10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

Form 10-Q

☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September30, 2014

or

☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from _____ to _____

Commission File Number: 001-32586

________________

DRESSER-RAND GROUP INC.

(Exact name of registrant as specified in its charter)

Delaware	20-1780492
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

West8 Tower, Suite 1000 10205 Westheimer Road Houston, TX, U.S.A. 112 Avenue Kleber Cedex 16, Paris, France	77042 75784
(Addresses of principal executive offices)	(Zip Codes)

(713) 354-6100 (Houston)

33 156 26 7171 (Paris)

(Registrant’s telephone numbers, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one): 

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐(Do not check if smaller reporting company)	Smaller reporting company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

The number of shares of common stock, $.01 par value, outstanding as of October 30, 2014, was 76,651,104.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	Page
Item 1. Financial Statements (unaudited):
Consolidated Statement of Income for the three and nine months ended September 30, 2014 and 2013	3
Consolidated Statement of Comprehensive Income for the three and nine months ended September 30, 2014 and 2013	4
Consolidated Balance Sheet at September 30, 2014 and December 31, 2013	5
Consolidated Statement of Cash Flows for the nine months ended September 30, 2014 and 2013	6
Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2014 and 2013	7
Notes to Consolidated Financial Statements at September 30, 2014	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3. Quantitative and Qualitative Disclosures about Market Risk	45
Item 4. Controls and Procedures	45
PART II. OTHER INFORMATION
Item 1. Legal Proceedings Item 1A. Risk Factors	46 46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 5. Other Information	47
Item 6. Exhibits	47
Signatures	50

Page 2 of 50

PART I. ― FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DRESSER-RAND GROUP INC.

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
	($ in millions, except per share amounts)
Net sales of products	$	512.9	$	430.2	$	1,503.5	$	1,592.4
Net sales of services		170.9		203.7		507.8		613.2
Total revenues		683.8		633.9		2,011.3		2,205.6
Cost of products sold		390.6		303.7		1,147.2		1,222.0
Cost of services sold		111.0		147.4		356.0		430.6
Total cost of sales		501.6		451.1		1,503.2		1,652.6
Gross profit		182.2		182.8		508.1		553.0
Selling and administrative expenses		92.0		93.1		296.9		287.7
Research and development expenses		5.8		8.3		20.3		31.2
Transaction-related expenses		10.5		-		10.5		-
Income from operations		73.9		81.4		180.4		234.1
Interest expense, net		(13.0)		(7.8)		(38.6)		(35.5)
Other expense, net		(17.7)		(8.1)		(18.2)		(7.1)
Income before income taxes		43.2		65.5		123.6		191.5
Provision for income taxes		11.9		15.5		46.9		52.7
Net income		31.3		50.0		76.7		138.8
Net income attributable to noncontrolling interest		(0.5)		(0.6)		(0.2)		(3.2)
Net income attributable to Dresser-Rand	$	30.8	$	49.4	$	76.5	$	135.6
Net income attributable to Dresser-Rand per share
Basic	$	0.40	$	0.65	$	1.00	$	1.78
Diluted	$	0.40	$	0.64	$	0.99	$	1.77
Weighted-average shares outstanding - (in thousands)
Basic		76,629		76,263		76,508		76,092
Diluted		77,279		76,890		77,107		76,790

See accompanying notes to consolidated financial statements.

Page 3 of 50

DRESSER-RAND GROUP INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
	($ in millions)
Net income	$	31.3	$	50.0	$	76.7	$	138.8
Other comprehensive (loss) income
Foreign currency translation adjustments		(71.6)		22.4		(70.1)		(18.2)
Unrealized gain on derivatives - net of tax of $0.0 and $0.0 for the three months ended September 30, 2014 and 2013, respectively, and $0.1 and $0.1 for the nine months ended September 30, 2014 and 2013, respectively		0.1		-		0.2		0.2
Pension and other postretirement benefit plans:
Amortization of prior service cost and net actuarial loss included in net periodic costs - net of tax of $0.2 and $0.8 for the three months ended September 30, 2014 and 2013, respectively, and $1.0 and $2.4 for the nine months ended September 30, 2014 and 2013, respectively		0.4		1.4		1.4		4.1
Total other comprehensive (loss) income		(71.1)		23.8		(68.5)		(13.9)
Total comprehensive (loss) income		(39.8)		73.8		8.2		124.9
Comprehensive loss (income) attributable to noncontrolling interest		0.2		(0.8)		0.5		(2.5)
Comprehensive (loss) income attributable to Dresser-Rand	$	(39.6)	$	73.0	$	8.7	$	122.4

See accompanying notes to consolidated financial statements.

Page 4 of 50

DRESSER-RAND GROUP INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)

	September 30,		December 31,
	2014		2013
	($ in millions)
Assets
Current assets
Cash and cash equivalents	$	160.7	$	190.4
Restricted cash		4.4		8.1
Accounts receivable, less allowance for losses of $8.4 at 2014 and $9.1 at 2013		618.2		727.4
Inventories, net		731.4		716.0
Prepaid expenses and other		65.9		68.8
Deferred income taxes		22.2		25.2
Total current assets		1,602.8		1,735.9
Property, plant and equipment, net		465.6		472.3
Goodwill		869.7		927.6
Intangible assets, net		457.6		479.0
Deferred income taxes		12.0		11.8
Other assets		102.6		111.2
Total assets	$	3,510.3	$	3,737.8
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accruals	$	620.7	$	729.1
Customer advance payments		223.1		164.5
Accrued income taxes payable		39.7		36.1
Short-term borrowings and current portion of long-term debt		31.3		40.1
Total current liabilities		914.8		969.8
Deferred income taxes		34.9		55.4
Postemployment and other employee benefit liabilities		58.3		74.0
Long-term debt		1,085.8		1,246.9
Other noncurrent liabilities		87.0		90.3
Total liabilities		2,180.8		2,436.4
Commitments and contingencies (Note 13)
Stockholders' equity
Common stock, $0.01 par value, 250,000,000 shares
authorized; and 76,650,843 and 76,293,924 shares issued and
outstanding at September 30, 2014 and December 31, 2013, respectively		0.8		0.8
Additional paid-in capital		182.4		162.4
Retained earnings		1,329.5		1,253.0
Accumulated other comprehensive loss		(186.6)		(118.8)
Total Dresser-Rand stockholders' equity		1,326.1		1,297.4
Noncontrolling interest		3.5		4.0
Total stockholders' equity		1,329.6		1,301.4
Total liabilities and stockholders' equity	$	3,510.4	$	3,737.8

See accompanying notes to consolidated financial statements.

Page 5 of 50

DRESSER-RAND GROUP INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2014		2013
	($ in millions)
Cash flows from operating activities
Net income	$	76.7	$	138.8
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization		70.7		67.1
Deferred income taxes		(30.9)		4.4
Stock-based compensation		19.4		22.8
Loss on re-measurement of previously held equity interest		18.3		-
Gain on fair value of assets acquired in excess of fair value of consideration		(6.6)		-
Excess tax benefits from stock-based compensation		(2.3)		(6.8)
Amortization of debt financing costs		1.7		2.9
Provision for losses on inventory		3.8		0.9
Provision for losses on accounts receivable		3.3		0.5
Loss from equity investments		3.6		4.0
Gain on disposal of assets		(3.4)		(0.4)
Changes in working capital and other, net of acquisitions
Accounts receivable		83.1		(143.2)
Inventories		(38.0)		(165.4)
Prepaid expenses and other		1.1		(13.8)
Accounts payable and accruals		(93.9)		57.8
Customer advances		53.3		(109.0)
Taxes payable		12.4		(9.3)
Pension and other post-retirement benefits		(16.6)		(9.1)
Other		33.2		(4.6)
Net cash provided by (used in) operating activities		188.9		(162.4)
Cash flows from investing activities
Capital expenditures		(43.5)		(56.3)
Loans made to investees and others		(20.7)		-
Proceeds from sales of assets		0.7		1.4
Acquisitions, net of cash acquired		(1.0)		-
Other investments		(3.5)		(12.5)
Decrease in restricted cash balances		3.4		5.8
Net cash used in investing activities		(64.6)		(61.6)
Cash flows from financing activities
Proceeds from exercise of stock options		4.3		4.0
Proceeds from borrowings		750.4		1,445.6
Repayments of borrowings		(901.6)		(1,161.8)
Excess tax benefits from stock-based compensation		2.3		6.8
Repurchase of common stock		(5.4)		(1.5)
Payments for debt financing costs		0.2		(4.7)
Net cash (used in) provided by financing activities		(149.8)		288.4
Effect of exchange rate changes on cash and cash equivalents		(4.2)		(12.8)
Net (decrease) increase in cash and cash equivalents		(29.7)		51.6
Cash and cash equivalents, beginning of period		190.4		122.8
Cash and cash equivalents, end of period	$	160.7	$	174.4

See accompanying notes to consolidated financial statements.

Page 6 of 50

DRESSER-RAND GROUP INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

							Accumulated
			Additional				Other		Non-		Total
	Common		Paid-in		Retained		Comprehensive		Controlling		Stockholders'
	Stock		Capital		Earnings		(Loss) Income		Interest		Equity
	($ in millions)
At December 31, 2013	$	0.8	$	162.4	$	1,253.0	$	(118.8)	$	4.0	$	1,301.4
Stock-based compensation		-		20.0		-		-		-		20.0
Net income		-		-		76.5		-		0.2		76.7
Other comprehensive income (loss)
Foreign currency translation adjustments		-		-		-		(69.4)		(0.7)		(70.1)
Unrealized gain on derivatives, net of tax of $0.1		-		-		-		0.2		-		0.2
Pension and other postretirement benefit plans -
net of tax of $1.0
Amortization of prior service cost and net
actuarial loss included in net periodic costs		-		-		-		1.4		-		1.4
At September 30, 2014	$	0.8	$	182.4	$	1,329.5	$	(186.6)	$	3.5	$	1,329.6

							Accumulated
			Additional				Other		Non-		Total
	Common		Paid-in		Retained		Comprehensive		Controlling		Stockholders'
	Stock		Capital		Earnings		(Loss) Income		Interest		Equity
	($ in millions)
At December 31, 2012	$	0.8	$	140.5	$	1,084.6	$	(134.7)	$	3.7	$	1,094.9
Stock-based compensation		-		18.4		-		-		-		18.4
Stock repurchases		-		(1.5)		-		-		-		(1.5)
Net income		-		-		135.6		-		3.2		138.8
Other comprehensive (loss) income
Foreign currency translation adjustments		-		-		-		(17.5)		(0.7)		(18.2)
Unrealized gain on derivatives, net of tax of $0.1		-		-		-		0.2		-		0.2
Pension and other postretirement benefit plans -
net of tax of $2.4
Amortization of prior service cost and net
actuarial loss included in net periodic costs		-		-		-		4.1		-		4.1
At September 30, 2013	$	0.8	$	157.4	$	1,220.2	$	(147.9)	$	6.2	$	1,236.7

See accompanying notes to consolidated financial statements.

Page 7 of 50

DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

($ in millions, except per share amounts)

1.Basis of Presentation

Unless the context otherwise indicates, the terms “we,” “our,” “us,” the “Company,” “Dresser-Rand” and similar terms refer to Dresser-Rand Group Inc. and its consolidated subsidiaries.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information.  The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for the fair presentation of the Company's Consolidated Balance Sheets as of September 30, 2014, and December 31, 2013; the Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2014 and 2013; and the Consolidated Statements of Cash Flows and Changes in Stockholders’ Equity for the nine months ended September 30, 2014 and 2013.  The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. 

In preparing financial statements in accordance with U.S. GAAP, management makes informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses.  Management evaluates its estimates and related assumptions regularly, including those related to fair values, allowance for losses on receivables, depreciation and amortization, inventory adjustments related to lower of cost or market, the carrying value and estimated useful lives of long-lived assets, valuation of assets including goodwill and other intangible assets, product warranties, sales allowances, taxes, pensions, postemployment benefits, stock-based compensation, stage of completion and ultimate profitability for certain long-term revenue contracts accounted for under the percentage of completion method, contract losses, penalties, environmental contingencies, product liability, self-insurance programs and other contingencies (including purchase price contingencies).  Changes in facts and circumstances or additional information may result in revised estimates and actual results may differ from these estimates. 

These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2013, and our other filings with the Securities and Exchange Commission.  Operating results for the three and nine months ended September 30, 2014, are not indicative of the results that may be expected for the year ending December 31, 2014.  Certain amounts in the prior periods consolidated financial statements have been reclassified to conform to the current period’s presentation.

On August 6, 2014, representatives of the Company received a non-binding indicative term sheet for a potential merger-of-equals from a strategic partner.  Among other items, the non-binding indicative term sheet requested a four-week period of exclusive negotiation between the Company and the strategic partner.  The potential merger-of-equals with the strategic partner was not consummated.On September 21, 2014, the Companyentered into an Agreement and Plan of Merger (the “Merger Agreement”) with Siemens Energy, Inc. (“Siemens”) whereby Siemens will acquire the Company.  The completion of the transaction (“Merger”) is subject to satisfaction or waiver of certain closing conditions including, among others, customary regulatory approvals and the approval of the transaction by our stockholders.

