject to the agreement;
however, any amendment that materially and disproportionately
prejudices an individual stockholder or a discrete group of
stockholders must be consented to in writing by such individual
or group.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">102

<!-- 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;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Supply Agreement</B>
</DIV>

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

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

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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. Although initially
owned by Dresser Industries, Inc., in the merger of Dresser
Industries, Inc. with and into Halliburton, Halliburton acquired
all of the rights to the use of the name &#147;Dresser.&#148;
When Halliburton sold its Dresser Equipment Group in April of
2001, Halliburton also sold the right to the &#147;Dresser&#148;
name, subject to existing licenses and certain limitations. The
Dresser-Rand Entities held one of those existing licenses, which
has since expired. In connection with the recent sale of the
Dresser-Rand Entities by Ingersoll-Rand, we negotiated a
replacement license for the right to use the &#147;Dresser&#148;
name in our business from Dresser, Inc. (f/k/a Dresser Equipment
Group), an affiliate of First Reserve, in perpetuity, for
consideration of $1&nbsp;million plus an additional
$4&nbsp;million payable over the next nine&nbsp;years.
</DIV>

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<A name='118'></A>
</DIV>

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

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

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD></TD>
    <TD>
    <B><I>Overview</I></B></TD>
</TR>

</TABLE>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior secured credit facility provides senior secured
financing of $745&nbsp;million, consisting of:
</DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $350&nbsp;million revolving credit facility (with a
    sub-facility denominated in euros in an amount not to exceed the
    equivalent of $220&nbsp;million and in sterling in an amount not
    to exceed the equivalent of $75&nbsp;million).</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The term loan portion of our senior secured credit facility was
fully funded and on August&nbsp;26, 2005, we increased the
availability under the revolving credit portion of our senior
secured credit facility from $300&nbsp;million to
$350&nbsp;million. On September&nbsp;30, 2005 we had
approximately $178.7&nbsp;million of borrowing capacity under
the revolving portion of our senior secured credit facility,
subject to certain conditions, after giving effect to
approximately $171.3&nbsp;million of outstanding letters of
credit.
</DIV>

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

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

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="97%"></TD>
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    <TD></TD>
    <TD>
    <B><I>Interest Rate and Fees</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
<FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">2</FONT>
of 1% and (3)&nbsp;the federal funds rate plus
<FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">2</FONT>
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.
</DIV>

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

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
applicable margin for base rate borrowings under the term loan
facility is 1.00%. The initial applicable margin for LIBOR
borrowings and EURIBOR borrowings under the term loan facility
is 2.00% and 2.50%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
<FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>
of 1% on the face amount of each letter of credit and other
customary documentary and processing charges.
</DIV>

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

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    <TD></TD>
    <TD>
    <B><I>Prepayments</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior secured credit facility requires us to prepay
outstanding term loans, subject to certain exceptions, with:
</DIV>

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    <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">
    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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    100% of the net cash proceeds of any incurrence of debt, other
    than certain debt permitted under the senior secured credit
    facility;&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">
    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.</TD>
</TR>

</TABLE>

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

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

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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    <TD></TD>
    <TD>
    <B><I>Amortization</I></B></TD>
</TR>

</TABLE>

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

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

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Guarantee and Security</I></B></TD>
</TR>

</TABLE>

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

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
exceptions with respect to immaterial subsidiaries and with
respect to any guaranty that could create materially adverse tax
consequences), and our direct parent, D-R Interholding, LLC,
referred to, collectively, as Domestic Guarantors.
</DIV>

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

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <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">
    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</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    subject to certain exceptions, a security interest in
    substantially all of the tangible and intangible assets owned by
    us and each Domestic Guarantor.</TD>
</TR>

</TABLE>

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

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

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <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">
    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</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Certain Covenants and Events of Default</I></B></TD>
</TR>

</TABLE>

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

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <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">
    sell assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    incur additional indebtedness;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    prepay, redeem or repurchase other indebtedness;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pay dividends and distributions or repurchase capital stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    create liens on assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    make investments, loans or advances;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    make capital expenditures;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    make amendments to any corporate documents that would be
    materially adverse to the lenders;</TD>
</TR>

</TABLE>

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<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;color: #000000; background: #ffffff;">

<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">
    make certain acquisitions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    engage in mergers or consolidations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    engage in certain transactions with affiliates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    amend certain material agreements governing indebtedness;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    change the business conducted by D-R Interholding, LLC and its
    subsidiaries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    enter into agreements that restrict dividends from subsidiaries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    enter into sale and lease-back transactions;&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">
    enter into swap agreements.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the senior secured credit facility requires us to
maintain the following financial covenants:
</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;color: #000000; background: #ffffff;">

<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">
    a maximum consolidated net leverage ratio;&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">
    a minimum interest coverage ratio.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior secured credit facility also contains certain
customary affirmative covenants and events of default.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On July 18, 2005, we amended our senior secured credit facility
to remove certain restrictions on our ability to consummate the
initial public offering and use the proceeds received therefrom.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>7<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">8</FONT>%&nbsp;Senior
Subordinated Notes due 2014</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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2004, we issued
7<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">8</FONT>%&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. In September, 2005, we used a portion of the proceeds
from our initial public offering to redeem $50&nbsp;million
aggregate principal amount of the notes. On January&nbsp;23,
2006, we filed an initial registration statement to exchange the
notes for identical freely tradeable notes registered under the
Securities Act.
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Guarantees</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The notes are guaranteed, on a senior subordinated, unsecured
basis, by each of our direct and indirect wholly-owned domestic
subsidiaries that guarantee the senior secured credit facility.
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Ranking</I></B></TD>
</TR>

</TABLE>

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

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
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.
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Optional Redemption</I></B></TD>
</TR>

</TABLE>

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

<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;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</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;the redemption occurs within 180&nbsp;days of the date
    of the closing of such equity offering.</TD>
</TR>

</TABLE>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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:
</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="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage</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>
</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>103.688%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2010</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102.458%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2011</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101.229%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2012 and thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.000%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Change of Control</I></B></TD>
</TR>

</TABLE>

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

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<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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Covenants</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The indenture governing the notes contains certain covenants
that, among other things, limit our ability and the ability of
some of our subsidiaries 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;color: #000000; background: #ffffff;">

<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">
    incur additional debt or issue certain preferred shares;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pay dividends on or make distributions in respect of our or any
    of our restricted subsidiaries&#146; capital stock or make other
    restricted payments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    make certain investments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    sell certain assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    create liens on certain debt without securing the notes;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    consolidate, merge, sell or otherwise dispose of all or
    substantially all of our assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    enter into certain transactions with our affiliates;&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">
    designate our subsidiaries as unrestricted subsidiaries.</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Events of Default</I></B></TD>
</TR>

</TABLE>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of January&nbsp;1, 2006 we were in compliance in all material
respects with all covenants and provisions contained under the
indenture governing the notes.
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Exchange Offer</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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. We were
unable to register the notes by that date and the notes continue
to be unregistered. Accordingly, the annual interest on the
notes increased by (1)&nbsp;0.25% for the first 90&nbsp;days
following August&nbsp;25, 2005, (2)&nbsp;an additional 0.25% for
90&nbsp;days beginning November&nbsp;23, 2005 and (3)&nbsp;will
increase by 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. We filed an initial
registration statement to register the notes on January&nbsp;23,
2006. The additional interest will cease to accrue upon
consummation of the exchange offer.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">109

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='119'></A>
</DIV>

<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following is a description of the material terms of our
amended and restated certificate of incorporation and amended
and restated bylaws. 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.</I>
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of January&nbsp;1, 2006, our authorized capital stock
consists of 250,000,000&nbsp;shares of common stock, par value
$0.01&nbsp;per share, of which 85,446,482&nbsp;shares were
issued and outstanding and 10,000,000&nbsp;shares of preferred
stock, par value $0.01&nbsp;per share, of which no shares are
currently issued and outstanding.
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Common Stock</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Voting Rights.</I> 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Dividend Rights.</I> 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Liquidation Rights.</I> 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other Matters.</I> 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.
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Preferred Stock</I></B></TD>
</TR>

</TABLE>

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

<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 designation of the series;</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 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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    whether dividends, if any, will be cumulative or non-cumulative
    and the dividend rate of the series;</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 dates at which dividends, if any, will be payable;</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 redemption rights and price or prices, if any, for shares of
    the series;</TD>
</TR>

</TABLE>

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<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;color: #000000; background: #ffffff;">

<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 terms and amounts of any sinking fund provided for the
    purchase or redemption of shares of the series;</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 amounts payable on shares of the series in the event of any
    voluntary or involuntary liquidation, dissolution or
    <FONT style="white-space: nowrap">winding-up</FONT> of the
    affairs of our company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    restrictions on the issuance of shares of the same series or of
    any other class or series;&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 voting rights, if any, of the holders of the series.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Anti-Takeover Effects of Certain Provisions of Delaware Law
and our Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws</B>
</DIV>

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

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Removal of Directors; Vacancies</I></B></TD>
</TR>

</TABLE>

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

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>No Cumulative Voting</I></B></TD>
</TR>

</TABLE>

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

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Calling of Special Meetings of Stockholders</I></B></TD>
</TR>

</TABLE>

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

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Stockholder Action by Written Consent</I></B></TD>
</TR>

</TABLE>

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

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Advance Notice Requirements for Stockholder Proposals and
    Director Nominations</I></B></TD>
</TR>

</TABLE>

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

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Supermajority Provisions</I></B></TD>
</TR>

</TABLE>

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

<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 removal of directors;</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 limitation on stockholder action by written consent;</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 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;</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 advance notice requirements for stockholder proposals and
    director nominations;&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 amendment provision requiring that the above provisions be
    amended only with a 75% supermajority vote.</TD>
</TR>

</TABLE>

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

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Limitations on Liability and Indemnification of Officers
    and Directors</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 restated
certificate of incorporation includes a provision that
eliminates the personal liability of directors for monetary
damages for breach of fiduciary duty as a director, except:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<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">
    for breach of duty of loyalty;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    for acts or omissions not in good faith or involving intentional
    misconduct or knowing violation of law;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">112

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<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;color: #000000; background: #ffffff;">

<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">
    under Section&nbsp;174 of the DGCL (unlawful dividends);&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    for transactions from which the director derived improper
    personal benefit.</TD>
</TR>

</TABLE>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There is currently no pending material litigation or proceeding
involving any of our directors, officers or employees for which
indemnification is sought.
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Delaware Anti-takeover Statute</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
<FONT style="white-space: nowrap">change-in</FONT>-control
attempts.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Bank of New York is the transfer agent and registrar for our
common stock.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our common stock trades on the New York Stock Exchange under the
symbol &#147;DRC.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Authorized but Unissued Capital Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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. These additional shares may be
used for a variety of corporate purposes, including future
public offerings, to raise additional capital or to facilitate
acquisitions.
</DIV>

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

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='120'></A>
</DIV>

<!-- link1 "SHARES ELIGIBLE FOR FUTURE SALE" -->

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of January&nbsp;1, 2006, we had a total of
85,446,482&nbsp;shares of common stock outstanding. Of the
outstanding shares, the shares sold in our initial public
offering and 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under our Stockholders Agreement, we may be required to register
the sale of our shares held indirectly 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 indirectly
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares entitled to these registration rights and management will
indirectly
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares entitled to these registration rights. See &#147;Certain
Related Party Transaction&nbsp;&#151; Stockholders
Agreement.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Rule&nbsp;144</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to the lock-up agreements described below and the volume
limitations and other conditions under
Rule&nbsp;144, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our currently outstanding common stock are currently
available for sale in the public market pursuant to exemptions
from registration requirements as follows:
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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:
</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;color: #000000; background: #ffffff;">

<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">
    1% of the then-outstanding shares of common stock or
    approximately 0.9&nbsp;million shares assuming no exercise by
    the underwriters of their option to purchase additional
    shares;&nbsp;and</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Rule&nbsp;144(k)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
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).
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with this offering, we, the selling stockholder
and each of our directors and executive officers 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 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;days
after the date of this prospectus, except with the prior written
consent of the representatives. See &#147;Underwriting.&#148;
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='121'></A>
</DIV>

<!-- link1 "CERTAIN UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CERTAIN UNITED STATES FEDERAL INCOME AND ESTATE TAX</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>CONSEQUENCES TO
<FONT style="white-space: nowrap">NON-U.S.&nbsp;HOLDERS</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder.
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A
<FONT style="white-space: nowrap">&#147;non-U.S.&nbsp;holder&#148;</FONT>
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:
</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;color: #000000; background: #ffffff;">

<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">
    an individual citizen or resident of the United States;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an estate the income of which is subject to United States
    federal income taxation regardless of its source;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
<FONT style="white-space: nowrap">non-U.S.&nbsp;holders</FONT>
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; or 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.
</DIV>

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

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
<FONT style="white-space: nowrap">non-U.S.&nbsp;Holder&#146;s</FONT>
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
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT> 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
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT>
within the United States (and, where a tax treaty applies, are
attributable to a United States permanent establishment of the
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder)</FONT>
are not subject to the withholding tax, provided that certain
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
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
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT>
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A <FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT>
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 and is eligible for treaty benefits 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
<FONT style="white-space: nowrap">non-U.S.&nbsp;holders</FONT>
that are entities rather than individuals.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A <FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT>
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Gain on Disposition of Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any gain realized on the disposition of our common stock
generally will not be subject to United States federal income or
withholding tax unless:
</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;color: #000000; background: #ffffff;">

<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 gain is effectively connected with a trade or business of
    the <FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>
    holder in the United States, and, if required by an applicable
    income tax treaty, is attributable to a United States permanent
    establishment of the
    <FONT style="white-space: nowrap">non-U.S.&nbsp;holder;
    </FONT></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
    <FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT> 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</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    we are or have been a &#147;United States real property holding
    corporation&#148; for United States federal income tax purposes.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An individual
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT>
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
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT>
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
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT>
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.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Common stock held by an individual
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT> 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.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We must report annually to the Internal Revenue Service and to
each
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT>
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
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
also be made available to the tax authorities in the country in
which the
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT>
resides under the provisions of an applicable income tax treaty.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A <FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT>
will be subject to backup withholding for dividends paid to such
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT>
unless such holder certifies under penalty of perjury that it is
a <FONT style="white-space: nowrap">non-U.S.&nbsp;holder,</FONT>
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder</FONT>
(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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any amounts withheld under the backup withholding rules may be
allowed as a refund or a credit against a
<FONT style="white-space: nowrap">non-U.S.&nbsp;holder&#146;s</FONT>
United States federal income tax liability provided the required
information is timely furnished to the Internal Revenue Service.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">118

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<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;color: #000000; background: #ffffff;">
<A name='122'></A>
</DIV>

<!-- link1 "UNDERWRITING" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms and subject to the conditions contained in an
underwriting agreement dated the date of this prospectus, the
underwriters named below, for
whom &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;&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;will
act as representatives, have severally agreed to purchase, and
we have agreed to sell to them, severally, the number of shares
indicated below.
</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="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&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>Number</B></TD><TD></TD>
</TR>

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

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

</TR>

</TABLE>
</CENTER>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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. Any underwriter may
allow, and such dealers may reallow, a concession not in excess
of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
share to other underwriters or to certain dealers. 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.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table shows the per share and total underwriting
discounts and commissions to be paid to the underwriters by the
selling shareholder. Such amounts are shown assuming both no
exercise and full exercise by the underwriters of their
over-allotment option.
</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="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Paid by the Selling Shareholder</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>No Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full Exercise</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>
</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="top">$</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" 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="top">$</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The common stock is listed on the New York Stock Exchange under
the symbol &#147;DRC&#148;.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">119

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, the selling stockholder and each of our directors and
executive officers have agreed that, without the prior written
consent of the representatives, none of us will, during the
period
ending &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;days
after the date of this prospectus:
</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;color: #000000; background: #ffffff;">

<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">
    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</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
whether any transaction described above is to be settled by
delivery of common stock or such other securities, in cash or
otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The restrictions described in this paragraph do not apply to:
</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;color: #000000; background: #ffffff;">

<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 shares to the underwriters pursuant to the
    underwriting agreement;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    grants, issuances, or exercises under our existing employee
    benefits plans;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the issuance of common stock in connection with the acquisition
    of, or joint venture with, another company;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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 this offering;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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; or</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 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.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">120

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
<FONT style="white-space: nowrap">over-the</FONT>-counter market
or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A prospectus in electronic format may be made available on the
website maintained 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. The
representatives will allocate shares to underwriters that may
make Internet distributions on the same basis as other
allocations. In addition, shares may be sold by the underwriters
to securities dealers who resell shares to online brokerage
account holders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and the selling stockholder have agreed to indemnify the
underwriters against certain liabilities, including liabilities
under the Securities Act.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive, each underwriter
has represented and agreed that with effect from and including
the date on which the Prospectus Directive is implemented in
that Member State it has not made and will not make an offer of
the shares to the public in that Member State, except that it
may, with effect from and including such date, make an offer of
the shares to the public in that Member State:
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (a)&nbsp;at any time to legal entities which are authorized or
    regulated to operate in the financial markets or, if not so
    authorized or regulated, whose corporate purpose is solely to
    invest in securities;</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;
    (b)&nbsp;at any time to any legal entity which has two or more
    of (1)&nbsp;an average of at least 250&nbsp;employees during the
    last financial year; (2)&nbsp;a total balance sheet of more than
    <FONT face="times new roman,times">&#128;</FONT>43,000,000 and
    (3)&nbsp;an annual net turnover of more than
    <FONT face="times new roman,times">&#128;</FONT>50,000,000, as
    shown in its last annual or consolidated accounts;&nbsp;or</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;
    (c)&nbsp;at any time in any other circumstances which do not
    require the publication by us of a prospectus pursuant to
    Article&nbsp;3 of the Prospectus Directive.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the purposes of the above, the expression an &#147;offer of
the shares to the public&#148; in relation to any shares in any
Member State means the communication in any form and by any
means of sufficient information on the terms of the offer and
the shares to be offered so as to enable an investor to decide
to purchase or subscribe the shares, as the same may be varied
in that Member State by any measure implementing the Prospectus
Directive in that Member State and the expression Prospectus
Directive means Directive 2003/71/ EC and includes any relevant
implementing measure in that Member State.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each underwriter has represented and agreed that it has only
communicated or caused to be communicated and will only
communicate or cause to be communicated an invitation or
inducement to engage in investment activity (within the meaning
of Section&nbsp;21 of the Financial Services and Markets Act
2000) in connection with the issue or sale of the shares in
circumstances in which Section&nbsp;21(1) of such Act does not
apply to us and it has complied and will comply with all
applicable provisions of such Act with respect to anything done
by it in relation to any shares in, from or otherwise involving
the United Kingdom.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">121

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='123'></A>
</DIV>

<!-- link1 "VALIDITY OF THE SHARES" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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&nbsp;&#38; Bartlett LLP, New York, New
York. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
act as counsel to the underwriters.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='124'></A>
</DIV>

<!-- link1 "EXPERTS" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated financial statements as of December&nbsp;31,
2004 and for the period from October&nbsp;30, 2004 to
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;color: #000000; background: #ffffff;">
<A name='125'></A>
</DIV>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have filed with the Securities and Exchange Commission (the
&#147;SEC&#148;) a registration statement on
<FONT style="white-space: nowrap">Form&nbsp;S-1</FONT> 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 currently subject to the
informational requirements of the Exchange Act and, in
accordance therewith, 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
<FONT style="white-space: nowrap">1-800-SEC-0330</FONT> 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;color: #000000; background: #ffffff;">122

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='126'></A>
</DIV>

<!-- link1 "Index to Consolidated Financial Statements (Successor)" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Index to Consolidated Financial Statements (Successor)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<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="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>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">
    <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>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated Financial Statements and Predecessor Combined
    Financial Statements at December&nbsp;31, 2004 and 2003 and for
    the period from October 30, 2004 through December 31, 2004, for
    the period from January&nbsp;1, 2004 through October&nbsp;29,
    2004, and for the years ended December&nbsp;31, 2003 and 2002</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>
    <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>
    <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>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated Financial Statements and Predecessor Combined
    Financial Statements at September&nbsp;30, 2005 and
    December&nbsp;31, 2004 and for the nine months ended
    September&nbsp;30, 2005 and 2004 (unaudited)</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 nine
    months ended September&nbsp;30, 2005 and Combined Statement of
    Operations (Predecessor) for the nine months ended
    September&nbsp;30, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-56</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Balance Sheet (Successor) at September&nbsp;30,
    2005 and December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-57</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 nine
    months ended September&nbsp;30, 2005 and Combined Statement of
    Cash Flows (Predecessor) for the nine months ended
    September&nbsp;30, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-58</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-59</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-1
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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
To the Directors and Stockholders of
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
Dresser-Rand Group Inc.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
/s/ <FONT style="font-variant:SMALL-CAPS">PricewaterhouseCoopers
LLP
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Buffalo, New York
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
May&nbsp;12, 2005, except as to the information contained in
Note&nbsp;23 for which the date is September&nbsp;12, 2005 and
the information contained in Note&nbsp;24 for which the date is
January&nbsp;16, 2006
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-2

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
To the Directors and Stockholders of
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
Dresser-Rand Group Inc.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
/s/ <FONT style="font-variant:SMALL-CAPS">PricewaterhouseCoopers
LLP
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Buffalo, New York
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
May&nbsp;12, 2005, except as to the information contained in
Note&nbsp;24 for which the date is January&nbsp;16, 2006
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-3

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONSOLIDATED STATEMENT OF OPERATIONS (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 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>
    <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>53,793,188</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>0.13</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;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of the consolidated
and combined financial statements
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONSOLIDATED BALANCE SHEET (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<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: 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="6%">&nbsp;</TD>
<TD  style="border-right: 2px solid #000000"></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 colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
<TD  style="border-right: 2px solid #000000">&nbsp;</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;</B></TD><TD></TD>
<TD  style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;</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>31, 2004</B></TD><TD></TD>
<TD  style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>31, 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  style="border-right: 2px solid #000000"></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><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><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>ASSETS</B></TD>
<TD></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  style="border-right: 2px 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>
</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">$</TD>
    <TD align="right" valign="bottom" nowrap>111,500</TD>
    <TD>&nbsp;</TD>
<TD  style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</TD>
    <TD>&nbsp;</TD>
<TD  style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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  style="border-right: 2px solid #000000">&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>
<TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY/PARTNERSHIP
    INTEREST</B></TD>
<TD></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  style="border-right: 2px 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>
</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">$</TD>
    <TD align="right" valign="bottom" nowrap>271,275</TD>
    <TD>&nbsp;</TD>
<TD  style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px 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>
</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: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px 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>
</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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px 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>
</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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px 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>
</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  style="border-right: 2px 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>
</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  style="border-right: 2px solid #000000">&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, 53,838,816&nbsp;shares
    authorized, 54,219,297&nbsp;shares issued and outstanding,
    respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>542</TD>
    <TD>&nbsp;</TD>
<TD  style="border-right: 2px 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>
</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>436,642</TD>
    <TD>&nbsp;</TD>
<TD  style="border-right: 2px 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>
</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  style="border-right: 2px 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>
</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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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  style="border-right: 2px solid #000000">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</TD>
    <TD>&nbsp;</TD>
<TD  style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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  style="border-right: 2px solid #000000">&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;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of the consolidated
and combined financial statements
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONSOLIDATED STATEMENT OF CASH FLOW (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<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><!-- Left VRule -->
    <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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="12" 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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>7,229</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>111,500</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of the consolidated
and combined financial statements
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS&#146;
EQUITY (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<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
    Interholding, LLC (adjusted to reflect the 1,006,092.87-for-one
    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-for-one 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>&#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>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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of the 0.53731353527-for-one reverse stock split effected
    August&nbsp;4, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(467</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>467</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 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 valign="bottom" bgcolor="#cceeff">
    <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>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>436,642</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;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of the consolidated
and combined financial statements
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS&#146;
EQUITY (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<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>&#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>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>&#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>(5,097</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;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of the consolidated
and combined financial statements
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
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: 3pt; ">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 identifiable 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. The Acquisition was
performed by First Reserve as a part of its strategy of making
diversified investments in the energy industry. The factors that
contributed to a purchase price that resulted in recognition of
goodwill include the Company&#146;s global presence, proven
customer service capabilities, and knowledgeable assembled
workforce comprised of various executives, managers, and sales
and production personnel. 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 based on
a 2.5% annual attrition rate; (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 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
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The relief from royalty method used to value existing
technologies and trademarks is an income approach based on the
assumption that the Company is relieved from paying a royalty to
obtain the use of these intangibles. Specific technologies
acquired relate to the Company&#146;s highly-engineered turbo
and reciprocating compression equipment and steam turbines,
including the DATUM turbo compressor platform.
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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>

<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 (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">
    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 Holdings (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 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>

<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>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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>

<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>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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>

<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-14

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories are stated at cost, which is not in excess of net
realizable value. Cost is based on the
<FONT style="white-space: nowrap">first-in,</FONT>
<FONT style="white-space: nowrap">first-out,</FONT>
(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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 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>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-15

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">F-16

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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>

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<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">F-17

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Assets and liabilities of
<FONT style="white-space: nowrap">non-U.S.&nbsp;entities,</FONT>
where the local currency is the functional currency, are
translated at year-end exchange rates and income and expenses
are translated using
average<FONT style="white-space: nowrap">-for-the</FONT>-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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For
<FONT style="white-space: nowrap">non-U.S.&nbsp;entities</FONT>
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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2004, the FASB released Staff Position
<FONT style="white-space: nowrap">No.&nbsp;FAS&nbsp;106-2</FONT>
(FSP <FONT style="white-space: nowrap">FAS&nbsp;106-2)</FONT>
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
<FONT style="white-space: nowrap">FAS&nbsp;106-2</FONT> 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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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. After giving effect to the reverse stock split on
August&nbsp;4, 2005 (see Note&nbsp;23), weighted average common
shares of 53,793,188 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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 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="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 style="border-right:1.5pt solid #000000;">&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 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>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 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>
    <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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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="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="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 style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&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>Period from</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</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 style="border-right:1.5pt solid #000000;">&nbsp;</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 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>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 style="border-right:1.5pt solid #000000;">&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>
</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 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>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 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="11" 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">$</TD>
    <TD align="right" valign="bottom" nowrap>408,424</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 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" 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 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 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 align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ending balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>423,330</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 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="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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 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="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 style="border-right:1.5pt solid #000000;">&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 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>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 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>
    <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="7" align="center"><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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 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="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 style="border-right:1.5pt solid #000000;">&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 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>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 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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 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="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 style="border-right:1.5pt solid #000000;">&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 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>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 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>
    <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;color: #000000; background: #ffffff;">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" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A summary of the deferred tax accounts follows:
</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="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">
    Current deferred assets and (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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Differences between book and tax bases of inventories and
    receivables</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,826</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">
    Differences between book and tax expense for other employee
    related benefits and allowances</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>403</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 reserves and valuation allowances versus tax deductions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,808</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">
    Other differences between tax and financial statement values</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,461</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">
    Gross current deferred tax assets</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 colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncurrent deferred tax assets and (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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax net operating loss carryforwards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,476</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">
    Pension contributions in excess of book expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,986</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Book depreciation/amortization versus tax
    depreciation/amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(37,343</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,194</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">
    Gross noncurrent deferred tax assets (liabilities)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,294</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,656</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">
    Less: valuation allowances</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,993</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,091</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 net deferred tax assets (liabilities)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(19,842</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25,063</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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-27

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<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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

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

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>11.</B></TD>
    <TD>
    <B>Long&#150;Term Debt</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Senior Secured Credit Facility</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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,
<FONT style="white-space: nowrap">D-R</FONT> 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,
<FONT style="white-space: nowrap">D-R</FONT> 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.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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
<FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">2</FONT>
of 1% and (3)&nbsp;the federal funds rate plus
<FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">2</FONT>
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.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 loans
under the Senior Secured Credit Facility at any time without
premium or penalty, other than customary breakage 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
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-28

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
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
<FONT style="white-space: nowrap">30-day</FONT> cure period as
provided for in the terms and conditions of the Senior Secured
Credit Facility.
</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Senior Subordinated Notes</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In conjunction with the Acquisition, the Company issued
$420.0&nbsp;million of
7<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">8</FONT>%&nbsp;senior
subordinated notes. The Senior Subordinated Notes mature on
November&nbsp;1, 2014 and bear interest at a rate of
7<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">8</FONT>%&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.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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 such period and (2)&nbsp;0.25%&nbsp;per
annum at the beginning of each subsequent
<FONT style="white-space: nowrap">90-day</FONT> period, up to a
maximum of 1.0%&nbsp;per annum until all such registration
defaults are cured.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-29

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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.
<FONT style="white-space: nowrap">Non-U.S.&nbsp;plans</FONT>
provide benefits based on earnings and years of service. Most of
the <FONT style="white-space: nowrap">non-U.S.&nbsp;plans</FONT>
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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<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="6%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="7%">&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="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="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD colspan="3" 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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="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="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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 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="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 style="border-right:1.5pt solid #000000;">&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 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>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 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>
    <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">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>870</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 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>16,903</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 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>(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 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">
    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 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</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 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>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 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>3,375</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 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">
    Net pension expense (income)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>547</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 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>

<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="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="6%">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 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="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 style="border-right:1.5pt solid #000000;">&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>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>&nbsp;&nbsp;&nbsp;2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</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></TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD colspan="3" 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 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 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 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">
    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 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>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 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>5.75</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 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 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 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>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 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>3.75</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 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">
    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 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>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 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>7.50</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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<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
    <FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT> plans.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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
<FONT style="white-space: nowrap">non-U.S.&nbsp;plans</FONT>
require employee contributions based on the employees&#146;
earnings.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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
<FONT style="white-space: nowrap">non-U.S.&nbsp;defined</FONT>
contribution plans, insured plans and other
<FONT style="white-space: nowrap">non-U.S.&nbsp;benefit</FONT>
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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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="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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 style="border-right:1.5pt solid #000000;">&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 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="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 style="border-right:1.5pt solid #000000;">&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 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>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 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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" 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">$</TD>
    <TD align="right" valign="bottom" nowrap>301</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 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>9,323</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 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>(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 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>3,011</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 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 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">$</TD>
    <TD align="right" valign="bottom" nowrap>750</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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="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="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="3" align="center" nowrap><B>Successor</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&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="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&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" align="center" nowrap><B>Period from</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&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="3" align="center" nowrap><B>October&nbsp;30</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January 1</B></TD><TD></TD>
    <TD colspan="7" 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="3" align="center" nowrap><B>through</B></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 colspan="7" 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="3" align="center" nowrap><B>December&nbsp;31,</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>October&nbsp;29,</B></TD><TD></TD>
    <TD colspan="7" 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" align="center" nowrap><B>2004</B></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 colspan="3" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD colspan="3" 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="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</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 colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD colspan="3" 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 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 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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&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 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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&nbsp;</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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&nbsp;</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 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 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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&nbsp;</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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD align="left" valign="bottom">&nbsp;</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 style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2010</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2010</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2009</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect on total service and interest cost components</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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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. The fair value of forward contracts at
December&nbsp;31, 2004 was $1.9 million, all of which were
ineffective hedges.
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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
<FONT style="white-space: nowrap">20-year</FONT> 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;color: #000000; background: #ffffff;">F-36

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<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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is contingently liable for customs duties in certain
<FONT style="white-space: nowrap">non-U.S.&nbsp;countries</FONT>
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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">F-37

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<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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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><!-- Left VRule -->
    <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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>20,319</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>21,078</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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: 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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 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>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has operations and or does business in various
<FONT style="white-space: nowrap">non-U.S.&nbsp;countries.</FONT>
It is possible that political instability, foreign currency
devaluations or other unanticipated adverse events could
materially affect 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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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><!-- Left VRule -->
    <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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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">
    New York State Grant</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,846</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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><!-- Left VRule -->
    <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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" nowrap><B>(In thousands of dollars)</B></TD><TD></TD>
</TR>

<TR>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>2,930</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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><!-- Left VRule -->
    <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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>77,607</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>199,907</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>3,567</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>26,004</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>5,775</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>16,269</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<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><!-- Left VRule -->
    <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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>123,831</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" 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 style="border-left:1.5pt solid #000000;">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>423,330</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>270,563</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" 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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" 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 style="border-left:1.5pt solid #000000;">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>77,700</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>199,907</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>159,060</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" 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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" 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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" 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 style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" 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 style="border-left:1.5pt solid #000000;">&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">$</TD>
    <TD align="right" valign="bottom" nowrap>226,764</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1.5pt solid #000000;">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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 style="border-left:1.5pt solid #000000;">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<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>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In July, 2005, our Board of Directors increased the shares
authorized to 250,000,000. On August&nbsp;10, 2005, we completed
our initial public offering of 31,050,000&nbsp;shares of our
common stock for net proceeds of $608.9&nbsp;million. On
September&nbsp;12, 2005, we used $55.0&nbsp;million of the net
proceeds to redeem $50.0&nbsp;million face value 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 and accrued interest to the
redemption date. On August&nbsp;4, 2005, our Board of Directors
approved a dividend of the remaining net proceeds of
$557.7&nbsp;million ($10.26 per share) to our stockholders
existing immediately prior to the offering, consisting of
affiliates of First Reserve Corporation and certain members of
senior management, that was paid on August&nbsp;11, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the completion of the offering, on
August&nbsp;4, 2005 our Board of Directors approved a
0.537314-for-one reverse stock split. The share related
information in these financial statements gives retroactive
effect to this reverse stock split.
</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;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>24.</B></TD>
    <TD>
    <B>Supplemental Guarantor Financial Information</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the Acquisition, the Company issued
$420&nbsp;million of senior subordinated notes. The following
subsidiaries, all of which are wholly owned, guaranteed the
notes on a full, unconditional and joint and several basis:
Dresser-Rand LLC, Dresser-Rand Power LLC, Dresser-Rand Company
and Dresser-Rand Global Services, LLC. The following
supplemental condensed consolidating and combining financial
information of the Issuer, Subsidiary Guarantors and Subsidiary
Non-Guarantors presents the balance sheets as of
December&nbsp;31, 2004, (Successor) and 2003 (Predecessor) and
statements of operations and cash flows, for the period from
October&nbsp;30, 2004, through December&nbsp;31, 2004,
(Successor) and the period from January&nbsp;1, 2004, through
October&nbsp;29, 2004, and the years ended December&nbsp;31,
2003, and 2002 (Predecessor). For the Successor periods
condensed consolidating financial statements, the column titled
&#147;Issuer&#148; represents Dresser-Rand Group, Inc. and such
presentation has been applied to the Predecessor condensed
combining financial statements. The condensed consolidating and
combining financial information presents investments in
consolidated subsidiaries using the equity method of accounting.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-45

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED CONSOLIDATING STATEMENT OF INCOME (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the Period from October 30 through December 31, 2004</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="3%">&nbsp;</TD>
    <TD width="35%">&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="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="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>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Consolidating</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>Issuer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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">
    Net sales</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>123,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>88,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,705</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,705</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>152,404</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>&nbsp;</TD>
    <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>(56</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,362</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>47,503</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>19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,310</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>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">
    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>&#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" align="left" style="border-top: 1pt solid #000000;">&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 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>(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>12,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,052</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>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">
    Equity earnings in affiliates (net of tax)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,517</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>(17,334</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">
    Interest (expense) income, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,649</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</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(806</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>(9,654</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">
    Intercompany interest and fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,984</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,965</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">
    Other income (expense), net</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>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,878</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>(1,846</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" align="left" style="border-top: 1pt solid #000000;">&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">
    Income (loss) before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,334</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,504</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>883</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>6,392</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>7,275</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>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) 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>10,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(17,334</TD>
    <TD align="left" valign="bottom" nowrap>)</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" 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>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-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="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED COMBINING STATEMENT OF INCOME (PREDECESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the Period from January 1 through October 29, 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="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="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>
    <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 colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Combining</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>Issuer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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">
    Net sales</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>429,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>285,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>715,495</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>332,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>210,781</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>543,712</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>&nbsp;</TD>
    <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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,172</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>171,783</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,836</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>122,700</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>&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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,336</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>49,083</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 affiliates (net of tax)</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>(8,691</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>(33,460</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 colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest (expense) income, net</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>1,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,737</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>3,156</TD>
    <TD>&nbsp;</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,214</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>1,882</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>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes</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>41,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33,460</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,121</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,249</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>11,970</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>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) 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>37,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,390</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(33,460</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,151</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: 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>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-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="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED COMBINING STATEMENT OF INCOME (PREDECESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the Year ended December 31, 2003</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="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="4%">&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>
    <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="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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Combining</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>Issuer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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">
    Net sales</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>648,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>686,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>1,335,350</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>565,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>574,559</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>1,140,154</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>&nbsp;</TD>
    <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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,887</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>195,196</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,346</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>156,129</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>&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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,474</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,541</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>39,067</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 affiliates (net of tax)</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>(28,959</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>8,594</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">
    Interest (expense) income, net</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>219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,719</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>1,938</TD>
    <TD>&nbsp;</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30,171</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>(9,202</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>
    <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 (loss) before income taxes</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>(17,245</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,594</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>
</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,241</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>11,438</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>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) income</DIV>
    </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>(19,442</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,848</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,594</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>
</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>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-48

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED COMBINING STATEMENT OF INCOME (PREDECESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the Year ended December 31, 2002</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="3%">&nbsp;</TD>
    <TD width="35%">&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="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="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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Combining</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>Issuer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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">
    Net sales</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>592,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>439,138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>1,031,353</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>505,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>368,259</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>873,902</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>&nbsp;</TD>
    <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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70,879</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>157,451</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,752</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>138,484</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</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>3,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,200</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>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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 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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,145</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,927</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>13,782</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">
    Equity earnings (losses) in affiliates (net of tax)</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>(9,990</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>(6,106</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">
    Interest (expense) income, net</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>(1,413</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>637</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>(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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,390</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>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>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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 align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes</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>1,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,106</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,006</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,624</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>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>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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 align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) 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>556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,106</TD>
    <TD align="left" valign="bottom" nowrap>)</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>&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;color: #000000; background: #ffffff;">F-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="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED CONSOLIDATING BALANCE SHEET (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>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="32%">&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>
    <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="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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Consolidating</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>Issuer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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</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">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>63,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>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">
    Accounts and notes receivables net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99,831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132,785</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>265,479</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories, net (excluding advance payments)</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>112,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,889</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>175,873</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 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>4,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,479</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>21,701</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>&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>32,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>280,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>261,312</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>574,553</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">
    Investment in affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>919,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,720</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>(963,431</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">
    Property, plant and equipment, net</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>158,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,422</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>226,764</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">
    Intangible assets, net</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>532,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>370,074</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>902,917</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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>23,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,604</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>46,840</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>&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">$</TD>
    <TD align="right" valign="bottom" nowrap>976,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,034,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>703,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(963,431</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</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" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="10" align="left" valign="top">
    <B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</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>
    <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 and accruals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>105,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>210,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>322,913</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">
    Loans payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,800</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>3,949</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>6,749</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>&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>9,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>214,410</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>329,662</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">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>696,500</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>120,164</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>816,664</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intercompany accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(183,078</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137,988</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 colspan="2" 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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,622</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>151,851</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>&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>523,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>245,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>529,184</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>1,298,177</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">
    Common Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>542</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>542</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>789,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(963,431</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452,355</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>&nbsp;</TD>
    <TD 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>452,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>789,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(963,431</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</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: 1pt solid #000000;">&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 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="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>976,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,034,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>703,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(963,431</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</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" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-50

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED COMBINING BALANCE SHEET (PREDECESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>December 31, 2003</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="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="4%">&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>
    <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="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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Combining</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>Issuer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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</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">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(156</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>41,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>41,537</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">
    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>&#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>1,037</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts and notes receivables net</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>95,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>146,187</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>242,021</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">
    Inventories, net (excluding advance payments)</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>93,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,614</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>133,425</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaids expenses and 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>3,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,815</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>26,163</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 and notes receivable 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>203,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>225,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(200,643</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>228,187</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>&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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>397,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>475,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(200,643</TD>
    <TD align="left" valign="bottom" nowrap>)</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 valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment in affiliates</DIV>
    </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>(39,104</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(525,931</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">
    Property, plant and equipment, net</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>75,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,811</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>101,438</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">
    Intangible assets, net</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>267,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,098</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>264,626</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,134</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>25,441</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>&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">$</TD>
    <TD align="right" valign="bottom" nowrap>565,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>710,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>514,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(726,574</TD>
    <TD align="left" valign="bottom" nowrap>)</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="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="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="10" align="left" valign="top">
    <B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</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>
    <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 and accruals</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>128,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>189,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>317,611</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">
    Loans payable</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>3,716</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>3,716</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts and notes payable 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>73,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>142,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(200,643</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,811</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>&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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>201,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>335,382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(200,643</TD>
    <TD align="left" valign="bottom" nowrap>)</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 valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" 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>&#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>213</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>213</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" 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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,935</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>162,489</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>&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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>334,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>364,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(200,643</TD>
    <TD align="left" valign="bottom" nowrap>)</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="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>&nbsp;</TD>
    <TD 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>565,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>375,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(525,931</TD>
    <TD align="left" valign="bottom" nowrap>)</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="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>&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="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>565,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>710,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>514,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(726,574</TD>
    <TD align="left" valign="bottom" nowrap>)</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="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>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-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="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the Period from October 30, 2004 through December 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="31%">&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>
    <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="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&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="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Consolidating</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>Issuer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Entities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Entities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</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="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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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">
    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>
    <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">
    Net cash provided by (used in) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,422</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,948</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" 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>
    <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">
    Capital expenditures</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>(929</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(862</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>(1,791</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">
    Acquisitions, net of cash</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>
    <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>
</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>

</TR>

<TR>
    <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>(1,125,148</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(929</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(862</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>(1,126,939</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">
    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>
    <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 change in debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>699,300</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>114,720</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>814,020</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">
    Change in intercompany accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(79,307</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,529</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 colspan="2" 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>(24,007</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,837</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,654</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</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>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of common units</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>437,109</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in due to (from) unconsolidated 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>(200</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(332</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>(532</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">
    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>1,129,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,529</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>

<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>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of exchange rate changes</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>3,392</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>3,392</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase in cash &#38; cash equivalents</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>63,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,159</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>111,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, beginning of 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>&#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 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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" 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">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>63,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>111,500</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>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-52

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED COMBINING STATEMENT OF CASH FLOWS (PREDECESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the period from January&nbsp;1 through October&nbsp;29,
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="36%">&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="4%">&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>
    <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="1%">&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="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Combining</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>Issuer</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Entities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Entities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Adjustments</B></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="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="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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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">
    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>
    <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">
    Net cash provided by (used in) operating activities</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>155,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(97,611</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>57,729</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" 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>
    <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">
    Capital expenditures</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>(4,607</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,094</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</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>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from 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>1,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(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>&#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>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sale of 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>&#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>1,037</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>

</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 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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,806</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,101</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>(4,907</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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="3" 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>
    <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">
    Net change in debt</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>(1,015</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,015</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">
    Change in due to (from) unconsolidated 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>(161,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115,402</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>(45,918</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">
    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>10,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,707</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#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>
</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>

</TR>

<TR>
    <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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(150,710</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,680</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>(52,030</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">
    Effect of exchange rate changes</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>1,930</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>1,930</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>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in cash&nbsp;&#38; cash equivalents</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>2,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(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>&#151;</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>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, beginning of 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>(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>41,693</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>41,537</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>

</TR>

<TR>
    <TD colspan="3" 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">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>41,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>44,259</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>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-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="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED COMBINING STATEMENT OF CASH FLOWS (PREDECESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the year ended December&nbsp;31, 2003</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="35%">&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="4%">&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>
    <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="1%">&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="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Combining</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>Issuer</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Entities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Entities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Adjustments</B></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="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="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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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">
    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>
    <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">
    Net cash provided by (used in) operating activities</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>26,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>50,963</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" 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>
    <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">
    Capital expenditures</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>(3,216</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,374</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>(7,590</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">
    Proceeds from 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>149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>411</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>560</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sale of 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>(227</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168</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>(59</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">
    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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,294</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,795</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>(7,089</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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="3" 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>
    <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">
    Net change in debt</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>(58</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>(58</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">
    Change in due to (from) unconsolidated 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>(28,362</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,067</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>(63,429</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">
    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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28,362</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,125</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>(63,487</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of exchange rate changes</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>1,531</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>1,531</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in cash&nbsp;&#38; cash equivalents</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>(5,026</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,056</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>(18,082</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, beginning of 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>4,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,749</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>59,619</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" 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">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(156</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>41,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>41,537</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>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-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="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED COMBINING STATEMENT OF CASH FLOWS (PREDECESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the Year ended December&nbsp;31, 2002</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="36%">&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="4%">&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>
    <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="1%">&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="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Combining</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>Issuer</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Entities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Entities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Adjustments</B></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="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="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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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">
    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>
    <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">
    Net cash provided by (used in) operating activities</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>11,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>42,029</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" 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>
    <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">
    Capital expenditures</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>(9,224</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,446</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>(13,670</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">
    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>10,145</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from 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>671</TD>
    <TD>&nbsp;</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>&#151;</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 valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sale of 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>363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,488</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>2,851</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>

</TR>

<TR>
    <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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,858</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>3,813</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" 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>
    <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 change in debt</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>3,536</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>3,536</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">
    Change in due to (from) unconsolidated 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>(11,959</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,161</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>(14,120</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">
    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>&#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>
    <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="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>

</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 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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,959</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,800</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>(18,759</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of exchange rate changes</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>1,159</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>1,159</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in cash&nbsp;&#38; cash equivalents</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>1,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,279</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>28,242</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, beginning of 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>2,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,470</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>31,377</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: 1pt solid #000000;">&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="3" 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">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>54,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>59,619</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>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-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="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONSOLIDATED STATEMENT OF OPERATIONS (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>AND COMBINED STATEMENT 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="3%">&nbsp;</TD>
    <TD width="54%">&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="8%">&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 style="border-right:1.5pt solid #000000;">&nbsp;</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 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>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</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>Ended</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>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>September&nbsp;30,</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</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>2005</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>
</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 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>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&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="7" align="center" nowrap><B>(In thousands of dollars, except</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>per share information)</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">
    Net sales of products to third parties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>683,656</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>506,187</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" 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>162,581</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>148,354</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">
    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>1,639</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" 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>1,314</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>

</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>846,237</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>657,494</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>

</TR>

<TR>
    <TD colspan="3" 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>533,685</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>386,024</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">
    Cost of services sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>124,160</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>112,216</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of products sold 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>968</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>

</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 cost of products and services sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>657,845</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>499,208</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>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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>188,392</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>158,286</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">
    Selling and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>118,331</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>110,493</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" 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>4,745</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>4,695</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>

</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">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,316</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>43,098</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest (expense)&nbsp;income, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44,619</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>2,306</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">
    Early redemption premium on debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,688</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>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,558</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>(2,754</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 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>

</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">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,451</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>42,650</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" 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>10,560</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>4,918</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>

</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 income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,891</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,732</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>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income 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 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>
</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">
    Basic and diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.08</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>
</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">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares used in computing net income 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 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>
</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">
    Basic and diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,178,986</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>
</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">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of the consolidated
and combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-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="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONSOLIDATED BALANCE SHEET (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="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30, 2005</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 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="2" align="center" nowrap><B>(unaudited)</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="6" align="center" nowrap><B>(In thousands of dollars except per share</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>information)</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">$</TD>
    <TD align="right" valign="bottom" nowrap>109,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>111,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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
    $8,757 in 2005 and $14,569 in 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>225,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>265,479</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">
    Inventories, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>163,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175,873</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="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,256</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">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,445</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 current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>528,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>574,553</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">
    Investments in and advances to partially owned
    companies&nbsp;&#151; at equity</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>12,448</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment, less accumulated depreciation of
    $21,137 in 2005 and $3,949 in 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>233,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>226,764</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">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>399,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>423,330</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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>472,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>479,587</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>26,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,392</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">$</TD>
    <TD align="right" valign="bottom" nowrap>1,660,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</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</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">$</TD>
    <TD align="right" valign="bottom" nowrap>297,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>271,275</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>113,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,661</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>5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,977</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 payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63</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>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <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>&#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" 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 current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>416,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>329,662</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 income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,287</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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>112,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,640</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">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>599,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>816,664</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>15,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,924</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>1,173,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,298,177</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies</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">
    (Notes&nbsp;7 through 10)&nbsp;</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 colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shareholders&#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>&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, $0.01&nbsp;par value, 250,000,000&nbsp;shares
    authorized in 2005 and 101,200,000&nbsp;shares in 2004;
    85,444,897&nbsp;shares issued and outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>542</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>492,226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>436,642</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>12,120</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>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,671</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,484</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 shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>486,529</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>

<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 shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,660,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</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;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of the consolidated
and combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-57

<!-- 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;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONSOLIDATED STATEMENT OF CASH FLOWS (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>AND COMBINED STATEMENT OF CASH FLOWS (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="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&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="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</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 style="border-right:1.5pt solid #000000;">&nbsp;</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="5">&nbsp;</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>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</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>Ended</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>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>September&nbsp;30,</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</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>2005</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>
</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 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>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&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="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" 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 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>
</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">$</TD>
    <TD align="right" valign="bottom" nowrap>4,891</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,732</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 (used in)
    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 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>
</TR>

<TR>
    <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>48,045</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>20,284</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">
    Amortization of deferred financing costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,627</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>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustment to allowance for doubtful accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,373</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>3,181</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 for estimated losses on inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,743</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>5,209</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">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,459</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>5,404</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">
    Employee equity compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,237</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>
</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>(3,323</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>1,098</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 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>
</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>48,362</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>48,624</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">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,003</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>(23,209</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>(9,965</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>(14,046</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 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>
</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 and accruals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,372</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>(19,545</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">
    Customer advance payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,838</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>18,604</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">
    Other current and noncurrent liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,386</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>(18,852</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 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>

</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 operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>222,384</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>64,484</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 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>

</TR>

<TR>
    <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 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>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <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>(10,747</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>(4,532</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisitions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,218</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>
</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 sale of equity investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000</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>
</TR>

<TR>
    <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>244</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>1,723</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 sale of 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 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>1,037</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 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>

</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) investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,721</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>(1,772</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 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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <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 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>
</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>(2,638</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>(991</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">
    Payments of long term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(211,162</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>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from initial public offering&nbsp;&#151; net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>608,925</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>
</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 dividend paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(557,686</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>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sale of stock to employees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,420</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>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in receivable from IR</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>(49,760</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 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>

</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 used in financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(161,141</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>(50,772</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 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>

</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</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,518</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>(203</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 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>

</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>(1,996</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>11,737</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>111,500</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>41,537</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 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>

</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">$</TD>
    <TD align="right" valign="bottom" nowrap>109,504</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53,274</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 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>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of the consolidated
and combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-58

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<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;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

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

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Basis of Presentation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying condensed consolidated financial statements
have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim
financial information. Accordingly, they do not include all of
the information and notes required by such principles applicable
to annual financial statements. These financial statements are
unaudited but, in the opinion of management, contain all
adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of our financial
position and results of operations. These financial statements
should be read in conjunction with our other filings with the
Securities and Exchange Commission. Operating results for the
periods presented are not necessarily indicative of the results
that may be expected for the year ending December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;29, 2004, pursuant to a purchase agreement with
Dresser-Rand Holdings, LLC, we acquired (the
&#147;Acquisition&#148;) from Ingersoll-Rand Company Limited,
LLC, (&#147;IR&#148;) the Dresser-Rand Company and its direct
and indirect subsidiaries, Dresser-Rand Canada, Inc. and
Dresser-Rand GmbH (collectively the &#147;Dresser-Rand
Entities&#148;). We used the proceeds from $430&nbsp;million
sale of common stock, borrowings of $420&nbsp;million in senior
subordinated notes, and borrowings of $395&nbsp;million under
the senior secured credit facility to fund the Acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Acquisition of the Dresser-Rand Entities was accounted for
under the purchase method of accounting. As a result, the
financial results presented for the period prior to the
Acquisition represent the predecessor (the
&#147;Predecessor&#148;) and the financial results presented for
the period subsequent to the Acquisition represents the
successor entity (the &#147;Successor&#148; or the
&#147;Company&#148;). 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. To clarify
and emphasize that the Successor has been presented on new basis
of accounting, we have separated Predecessor and Successor
operations with a vertical black line, where appropriate.
Certain amounts in the 2004 financial statements have been
reclassified to conform to their presentation in the
2005&nbsp;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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Recently Issued Accounting Standards</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the Financial Accounting Standards Board
(FASB)&nbsp;issued SFAS&nbsp;No.&nbsp;151, <I>Inventory Costs,
an Amendment of Accounting Research Bulletin&nbsp;No.&nbsp;43,
and Chapter&nbsp;4</I>. 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;123R, Share-Based
Payments, that is a revision of SFAS&nbsp;No.&nbsp;123,
<I>Accounting for Stock-Based Compensation</I>. This Statement
supersedes APB Opinion No.&nbsp;25, <I>Accounting for Stock
Issued to Employees</I>. SFAS&nbsp;123R focuses primarily on
accounting for transactions in which an entity obtains employee
services in exchange for equity. 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 $3,237,000 for the nine
months ended September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;153,
<I>Exchanges of Non-monetary Assets</I>, an Amendment of APB
Opinion No.&nbsp;29, <I>Accounting for Non-monetary
Transactions</I>. SFAS&nbsp;No.&nbsp;153 eliminates the
exception from fair value measurement for non-monetary 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 non-monetary exchange
has commercial substance if
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-59

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<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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
the future cash flows of the entity are expected to change
significantly as a result of the exchange. This statement is
effective for exchanges occurring in fiscal years beginning
after June&nbsp;15, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2005, the FASB issued Interpretation No.&nbsp;47, an
interpretation of SFAS No.&nbsp;143, <I>Accounting for
Conditional Asset Retirement Obligations</I>. Interpretation
No.&nbsp;47 requires that a legal obligation to perform an asset
retirement activity in which the timing and (or) method of
settlement are conditional on a future event that may not be
within our control be recognized as a liability at the fair
value of a conditional asset retirement obligation, if the fair
value of the liability can be reasonably estimated. SFAS
No.&nbsp;143 acknowledges that in some cases, sufficient
information may not be available to reasonably estimate the fair
value of an asset retirement obligation. This Interpretation is
effective for our December&nbsp;31, 2005 financial statements.
We are currently assessing the impact the Interpretation will
have on our financial position and results of operation.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, the FASB issued SFAS&nbsp;No.&nbsp;154,
<I>Accounting Changes and Error Corrections</I>.
SFAS&nbsp;No.&nbsp;154 provides guidance on the accounting for
and reporting of accounting for changes and error corrections.
This statement is effective for fiscal years beginning after
December&nbsp;31, 2005.
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Inventories</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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="58%">&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 colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</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>2005</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="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="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(audited)</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 thousands)</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">$</TD>
    <TD align="right" valign="bottom" nowrap>80,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>60,728</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>289,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>209,247</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>370,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>269,975</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>(207,268</TD>
    <TD align="left" valign="bottom" nowrap>)</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>
</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">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>163,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>175,873</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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 classified as &#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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Sale of common stock</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;10, 2005, we completed our initial public
offering of 31,050,000&nbsp;shares of our common stock for net
proceeds of $608.9&nbsp;million. On September&nbsp;12, 2005, we
used $55.0&nbsp;million of the net proceeds to redeem
$50.0&nbsp;million face value amount of our
7<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">8</FONT>%&nbsp;senior
subordinated notes due 2014, and to pay the applicable
redemption premium of $3.7&nbsp;million and accrued interest of
$1.3&nbsp;million to the redemption date. Our Board of Directors
approved the payment of a dividend on August&nbsp;11, 2005, of
the remaining net proceeds, excluding certain related costs, of
$557.7&nbsp;million ($10.26&nbsp;per share) to our stockholders
existing immediately prior to the offering, consisting of
affiliates of First Reserve Corporation and certain members of
senior 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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Acquisitions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;8, 2005, we acquired from Tuthill Corporation
certain assets of its Tuthill Energy Systems Division
(&#147;TES&#148;). TES is an international manufacturer of
single and multi-stage steam turbines and portable ventilators
under the Coppus, Murray and Nadrowski brands which complement
our steam turbine
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-60

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
business. The current estimated cost of TES is approximately
$57.0&nbsp;million, net of $4.0&nbsp;million cash acquired,
subject to future adjustments for agreement on the final working
capital at the closing date and other related matters. We have
preliminarily allocated the cost based on current estimates of
the fair value of assets acquired and liabilities assumed as
follows (in thousands):
</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">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,458</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory&nbsp;&#151; net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,690</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD 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>208</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>

<TR>
    <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>21,356</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <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">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,319</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets and goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,414</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>

<TR valign="bottom" bgcolor="#cceeff">
    <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>70,089</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>

<TR>
    <TD 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">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,570</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD 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>2,501</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>

<TR>
    <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>13,071</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>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid&nbsp;&#151; net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,018</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>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The above amounts are estimates as final appraisals and other
required information to determine final cost and assign fair
values have not been received. Also, certain restructuring of
operations will be necessary to obtain appropriate synergies in
the combined steam turbine business. Accordingly, the above
amounts may be revised when all required information is obtained
and the restructuring plan is finalized which is expected to be
accomplished during the first quarter of 2006. Pro forma
financial information, assuming that TES had been acquired at
the beginning of each period for which an income statement is
presented, has not been presented because the effect on our
results for these periods was not considered material. TES
results have been included in our financial results since
September&nbsp;8, 2005, and were not material to the results of
operations for the three months and nine months ended
September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the third quarter of 2005, we purchased the other 50% of
our Multiphase Power and Processing Technologies (MppT) joint
venture for a payment of $200,000 and an agreement to pay
$300,000 on April&nbsp;1, 2006, and $425,000 on April&nbsp;1,
2007. The net present value of the total consideration is
$876,000, bringing our total investment in MppT to
$2.9&nbsp;million at the date of the purchase. MppT owns patents
and technology for inline, compact, gas-liquid scrubbers.
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Intangible assets and goodwill</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The cost and related accumulated amortization of intangible
assets were:
</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="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&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="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="6" align="center" nowrap><B>September&nbsp;30, 2005</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>
</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>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</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>Cost</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>Cost</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>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</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="14" 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">
    Trade names</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>89,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,903</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>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer relationships</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>232,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,216</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>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Software and technology</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>149,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,304</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other amortizable intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,756</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</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>514,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,466</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>
</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;color: #000000; background: #ffffff;">F-61

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Changes in cost in the above table from December&nbsp;31, 2004
to September&nbsp;30, 2005, arose from translation adjustments
and the amounts related to the TES and MppT acquisitions. Such
TES amounts are subject to change when final appraisals are
received.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Amortization of intangible assets for the nine months ended
September&nbsp;30, 2005 was $30.1&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The changes in goodwill for the nine months ended
September&nbsp;30, 2005, were:
</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="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>423,330</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    TES acquisition</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,120</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>(29,164</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>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at September&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>399,286</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>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The goodwill from the TES acquisition is subject to change when
the final appraisals are received and the working capital
adjustment is finalized.
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Income taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our estimated income tax provision for the nine months ended
September&nbsp;30, 2005, results in an effective rate that
differs from U.S.&nbsp;Federal statutory rate of 35% principally
because, in certain tax jurisdictions, we have incurred net
operating losses from inception and are currently forecasting
net operating losses for 2005. As a result, we have provided a
valuation allowance for the deferred tax assets in those
jurisdictions on the basis that it is more likely than not, as
defined by generally accepted accounting principles, that we
will not realize the net operating loss assets. We will adjust
that valuation allowance in the future when, based principally
on attained results, it becomes more likely than not that the
benefits of the net operating loss carried forward will be
realized. Our effective income tax rate for the three months and
nine months ended September&nbsp;30, 2004, differed from the
U.S.&nbsp;Federal statutory rate of 35%, primarily because the
Predecessor period reflected the non-taxable partnership
structure in existence for most of the domestic operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As mentioned in Note&nbsp;1, the Successor began operations as a
new entity on October&nbsp;29, 2004. We operate in numerous
countries around the world and file tax returns as appropriate.
The Acquisition was an asset purchase in the United States and a
stock purchase outside the United States. The purchase price was
allocated among the entities acquired based on estimated fair
values. Deferred taxes were recorded to reflect the difference
between the purchase price allocated to foreign entities and
their underlying tax basis. Management believes that it has
provided adequate estimated liabilities for taxes based on the
allocation of the purchase price and its understanding of the
tax laws and regulations in those countries. Since few tax
returns have been filed since beginning operations and none have
been audited by the appropriate taxing authorities, we could be
exposed to additional income and other taxes.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2004, the American Jobs Creation Act of 2004 (the
&#147;Act&#148;) was enacted. The Act raises a number of issues
with respect to accounting for income taxes. For companies that
pay U.S.&nbsp;income taxes on manufacturing activities in the
U.S., the Act provides a deduction from taxable income equal to
a stipulated percentage of qualified income from domestic
production activities. On December&nbsp;21, 2004, the FASB
issued guidance regarding the accounting implications of the Act
related to the deduction for qualified domestic production
activities which should be accounted for as a special deduction
under SFAS&nbsp;No.&nbsp;109, <I>Accounting for Income
Taxes</I>. The guidance applies to financial statements for
periods ending after the date the Act was enacted. In years in
which there is U.S.&nbsp;taxable income starting in 2005, this
essentially results in a one percentage point reduction in the
statutory rate. The Act also creates a temporary incentive for
U.S.&nbsp;multinationals to repatriate accumulated income earned
abroad by providing an 85% dividends received deduction for
certain dividends from controlled foreign corporations. The
deduction is subject to a number of limitations. As part of the
sale of the Predecessor, all previously undistributed foreign
earnings were deemed
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-62

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
distributed to IR. Accordingly, while we are still evaluating
the potential impact of these dividend repatriation provisions,
any amounts repatriated under the Act are not likely to be
significant.
</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>Pension plans</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The components of net periodic pension cost for defined benefit
pension plans 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="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&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 style="border-right:1.5pt solid #000000;">&nbsp;</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 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>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months 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>September&nbsp;30, 2005</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30, 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 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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD colspan="7" align="center" nowrap><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,862</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,757</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>12,891</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>15,250</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>(14,575</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>(19,126</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 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>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <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 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>408</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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 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>2,991</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic pension cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,178</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,280</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>

</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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><B>9.</B></TD>
    <TD>
    <B>Postretirement benefits other than pensions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The components of net periodic postretirement benefits cost for
such plans 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="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&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 style="border-right:1.5pt solid #000000;">&nbsp;</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 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>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months 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>September&nbsp;30, 2005</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30, 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 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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD colspan="7" align="center" nowrap><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,498</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,444</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>2,052</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>8,411</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 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 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>
</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 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>(775</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">
    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 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>2,692</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>

</TR>

<TR>
    <TD colspan="2" 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">$</TD>
    <TD align="right" valign="bottom" nowrap>3,550</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,772</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>

</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;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>10.</B></TD>
    <TD>
    <B>Commitments and contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the enhanced compliance processes implemented by
us shortly prior to and following the Acquisition, we have
recently discovered that our Brazilian subsidiary engaged in a
number of transactions that resulted in steam turbine parts and
services being provided to Moa Nickel S.A., a Cuban mining
company jointly owned by the Government of Cuba and Sherritt
International Corp., a Canadian company. Our revenues from these
transactions were approximately $4&nbsp;million in the aggregate
since December, 1999, when we acquired a controlling interest in
the Brazilian subsidiary. This amount represents approximately
0.08% of our consolidated revenues from 2000 through
September&nbsp;30, 2005. Of the $4&nbsp;million, approximately
$2.5&nbsp;million in revenues were in connection with the sale
of a spare part ordered in October, 2003, which was delivered
and installed in Cuba, with the assistance of
<FONT style="white-space: nowrap">non-U.S.&nbsp;employees</FONT>
of our Brazilian subsidiary, in May, 2005. When these
transactions came to our attention, we instructed our Brazilian
subsidiary in July, 2005, to cease dealings with Cuba. These
transactions were apparently in violation of the
U.S.&nbsp;Treasury Department&#146;s Office of Foreign Assets
Control&#146;s regulations with respect to Cuba. We have
informed the U.S.&nbsp;Treasury Department of these matters and
are currently engaged in preliminary discussions with the
Department. Our inquiry into these transactions is continuing
and the Department&#146;s review of this matter is in a very
preliminary
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-63

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
stage. Cuba is subject to economic sanctions administered by the
U.S.&nbsp;Treasury Department&#146;s Office of Foreign Assets
Control, and is identified by the U.S.&nbsp;State Department as
a terrorist-sponsoring state. To the extent we violated any
regulations with respect to Cuba or the Department determines
that other violations have occurred, we will be subject to fines
or other sanctions, including possible criminal penalties, with
related business consequences. We do not expect these matters to
have a material adverse effect on our financial results, cash
flow or liquidity. In addition, the Department&#146;s
investigation into our activities with respect to Cuba may
result in additional scrutiny of our activities with respect to
other countries that are the subject of sanctions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are involved in various litigation, claims and administrative
proceedings, including environmental matters, arising in the
normal course of business. 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 any future adjustments to recorded amounts, with
respect to these currently known contingencies, 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the Acquisition, 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 remaining issues to be resolved are not
expected to be material. In 2002, the Predecessor received
$10.0&nbsp;million of grant funds from the New York Empire State
Development Corporation (&#147;ESDC&#148;). 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 2002. The grant vests ratably over a five-year
period commencing in 2001 and concluding in 2005, based on
certain criteria. Prior to the end of 2003, the Predecessor and
ESDC restructured the grant to reflect the then existing
business environment that reduced 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 restructured ESDC grant
provides, among other conditions, that we meet certain
employment levels at December&nbsp;31 of each year; otherwise,
we could be obligated to reimburse the ESDC a portion of the
grant. Management expects that it will meet the required
employment level on December&nbsp;31, 2005.
</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;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>11.</B></TD>
    <TD>
    <B>Warranty accruals</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain a product warranty liability that represents
estimated future claims for equipment, parts and services
covered during a warranty period. A warranty liability is
provided at the time of revenue recognition
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-64