At the time the merger becomes effective, each outstanding share of Dresser-Rand common stock (excluding any shares held by Siemens, its subsidiaries, Dresser-Rand and dissenting shares in accordance with Delaware law), will be cancelled and converted into the right to receive cash in the amount of (i) $83.00 per share plus (ii) $0.55on the first of each month until the date of closing beginning on March 1, 2015.

In connection with these acquisition related activities, the Company incurred $10.5 of legal, accounting and investment bank transaction related expenses for the three and nine months ended September 30, 2014.

On September 21, 2014, the board of directors of the Company also adopted a limited duration Shareholder Rights Plan (the “Plan”) and created 1,000,000 shares of preferred stock designated as Series A Junior Participating Preferred Stock, with a par value of $0.01 per share, if any.  Pursuant to the Plan, the board of directors declared a dividend of one preferred stock purchase right (each a “Right” and collectively, the “Rights”) on each outstanding share of the Company’s common stock as of the close of business on October 2, 2014.  Each Right, once exercisable, will entitle shareholders to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock at a price of $300 per Right, subject to adjustment.

Page 8 of 50

DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

($ in millions, except per share amounts)

The Rights are exercisable ten days following a public announcement that certain persons or groups (other than Siemens or any of its affiliates or associates acting pursuant to the Merger Agreement) have acquired beneficial ownership of 10.0% or more of the outstanding shares of the Company’s common stock or ten business days after the commencement of an offer, that if completed, would result in certain persons or groups having beneficial ownership of 10.0% or more of the outstanding shares of the Company’s common stock (a “flip-in event”).  The Plan provides that the ownership of shareholders that beneficially own 10.0% or more of the Company’s common stock on the date of adoption of the Plan will be grandfathered, but the Rights would become exercisable if at any time any such shareholder increases its ownership percentage by 1.0% or more.  The Rights become exercisable for shares of the Company’s common stock at 50.0% of the then-market price of the common stock.  Derivative interests in the Company’s common stock, such as swap arrangements, regardless of whether such arrangements carry with them the right to control voting or disposition of the underlying securities, are also considered beneficial ownership of the underlying common stock for purposes of the Plan.

If a 10.0% or more shareholder of the Company acquires Dresser-Rand, by merger or otherwise, in a transaction where the Company does not survive, the Company’s common stock is changed or exchanged or 50.0% or more of the Company’s assets, cash flow or earnings power is sold or transferred (a “flip-over event”), the Rights become exercisable for shares of the common stock of the company acquiring Dresser-Rand at 50.0% of the then-market price for Dresser-Rand common stock.

Any Rights that are or were beneficially owned by a person who has acquired 10.0% or more of the outstanding shares of the Company’s common stock and who engages in certain transactions or realizes the benefits of certain transactions with the Company will become null and void.  If an offer to acquire all of the Company’s outstanding shares of common stock is determined to be fair by the board of directors, the transaction will not trigger a flip-in event or a flip-over event.  The Company may also redeem the Rights at $0.01 per Right at any time prior to a flip-in event.  These Rights are set to expire no later than September 22, 2015.

Revenue Recognition

Multiple-element arrangements

We recognize revenue when it is realized or realizable and earned. Generally, we consider revenue realized or realizable and earned when we have persuasive evidence of an arrangement, delivery of the product or service has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Delivery does not occur until products have been shipped or services have been provided to the client, risk of loss has transferred to the client, and either any required client acceptance has been obtained (or such provisions have lapsed) or we have objective evidence that the criteria specified in the client acceptance provisions have been satisfied. The amount of revenue related to any contingency is not recognized until the contingency is resolved.

A substantial portion of our arrangements are multiple-element revenue arrangements or contracts, where multiple products and/or services are involved. Products involved in multiple-element arrangements may include centrifugal compressors, gas turbines, power turbines, power recovery expanders, reciprocating compressors, steam turbines and engines. Our typical arrangement includes one of our classes of compressors and a driver (e.g., a motor, turbine or an engine).  In addition to our products, we perform installation and commissioning, training, and other services, and we purchase any number of standard or engineered items from third parties (“buyouts”) that support the application in which our equipment is being used.  Generally, buyouts, installation and commissioning, training and each of our products listed above are considered separate deliverables for a number of reasons, including the following:

· Clients would purchase each of those products or services apart from other products or services;

· The products and services being provided are at the request of the client and for the client’s sole benefit, apart from any other product or service in the transaction;

· The other deliverables can be performed without the service or product in question being performed or delivered;

· Contractual payments are typically tied to the delivery or performance of the specific product or service;

Page 9 of 50

DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

($ in millions, except per share amounts)

· The skills or equipment required to perform the services are readily available in the marketplace; and

· Clients attribute significant value to each product or service.

These contracts generally can takefifteen months or more to complete, but occasionally may take longer.The timing between the first deliverable and the last deliverable is generally three to twelve months, and services are typically delivered last.

Because the aforementioned separate deliverables have value to the client on a stand-alone basis, they are typically considered separate units of accounting.  The entire contract value is allocated to each unit of accounting. Revenue allocated to products is recognized upon delivery, while revenue allocated to services is recognized when the service is performed.  We use the selling price hierarchy described below to determine how to separate multiple-element revenue arrangements into separate units of accounting and how to allocate the arrangement consideration among those separate units of accounting:

· Vendor-specific objective evidence (“VSOE”).

· Third-party evidence (“TPE”), if vendor-specific objective evidence is not available.

· Estimated selling price (“ESP”), determined in the same manner as that used to determine the price at which we sell the deliverables on a stand-alone basis, if neither vendor-specific objective evidence nor third-party evidence is available.

In substantially all of our multi-element arrangements, we use ESP to allocate arrangement consideration. We determine ESP based on our normal pricing and discounting practices. In determining ESP, we apply significant judgment as we weigh a variety of factors, based on the facts of the arrangement. We typically arrive at an ESP by considering client and entity-specific factors such as existing pricing, price discounts, geographies, competition, internal costs and profitability objectives.

Our sales arrangements do not include a general right of return of the delivered unit(s). In certain cases, the cancellation terms of a contract provide us with the opportunity to bill for certain incurred costs and penalties.

If it is determined that the separate deliverables do not have value on a stand-alone basis, the entire arrangement is accounted for as one unit of accounting, which results in revenue being recognized when the last unit is delivered based on the revenue recognition policy described above.

It is uncommon for the Company to have contract scope adjustments that impact the selling price for specific units of accounting resulting in changes in the allocation of the selling price.  In the event of such an adjustment, we apply the change in the allocation of the selling price to the units of accounting that are not yet delivered.  As our business and offerings evolve over time, our pricing practices may be required to be modified accordingly, which could result in changes in selling prices in subsequent periods.  Historically, there have been no material impacts, nor do we currently expect material impacts in the next twelve months, on our revenue recognition due to changes in our VSOE, TPE or ESP.

Percentage of completion

We also enter into certain large contracts with expanded construction-type scope and risk.  These contractual arrangements have a scope of activity that differs in substance from the scope of deliverables found in our traditional sales agreements.  For these types of contracts, we apply the guidelines of ASC 605-35 – Construction-Type and Production-Type Contracts and utilize the percentage of completion method of revenue recognition. Non-traditional scope arrangements include activities typically performed by engineering, procurement and construction contractors. Our clients on these projects typically require us to act as a general construction contractor for all or a portion of these projects. These arrangements are often executed in the form of turnkey contracts, where the Company designs, engineers, manufactures, constructs, transports, erects and hands over to the client at the designated destination point the fully commissioned and tested module or facility, which is ready for operation.  Percentage of completion revenue represents approximately3.1%

Page 10 of 50

DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

($ in millions, except per share amounts)

and 6.7% of consolidated revenues for the three months ended September 30, 2014 and 2013, respectively, and4.2% and7.1% of consolidated revenues for the nine months ended September 30, 2014 and 2013, respectively.

Under the percentage of completion method, revenue is recognized as work on a contract progresses.  For each contractual arrangement that qualifies for the percentage of completion method of accounting, the Company recognizes revenue, cost of sales and gross profit in the amounts that are equivalent to a percentage of the total estimated contract sales value, estimated cost of sales and estimated gross profit to be achieved upon completion of the project.  This percentage is generally determined by dividing the cumulative amount of labor costs and labor converted material costs incurred to date by the sum of the cumulative costs incurred to date plus the estimated remaining costs to be incurred in order to complete the contract.  Preparing these estimates is a process requiring judgment.  Factors influencing these estimates include, but are not limited to, historical performance trends, inflationary trends, productivity and labor disruptions, availability of materials, claims, change orders and other factors as set forth in the Risk Factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.  In the event that the Company experiences changes in estimated revenues, cost of sales and gross profit, they would be recognized using a cumulative catch-up adjustment that recognizes in the current period the cumulative effect of the changes on current and prior periods based on a contract’s updated percentage of completion.

We apply the percentage of completion method of accounting to agreements when the following conditions exist:

· The costs are reasonably estimable;

· The contract includes provisions that clearly specify the enforceable rights regarding products and services to be provided and received by the parties, the consideration to be exchanged and the manner and terms of settlement;

· The customer can be expected to satisfy all obligations under the contract; and

· We expect to perform all of our contractual obligations.

Cost of revenue for our construction-type contracts includes contract costs, such as materials and labor, and indirect costs that are attributable to contract activity.  Generally, we bill our customers based on advance billing terms or completion of certain contract milestones.  Cumulative costs and estimated earnings recognized to date in excess of cumulative billings are included in accounts receivable on the consolidated balance sheet.  Cumulative billings in excess of cumulative costs and estimated earnings recognized to date are included in accounts payable and accruals on the consolidated balance sheet.

We estimate the future costs and estimated gross profit that will be incurred related to sales arrangements to determine whether any arrangement will result in a loss. These costs include material, labor and overhead. Factors influencing these future costs include the availability of materials and skilled laborers. We record provisions for estimated losses on uncompleted contracts in the period in which such losses are identified. 

Fair Value Measurements

Fair value, as defined in U.S. GAAP, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). U.S. GAAP classifies the inputs used to measure fair value into the following hierarchy:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2	Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability
Level 3	Unobservable inputs for the asset or liability

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DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

($ in millions, except per share amounts)

Recurring Fair Value Measurements —  Fair values of the Company’s cash and cash equivalents, restricted cash, accounts receivable, short-term borrowings, accounts payable and customer advance payments approximate their carrying values due to the short-term nature of these instruments.  The Company’s financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Nonrecurring Fair Value Measurements —Fair value measurements were applied with respect to the Company’s nonfinancial assets and liabilities measured on a nonrecurring basis, which consists primarily of intangible assets, other long-lived assets and other assets acquired and liabilities assumed, including contingent consideration, related to purchased businesses in business combinations and impairments.

Fair Value of Financial Instruments —Recurring fair value measurement of financial instruments consist principally of foreign currency derivatives, interest rate swaps and fixed rate long-term debt.

Input levels used for fair value measurements are as follows:

		Input
Description	Disclosure	Level	Level 2 Inputs	Level 3 Inputs
Acquired assets and liabilities	Note 3	Level 3	Not applicable	Level 3 inputs are more fully described in Note 3.
Impairment of long-lived assets	Note 7	Level 3	Not applicable	Level 3 inputs are more fully described in Note 7.
Financial derivatives	Note 8	Level 2	Quoted prices of similar assets or liabilities in active markets	Not applicable
Long-term debt (disclosure only)	Note 10	Level 2	Quoted prices in markets that are not active	Not applicable

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DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

2.New Accounting Standards

Effective January 1, 2014, the Company adopted FASB ASU 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date (“ASU 2013-04”). The amendments in ASU 2013-04 provide guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. In accordance with the amendments, an entity will measure the obligation as the sum of (1) the amount the reporting entity agreed to pay on the basis of its arrangements among its co-obligors, and (2) any additional amount the reporting entity expects to pay on behalf of its co-obligors. The amendments in ASU 2013-04 also require an entity to disclose the nature and amount of the obligation as well as other information about those obligations. The adoption of ASU 2013-04 did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2014, the Company adopted FASB ASU 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU 2013-05”). The amendments in ASU 2013-05 resolve the diversity in practice in applying Subtopic 810-10, Consolidation, and Subtopic 830-30, Foreign Currency Matters, when a reporting entity ceases to have a controlling financial interest in a subsidiary within a foreign entity. The amendments in ASU 2013-05 require the reporting entity to release any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary resided.  For an equity method investment that is a foreign entity, a pro rata portion of the cumulative translation adjustment should be released into net income upon a partial sale of such an equity method investment, if significant influence is retained.  Additionally, the amendments clarify that the sale of an investment in a foreign entity includes both (1) events that result in the loss of a controlling financial interest in a foreign entity; and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date (step acquisition). The adoption of ASU 2013-05 did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2014, the Company adopted FASB ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). The amendments in ASU 2013-11 clarify that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward ifthe settlement of the deferred tax asset is required or expected in the event the uncertain tax position is disallowed.  In situations where a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The adoption of ASU 2013-11 did not have a material impact on the Company’s consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”). The amendments in ASU 2014-08 change the criteria for reporting discontinued operations while enhancing disclosures in this area.Under the new guidance, disposals representing a strategic shift in operations should be presented as discontinued operations. Additionally, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income and expenses of discontinued operations. The amendments in ASU 2014-08 are effective prospectively for all disposals (or classifications as held for sale) of components of an entity, and for all businesses that, on acquisition, are classified as held for sale that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. The Company is currently evaluating the new guidance to determine the impact it may have to its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the

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DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, with early application not permitted.  Companies may use either a full retrospective or a modified retrospective approach to adopt this ASU and the Company is currently evaluating which transition approach to use.  The Company iscurrently evaluating the new pronouncement to determine the impact it may have to its consolidated financial statements.

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation (“ASU 2014-10”). The amendments in ASU 2014-10 remove an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity. The revised consolidation standards are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, with early application permitted.  The Company is evaluating the new pronouncement to determine the impact it may have to its consolidated financial statements.

In June 2014, the FASB issued ASU 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period (“ASU 2014-12”). The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, with early application permitted.  Companies may use either a prospective or a retrospective approach to adopt this ASU and the Company is currently evaluating which transition approach to use.  The Company is evaluating the new pronouncement to determine the impact it may have to its consolidated financial statements.

3. Acquisitions and Other Investments

Acquisitions

On August 8, 2014, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) to acquirefinancial control of Ramgen Power Systems, LLC (“Ramgen”), an entity in which the Company held a42.2% equity interest immediately preceding the acquisition date. The Asset Purchase Agreement superseded all prior agreements between the Company and Ramgen.  Ramgen was developing compressor technology that applies proven supersonic aircraft technology to ground-based air and gas compressors.

The Company previously acquired its equity interest in Ramgen through various investments totaling $34.4 from 2008 to 2013.  Pursuant to the terms of the Asset Purchase Agreement, the Companyacquired the remaining 57.8% of Ramgen’s assets ina business combination, in exchange for cash of approximately $1.0 and the rights to royalty payments from certain future sales made by the Company (“contingent consideration”).  The acquisition gives the Company sole ownership of the supersonic compressor technology and, therefore, control over the continued development and commercialization of the supersonic compressor program.

The purchase of Ramgen resulted in a net loss to the Company of $11.7, which consisted of two components: (1) a loss on the re-measurement of the Company’s previously held interest, and (2) a gain related to the fair value of the assets acquired in excess of the fair value of the consideration.

Because the business combination was achieved in stages, the Company re-measured its previously held equity interest in Ramgen at its acquisition-date fair value and recognized the resulting loss of $18.3 in other expense, netfor the three and nine months ended September 30, 2014, in the consolidated statement of income. The acquisition-date fair value of the previous equity interest of $10.3 was estimated using the cost aggregation approach based upon the underlying fair value of the assets of Ramgen.  Since Ramgen was a private company, the fair value measurement was based on significant inputs that are not observable in the market and represent a Level 3 measurement as defined in ASC 820.  The cost approach was applied to the property, plant and equipment based on the type of use, condition, square footage and other similar factors to determine the fair value of assets acquired.  The income approach was applied to the intangible assets using projected

Page 14 of 50

DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

results, a  market-based discount rate of 25.0% and a market-based royalty rate of 5.0%.  Acquired intangible assets consist of in-process research and development.

The Company believes that there are various factors that resulted in a negotiated purchase price for which the fair value of identifiable assets acquired exceeded the fair value of the consideration transferred.  Prior to the acquisition, Ramgen did not have a commercial function, and Dresser-Rand has a history of bringing new products to market.  There is considerable interest in the product as the Company has experienced significant inquiry volume since 2012.  In parallel with our efforts to gain a significant understanding of the technology, the Company continued to provide funding to Ramgen.  Ramgen would have incurred significant cost and delays in order to identify and engage another partner, arrange new funding, and commercialize the product.  Finally, there were certain protective provisions in the joint venture agreements which were negotiated in good faith, limiting the parties’ ability to sell shares, subcontract rights, or sell the technology without the other party’s consent.

The recorded amounts of the net assets acquired are as follows:

	August 8, 2014
Property, plant and equipment	$	10.0
Intangible assets		14.4
Deferred tax liabilities, net		(3.9)
Net assets acquired		20.5
Fair value of previous equity interest		(10.3)
Fair value of consideration:
Cash		(1.0)
Contingent consideration (non-cash)		(2.6)
Value of net assets acquired in excess of fair value of consideration	$	6.6

The contingent consideration arrangement requires the Company to pay royalties to Ramgen based on future sales related to the purchased products and technology for fifteen years upon commercialization.  The maximum amount payable shall not exceed $44.5.  The fair value of the contingent consideration was estimated using a discounted cash flow model based on projected sales related to the purchased products and technology. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820.  The income approach was applied to the contingent consideration using projected results, an estimated discount rate of 25.0% and contractually negotiated royalty rates of 1.0% to 2.0%.

Consequently, the Company reassessed the recognition and measurement of identifiable assets acquired and concluded that all acquired assets were recognized and that the valuation procedures and resulting measures were appropriate.  As a result, the Company recorded the fair value of the assets acquired in excess of the fair value of the consideration paid as again of $6.6in other expense, net in the consolidated statement of income.

Pro forma financial information for the Ramgen acquisition, assuming it occurred at the beginning of 2013, has not been presented because the effect on our financial results was not considered material.  The financial results of Ramgen have been included in our consolidated financial results from the date of acquisition.  Since the activities are principally research and development activities, the financial results of Ramgen have remained unallocated and have not been incorporated into the Company’s existing new units and aftermarket parts and services segments.

Other Investments

On June 28, 2013, the Company and Apex Compressed Air Energy Storage, LLC (“APEX”) formed Bethel Holdco, LLC (“Bethel”) to develop a 317 megawatt compressed air energy storage (“CAES”) facility to be constructed in the north zone

Page 15 of 50

DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

of Texas.  The Company expects to manufacture and supply the compression trains, expansion trains, balance of plant process equipment and installation, commissioning, start-up and on-site testing services to a subsidiary of Bethel, subject to the project reaching full financing.  Although the project is not yet fully financed, management believes that the ability to finance the project will not have a material adverse effect on the Company’s financial condition.  As of September 30, 2014, the Company had invested a total of$5.0for a5.7% ownership interest in Bethel.  The remaining 94.3% interest is held by APEX.  The Company has certain rights, but no obligations, to make additional capital contributions to Bethel.In connection with its investment in Bethel, the Company received an option tosell all ofitsinitial ownership interests in Bethelto APEX at such time on or after the second anniversary of the CAES facility achieving commercial operation that Bethel has a net positive amount of available cash to distribute to its members for a trailing twelve-month period.  The sale price under the option is the Company’s purchase price for the Bethel interests.On February 14, 2014, the Company entered into a term loan agreement with Bethel to help fund the construction of the CAES facility.  The Company may loan Bethel an aggregate principal amount of up to $25.0, with interest rates ranging from 8.0% to 16.0% per annum.  Loans made under the arrangement mature no later than eight years from the date of issuance.  As of September 30, 2014, Bethel has borrowed $18.6from the Company.  The Company’s maximum exposure to loss on its investment in Bethel is limited to amounts invested (including amounts loaned) plus any amounts the Company may choose to invest in the future.In determining whether the Company should consolidate Bethel, the Company considered that its board participation, ownership interest and loan would not give the Company the power to direct the activities of Bethel and, consequently, would not result in the Company being the primary beneficiary.  The investment in Bethel is being accounted for under the equity method of accounting, and the amount of the investment recorded in other noncurrent assets on the consolidated balance sheet is $4.9 at September 30, 2014.  The Company recognized revenues from APEX of $0.0 and $22.4 for the three and nine months ended September 30, 2014, respectively.

In February 2011, the Company entered into an agreement to acquire a noncontrolling interest in Echogen Power Systems, LLC (“Echogen”), a privately-held technology company that is developing and commercializing power generation systems that harness waste heat for power and cooling applications using a proprietary supercritical carbon dioxide process technology.  The Company will pay Echogen a royalty based on future equipment sales in these markets. Aggregate minimum royalties of $6.0 must be paid in the first five years of commercialization, which has not begun, regardless of the amount of revenues generated, or the license will become non-exclusive.  On March 26,  2014, the Company entered into an agreement for exclusive license rights to certain of Echogen’s intellectual property in exchange for $2.5 of cash and the relief of the Company’s obligation to provide certain equipment which was required under the original agreement. These exclusive license rights are represented by the remaining shares of Echogen held by the Company, which will be exchanged for an exclusive license if Echogen’s intellectual property is proven.  Additionally, the Company matched other funding of$1.0during the three months ended September 30, 2014.  As of September 30, 2014, the Company had invested a total of $26.5 for a 33.9% noncontrolling interest in Echogen. The Company’s maximum exposure to loss on its investment in Echogen is limited to amounts invested plus any amounts the Company may choose to invest in the future, if any.In determining whether the Company should consolidate Echogen, the Company considered that its board participation and ownership interest would not give the Company the power to direct the activities of Echogen and, consequently, would not result in the Company being the primary beneficiary.  The investment in Echogen is being accounted for under the equity method of accounting, and the amount of the investment recorded in other noncurrent assets on the consolidated balance sheet is $14.8 at September 30, 2014.

In April 2009, the Company and Al Rushaid Petroleum Investment Company (“ARPIC”) executed a Business Venture Agreement to form a joint venture, Dresser-Rand Arabia LLC (“D-R Arabia”). D-R Arabia was formed to execute manufacturing, repair, and other services, and to provide technical expertise and training in the Kingdom of Saudi Arabia. The Company and ARPIC each own approximately 50% of D-R Arabia. In determining whether the Company should consolidate D-R Arabia, the Company determined that its ownership, board participation and other related contractual rights would give the Company the ability to direct the activities of D-R Arabia, which would result in the Company being the primary beneficiary. Consequently, D-R Arabia is consolidated in the financial results of the Company.

D-R Arabia has total assets of approximately $51.4, consisting principally of property, plant and equipment, and total liabilities of approximately $82.0, consisting principally of intercompany loans. The assets have been classified accordingly in the Company’s consolidated balance sheet, and the loans have been eliminated in consolidation. Both parties to the joint venture have signed a resolution committing to provide financial support to D-R Arabia, as needed, to meet the Company’s obligations as they become due.

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DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

The Company and ARPIC, as shareholders of D-R Arabia, and their respective director nominees provided approvals to enable D-R Arabia to satisfy two issues raised by the Saudi Arabian General Investment Authority (“SAGIA”), concerning adding licensing to provide additional services and repairs and increasing its capitalization.  The necessary filings have been made with SAGIA, which approved the filings on August 27, 2014.  Additional filings are being pursued with the Ministry of Commerce to increase the share capital of the Company.

4.Costs and Estimated Earnings on Uncompleted Contracts

Costs and estimated earnings on uncompleted contracts were as follows:  

	September 30,		December 31,
	2014		2013
Costs incurred on uncompleted contracts	$	261.7	$	195.5
Estimated earnings		70.6		52.4
		332.3		247.9
Less: billings to date		(340.6)		(162.7)
	$	(8.3)	$	85.2
Costs and estimated earnings in excess of billings	$	16.8	$	98.1
Billings in excess of costs and estimated earnings		(25.1)		(12.9)
	$	(8.3)	$	85.2

5.Intangible Assets and Goodwill

The following table sets forth the weighted-average useful life, gross amount and accumulated amortization of intangible assets:

	September 30, 2014					December 31, 2013
	Cost		Accumulated Amortization		Weighted-Average Useful Lives	Cost		Accumulated Amortization
Trade names	$	117.6	$	26.6	36 years	$	120.0	$	24.2
Customer relationships		323.2		88.5	32 years		333.2		79.4
Non-compete agreements		5.3		5.2	3 years		5.5		5.0
Existing technology		171.6		62.5	23 years		173.3		55.6
Contracts and purchase agreements		9.7		1.7	11 years		10.2		1.4
Software		28.7		28.4	10 years		28.7		26.3
In-process research and development		14.4		-	(a)		-		-
Total amortizable intangible assets	$	670.5	$	212.9		$	670.9	$	191.9

(a)Research and development intangible assets are considered indefinite-lived until the abandonment or completion of the associated research and development efforts.

Intangible asset amortization expense was $8.3 and $25.1 for the three and nine months ended September 30, 2014, respectively, and $7.1 and $21.7 for the three and nine months ended September 30, 2013, respectively, and is estimated to be $8.6 for the remainder of fiscal year 2014.  Estimated amortization expense for each of the subsequent five fiscal years

Page 17 of 50

DRESSER-RAND GROUP INC.

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(Unaudited)

($ in millions, except per share amounts)

is expected to be as follows: $30.6 in 2015,  $30.0 in 2016,  $29.8 in 2017,  $29.4 in 2018 and $29.1 in 2019.

In-process research and development was acquired in the Ramgen acquisition  (see Note 3).  Upon completion of the associated research and development efforts, in-process research and development is reclassified to existing technology and amortized based upon the Company’s estimate of its useful life at that time.