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
based on historical experience and adjusted as required. 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="3%">&nbsp;</TD>
    <TD width="61%">&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="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended</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>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" align="center" nowrap><B>(In thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</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="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</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">
    Balance, beginning of period</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>23,699</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provisions for warranties issued during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,599</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">
    Adjustments to warranties issued in prior periods</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(426</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">
    Payments during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,379</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,850</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">
    Translation adjustments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,266</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>960</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 colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,982</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;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>12.</B></TD>
    <TD>
    <B>Other comprehensive (loss) income</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The components of other comprehensive (loss) income 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="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</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>Ended</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 colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30, 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>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>(In thousands)</B></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="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,732</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive (loss) 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>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in value of cash flow hedge</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>171</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,155</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,394</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">
    Comprehensive (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(22,264</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,297</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 align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The components of accumulated other comprehensive (loss) income
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="2" align="center" nowrap><B>September&nbsp;30,</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>2005</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>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</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>(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">
    Minimum pension liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(922</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(922</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,749</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,406</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">
    Accumulated other comprehensive (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(18,671</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,484</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: 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;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>13.</B></TD>
    <TD>
    <B>Segment information:</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have two reportable segments based on the engineering and
production processes, and the products and services provided by
each segment 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;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>1)&nbsp;</TD>
    <TD align="left">
    New Units 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>2)&nbsp;</TD>
    <TD align="left">
    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.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unallocable amounts represent expenses and assets that cannot be
assigned directly to either reportable segment because of their
nature. Unallocable expenses included Ingersoll-Rand corporate
allocations
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-65

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
(Predecessor), corporate expenses (Successor), research and
development expenses, and restructuring charges. Assets that are
directly assigned to the two reportable segments include trade
accounts receivable, net inventories, and goodwill. Unallocable
assets include cash, prepaid expenses, deferred taxes, property,
plant and equipment, and intangibles.
</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="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&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 style="border-right:1.5pt solid #000000;">&nbsp;</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 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>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</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>Ended</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>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>September&nbsp;30, 2005</B></TD><TD></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30, 2004</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 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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(In thousands)</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>Sales</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 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>
</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">$</TD>
    <TD align="right" valign="bottom" nowrap>399,044</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>256,590</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>447,193</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>400,904</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>

</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">$</TD>
    <TD align="right" valign="bottom" nowrap>846,237</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>657,494</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Operating Income</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 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>
</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">$</TD>
    <TD align="right" valign="bottom" nowrap>4,713</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,007</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>93,197</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>72,858</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" 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>(32,594</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>(31,767</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 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>

</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">$</TD>
    <TD align="right" valign="bottom" nowrap>65,316</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>43,098</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>

</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <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">$</TD>
    <TD align="right" valign="bottom" nowrap>22,499</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,438</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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>25,546</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>11,846</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>

</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">$</TD>
    <TD align="right" valign="bottom" nowrap>48,045</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,284</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>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Assets</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 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>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <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>249,075</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>
</TR>

<TR>
    <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>529,025</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>&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">
    Unallocable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>882,273</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>
</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">&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>1,660,373</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>
</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">&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;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>14.</B></TD>
    <TD>
    <B>Stockholders&#146; equity:</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Changes in stockholders&#146; equity for nine months ended
September&nbsp;30, 2005, were:
</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="32%">&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="7%">&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="4%">&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="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="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>
</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>Additional</B></TD><TD></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="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&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>Paid-In</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="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>(In thousands)</B></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>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>(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 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>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balances at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>436,642</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">$</TD>
    <TD align="right" valign="bottom" nowrap>452,897</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">&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>4,891</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>4,891</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD 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>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,655</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>4,657</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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>(27,155</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,155</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">
    IPO net proceeds</DIV>
    </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>608,615</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>608,925</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash dividends</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>(557,686</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>(557,686</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">
    Balances at September&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>492,226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(18,671</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>486,529</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>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-66

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

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

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>15.</B></TD>
    <TD>
    <B>Changes in existing financing arrangements:</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;26, 2005, we increased the availability under the
revolving credit portion of our senior credit facility from
$300&nbsp;million to $350&nbsp;million.
</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;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>16.</B></TD>
    <TD>
    <B>Supplemental guarantor financial information:</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the Acquisition, the Company issued
$420&nbsp;million of senior subordinated notes. The following
subsidiaries, all of which are wholly owned, guaranteed the
notes on a full, unconditional and joint and several basis:
Dresser-Rand LLC, D-R Steam LLC, Dresser-Rand Power LLC,
Dresser-Rand Company and Dresser-Rand Global Services, LLC. The
following supplemental condensed consolidating and combining
financial information of the Issuer, Subsidiary Guarantors and
Subsidiary Non-Guarantors presents the balance sheets as of
September&nbsp;30, 2005, and December&nbsp;31, 2004 (Successor)
and statements of operations and cash flows for the nine months
ended September&nbsp;30, 2005 (Successor) and 2004
(Predecessor). For the Successor periods condensed consolidating
financial statements, the column titled &#147;Issuer&#148;
represents Dresser-Rand Group Inc. and such presentation has
been applied to the Predecessor condensed combining financial
statements. The condensed consolidating and combining financial
information presents investments in consolidated subsidiaries
using the equity method of accounting.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-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="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED CONSOLIDATING BALANCE SHEET (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>September&nbsp;30, 2005</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="32%">&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>
    <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="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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Consolidating</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>Issuer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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</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">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>109,504</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 and notes receivables net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122,275</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>225,117</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories, net (excluding advance payments)</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>114,794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,577</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>163,371</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 deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,224</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>30,659</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>&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>2,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>262,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>264,003</TD>
    <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>528,651</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">
    Investment in affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,010,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,456</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>(1,059,166</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">
    Property, plant and equipment, net</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>170,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,683</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>233,598</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">
    Intangible assets, net</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>530,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>340,693</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>871,565</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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>17,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,125</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>26,559</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>&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">$</TD>
    <TD align="right" valign="bottom" nowrap>1,030,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,018,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>670,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,059,166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,660,373</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" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="10" align="left" valign="top">
    <B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</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>
    <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 and accruals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>161,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>240,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>416,438</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">
    Loans payable</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>63</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>63</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>&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>14,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>240,535</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>416,501</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">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>532,158</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>66,989</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>599,148</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intercompany accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,766</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(128,568</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>131,334</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 colspan="2" 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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,817</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>158,195</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>&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>544,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>139,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>489,675</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>1,173,844</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">
    Common Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>854</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>854</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>485,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>878,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>180,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,059,166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>485,675</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>&nbsp;</TD>
    <TD 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>486,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>878,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>180,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,059,166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>486,529</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>&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="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,030,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,018,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>670,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,059,166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,660,373</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" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-68

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED CONSOLIDATING BALANCE SHEET (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>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="32%">&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>
    <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="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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Consolidating</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>Issuer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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</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">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>63,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>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">
    Accounts and notes receivables net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99,831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132,785</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>265,479</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories, net (excluding advance payments)</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>112,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,889</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>175,873</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 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>4,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,479</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>21,701</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>&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>32,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>280,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>261,312</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>574,553</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">
    Investment in affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>919,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,720</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>(963,431</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">
    Property, plant and equipment, net</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>158,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,422</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>226,764</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">
    Intangible assets, net</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>532,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>370,074</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>902,917</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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>23,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,604</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>46,840</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>&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">$</TD>
    <TD align="right" valign="bottom" nowrap>976,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,034,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>703,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(963,431</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</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" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="10" align="left" valign="top">
    <B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</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>
    <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 and accruals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>105,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>210,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>322,913</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">
    Loans payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,800</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>3,949</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>6,749</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>&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>9,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>214,410</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>329,662</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">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>696,500</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>120,164</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>816,664</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intercompany accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(183,078</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137,988</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 colspan="2" 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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,622</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>151,851</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>&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>523,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>245,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>529,184</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>1,298,177</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">
    Common Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>542</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>542</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>789,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(963,431</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452,355</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>&nbsp;</TD>
    <TD 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>452,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>789,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(963,431</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</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: 1pt solid #000000;">&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 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="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>976,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,034,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>703,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(963,431</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,751,074</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" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-69

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED CONSOLIDATING STATEMENT OF INCOME (SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the nine months ended September&nbsp;30, 2005</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="36%">&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="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="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>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Consolidating</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>Issuer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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">
    Net sales</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>561,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>359,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(74,156</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>846,237</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>2,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>456,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>277,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(74,156</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>662,590</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>&nbsp;</TD>
    <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>(2,285</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81,792</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>183,647</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>1,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,409</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>118,331</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>&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>(3,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,383</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>65,316</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity earnings in affiliates (net of tax)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,645</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>(52,713</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 colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest (expense) income, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(40,884</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,111</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>(44,619</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">
    Intercompany interest and fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,364</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,999</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 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>(2,338</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,694</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,246</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>
    <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 (loss) before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(52,713</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,451</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>&#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>10,560</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>10,560</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>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(52,713</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,891</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" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-70
<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED COMBINING STATEMENT OF INCOME (PREDECESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the nine months ended September&nbsp;30, 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="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="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>
    <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 colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Combining</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>Issuer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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">
    Net sales</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>416,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>241,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>657,494</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>330,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173,551</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>503,903</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>&nbsp;</TD>
    <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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,739</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>153,591</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,873</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>110,493</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>&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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,866</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>43,098</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity earnings in affiliates (net of tax)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,124</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>(32,608</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 colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest (expense) income, 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>1,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,199</TD>
    <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>2,306</TD>
    <TD>&nbsp;</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,650</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,754</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>
    <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 (loss) before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32,608</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,650</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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,822</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>4,918</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>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(32,608</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,732</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" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-71

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(SUCCESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the nine months ended September&nbsp;30, 2005</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="28%">&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="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="4%">&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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Consolidating</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>Issuer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Entities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Entities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</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="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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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">
    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>
    <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">
    Net cash provided by (used in) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,771</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>142,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>86,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,645</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>222,384</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" 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>
    <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">
    Capital expenditures</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>(7,938</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,809</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>(10,747</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">
    Proceeds from 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>66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>178</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>244</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sale of equity investment</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>10,000</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>10,000</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">
    Acquisitions, net of cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,018</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(200</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>(57,218</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">
    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>(57,018</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,631</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>(57,721</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">
    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>
    <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 change in debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(167,141</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>(46,659</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>(213,800</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">
    Change in intercompany accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>176,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(165,683</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,233</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,645</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">
    Issuance of common units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,420</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>1,420</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">
    Proceeds from initial public offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>608,925</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>608,925</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" 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>(557,686</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>(557,686</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">
    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>61,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(165,683</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59,892</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(161,141</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of exchange rate changes</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>(5,518</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>(5,518</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">
    Net increase (decrease) in cash&nbsp;&#38; cash equivalents</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>(20,764</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,768</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>(1,996</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, beginning of 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>63,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,159</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>111,500</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" 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">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>109,504</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>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-72

<!-- 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;color: #000000; background: #ffffff;">
<B>DRESSER-RAND GROUP INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CONDENSED COMBINING STATEMENT OF CASH FLOWS (PREDECESSOR)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the nine months ended September&nbsp;30, 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="35%">&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="4%">&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>
    <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="1%">&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="2" align="center" nowrap><B>Subsidiary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subsidiary</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="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Non-Guarantors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Combining</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>Issuer</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Entities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Entities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Adjustments</B></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="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="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>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" 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">
    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>
    <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">
    Net cash provided by (used in) operating activities</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>68,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,440</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>64,484</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" 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>
    <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">
    Capital expenditures</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>(2,053</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,479</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>(4,532</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">
    Proceeds from 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>1,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,723</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sale of 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>&#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>1,037</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>

</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 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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,488</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>(1,772</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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="3" 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>
    <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">
    Net change in debt</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>(1,012</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>(1,012</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">
    Change in due to (from) unconsolidated 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>(66,516</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,756</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>(49,760</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">
    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>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(66,516</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,744</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>(50,772</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of exchange rate changes</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>(203</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>(203</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>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&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">
    Net increase (decrease) in cash&nbsp;&#38; cash equivalents</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>3,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,613</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>11,737</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, beginning of 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>(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>41,693</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>41,537</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>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" 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">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>50,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</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>53,274</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>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-73

<!-- 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;color: #000000; background: #ffffff;">

</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="y16020y1602025.gif" alt="(DRESSER-RAND GROUP INC LOGO)">
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">

</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<DIV align="center" style="font-size: 4pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 2.0pt solid 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>

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

<DIV align="center" style="font-size: 4pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 2.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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>42,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <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 valign="bottom" bgcolor="#cceeff">
    <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>
    <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 valign="bottom" bgcolor="#cceeff">
    <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>
    <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 valign="bottom" bgcolor="#cceeff">
    <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">&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">
    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>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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
amended and restated certificate of incorporation and amended
and restated bylaws of Dresser-Rand Group, Inc. provide for such
limitations on liability.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we currently maintain insurance on behalf of our
directors and executive officers insuring them against certain
liabilities asserted against them in their capacities as
directors or officers or arising out of such status. Such
insurance would be available to our directors and officers in
accordance with its terms.
</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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 the certificates
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">
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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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 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&nbsp;shares of the issuer&#146;s common stock
for an aggregate price of $1.4&nbsp;million (this purchase of
shares reflects the issuer&#146;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&nbsp;shares of the
issuer&#146;s common stock.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, the issuer issued 303,735&nbsp;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 align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 2005, the issuer declared a 0.537314-for-one reverse
stock split.
</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;color: #000000; background: #ffffff;">

<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 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;color: #000000; background: #ffffff;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;</I></TD>
    <TD>
    <I>Exhibits</I></TD>
</TR>

</TABLE>

<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="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="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap>.1&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement</TD>
</TR>

<TR>
    <TD align="right" 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">
    Amended and Restated Certificate of Incorporation of
    Dresser-Rand Group Inc.</TD>
</TR>

<TR>
    <TD align="right" 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">
    Amended and Restated By-Laws of Dresser-Rand Group Inc.</TD>
</TR>

<TR>
    <TD align="right" 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="right" 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="right" 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">
    First Supplemental Indenture, dated as of December&nbsp;22, 2005
    among Dresser-Rand Group Inc., the guarantors party thereto and
    Citibank, N.A., as trustee</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.4*</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 representatives of the placement agents</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Simpson Thacher&nbsp;&#38; Bartlett LLP</TD>
</TR>

<TR>
    <TD align="right" 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 Acquisition LLC and Ingersoll-Rand Company Limited</TD>
</TR>

<TR>
    <TD align="right" 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)&nbsp;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="right" 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 and Consent to the Credit Agreement, dated
    as of January&nbsp;4, 2005, among D-R Interholding, LLC,
    Dresser-Rand Group Inc., D-R Holdings (UK)&nbsp;Limited, D-R
    Holdings (France) S.A.S. and the lenders party thereto</TD>
</TR>

<TR>
    <TD align="right" 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">
    Form of Amendment No.&nbsp;2 and Consent to the Credit Agreement
    and Amendment No.&nbsp;1 to the Domestic Guarantee and
    Collateral Agreement among D-R Interholding, LLC, Dresser Rand
    Group Inc., D-R Holdings (UK)&nbsp;Limited, D-R Holdings
    (France) S.A.S. and the lenders party thereto</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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="right" 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">
    Commitment Increase Supplement dated as of August&nbsp;26, 2005,
    to the Credit Agreement dated as of October&nbsp;29, 2004, among
    Dresser-Rand Group Inc., the Foreign Borrowers party thereto
    from time to time, 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 Natexis Banques
    Populaires and Bear Stearns Corporate Lending Inc., as
    co-documentation agents</TD>
</TR>

<TR>
    <TD align="right" 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">
    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="right" 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">
    Supplement No. 1 dated as of December 22, 2005, to the 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="right" 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">
    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="right" 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">
    Supply Agreement, dated October&nbsp;31, 2004, by and between
    Dresser-Rand Company and Ingersoll-Rand Company</TD>
</TR>

<TR>
    <TD align="right" 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">
    License Agreement, dated as of October&nbsp;26, 2004, by and
    between Dresser, Inc. and Dresser-Rand Group Inc.</TD>
</TR>

<TR>
    <TD align="right" 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">
    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="right" 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">
    Amended and Restated Limited Liability Company Agreement of
    Dresser-Rand Holdings, LLC, effective as of October&nbsp;29, 2004</TD>
</TR>

<TR>
    <TD align="right" 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">
    Amendment to the Amended and Restated Limited Liability Company
    Agreement of Dresser-Rand Holdings, LLC, effective as of
    June&nbsp;24, 2005</TD>
</TR>

<TR>
    <TD align="right" 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">
    Employment Agreement, dated October&nbsp;27, 2004, by and among
    Vincent R. Volpe, Dresser-Rand Holdings, LLC and Dresser-Rand
    Group Inc.</TD>
</TR>

<TR>
    <TD align="right" 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">
    Employment Agreement, dated July&nbsp;25, 1990, by and between
    Jean-Francois Chevrier and Dresser-Rand S.A.</TD>
</TR>

<TR>
    <TD align="right" 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">
    Amended and Restated Stockholder Agreement, effective as of
    July&nbsp;15, 2005, by and among Dresser-Rand Group Inc., D-R
    Interholding, LLC, Dresser-Rand Holdings, LLC and certain
    management employees, together with any other stockholder who
    may be made party to this agreement</TD>
</TR>

<TR>
    <TD align="right" 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">
    Dresser-Rand Group Inc. Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" 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">
    Dresser-Rand Group Inc. 2005 Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Dresser-Rand Group Inc. 2005&nbsp;Directors Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Subscription Agreement</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Management Stock Subscription Agreement</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Annual Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" 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="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1&#134;</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="right" 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="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Powers of Attorney (included in signature page of this
    Registration Statement)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid 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: 9pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;&nbsp;*&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Registration Statement on
    <FONT style="white-space: nowrap">Form&nbsp;S-1</FONT> of
    Dresser-Rand Group Inc. (File
    No.&nbsp;<FONT style="white-space: nowrap">333-124963)
    </FONT></TD>
</TR>

</TABLE>

<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: 9pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>**&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Quarterly Report on
    <FONT style="white-space: nowrap">Form&nbsp;10-Q</FONT> of
    Dresser-Rand Group Inc. filed with the SEC on November&nbsp;14,
    2005</TD>
</TR>

</TABLE>

<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: 9pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>***&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Registration Statement on
    <FONT style="white-space: nowrap">Form&nbsp;S-4</FONT> of
    Dresser-Rand Group Inc. filed with the SEC on January&nbsp;23,
    2006</TD>
</TR>

</TABLE>

<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: 9pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;&nbsp;&#134;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    To be filed by amendment</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Financial Statement
Schedules</I>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Schedule&nbsp;II&nbsp;&#151; Valuation and Qualifying
Accounts and Reserves</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Dresser-Rand Group Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<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;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 100%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff;">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;color: #000000; background: #ffffff;">

<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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and 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 registrant 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;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned registrant hereby undertakes that:
</DIV>

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

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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
January&nbsp;26, 2006.
</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;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    DRESSER-RAND GROUP INC.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 48pt; 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;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="57%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><DIV style="border-bottom: 1pt solid solid black" align="left">
    /s/ <FONT style="font-variant:SMALL-CAPS">Vincent R. Volpe Jr.
    </FONT></DIV></TD>
</TR>



<TR valign="top"  style="font-size: 10pt;color: #000000; background: #ffffff;">
    <TD>&nbsp;</TD>
    <TD align="left">Name:</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Vincent R. Volpe Jr.</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left">President, Chief Executive<BR>
Officer and Director</TD>
</TR>

</TABLE>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each person whose signature appears below authorizes Lonnie A.
Arnett and Randy D. Rinicella and each of them, as his
<FONT style="white-space: nowrap">attorney-in</FONT>-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
<FONT style="white-space: nowrap">Form&nbsp;S-1</FONT> 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
<FONT style="white-space: nowrap">attorney-in</FONT>-fact may
deem appropriate, and with full power and authority to perform
and do any and all acts and things, whatsoever which any such
<FONT style="white-space: nowrap">attorney-in</FONT>-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
<FONT style="white-space: nowrap">attorney-in</FONT>-fact or
substitute.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&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="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&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>
    <HR size="1" noshade></FONT>Vincent R. Volpe Jr.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    President, Chief Executive<BR>
    Officer and Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January&nbsp;26, 2006</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>
    <HR size="1" noshade></FONT>Leonard M. Anthony</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Executive Vice President<BR>
    and Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January&nbsp;26, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Lonnie A. Arnett<BR>
    <HR size="1" noshade></FONT>Lonnie A. Arnett</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Vice President, Controller and<BR>
    Chief Accounting Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January&nbsp;26, 2006</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>
    <HR size="1" noshade></FONT>William E. Macaulay</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Chairman of the Board of<BR>
    Directors</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January&nbsp;26, 2006</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>
    <HR size="1" noshade></FONT>Thomas J. Sikorski</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January&nbsp;26, 2006</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&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">Mark A. McComiskey<BR>
    <HR size="1" noshade></FONT>Mark A. McComiskey</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January&nbsp;26, 2006</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>
    <HR size="1" noshade></FONT>Kenneth W. Moore</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January&nbsp;26, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Michael L.
    Underwood<BR>
    <HR size="1" noshade></FONT>Michael L. Underwood</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January&nbsp;26, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Philip R. Roth<BR>
    <HR size="1" noshade></FONT>Philip R. Roth</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January&nbsp;26, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <BR>
    <HR size="1" noshade>Louis A. Raspino</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">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="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>EXHIBIT INDEX</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="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="left" nowrap><B>Exhibit&nbsp;No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description of Exhibit</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>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap>.1&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement</TD>
</TR>

<TR>
    <TD align="right" 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">
    Amended and Restated Certificate of Incorporation of
    Dresser-Rand Group Inc.</TD>
</TR>

<TR>
    <TD align="right" 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">
    Amended and Restated By-Laws of Dresser-Rand Group Inc.</TD>
</TR>

<TR>
    <TD align="right" 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="right" 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="right" 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">
    First Supplemental Indenture, dated as of December&nbsp;22, 2005
    among Dresser-Rand Group Inc., the guarantors party thereto and
    Citibank, N.A., as trustee</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.4*</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 representatives of the placement agents</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Simpson Thacher&nbsp;&#38; Bartlett LLP</TD>
</TR>

<TR>
    <TD align="right" 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 Acquisition LLC and Ingersoll-Rand Company Limited</TD>
</TR>

<TR>
    <TD align="right" 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)&nbsp;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="right" 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 and Consent to the Credit Agreement, dated
    as of January&nbsp;4, 2005, among D-R Interholding, LLC,
    Dresser-Rand Group Inc., D-R Holdings (UK)&nbsp;Limited, D-R
    Holdings (France) S.A.S. and the lenders party thereto</TD>
</TR>

<TR>
    <TD align="right" 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">
    Form of Amendment No.&nbsp;2 and Consent to the Credit Agreement
    and Amendment No.&nbsp;1 to the Domestic Guarantee and
    Collateral Agreement among D-R Interholding, LLC, Dresser Rand
    Group Inc., D-R Holdings (UK)&nbsp;Limited, D-R Holdings
    (France) S.A.S. and the lenders party thereto</TD>
</TR>

<TR>
    <TD align="right" 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">
    Commitment Increase Supplement dated as of August&nbsp;26, 2005,
    to the Credit Agreement dated as of October&nbsp;29, 2004, among
    Dresser-Rand Group Inc., the Foreign Borrowers party thereto
    from time to time, 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 Natexis Banques
    Populaires and Bear Stearns Corporate Lending Inc., as
    co-documentation agents</TD>
</TR>

<TR>
    <TD align="right" 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">
    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="right" 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">
    Supplement No. 1 dated as of December 22, 2005, to the 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="right" 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">
    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="right" 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">
    Supply Agreement, dated October&nbsp;31, 2004, by and between
    Dresser-Rand Company and Ingersoll-Rand Company</TD>
</TR>

<TR>
    <TD align="right" 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">
    License Agreement, dated as of October&nbsp;26, 2004, by and
    between Dresser, Inc. and Dresser-Rand Group Inc.</TD>
</TR>

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

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<TR style="font-size: 8pt;">
    <TD colspan="3" align="left" nowrap><B>Exhibit&nbsp;No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description of Exhibit</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>
</TR>

<TR>
    <TD align="right" 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">
    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="right" 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">
    Amended and Restated Limited Liability Company Agreement of
    Dresser-Rand Holdings, LLC, effective as of October&nbsp;29, 2004</TD>
</TR>

<TR>
    <TD align="right" 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">
    Amendment to the Amended and Restated Limited Liability Company
    Agreement of Dresser-Rand Holdings, LLC, effective as of
    June&nbsp;24, 2005</TD>
</TR>

<TR>
    <TD align="right" 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">
    Employment Agreement, dated October&nbsp;27, 2004, by and among
    Vincent R. Volpe, Dresser-Rand Holdings, LLC and Dresser-Rand
    Group Inc.</TD>
</TR>

<TR>
    <TD align="right" 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">
    Employment Agreement, dated July&nbsp;25, 1990, by and between
    Jean-Francois Chevrier and Dresser-Rand S.A.</TD>
</TR>

<TR>
    <TD align="right" 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">
    Amended and Restated Stockholder Agreement, effective as of
    July&nbsp;15, 2005, by and among Dresser-Rand Group Inc., D-R
    Interholding, LLC, Dresser-Rand Holdings, LLC and certain
    management employees, together with any other stockholder who
    may be made party to this agreement</TD>
</TR>