The following table represents the changes in goodwill in total and by segment (see Note 15 for additional segment information):

			Aftermarket
	New Units		Parts and Services		Total
Balance, December 31, 2013	$	488.4	$	439.2	$	927.6
Foreign currency adjustments		(33.7)		(24.2)		(57.9)
Balance, September 30, 2014	$	454.7	$	415.0	$	869.7

6. Inventories, net

Inventories were as follows:

	September 30,		December 31,
	2014		2013
Raw materials	$	149.3	$	71.0
Finished parts		287.7		262.4
Work-in-process		752.4		845.9
		1,189.4		1,179.3
Less: progress payments from clients		(458.0)		(463.3)
Inventories, net	$	731.4	$	716.0

Finished parts may be used in production or sold to customers.  Progress payments represent payments from clients based on milestone completion schedules or advance billing terms.  Any payments received in excess of inventory investment are classified as “Customer Advance Payments” in the current liabilities section of the consolidated balance sheet.  Progress payments to suppliers are included in work-in-process and were $95.1 and $129.0  at September 30, 2014, and December 31, 2013, respectively.  The total allowance for obsolescence for slow-moving inventory for all categories of inventory was $35.5 and $30.7 at September 30, 2014, and December 31, 2013, respectively.

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DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

7. Property, plant and equipment

Property, plant and equipment were as follows:

	September 30,		December 31,
	2014		2013
Cost:
Land	$	30.6	$	33.1
Buildings and improvements		255.6		261.4
Machinery and equipment		514.6		479.0
		800.8		773.5
Less: accumulated depreciation		(335.2)		(301.2)
Property, plant and equipment, net	$	465.6	$	472.3

Depreciation expense was$14.8 and $45.6 for the three and nine months ended September 30, 2014, respectively, and $14.1 and $45.4 for the three and nine months ended September 30, 2013, respectively.

Impairment of Spanish Cogeneration Facilities

The Company haswhole or majority ownership ofsix cogeneration facilities in Spain. The Spanish government published a ministerial order on June 20, 2014, that reflected a reduction in existing tariffs of approximately 38%, which was retroactive to July 2013.

The enacted order was issued in draft form in February 2014 and is an implementation of a law that was passed in 2013.  The 2013 law did not have sufficient specificity to reasonably estimate the change in the tariff without the further order, but did provide that the existing tariffs would be paid on a provisional basis until the order was issued.  Before the initial draft was issued, the Company believed there would not be a material change in the tariff, and therefore did not believe that assets would be impaired. Once the initial draft was issued, the Company determined that operating the cogeneration facilities would not be economical under the proposed reduced tariff level and decided to suspend operations at the facilities.  Because the initial draft related to the 2013 law, the Company recorded the resulting impairment charge of $40.0 in the three months ended December 31, 2013.  The impairment charge solely impacted the aftermarket parts and services segment.

The impaired assets included land, power generation equipment, cogeneration plant equipment and structures. The land was valued using the market approach and the machinery and equipment was valued using the cost approach. The income approach was considered and applied to the total operations, but the income approach was not applied to the individual assets because these assets contribute to earnings jointly with many other economic factors.  No value was placed on the structures because it was determined that buildings would not be necessary for the highest and best use of the land.

The market approach was applied to the land based on discussions with local brokers considering the land’s size, shape, zoning, location, and other similar factors. This methodology was used because comparable land transactions and comparable current listings could not be located. 

The current replacement cost of a typical similar cogeneration facility was the basis used to estimate the replacement cost of the machinery and equipment.  Recoverability adjustments were applied to the current replacement cost based upon production hours since the last overhaul to reduce the estimated fair value accordingly.

The Company has initiated the liquidation process for four of the cogeneration facilities.  The liquidation of all six facilities is subject to final approval by each of the legal entities’ boards of directors as well as the Spanish government, which is expected to occur in the three months ended December 31, 2014.  Because the Company continues to maintain financial control over these legal entities and the liquidation process is still subject to board and governmental approval, the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

balance sheets and the results of operations of the cogeneration facilities have been included in the consolidated continuing operations of the Company for all periods presented.

Conditional Asset Retirement Obligations

Any 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 is recognized as a liability at the fair value of the conditional asset retirement obligation, if the fair value of the liability can be reasonably estimated. U.S. GAAP acknowledges that, in some cases, sufficient information may not be available to reasonably estimate the fair value of an asset retirement obligation.

We are legally obligated to decommission some of our cogeneration sites in Brazil and Spain upon site exit.  The Company has not recorded any conditional asset retirement obligations on its cogeneration facilities in Brazil because there is no current active market in which the obligations could be transferred and we do not have sufficient information to reasonably estimate the range of settlement dates and their related probabilities. The Company believes any obligations arising from decommissioning activities in Brazil are immaterial to the financial statements.  In connection with the suspension of its cogeneration facilities in Spain, the Company recordeda  conditional asset retirement obligation related to its Spanish cogeneration facilities in 2014.  The changes in the Company’s asset retirement obligations were as follows:

	Nine Months Ended September 30,
	2014		2013
Beginning balance	$	-	$	-
Provisions		4.5		-
Adjustments		(0.9)		-
Effects of exchange rate changes		(0.6)		-
Ending balance	$	3.0	$	-

8. Financial Instruments (€ in millions)

The Company manages exposure to changes in foreign currency exchange rates and interest rates through its normal operating and financing activities as well as through the use of financial instruments.

The purpose of the Company’s hedging activities is to mitigate the economic impact of changes in foreign currency exchange rates and interest rates.  The Company attempts to hedge transaction exposures through natural offsets.  To the extent that this is not practicable, the Company may enter into forward exchange contracts or interest rate swaps.  Major exposure areas considered for hedging include foreign currency denominated receivables and payables, firm committed transactions, forecast sales and purchases and variable interest rates.

The Company has entered into an interest rate swap agreement to minimize the economic impact of fluctuations in interest rates on the lease of its compressor testing facility in France. The interest rate swap has a notional amount of €18.0 (approximately $22.7) and effectively converts substantially the entire interest component of the lease from a variable rate of interest to a fixed rate of interest of approximately 3.87% per annum. The interest rate swap has been designated as a cash flow hedge for accounting purposes, and unrealized gains and losses are recognized in other comprehensive income.  The fair value of the interest rate swap at September 30, 2014, and December 31, 2013 was $0.5 and $0.7, respectively, and the related unrealized gain for the three and nine months ended September 30, 2014, was $0.1 and$0.2, respectively, and$0.0 and$0.2 for the three and nine months ended September 30, 2013, respectively.

None of the Company’s other derivative financial instruments are designated as hedges for accounting purposes.  Changes in the fair values of derivatives that are not designated as hedges for accounting purposes are immediately recognized in the consolidated statement of income in other expense, net.

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DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

All of the Company’s foreign currency derivative contracts are subject to master netting arrangements.  These arrangements provide for the option to settle contracts with a given counterparty on a net basis when they settle on the same day and the same currency.  In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event, and do not require the Company to post any cash collateral.  The Company has elected to present the derivative contracts on a gross basis in the consolidated balance sheet.  The Company recognizes derivatives in prepaid expenses and other, or accounts payable and accruals, as appropriate, on the consolidated balance sheet and measures them at fair value each reporting period.  As of September 30, 2014, had the Companypresented itsderivative contracts on a net basis, the assets and liabilities presented in the table below would be offset by $4.2, resulting in net foreign currency exchange contracts assets and liabilities of $9.5 and $8.5, respectively.

The following table sets forth the Company’s gross foreign currency exchange contracts that were accounted for at fair value on a recurring basis:

	September 30,		December 31,
	2014		2013
Foreign currency exchange contracts assets	$	13.7	$	5.4
Foreign currency exchange contracts liabilities	$	12.7	$	16.3

The notional amount for the forward exchange contracts outstanding as of September 30, 2014, and December 31, 2013, was $590.0 and $546.6, respectively.  The net foreign currency gains (losses) recognized for forward currency contracts were $7.7 and$12.1 for the three and nine months ended September 30, 2014, respectively, compared to$(8.1)and  $(17.4)for the threeand ninemonths ended September 30,  2013, respectively.

9.Income taxes

We operate in numerous countries and tax jurisdictions around the world and there is no assurance that future tax audits will not result in significant tax adjustments. Management believes that it has provided adequate estimated liabilities for taxes based on its understanding of the tax laws and regulations in those countries.

Our estimated income tax provisions for the three and nine months ended September 30, 2014 and 2013, result in effective rates that differ from the U.S. federal statutory rate of 35% principally because of different tax rates in foreign tax jurisdictions and certain deductions and credits allowable for income tax purposes, offset by state and local income taxes and valuation allowances on net operating loss carryforwards that more-likely-than-not will not be realized.  We will adjust the valuation allowances in the future if it becomes more-likely-than-not that the benefits of deferred tax assets will not be realized.

The increase in the effective tax rate for the three and nine months ended September 30, 2014, as compared to the three and nine months ended September 30, 2013, is principally due to an increased amount of net operating losses in certain foreign countries for which we could not record benefits under U.S.  GAAP, thus increasing the effective tax rate by approximately 9.4 and 12.6 percentage points, respectively.  In the three months ended September 30, 2014, the company was able to benefit previously unrecognized foreign tax credits, thus reducing the effective tax rate for the three and nine months ended September 30, 2014, by approximately 7.3 percentage points and 2.8 percentage points, respectively.

On January 2, 2013, the American Taxpayer Relief Act (“ATRA”) of 2012 was signed into law. Some of the provisions were retroactive to January 1, 2012, including the exclusion from U.S. federal taxable income of certain interest, dividends, rents, and royalty income of foreign affiliates, as well as the tax benefits of the credits associated with that income and an extension of the research and experimentation credit. Therefore, as required by U.S. GAAP, a $4.4 benefit was reflected in the three months ended March 31, 2013 as a discrete event. The “look-through” exemption for foreign earnings provision and the research and experimentation credit has not yet been extended for 2014, causing an increase in the effective tax rate

Page 21 of 50

DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

of approximately 1.0 percentage point for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013.  The increase in the effective tax rate for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013, was not significant.

As a result of the devaluation of the Venezuelan bolivar on February 8, 2013, the Company recorded a nondeductible foreign exchange loss in its Consolidated Statement of Income of approximately $3.1 for the three months ended March 31, 2013.  Had this amount been deductible, our effective tax rate would have been 1.0 percentage point lower for the nine months ended September 30, 2013. 

Certain foreign subsidiaries are operating under tax holiday arrangements that will expire during 2014 and 2015, subject to potential extensions.  For the three and nine months ended September 30, 2014, the impact of these tax holiday arrangements lowered income tax expense by $1.7($0.02 per diluted share) and$4.6  ($0.06 per diluted share), respectively, and by$1.9  ($0.02  per diluted share) and $5.2  ($0.07 per diluted share) for the three and nine months ended September 30, 2013, respectively.

Except for earnings in our Indian subsidiary, and certain current earnings of our Luxembourg subsidiary, management has decided to indefinitely reinvest the unremitted earnings of the Company’s foreign subsidiaries and, therefore, no provision for U.S. federal or state income taxes has been provided on those foreign earnings. If any indefinitely reinvested foreign earnings are distributed, in the form of dividends or otherwise, the Company could be subject to additional U.S. income taxes (subject to adjustment for foreign tax credits), as well as withholding taxes imposed by certain foreign jurisdictions.

10.Long-Term Debt

Long-term debt consists of the following:

	September 30,		December 31,
	2014		2013
Amended Credit Facility	$	725.5		$              884.5
6½% Senior Subordinated Notes due May 2021		375.0		375.0
Bank overdraft facility		-		4.6
Other indebtedness		16.6		22.9
Total debt		1,117.1		1,287.0
Less:  current portion		(31.3)		(40.1)
Total long-term debt	$	1,085.8		1,246.9

On June 27, 2014, we entered into an amendment (the “First Amendment”) to our committed credit agreement (as amended by the First Amendment, the “Amended Credit Facility”).  The First Amendment amends certain terms and provisions of our committed credit agreement to incorporate recent changes to the ownership structure of certain legal entities completed by the Company in order to facilitate the Company’s cash management activities.

At September 30, 2014, the Company was in compliance with its debt covenants.

Page 22 of 50

DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

Senior Subordinated Notes

The carrying and fair values of the Company’s Senior Subordinated Notes were as follows:

	September 30, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
6½% senior subordinated notes due May 2021	$	375.0	$	403.6	$	375.0	$	400.5

Due to the variable rate nature of all of the Company’s other long-term debt, the carrying values materially approximate their fair values as the rates are comparable to current market rates at which debt with similar terms could be obtained.

11. Pension Plans

The components of net pension expense were as follows:

	U.S. Plans								Non-U.S. Plans
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013		2014		2013		2014		2013
Service cost	$	0.9	$	0.9	$	2.7	$	2.9	$	0.6	$	1.4	$	1.8	$	4.2
Interest cost		3.2		2.9		9.8		8.7		1.4		1.6		4.1		4.7
Expected return on plan assets		(4.6)		(4.0)		(13.8)		(12.1)		(1.6)		(1.8)		(4.9)		(5.1)
Amortization of net actuarial
loss		0.6		1.9		2.0		5.9		-		-		0.2		0.2
Amortization of prior service
cost		-		-		0.1		-		-		0.1		0.1		0.1
Net pension expense	$	0.1	$	1.7	$	0.8	$	5.4	$	0.4	$	1.3	$	1.3	$	4.1

The fair value measurement of certain plan assets (approximately 3.5% of total plan assets) is derived using significant unobservable inputs (Level 3).  Level 3 assets consist of annuities held as investments within the plan that cover a set amount of liabilities and the effects of changes in the values of the related assets and liabilities are generally offsetting.  Level 3 assets also consist of annuities that require contribution premiums to fund ongoing liabilities as required by foreign governmental regulations.  Annuities are valued using standard actuarial calculations such as discount rates, mortality rates and participant population.