<TR>
    <TD align="right" 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">
    Dresser-Rand Group Inc. Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" 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">
    Dresser-Rand Group Inc. 2005 Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Dresser-Rand Group Inc. 2005&nbsp;Directors Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Subscription Agreement</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Management Stock Subscription Agreement</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Annual Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" 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="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1&#134;</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="right" 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="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Powers of Attorney (included in signature page of this
    Registration Statement)</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;&nbsp;*&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Registration Statement on
    <FONT style="white-space: nowrap">Form&nbsp;S-1</FONT> of
    Dresser-Rand Group Inc. (File
    No.&nbsp;<FONT style="white-space: nowrap">333-124963)
    </FONT></TD>
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    <TD>&nbsp;</TD>
    <TD>**&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Quarterly Report on
    <FONT style="white-space: nowrap">Form&nbsp;10-Q</FONT> of
    Dresser-Rand Group Inc. filed with the SEC on November&nbsp;14,
    2005</TD>
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    <TD>***&nbsp;</TD>
    <TD align="left">
    Incorporated by reference to the Registration Statement on
    <FONT style="white-space: nowrap">Form&nbsp;S-4</FONT> of
    Dresser-Rand Group Inc. filed with the SEC on January&nbsp;23,
    2006</TD>
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    To be filed by amendment</TD>
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S-1
Table of Contents
As filed with the Securities and Exchange Commission on
January 26, 2006
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)
With a copy 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
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
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Title of Each Class of
Aggregate Offering
Amount of
Securities to be Registered
Price(1)
Registration Fee
Common Stock, par value $.01 per share
$400,000,000
$42,800.00
(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"), based on the average
    of the high and low prices of the common stock on
    January 25, 2006, as reported on the New York Stock
    Exchange.
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                     ,
2006
Shares
Dresser-Rand Group Inc.
Common Stock
D-R Interholding, LLC, the selling stockholder, is
selling            shares
of our common stock. The selling stockholder will grant the
underwriters an option to purchase up
to                     additional
shares of common stock to cover over-allotments. We will not
receive any proceeds from the sale of shares in this offering.
Our common stock is listed on the New York Stock Exchange under
the symbol "DRC".
On                     ,
2006, the last reported sale price of our common stock was
$           per
share.
Investing in the common stock involves risks. See "Risk
Factors" beginning on page 13.
Proceeds,
Public
Underwriting
Before Expenses,
Offering Price
Discount
to the Selling Stockholder
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                     ,
2006.
,
2006
Table of Contents
[ART WORK]
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
13
Special Note Regarding Forward-Looking
    Statements
25
Market and Industry Data
26
The Transactions
27
Use of Proceeds
31
Dividend Policy
31
Price Range of Our Common Stock
31
Capitalization
32
Unaudited Pro Forma Financial
    Information
33
Selected Historical Financial
    Information
38
Management's Discussion and Analysis
    of Financial Condition and Results of Operations
41
Industry Overview
68
Business
72
Management
85
Principal and Selling Stockholders
100
Certain Related Party Transactions
102
Description of Indebtedness
104
Description of Capital Stock
110
Shares Eligible for Future Sale
114
Certain United States Federal Income and
    Estate Tax Consequences to Non-U.S. Holders
116
Underwriting
119
Validity of the Shares
122
Experts
122
Where You Can Find More Information
122
Index to Financial Statements
F-1
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.
i
Table of Contents
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in
    this prospectus. This summary 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 combined financial statements and related notes,
    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 to the predecessors of the issuer
(Dresser-Rand Company and its direct and indirect subsidiaries,
Dresser-Rand Canada, Inc. and Dresser-Rand GmbH), (iv) the
term "Ingersoll-Rand" refers to Ingersoll-Rand Company
Limited, a Bermuda corporation, and its predecessors, which sold
its 51% interest in the Dresser-Rand Entities in the acquisition
described in "The Transactions" and (v) the term
"initial public offering" refers to our initial public
offering of common stock which was completed on August 10,
2005.
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 38% of the total
installed base of equipment in operation. 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 Royal Dutch Shell, Exxon Mobil, BP, Statoil,
Chevron, Petrobras, Pemex, PDVSA, Conoco, Lukoil, Marathon and
Dow Chemical.
We operate globally with manufacturing facilities in the United
States, France, Germany, Norway, India and Brazil and have 24
service and support centers worldwide. We have one of the
broadest sales and services networks in the industry, with
locations in all of the major international energy markets and
established coverage of 105 countries. 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 September 30, 2004 and
September 30, 2005, our backlog was $586.2 million and
$872.8 million, respectively. For the nine months ended
September 30, 2004 and September 30, 2005, we
generated net income of $37.7 million and
$4.9 million, respectively, and EBITDA of
$60.6 million and $108.1 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,
respectively, 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." These results reflect the impact of both our
growth-oriented business realignment and our continued focus on
operating efficiency.
1
Table of Contents
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. Our
products are custom-designed to client specifications for
long-life, critical applications. We are the market leader in
North America in new unit sales of turbo and reciprocating
compressors and have consistently ranked in the top three in
worldwide market share.
Aftermarket Parts and Services
We offer a comprehensive range of aftermarket parts and
services, including installation, maintenance, monitoring,
operation, repairs, overhauls and upgrades. 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.
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.
Competitive Strengths
Global Presence and Market Leadership.
We operate
    globally and provide coverage in 105 countries worldwide.
    We believe we are a leading provider of rotating equipment
    solutions in most of the markets we serve. We believe that
    rotating equipment solutions providers with global scale are
    positioned to disproportionately share in future industry growth
    as customers shift their business to the handful of companies
    with the ability to fulfill the full range of their equipment
    and service needs worldwide.
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 38% 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 the
    opportunity to significantly grow our aftermarket parts and
    services business in light of an industry outsourcing trend, a
    substantial source of stable, recurring, high-margin aftermarket
    revenue, 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.
2
Table of Contents
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
    for both our own and other OEM's equipment. Our coverage
    area of service centers servicing both turbo and reciprocating
    compressors is approximately 50% larger than that of our next
    closest competitor. 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.
Our research efforts center
    around leading technologies that maximize operating performance
    by increasing efficiency, durability, reliability and
    versatility. For example, we spent approximately five years and
    over $60 million to develop our DATUM turbo compressor
    platform. 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 (time from order booking to unit delivery) in
    the industry among manufacturers in our product range. 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 have invested
    substantial resources to develop a number of key proprietary
    systems. These systems enable us to reduce costs, shorten cycle
    times, monitor our own and some of our competitors'
    installed bases, 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 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.
•
Visibility.
We have a high degree of visibility into our
    forecasted financial performance because a substantial portion
    of our new unit orders is booked six to nine months in advance
    of delivery. At September 30, 2005, our new units backlog
    was $687.3 million or 64.5% above the new units backlog at
    September 30, 2004.
Business Strategy
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 in these
sectors. Specifically, we intend to:
Increase Sales of Aftermarket Parts and Services to Existing
    Installed Base.
We are implementing a proactive approach to
    aftermarket parts and services sales that capitalizes on our
    newly created proprietary database of the installed base of our
    own and our competitors' equipment.
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. We intend to
3
Table of Contents
capitalize on our expertise, 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.
Grow Alliances.
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.
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. 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.
Since the fourth
    quarter of 2002, we have implemented a number of productivity
    improvement programs across our entire company that have
    permitted us to streamline our operations. From
    September 30, 2002 through December 31, 2004, we
    consolidated eight facilities and reduced headcount from 5,942
    to 4,631 employees, and have significantly increased our
    profitability. 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.
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
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
risks 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 13 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
4
Table of Contents
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 consisting of a $395 million
term loan portion and a $300 million revolving portion. See
"The Transactions."
Recent Developments
On June 30, 2005, we announced that we had entered into an
asset purchase agreement with Tuthill Corporation whereby we
agreed to purchase certain assets of its Tuthill Energy Systems
division (TES). Tuthill Energy Systems is an international
manufacturer of single- and multi-stage steam turbines and
portable ventilators and manufactures under the Coppus, Murray
and Nadrowski brands. The aggregate purchase price for the
acquisition was approximately $58.7 million. We financed
this acquisition with our available cash and/or borrowings under
our senior secured credit facility and the acquisition closed on
September 8, 2005.
We recently completed our initial public offering. In
September 2005, a portion of the proceeds from the initial
public offering were used to redeem $50 million aggregate
principal amount of the notes.
On August 26, 2005, we increased the availability under the
revolving credit portion of our senior secured credit facility
from $300 million to $350 million.
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.
5
Table of Contents
The Offering
Selling stockholder
D-R Interholding, LLC.
Shares of common stock offered by the selling stockholder
shares.
Shares of common stock outstanding after this offering
85,446,482 shares.
Over-allotment option
shares.
Use of proceeds
We will not receive any of the proceeds from the sale of shares
    by the selling stockholder. The selling stockholder will receive
    all the net proceeds from the sale of shares of common stock
    offered by this prospectus.
New York Stock Exchange symbol
"DRC"
Unless we specifically state otherwise, all information in this
prospectus:
•
assumes no exercise by the underwriters of their option to
    purchase additional shares; and
•
excludes [4,270,660] shares of common stock reserved for
    issuance under our 2005 Stock Incentive Plan and our
    2005 Directors Stock Incentive Plan.
6
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 information as of December 31,
2003 and for the years ended December 31, 2002 and 2003 and
for the period from January 1, 2004 through
October 29, 2004 has 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 has 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 Dresser-Rand Entities' unaudited
summary historical financial information for the
nine months ended September 30, 2004 has been derived
from the Dresser-Rand Entities' unaudited combined
financial statements and related notes which are included
elsewhere in this prospectus, and reflect all adjustments,
consisting of normal, recurring adjustments, which are, in the
opinion of management, necessary for a fair presentation of the
Dresser-Rand Entities' financial position, results of
operations and cash flows as of and for the period presented.
Dresser-Rand Group Inc.'s unaudited summary historical
financial information as of and for the nine months ended
September 30, 2005 has been derived from Dresser-Rand Group
Inc.'s unaudited consolidated financial statements and
related notes which are included elsewhere in this prospectus,
and reflect all adjustments, consisting of normal, recurring
adjustments, which are, in the opinion of management, necessary
for a fair presentation of Dresser-Rand Group Inc.'s
financial position, results of operations and cash flows as of
and for the period presented. Dresser-Rand Group Inc.'s
results of operations for the nine months ended
September 30, 2005 are not necessarily indicative of our
results of operations for the full year. The following summary
unaudited pro forma statements of operations information for the
year ended December 31, 2004 and for the nine months ended
September 30, 2005 have been prepared to give pro forma
effect to the initial public offering, the use of proceeds
therefrom and the transactions as if they had occurred on
January 1, 2004. 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 our historical consolidated and combined financial
statements and the notes thereto included elsewhere in this
prospectus.
7
Table of Contents
Predecessor
Successor
Period
Period
Pro Forma
Pro Forma
Year Ended
January 1
Nine Months
October 30
Nine Months
Year
Nine Months
December 31,
through
Ended
through
Ended
Ended
Ended
October 29,
September 30,
December 31,
September 30,
December 31,
September 30,
2002
2003
2004
2004
2004
2005
2004
2005
(In
thousands)
Statement of Operations Data:
Total revenues
$
1,031,353
$
1,335,350
$
715,495
$
657,494
$
199,907
$
846,237
$
915,402
$
846,237
Cost of goods sold
865,858
1,132,047
538,042
499,208
149,564
657,845
704,497
652,751
Gross profit
165,495
203,303
177,453
158,286
50,343
188,392
210,905
193,486
Selling and administrative expenses
138,484
156,129
122,700
110,493
21,499
118,331
143,094
118,331
Research and development expenses
8,044
8,107
5,670
4,695
1,040
4,745
6,710
4,745
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
43,098
26,004
65,316
61,101
70,410
Interest income (expense), net
(776
)
1,938
3,156
2,306
(9,654
)
(44,619
)
(50,103
)
(39,989
)
Early redemption premium on debt
—
—
—
—
—
(3,688
)
—
—
Other income (expense), net
15,000
(9,202
)
1,882
(2,754
)
(1,846
)
(1,558
)
36
(1,558
)
Income (loss) before income taxes
28,006
31,803
54,121
42,650
14,504
15,451
11,034
28,863
(Benefit) provision for income taxes(2)
11,910
11,438
11,970
4,918
7,275
10,560
15,997
9,845
Net income (loss)
$
16,096
$
20,365
$
42,151
$
37,732
$
7,229
$
4,891
$
(4,963
)
$
19,018
Predecessor
Successor
Period
Period
Pro Forma
Pro Forma
Year Ended
January 1
Nine Months
October 30
Nine Months
Year
Nine Months
December 31,
through
Ended
through
Ended
Ended
Ended
October 29,
September 30,
December 31,
September 30,
December 31,
September 30,
2002
2003
2004
2004
2004
2005
2004
2005
(In thousands except share
and per share
data)
Earnings per share data(3)(4)(5):
Basic and diluted earnings (loss) per share:
Net income (loss)
$
0.13
$
0.08
$
(0.06
)
$
0.22
Weighted average shares
53,793,188
60,178,986
84,843,188
85,314,700
Cash flow data:
Cash flows provided by (used in) operating activities
$
42,029
$
50,963
$
57,729
$
64,484
$
17,948
$
222,384
Cash flows provided by (used in) investing activities
3,813
(7,089
)
(4,907
)
(1,772
)
(1,126,939
)
(57,721
)
Cash flows provided by (used in) financing activities
(18,759
)
(63,487
)
(52,030
)
(50,772
)
1,217,099
(161,141
)
Other financial data:
EBITDA(6)(7)(8)
$
62,604
$
58,974
$
73,680
$
60,628
$
40,427
$
108,115
$
127,413
$
116,897
Depreciation and amortization
33,822
29,109
22,715
20,284
16,269
48,045
66,276
48,045
Capital expenditures
13,670
7,590
7,701
4,532
1,791
10,747
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Table of Contents
Predecessor
Successor
As of
As of
As of
December 31,
December 31,
September 30,
2003
2004
2005
(In thousands)
Balance Sheet Data:
Cash and cash equivalents
$
41,537
$
111,500
$
109,504
Property, plant and equipment, net
101,438
226,764
233,598
Total assets
1,063,875
1,751,074
1,660,373
Goodwill
10,214
423,330
399,286
Debt:
Short-term debt
3,716
2,734
63
Long-term debt, including current maturities
213
400,679
229,148
Senior subordinated notes
—
420,000
370,000
Total debt
3,929
823,413
599,211
Partnership interest
565,035
—
—
Stockholders' equity
—
452,897
486,529
(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 have 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 (loss) 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 and the
0.537314-for
-one
    reverse stock split effected in August 2005.
(5)
Unaudited pro forma basic and diluted earnings per share data
    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 include 31,050,000 shares of our common
    stock offered in our initial public offering.
(6)
EBITDA is defined as net income (loss) 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
9
Table of Contents
equipment (affecting relative depreciation expense). The
    following table reconciles EBITDA to net income (loss):
Predecessor
Successor
Pro Forma
Period
Period
Pro Forma
Nine
Year Ended
January 1
Nine Months
October 30
Nine Months
Year
Months
December 31,
through
Ended
through
Ended
Ended
Ended
October 29,
September 30,
December 31,
September 30,
December 31,
September 30,
2002
2003
2004
2004
2004
2005
2004
2005
(In thousands)
Net income (loss)
$
16,096
$
20,365
$
42,151
$
37,732
$
7,229
$
4,891
$
(4,963
)
$
19,018
Provision (benefit) for income taxes
11,910
11,438
11,970
4,918
7,275
10,560
15,997
9,845
Interest expense (income) net
776
(1,938
)
(3,156
)
(2,306
)
9,654
44,619
50,103
39,989
Depreciation and amortization
33,822
29,109
22,715
20,284
16,269
48,045
66,276
48,045
EBITDA
$
62,604
$
58,974
$
73,680
$
60,628
$
40,427
$
108,115
$
127,413
$
116,897
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.
(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
Pro Forma
Period
Pro Forma
Nine
Year Ended
Period January 1
Nine Months
October 30
Nine Months
Year
Months
December 31,
through
Ended
through
Ended
Ended
Ended
October 29,
September 30,
December 31,
September 30,
December 31,
September 30,
2002
2003
2004
2004
2004
2005
2004
2005
(In thousands)
Net reduction in SFAS 106 expense(a)
$
8,512
$
10,033
$
9,322
$
8,397
$
—
$
—
$
—
$
—
Excess (additional) corporate allocation(b)
(4,876
)
3,816
2,122
1,913
—
—
2,122
—
Removal of incremental corporate overhead(c)
—
5,091
8,025
7,994
—
—
8,025
—
Pension(d)
(2,317
)
8,079
1,529
1,632
—
—
1,085
—
Compensation adjustment(e)
(150
)
(150
)
(125
)
(112
)
—
—
—
—
Non-cash compensation(f)
—
—
—
—
75
3,152
75
3,152
$
1,169
$
26,869
$
20,873
$
19,824
$
75
$
3,152
$
11,307
$
3,152
(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.
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Table of Contents
(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 CEO compensation adjustment of $150,000 annually.
(f)
Reflects employee non-cash equity compensation.
(8)
The following table provides supplemental information as to
    unusual and other items that are reflected in EBITDA:
Predecessor
Successor
Period
Period
Pro Forma
Pro Forma
Year Ended
January 1
Nine Months
October 30
Nine Months
Year
Nine Months
December 31,
through
Ended
through
Ended
Ended
Ended
October 29,
September 30,
December 31,
September 30,
December 31,
September 30,
2002
2003
2004
2004
2004
2005
2004
2005
(In thousands)
Restructuring costs
$
5,185
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Productivity measures(a)
—
11,696
4,679
4,841
(62
)
—
4,617
—
Nigeria loss contract(b)
—
4,843
6,437
5,935
206
—
6,643
—
Nigeria casualty losses(c)
—
2,750
—
—
—
—
—
—
Provision for obsolete material(d)
—
3,300
2,100
3,000
—
—
2,100
—
New York State grant(e)
(8,000
)
1,289
—
—
—
—
—
—
Equity (earnings) losses(f)
479
133
1,013
1,010
(194
)
560
819
560
Insurance claim(g)
(10,145
)
—
—
—
—
—
—
—
Settlement of product liability claim(h)
—
—
(4,500
)
(4,500
)
—
—
(4,500
)
—
China receivables(i)
—
—
970
970
—
—
970
—
Write-off of purchased in-process research and development assets
—
—
—
—
1,800
—
—
—
Inventory step-up write off(j)
—
—
—
—
2,281
5,094
—
5,094
Other expense (income)(k)
1,535
(2,976
)
(826
)
(192
)
1,017
(266
)
191
(266
)
Note premium(l)
—
—
—
—
—
3,688
—
3,688
Hedge (gains) losses(m)
—
—
(1,095
)
(5
)
18
1,957
(1,077
)
1,957
Pension loss amortization(n)
—
—
—
—
—
187
—
187
Franchise taxes(o)
$
—
$
—
$
—
$
—
$
—
$
707
$
—
$
707
$
(10,946
)
$
21,035
$
8,778
$
11,059
$
5,066
$
11,927
$
9,763
$
11,927
(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 equity in (income) losses in joint ventures.
11
Table of Contents
(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 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 and $5.1 million was
    expensed in the nine months ended September 30, 2005.
(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."
(l)
Reflects premium paid on early redemption of $50 million
    aggregate principal amount of the notes.
(m)
Reflects (gains) losses due to hedging of foreign currencies.
(n)
Reflects pension loss amortization.
(o)
Reflects franchise taxes.
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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 below.
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:
•
hiring, in the third quarter of 2005, an Assistant
    Controller-Director Tax Worldwide;
•
hiring an experienced Chief Financial Officer with broad finance
    and SEC reporting experience, a Chief Accounting Officer with
    significant accounting and SEC reporting experience, a Director
    of Risk Management, a Director of Internal Audit and a General
    Counsel;
•
changing the organizational relationship of the worldwide
    accounting organization so that the Controllers of the operation
    units report directly to our Vice-President, Controller and
    Chief Accounting Officer;
•
engaging additional outside personnel to assist our internal
    personnel with audit work and SEC reporting;
•
outsourcing a substantial portion of our tax functions to a
    professional service firm; and
•
engaging external resources to supplement our Section 404
    evaluation efforts.
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While we have taken actions to address the items identified,
additional measures will be necessary and these measures, along
with other measures we expect to take to improve our internal
controls over financial reporting, may not be sufficient to
address the issues identified by our independent auditors or
ensure that our internal controls over financial reporting are
effective. If we are unable to provide reliable and timely
financial external reports, our business and prospects could
suffer material adverse effects. 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 over financial reporting. 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
would result in us receiving something other than an unqualified
report from our auditors with respect to our internal controls
over financial reporting. 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 would result in the inability of our
external auditors to deliver an unqualified report, or any
report, on our internal controls over financial reporting.
Inferior internal controls over financial reporting 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 recently became subject to financial reporting and
    other requirements for which our accounting and other management
    systems and resources may not be adequately prepared.
The initial public offering resulted 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.
However, we may need to supplement our financial, administrative
and other resources, and we may have underestimated the
difficulties and costs of
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obtaining any required resources and successfully operating as
an independent company. 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. Further, if
we are late in filing certain SEC reports, it could constitute a
default under our indenture and senior secured credit facility.
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.
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.
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We may not be able to complete, or achieve the expected
    benefits from, any future acquisitions, which could adversely
    affect our growth.
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 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;
•
unexpected changes in regulatory requirements; and
•
the burden of complying with multiple and potentially
    conflicting laws.
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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 or have previously been subject to
sanctions and embargoes imposed by the U.S. government and
the United Nations, including Iraq, Iran, Libya, Sudan and
Syria. Those foreign subsidiaries sell compressors, turbines and
related parts and accessories to customers including enterprises
controlled by government agencies of these countries in the oil,
gas, petrochemical and power production industries. 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.
In addition, some of these countries, including those named in
the preceding paragraph, are or previously have been identified
by the State Department as terrorist-sponsoring states. Because
certain of our foreign subsidiaries have contact with and
transact business in such countries, including sales to
enterprises controlled by agencies of the governments of such
countries, our reputation may suffer due to our association with
these countries. Further, certain U.S. states have recently
enacted legislation regarding investments by pension funds and
other retirement systems in companies that have business
activities or contacts with countries that have been identified
as terrorist-sponsoring states and similar legislation may be
pending in other states. As a result, pension funds and other
retirement systems may be subject to reporting requirements with
respect to investments in companies such as ours or may be
subject to limits or prohibitions with respect to those
investments.
Fluctuations in the value of the U.S. dollar may adversely
affect our results of operations. Because our combined financial
results are reported in U.S. dollars, if we generate sales
or earnings in other currencies the translation of those results
into U.S. 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
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continue to experience economic loss and a negative impact on
earnings as a result of foreign currency exchange rate
fluctuations.
In the past, our Brazilian subsidiary has engaged in
    business transactions involving a Cuban entity that could
    subject us to potential sanctions.
As a result of the enhanced compliance processes implemented by
us shortly prior to and following the acquisition of the Company
from Ingersoll-Rand in October 2004, we have recently discovered
that our Brazilian subsidiary engaged in a number of
transactions that resulted in steam turbine parts and services
being provided to Moa Nickel S.A., a Cuban mining company
jointly owned by the Government of Cuba and Sherritt
International Corp., a Canadian company. Our revenues from these
transactions were approximately $4.0 million in the
aggregate since December 1999, when we acquired a controlling
interest in the Brazilian subsidiary. This amount represents
approximately 0.08% of our consolidated revenues from 2000
through September 30, 2005. Of the $4.0 million,
approximately $2.5 million in revenues were in connection
with the sale of a spare part ordered in October 2003, which was
delivered and installed in Cuba, with the assistance of non-U.S.
employees of our Brazilian subsidiary, in May 2005. When these
transactions came to our attention, we instructed our Brazilian
subsidiary in July 2005 to cease dealings with Cuba. These
transactions were apparently in violation of the U.S. Treasury
Department's Office of Foreign Assets Control's
regulations with respect to Cuba. We have informed the U.S.
Treasury Department of these matters and are currently engaged
in preliminary discussions with the Department. Our inquiry into
these transactions is continuing and the Department's
review of this matter is in a very preliminary stage. Cuba is
subject to economic sanctions administered by the U.S. Treasury
Department's Office of Foreign Assets Control, and is
identified by the U.S. State Department as a
terrorist-sponsoring state. To the extent we violated any
regulations with respect to Cuba or the Department determines
that other violations have occurred, we will be subject to fines
or other sanctions, including possible criminal penalties, with
related business consequences. In addition, the
Department's investigation into our activities with respect
to Cuba may result in additional scrutiny of our activities with
respect to other countries that are the subject of sanctions. We
do not expect these matters to have a material adverse effect on
our financial performance.
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 U.S. and
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.
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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 U.S. and foreign, federal, state
and local environmental laws and regulations. Such liability may
be imposed without regard to the 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
workplace 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 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, BP, 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 September 30, 2005, we had 5,139 employees
worldwide. Of our employees, approximately 65% are located in
the United States. Approximately 35% of our employees in the
United States are covered by collective bargaining agreements. A
new collective bargaining agreement with IAM Moore Lodge
# 1580 that represents employees at our Wellsville, New
York facility was recently ratified. None of our material
collective bargaining agreements will expire through the end of
2006, and one will expire in each of 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, approximately 35% of our employees
outside of the United States 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
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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.
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%, it will continue
to be able to strongly influence or effectively control our
decisions.
If we continue to be a "controlled company"
    within the meaning of the New York Stock Exchange rules we
    intend to rely on exemptions from certain corporate governance
    requirements.
Upon completion of this offering, if First Reserve continues to
control a majority of our outstanding common stock, we will
continue to be 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 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. We are currently
utilizing these exemptions. As a result, we do not have a
majority of independent directors nor do our nominating and
corporate governance and compensation committees consist
entirely of independent directors.
Our historical financial information may not be comparable
    to future periods and some of it has not been audited or
    reviewed.
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.
The historical financial information included in this prospectus
for the one month period ended January 31, 2000 and the
eleven month period ended December 31, 2000 has not been
audited or reviewed by an independent accountant.
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.
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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.
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. In
addition, press and other third-party announcements or rumors
relating to any of these unaffiliated companies may adversely
affect the 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.
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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.
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 September 30, 2005, our total
indebtedness was approximately $599.2 million. In addition,
we had $171.3 million of letters of credit outstanding and
additional borrowings available under the revolving portion of
our senior secured credit facility of $178.7 million. 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 for us 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,
$17.9 million and $222.4 million for 2002, 2003, the
period January 1, 2004 through October 29, 2004, the period
October 30, 2004 through December 31, 2004 and for the nine
months ended September 30, 2005, respectively. Our high
level of indebtedness requires that we use a substantial portion
of our cash flow from operating activities to pay principal of
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, including the exchange notes. 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
22
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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 our senior subordinated notes, on commercially
reasonable terms.
The covenants in the senior secured credit facility and
    the indenture governing our senior subordinated notes impose
    restrictions that may limit our operating and financial
    flexibility.
Our senior secured credit facility and the indenture governing
our senior subordinated 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;
•
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 our
senior subordinated notes and/or the senior secured credit
facility. If there were an event of default under the indenture
governing our senior subordinated 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.
Risks Related to 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, the selling stockholder and each of our directors and
executive officers 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
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Table of Contents
of this prospectus continuing through the date that
is            days
after the date of this prospectus, except with the prior written
consent of the representatives. See "Underwriters."
After this offering, we will have approximately
85,466,482 million shares of common stock outstanding. Of
those shares, the 31,050,000 shares of common stock sold in
our initial public offering are freely tradeable and
the            million
shares being offered hereby will be freely tradable.
The            million
shares that were not sold in our initial public offering and
this offering will be eligible for resale from time to time
after the expiration of the
-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 limitation
and                 shares
may currently be sold subject to volume, manner of sale and
other conditions of Rule 144. After the expiration of the
-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 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. You may be unable to resell your shares of our
common stock at or above the 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.
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."
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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, currency and other risks associated with
    our international sales and operations;
•
loss of our senior management;
•
our brand name may be confused with others;
•
environmental compliance costs and liabilities;
•
failure to maintain safety performance acceptable to our clients;
•
failure to negotiate new collective bargaining agreements;
•
our ability to operate as a stand-alone company;
•
unexpected product claims or regulations;
•
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.
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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, the International Energy Agency 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 such sources may have obtained their data 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.
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Table of Contents
THE TRANSACTIONS
The following contains summaries of the terms of the 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. The
purchase price was adjusted 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.
Ingersoll-Rand has provided all three closing statements,
resulting in a purchase price reduction of $3.2 million, of
which $2.4 million has been reflected in the historical
financial information included in this prospectus. The remaining
$0.8 million will be reflected in the first quarter of 2006.
In addition, the following additional amounts were paid to
Dresser-Rand Holdings, LLC at, or following, the closing date:
(1) $17.0 million, which amount equals certain retiree
welfare benefits less certain overdue receivables,
(2) $25.9 million with respect to defined benefit
pension fund deficiencies in defined pension plans and
(3) $4.6 million for supplemental management
compensation earned during the first ten months of 2004.
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 profit 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 2004 and
invested cash equity in Dresser-Rand Holdings, LLC, which
commensurately reduced First Reserve's 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.
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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 minimis limitation). The
sellers' indemnification obligations with respect to
breaches of representations and warranties and covenants are
subject to a "basket" of $18 million 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 minimis 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 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.
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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, including a supply
agreement and license agreement. Funds affiliated with First
Reserve and certain management employees have entered into 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. First
Reserve and certain management stockholders have 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 owned 100% of the issuer's
outstanding shares of capital stock (before giving effect to
subsequent purchases of shares by certain management employees).
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 consisted 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.
On August 26, 2005, we increased the $300 million
revolving portion of our senior secured credit facility to
$350 million. As of September 30, 2005, we had
approximately $178.7 million of borrowing capacity under
the revolving portion of our senior secured credit facility,
subject to certain conditions, after giving effect to
approximately $171.3 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
91.4
Senior subordinated notes
420.0
Existing indebtedness
2.9
Existing indebtedness
2.9
Financing fees and expenses
33.5
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 September 30, 2005, we had approximately
    $178.7 million available for borrowing under the revolving
    portion of the senior secured credit facility, subject to
    certain conditions, after giving effect to approximately
    $171.3 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.
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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.
Corporate Structure
The following chart summarizes our current corporate structure.
(1)
D-R Interholding, LLC owns 63.5% of Dresser-Rand Group
    Inc.'s outstanding shares of capital stock.
(2)
There are nine domestic subsidiaries of which seven are
    operating subsidiaries.
(3)
There are 44 foreign subsidiaries of which 36 are operating
    subsidiaries.
30
Table of Contents
USE OF PROCEEDS
D-R Interholding,
LLC, the selling stockholder, will receive all the net proceeds
from the sale of our common stock in this offering. We will not
receive any of the proceeds from the sale of common stock in
this offering. The selling stockholder will distribute all of
the net proceeds it receives from this offering to its direct
parent, Dresser-Rand Holdings, LLC. Dresser-Rand Holdings, LLC
will then distribute such proceeds in accordance with the terms
of the Amended and Restated Limited Liability Company Agreement
of Dresser-Rand Holdings, LLC to its members, consisting of
affiliates of First Reserve, certain of our executive officers
and other management employees. Accordingly, approximately
$          will
be received by affiliates of First Reserve, approximately
$          will
be received by certain of our executive officers, consisting of
Mr. Volpe ($     ),
Mr. Anthony ($     ),
Mr. Riordan ($     ), Mr. Nye
($     ), Mr. Dickson
($     ), Mr. Rossi
($     ), Mr. Chevrier
($     ), Ms. Powers
($     ) and Mr. Rinicella
($     ), and approximately
($     ) will be received by the other
management members of Dresser-Rand Holdings, LLC in the
aggregate.
In the event the underwriters fully exercise their
over-allotment option, approximately
$          of
the net proceeds will be received by affiliates of First
Reserve. In addition, approximately
$          will
be received by certain of our executive officers, consisting of
Mr. Volpe ($     ),
Mr. Anthony ($     ),
Mr. Riordan ($     ), Mr. Nye
($     ), Mr. Dickson
($     ), Mr. Rossi
($     ), Mr. Chevrier
($     ), Ms. Powers
($     ) and Mr. Rinicella
($     ), and approximately
($     ) will be received by the other
management members of Dresser-Rand Holdings, LLC in the
aggregate.
DIVIDEND POLICY
In connection with our initial public offering, we distributed
approximately $557.8 million ($10.26 per share) of the
net proceeds to pay a dividend to our stockholders existing
immediately prior to the initial public offering, consisting of
affiliates of First Reserve and certain members of senior
management. Affiliates of First Reserve received approximately
$544.3 million, and the management members of Dresser-Rand
Holdings, LLC received approximately $11.8 million in the
aggregate consisting of Mr. Volpe ($3,779,192),
Mr. Anthony ($1,462,726), Mr. Riordan ($851,303),
Mr. Nye ($441,237), Mr. Dickson ($757,544),
Mr. Rossi ($760,697), Mr. Chevrier ($453,645),
Ms. Powers ($1,264,329), Mr. Rinicella ($417,366) and
the other management members of Dresser-Rand Holdings, LLC in
the aggregate ($1,605,880). In addition, 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.
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. 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.
PRICE RANGE OF OUR COMMON STOCK
Trading in our common stock commenced on the New York Stock
Exchange on August 5, 2005 under the symbol
"DRC". The following table sets forth, for the periods
indicated, the high and low sales prices per share of our common
stock reported in the New York Stock Exchange consolidated tape.
High
Low
2005
Quarter ended September 30, 2005
$
26.75
$
20.10
Quarter ended December 31, 2005
$
25.15
$
19.05
2006
Quarter ended March 31, 2006
    (through           ,
    2006)
31
Table of Contents
CAPITALIZATION
The information in this table should be read in conjunction with
"The Transactions," "Selected Historical
Financial Information," "Management's Discussion
and Analysis of Financial Condition and Results of
Operations," "Description of Indebtedness" and
our historical consolidated and combined financial statements
and accompanying notes thereto included elsewhere in this
prospectus. The table excludes cash and cash equivalents as of
September 30, 2005 of $109.5 million.
As of September 30,
2005
(Unaudited)
(In millions)
Debt:
Senior secured credit facility:
Revolving credit facility(1)
$
—
Term loan facility
229.0
Senior subordinated notes due 2014
370.0
Other debt
.2
Total debt(2)
599.2
Stockholders' equity:
Common stock, par value $0.01 per share, 250,000,000 shares
    authorized, 85,444,897 shares issued and outstanding
.9
Additional paid-in capital
492.2
Retained earnings (accumulated deficit)
12.1
Accumulated other comprehensive loss
(18.7
)
Total stockholders' equity
486.5
Total capitalization
$
1,085.7
(1)
As of September 30, 2005, we had approximately
    $178.7 million available for borrowing under the revolving
    portion of the senior secured credit facility, subject to
    certain conditions, after giving effect to approximately
    $171.3 million of letters of credit outstanding thereunder.
    See "The Transactions" and "Description of
    Indebtedness."
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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 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 and as of
and for the nine months ended September 30, 2005. The
unaudited pro forma statements of operations for the year ended
December 31, 2004 and the nine months ended
September 30, 2005 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 initial public offering and the
estimated use of proceeds therefrom, as if they had been
consummated on January 1, 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 our historical consolidated and combined
financial statements and the notes thereto included elsewhere in
this prospectus.
33
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)
3,901
(j)
(50,103
)
Other income (expense), net
1,882
(1,846
)
—
—
36
Income (loss) before income taxes
54,121
14,504
(61,492
)
3,901
11,034
(Benefit) provision for income taxes
11,970
7,275
(4,730
)(i)
1,482
(i)
15,997
Net income(loss)
$
42,151
$
7,229
$
(56,762
)
$
2,419
$
(4,963
)
Basic and Diluted Earnings Per Share Data(4)(5)(6)
Earnings per share
$
0.13
$
(0.06
)
Weighted average shares
53,793,188
84,843,188
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.
34
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 certain of our
    executives who acquired common units in
Dresser-Rand
Holdings,
    LLC 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.
35
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%)
$
3,584
$
2,987
Commitment fee on our revolving credit facility (at 0.5%)
783
653
Interest expense on our Term Loan B (at 4.3%)
17,201
14,365
Interest expense on the notes (at 7.375%)
30,975
25,813
Amortization of debt issuance costs
4,425
3,688
Total interest adjustment
$
56,968
$
47,506
Interest expense on average outstanding letters of credit of
    $133.4 million in 2004 was 2.5%. A change of
1
/
8
percentage
    point in interest rates on the aggregate amount outstanding
    under our new revolving credit facility and term loan B would
    change annual interest expense by $497.
(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 U.S. 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 connection with the initial public offering, we used
    approximately $55.0 million of the net proceeds to redeem
    $50.0 million of the $420 million aggregate principal
    amount of our notes due 2014, including the payment of the
    applicable redemption premium and accrued interest. The
    annualized interest savings resulting from the redemption will
    be $3.7 million, the annualized reduction in amortization
    of deferred financing fees will be $0.2 million, and we
    incurred a one-time charge of $1.9 million from the write-off of
    deferred financing fees and incurred prepayment penalties of
    $3.7 million.
(4)
Historical basic and diluted earnings per share data have not
    been presented for the Predecessor because the Predecessor did
    not operate as a separate legal entity from Ingersoll-Rand.
(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-one
    stock split effected in February 2005 and the 0.537314-for-one
    reverse stock split effected in August 2005.
(6)
Unaudited pro forma basic and diluted earnings per share data
    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
    includes 31,050,000 shares of our common stock offered in
    our initial public offering.
36
Table of Contents
DRESSER-RAND GROUP INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2005
Offering
Pro Forma
and Other
Historical(1)
Adjustments(2)
Adjustments(2)
Pro Forma
(In thousands except share and per share data)
Total revenues
$
846,237
$
$
$
846,237
Cost of goods sold
657,845
(5,094
)(a)
652,751
Gross profit
188,392
5,094
193,486
Selling and administrative expenses
118,331
118,331
Research and development expenses
4,745
4,745
Operating income
65,316
5,094
70,410
Interest expense, net
(44,619
)
4,630
(c)
(39,989
)
Early redemption premium on debt
(3,688
)
3,688
—
Other expense, net
(1,558
)
(1,558
)
Income before income taxes
15,451
5,094
8,318
28,863
Provision for income taxes
10,560
(272
)(b)
(443
)(b)
9,845
Net income
$
4,891
$
5,366
$
8,761
$
19,018
Basic and Diluted Earnings Per Share Data(3)(4)
Earnings per share
$
0.08
$
0.22
Weighted average shares
60,178,986
85,314,700
(1)
The amounts in this column represent the reported results of
    Dresser-Rand Group Inc., the successor, from January 1, 2005
    through September 30, 2005.
(2)
The amounts in these columns represent the adjustments to
    reflect the pro forma impact of the transactions.
(a)
Reflects a $5.1 million 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 January 1, 2005 through
    September 30, 2005.
(b)
Reflects the income tax effect of our pro forma adjustments to
    the income statement. We used an effective tax rate based on the
    estimated effective consolidated income tax rate for the year
    ended December 31, 2005, after giving effect to the pro
    forma adjustments for the entire year 2005 which provides a
    benefit for U.S. tax loss carryforwards not previously
    recognized.
(c)
In connection with the initial public offering, we used
    approximately $55.0 million of the net proceeds to redeem
    $50.0 million 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 and accrued interest. The
    annualized interest savings resulting from the redemption will
    be $3.7 million, the annualized reduction in amortization
    of deferred financing fee will be $0.2 million, and we incurred
    a one-time charge of $1.9 million from the write-off
    of deferred financing fees and incurred prepayment penalties of
    $3.7 million.
(3)
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 and the
0.537314-for-one
stock
    split effected August 2005.
(4)
Unaudited pro forma basic and diluted earnings per share data
    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
    includes 31,050,000 shares of our common stock offered in
    our initial public offering.
37
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
years ended December 31, 2001, 2002, and 2003 and the
period from January 1, 2004 through October 29, 2004
has 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 has
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 have been derived from the
Dresser-Rand Entities' 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 the Dresser-Rand
Entities' unaudited combined financial statements, which
are not included in this prospectus. The selected historical
combined financial information for the nine months ended
September 30, 2004 and the selected financial information
for the quarters ended March 31, June 30 and
September 30, 2003 and 2004, the quarter ended
December 31, 2003 and the period from October 1, 2004
through October 29, 2004 have been derived from the
Dresser-Rand Entities' unaudited combined financial
statements included elsewhere in this prospectus, which have
been prepared on a basis consistent with the audited financials
included elsewhere in this prospectus. The selected historical
consolidated financial information as of and for the
nine months ended September 30, 2005 and the selected
financial information for the period from October 30, 2004
through December 31, 2004 and the quarters ended
March 31, June 30 and September 30, 2005 have
been derived from Dresser-Rand Group Inc.'s unaudited
consolidated financial statements included elsewhere in this
prospectus which have been prepared on a basis consistent with
the audited financials included elsewhere 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 our historical
consolidated and combined financial statements and the notes
thereto included elsewhere in this prospectus.
38
Table of Contents
Predecessor
Successor
Period
Period
1 Month
11 Months
January 1
Nine Months
October 30
Nine Months
Ended
Ended
Year Ended December 31,
through
Ended
through
Ended
January 31,
December 31,
October 29,
September 30,
December 31,
September 30,
2000
2000
2001
2002
2003
2004
2004
2004
2005
(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
$
654,541
$
199,907
$
846,237
Net sales to affiliates
2,837
1,841
1,439
1,845
1,639
—
—
Other operating revenue
—
2,759
1,669
1,167
1,314
—
—
Total revenues
42,690
777,754
876,722
1,031,353
1,335,350
715,495
657,494
199,907
846,237
Cost of goods sold
714,093
865,858
1,132,047
538,042
499,208
149,564
657,845
Gross profit
162,629
165,495
203,303
177,453
158,286
50,343
188,392
Selling and administrative expenses
132,755
138,484
156,129
122,700
110,493
21,499
118,331
Research and development expenses
6,969
8,044
8,107
5,670
4,695
1,040
4,745
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
43,098
26,004
65,316
Interest income (expense), net
(302
)
(776
)
1,938
3,156
2,306
(9,654
)
(44,619
)
Early redemption premium on debt
—
—
—
—
—
—
(3,688
)
Other income (expense), net
3,150
15,000
(9,202
)
1,882
(2,754
)
(1,846
)
(1,558
)
Income (loss) from continuing operations before income taxes
23,616
28,006
31,803
54,121
42,650
14,504
15,451
Provision (benefit) for income taxes(2)
14,781
11,910
11,438
11,970
4,918
7,275
10,560
Income (loss) from continuing operations
(12,498
)
(20,331
)
8,835
16,096
20,365
42,151
37,732
7,229
4,891
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
$
37,732
$
7,229
$
4,891
Earnings per share data(3)(4):
Basic earnings (loss) per share:
Net income (loss)
$
0.13
$
0.08
Weighted average shares
53,793,188
60,178,986
Cash flow data:
Cash flows provided by (used in) operating activities
$
57,837
$
42,029
$
50,963
$
57,729
$
64,484
$
17,948
$
222,384
Cash flows provided by (used in) investing activities
(15,896
)
3,813
(7,089
)
(4,907
)
(1,772
)
(1,126,939
)
(57,721
)
Cash flows provided by (used in) financing activities
(42,937
)
(18,759
)
(63,487
)
(52,030
)
(50,772
)
1,217,099
(161,141
)
39
Table of Contents
Predecessor
Successor
As of December 31,
As of
As of
December 31,
September 30,
2000
2001
2002
2003
2004
2005
(In
thousands)
Balance Sheet Data:
Cash and cash equivalents
$
$
31,377
$
59,619
$
41,537
$
111,500
$
109,504
Total assets
1,030,072
1,052,741
1,119,464
1,063,875
1,751,074
1,660,373
Debt:
Current portion of long-term debt
52
2,631
3,716
6,749
63
Long-term debt, net of current maturities
260
1,254
213
396,664
229,148
Senior subordinated notes
—
—
—
420,000
370,000
Total debt
4,685
312
3,885
3,929
823,413
599,211
Partnership interest
588,450
526,710
565,035
—
—
Stockholders' equity
—
—
—
452,897
486,529
(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 $15,997. 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 have 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 and the
0.537314-for-one
reverse stock split effected in August 2005.
Selected Unaudited Quarterly Financial Data:
Predecessor
Period
Three Months Ended
October 1
through
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
October 29,
2003
2003
2003
2003
2004
2004
2004
2004
(In thousands)
Total revenues
$
278,106
$
337,050
$
379,758
$
340,436
$
170,348
$
269,883
$
217,263
$
58,001
Gross profit
39,178
42,479
46,602
75,044
47,583
53,637
57,066
19,167
Net income
(5,226
)
2,158
1,884
21,549
3,310
13,370
21,052
4,419
Successor
Period
October 30
Three Months Ended
through
December 31,
March 31,
June 30,
September 30,
2004
2005
2005
2005
(In thousands, except per share data)
Total revenues
$
199,907
$
234,000
$
302,478
$
309,759
Gross profit
50,343
47,709
63,778
76,905
Net income (loss)
7,229
(4,018
)
(1,525
)
10,434
Earnings per share basic and diluted
0.13
(0.07
)
(0.03
)
0.15
40
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 our historical consolidated and combined
financial statements and notes 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 57 global locations in 11
U.S. states and 24 countries. Our total combined revenues
by geographic region for the year ended December 31, 2004
consisted of North America (39%), Latin America (18%), Europe
(15%), Asia Pacific (13%) and the Middle East and Africa (15%).
For the nine months ended September 30, 2005, our revenue
by geographic region consisted of North America (41%), Latin
America (12%), Europe (20%), Asia Pacific (12%) 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 which
consisted of a $395 million term loan portion and a
$300 million revolving portion. On August 26, 2005, we
increased the $300 million revolving portion of our senior
secured credit facility to $350 million.
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Table of Contents
At the time of the acquisition, our equity capitalization
consisted of 100 shares of common stock at an initial cost of
$4.3 million per share. This high per share price made
certain contemplated management investment and incentive
arrangements difficult to effectuate; therefore, in February
2005, we gave effect to a
1,006,092.87-for-one
stock split to achieve a price per share equivalent to price per
unit of Dresser-Rand Holdings, LLC as of the date of the
acquisition. In connection with the completion of the initial
public offering, the board of directors approved a
0.537314-for-one reverse stock split. As a result of this stock
split and reverse stock split, we had 85,444,897 shares
outstanding at September 30, 2005.
The consolidated financial statements reflect our financial
position as of September 30, 2005 and December 31,
2004 and our results of operations and cash flows for the nine
months ended September 30, 2005 and for the period from
October 30, 2004 to December 31, 2004, and the
financial position of our predecessor entity, on a combined
basis, as of September 30, 2004 and December 31, 2003
and its results of operations and cash flows for the nine months
ended September 30, 2004, for the period from
January 1, 2004 to October 29, 2004 and for the years
ended December 31, 2003 and 2002.
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 $33.5 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 September 30, 2002, our
worldwide headcount was 5,942 employees. From September 30,
2002 to December 31, 2003, we reduced our headcount, on a
worldwide basis, by 1,061 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
42
Table of Contents
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
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.
Non-cash Compensation Expense
In May 2005, three members of senior management purchased
303,735 common units of Dresser-Rand Holdings, LLC for an
aggregate purchase price of $1.3 million and were also
granted 1,000,000 profit units (comprised of 300,000 service
units and 700,000 exit units). The sale of these common units
and the grant of the profit units may have been made at below
market prices. As a result, we incurred additional charges
related to the sale of the common units and granting of the
service units of $2.7 million in the second quarter. We
expect to incur an additional $0.5 million of non-cash
compensation expense per year over the five-year vesting period
of the service units. No additional charges related to the
granting of the exit units are anticipated for 2005 due to
inherent limiting factors related to the exit unit plan.
Upon completion of this offering, as a result of certain members
of our management receiving proceeds from the selling
stockholder for their exit units, we will incur a pre-tax and
after-tax, non-cash compensation expense of
$               in
the period in which this offering is consummated. In the event
the underwriters fully exercise their over-allotment option, we
will incur an additional
$               pre-tax
and after-tax, non-cash compensation expense.
Charges Related to Deferred Financing Fees
We incurred a one-time charge of $1.9 million from the
write-off of deferred financing fees and incurred prepayment
penalties of $3.7 million in the third quarter of 2005 as a
result of the redemption of $50.0 million aggregate
principal amount of our notes with the use of a portion of the
proceeds from the initial public offering.
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
43
Table of Contents
improvements that extend the life of the asset are generally
capitalized. Intangible assets primarily consist of amounts
allocated to 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 nine months ended September 30, 2005 and
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 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 $350 million
of letters of credit outstanding at any time, subject to certain
conditions.
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Table of Contents
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 nine months ended
September 30, 2005 and for the period from October 30,
2004 through December 31, 2004 include the accounts of
Dresser-Rand Group Inc. and its wholly-owned subsidiaries.
Included in these periods 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.
Predecessor
The combined financial statements for the nine months ended
September 30, 2004, 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.
Fourth Quarter 2005 Inventory Charge
We have recently discovered an inventory discrepancy at our
Brazilian subsidiary as result of errors in a new computer
system being installed at our Brazilian operations in 2005. We
have done a physical inventory in Brazil and have reconciled the
physical results with those in the computer and accounting
records. We expect to record a write-off of inventory in the
fourth quarter of 2005 of about $1,885,000 after income taxes.
We have implemented additional manual reviews and controls to
provide reasonable assurance that inventory in Brazil is
properly accounted for until the problems with the computer
system are resolved.
45
Table of Contents
Results of Operations
Total Company
Nine Months Ended September 30, 2005 (Successor)
    Compared to the Nine Months Ended September 30, 2004
    (Predecessor)
The following table presents selected historical financial
information for the nine months ended September 30, 2005
and September 30, 2004. Amounts are also presented as a
percentage of total revenues. The two columns under
period-to
-period change
show the dollar change and percentage change from the nine
months ended September 30, 2004 to the nine months ended
September 30, 2005.
Predecessor
Successor
Nine Months
Nine Months
Period to Period
Ended
Ended
Change
September 30,
September 30,
2004 to
2004
2005
2005
Change
(Dollars in millions)
Statement of Operations Data:
Total revenues
$
657.5
100.0
%
$
846.2
100.0
%
$
188.7
28.7
%
Cost of goods sold
499.2
75.9
657.8
77.7
158.6
31.8
Gross profit
158.3
24.1
188.4
22.3
30.1
19.0
Selling and administrative expenses
110.5
16.8
118.3
14.0
7.8
7.1
Research and development expenses
4.7
0.7
4.7
0.6
0.0
1.1
Operating income
43.1
6.6
65.3
7.7
22.2
51.6
Interest (expense) income, net
2.4
0.3
(44.6
)
(5.3
)
(47.0
)
N/M
Early redemption premium on debt
—
—
(3.7
)
(0.4
)
(3.7
)
100
Other income (expense), net
(2.8
)
(0.4
)
(1.5
)
(0.2
)
1.3
46.4
Income (loss) before income taxes
42.7
6.5
15.5
1.8
(27.2
)
(63.8
)
(Benefit) provision for income taxes
5.0
0.8
10.6
1.2
5.6
114.7
Net income (loss)
$
37.7
5.7
%
$
4.9
0.6
%
$
(32.8
)
(87.0
)%
Total revenues.
The demand for oil and gas products
continues to increase in 2005 driving strong demand for our
products and services. Total revenues increased by
$188.7 million, or 28.7% for the nine months ended
September 30, 2005, compared to the same period in 2004.
Our backlog at December 31, 2004, increased 51.8% compared
to December 31, 2003, which contributed to increased
revenues during this 2005 period.
Cost of goods sold.
As a percentage of revenues, cost of
goods sold increased to 77.7% for the nine months ended
September 30, 2005 from 75.9% for the same period in 2004.
Cost of goods sold increased by $34.4 million for
adjustments related to purchase accounting which were recognized
during 2005, reflecting additional depreciation and amortization
and the purchase accounting value of inventory sold.
Selling and administrative expenses.
Selling and
administrative expenses increased by $7.8 million for the
nine months ended September 30, 2005 from the same period
in 2004, but decreased as a percentage of sales. Establishing
corporate functions for the stand-alone company was the
principal cause of a $14.8 million direct increase in
expenses during the nine months ended September 30, 2005,
compared to $14.6 million of administrative expenses
allocated to us from Ingersoll-Rand during the same period in
2004. Third party commissions increased $1.2 million over
2004 due to the increase in sales. An additional
$1.7 million of increases were the result of the
consolidation of TES and expenses related to the acquisition.
Other costs increased to support current and future growth.
Research and development.
Research and development
expenses for the nine months ended September 30, 2005 and
2004 were $4.7 million and $4.7 million, respectively.
Operating income.
Operating income increased by
$22.2 million to $65.3 million for the nine months
ended September 30, 2005 from $43.1 million for the
same period in 2004 primarily attributable to the factors
46
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discussed above regarding increased sales and gross profit
partially offset by high selling and administrative expenses.
Interest (expense) income, net.
Interest expense was
$44.6 million for the nine months ended September 30,
2005 compared to interest income of $2.4 million for the
same period in 2004. The difference was primarily from interest
on the outstanding principal of the senior secured credit
facility and senior subordinated notes issued in connection with
the transactions. Additionally, 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. We were not able to register the notes by
that date. Accordingly, the annual interest on the notes
increased by (1) .25% for the first 90 days following
August 25, 2005, increasing our interest expense by about
$90,000 during the nine months ended September 30, 2005,
and (2) will increase by .25% at the beginning of each
subsequent 90-day period, up to a maximum of 1% until all such
registration defaults are cured. We will now be required to
incorporate financial information through September 30,
2005, into any registration statement filed with the SEC.
Early redemption premium on debt.
We used a portion of
the proceeds from our initial public offering to prepay
$50 million of our notes incurring a premium payment of
$3.7 million.
Provision for income taxes.
Provision for income taxes
for the nine months ended September 30, 2005 was
$10.6 million and results in an effective tax rate that
differs from the U.S. Federal statutory rate of 35%
principally because of current and forecasted net operating
losses in certain tax jurisdictions. As a result, we have
provided for a valuation allowance for that deferred tax asset
on the basis that it is more likely than not we will not realize
that asset. The effective tax rate for the nine months ended
September 30, 2004, differs from the U.S. Federal
statutory rate of 35% primarily because the Predecessor period
reflected the non-taxable partnership structure in existence for
most of the domestic operations.
Bookings and backlog.
Bookings during the nine months
ended September 30, 2005 were $1,036.0 million, 26.6%
higher than the $818.2 million in bookings for the same
period in 2004. The backlog at September 30, 2005 was
$872.8 million, or 48.9% above the $586.2 million
backlog at September 30, 2004. The increase is attributable
to increased worldwide demand in the new units segment.
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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
)
(4.8
)
Other income (expense), net
(9.2
)
(0.6
)
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 decrease in revenues of $420.0 million was
primarily from the 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) revenue decreases in other
new units sold totaling $251.7 million 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 which were shipped in 2003. The invoicing
of these projects in 2003 created a low backlog at the end of
2003, a 48% reduction from 2002, thereby reducing shipments in
2004. The shipments of orders is largely dependent on the timing
of the completion of the order, and therefore this volume
decrease in new units revenues in 2004 is not necessarily
indicative of future trends. Additionally, the oil and gas
industry can be cyclical with regard to sales of units caused by
the price of oil and the buying cycles of our larger clients for
major projects. The decrease in revenues from new units was
offset by the aftermarket parts and services segment revenues
which were $570.1 million in 2004 compared to
$542.4 million in 2003. This increase in revenue reflects
our continuing efforts to expand the breadth of aftermarket
services available to our customers.
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
48
Table of Contents
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 of goods
sold by $15.6 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 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 $5.2 million
49
Table of Contents
and $4.8 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)
Foreign 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.
50
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 $112.2 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 and (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, including treasury
and cash management, internal audit services, tax planning and
compliance, risk management services and various payroll and
benefits services.
51
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.
52
Table of Contents
Segment Analysis
Nine Months Ended September 30, 2005 (Successor)
    Compared to Nine Months Ended September 30, 2004
    (Predecessor)
Period to Period
Predecessor
Successor
Change
Nine Months
Nine Months
Ended
Ended
September 30,
September 30,
2004 to
2004
2005
2005
Change
(Dollars in millions)
Sales, net
New units
$
256.6
39.0
%
$
399.0
47.2
%
$
142.4
55.5
%
Aftermarket parts and services
400.9
61.0
447.2
52.8
46.3
11.5
$
657.5
100.0
%
$
846.2
100.0
%
$
188.7
28.7
%
Gross Profit
New units
$
31.7
$
40.4
$
8.7
27.4
%
Aftermarket parts and services
126.6
148.0
21.4
16.9
Total gross profit
$
158.3
$
188.4
$
30.1
19.0
%
Operating Income (Loss)
New units
$
2.0
$
4.7
$
2.7
134.8
%
Aftermarket parts and services
72.9
93.2
20.3
27.9
Unallocated corporate expense
(31.8
)
(32.6
)
(0.8
)
2.6
Total operating income
$
43.1
$
65.3
$
22.2
51.6
%
New Units
Revenues.
Revenues in the new units segment increased
$142.4 million for the nine months ended September 30,
2005, compared to the same period in 2004. The increase is
primarily attributable to higher backlog coming into the period,
as orders typically have lead times from as little as three
months to over twelve months depending on the complexity of the
configuration. Improved new order rates also contributed. Our
operations in North America, France and Norway accounted for
most of this increase.
Gross profit.
Gross profit increased by $8.7 million
for the nine months ended September 30, 2005 compared to
the same period in 2004. As a percentage of segment revenues,
gross profit decreased to 10.1% for the period in 2005 from
12.4% for the same period in 2004. The decrease was due to
higher allocations including the additional costs related to
purchase accounting recognized in the period for higher
depreciation and amortization and the purchase accounting value
of inventory sold.
Operating income.
Operating income increased by
$2.7 million for the nine months ended September 30,
2005 compared to the same period in 2004. This increase is
attributable to the $8.7 million increase in gross profit
mentioned above, less a $6.0 million increase in the
allocation of costs and expenses due to the increase in sales.
Bookings.
Bookings for the nine months ended
September 30, 2005 were $558.3 million, 45.2% higher
than the $384.5 million in bookings for the same period in
2004.
Aftermarket Parts and Services
Revenues.
Revenues increased by $46.3 million, or
11.5%, for the nine months ended September 30, 2005
compared to the same period in 2004 primarily from higher parts
sales.
Gross profit.
Gross profit increased by
$21.4 million for the nine months ended September 30,
2005 compared to the same period in 2004 as a result of the
increases in volume. As a percentage of revenues, gross profit
increased to 33.1% for the nine months ended September 30,
2005, from 31.6% for the same period in
53
Table of Contents
2004, due to a more favorable product mix from increased parts
revenue and lower allocations from stronger growth in new units.
Operating income (loss).
Operating income increased by
$20.3 million, or 27.9% for the nine months ended
September 30, 2005, compared to the same period in 2004.
This increase is mainly attributable to the change in gross
profit mentioned above.
Bookings.
Bookings for the nine months ended
September 30, 2005 were $477.7 million, 10.2% above
bookings for the same period in 2004.
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
(Dollars 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) revenue
decreases in other new units sold totaling $251.7 million
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 which were shipped in 2003. The
invoicing of these projects in 2003 created a low backlog at the
end of 2003, a 48% reduction from 2002, thereby reducing
shipments in 2004. The
54
Table of Contents
shipments of orders is largely dependent on the timing of the
completion of the order, and therefore this volume decrease in
new units revenues in 2004 is not necessarily indicative of
future trends. Additionally, the oil and gas industry can be
cyclical with regard 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 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 70.1% 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,
$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
$3.6 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 12.6%. 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, $85.1 million and $98.1 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
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Table of Contents
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 was 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.
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
(Dollars in millions)
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.
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Table of Contents
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 decreases in parts of
$8.9 million and repair of $12.6 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 provided by operating activities for the nine months
ended September 30, 2005 was $222.4 million compared
to $64.5 million for the same period in 2004. The increase
of $157.9 million in net cash provided by operating
activities was mainly from a reduction in inventories and an
increase in customer advance payments. Inventories-net declined
$13.0 million and customer advance payments increased
$75.8 million from December 31, 2004, a result of our
increased efforts to collect customer payments in line with or
ahead of the costs of inventory work-in-process. In addition,
other current and noncurrent liabilities increased
$26.4 million for the nine months ended September 30,
2005, compared to a decrease of $18.9 million for the nine
months ended September 30, 2004. This change over the
periods is primarily attributable to accrued interest on new
debt and other accruals related to being a stand-alone company
compared to being a division of Ingersoll-Rand.
Net cash flow provided by investing activities for the nine
months ended September 30, 2005 was $57.7 million,
compared to net cash used in investing activities of
$1.8 million for the same period in 2004.
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Table of Contents
Capital expenditures for the nine months ended
September 30, 2005, were $10.7 million. We sold our
investment in a partially owned entity in the first quarter of
2005 for $10 million.
On September 8, 2005, we acquired from Tuthill Corporation
certain assets of its TES. TES is an international manufacturer
of single and multi-stage steam turbines and portable
ventilators under the Coppus, Murray and Nadrowski brands which
complement our steam turbine business. The current estimated
cost of TES is approximately $57.0 million, net of
$4.0 million cash acquired, subject to future adjustments
for agreement on the final working capital at the closing date
and other related matters. We have preliminarily allocated the
cost based on current estimates of the fair value of assets
acquired and liabilities assumed as follows (in thousands):
Accounts receivable
$
13,458
Inventory — net
7,690
Prepaid expenses and other current assets
208
Total current assets
21,356
Property, plant and equipment, net
20,319
Intangible assets and goodwill
28,414
Total assets acquired
70,089
Accounts payable and accruals
10,570
Other liabilities
2,501
Total liabilities assumed
13,071
Cash paid — net
$
57,018
The above amounts are estimates as final appraisals and other
required information to determine final cost and assign fair
values have not been received. Also, certain restructuring of
operations will be necessary to obtain appropriate synergies in
the combined steam turbine business. Accordingly, the above
amounts may be revised when all required information is obtained
and the restructuring plan is finalized which is expected to be
accomplished during the first quarter of 2006. Pro forma
financial information, assuming that TES had been acquired at
the beginning of each period for which an income statement is
presented, has not been presented because the effect on our
results for these periods was not considered material. TES
results have been included in our financial results since
September 8, 2005, and were not material to the results of
operations for the nine months ended September 30, 2005.
During the third quarter of 2005, we purchased the other 50% of
our Multiphase Power and Processing Technologies (MppT) joint
venture for a payment of $200,000 and an agreement to pay
$300,000 on April 1, 2006, and $425,000 on April 1,
2007. The net present value of the total consideration is
$876,000, bringing our total investment in MppT to
$2.9 million at the date of purchase. MppT owns patents and
technology for inline, compact, gas-liquid scrubbers.
Net cash used in financing activities was $161.1 million
for the nine months ended September 30, 2005, related
primarily to our initial public offering and payments on
long-term debt, compared to $50.8 million for the nine
months ended September 30, 2004, related primarily to the
impact of the net change in intercompany accounts with
Ingersoll-Rand.
On August 10, 2005, we completed our initial public
offering of 31,050,000 shares of our common stock for net
proceeds of approximately $608.9 million. On
September 12, 2005, we used approximately
$55.0 million of the net proceeds to redeem
$50.0 million face value amount of our
7
3
/
8
%
senior subordinated notes due 2014, including the payment of
$3.7 million applicable redemption premium and
$1.3 million accrued interest to the redemption date. Our
board of directors approved the payment of a dividend on
August 11, 2005, of the remaining net proceeds, excluding
certain costs, of approximately $557.7 million ($10.26 per
share) to our stockholders existing immediately prior to the
offering, consisting of affiliates of
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Table of Contents
First Reserve and certain members of senior management. In
addition, we have paid $211.2 million in long-term debt and
$2.6 million in short-term debt for a total debt reduction
during 2005 of $213.8 million.
On August 26, 2005, we increased the availability under the
revolving credit portion of our senior credit facility from
$300 million to $350 million. As of September 30,
2005, we had a cash balance of $109.5 million and the
ability to borrow $178.7 million under our
$350 million senior secured revolving credit facility, as
$171.3 million was used for outstanding letters of credit.
Although there can be no assurances, 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
revolving credit facility will be adequate to meet our working
capital, capital expenditures, debt service and other funding
requirements for the next twelve months and our long-term future
contractual obligations.
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 were 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 $42.5 million, or 31.9%, 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 $6.6 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 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 cost of 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
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Table of Contents
$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 $53.4 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
$820.0 million under the notes and the senior secured
credit facility, assumed approximately $2.9 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 September 30, 2005, of the $350.0 million of
capacity, $171.3 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 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. Capital expenditures for the