The Company made pension contributions of$4.8and $13.8, respectively, duringthe threeand nine months ended September 30, 2014, and $7.2 and $17.3, respectively, during the three and nine months ended September 30, 2013.

Page 23 of 50

DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

12.Post-Retirement Benefits Other than Pensions

The components of the net post-retirement benefit expense were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Interest cost	$	0.2	$	0.1	$	0.5	$	0.5
Amortization of net actuarial loss		-		0.2		-		0.4
Net post-retirement benefits expense	$	0.2	$	0.3	$	0.5	$	0.9

13.Commitments and Contingencies (€ and R$ in millions)

Legal Proceedings

We are involved in various litigation, claims and administrative proceedings 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. We are indemnified by our former owner, Ingersoll Rand Company Limited (“Ingersoll Rand”), for certain of these matters as part of Ingersoll Rand’s sale of the Company and by the sellers of Grupo Guascor for certain of these matters in connection with our acquisition of Grupo Guascor, S.L. (“Guascor”) in May 2011.  While adverse decisions in certain of these litigation matters, claims and administrative proceedings could have a material effect on a particular period’s results of operations, subject to the uncertainties inherent in estimating future costs for contingent liabilities and the benefit of the indemnitiesfrom Ingersoll Rand and the sellers of Guascor, management believes that any future accruals with respect to these currently known contingencies would not have a material effect on the financial condition, liquidity or cash flows of the Company.

Shareholder Litigation

A putative class action lawsuit challenging the proposed merger with Siemens Energy, Inc. was filed on September 24, 2014 on behalf of Dresser-RandGroup Inc. stockholders in the Delaware Court of Chancery.  The action is captioned Soffer v. Volpe et al., C.A. No. 10165-CB (Del. Ch.).  The complaint in the Soffer action alleges that the directors of the Company breached their fiduciary duties to stockholders by engaging in a flawed sale process, agreeing to sell the Company for inadequate consideration and agreeing to improper deal protection terms in the Merger Agreement.  In addition, the lawsuit alleges that the Company, Siemens and Dynamo Acquisition Corporation, the Delaware subsidiary formed by Siemens in connection with the transaction, aided and abetted these purported breaches of fiduciary duty.  The lawsuit seeks, among other things, an injunction barring the merger.On October 21, 2014, plaintiffs amended the complaint to allege as additional basis for relief that the directors of the Company engaged in self-dealing because they will benefit from their compensation arrangements and/or the sale of their personal stakes in the Company and that the preliminary proxy statement filed by the Company on October 9, 2014 fails to provide stockholders with material information about the transaction and/or is materially misleading.  On October 24, 2014, Construction Industry & Laborers Union Local 872 Pension A Trust v. Dresser-Rand Group, Inc., et al, C.A. No. 10285-CB (Del. Ch.) was filed in the Delaware Court of Chancery.  This complaint contains claims and allegations similar to those in the pre-amendmentSoffer complaint and seeks similar relief on behalf of the same putative class.  The Company believes that the lawsuits are without merit.

Guascor Purchase Price Dispute

On May 4, 2011, the Company acquired all of the issued and outstanding capital stock of Guascor pursuant to a Share Purchase Agreement (the “SPA”) for approximately $543.2.  The purchase price was subject to a further adjustment to the extent that net debt (debt minus cash) at the end of business on May 4, 2011, was different from €124.5. Pursuant to the SPA, this adjustment is to be computed on the basis of Spanish generally accepted accounting principles (“SGAAP”).

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DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

The Company and the sellers of Guascor (“Sellers”) are in dispute about the amount of the purchase price adjustment set out in the SPA. In some cases, the Sellers and the Company have opposing views as to the amount that should be included in the price adjustment.  In other cases, the Sellers and the Company are in dispute as to whether certain items should be included in the net debt computation.  In accordance with the provisions of the SPA, the parties are resolving this dispute under an arbitration in the International Court of Commerce (“ICC”) and before a French court-appointed expert.  Based upon its interpretation of Spanish GAAP, the Company has unresolved disputes totaling approximately $42.4 with the Sellers.

The Company has recorded a receivable from the Sellers for the purchase price adjustment, net of an allowance for the Company’s best estimate of amounts collectible.  This allowance was established by considering, for each disputed item, the Company’s view of its position under SGAAP, uncertainties around the expert’s interpretation of SGAAP, and the collectability of the amounts. As additional information becomes known and disputed items are resolved, changes to the allowance will be recorded directly to net income.  The final resolution of these amounts could take several months and potentially years if appeals are pursued.  The final amount could be materially different than the net receivable recorded by the Company.  The Company, however, does not believe that the difference could have a material adverse effect on its operating results, financial condition, liquidity or cash flows.

Painted Post Labor Litigation

In November 2007, Local 313 of IUE-CWA, the union that represents certain employees at the Company’s Painted Post, New York, facility (the “IUE”) made an offer to have its striking members return to work under the terms of the previously expired union agreement.  The Company rejected that offer and locked out these represented employees.  Approximately one week later, after reaching an impasse in negotiations, the Company exercised its right to implement the terms of its last contract offer, ended the lockout, and the employees represented by the IUE agreed to return to work under the implemented terms.  Subsequently, the IUE filed several unfair labor practice (“ULP”) charges against the Company with Region 3 of the National Labor Relations Board (“NLRB”), asserting multiple allegations arising from the protracted labor dispute, its termination, contract negotiations and related matters.

Region 3 of the NLRB decided to proceed to complaint on only one-third of the ULP allegations asserted by the IUE, while the remaining claims were dismissed.  Notably, the NLRB found that many of the critical aspects of the Company’s negotiations with the IUE were handled appropriately, including the NLRB’s findings that the union’s strike was not an unfair labor practice strike and the Company’s declaration of impasse and its unilateral implementation of its last offer were lawful. The Company, therefore, continued to operate under a more contemporary and competitive implemented contract offer while contract negotiations with the IUE continued in 2008 and 2009.  In November 2009, a collective bargaining agreement between the IUE and the Company was ratified, which agreement was renegotiated in 2013 and extended to March 2016.

The claims that proceeded to complaint before the NLRB included the Company’s handling of the one week lockout, the negotiation of the recall process used to return employees to the facility after reaching impasse and lifting the lockout, and the termination of two employees who engaged in misconduct on the picket line during the strike.  The trial of this matter took place before a NLRB Administrative Law Judge (the “ALJ”) in Elmira and Painted Post, New York, during the summer of 2009.  On January 29, 2010, the ALJ issued his decision in which he found in favor of the union on some issues and upheld the Company’s position on others.  The Company timely appealed the ALJ’s rulings against the Company to the NLRB in Washington, D.C.  On August 6, 2012, the NLRB affirmed the ALJ’s rulings.  The Company timely appealed the matter to the U.S. Fifth Circuit Court of Appeals, which stayed the proceedings in July 2013 pending a ruling by the U.S. Supreme Court on a constitutional issue, in an unrelated case, that is also in controversy in the Company’s appeal.  The U.S. Supreme Court’s decision on the constitutional matter was decided in June 2014. That decision held that the NLRB that ruled on this and other cases was invalidly appointed by the President and the matters decided by that NLRB were also set aside as invalid. As a result, this matter has been returned to the current and validly appointed NLRB to be reheard in its entirety. The Company continues to believe it complied with the law and that it will ultimately prevail with respect to these ULP allegations.  The litigation process, including further appeals, could reasonably take one to two years to resolve with finality.  Given the broad scope of possible remedies that may apply pursuant to conflicting case law, the Company cannot estimate the range of loss, if any, at this time.  Although the ultimate outcome of these matters cannot be ascertained at this

Page 25 of 50

DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

time, it is the opinion of management that the resolution of such matters will not have a material adverse effect on the Company’s financial condition.

Banco Santos Litigation

In July 2004, Guascor SA and Jaguari Energetica SA, subsidiaries of Guascor (collectively, the “GG Entities”), entered into an agreement (the “BNDES Agreement”) with the Bank of National Economic and Social Development (“BNDES”) for the construction of a hydroelectric dam in Rio Grande do Sul, Brazil (the “Project”).  Pursuant to the terms of the BNDES Agreement, in August 2004, the GG Entities entered into a separate agreement (the “Banco Santos Agreement”) with Banco Santos, a Brazilian bank previously based in Sao Paulo, Brazil.  Per the terms of the Banco Santos Agreement, Banco Santos and the GG Entities agreed that: (i) in exchange for a fee paid by the GG Entities, Banco Santos would establish a reserve in favor of the GG Entities in the amount of R$3.6 (approximately $1.5) (the “Reserve”) to ensure that funds for a twelve month term would be available (if needed) by the GG Entities to fund their performance obligations under the BNDES Agreement; (ii) the GG Entities would issue twelve banking credit notes (the “Notes”) to Banco Santos (one for each of the twelve months), under which Notes the GG Entities would be obligated to make a payment to Banco Santos if the GG Entities used the applicable portion of the Reserve associated with a Note; and (iii) no portion of the Reserve would be invested by Banco Santos in any high risk investments.  The GG Entities completed the Project in December 2006 and fulfilled their obligations under the BNDES Agreement, without using any portion of the Reserve.  Accordingly, the Company believes that, pursuant to the terms of the Banco Santos Agreement, none of the Notes securing the Reserve became due or payable by the GG Entities to Banco Santos.  

In September 2004, Banco Santos, without the knowledge or consent of the GG Entities, transferred the Reserve to its affiliates, Santos Credit Yield (“SCY”) and Santos Credit Master (“SCM,” and together with SCY, the “BS Affiliates”).  Upon the receipt of the Reserve, the BS Affiliates invested the funds in a high risk investment, resulting in the loss of the entire Reserve.  In addition, concurrently with the transfer of the Reserve, Banco Santos assigned its rights in the Notes to the BS Affiliates.  Shortly after the assignment of the Notes, Banco Santos declared bankruptcy.        

The GG Entities commenced an action (the “Declaratory Action”) in the Civil Courts in the State of Sao Paulo, Brazil, in April 2005 seeking a declaratory judgment that the BS Affiliates were barred from recovering any amounts with regard to the Notes because such Notes were null and void pursuant to the terms of the Banco Santos Agreement.  In December 2010, while the Declaratory Action was still pending, the BS Affiliates filed a separate action (the “BS Action”) in the Sao Paulo Civil Court seeking to recover from the GG Entities the amount of the Reserve.  The Court stayed the BS Action in September 2011 pending a final ruling in the Declaratory Action.  The GG Entities appealed the Court’s denial of their request for declaratory relief, and the Appellate Court ruled in our favor, and we were not ordered to pay any amounts.  Banco Santos did not agree with the decision and has appealed to the Supreme Court.

The Company believes that the chances of losing the case in the Supreme Court are remote, based on the factual circumstances and the applicable law, that Banco Santos and the BS Affiliates violated the terms of the Banco Santos Agreement and the payment terms of the Notes, and that the GG Entities should prevail in the final decision of the Declaratory Action and a similar case filed by the BS Affiliates.  Notwithstanding, the ultimate outcome of these proceedings is pending the Supreme Court’s decision and cannot be ascertained at this time.  The Company estimates that the total aggregate exposure for damages, interest and attorneys’ fees could be up to R$46.4  (approximately $19.0).  Moreover, the Company has an indemnification claim against the sellers of Guascor with regard to this matter.

Italian Value-Added Tax Claim

The Company is in litigation with the Italian tax authorities regarding value-added taxes for tax years 2005-2008 and the application of Italian and European Union laws.  The Company received an adverse judgment from the Italian Tax Court (i.e., the Commissione Tributaria Provinciale Di Genova) in February 2012 for tax years 2005-2006 for approximately €4.2 ($5.3).  On March 6, 2014, as requested by the Italian Tax Court with regard to tax years 2007 and 2008, the Court of Justice of the European Union issued an advisory, preliminary ruling, which ruling supported the Company’s position with regard to the value-added tax regulations that no such taxes are owed.  The Company then requested that the Italian Tax Court issue its judgment with regard to tax years 2007 and 2008, which judgment the Company intends to present to the appeals court in connection with its appeal of the Italian Tax Court’s adverse judgment with respect to tax years 2005 and

Page 26 of 50

DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

2006.On September 24, 2014, the Italian Tax Court issued its judgment with regard to tax years 2007 and 2008 in accordance with European Union recommendations.  The Italian tax authorities have six months to file an appeal.  The next hearing which will review tax years 2005 and 2006 is scheduled for November 2014.  The Company intends to request the withdrawal of the tax authority’s claim with respect to tax years 2005 and 2006.  The Company estimates the total aggregate exposure for taxes, interest and penalties could be up to €10.1 ($12.8).

14.   Warranties

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 based on historical experience and is adjusted as required.