nine months ended September 30, 2005, were
$10.7 million.
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. We are currently not aware of any
significant restrictions on the ability of the issuer's
subsidiaries to distribute cash to the issuer. As of
September 30, 2005, we had cash of $109.5 million,
working capital, including cash, of $112.2 million, and the
ability to borrow approximately $178.7 million. From time
to time based on market conditions, we may repurchase a portion
of the notes at market prices which may result in purchase
prices in excess of par. In connection with the matters
described in "Risk Factors — Risks Related to Our
Business — In the past, our Brazilian subsidiary has
engaged in business transactions involving a Cuban entity that
could subject us to potential sanctions," to the extent we
violated any regulations, we may be subject to fines. We do not
expect any such fines to be material to our liquidity or
financial condition. Although we cannot assure you that we will
continue to generate comparable levels of cash and working
capital from operations, 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 for
the next twelve months and our long-term future contractual
obligations.
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 for
the nine months ended September 30, 2005 compared to
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Table of Contents
$1.9 million for the nine months ended September 30,
2004. 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 $2.3 million annually (based on the outstanding
principal balance at September 30, 2005).
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 Other 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.
Covenant levels and ratios for the four quarters ended
September 30, 2005 are as follows:
September 30, 2005
Covenant Level
Ratio
Senior Secured Credit Facility(1)
Minimum Adjusted EBITDA to cash interest ratio
1.87x
3.7x
Maximum total debt to Adjusted EBITDA ratio
6.50x
2.7x
Indenture(2)
Minimum pro forma Adjusted EBITDA to pro forma fixed charge
    ratio required to incur additional debt pursuant to ratio
    provisions(3)
2.0x
3.8x
(1)
Our senior secured credit facility requires us to maintain an
    Adjusted EBITDA to cash interest ratio starting at a minimum of
    1.87x and a total debt to Adjusted EBITDA ratio starting at a
    maximum of 6.50x. 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,
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Table of Contents
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
Four
Year Ended
January 1
Nine Months
October 30
Nine Months
Quarters
December 31,
through
Ended
through
Ended
Ended
October 29,
September 30,
December 31,
September 30,
September 30,
2002
2003
2004
2004
2004
2005
2005(a)
(In thousands)
Net income (loss)
$
16,096
$
20,365
$
42,151
$
37,732
$
7,229
$
4,891
$
16,539
(Benefit) provision for income taxes
11,910
11,438
11,970
4,918
7,275
10,560
24,887
Interest (income) expense, net
776
(1,938
)
(3,156
)
(2,306
)
9,654
44,619
53,423
Depreciation and amortization
33,822
29,109
22,715
20,284
16,269
48,045
66,745
EBITDA
62,604
58,974
73,680
60,628
40,427
108,115
161,594
Net reduction in SFAS 106 expense(b)
8,512
10,033
9,322
8,397
—
—
925
Excess (additional) corporate allocation(c)
(4,876
)
3,816
2,122
1,913
—
—
209
Removal of incremental corporate overhead(d)
—
5,091
8,025
7,994
—
—
31
Restructuring severance(e)
5,185
—
—
—
—
—
—
Productivity measures(f)
—
11,696
4,679
4,841
(62
)
—
(224
)
Pension(g)
(2,317
)
8,079
1,529
1,632
—
—
(103
)
Nigeria loss contract(h)
—
4,843
6,437
5,935
206
—
708
Nigeria casualty losses(i)
—
2,750
—
—
—
—
—
Provision for obsolete material(j)
—
3,300
2,100
3,000
—
—
(900
)
New York State grant(k)
(8,000
)
1,289
—
—
—
—
—
Equity (earnings) losses(l)
479
133
1,013
1,010
(194
)
560
369
Insurance claim(m)
(10,145
)
—
—
—
—
—
—
Settlement of product liability claim(n)
—
—
(4,500
)
(4,500
)
—
—
—
China receivables(o)
—
—
970
970
—
—
—
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Predecessor
Successor
Period
Period
Four
Year Ended
January 1
Nine Months
October 30
Nine Months
Quarters
December 31,
through
Ended
through
Ended
Ended
October 29,
September 30,
December 31,
September 30,
September 30,
2002
2003
2004
2004
2004
2005
2005(a)
(In thousands)
Write-off of purchased in-process research and development assets
—
—
—
—
1,800
—
1,800
Inventory step-up write- off(p)
—
—
—
—
2,281
5,094
7,375
Other expense (income)(q)
1,535
(2,976
)
(826
)
(192
)
1,017
(266
)
117
Compensation adjustment(r)
(150
)
(150
)
(125
)
(112
)
—
—
(13
)
Note premium(s)
—
—
—
—
—
3,688
3,688
Non-cash compensation(t)
—
—
—
—
75
3,152
3,227
Hedge (gains) losses(u)
—
—
(1,095
)
(5
)
18
1,957
885
Pension loss amortization(v)
—
—
—
—
—
187
187
Franchise taxes(w)
—
—
—
—
—
707
707
Adjusted EBITDA
$
52,827
$
106,878
$
103,331
$
91,511
$
45,568
$
123,194
$
180,582
(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.
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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, and $5.1 million was
    expensed in the nine months ended September 30, 2005.
(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.
(s)
Reflects premium paid on early redemption of $50 million
    aggregate principal amount of the notes.
(t)
Reflects employee non-cash equity compensation.
(u)
Reflects (gains) losses due to hedging of foreign currencies.
(v)
Reflects pension loss amortization.
(w)
Reflects franchise taxes.
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
$75,000 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.
In March 2005, the FASB released FASB Interpretation
No. 47, entitled "Accounting for Conditional Asset
Retirement Obligations." This Interpretation is effective
no later than our December 31, 2005 financial statements.
We are currently assessing the impact the Interpretation will
have on our financial position and results of operation.
In May 2005, the FASB issued SFAS No. 154, "Accounting
Changes and Error Corrections." SFAS No. 154 provides
guidance on the accounting for and reporting of accounting
changes and error corrections. This statement is effective for
fiscal years beginning after December 15, 2005.
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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, $0.5 million
from the period from October 30, 2004 through
December 31, 2004 and $9.6 million for the nine months
ended September 30, 2005. 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 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 was $2.4 million
for the nine months ended September 30, 2005, $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.
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 relating to any
    contract that might result in a loss. 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
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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 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 our obligations under our plans are reasonable based
    on input from our actuaries, outside investment advisors, and
    information as to assumptions used by plan sponsors.
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 components
$
166
$
(130
)
Effect of postretirement benefit obligations
10,144
(8,014
)
•
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
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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 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.
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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.
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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
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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 worldwide is forecasted to increase at
    an annual average growth rate of 2.4% per year from
    2001-2030 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
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•
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."
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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 38% 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 Royal Dutch Shell, ExxonMobil, BP, Statoil, Chevron,
Petrobras, Pemex, PDVSA, Conoco, Lukoil, Marathon and Dow
Chemical. 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. For the
nine months ended September 30, 2004 and September 30,
2005, we generated net income of $37.7 million and
$4.9 million and EBITDA of $60.6 million and
$108.1 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
$586.2 million at September 30, 2004 to
$872.8 million at September 30, 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 units 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
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$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 38% 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
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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.
•
TEST.
We use a Siebel-based technology enabled selling
    tool (TEST), 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
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flow from operations was $222.4 million for the nine months
    ended September 30, 2005 compared to $64.5 million for
    the same period in 2004. 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 September 30, 2005 and September 30,
    2004, our new units backlog was $687.3 million and
    $417.8 million, respectively, representing a 64.5%
    increase. As of December 31, 2004 and December 31,
    2003, our new units backlog was $489.3 million and $287.7
    million, respectively, representing a 70.1% 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 for a net aggregate amount of approximately
    $733,000.
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,
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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
partner for rotating equipment with Statoil, Marathon Ashland
Petroleum and Shell Chemicals (USA). In addition, we are a
preferred, non-exclusive supplier to other alliance partners,
including BP, 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 5,942 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 nine months ended
September 30, 2005 and the year ended December 31,
2004 improved substantially as compared to the nine months ended
September 30, 2004 and 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.
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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.
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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 kilowatts 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
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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
•
Condition Monitoring
•
Product Training
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•
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 50% larger than 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.
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
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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, India, Germany and Brazil.
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, Chevron, 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, BP 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, non-exclusive supplier alliances with ConocoPhillips,
ExxonMobil, Duke Energy and BP.
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
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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 7 of our larger
competitors, the reciprocating compressor industry has
consolidated from more than 12 to 7 of our larger competitors
and the steam turbine industry has consolidated from more than
18 to 6 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
Compression, Neuman & Esser, Peter Brotherhood Ltd.,
Ariel Corp., Thomassen and Mitsui; and in the steam turbine
industry include Elliott/Ebara, Siemens, General Electric/ Nuovo
Pignone, Mitsubishi Heavy Industries, 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, $1.0 million and $4.7 million
for the period from January 1, 2004 through
October 29, 2004, for the period from October 30, 2004
through December 31, 2004 and for the nine months ended
September 30, 2005, 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 September 30, 2005, we had 5,139 employees
worldwide. Of our employees, approximately 65% are located in
the United States. Approximately 35% of our employees in the
United States are covered by collective bargaining agreements. A
new collective bargaining agreement with IAM Moore
Lodge # 1580 that represents employees at our
Wellsville, New York facility was recently ratified. None of our
material collective bargaining agreements will expire through
the end of 2006, and one will expire in each of 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 35% of our
employees belong to industry or national labor unions. We
believe that our relations with our employees are good.
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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 January 1, 2006.
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
Burlington, Iowa
Owned
185,000
Manufacturing and services
Millbury, Massachusetts
Owned
104,000
Manufacturing and services
Campinas, Brazil
Owned
36,870
Manufacturing and services
Kongsberg, Norway
Leased
104,000
Manufacturing and services
Le Havre, France
Owned/Leased
866,000
Manufacturing and services
Naroda, India
Leased
102,000
Manufacturing and services
Oberhausen, Germany
Owned
75,000
Manufacturing and services
Bielefeld, Germany
Owned
31,000
Manufacturing and services
Houston, Texas
Owned
115,800
Services
Houston, Texas
Owned
45,900
Controls
Houston, Texas
Owned
77,800
Warehouse and offices
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 the 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.
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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 been
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 and, to date, the parties
have resolved all but a small number of them. We do not believe
any of the outstanding items are material.
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.
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MANAGEMENT
Directors and Executive Officers
Our board of directors currently consists of eight directors. At
the annual meeting of stockholders, directors will be elected to
serve a term of one year and until their successors are duly
elected and qualified.
The following table sets forth the name, age as of
January 1, 2006 and position of each person that serves as
an executive officer or director of our company.
Name
Age
Position
Vincent R. Volpe Jr.
48
President, Chief Executive Officer and Director
Leonard M. Anthony
51
Executive Vice President and Chief Financial Officer
Stephen A. Riordan
46
Vice President Finance
Walter J. Nye
50
Executive Vice President, Worldwide Product Services
Bradford W. Dickson
50
Executive Vice President, New Equipment Worldwide
Christopher Rossi
41
Vice President and General Manager,
North American Operations
Jean-Francois Chevrier
59
Vice President and General Manager, European Operations
Elizabeth C. Powers
46
Vice President and Chief Administrative Officer
Randy D. Rinicella
48
Vice President, General Counsel and Secretary
Lonnie A. Arnett
59
Vice President, Controller and Chief Accounting Officer
William E. Macaulay
60
Chairman of the Board of Directors
Thomas J. Sikorski
44
Director
Mark A. McComiskey
33
Director
Kenneth W. Moore
36
Director
Michael L. Underwood
61
Director
Louis A. Raspino
53
Director
Philip R. Roth
54
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; 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
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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.
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 2002. 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
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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 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 April 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.
Lonnie A. Arnett
has been our Vice President,
Controller and Chief Accounting Officer since June 2005. Prior
to that, he served as Vice President, Controller and Chief
Accounting Officer for International Steel Group Inc. since
November 2003. From May 1984 to October 2003, Mr. Arnett
served as Vice President, Controller and Chief Accounting
Officer of Bethlehem Steel Corporation. In October 2001,
Bethlehem Steel filed for bankruptcy protection under
Chapter 11 of the U.S. Bankruptcy Code. Mr. Arnett
held financial leadership positions in auditing and as Corporate
Controller at Armco from April 1977 to April 1984. He also led a
variety of audit engagements for Deloitte & Co., now
Deloitte and Touche, from June 1968 to March 1977.
Mr. Arnett is a CPA and earned a BS in Accounting from
Western Kentucky University and an AMP from Harvard Business
School.
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.
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Mark A. McComiskey
has been a member of our board
of directors since the acquisition in October 2004.
Mr. McComiskey is a Director 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 Managing 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.
Michael L. Underwood
has been a member of our
board of directors since August 2005. He has over 35 years of
accounting experience. He joined Arthur Andersen LLP in 1968 and
advanced through accounting positions of increasing
responsibility. He served as Staff, Senior or Manager from
February 1968 to September 1978 and he served as Partner from
September 1978 to June 2002 where he led a variety of audit
engagements and served as an advisory partner for public
manufacturing companies. From June 2002 to June 2003,
Mr. Underwood served as Director at Deloitte & Touche
LLP where he conducted
Sarbanes-Oxley
training, among other things. Mr. Underwood earned both a
BS and a Masters in Accounting from the University of Illinois.
Louis A. Raspino
has been a member of our board of
directors since December 2005. He has over 30 years of
experience in the oil and gas exploration production and service
industry. Mr. Raspino has been the President and Chief Executive
Officer of Pride International Inc. since June 2005 and was
an Executive Vice President and Chief Financial Officer from
December 2003 until June 2005. Before joining Pride
International in December 2003, he was Senior Vice President and
Chief Financial Officer of Grant Prideco, Inc. from July 2001
until December 2003. From December 2000 until April 2001, Mr.
Raspino served as Senior Vice President, Chief Financial Officer
and Chief Operating Officer of JRL Enterprises, Inc. Previously,
he was also Vice President of Finance for Halliburton Company,
Senior Vice President and Chief Financial Officer of The
Louisiana Land & Exploration Company and began his
career with Ernst & Young. Mr. Raspino is a CPA
and earned a BS from Louisiana State University in New Orleans
and an MBA from Loyola University.
Philip R. Roth
has been a member of our board of
directors since December 2005. He has over 30 years of
accounting and finance experience. Mr. Roth was formerly
Vice President, Finance and Chief Financial Officer of Gardner
Denver, Inc., from May 1996 until August 2004. Prior
to joining Gardner Denver, Mr. Roth was with Emerson Electric
Co. from 1980 until 1996 where he held positions in accounting,
treasury and investor relations at the corporate office, and in
strategic planning and acquisitions, and as a Chief Financial
Officer at the division level. Mr. Roth is a CPA and began his
career with Price Waterhouse. He earned a BS in Accounting and
Business Administration from the University of Missouri and an
MBA from the Olin School of Business at Washington University.
Composition of the Board of Directors
Our board of directors currently consists of
eight directors, including three independent
directors, Messrs. Underwood, Raspino and Roth.
If First Reserve owns more than 50% of our common stock upon
completion of this offering, we will continue to be a
"controlled company" under the New York Stock Exchange
corporate governance rules. As a result, we would continue to 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. We are currently utilizing these exemptions. In the
event First Reserve owns less than a majority of our common
stock upon completion of this offering, we will cease to be a
controlled company within the meaning of these rules and we will
be required to comply with these provisions within one year
following completion of this offering.
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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,
Kenneth W. Moore, Louis A. Raspino, Philip R.
Roth and Michael L. Underwood. Messrs. Raspino, Roth and
Underwood are independent members and Mr. Underwood is a
"financial expert" as such term is defined in
Item 401(h) of the
Regulation S-K.
We
expect to have only independent directors on our audit committee
within the transition period specified in
Rule 10A-3
under
the Exchange Act. 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 management's
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.
The board of directors has approved and adopted a Code of
Business Conduct for all employees and an additional 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.
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 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
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(4) establishing criteria for and leading the annual
performance self-evaluation of the board of directors and each
committee.
Director Compensation
None of our non-independent directors currently receives any
additional compensation for serving as a director or as a member
or chair of a committee of the board of directors. In connection
with and following our initial public offering, we have added
independent directors to our board. We plan to pay our
independent directors an annual retainer of $36,000 in cash and
$30,000 in annual grants of restricted stock pursuant to the
2005 Directors Stock Incentive Plan. We also plan to pay
independent directors a fee of $10,000 for acting as committee
chairs ($15,000 for serving as audit committee chair). For each
of the first six board or committee meetings our independent
directors attend in person during any year, they will earn a fee
of $4,000, and for any additional meetings they attend in person
or for any meeting they attend telephonically, they will be paid
a fee of $1,000. In addition, our independent directors may opt
to receive shares of our common stock in lieu of any cash
directors' fees under our 2005 Directors Stock Incentive
Plan.
Compensation Committee Interlocks and Insider
Participation
Vincent Volpe Jr., our president and chief executive
officer, has served as a member of our compensation committee
since October 2004. The entire board of directors, excluding
Mr. Volpe, determines Mr. Volpe's compensation.
Executive Compensation
Summary Compensation Table
The following summary compensation table sets forth information
concerning compensation earned in 2004 and 2003, by our chief
executive officer and our other four most highly compensated
executive officers at the end of the 2004 fiscal year. All
references to stock under "Executive Compensation"
refer to shares of common stock of Ingersoll-Rand and all
references to "plans" refer to executive compensation
plans of Ingersoll-Rand. As of the consummation of the
acquisition, our management ceased to participate in such plans.
Long-Term Compensation
Payouts
Awards
Annual Compensation
Long-Term
Restricted
Number of Securities
Incentive
Other Annual
Stock
Underlying
Plan
All Other
Name and Principal Position
Year
Salary ($)
Bonus ($)(1)
Compensation ($)
Award(s) ($)
Option/SARs (#)($)
Payouts
Compensation(4)($)
Vincent R. Volpe Jr.
2004
375,000
865,593
—
—
20,430
—
1,330,000
President and Chief
2003
349,999
713,646
—
—
20,900
—
—
Executive Officer
Walter J. Nye
2004
224,561
129,000
—
—
9,970
—
334,476
Executive Vice President,
2003
211,866
98,500
—
—
9,720
—
—
Worldwide Product Services
Stephen A. Riordan
2004
193,722
124,800
—
—
5,280
—
283,932
Vice President Finance(2)
2003
173,016
100,000
—
—
5,000
—
—
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Long-Term Compensation
Payouts
Awards
Annual Compensation
Long-Term
Restricted
Number of Securities
Incentive
Other Annual
Stock
Underlying
Plan
All Other
Name and Principal Position
Year
Salary ($)
Bonus ($)(1)
Compensation ($)
Award(s) ($)
Option/SARs (#)($)
Payouts
Compensation(4)($)
Bradford W. Dickson
2004
193,923
122,100
—
—
7,130
—
284,400
Executive Vice President,
2003
181,290
86,967
—
—
6,820
—
—
New Equipment Worldwide
Jean-Francois Chevrier
2004
210,728
108,300
—
—
6,860
—
302,782
Vice President, European
2003
186,480
78,944
—
—
6,510
—
—
Operations(3)
(1)
This column reflects both amounts earned as annual bonuses and
    under the Performance Share Program. The Performance Share
    Program provides annual awards based on a combination of the
    achievement of strategic initiatives and annual financial
    performance. Payments are made in cash unless previously
    deferred into the Executive Deferral Plan. The Performance Share
    Program was discontinued at December 31, 2004. The amounts
    earned as bonuses and under the Performance Share Program were
    as follows:
Performance Share
Name
Year
Bonus ($)
Program ($)
Vincent R. Volpe Jr
2004
440,100
425,493
2003
282,400
431,246
(2)
Mr. Riordan was Vice President Finance from January 2003
    through October 2004 and acted as the chief financial officer
    from October 2004 through April 2005.
(3)
The average dollar to euro exchange rate for 2003 and 2004 was
    used to reflect earnings and bonus for Mr. Chevrier.
(4)
To reward selected key employees in the event of a successful
    sale of Dresser-Rand Company, Ingersoll-Rand established a sales
    incentive program. Each of Messrs. Riordan, Nye, Dickson
    and Chevrier received, pursuant to the program, payments from
    Ingersoll-Rand equal to 100% of their total cash compensation
    (annual base salary plus annual target bonus amount) as of the
    date of the acquisition. In addition, all participants in the
    program had their unvested stock options, or stock equivalency
    rights for non-U.S. employees, in Ingersoll-Rand vest
    immediately as of October 29, 2004, the date of the
    acquisition. In addition, Mr. Volpe received payments from
    Ingersoll-Rand pursuant to the sales incentive program equal to
    two times his total cash compensation (annual base salary plus
    annual target bonus amount) as of the date of the acquisition
    and his unvested stock options vested as of October 29,
    2004.
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Stock Options and Stock Appreciation Rights of
    Ingersoll-Rand
The following table sets forth information concerning the grant
of stock options of Ingersoll-Rand to our chief executive
officer and each of our other four most highly compensated
executive officers during the 2004 fiscal year.
Grant Date
Individual Grants
Value
Number of
Securities
Percent of Total
Underlying
Options/SARs
Grant Date
Options/SARs
Granted to
Exercise or
Present
Granted
Employees in
Base
Value ($)
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.
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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
profit 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,
Dresser-Rand
Holdings, LLC may elect to liquidate his common units in
exchange for shares of our common stock having an equivalent
total value. If Mr. Volpe resigns for "good
reason" or is terminated without cause and
Dresser-Rand
Holdings,
LLC does not elect to convert his common units to common shares,
he may require
Dresser-Rand
Holdings,
LLC to do so and require
Dresser-Rand
Holdings,
LLC 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
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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 profit 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 2004. 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
the Holdings LLC Agreement, management 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 only asset of Dresser-Rand Holdings, LLC is its ownership,
through D-R Interholding, LLC, of our shares. 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 October and 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. The proceeds of all
common unit issuances were used to acquire, through D-R
Interholding, LLC, our shares.
The proceeds from the dividends paid to shareholders in
connection with our initial public offering were distributed to
members of Dresser-Rand Holdings, LLC in accordance with the
terms of the Holdings LLC Agreement. Affiliates of First Reserve
received approximately $544.3 million, and the management
members of Dresser-Rand Holdings, LLC received approximately
$11.8 million in the aggregate, with Messrs. Volpe,
Anthony, Nye, Riordan, Dickson and Chevrier, respectively,
receiving approximately $3,779,192, $1,462,726, $441,237,
$851,303, $757,544 and $453,645.
Dresser-Rand Holdings, LLC currently holds 54,221,932 shares of
our common stock. The amount of proceeds that would be received
by management members of Dresser-Rand Holdings, LLC in connection
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with a sale by Dresser-Rand Holdings, LLC depends on the amount
of cash proceeds received by First Reserve compared to various
multiples of First Reserve's cost per share. If
Dresser-Rand Holdings, LLC were to sell all of its shares (in
this offering and one or more other secondary offerings, for
example), then it would generate proceeds equal to the number of
shares of our common stock it holds multiplied by the average
price per share at which the shares were sold. If these sales
were to occur at an average price per share above $14.07, the
management members would be fully vested in their profits units,
and would receive approximately 9.6% of the net proceeds raised
in such sales, with Messrs. Volpe, Anthony, Nye, Riordan,
Dickson and Chevrier, respectively, receiving approximately
4.1%, 0.9%, 0.4%, 0.7%, 0.5% and 0.4% of the net proceeds.
All such payments to management would be from the proceeds of
stock sales by Dresser-Rand Holdings, LLC, which may be effected
through D-R Interholding, LLC, neither of which is consolidated
in our financial statements. Though management would receive no
payment from us in connection with this or any other such
offering, we would record a
pre-tax
and after-tax,
non-cash compensation expense in connection with the exit units
and an increase in paid-in capital approximately equal to the
amount of proceeds received by management in respect of such
exit units. Neither cash nor total stockholders' equity
would be impacted.
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, which it is anticipated will consist solely of
amounts realized with respect to Dresser-Rand Holdings,
LLC's investment in our shares. Profit units consist of
service units and five tranches of exit units, and, as explained
in more detail below, 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 unit, although the exit units are subject to the
additional condition that the applicable performance-based
conditions are satisfied. The benchmark amount of $4.33 for each
profit unit was set at the initial per unit cost of the common
units, which equated to the value of our shares at the time of
the acquisition. Because the benchmark amount was set at this
amount, profit units will share in distributions from
Dresser-Rand Holdings, LLC only if there is any realized gain in
the value of our shares. It is anticipated that any cash
received by Dresser-Rand Holdings, LLC with respect to our
shares that it owns (including the shares being sold in this
offering) will be promptly distributed to the holders of the
common units and, to the extent applicable, the profit units.
As of January 1, 2006, approximately 98.4% of common units
were held by First Reserve and approximately 1.6% were held by
certain and former members of our management. 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.
Holders of profit units generally will not be entitled to
distributions in respect of such units until such time as the
amounts that would otherwise have been distributed in respect of
each such unit equals the benchmark amount described above,
except that Dresser-Rand Holdings, LLC may advance tax
distributions to help cover any allocations of taxable income to
them. Once this benchmark amount is achieved, profit units will
participate proportionately in distributions.
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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. The initial public offering
was not considered a change of control under the Holdings LLC
Agreement. Although unvested service units are subject to
forfeiture if a management member's service terminates,
management members are entitled to receive any distributions of
profits and losses payable with respect to their unvested
service units as long as they are providing services to or for
the benefit of Dresser-Rand Holdings, LLC at the time of the
distribution.
Subject to the management member's continued service to or
for the benefit of Dresser-Rand Holdings, LLC management members
will be entitled to receive a distribution of profits over and
above the benchmark amount on their exit units upon the
occurrence of a transaction where First Reserve receives cash,
cash equivalents or marketable publicly-traded securities on or
with respect to its common units, if the value First Reserve
receives from the transaction, or the cumulative value resulting
from any prior transactions, exceeds multiples of the initial
price paid by First Reserve for its units ranging from 2.25 to
3.25. Any tranche of exit units that does not become vested in a
transaction described in the preceding sentence that is a change
of control under the Holdings LLC Agreement will automatically
be cancelled and the holder will not be entitled to any
distributions with respect to such cancelled exit units. This
offering will not be a change of control under the
Holdings LLC Agreement. It is anticipated that this
offering will be a transaction that will result in a
distribution on some of the exit units because we expect that
some of the multiples will be achieved.
If a management member ceases to provide services to or for the
benefit of Dresser-Rand Holdings, LLC, Dresser-Rand Holdings,
LLC may liquidate the management member's units in exchange
for shares of our common stock. The actual number of shares of
our common stock that a management member would receive will be
determined at the time, and will have the same total value as
the amount the management member would receive if Dresser-Rand
Holdings, LLC were to sell all of its assets for cash and
distribute the proceeds to its members.
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,
units held by management members 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 any successor entity in connection with an
initial public offering of such successor entity to Dresser-Rand
Holdings, LLC 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 of any successor entity to
Dresser-Rand Holdings, LLC under the Holdings LLC Agreement.
2005 Stock Incentive Plan
Our board of directors has adopted, and our stockholders have
approved, 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.
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A total of approximately 4.3 million shares of our common
stock are available for awards under the 2005 Stock Incentive
Plan and the 2005 Directors 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.
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 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.
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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.
2005 Directors Stock Incentive Plan
Our board of directors has adopted, and our stockholders have
approved, our 2005 Directors Plan for our directors who are
not also our officers or employees, or officers or employees of
First Reserve. The 2005 Directors Plan is administered by
our board of directors.
A total of approximately 4.3 million shares of our common
stock are available for awards under the 2005 Directors
Plan and the 2005 Stock Incentive 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 receive an annual
grant with a value of $30,000 immediately following the first
regular meeting of our board of directors in any year the
2005 Directors Plan is in effect (the annual grant for 2005
was awarded in connection with our initial public offering).
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 $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. A pro-rata portion of the
annual grant of shares may be awarded to eligible directors who
join our board of directors following the normal grant date.
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
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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 has adopted 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 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.
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 Annual
Incentive Plan before the first meeting of our stockholders in
2009 at which directors will be elected.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table and accompanying footnotes show information
regarding the beneficial ownership of our common stock, before
this offering and after this offering, held directly 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
after the offering are based
on                      shares
of our common stock to be issued and outstanding immediately
after this offering,
including                      shares
that may be sold to the underwriters pursuant to their
over-allotment option.
Shares Beneficially Owned After This Offering
Shares Beneficially
Assuming the
Assuming the
Owned Immediately
Underwriters' Option Is
Underwriters' Option Is
Prior to this Offering
Not Exercised(1)
Exercised in Full
Percent of
Percent of
Percent of
Name of Beneficial Owner
Number
Common
Number
Common
Number
Common
Dresser-Rand Holdings, LLC(2)
54,221,932
63.5
%
%
%
Michael L. Underwood(3)
1,429
*
1,429
*
1,429
*
Louis A. Raspino
78
*
78
*
78
*
Philip R. Roth
78
*
78
*
78
*
Directors and executive officers as a group (17 persons)(4)
1,585
*
1,585
*
1,585
*
*
Less than 1% of outstanding common stock.
(1)
The selling stockholder will grant the underwriters an option to
    purchase up to an
    additional            shares
    in this offering.
(2)
63.5% of our common stock is owned by D-R Interholding, LLC,
    which in turn is 100% owned by Dresser-Rand Holdings, LLC.
    Dresser-Rand Holdings, LLC is controlled by First Reserve
    Fund IX, L.P. ("Fund IX") and First Reserve
    Fund X, L.P. ("Fund X"). 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 GP X, L.P.
    ("GP X") is the general partner of Fund X. First
    Reserve GP X, Inc. ("GP X, Inc.") is the general
    partner of GP X. First Reserve Corporation is the adviser to
    Fund IX and Fund X. The officers for GP IX, GP IX
    Inc., GP X and GP X Inc. are William E. Macaulay, John A. Hill,
    Ben A. Guill, Thomas R. Denison, J.W.G. (Will) Honeybourne, Alex
    T. Krueger, Thomas J. Sikorski, Jennifer C. Zarrilli, Craig M.
    Jarchow, Kenneth W. Moore, Catia Cesari, Timothy H. Day, Joseph
    Robert Edwards, Mark A. McComiskey, J. Hardy Murchison, Glenn J.
    Payne, Kristin A. Custar, Brian K. Lee, Bingfeng Leng, Timothy
    K. O'Keeffe, Anne E. Gold, Valerie A. Thomason and Damien
    T. J. Harris, who are all employees of First Reserve. Decisions
    with respect to voting and investments are made by the
    Investment Committee of First Reserve, made up of a subset of
    these officers that includes the officers named above except for
    Ms. Thomason and Mr. Harris. With respect to
    investments held by these entities, decisions with respect to
    operations oversight are made by the subset of these officers
    that work most closely on a given investment, which includes
    Messrs. Macaulay, McComiskey, Moore and Sikorski in the
    case of Dresser-Rand Group Inc. The address of GP IX, Inc., GP
    IX, Fund IX, GP X, Inc., GP X, Fund X and First
    Reserve Corporation is c/o First Reserve Corporation, One
    Lafayette Place, Greenwich, CT 06830.
(3)
The address of Messrs. Raspino, Roth and Underwood is c/o
    Dresser-Rand Group Inc., Paul Clark Drive, Olean, New York 14760.
(4)
Because members of senior management hold their interests in
    units of Dresser-Rand Holdings, LLC, which is controlled by
    First Reserve, they are not deemed to beneficially own the
    common stock of Dresser-Rand Group Inc. in which they have an
    economic interest.
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In addition to the beneficial ownership of our common stock set
forth in the table above, First Reserve and certain of our
directors and named executive officers own an economic interest
in our common stock indirectly through membership units in
Dresser-Rand Holdings, LLC. The information in the table below
reflects the number of shares of our common stock that
correspond to each named holder's economic interest in
common units in
Dresser-Rand Holdings, LLC
and does not reflect any economic interest in profit units. The
following table and accompanying footnotes show information
regarding the economic interest of our common stock by
(i) each person known by us to hold an economic interest in
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.
Economic Interest Held
After This Offering
Economic Interest Held
Assuming the
Assuming the
Immediately Prior to
Underwriters' Option
Underwriters' Option
This Offering
Is Not Exercised(1)
Is Exercised in Full
Percent of
Percent of
Percent of
Common
Common
Common
Name of Economic Interest Holder
Number
Stock
Number
Stock
Number
Stock
First Reserve Fund X, L.P.
32,250,422
37.7
%
%
%
First Reserve Fund IX, L.P.
21,086,814
24.7
Vincent R. Volpe Jr.
248,179
*
Leonard M. Anthony
118,906
*
Stephen A. Riordan
62,044
*
Walter J. Nye
31,022
*
Bradford W. Dickson
62,019
*
Christopher Rossi
62,328
*
Jean-Francois Chevrier
32,238
*
Elizabeth C. Powers
111,681
*
Randy D. Rinicella
37,845
*
Lonnie A. Arnett
—
—
—
—
—
—
William E. Macaulay(2)
—
—
—
—
—
—
Thomas J. Sikorski(2)
—
—
—
—
—
—
Mark A. McComiskey(2)
—
—
—
—
—
—
Kenneth W. Moore(2)
—
—
—
—
—
—
Directors and executive officers as a group (17 persons)(3)
766,262
*
*
Less than 1% of outstanding common stock.
(1)
The selling stockholder will grant the underwriters an option to
    purchase up to an
    additional            shares
    in this offering.
(2)
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.
(3)
Excludes 1,585 shares of common stock directly held by Louis A.
    Raspino, Philip R. Roth and Michael L. Underwood as set forth in
    the previous table.
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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 and profit
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
In connection with the acquisition, we entered into a
stockholders agreement with First Reserve and certain management
stockholders, which was amended and restated in connection with
the initial public offering. The stockholders agreement provides
that our board of directors consist of six members. The board
may be subsequently expanded by vote of the board to include
additional directors, including such additional independent
directors as may be required by applicable securities laws or
the rules of any exchange on which shares of our common stock
are traded. The stockholders agreement provides that for so long
as First Reserve holds at least 5% of the outstanding shares of
our common stock, it may designate all of the nominees for
election to our board of directors other than any independent
directors. All stockholders that are a party to the stockholders
agreement are obligated to vote their shares in favor of such
nominees. Independent directors will be designated for
nomination by our board of directors, however such independent
nominees must be reasonably acceptable to First Reserve for so
long as its holds at least 5% of the outstanding shares of our
common stock. Our board of directors currently consists of our
Chief Executive Officer, four other directors nominated by First
Reserve, Louis A. Raspino, Philip R. Roth and Michael L.
Underwood.
For so long as First Reserve holds at least 20% of the
outstanding shares of our common stock, many significant
decisions involving us require the approval of a majority of our
board of directors and at least one director designated for
nomination by First Reserve who is also an officer of First
Reserve Corporation. For example, the following transactions are
subject to such approval requirements: any acquisition or sale
of assets involving amounts in excess of one percent of sales
during any twelve month period, or any acquisition of another
business or any equity of another entity; any merger,
consolidation, substantial sale of assets or dissolution
involving us or any of our material subsidiaries; any
declaration of dividends; the issuance of common stock or other
securities of us or any of our material subsidiaries; and any
amendment to our amended and restated certificate of
incorporation or comparable organizational documents of our
material subsidiaries. Although state law is ambiguous regarding
the extent to which fiduciary duties can be waived by contract,
to the extent permitted by law, First Reserve has no implied or
express duty to us or you regarding the approval or disapproval
of these transactions. In addition, to the extent permitted by
law, the stockholders agreement specifically provides that First
Reserve and its affiliates may engage in material business
transactions with us, pursue acquisition opportunities that may
be complementary to us or make investments in companies that
compete directly or indirectly against us, and will not be
deemed to breach any fiduciary duty.
The stockholders agreement provides that First Reserve will have
the ability to require us to register its shares of our common
stock and may also 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,
in connection with other registered offerings by us, holders of
shares of our common stock who are parties to the stockholders
agreement will have the ability to exercise certain piggyback
registration rights with respect to their shares. Also, we are
obligated to pay the fees associated with any public offering of
shares held by First Reserve and management stockholders.
The stockholders agreement has an indefinite term. The
stockholders agreement may generally be terminated or amended
with the written consent of the stockholders holding a majority
of the shares of our common stock subject to the agreement;
however, any amendment that materially and disproportionately
prejudices an individual stockholder or a discrete group of
stockholders must be consented to in writing by such individual
or group.
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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 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. Although initially
owned by Dresser Industries, Inc., in the merger of Dresser
Industries, Inc. with and into Halliburton, Halliburton acquired
all of the rights to the use of the name "Dresser."
When Halliburton sold its Dresser Equipment Group in April of
2001, Halliburton also sold the right to the "Dresser"
name, subject to existing licenses and certain limitations. The
Dresser-Rand Entities held one of those existing licenses, which
has since expired. In connection with the recent sale of the
Dresser-Rand Entities by Ingersoll-Rand, we negotiated a
replacement license for the right to use the "Dresser"
name in our business from Dresser, Inc. (f/k/a Dresser Equipment
Group), an affiliate of First Reserve, in perpetuity, for
consideration of $1 million plus an additional
$4 million payable over the next nine years.
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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 $745 million, consisting of:
•
a $395 million term loan facility (with a
€
78.5 million
    sub-facility); and
•
a $350 million revolving credit facility (with a
    sub-facility denominated in euros in an amount not to exceed the
    equivalent of $220 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 August 26, 2005, we increased the
availability under the revolving credit portion of our senior
secured credit facility from $300 million to
$350 million. On September 30, 2005 we had
approximately $178.7 million of borrowing capacity under
the revolving portion of our senior secured credit facility,
subject to certain conditions, after giving effect to
approximately $171.3 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
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applicable margin for base rate borrowings under the term loan
facility is 1.00%. The initial applicable margin 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
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exceptions with respect to immaterial subsidiaries and with
respect to any guaranty that could create 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;
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•
make certain acquisitions;
•
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.
On July 18, 2005, we amended our senior secured credit facility
to remove certain restrictions on our ability to consummate the
initial public offering and use the proceeds received therefrom.
7
3
/
8
% Senior
Subordinated Notes due 2014
General
In October 2004, we issued
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. In September, 2005, we used a portion of the proceeds
from our initial public offering to redeem $50 million
aggregate principal amount of the notes. On January 23,
2006, we filed an initial registration statement to exchange the
notes for identical freely tradeable notes registered under the
Securities Act.
Guarantees
The notes are guaranteed, on a senior subordinated, unsecured
basis, by each of our direct and indirect wholly-owned domestic
subsidiaries that guarantee the senior secured credit facility.
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
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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.
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.
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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;
•
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 January 1, 2006 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. We were
unable to register the notes by that date and the notes continue
to be unregistered. Accordingly, the annual interest on the
notes increased by (1) 0.25% for the first 90 days
following August 25, 2005, (2) an additional 0.25% for
90 days beginning November 23, 2005 and (3) will
increase by 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. We filed an initial
registration statement to register the notes on January 23,
2006. The additional interest will cease to accrue upon
consummation of the exchange offer.
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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. 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
As of January 1, 2006, our authorized capital stock
consists of 250,000,000 shares of common stock, par value
$0.01 per share, of which 85,446,482 shares were
issued and outstanding and 10,000,000 shares of preferred
stock, par value $0.01 per share, of which no shares are
currently issued and 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;
•
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;
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•
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.
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.
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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 restated
certificate of incorporation includes a provision that
eliminates the personal liability of directors for monetary
damages for breach of fiduciary duty as a director, except:
•
for breach of duty of loyalty;
•
for acts or omissions not in good faith or involving intentional
    misconduct or knowing violation of law;
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•
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
The Bank of New York is the transfer agent and registrar for our
common stock.
Listing
Our common stock trades 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. 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.
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SHARES ELIGIBLE FOR FUTURE SALE
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.
As of January 1, 2006, we had a total of
85,446,482 shares of common stock outstanding. Of the
outstanding shares, the shares sold in our initial public
offering and 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 indirectly 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 indirectly
own            million
shares entitled to these registration rights and management will
indirectly
own            million
shares entitled to these registration rights. See "Certain
Related Party Transaction — Stockholders
Agreement."
Rule 144
Subject to the lock-up agreements described below and the volume
limitations and other conditions under
Rule 144,            shares
of our currently outstanding common stock are currently
available for sale in the public market pursuant to exemptions
from registration requirements as follows:
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 or
    approximately 0.9 million shares assuming no exercise by
    the underwriters of their option to purchase additional
    shares; 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.
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).
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Lock-Up Agreements
In connection with this offering, we, the selling stockholder
and each of our directors and executive officers 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                   days
after the date of this prospectus, except with the prior written
consent of the representatives. See "Underwriting."
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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," or 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 establishment of the
non-U.S. holder)
are not subject to the withholding tax, provided that certain
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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 and is eligible for treaty benefits 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
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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.
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UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement dated the date of this prospectus, the
underwriters named below, for
whom                                         and                     will
act as representatives, have severally agreed to purchase, and
we have agreed to sell to them, severally, the number of shares
indicated below.
Number
Name
of Shares
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. Any underwriter may
allow, and such dealers may reallow, a concession not in excess
of
$          a
share to other underwriters or to certain dealers. 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 about 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 the
selling shareholder. Such amounts are shown assuming both no
exercise and full exercise by the underwriters of their
over-allotment option.
Paid by the Selling Shareholder
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.
The common stock is listed on the New York Stock Exchange under
the symbol "DRC".
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We, the selling stockholder and each of our directors and
executive officers have agreed that, without the prior written
consent of the representatives, none of us will, during the
period
ending            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 this 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 this offering;
•
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;
•
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; 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.
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 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.
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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.
A prospectus in electronic format may be made available on the
website maintained 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. The
representatives will allocate shares to underwriters that may
make Internet distributions on the same basis as other
allocations. In addition, shares may be sold by the underwriters
to securities dealers who resell shares to online brokerage
account holders.
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.
We and the selling stockholder have agreed to indemnify the
underwriters against certain liabilities, including liabilities
under the Securities Act.
European Economic Area
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive, each underwriter
has represented and agreed that with effect from and including
the date on which the Prospectus Directive is implemented in
that Member State it has not made and will not make an offer of
the shares to the public in that Member State, except that it
may, with effect from and including such date, make an offer of
the shares to the public in that Member State:
(a) at any time to legal entities which are authorized or
    regulated to operate in the financial markets or, if not so
    authorized or regulated, whose corporate purpose is solely to
    invest in securities;
(b) at any time to any legal entity which has two or more
    of (1) an average of at least 250 employees during the
    last financial year; (2) a total balance sheet of more than
€
43,000,000 and
    (3) an annual net turnover of more than
€
50,000,000, as
    shown in its last annual or consolidated accounts; or
(c) at any time in any other circumstances which do not
    require the publication by us of a prospectus pursuant to
    Article 3 of the Prospectus Directive.
For the purposes of the above, the expression an "offer of
the shares to the public" in relation to any shares in any
Member State means the communication in any form and by any
means of sufficient information on the terms of the offer and
the shares to be offered so as to enable an investor to decide
to purchase or subscribe the shares, as the same may be varied
in that Member State by any measure implementing the Prospectus
Directive in that Member State and the expression Prospectus
Directive means Directive 2003/71/ EC and includes any relevant
implementing measure in that Member State.
United Kingdom
Each underwriter has represented and agreed that it has only
communicated or caused to be communicated and will only
communicate or cause to be communicated an invitation or
inducement to engage in investment activity (within the meaning
of Section 21 of the Financial Services and Markets Act
2000) in connection with the issue or sale of the shares in
circumstances in which Section 21(1) of such Act does not
apply to us and it has complied and will comply with all
applicable provisions of such Act with respect to anything done
by it in relation to any shares in, from or otherwise involving
the United Kingdom.
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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.                     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 to
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 currently subject to the
informational requirements of the Exchange Act and, in
accordance therewith, 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).
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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 at December 31, 2004 and 2003 and 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 years ended December 31, 2003 and 2002
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
Consolidated Financial Statements and Predecessor Combined
    Financial Statements at September 30, 2005 and
    December 31, 2004 and for the nine months ended
    September 30, 2005 and 2004 (unaudited)
Consolidated Statement of Operations (Successor) for the nine
    months ended September 30, 2005 and Combined Statement of
    Operations (Predecessor) for the nine months ended
    September 30, 2004
F-56
Consolidated Balance Sheet (Successor) at September 30,
    2005 and December 31, 2004
F-57
Consolidated Statement of Cash Flows (Successor) for the nine
    months ended September 30, 2005 and Combined Statement of
    Cash Flows (Predecessor) for the nine months ended
    September 30, 2004
F-58
Notes to Consolidated and Combined Financial Statements
F-59
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, except as to the information contained in
Note 23 for which the date is September 12, 2005 and
the information contained in Note 24 for which the date is
January 16, 2006
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, except as to the information contained in
Note 24 for which the date is January 16, 2006
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
53,793,188
Net income per common share
$
0.13
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
December
31, 2004
31, 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, 53,838,816 shares
    authorized, 54,219,297 shares issued and outstanding,
    respectively
542
—
Additional paid-in capital
436,642
—
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
    Interholding, LLC (adjusted to reflect the 1,006,092.87-for-one
    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-for-one 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
—
Effect of the 0.53731353527-for-one reverse stock split effected
    August 4, 2005
(467
)
467
—
—
—
—
Total comprehensive income
—
—
—
—
$
15,713
15,713
At December 31, 2004
$
542
$
436,642
$
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 identifiable 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. The Acquisition was
performed by First Reserve as a part of its strategy of making
diversified investments in the energy industry. The factors that
contributed to a purchase price that resulted in recognition of
goodwill include the Company's global presence, proven
customer service capabilities, and knowledgeable assembled
workforce comprised of various executives, managers, and sales
and production personnel. 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 based on
a 2.5% annual attrition rate; (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 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
F-10
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
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.
The relief from royalty method used to value existing
technologies and trademarks is an income approach based on the
assumption that the Company is relieved from paying a royalty to
obtain the use of these intangibles. Specific technologies
acquired relate to the Company's highly-engineered turbo
and reciprocating compression equipment and steam turbines,
including the DATUM turbo compressor platform.
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.
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".
F-11
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
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 (U.K.) Ltd.
UK
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 Holdings (Delaware) LLC
United States of America
Dresser-Rand Holding Company
Venezuela
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
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
F-12
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Legal Entities
Country
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
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
F-13
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Legal Entities
Country
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.
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
F-14
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
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 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.
F-15
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
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. After giving effect to the reverse stock split on
August 4, 2005 (see Note 23), weighted average common
shares of 53,793,188 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.
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
F-27
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
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 loans
under the Senior Secured Credit Facility at any time without
premium or penalty, other than customary breakage 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
F-28
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
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 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.
F-29
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
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 components
$
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 fair value of forward contracts at
December 31, 2004 was $1.9 million, all of which were
ineffective hedges.
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 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
F-39
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
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 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
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.
F-44
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
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.
In July, 2005, our Board of Directors increased the shares
authorized to 250,000,000. On August 10, 2005, we completed
our initial public offering of 31,050,000 shares of our
common stock for net proceeds of $608.9 million. On
September 12, 2005, we used $55.0 million of the net
proceeds to redeem $50.0 million face value amount of our
7
3
/
8
%
senior subordinated notes due 2014, including the payment of the
applicable redemption premium and accrued interest to the
redemption date. On August 4, 2005, our Board of Directors
approved a dividend of the remaining net proceeds of
$557.7 million ($10.26 per share) to our stockholders
existing immediately prior to the offering, consisting of
affiliates of First Reserve Corporation and certain members of
senior management, that was paid on August 11, 2005.
In connection with the completion of the offering, on
August 4, 2005 our Board of Directors approved a
0.537314-for-one reverse stock split. The share related
information in these financial statements gives retroactive
effect to this reverse stock split.
24.
Supplemental Guarantor Financial Information
In connection with the Acquisition, the Company issued
$420 million of senior subordinated notes. The following
subsidiaries, all of which are wholly owned, guaranteed the
notes on a full, unconditional and joint and several basis:
Dresser-Rand LLC, Dresser-Rand Power LLC, Dresser-Rand Company
and Dresser-Rand Global Services, LLC. The following
supplemental condensed consolidating and combining financial
information of the Issuer, Subsidiary Guarantors and Subsidiary
Non-Guarantors presents the balance sheets as of
December 31, 2004, (Successor) and 2003 (Predecessor) and
statements of operations and cash flows, for the period from
October 30, 2004, through December 31, 2004,
(Successor) and the period from January 1, 2004, through
October 29, 2004, and the years ended December 31,
2003, and 2002 (Predecessor). For the Successor periods
condensed consolidating financial statements, the column titled
"Issuer" represents Dresser-Rand Group, Inc. and such
presentation has been applied to the Predecessor condensed
combining financial statements. The condensed consolidating and
combining financial information presents investments in
consolidated subsidiaries using the equity method of accounting.
F-45
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENT OF INCOME (SUCCESSOR)
For the Period from October 30 through December 31, 2004
Subsidiary
Subsidiary
Consolidating
Issuer
Guarantors
Non-Guarantors
Adjustments
Total
(In thousands of dollars)
Net sales
$
—
$
123,431
$
88,181
$
(11,705
)
$
199,907
Cost of goods sold
56
98,234
65,819
(11,705
)
152,404
Gross Profit
(56
)
25,197
22,362
—
47,503
Selling and administrative expenses
19
13,170
8,310
—
21,499
Restructuring charges
—
—
—
—
—
Income from operations
(75
)
12,027
14,052
—
26,004
Equity earnings in affiliates (net of tax)
15,817
1,517
—
(17,334
)
—
Interest (expense) income, net
(8,649
)
(199
)
(806
)
—
(9,654
)
Intercompany interest and fees
1,019
(2,984
)
1,965
—
—
Other income (expense), net
—
32
(1,878
)
—
(1,846
)
Income (loss) before income taxes
8,112
10,393
13,333
(17,334
)
14,504
Provision for income taxes
883
—
6,392
—
7,275
Net (loss) income
$
7,229
$
10,393
$
6,941
$
(17,334
)
$
7,229
F-46
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED COMBINING STATEMENT OF INCOME (PREDECESSOR)
For the Period from January 1 through October 29, 2004
Subsidiary
Subsidiary
Combining
Issuer
Guarantors
Non-Guarantors
Adjustments
Total
(In thousands of dollars)
Net sales
$
—
$
429,542
$
285,953
$
—
$
715,495
Cost of goods sold
—
332,931
210,781
—
543,712
Gross Profit
—
96,611
75,172
—
171,783
Selling and administrative expenses
—
61,864
60,836
—
122,700
Income from operations
—
34,747
14,336
—
49,083
Equity earnings (losses) in affiliates (net of tax)
42,151
(8,691
)
—
(33,460
)
—
Interest (expense) income, net
—
1,419
1,737
—
3,156
Other income (expense), net
—
14,096
(12,214
)
—
1,882
Income (loss) before income taxes
42,151
41,571
3,859
(33,460
)
54,121
Provision for income taxes
—
3,721
8,249
—
11,970
Net (loss) income
$
42,151
$
37,850
$
(4,390
)
$
(33,460
)
$
42,151
F-47
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED COMBINING STATEMENT OF INCOME (PREDECESSOR)
For the Year ended December 31, 2003
Subsidiary
Subsidiary
Combining
Issuer
Guarantors
Non-Guarantors
Adjustments
Total
(In thousands of dollars)
Net sales
$
—
$
648,904
$
686,446
$
—
$
1,335,350
Cost of goods sold
—
565,595
574,559
—
1,140,154
Gross Profit
—
83,309
111,887
—
195,196
Selling and administrative expenses
—
92,783
63,346
—
156,129
Income from operations
—
(9,474
)
48,541
—
39,067
Equity earnings (losses) in affiliates (net of tax)
20,365
(28,959
)
—
8,594
—
Interest (expense) income, net
—
219
1,719
—
1,938
Other income (expense), net
—
20,969
(30,171
)
—
(9,202
)
Income (loss) before income taxes
20,365
(17,245
)
20,089
8,594
31,803
Provision for income taxes
—
2,197
9,241
—
11,438
Net (loss) income
$
20,365
$
(19,442
)
$
10,848
$
8,594
$
20,365
F-48
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED COMBINING STATEMENT OF INCOME (PREDECESSOR)
For the Year ended December 31, 2002
Subsidiary
Subsidiary
Combining
Issuer
Guarantors
Non-Guarantors
Adjustments
Total
(In thousands of dollars)
Net sales
$
—
$
592,215
$
439,138
$
—
$
1,031,353
Cost of goods sold
—
505,643
368,259
—
873,902
Gross Profit
—
86,572
70,879
—
157,451
Selling and administrative expenses
—
86,732
51,752
—
138,484
Restructuring charges
—
3,985
1,200
—
5,185
Income from operations
—
(4,145
)
17,927
—
13,782
Equity earnings (losses) in affiliates (net of tax)
16,096
(9,990
)
—
(6,106
)
—
Interest (expense) income, net
—
(1,413
)
637
—
(776
)
Other income (expense), net
—
17,390
(2,390
)
—
15,000
Income (loss) before income taxes
16,096
1,842
16,174
(6,106
)
28,006
Provision for income taxes
—
1,286
10,624
—
11,910
Net (loss) income
$
16,096
$
556
$
5,550
$
(6,106
)
$
16,096
F-49
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET (SUCCESSOR)
December 31, 2004
Subsidiary
Subsidiary
Consolidating
Issuer
Guarantors
Non-Guarantors
Adjustments
Total
(In thousands of dollars)
ASSETS
Cash and cash equivalents
$
—
$
63,341
$
48,159
$
—
$
111,500
Accounts and notes receivables net
32,863
99,831
132,785
—
265,479
Inventories, net (excluding advance payments)
—
112,984
62,889
—
175,873
Prepaid expenses and deferred income taxes
—
4,222
17,479
—
21,701
Total Current Assets
32,863
280,378
261,312
—
574,553
Investment in affiliates
919,711
43,720
—
(963,431
)
—
Property, plant and equipment, net
—
158,342
68,422
—
226,764
Intangible assets, net
—
532,843
370,074
—
902,917
Other Assets
23,560
19,676
3,604
—
46,840
Total Assets
$
976,134
$
1,034,959
$
703,412
$
(963,431
)
$
1,751,074
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accruals
$
7,015
$
105,437
$
210,461
$
—
$
322,913
Loans payable
2,800
—
3,949
—
6,749
Total current liabilities
9,815
105,437
214,410
—
329,662
Long-term debt
696,500
—
120,164
—
816,664
Intercompany accounts
(183,078
)
45,090
137,988
—
—
Other noncurrent liabilities
—
95,229
56,622
—
151,851
Total liabilities
523,237
245,756
529,184
—
1,298,177
Common Stock
542
—
—
—
542
Other stockholders' equity
452,355
789,203
174,228
(963,431
)
452,355
Total stockholders' equity
452,897
789,203
174,228
(963,431
)
452,897
Total liabilities and stockholders' equity
$
976,134
$
1,034,959
$
703,412
$
(963,431
)
$
1,751,074
F-50
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED COMBINING BALANCE SHEET (PREDECESSOR)
December 31, 2003
Subsidiary
Subsidiary
Combining
Issuer
Guarantors
Non-Guarantors
Adjustments
Total
(In thousands of dollars)
ASSETS
Cash and cash equivalents
$
—
$
(156
)
$
41,693
$
—
$
41,537
Marketable securities
—
1,037
—
—
1,037
Accounts and notes receivables net
—
95,834
146,187
—
242,021
Inventories, net (excluding advance payments)
—
93,811
39,614
—
133,425
Prepaids expenses and deferred income taxes
—
3,348
22,815
—
26,163
Accounts and notes receivable affiliates
—
203,415
225,415
(200,643
)
228,187
Total Current Assets
—
397,289
475,724
(200,643
)
672,370
Investment in affiliates
565,035
(39,104
)
—
(525,931
)
—
Property, plant and equipment, net
—
75,627
25,811
—
101,438
Intangible assets, net
—
267,724
(3,098
)
—
264,626
Other Assets
—
9,307
16,134
—
25,441
Total Assets
$
565,035
$
710,843
$
514,571
$
(726,574
)
$
1,063,875
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accruals
$
—
$
128,012
$
189,599
$
—
$
317,611
Loans payable
—
—
3,716
—
3,716
Accounts and notes payable affiliates
—
73,387
142,067
(200,643
)
14,811
Total current liabilities
—
201,399
335,382
(200,643
)
336,138
Long-term debt
—
—
213
—
213
Other noncurrent liabilities
—
133,554
28,935
—
162,489
Total liabilities
—
334,953
364,530
(200,643
)
498,840
Total stockholders' equity
565,035
375,890
150,041
(525,931
)
565,035
Total liabilities and stockholders' equity
$
565,035
$
710,843
$
514,571
$
(726,574
)
$
1,063,875
F-51
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(SUCCESSOR)
For the Period from October 30, 2004 through December 31,
2004
Subsidiary
Subsidiary
Guarantors
Non-Guarantors
Consolidating
Issuer
Entities
Entities
Adjustments
Total
(In thousands of dollars)
Cash flows from operating activities:
Net cash provided by (used in) operating activities
$
(4,422
)
$
1,639
$
13,202
$
7,529
$
17,948
Cash flows from investing activities:
Capital expenditures
—
(929
)
(862
)
—
(1,791
)
Acquisitions, net of cash
(1,125,148
)
—
—
—
(1,125,148
)
Net cash provided by (used in) investing activities
(1,125,148
)
(929
)
(862
)
—
(1,126,939
)
Cash flows From financing activities:
Net change in debt
699,300
—
114,720
—
814,020
Change in intercompany accounts
17,168
69,668
(79,307
)
(7,529
)
—
Cash paid for debt issuance costs
(24,007
)
(6,837
)
(2,654
)
—
(33,498
)
Issuance of common units
437,109
—
—
—
437,109
Change in due to (from) unconsolidated affiliates
—
(200
)
(332
)
—
(532
)
Net cash provided by (used in) financing activities
1,129,570
62,631
32,427
(7,529
)
1,217,099
Effect of exchange rate changes
—
—
3,392
—
3,392
Net increase in cash & cash equivalents
—
63,341
48,159
—
111,500
Cash and cash equivalents, beginning of period
—
—
—
—
—
Cash and cash equivalents, end of period
$
—
$
63,341
$
48,159
$
—
$
111,500
F-52
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED COMBINING STATEMENT OF CASH FLOWS (PREDECESSOR)
For the period from January 1 through October 29,
2004
Subsidiary
Subsidiary
Guarantors
Non-Guarantors
Combining
Issuer
Entities
Entities
Adjustments
Total
(In thousands of dollars)
Cash flows from operating activities:
Net cash provided by (used in) operating activities
$
—
$
155,340
$
(97,611
)
$
—
$
57,729
Cash flows from investing activities:
Capital expenditures
—
(4,607
)
(3,094
)
—
(7,701
)
Proceeds from sale of property, plant and equipment
—
1,764
(7
)
—
1,757
Proceeds from sale of marketable securities
—
1,037
—
—
1,037
Net cash provided by (used in) investing activities
—
(1,806
)
(3,101
)
—
(4,907
)
Cash flows from financing activities:
Net change in debt
—
—
(1,015
)
—
(1,015
)
Change in due to (from) unconsolidated affiliates
—
(161,320
)
115,402
—
(45,918
)
Dividends paid
—
10,610
(15,707
)
—
(5,097
)
Net cash provided by (used in) financing activities
—
(150,710
)
98,680
—
(52,030
)
Effect of exchange rate changes
—
—
1,930
—
1,930
Net increase (decrease) in cash & cash equivalents
—
2,824
(102
)
—
2,722
Cash and cash equivalents, beginning of period
—
(156
)
41,693
—
41,537
Cash and cash equivalents, end of period
$
$
2,668
$
41,591
$
—
$
44,259
F-53
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED COMBINING STATEMENT OF CASH FLOWS (PREDECESSOR)
For the year ended December 31, 2003
Subsidiary
Subsidiary
Guarantors
Non-Guarantors
Combining
Issuer
Entities
Entities
Adjustments
Total
(In thousands of dollars)
Cash flows from operating activities:
Net cash provided by (used in) operating activities
$
—
$
26,630
$
24,333
$
—
$
50,963
Cash flows from investing activities:
Capital expenditures
—
(3,216
)
(4,374
)
—
(7,590
)
Proceeds from sale of property, plant and equipment
—
149
411
—
560
Proceeds from sale of marketable securities
—
(227
)
168
—
(59
)
Net cash provided by (used in) investing activities
—
(3,294
)
(3,795
)
—
(7,089
)
Cash flows from financing activities:
Net change in debt
—
—
(58
)
—
(58
)
Change in due to (from) unconsolidated affiliates
—
(28,362
)
(35,067
)
—
(63,429
)
Net cash provided by (used in) financing activities
—
(28,362
)
(35,125
)
—
(63,487
)
Effect of exchange rate changes
—
—
1,531
—
1,531
Net increase (decrease) in cash & cash equivalents
—
(5,026
)
(13,056
)
—
(18,082
)
Cash and cash equivalents, beginning of period
—
4,870
54,749
—
59,619
Cash and cash equivalents, end of period
$
—
$
(156
)
$
41,693
$
—
$
41,537
F-54
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED COMBINING STATEMENT OF CASH FLOWS (PREDECESSOR)
For the Year ended December 31, 2002
Subsidiary
Subsidiary
Guarantors
Non-Guarantors
Combining
Issuer
Entities
Entities
Adjustments
Total
(In thousands of dollars)
Cash flows from operating activities:
Net cash provided by (used in) operating activities
$
—
$
11,967
$
30,062
$
—
$
42,029
Cash flows from investing activities:
Capital expenditures
—
(9,224
)
(4,446
)
—
(13,670
)
Proceeds from insurance recoveries
—
10,145
—
—
10,145
Proceeds from sale of property, plant and equipment
—
671
3,816
—
4,487
Proceeds from sale of marketable securities
—
363
2,488
—
2,851
Net cash provided by (used in) investing activities
—
1,955
1,858
—
3,813
Cash flows from financing activities:
Net change in debt
—
—
3,536
—
3,536
Change in due to (from) unconsolidated affiliates
—
(11,959
)
(2,161
)
—
(14,120
)
Dividends paid
—
—
(8,175
)
—
(8,175
)
Net cash provided by (used in) financing activities
—
(11,959
)
(6,800
)
—
(18,759
)
Effect of exchange rate changes
—
—
1,159
—
1,159
Net increase (decrease) in cash & cash equivalents
—
1,963
26,279
—
28,242
Cash and cash equivalents, beginning of period
—
2,907
28,470
—
31,377
Cash and cash equivalents, end of period
$
—
$
4,870
$
54,749
$
—
$
59,619
F-55
Table of Contents
DRESSER-RAND GROUP INC.
CONSOLIDATED STATEMENT OF OPERATIONS (SUCCESSOR)
AND COMBINED STATEMENT OF OPERATIONS (PREDECESSOR)
Successor
Predecessor
Nine Months
Nine Months
Ended
Ended
September 30,
September 30,
2005
2004
(unaudited)
(unaudited)
(In thousands of dollars, except
per share information)
Net sales of products to third parties
$
683,656
$
506,187
Net sales of services to third parties
162,581
148,354
Net sales to affiliates
—
1,639
Other operating revenue
—
1,314
Total
846,237
657,494
Cost of products sold
533,685
386,024
Cost of services sold
124,160
112,216
Cost of products sold to affiliates
—
968
Total cost of products and services sold
657,845
499,208
Gross profit
188,392
158,286
Selling and administrative expenses
118,331
110,493
Research and development expenses
4,745
4,695
Income from operations
65,316
43,098
Interest (expense) income, net
(44,619
)
2,306
Early redemption premium on debt
(3,688
)
—
Other expense, net
(1,558
)
(2,754
)
Income before income taxes
15,451
42,650
Provision for income taxes
10,560
4,918
Net income
$
4,891
$
37,732
Net income per share:
Basic and diluted
$
0.08
Shares used in computing net income per share:
Basic and diluted
60,178,986
The accompanying notes are an integral part of the consolidated
and combined financial statements.
F-56
Table of Contents
DRESSER-RAND GROUP INC.
CONSOLIDATED BALANCE SHEET (SUCCESSOR)
September 30, 2005
December 31, 2004
(unaudited)
(In thousands of dollars except per share
information)
ASSETS
Current assets
Cash and cash equivalents
$
109,504
$
111,500
Accounts receivable, less allowance for doubtful accounts of
    $8,757 in 2005 and $14,569 in 2004
225,117
265,479
Inventories, net
163,371
175,873
Prepaid expenses
18,842
14,256
Deferred income taxes
11,817
7,445
Total current assets
528,651
574,553
Investments in and advances to partially owned
    companies — at equity
—
12,448
Property, plant and equipment, less accumulated depreciation of
    $21,137 in 2005 and $3,949 in 2004
233,598
226,764
Goodwill
399,286
423,330
Intangible assets, net
472,279
479,587
Other assets
26,559
34,392
Total assets
$
1,660,373
$
1,751,074
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accruals
$
297,450
$
271,275
Customer advance payments
113,988
38,661
Income taxes payable
5,000
12,977
Loans payable
63
2,734
Current maturities of long-term debt
—
4,015
Total current liabilities
416,501
329,662
Deferred income taxes
29,743
27,287
Postemployment and other employee benefit liabilities
112,537
111,640
Long-term debt
599,148
816,664
Other noncurrent liabilities
15,915
12,924
Total liabilities
1,173,844
1,298,177
Commitments and contingencies
(Notes 7 through 10)
Shareholders' Equity
Common stock, $0.01 par value, 250,000,000 shares
    authorized in 2005 and 101,200,000 shares in 2004;
    85,444,897 shares issued and outstanding
854
542
Additional paid in capital
492,226
436,642
Retained earnings
12,120
7,229
Accumulated other comprehensive (loss) income
(18,671
)
8,484
Total shareholders' equity
486,529
452,897
Total liabilities and shareholders' equity
$
1,660,373
$
1,751,074
The accompanying notes are an integral part of the consolidated
and combined financial statements.
F-57
Table of Contents
DRESSER-RAND GROUP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (SUCCESSOR)