The following table represents the changes in the product warranty liability:

	Nine Months Ended September 30,
	2014		2013
Beginning balance	$	21.4	$	20.1
Provision for warranties issued during period		10.2		13.5
Adjustments to warranties issued in prior periods		1.1		1.7
Payments during the period		(12.7)		(14.9)
Foreign currency adjustments		(0.4)		(0.7)
Ending balance	$	19.6	$	19.7

15.Segment Information

The Company has 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 predominately highly engineered solutions to new requests from clients. New units also include standardized equipment such as engines and single stage steam turbines. The segment includes engineering, manufacturing, project management, packaging, testing, sales and administrative support.

2) Aftermarket parts and services consist of support solutions for the existing population of installed equipment and the operation and maintenance of several types of energy plants. The segment includes engineering, manufacturing, project management, installation, commissioning, start-up and other field services, repairs, overhauls, refurbishment, sales and administrative support.

These functions have been defined as the operating segments of the Company because they are the segments (1) that engage in business activities from which revenues are earned and expenses are incurred; (2) whose operating results are regularly reviewed by the Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and (3) for which discrete financial information is available.

Unallocated amounts represent expenses and assets that cannot be assigned directly to either reportable segment because of their nature.  Unallocated net expenses include certain corporate expenses and research and development expenses.  Assets that are directly assigned to the two reportable segments are trade accounts receivable, net inventories and goodwill.  Unallocated assets include cash, prepaid expenses and other, deferred taxes, property, plant and equipment and intangible assets. There are no significant intercompany transactions between our reportable segments.

Page 27 of 50

DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

Segment results for the three and nine months ended September 30, 2014 and 2013 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Revenues
New units	$	338.7	$	272.9	$	1,032.7	$	1,136.3
Aftermarket parts and services		345.1		361.0		978.6		1,069.3
Total revenues	$	683.8	$	633.9	$	2,011.3	$	2,205.6
Income from operations
New units	$	17.3	$	33.5	$	60.1	$	87.9
Aftermarket parts and services		90.0		75.0		210.3		234.2
Unallocable		(33.4)		(27.1)		(90.0)		(88.0)
Total income from operations	$	73.9	$	81.4	$	180.4	$	234.1
Depreciation and amortization
New units	$	10.2	$	8.7	$	34.2	$	34.0
Aftermarket parts and services		12.9		12.5		36.5		33.1
Total depreciation and amortization	$	23.1	$	21.2	$	70.7	$	67.1

Total assets by segment were as follows:

	September 30,		December 31,
	2014		2013
Total assets (including goodwill)
New units	$	1,036.3	$	1,113.8
Aftermarket parts and services		1,336.2		1,305.0
Unallocable		1,137.8		1,319.0
Total assets	$	3,510.3	$	3,737.8

16.Incentive Stock-Based Compensation Plans

During the nine months ended September 30,  2014, the Compensation Committee of the Company’s Board of Directors, and with respect to the President and Chief Executive Officer, the independent members of the Board of Directors, approved grants of options and stock appreciation rights for 297,007 shares of common stock and grants of 332,737 shares of time-vested restricted stock units to employees under the Dresser-Rand Group Inc. 2008 Stock Incentive Plan and approved the issuance of Performance Restricted Stock Units with a target grant amount of 69,499 restricted stock units.

The Company also granted 15,736 shares of stock to non-employee Directors in February 2014. 

The difference between basic weighted-average shares outstanding and diluted weighted-average shares outstanding in the computation of earnings per share presented in the Consolidated Statement of Income is comprised entirely of the dilutive effect of the stock-based compensation awards described above for all periods presented.

Page 28 of 50

DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

17.Accumulated Other Comprehensive Income (Loss) (“AOCI”)

AOCI and the changes in AOCI by component were as follows:

	Foreign				Pension and
	Currency		Unrealized		Other
	Translation		(Loss) Gain on		Postretirement
	Adjustments		Derivatives		Benefit Plans		Total
At December 31, 2013	$	(69.5)	$	(0.4)	$	(48.9)	$	(118.8)
Other comprehensive loss before reclassifications		(69.4)		-		-		(69.4)
Amounts reclassified from AOCI		-		0.2		1.4		1.6
Net current period other comprehensive (loss) income		(69.4)		0.2		1.4		(67.8)
At September 30, 2014	$	(138.9)	$	(0.2)	$	(47.5)	$	(186.6)

During the three and nine months ended September 30, 2014, foreign currency translation adjustments in accumulated other comprehensive loss were $(70.9) and$(69.4), respectively, primarily due to the weakening of the Euro of approximately 7.8% during the three months ended September 30, 2014.

	Foreign				Pension and
	Currency		Unrealized		Other
	Translation		(Loss) Gain on		Postretirement
	Adjustments		Derivatives		Benefit Plans		Total
At December 31, 2012	$	(51.3)	$	(0.7)	$	(82.7)	$	(134.7)
Other comprehensive loss before reclassifications		(17.5)		-		-		(17.5)
Amounts reclassified from AOCI		-		0.2		4.1		4.3
Net current period other comprehensive (loss) income		(17.5)		0.2		4.1		(13.2)
At September 30, 2013	$	(68.8)	$	(0.5)	$	(78.6)	$	(147.9)

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DRESSER-RAND GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ―  (continued)

(Unaudited)

($ in millions, except per share amounts)

Items reclassified out of AOCI into net income for the three and nine months ended September 30, 2014 and 2013 were as follows:

	Amount Reclassified From AOCI into Net Income
	Three Months Ended September 30,				Nine Months Ended September 30,				Affected Line Item in the Consolidated Statement
Details About AOCI Components	2014		2013		2014		2013		of Income
Unrealized gain on derivatives	$	(0.1)	$	-	$	(0.3)	$	(0.3)	Interest expense, net
		-		-		0.1		0.1	Provision for income taxes
	$	(0.1)	$	-	$	(0.2)	$	(0.2)	Net of tax
Pension and other postretirement benefit plans
Amortization of net actuarial loss	$	(0.5)	$	(2.2)	$	(2.4)	$	(6.5)	(a)
		0.1		0.8		1.0		2.4	Provision for income taxes
	$	(0.4)	$	(1.4)	$	(1.4)	$	(4.1)	Net of tax
Total reclassifications, net of tax	$	(0.5)	$	(1.4)	$	(1.6)	$	(4.3)	Net of tax

(a)These items are included in the computation of net pension expense and net post-retirement benefits expense. See Note 11, Pension Plans and Note 12, Post-Retirement Benefits Other than Pensionsfor additional information.

18. Significant Concentration of Credit Risk

At September 30, 2014, approximately 16.2%of the Company’s net accounts receivable was from Petroleos de Venezuela, S.A. (“PDVSA”).  Historically, the Company has collected its outstanding receivables from PDVSA. Payments of approximately $53.3 were received during the nine months ended September 30, 2014.  The Company believes that, based on this historical experience and discussions with PDVSA, the outstanding balance is ultimately collectible.  Consequently, a provision for bad debts has not been recorded for these accounts receivable.

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ($ in millions)

Overview

We are among the largest global suppliers of custom-engineered rotating equipment solutions for long-life, critical applications in the oil, gas, chemical, petrochemical, process, power generation, military and other industries worldwide. Our equipment and service solutions are also used in energy infrastructure, including oil and gas, environmental solutions and power generation.

Our products and services are widely used in oil and gas applications that include hydrogen recycle, make-up, wet gas and other applications for the refining industry; cracked gas, propylene and ethylene compression for petrochemical facilities; ammonia syngas, refrigeration, and carbon dioxide compression for fertilizer production; a number of compression duties for chemical plants; gas gathering, export, lift and re-injection of natural gas or carbon dioxide (“CO₂”) to meet regulatory requirements or for enhanced oil recovery in the upstream market; gas processing, main refrigeration compression and a variety of other duties required in the production of liquefied natural gas (“LNG”); gas processing duties, storage and pipeline transmission compression for the midstream market; synthetic fuels; and steam or gas turbine mechanical drives or power generation packages for floating production, storage and offloading (“FPSO”) vessels and offshore platforms as well as for a variety of compression and pumping applications in various segments of the oil and gas market. We are also a supplier of diesel and gas engines that provides customized energy solutions across worldwide energy infrastructure markets based upon reciprocating engine power systems technologies.

Our custom-engineered products are also used in other advanced applications in the environmental markets we serve. These applications use renewable energy sources, reduce carbon footprint, recover energy and/or increase energy efficiency. These products include, among others: compression technologies for carbon capture and sequestration (“CCS”); hot gas turbo-expanders for energy recovery in refineries and certain chemical facilities; co- and tri-generation combined heat and power (“CHP”) packages for institutional and other clients; and a large number of steam turbine applications to generate power using steam produced by recovering exhaust heat from the main engines in ships, recovering heat from mining and metals production facilities and exhaust heat recovery from gas turbines in on-shore and off-shore sites. We also have experience in the design, construction and development of power generation and cogeneration plants and other energy solutions. Other biomass and biogas applications for our steam turbine product line include gasification of municipal solid waste or incineration of wood, palm oil, sugar or pulp and paper residues to generate power. Our equipment is used for compressed air energy storage (“CAES”) for utility sized power generation. A CAES plant makes use of our classes of axial compressors, centrifugal compressors, gas expanders, controls and rotating equipment system integration capabilities. These applications are environmentally-friendly and provide unique response features for grid management. Other general industrial markets served include steel and distributed power generation. We operate globally with manufacturing facilities in the United States (“U.S.”), France, United Kingdom (“UK”), Germany, Spain, Norway, Brazil and India.

In addition to our products and services, we provide complete, turnkey compression and power generation solutions to our clients in the oil, gas and environmental markets we serve.  These solutions typically incorporate one or more of our products and services into the compression or power generation facility, which may include process equipment, such as coolers, vessels, gas dehydration systems, process and utility piping and valves, process instrumentation, transformers and switch gears, and facility controls, as well as civil works and structures.  We manage the complete project, including engineering, project controls, procurement, construction, installation, commissioning and start-up of the facility.

We provide a wide array of products and services to our worldwide client base in over 150 countries from our global locations in 18 U.S. states and 32 countries through our 73 sales offices, 49 service and support centers, including six engineering and research and development centers, and 14 manufacturing locations.

Our solutions-based service offering combines our industry-leading technology, extensive worldwide service center network, deep product expertise, project management capabilities and a culture of safety (which we believe to be industry-leading), compliance and continuous improvement. This approach drives our growth as we offer integrated service solutions that help our clients lower the life cycle costs of their rotating equipment, minimize adverse environmental impact and maximize returns on their production and processing equipment. We believe our business model and alliance-based approach built on alliance and frame agreements align us with our clients who increasingly choose service providers that can help optimize performance over the entire life cycle of their equipment. Our alliance/frame agreement program encompasses the provision of new units and/or parts and services. We offer our clients a dedicated team, advanced business tools, a 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.

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From a long-term perspective, we believe that the fundamentals driving trends in our industry include population and economic growth; maturing producing oil and gas fields worldwide that require greater use of compression equipment to maintain production levels; the advancement of shale gas technologies which require compression for both transmission and gas processing activities; the increase in demand for electricity requiring greater use of power generation equipment; the increase in demand for natural gas that is driving growth in gas production, storage, transmission infrastructure and LNG; international regulatory and environmental initiatives, including clean fuel legislation and stricter emission controls; the aging installed base of our class of equipment that is increasing demand for aftermarket parts and services, overhauls and upgrades; and the increased outsourcing of equipment maintenance and operation.  With respect to our long-term business strategy, certain of our key strategic objectives include:

· Increasing sales of aftermarket parts and services to the installedbase of Dresser-Rand equipment;

· Expanding sales of aftermarket parts and services to non-Dresser-Rand equipment in our class;

· Growing alliances;

· Expanding our performance-based long-term service contracts;

· Introducing new and innovative products and technologies;

· Improving profitability; and

· Selectively pursuing acquisitions.

On August 6, 2014, representatives of the Company received a non-binding indicative term sheet for a potential merger-of-equals from a strategic partner.  Among other items, the non-binding indicative term sheet requested a four-week period of exclusive negotiation between the Company and the strategic partner.  The potential merger-of-equals with the strategic partner was not consummated.  On September 21, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Siemens Energy, Inc. (“Siemens”) whereby Siemens will acquire us (the “Merger”).  The completion of the transaction (“Merger”) is subject to satisfaction or waiver of certain closing conditions including, among others, customary regulatory approvals and the approval of the transaction by our stockholders.

Additional information regarding the proposed transactions and the related terms and conditions is set forth in our Current Report on Form 8-K, filed on September 23, 2014, as well as Note 1, Basis of Presentation in the consolidated financial statements.

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 predominately highly engineered solutions to new requests from clients. New units also include standardized equipment such as engines and single stage steam turbines. The segment includes engineering, manufacturing, project management, packaging, testing, sales and administrative support.

2) Aftermarket parts and services consist of support solutions for the existing population of installed equipment and the operation and maintenance of several types of energy plants. The segment includes engineering, manufacturing, project management, installation, commissioning, start-up and other field services, repairs, overhauls, refurbishment, sales and administrative support.