AND COMBINED STATEMENT OF CASH FLOWS (PREDECESSOR)
Successor
Predecessor
Nine Months
Nine Months
Ended
Ended
September 30,
September 30,
2005
2004
(unaudited)
(unaudited)
(In thousands of dollars)
Cash flows from operating activities
Net income
$
4,891
$
37,732
Adjustments to arrive at net cash provided by (used in)
    operating activities:
Depreciation and amortization
48,045
20,284
Amortization of deferred financing costs
8,627
—
Adjustment to allowance for doubtful accounts
(1,373
)
3,181
Provision for estimated losses on inventory
2,743
5,209
Deferred income taxes
(2,459
)
5,404
Employee equity compensation
3,237
—
Other
(3,323
)
1,098
(Increase) decrease in:
Accounts receivable
48,362
48,624
Inventories
13,003
(23,209
)
Other current and noncurrent assets
(9,965
)
(14,046
)
Increase (decrease) in:
Accounts payable and accruals
8,372
(19,545
)
Customer advance payments
75,838
18,604
Other current and noncurrent liabilities
26,386
(18,852
)
Net cash provided by operating activities
222,384
64,484
Cash flows from investing activities
Capital expenditures
(10,747
)
(4,532
)
Acquisitions
(57,218
)
—
Proceeds from sale of equity investment
10,000
—
Proceeds from sales of property, plant and equipment
244
1,723
Proceeds from sale of marketable securities
—
1,037
Net cash provided by (used in) investing activities
(57,721
)
(1,772
)
Cash flows from financing activities
Payments of short-term borrowings
(2,638
)
(991
)
Payments of long term debt
(211,162
)
(21
)
Proceeds from initial public offering — net
608,925
—
Cash dividend paid
(557,686
)
—
Proceeds from sale of stock to employees
1,420
—
Changes in receivable from IR
—
(49,760
)
Net cash used in financing activities
(161,141
)
(50,772
)
Effect of exchange rate changes on cash
(5,518
)
(203
)
Net increase (decrease) in cash and cash equivalents
(1,996
)
11,737
Cash and cash equivalents, beginning of the period
111,500
41,537
Cash and cash equivalents, end of period
$
109,504
$
53,274
The accompanying notes are an integral part of the consolidated
and combined financial statements.
F-58
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
1.
Basis of Presentation
The accompanying condensed consolidated financial statements
have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim
financial information. Accordingly, they do not include all of
the information and notes required by such principles applicable
to annual financial statements. These financial statements are
unaudited but, in the opinion of management, contain all
adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of our financial
position and results of operations. These financial statements
should be read in conjunction with our other filings with the
Securities and Exchange Commission. Operating results for the
periods presented are not necessarily indicative of the results
that may be expected for the year ending December 31, 2005.
On October 29, 2004, pursuant to a purchase agreement with
Dresser-Rand Holdings, LLC, we acquired (the
"Acquisition") from Ingersoll-Rand Company Limited,
LLC, ("IR") the Dresser-Rand Company and its direct
and indirect subsidiaries, Dresser-Rand Canada, Inc. and
Dresser-Rand GmbH (collectively the "Dresser-Rand
Entities"). We used the proceeds from $430 million
sale of common stock, borrowings of $420 million in senior
subordinated notes, and borrowings of $395 million under
the senior secured credit facility to fund the Acquisition.
The Acquisition of the Dresser-Rand Entities was accounted for
under the purchase method of accounting. As a result, the
financial results presented for the period prior to the
Acquisition represent the predecessor (the
"Predecessor") and the financial results presented for
the period subsequent to the Acquisition represents the
successor entity (the "Successor" or the
"Company"). 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. To clarify
and emphasize that the Successor has been presented on new basis
of accounting, we have separated Predecessor and Successor
operations with a vertical black line, where appropriate.
Certain amounts in the 2004 financial statements have been
reclassified to conform to their presentation in the
2005 statements.
2.
Recently Issued Accounting Standards
In November 2004, the Financial Accounting Standards Board
(FASB) issued SFAS No. 151,
Inventory Costs,
an Amendment of Accounting Research Bulletin No. 43,
and 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 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
. SFAS 123R focuses primarily on
accounting for transactions in which an entity obtains employee
services in exchange for equity. 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 $3,237,000 for the nine
months ended September 30, 2005.
In December 2004, the FASB issued SFAS No. 153,
Exchanges of Non-monetary Assets
, an Amendment of APB
Opinion No. 29,
Accounting for Non-monetary
Transactions
. SFAS No. 153 eliminates the
exception from fair value measurement for non-monetary 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 non-monetary exchange
has commercial substance if
F-59
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
the future cash flows of the entity are expected to change
significantly as a result of the exchange. This statement is
effective for exchanges occurring in fiscal years beginning
after June 15, 2005.
In March 2005, the FASB issued Interpretation No. 47, an
interpretation of SFAS No. 143,
Accounting for
Conditional Asset Retirement Obligations
. Interpretation
No. 47 requires that a legal obligation to perform an asset
retirement activity in which the timing and (or) method of
settlement are conditional on a future event that may not be
within our control be recognized as a liability at the fair
value of a conditional asset retirement obligation, if the fair
value of the liability can be reasonably estimated. SFAS
No. 143 acknowledges that in some cases, sufficient
information may not be available to reasonably estimate the fair
value of an asset retirement obligation. This Interpretation is
effective for our December 31, 2005 financial statements.
We are currently assessing the impact the Interpretation will
have on our financial position and results of operation.
In May 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections
.
SFAS No. 154 provides guidance on the accounting for
and reporting of accounting for changes and error corrections.
This statement is effective for fiscal years beginning after
December 31, 2005.
3.
Inventories
Inventories were as follows:
September 30,
December 31,
2005
2004
(unaudited)
(audited)
(In thousands)
Raw materials and supplies
$
80,970
$
60,728
Work-in-process and finished goods
289,669
209,247
370,639
269,975
Less:
Progress payments
(207,268
)
(94,102
)
Inventories
$
163,371
$
175,873
The progress payments represent payments from customers based on
milestone completion schedules. Any payments received in excess
of inventory investment are classified as "Customer Advance
Payments" in the current liabilities section of the balance
sheet.
4.
Sale of common stock
On August 10, 2005, we completed our initial public
offering of 31,050,000 shares of our common stock for net
proceeds of $608.9 million. On September 12, 2005, we
used $55.0 million of the net proceeds to redeem
$50.0 million face value amount of our
7
3
/
8
% senior
subordinated notes due 2014, and to pay the applicable
redemption premium of $3.7 million and accrued interest of
$1.3 million to the redemption date. Our Board of Directors
approved the payment of a dividend on August 11, 2005, of
the remaining net proceeds, excluding certain related costs, of
$557.7 million ($10.26 per share) to our stockholders
existing immediately prior to the offering, consisting of
affiliates of First Reserve Corporation and certain members of
senior management.
5.
Acquisitions
On September 8, 2005, we acquired from Tuthill Corporation
certain assets of its Tuthill Energy Systems Division
("TES"). TES is an international manufacturer of
single and multi-stage steam turbines and portable ventilators
under the Coppus, Murray and Nadrowski brands which complement
our steam turbine
F-60
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
business. The current estimated cost of TES is approximately
$57.0 million, net of $4.0 million cash acquired,
subject to future adjustments for agreement on the final working
capital at the closing date and other related matters. We have
preliminarily allocated the cost based on current estimates of
the fair value of assets acquired and liabilities assumed as
follows (in thousands):
Accounts receivable
$
13,458
Inventory — net
7,690
Prepaid expenses and other current assets
208
Total current assets
21,356
Property, plant and equipment, net
20,319
Intangible assets and goodwill
28,414
Total assets acquired
70,089
Accounts payable and accruals
10,570
Other liabilities
2,501
Total liabilities assumed
13,071
Cash paid — net
$
57,018
The above amounts are estimates as final appraisals and other
required information to determine final cost and assign fair
values have not been received. Also, certain restructuring of
operations will be necessary to obtain appropriate synergies in
the combined steam turbine business. Accordingly, the above
amounts may be revised when all required information is obtained
and the restructuring plan is finalized which is expected to be
accomplished during the first quarter of 2006. Pro forma
financial information, assuming that TES had been acquired at
the beginning of each period for which an income statement is
presented, has not been presented because the effect on our
results for these periods was not considered material. TES
results have been included in our financial results since
September 8, 2005, and were not material to the results of
operations for the three months and nine months ended
September 30, 2005.
During the third quarter of 2005, we purchased the other 50% of
our Multiphase Power and Processing Technologies (MppT) joint
venture for a payment of $200,000 and an agreement to pay
$300,000 on April 1, 2006, and $425,000 on April 1,
2007. The net present value of the total consideration is
$876,000, bringing our total investment in MppT to
$2.9 million at the date of the purchase. MppT owns patents
and technology for inline, compact, gas-liquid scrubbers.
6.
Intangible assets and goodwill
The cost and related accumulated amortization of intangible
assets were:
September 30, 2005
December 31, 2004
Accumulated
Accumulated
Cost
Amortization
Cost
Amortization
(unaudited)
(In thousands)
Trade names
$
89,692
$
1,903
$
82,700
$
344
Customer relationships
232,648
5,216
227,746
936
Software and technology
158,765
7,281
149,653
1,304
Other amortizable intangible assets
33,640
28,066
31,828
9,756
Total
$
514,745
$
42,466
$
491,927
$
12,340
F-61
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Changes in cost in the above table from December 31, 2004
to September 30, 2005, arose from translation adjustments
and the amounts related to the TES and MppT acquisitions. Such
TES amounts are subject to change when final appraisals are
received.
Amortization of intangible assets for the nine months ended
September 30, 2005 was $30.1 million.
The changes in goodwill for the nine months ended
September 30, 2005, were:
Balance at December 31, 2004
$
423,330
TES acquisition
5,120
Translation adjustments
(29,164
)
Balance at September 30, 2005
$
399,286
The goodwill from the TES acquisition is subject to change when
the final appraisals are received and the working capital
adjustment is finalized.
7.
Income taxes
Our estimated income tax provision for the nine months ended
September 30, 2005, results in an effective rate that
differs from U.S. Federal statutory rate of 35% principally
because, in certain tax jurisdictions, we have incurred net
operating losses from inception and are currently forecasting
net operating losses for 2005. As a result, we have provided a
valuation allowance for the deferred tax assets in those
jurisdictions on the basis that it is more likely than not, as
defined by generally accepted accounting principles, that we
will not realize the net operating loss assets. We will adjust
that valuation allowance in the future when, based principally
on attained results, it becomes more likely than not that the
benefits of the net operating loss carried forward will be
realized. Our effective income tax rate for the three months and
nine months ended September 30, 2004, differed from the
U.S. Federal statutory rate of 35%, primarily because the
Predecessor period reflected the non-taxable partnership
structure in existence for most of the domestic operations.
As mentioned in Note 1, the Successor began operations as a
new entity on October 29, 2004. We operate in numerous
countries around the world and file tax returns as appropriate.
The Acquisition was an asset purchase in the United States and a
stock purchase outside the United States. The purchase price was
allocated among the entities acquired based on estimated fair
values. Deferred taxes were recorded to reflect the difference
between the purchase price allocated to foreign entities and
their underlying tax basis. Management believes that it has
provided adequate estimated liabilities for taxes based on the
allocation of the purchase price and its understanding of the
tax laws and regulations in those countries. Since few tax
returns have been filed since beginning operations and none have
been audited by the appropriate taxing authorities, we could be
exposed to additional income and other taxes.
In October 2004, the American Jobs Creation Act of 2004 (the
"Act") was enacted. The Act raises a number of issues
with respect to accounting for income taxes. For companies that
pay U.S. income taxes on manufacturing activities in the
U.S., the Act provides a deduction from taxable income equal to
a stipulated percentage of qualified income from domestic
production activities. On December 21, 2004, the FASB
issued guidance regarding the accounting implications of the Act
related to the deduction for qualified domestic production
activities which should be accounted for as a special deduction
under SFAS No. 109,
Accounting for Income
Taxes
. The guidance applies to financial statements for
periods ending after the date the Act was enacted. In years in
which there is U.S. taxable income starting in 2005, this
essentially results in a one percentage point reduction in the
statutory rate. The Act also creates a temporary incentive for
U.S. multinationals to repatriate accumulated income earned
abroad by providing an 85% dividends received deduction for
certain dividends from controlled foreign corporations. The
deduction is subject to a number of limitations. As part of the
sale of the Predecessor, all previously undistributed foreign
earnings were deemed
F-62
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
distributed to IR. Accordingly, while we are still evaluating
the potential impact of these dividend repatriation provisions,
any amounts repatriated under the Act are not likely to be
significant.
8.
Pension plans
The components of net periodic pension cost for defined benefit
pension plans are as follows:
Successor
Predecessor
Nine Months Ended
Nine Months Ended
September 30, 2005
September 30, 2004
(In thousands)
Service cost
$
3,862
$
3,757
Interest cost
12,891
15,250
Expected return on plan assets
(14,575
)
(19,126
)
Net amortization of unrecognized:
Prior service cost
—
408
Plan net losses
—
2,991
Net periodic pension cost
$
2,178
$
3,280
9.
Postretirement benefits other than pensions
The components of net periodic postretirement benefits cost for
such plans are as follows:
Successor
Predecessor
Nine Months Ended
Nine Months Ended
September 30, 2005
September 30, 2004
(In thousands)
Service cost
$
1,498
$
1,444
Interest cost
2,052
8,411
Net amortization of unrecognized:
Prior service cost
—
(775
)
Plan net losses
—
2,692
Net periodic postretirement benefits cost
$
3,550
$
11,772
10.
Commitments and contingencies
As a result of the enhanced compliance processes implemented by
us shortly prior to and following the Acquisition, we have
recently discovered that our Brazilian subsidiary engaged in a
number of transactions that resulted in steam turbine parts and
services being provided to Moa Nickel S.A., a Cuban mining
company jointly owned by the Government of Cuba and Sherritt
International Corp., a Canadian company. Our revenues from these
transactions were approximately $4 million in the aggregate
since December, 1999, when we acquired a controlling interest in
the Brazilian subsidiary. This amount represents approximately
0.08% of our consolidated revenues from 2000 through
September 30, 2005. Of the $4 million, approximately
$2.5 million in revenues were in connection with the sale
of a spare part ordered in October, 2003, which was delivered
and installed in Cuba, with the assistance of
non-U.S. employees
of our Brazilian subsidiary, in May, 2005. When these
transactions came to our attention, we instructed our Brazilian
subsidiary in July, 2005, to cease dealings with Cuba. These
transactions were apparently in violation of the
U.S. Treasury Department's Office of Foreign Assets
Control's regulations with respect to Cuba. We have
informed the U.S. Treasury Department of these matters and
are currently engaged in preliminary discussions with the
Department. Our inquiry into these transactions is continuing
and the Department's review of this matter is in a very
preliminary
F-63
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
stage. Cuba is subject to economic sanctions administered by the
U.S. Treasury Department's Office of Foreign Assets
Control, and is identified by the U.S. State Department as
a terrorist-sponsoring state. To the extent we violated any
regulations with respect to Cuba or the Department determines
that other violations have occurred, we will be subject to fines
or other sanctions, including possible criminal penalties, with
related business consequences. We do not expect these matters to
have a material adverse effect on our financial results, cash
flow or liquidity. In addition, the Department's
investigation into our activities with respect to Cuba may
result in additional scrutiny of our activities with respect to
other countries that are the subject of sanctions.
We are involved in various litigation, claims and administrative
proceedings, including environmental matters, arising in the
normal course of business. 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 any future adjustments to recorded amounts, with
respect to these currently known contingencies, 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.
In connection with the Acquisition, 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 remaining issues to be resolved are not
expected to be material. In 2002, the Predecessor received
$10.0 million of grant funds from the New York Empire State
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 2002. The grant vests ratably over a five-year
period commencing in 2001 and concluding in 2005, based on
certain criteria. Prior to the end of 2003, the Predecessor and
ESDC restructured the grant to reflect the then existing
business environment that reduced 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 restructured ESDC grant
provides, among other conditions, that we meet certain
employment levels at December 31 of each year; otherwise,
we could be obligated to reimburse the ESDC a portion of the
grant. Management expects that it will meet the required
employment level on December 31, 2005.
11.
Warranty accruals
We maintain a product warranty liability that represents
estimated future claims for equipment, parts and services
covered during a warranty period. A warranty liability is
provided at the time of revenue recognition
F-64
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
based on historical experience and adjusted as required. The
following table represents the changes in the product warranty
liability:
Nine Months Ended
Successor
Predecessor
(In thousands)
September 30,
September 30,
2005
2004
Balance, beginning of period
$
21,078
$
23,699
Provisions for warranties issued during the period
9,350
6,599
Adjustments to warranties issued in prior periods
1,436
(426
)
Payments during the period
(9,379
)
(10,850
)
Translation adjustments
(1,266
)
960
Balance, end of period
$
21,219
$
19,982
12.
Other comprehensive (loss) income
The components of other comprehensive (loss) income are as
follows:
Nine Months
Nine Months
Ended
Ended
September 30, 2005
September 30, 2004
(In thousands)
Net (loss) income
$
4,891
$
37,732
Other comprehensive (loss) income:
Change in value of cash flow hedge
—
171
Foreign currency translation adjustment
(27,155
)
4,394
Comprehensive (loss) income
$
(22,264
)
$
42,297
The components of accumulated other comprehensive (loss) income
are as follows:
September 30,
December 31,
2005
2004
(unaudited)
(In thousands)
Minimum pension liability
$
(922
)
$
(922
)
Foreign currency translation adjustment
(17,749
)
9,406
Accumulated other comprehensive (loss) income
$
(18,671
)
$
8,484
13.
Segment information:
We have two reportable segments based on the engineering and
production processes, and the products and services provided by
each segment 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.
Unallocable amounts represent expenses and assets that cannot be
assigned directly to either reportable segment because of their
nature. Unallocable expenses included Ingersoll-Rand corporate
allocations
F-65
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
(Predecessor), corporate expenses (Successor), research and
development expenses, and restructuring charges. Assets that are
directly assigned to the two reportable segments include trade
accounts receivable, net inventories, and goodwill. Unallocable
assets include cash, prepaid expenses, deferred taxes, property,
plant and equipment, and intangibles.
Successor
Predecessor
Nine Months
Nine Months
Ended
Ended
September 30, 2005
September 30, 2004
(In thousands)
Sales
New units
$
399,044
$
256,590
Aftermarket parts and services
447,193
400,904
Total
$
846,237
$
657,494
Operating Income
New units
$
4,713
$
2,007
Aftermarket parts and services
93,197
72,858
Unallocable
(32,594
)
(31,767
)
Total
$
65,316
$
43,098
Depreciation and Amortization
New units
$
22,499
$
8,438
Aftermarket parts and services
25,546
11,846
Total
$
48,045
$
20,284
Total Assets
New units
$
249,075
Aftermarket parts and services
529,025
Unallocable
882,273
Total
$
1,660,373
14.
Stockholders' equity:
Changes in stockholders' equity for nine months ended
September 30, 2005, were:
Accumulated
Additional
Other
Common
Paid-In
Retained
Comprehensive
(In thousands)
Stock
Capital
Earnings
(Loss)
Total
Balances at December 31, 2004
$
542
$
436,642
$
7,229
$
8,484
$
452,897
Net income
—
—
4,891
—
4,891
Stock-based employee compensation
2
4,655
—
—
4,657
Currency translation
—
—
—
(27,155
)
(27,155
)
IPO net proceeds
310
608,615
—
—
608,925
Cash dividends
—
(557,686
)
—
—
(557,686
)
Balances at September 30, 2005
$
854
$
492,226
$
12,120
$
(18,671
)
$
486,529
F-66
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
15.
Changes in existing financing arrangements:
On August 26, 2005, we increased the availability under the
revolving credit portion of our senior credit facility from
$300 million to $350 million.
16.
Supplemental guarantor financial information:
In connection with the Acquisition, the Company issued
$420 million of senior subordinated notes. The following
subsidiaries, all of which are wholly owned, guaranteed the
notes on a full, unconditional and joint and several basis:
Dresser-Rand LLC, D-R Steam LLC, Dresser-Rand Power LLC,
Dresser-Rand Company and Dresser-Rand Global Services, LLC. The
following supplemental condensed consolidating and combining
financial information of the Issuer, Subsidiary Guarantors and
Subsidiary Non-Guarantors presents the balance sheets as of
September 30, 2005, and December 31, 2004 (Successor)
and statements of operations and cash flows for the nine months
ended September 30, 2005 (Successor) and 2004
(Predecessor). For the Successor periods condensed consolidating
financial statements, the column titled "Issuer"
represents Dresser-Rand Group Inc. and such presentation has
been applied to the Predecessor condensed combining financial
statements. The condensed consolidating and combining financial
information presents investments in consolidated subsidiaries
using the equity method of accounting.
F-67
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET (SUCCESSOR)
September 30, 2005
Subsidiary
Subsidiary
Consolidating
Issuer
Guarantors
Non-Guarantors
Adjustments
Total
(In thousands of dollars)
ASSETS
Cash and cash equivalents
$
—
$
42,577
$
66,927
$
—
$
109,504
Accounts and notes receivables net
2,405
100,437
122,275
—
225,117
Inventories, net (excluding advance payments)
—
114,794
48,577
—
163,371
Prepaid expenses and deferred income taxes
14
4,421
26,224
—
30,659
Total Current Assets
2,419
262,229
264,003
528,651
Investment in affiliates
1,010,710
48,456
—
(1,059,166
)
—
Property, plant and equipment, net
—
170,915
62,683
—
233,598
Intangible assets, net
—
530,872
340,693
—
871,565
Other Assets
17,599
5,835
3,125
—
26,559
Total Assets
$
1,030,728
$
1,018,307
$
670,504
$
(1,059,166
)
$
1,660,373
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accruals
$
14,807
$
161,159
$
240,472
$
—
$
416,438
Loans payable
—
—
63
—
63
Total current liabilities
14,807
161,159
240,535
—
416,501
Long-term debt
532,158
1
66,989
—
599,148
Intercompany accounts
(2,766
)
(128,568
)
131,334
—
—
Other noncurrent liabilities
—
107,378
50,817
—
158,195
Total liabilities
544,199
139,970
489,675
—
1,173,844
Common Stock
854
—
—
—
854
Other stockholders' equity
485,675
878,337
180,829
(1,059,166
)
485,675
Total stockholders' equity
486,529
878,337
180,829
(1,059,166
)
486,529
Total liabilities and stockholders' equity
$
1,030,728
$
1,018,307
$
670,504
$
(1,059,166
)
$
1,660,373
F-68
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET (SUCCESSOR)
December 31, 2004
Subsidiary
Subsidiary
Consolidating
Issuer
Guarantors
Non-Guarantors
Adjustments
Total
(In thousands of dollars)
ASSETS
Cash and cash equivalents
$
—
$
63,341
$
48,159
$
—
$
111,500
Accounts and notes receivables net
32,863
99,831
132,785
—
265,479
Inventories, net (excluding advance payments)
—
112,984
62,889
—
175,873
Prepaid expenses and deferred income taxes
—
4,222
17,479
—
21,701
Total Current Assets
32,863
280,378
261,312
—
574,553
Investment in affiliates
919,711
43,720
—
(963,431
)
—
Property, plant and equipment, net
—
158,342
68,422
—
226,764
Intangible assets, net
—
532,843
370,074
—
902,917
Other Assets
23,560
19,676
3,604
—
46,840
Total Assets
$
976,134
$
1,034,959
$
703,412
$
(963,431
)
$
1,751,074
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accruals
$
7,015
$
105,437
$
210,461
$
—
$
322,913
Loans payable
2,800
—
3,949
—
6,749
Total current liabilities
9,815
105,437
214,410
—
329,662
Long-term debt
696,500
—
120,164
—
816,664
Intercompany accounts
(183,078
)
45,090
137,988
—
—
Other noncurrent liabilities
—
95,229
56,622
—
151,851
Total liabilities
523,237
245,756
529,184
—
1,298,177
Common Stock
542
—
—
—
542
Other stockholders' equity
452,355
789,203
174,228
(963,431
)
452,355
Total stockholders' equity
452,897
789,203
174,228
(963,431
)
452,897
Total liabilities and stockholders' equity
$
976,134
$
1,034,959
$
703,412
$
(963,431
)
$
1,751,074
F-69
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENT OF INCOME (SUCCESSOR)
For the nine months ended September 30, 2005
Subsidiary
Subsidiary
Consolidating
Issuer
Guarantors
Non-Guarantors
Adjustments
Total
(In thousands of dollars)
Net sales
$
—
$
561,105
$
359,288
$
(74,156
)
$
846,237
Cost of goods sold
2,285
456,965
277,496
(74,156
)
662,590
Gross Profit
(2,285
)
104,140
81,792
—
183,647
Selling and administrative expenses
1,035
74,887
42,409
—
118,331
Income from operations
(3,320
)
29,253
39,383
—
65,316
Equity earnings in affiliates (net of tax)
47,068
5,645
—
(52,713
)
—
Interest (expense) income, net
(40,884
)
376
(4,111
)
—
(44,619
)
Intercompany interest and fees
4,365
(7,364
)
2,999
—
—
Other income (expense), net
(2,338
)
786
(3,694
)
—
(5,246
)
Income (loss) before income taxes
4,891
28,696
34,577
(52,713
)
15,451
Provision for income taxes
—
—
10,560
—
10,560
Net (loss) income
$
4,891
$
28,696
$
24,017
$
(52,713
)
$
4,891
F-70
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED COMBINING STATEMENT OF INCOME (PREDECESSOR)
For the nine months ended September 30, 2004
Subsidiary
Subsidiary
Combining
Issuer
Guarantors
Non-Guarantors
Adjustments
Total
(In thousands of dollars)
Net sales
$
—
$
416,204
$
241,290
$
—
$
657,494
Cost of goods sold
—
330,352
173,551
—
503,903
Gross Profit
—
85,852
67,739
—
153,591
Selling and administrative expenses
—
53,620
56,873
—
110,493
Income from operations
—
32,232
10,866
—
43,098
Equity earnings in affiliates (net of tax)
37,732
(5,124
)
—
(32,608
)
—
Interest (expense) income, net
1,107
1,199
2,306
Other income (expense), net
—
896
(3,650
)
—
(2,754
)
Income (loss) before income taxes
37,732
29,111
8,415
(32,608
)
42,650
Provision for income taxes
—
1,096
3,822
—
4,918
Net (loss) income
$
37,732
$
28,015
$
4,593
$
(32,608
)
$
37,732
F-71
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(SUCCESSOR)
For the nine months ended September 30, 2005
Subsidiary
Subsidiary
Guarantors
Non-Guarantors
Consolidating
Issuer
Entities
Entities
Adjustments
Total
(In thousands of dollars)
Cash flows from operating activities:
Net cash provided by (used in) operating activities
$
(4,771
)
$
142,991
$
86,809
$
(2,645
)
$
222,384
Cash flows from investing activities:
Capital expenditures
—
(7,938
)
(2,809
)
—
(10,747
)
Proceeds from sale of property, plant and equipment
—
66
178
—
244
Proceeds from sale of equity investment
—
10,000
—
—
10,000
Acquisitions, net of cash
(57,018
)
(200
)
—
—
(57,218
)
Net cash provided by (used in) investing activities
(57,018
)
1,928
(2,631
)
—
(57,721
)
Cash flows from financing activities:
Net change in debt
(167,141
)
—
(46,659
)
—
(213,800
)
Change in intercompany accounts
176,271
(165,683
)
(13,233
)
2,645
—
Issuance of common units
1,420
—
—
—
1,420
Proceeds from initial public offering
608,925
—
—
—
608,925
Dividends paid
(557,686
)
—
—
—
(557,686
)
Net cash provided by (used in) financing activities
61,789
(165,683
)
(59,892
)
2,645
(161,141
)
Effect of exchange rate changes
—
—
(5,518
)
—
(5,518
)
Net increase (decrease) in cash & cash equivalents
—
(20,764
)
18,768
—
(1,996
)
Cash and cash equivalents, beginning of period
—
63,341
48,159
—
111,500
Cash and cash equivalents, end of period
$
—
$
42,577
$
66,927
$
—
$
109,504
F-72
Table of Contents
DRESSER-RAND GROUP INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
CONDENSED COMBINING STATEMENT OF CASH FLOWS (PREDECESSOR)
For the nine months ended September 30, 2004
Subsidiary
Subsidiary
Guarantors
Non-Guarantors
Combining
Issuer
Entities
Entities
Adjustments
Total
(In thousands of dollars)
Cash flows from operating activities:
Net cash provided by (used in) operating activities
$
—
$
68,924
$
(4,440
)
$
—
$
64,484
Cash flows from investing activities:
Capital expenditures
—
(2,053
)
(2,479
)
—
(4,532
)
Proceeds from sale of property, plant and equipment
—
1,732
(9
)
—
1,723
Proceeds from sale of marketable securities
—
1,037
—
—
1,037
Net cash provided by (used in) investing activities
—
716
(2,488
)
—
(1,772
)
Cash flows from financing activities:
Net change in debt
—
—
(1,012
)
—
(1,012
)
Change in due to (from) unconsolidated affiliates
—
(66,516
)
16,756
—
(49,760
)
Net cash provided by (used in) financing activities
—
(66,516
)
15,744
—
(50,772
)
Effect of exchange rate changes
—
—
(203
)
—
(203
)
Net increase (decrease) in cash & cash equivalents
—
3,124
8,613
—
11,737
Cash and cash equivalents, beginning of period
—
(156
)
41,693
—
41,537
Cash and cash equivalents, end of period
$
—
$
2,968
$
50,306
$
—
$
53,274
F-73
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
$
42,800
Printing and Engraving Expenses
*
Blue Sky Fees and Expenses
*
Legal Fees
*
Accounting Fees
*
Registrar and Transfer Agent Fees
*
NASD Filing Fee
*
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
amended and restated certificate of incorporation and amended
and restated bylaws of Dresser-Rand Group, Inc. provide for such
limitations on liability.
In addition, we currently maintain insurance on behalf of our
directors and executive officers insuring them against certain
liabilities asserted against them in their capacities as
directors or officers or arising out of such status. Such
insurance would be available to our directors and officers in
accordance with its terms.
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 the certificates
II-1
Table of Contents
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 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.
In August 2005, the issuer declared a 0.537314-for-one reverse
stock split.
Item 16.
Exhibits and Financial Statement Schedules.
(a)
Exhibits
1
.1†
Form of Underwriting Agreement
3
.1*
Amended and Restated Certificate of Incorporation of
    Dresser-Rand Group Inc.
3
.2*
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***
First Supplemental Indenture, dated as of December 22, 2005
    among Dresser-Rand Group Inc., the guarantors party thereto and
    Citibank, N.A., as trustee
4
.4*
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 representatives of the 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 and Consent to the Credit Agreement, dated
    as of January 4, 2005, among D-R Interholding, LLC,
    Dresser-Rand Group Inc., D-R Holdings (UK) Limited, D-R
    Holdings (France) S.A.S. and the lenders party thereto
10
.4*
Form of Amendment No. 2 and Consent to the Credit Agreement
    and Amendment No. 1 to the Domestic Guarantee and
    Collateral Agreement among D-R Interholding, LLC, Dresser Rand
    Group Inc., D-R Holdings (UK) Limited, D-R Holdings
    (France) S.A.S. and the lenders party thereto
II-2
Table of Contents
10
.5**
Commitment Increase Supplement dated as of August 26, 2005,
    to the Credit Agreement dated as of October 29, 2004, among
    Dresser-Rand Group Inc., the Foreign Borrowers party thereto
    from time to time, 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 Natexis Banques
    Populaires and Bear Stearns Corporate Lending Inc., as
    co-documentation agents
10
.6*
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
.7***
Supplement No. 1 dated as of December 22, 2005, to the Domestic
    Guarantee and Collateral Agreement dated and effective as of
    October 29, 2004, among D-R Interholding, LLC, Dresser-Rand
    Group Inc., the domestic subsidiary loan parties named therein
    and Citicorp North America, Inc. as collateral agent
10
.8*
Transition Services Agreement, dated as of October 29, 2004
    by and between Ingersoll-Rand Company Limited and Dresser-Rand
    Group Inc.
10
.9*
Supply Agreement, dated October 31, 2004, by and between
    Dresser-Rand Company and Ingersoll-Rand Company
10
.10*
License Agreement, dated as of October 26, 2004, by and
    between Dresser, Inc. and Dresser-Rand Group Inc.
10
.11*
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
.12*
Amended and Restated Limited Liability Company Agreement of
    Dresser-Rand Holdings, LLC, effective as of October 29, 2004
10
.13*
Amendment to the Amended and Restated Limited Liability Company
    Agreement of Dresser-Rand Holdings, LLC, effective as of
    June 24, 2005
10
.14*
Employment Agreement, dated October 27, 2004, by and among
    Vincent R. Volpe, Dresser-Rand Holdings, LLC and Dresser-Rand
    Group Inc.
10
.15*
Employment Agreement, dated July 25, 1990, by and between
    Jean-Francois Chevrier and Dresser-Rand S.A.
10
.16*
Amended and Restated Stockholder Agreement, effective as of
    July 15, 2005, by and among Dresser-Rand Group Inc., D-R
    Interholding, LLC, Dresser-Rand Holdings, LLC and certain
    management employees, together with any other stockholder who
    may be made party to this agreement
10
.17*
Dresser-Rand Group Inc. Stock Incentive Plan
10
.18*
Dresser-Rand Group Inc. 2005 Stock Incentive Plan
10
.19*
Dresser-Rand Group Inc. 2005 Directors Stock Incentive Plan
10
.20*
Form of Subscription Agreement
10
.21*
Form of Management Stock Subscription Agreement
10
.22*
Annual 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 page of this
    Registration Statement)
*
Incorporated by reference to the Registration Statement on
Form S-1
of
    Dresser-Rand Group Inc. (File
    No.
333-124963)
**
Incorporated by reference to the Quarterly Report on
Form 10-Q
of
    Dresser-Rand Group Inc. filed with the SEC on November 14,
    2005
***
Incorporated by reference to the Registration Statement on
Form S-4
of
    Dresser-Rand Group Inc. filed with the SEC on January 23,
    2006
†
To be filed by amendment
II-3
Table of Contents
(b) Financial Statement
Schedules
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
and 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 registrant 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.
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
January 26, 2006.
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 Lonnie A.
Arnett 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
January 26, 2006
/s/
Leonard M. Anthony
Leonard M. Anthony
Executive Vice President
and Chief Financial Officer
January 26, 2006
/s/
Lonnie A. Arnett
Lonnie A. Arnett
Vice President, Controller and
Chief Accounting Officer
January 26, 2006
/s/
William E. Macaulay
William E. Macaulay
Chairman of the Board of
Directors
January 26, 2006
/s/
Thomas J. Sikorski
Thomas J. Sikorski
Director
January 26, 2006
II-6
Table of Contents
Signature
Title
Date
/s/
Mark A. McComiskey
Mark A. McComiskey
Director
January 26, 2006
/s/
Kenneth W. Moore
Kenneth W. Moore
Director
January 26, 2006
/s/
Michael L.
    Underwood
Michael L. Underwood
Director
January 26, 2006
/s/
Philip R. Roth
Philip R. Roth
Director
January 26, 2006
Louis A. Raspino
Director
II-7
Table of Contents
EXHIBIT INDEX
Exhibit No.
Description of Exhibit
1
.1†
Form of Underwriting Agreement
3
.1*
Amended and Restated Certificate of Incorporation of
    Dresser-Rand Group Inc.
3
.2*
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***
First Supplemental Indenture, dated as of December 22, 2005
    among Dresser-Rand Group Inc., the guarantors party thereto and
    Citibank, N.A., as trustee
4
.4*
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 representatives of the 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 and Consent to the Credit Agreement, dated
    as of January 4, 2005, among D-R Interholding, LLC,
    Dresser-Rand Group Inc., D-R Holdings (UK) Limited, D-R
    Holdings (France) S.A.S. and the lenders party thereto
10
.4*
Form of Amendment No. 2 and Consent to the Credit Agreement
    and Amendment No. 1 to the Domestic Guarantee and
    Collateral Agreement among D-R Interholding, LLC, Dresser Rand
    Group Inc., D-R Holdings (UK) Limited, D-R Holdings
    (France) S.A.S. and the lenders party thereto
10
.5**
Commitment Increase Supplement dated as of August 26, 2005,
    to the Credit Agreement dated as of October 29, 2004, among
    Dresser-Rand Group Inc., the Foreign Borrowers party thereto
    from time to time, 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 Natexis Banques
    Populaires and Bear Stearns Corporate Lending Inc., as
    co-documentation agents
10
.6*
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
.7***
Supplement No. 1 dated as of December 22, 2005, to the Domestic
    Guarantee and Collateral Agreement dated and effective as of
    October 29, 2004, among D-R Interholding, LLC, Dresser-Rand
    Group Inc., the domestic subsidiary loan parties named therein
    and Citicorp North America, Inc. as collateral agent
10
.8*
Transition Services Agreement, dated as of October 29, 2004
    by and between Ingersoll-Rand Company Limited and Dresser-Rand
    Group Inc.
10
.9*
Supply Agreement, dated October 31, 2004, by and between
    Dresser-Rand Company and Ingersoll-Rand Company
10
.10*
License Agreement, dated as of October 26, 2004, by and
    between Dresser, Inc. and Dresser-Rand Group Inc.
Table of Contents
Exhibit No.
Description of Exhibit
10
.11*
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
.12*
Amended and Restated Limited Liability Company Agreement of
    Dresser-Rand Holdings, LLC, effective as of October 29, 2004
10
.13*
Amendment to the Amended and Restated Limited Liability Company
    Agreement of Dresser-Rand Holdings, LLC, effective as of
    June 24, 2005
10
.14*
Employment Agreement, dated October 27, 2004, by and among
    Vincent R. Volpe, Dresser-Rand Holdings, LLC and Dresser-Rand
    Group Inc.
10
.15*
Employment Agreement, dated July 25, 1990, by and between
    Jean-Francois Chevrier and Dresser-Rand S.A.
10
.16*
Amended and Restated Stockholder Agreement, effective as of
    July 15, 2005, by and among Dresser-Rand Group Inc., D-R
    Interholding, LLC, Dresser-Rand Holdings, LLC and certain
    management employees, together with any other stockholder who
    may be made party to this agreement
10
.17*
Dresser-Rand Group Inc. Stock Incentive Plan
10
.18*
Dresser-Rand Group Inc. 2005 Stock Incentive Plan
10
.19*
Dresser-Rand Group Inc. 2005 Directors Stock Incentive Plan
10
.20*
Form of Subscription Agreement
10
.21*
Form of Management Stock Subscription Agreement
10
.22*
Annual 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 page of this
    Registration Statement)
*
Incorporated by reference to the Registration Statement on
Form S-1
of
    Dresser-Rand Group Inc. (File
    No.
333-124963)
**
Incorporated by reference to the Quarterly Report on
Form 10-Q
of
    Dresser-Rand Group Inc. filed with the SEC on November 14,
    2005
***
Incorporated by reference to the Registration Statement on
Form S-4
of
    Dresser-Rand Group Inc. filed with the SEC on January 23,
    2006
†
To be filed by amendment