These functions have been defined as the operating segments of the Company because they are the segments (1) that engage in business activities from which revenues are earned and expenses are incurred; (2) whose operating results are regularly reviewed by the Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and (3) for which discrete financial information is available.

Unallocated amounts represent expenses and assets that cannot be assigned directly to either reportable segment because of their nature.  Unallocated net expenses include certain corporate expenses and research and development expenses.  Assets that are directly assigned to the two reportable segments are trade accounts receivable, net inventories and goodwill.  Unallocated assets include cash, prepaid expenses and other, deferred taxes, property, plant and equipment and intangible assets. There are no significant intercompany transactions between our reportable segments.

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Results of Operations

Three months ended September 30, 2014, compared to the three months ended September 30, 2013:

For the three months ended September 30, 2014, the Company achieved net income attributable to Dresser-Rand of $30.8, or $0.40 per diluted share, compared with net income attributable to Dresser-Rand of $49.4 million, or $0.64 per diluted share for the three months ended September 30, 2013. The Company generated operating income of $73.9 in the three months ended September 30, 2014, which includes $10.5 of transaction-related expenses. Net income attributable to Dresser-Rand for the three months ended September 30, 2014 was also reduced by approximately $11.7 associated with the Company’s acquisition of Ramgen, which consists of a loss of $18.3 related to writing down its previously owned interest and a gain of $6.6 associated with the excess of the fair value of the assets acquired over the consideration paid.

	Three Months Ended			Three Months Ended			Period to Period Change
	September 30, 2014			September 30, 2013			2013 to 2014		% Change
Consolidated Statement of Operations Data:
Revenues	$	683.8	100.0%	$	633.9	100.0%	$	49.9	7.9%
Cost of sales		501.6	73.4		451.1	71.2		50.5	11.2%
Gross profit		182.2	26.6		182.8	28.8		(0.6)	(0.3)%
Selling and administrative expenses		92.0	13.5		93.1	14.7		(1.1)	(1.2)%
Research and development expenses		5.8	0.8		8.3	1.3		(2.5)	(30.1)%
Transaction-related expenses		10.5	1.5		-	0.0		10.5	NM
Income from operations		73.9	10.8		81.4	12.8		(7.5)	(9.2)%
Interest expense, net		(13.0)	(1.9)		(7.8)	(1.2)		(5.2)	66.7%
Other expense, net		(17.7)	(2.6)		(8.1)	(1.3)		(9.6)	118.5%
Income before income taxes		43.2	6.3		65.5	10.3		(22.3)	(34.0)%
Provision for income taxes		11.9	1.7		15.5	2.4		(3.6)	(23.2)%
Net income		31.3	4.6		50.0	7.9		(18.7)	(37.4)%
Net income attributable to
noncontrolling interest		(0.5)	(0.1)		(0.6)	(0.1)		0.1	(16.7)%
Net income attributable to Dresser-Rand	$	30.8	4.5%	$	49.4	7.8%	$	(18.6)	(37.7)%
Bookings	$	734.5		$	671.1		$	63.4	9.4%
Backlog - ending	$	2,787.9		$	2,986.0		$	(198.1)	(6.6)%

Revenues.   Revenues were $683.8 for the three months ended September 30, 2014, compared to $633.9 for the three months ended September 30, 2013, an increase of $49.9 or 7.9%. Generally, oil prices and other macroeconomic conditions that affect the oil and gas industry have an impact on our business over an extended period of time. On a quarterly or annual basis, however, there is typically not a direct correlation of short-term volatility in these factors to our periodic financial results. Fluctuations in revenues and bookings are generally due to variability in the timing and size of very large orders in the new units segment, which is typical in the oil and gas industry. This occurs because our equipment, in many cases, is used in very large capital projects that take years to plan and execute, and such projects do not occur on a regular or consistent basis due to their size, location, technical resources, client capital expenditure constraints and long-term relationship to global energy supply and demand. While a change in these factors at a macroeconomic level will tend to have a corresponding overall effect on our revenue, the timing of such effect on our quarterly or even annual revenues is not directly correlated because of the very long lead times required to evaluate the macroeconomic landscape and then plan, permit and execute the projects. Furthermore, the highly engineered nature of our worldwide products and services does not easily lend itself to measuring the impact of price, volume and mix on changes in our total revenues from year to year. Nevertheless, based on factors such as measures of labor hours and purchases from suppliers, revenues increased due to higher volume during the three months ended September 30, 2014 as a result of the timing issues discussed above.Revenues also increased for the three months ended September 30, 2014, as a result of the timing of aftermarket parts orders, particularly in Latin America.  Revenues were negatively impactedby our six cogeneration facilities in Spain.  The Spanish government published a ministerial order on June 20, 2014, that reflects an approximate 38% reduction in the tariffs payable with respect to such facilities.  In connection with the order being issued and the reduction of the tariffs and

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the suspension of operations at the facilities, revenues for the three months ended September 30, 2014 were lower by approximately  $33.3.

Cost of sales.  Cost of sales was $501.6 for the three months ended September 30, 2014, compared to $451.1 for the three months ended September 30, 2013.  As a percentage of revenues, cost of sales was 73.4% for the three months ended September 30, 2014, compared to 71.2% for the three months ended September 30, 2013.  The increase in cost of sales as a percentage of revenues from the three months ended September 30, 2013 to the three months ended September 30, 2014 was principally the result of a  shift in mix from our aftermarket parts and services segment to our new units segment.A better mix of projects within each segment partially offset this impact.Additionally, progress on our value engineering initiatives has lagged the competitive pressures in the market reflecting higher costs as a percentage of sales.

Gross profit.  Gross profit was $182.2 for the three months ended September 30, 2014, compared to $182.8 for the three months ended September 30, 2013.  As a percentage of revenues, gross profit was 26.6% for the three months ended September 30, 2014, compared to 28.8% for the three months ended September 30, 2013.  We experienced decreased gross profit as a percentage of revenues as a result of the factors discussed above.

Selling and administrative expenses.  Selling and administrative expenses were $92.0 for the three months ended September 30, 2014, compared to $93.1 for the three months ended September 30, 2013.  The decrease in selling and administrative expenses was generally the result of lower headcount, partially offset by cost inflation.  As a percentage of revenues, selling and administrative expenses decreased to 13.5% from 14.7%.

Research and development expenses.  Research and development expenses for the three months ended September 30, 2014, were $5.8, compared to $8.3 for the three months ended September 30, 2013.  The decline in research and development expenses is the result of changing expenditure profiles within major programs as they near market release.  We continue to effectively execute our strategy to introduce new and innovative products and technologies with a focus on key new product development initiatives for DATUM®, DATUM® Integrated Compression System (“ICS”), subsea compression, LNG, steam turbines and reciprocating engines.

Transaction-related expenses.  Transaction-related expenses were $10.5 for the three months ended September 30, 2014.  The pending acquisition of the Company is discussed more fully in Note 1, Basis of Presentation in the consolidated financial statements.

Income from operations.  Income from operations was $73.9 for the three months ended September 30, 2014, compared to $81.4 for the three months ended September 30, 2013, a decrease of $7.5 or 9.2%.  As a percentage of revenues, income from operations for the three months ended September 30, 2014, was 10.8% compared to 12.8% for the three months ended September 30, 2013.  The decrease in income from operations and income from operations as a percentage of revenues is the result of the factors discussed above.

Interest expense, net.  Interest expense, net was $13.0 for the three months ended September 30, 2014, compared to $7.8 for the three months ended September 30, 2013. The increase is primarily due to a settlement, which resulted in lower interest expense for the three months ended September 30, 2013.  During September 2013, Enviroil Italia, S.p.A. (“Enviroil”), an affiliate of the Company, entered into a settlement agreement in which the counterparty agreed to waive sanctions, interest and other related costs that the counterparty had previously claimed, and the Company had previously accrued.  Accordingly, upon entering into the settlement agreement, the interest portion of this accrual was reversed, resulting in a reduction in interest expense of $6.5.

Other expense, net.  Other expense, net was $17.7 for the three months ended September 30, 2014, compared to other expense, net of $8.1 for the three months ended September 30, 2013.  Other expense, net, consists principally of net currency gains and losses and earnings and losses on investments accounted for under the equity method of accounting.  On August 8, 2014, the Company consummated the agreement to acquire financial control of Ramgen Power Systems, LLC (“Ramgen”), an entity in which the Company held a 42.2% equity interest immediately preceding the acquisition date.  Because the business combination was achieved in stages, the Company re-measured its previously held equity interest in Ramgen at its acquisition-date fair value and recognized the resulting loss of $18.3 in other expense, net.  The Company has  a  history of bringing new products to market and as a result of its ability and commitment to continue pursuit of commercialization of the supersonic compressor, was able to negotiate a purchase price for which the fair value of identifiable assets acquired exceeded the fair value of the consideration transferred.  As a result, the Company recorded the fair value of the assets acquired in excess of the fair value of the consideration paid of $6.6 as a gain in other expense, net.  The acquisition of Ramgen is discussed more fully in Note 3, Acquisitions and Other Investments in the consolidated financial statements.

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Provision for income taxes.  Provision for income taxes was $11.9 for the three months ended September 30, 2014, and $15.5 for the three months ended September 30, 2013. Our estimated income tax provision for the three months ended September 30, 2014 and 2013, generally differs from the U.S. federal statutory rate of 35% because of different tax rates in foreign tax jurisdictions and certain exemptions and credits allowable for income tax purposes, offset by state and local income taxes, and valuation allowances on net operating loss carryforwards that more-likely-than-not will not be realized.  We will adjust the valuation allowances in the future if it becomes more-likely-than-not that the benefits of deferred tax assets willnot be realized.

The increase in the effective tax rate for the three months ended September30, 2014, as compared to the three months ended September 30, 2013, isprincipally due to an increased amount of net operating losses in certain foreign countries for which we could not record benefits under U.S.  GAAP, thus increasing the effective tax rate by approximately 9.4 percentage points.  In the three months ended September 30, 2014, the company was able to benefit previously unrecognized foreign tax credits, thus reducing the effective tax rate by approximately 7.3 percentage points.

Certain foreign subsidiaries are operating under tax holiday arrangements that will expire during 2014 and 2015, subject to potential extensions.  For the three months ended September 30, 2014 and 2013, the impact of these tax holiday arrangements lowered income tax expense by $1.7 ($0.02 per diluted share) and $1.9 ($0.02 per diluted share), respectively.

Noncontrolling interest.  Noncontrolling interest includes the share of net income and net losses in consolidated entities that are not 100% owned by us.

Bookings and backlog.   Bookings for the three months ended September 30, 2014, were $734.5 compared to $671.1 for the three months ended September 30, 2013, an increase of $63.4 or 9.4%.  The Company believes that the increase in bookings is primarily due to the timing of large orders in the new units segment as well as an increase in aftermarket parts orders, particularly in the U.S. and Latin America.The increase in bookings is partially offset by the change in the tariffs reflected in the Spanish ministerial order discussed above, which resulted in lower 2014 aftermarket bookings of approximately $33.3.Backlog was $2,787.9 at September 30, 2014, compared to $2,986.0 at September 30, 2013.

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Segment Analysis —  three months ended September 30, 2014, compared to three months ended September 30, 2013:

	Three Months Ended				Three Months Ended		Period to Period Change
	September 30, 2014				September 30, 2013		2013 to 2014		% Change
Revenues
New units	$	338.7	49.5%	$	272.9	43.1%	$	65.8	24.1%
Aftermarket parts and services		345.1	50.5%		361.0	56.9%		(15.9)	(4.4)%
Total revenues	$	683.8	100.0%	$	633.9	100.0%	$	49.9	7.9%
Gross profit
New units	$	39.5		$	55.3		$	(15.8)	(28.6)%
Aftermarket parts and services		142.7			127.5			15.2	11.9%
Total gross profit	$	182.2		$	182.8		$	(0.6)	(0.3)%
Income from operations
New units	$	17.3		$	33.5		$	(16.2)	(48.4)%
Aftermarket parts and services		90.0			75.0			15.0	20.0%
Unallocated		(33.4)			(27.1)			(6.3)	23.2%
Total income from operations	$	73.9		$	81.4		$	(7.5)	(9.2)%
Bookings
New units	$	349.6		$	265.4		$	84.2	31.7%
Aftermarket parts and services		385.2			405.7			(20.5)	(5.1)%
Total bookings	$	734.8		$	671.1		$	63.7	9.5%
Backlog - ending
New units	$	2,042.6		$	2,224.8		$	(182.2)	(8.2)%
Aftermarket parts and services		745.3			761.2			(15.9)	(2.1)%
Total backlog	$	2,787.9		$	2,986.0		$	(198.1)	(6.6)%

New Units

Revenues.  Revenues for this segment were $338.7 for the three months ended September 30, 2014, compared to $272.9 for the three months ended September 30, 2013, an increase of $65.8 or 24.1%.  The business impact of oil prices, other macroeconomic conditions and the timing and size of orders on this segment is more fully described above in the Revenues caption in the section titled Three months ended September 30, 2014, compared to the three months ended September 30, 2013.Based on factors such as measures of labor hours and purchases from suppliers, volumes increased during the three months ended September 30, 2014,principally as a result of the timing issues discussed in the section referenced above.

Gross profit.  Gross profit was $39.5 for the three months ended September 30, 2014, compared to $55.3 for the three months ended September 30, 2013.  Gross profit as a percentage of segment revenues was 11.7% for the three months ended September 30, 2014, compared to 20.3% for the three months ended September 30, 2013.  We experienced decreased gross profit as a percentage of sales in our new units segment due to a shift in fixed cost allocations from the aftermarket segment due to changes in the mix of products and volume.  Additionally, progress on our value engineering initiatives has lagged the competitive pressures in the market reflecting higher costs as a percentage of sales.

Income from operations.  Income from operations was $17.3 for the three months ended September 30, 2014, compared to $33.5 for the three months ended September 30, 2013.  As a percentage of segment revenues, income from operations was 5.1% for the three months ended September 30, 2014, compared to 12.3% for the three months ended September 30, 2013.  Income from operations as a percentage of revenues decreased compared to the prior year as a result of the factors discussed above.

Bookings and backlog.New units bookings for the three months ended September 30, 2014, were $349.6, compared to $265.4 for the three months ended September 30, 2013.The Company believes that the increase in bookings is primarily

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due tothe timing of large orders.  During the three months ended September 30, 2013, bookings were negatively impacted by delays in major projects, principally upstream, by our end-user clients in an effort to address their escalating capital costs relating to those projects.  Backlog was $2,042.6 at September 30, 2014, compared to $2,224.8 at September 30, 2013.

Aftermarket Parts and Services

Revenues.  Revenues for this segment were $345.1 for the three months ended September 30, 2014, compared to $361.0 for the three months ended September 30, 2013, a decrease of $15.9 or 4.4%.  Generally, oil prices and other macroeconomic conditions that affect the oil and gas industry have an impact on our business over an extended period of time, but less so in this segment. On a quarterly or annual basis, however, there is typically not a meaningful correlation of those factors to our periodic financial results. The decrease in revenues for the three months ended September 30, 2014, is attributable to our six cogeneration facilities in Spain.In connection with the change in the tariffs reflected in the Spanish ministerial order discussed above, our 2014 revenues were lower by approximately $33.3. The decline in revenues for the three months ended September 30, 2014, was partially offset by an increase in aftermarket parts orders, particularly in Latin America.

Gross profit.  Gross profit was $142.7 for the three months ended September 30, 2014, compared to $127.5 for the three months ended September 30, 2013.Gross profit as a percentage of segment revenues for the three months ended September 30, 2014, of 41.4% increased from 35.3% for the three months ended September 30, 2013.  Gross profit as a percentage of revenueincreased because ofa more favorable mix resulting from the suspension of activities at the Company’s Spanish cogeneration facilities and the increase in aftermarket parts orders mentioned above.

Income from operations.  Income from operations was $90.0 for the three months ended September 30, 2014, compared to $75.0 for the three months ended September 30, 2013.  As a percentage of segment revenues, income from operations increased to 26.1% for the three months ended September 30, 2014, from 20.8% for the three months ended September 30, 2013.  The changes in income from operations and income from operations as a percentage of segment revenues resulted principally from the factors discussed above.

Bookings and backlog.Bookings for the three months ended September 30, 2014, were $385.2, compared to $405.7 for the three months ended September 30, 2013. The decrease in bookings for the three months ended September 30, 2014, is attributable to our six cogeneration facilities in Spain.In connection with the change in the tariffs reflected in the Spanish ministerial order discussed above, our 2014 bookings are lower by approximately $33.3.The decline in bookings for the three months ended September 30, 2014, was partially offset by an increase in aftermarket parts orders, particularly in the U.S. and Latin America. Backlog was $745.3 at September 30, 2014, compared to $761.2 at September 30, 2013.

Nine months ended September 30, 2014, compared to the nine months ended September 30, 2013:

For the nine months ended September 30, 2014, the Company achieved net income attributable to Dresser-Rand of $76.5, or $0.99 per diluted share, compared with net income attributable to Dresser-Rand of $135.6, or $1.77 per diluted share for the nine months ended September 30, 2013. The Company generated operating income of $180.4 in the nine months ended September 30, 2014, which includes $10.5 of transaction-related expenses. Operating income for the nine months ended September 30, 2014, was also reduced by approximately $5.2 of severance cost associated with the suspension of operations at six of the Company’s cogeneration facilities in Spain, as well as the planned consolidation of operations in Germany. Net income attributable to Dresser-Rand for the nine months ended September 30, 2014 was reduced by approximately $11.7 associated with the Company’s acquisition of Ramgen which consists of a loss of $18.3 related to writing down its previously owned interest and a gain of $6.6 associated with the excess of the fair value of the assets acquired over the consideration paid.

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	Nine Months Ended			Nine Months Ended			Period to Period Change
	September 30, 2014			September 30, 2013			2013 to 2014		% Change
Consolidated Statement of Operations Data:
Revenues	$	2,011.3	100.0%	$	2,205.6	100.0%	$	(194.3)	(8.8)%
Cost of sales		1,503.2	74.7		1,652.6	74.9		(149.4)	(9.0)%
Gross profit		508.1	25.3		553.0	25.1		(44.9)	(8.1)%
Selling and administrative expenses		296.9	14.8		287.7	13.0		9.2	3.2%
Research and development expenses		20.3	1.0		31.2	1.5		(10.9)	(34.9)%
Transaction-related expenses		10.5	0.5		-	0.0		10.5	NM
Income from operations		180.4	9.0		234.1	10.6		(53.7)	(22.9)%
Interest expense, net		(38.6)	(2.0)		(35.5)	(1.6)		(3.1)	8.7%
Other expense, net		(18.2)	(0.9)		(7.1)	(0.3)		(11.1)	156.3%
Income before income taxes		123.6	6.1		191.5	8.7		(67.9)	(35.5)%
Provision for income taxes		46.9	2.3		52.7	2.4		(5.8)	(11.0)%
Net income		76.7	3.8		138.8	6.3		(62.1)	(44.7)%
Net income attributable to
noncontrolling interest		(0.2)	0.0		(3.2)	(0.2)		3.0	(93.8)%
Net income attributable to Dresser-Rand	$	76.5	3.8%	$	135.6	6.1%	$	(59.1)	(43.6)%
Bookings	$	2,019.7		$	2,207.3		$	(187.6)	(8.5)%
Backlog - ending	$	2,787.9		$	2,986.0		$	(198.1)	(6.6)%

Revenues.   Revenues were $2,011.3 for the nine months ended September 30, 2014, compared to $2,205.6 for the nine months ended September 30, 2013, a decrease of $194.3 or 8.8%.The business impact of oil prices, other macroeconomic conditions and the timing and size of large orders is more fully described above in the Revenues caption in the section titled Three months ended September 30, 2014, compared to the three months ended September 30, 2013.  Based on factors such as measures of labor hours and purchases from suppliers, revenues decreased due to lower volume during the nine months ended September 30, 2014 as a result of the timing issues discussed above.Specifically, we have been impacted byprevious delays by the Company’s end-user clients in placing equipment orders for major projects, mostly for upstream applications.Revenues were also negatively impactedby six of our cogeneration facilities in Spain.  The Spanish  government published a ministerial order on June 20, 2014, that reflects an approximate 38% reduction in the tariffs payable with respect to such facilities.  In connection with the order being issued and the reduction of the tariffs and the suspension of operations at the facilities,  revenues  for the nine months ended September 30, 2014  were lower by approximately  $95.1.The decrease in revenues for the nine months ended September 30, 2014, is also partially attributable to a reduction in shipments to one Latin American national oil company as the Company works collaboratively with this client to reduce outstanding receivables.The decrease in revenue on extended scope projects, which are accounted for under the percentage of completion method of accounting, was $72.0 for the nine months ended September 30, 2014.

Cost of sales.  Cost of sales was $1,503.2 for the nine months ended September 30, 2014, compared to $1,652.6 for the nine months ended September 30, 2013.  As a percentage of revenues, cost of sales was 74.7% for the nine months ended September 30, 2014, compared to 74.9% for the nine months ended September 30, 2013.  An improvement in mix within the segments was substantially offset by reduced operating leverage on fixed overhead costs as a result of lower volume.

Gross profit.  Gross profit was $508.1 for the nine months ended September 30, 2014, compared to $553.0 for the nine months ended September 30, 2013.  As a percentage of revenues, gross profit was 25.3% for the nine months ended September 30, 2014, compared to 25.1% for the nine months ended September 30, 2013.  We experienced increased gross profit as a percentage of revenues as a result of the factors discussed above.

Selling and administrative expenses.  Selling and administrative expenses were $296.9 for the nine months ended September 30, 2014, compared to $287.7 for the nine months ended September 30, 2013.  The increase in selling and administrative expenses was generally the result of cost inflation and  severance costof approximately $5.2 associated with

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the suspension of operations at six of our cogeneration facilities in Spain, as well as the planned consolidation of operations in Germany.As a percentage of revenues, selling and administrative expenses increased to 14.8% from 13.0%.

Research and development expenses.  Research and development expenses for the nine months ended September 30, 2014, were $20.3, compared to $31.2 for the nine months ended September 30, 2013.  The decline in research and development expenses is the result of changing expenditure profiles within major programs as they near market release.  We continue to effectively execute our strategy to introduce new and innovative products and technologies with a focus on key new product development initiatives for DATUM®, DATUM® ICS, subsea compression, LNG, steam turbines and reciprocating engines.

Transaction-related expenses.  Transaction-related expenses were $10.5 for the nine months ended September 30, 2014.  The pending acquisition of the Company is discussed more fully in Note 1, Basis of Presentation in the consolidated financial statements.

Income from operations.  Income from operations was $180.4 for the nine months ended September 30, 2014, compared to $234.1 for the nine months ended September 30, 2013, a decrease of $53.7 or 22.9%.  As a percentage of revenues, income from operations for the nine months ended September 30, 2014, was 9.0% compared to 10.6% for the nine months ended September 30, 2013.  The decrease in income from operations and income from operations as a percentage of revenues is the result of the factors discussed above.

Interest expense, net.  Interest expense, net was $38.6 for the nine months ended September 30, 2014, compared to $35.5 for the nine months ended September 30, 2013.The increase is primarily due to a settlement, which resulted in lower interest expense for the nine months ended September 30, 2013.  During September 2013, Enviroil, an affiliate of the Company, entered into a settlement agreement in which the counterparty agreed to waive sanctions, interest and other related costs that the counterparty had previously claimed, and the Company had previously accrued.  Accordingly, upon entering into the settlement agreement, the interest portion of this accrual was reversed, resulting in a reduction in interest expense of $6.5.  The increase in interest expense is partially offset by higher interest income for the nine months ended September 30, 2014, due to higher average interest-bearing cash balances.

Other expense, net.  Other expense, net was $18.2 for the nine months ended September 30, 2014, compared to other expense, net of $7.1 for the nine months ended September 30, 2013.  Other expense, net, consists principally of net currency gains and losses and earnings and losses on investments accounted for under the equity method of accounting.  On August 8, 2014, the Company consummated the agreement to acquire financial control of Ramgen, an entity in which the Company held a 42.2% equity interest immediately preceding the acquisition date.  Because the business combination was achieved in stages, the Company re-measured its previously held equity interest in Ramgen at its acquisition-date fair value and recognized the resulting loss of $18.3 in other expense, net.  The Company has  a  history of bringing new products to market and as a result of its ability and commitment to continue pursuit of commercialization of the supersonic compressor, was able to negotiate a purchase price for which the fair value of identifiable assets acquired exceeded the fair value of the consideration transferred.  As a result, the Company recorded the fair value of the assets acquired in excess of the fair value of the consideration paid of $6.6 as a gain in other expense, net.  The acquisition of Ramgen is discussed more fully in Note 3, Acquisitions and Other Investments in the consolidated financial statements.Other expense, net for the nine months ended September 30, 2013, was impacted by the devaluation of the Venezuelan bolivar on February 8, 2013.  As a result of this devaluation, the Company recorded a non-deductible foreign exchange loss in its Consolidated Statement of Income of approximately $3.1 for the nine months ended September 30, 2013.

Provision for income taxes.  Provision for income taxes was $46.9 for the nine months ended September 30, 2014, and $52.7 for the nine months ended September 30, 2013. Our estimated income tax provision for the nine months ended September 30, 2014 and 2013, generally differs from the U.S. federal statutory rate of 35% because of different tax rates in foreign tax jurisdictions and certain exemptions and credits allowable for income tax purposes, offset by state and local income taxes, and valuation allowances on net operating loss carryforwards that more-likely-than-not will not be realized.  We will adjust the valuation allowances in the future if it becomes more-likely-than-not that the benefits of deferred tax assets willnot be realized.

The increase in the effective tax rate for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013, isprincipally due to an increased amount of net operating losses in certain foreign countries for which we could not record a benefit under U.S.  GAAP, thus increasing the effective tax rate by approximately 12.6 percentage points.  In the nine months ended September 30, 2014, the company was able to benefit previously unrecognized foreign tax credits, thus reducing the effective tax rate by approximately 2.8 percentage points.

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On January 2, 2013, the ATRAof 2012 was signed into law. Some of the provisions were retroactive to January 1, 2012, including the exclusion from U.S. federal taxable income of certain interest, dividends, rents, and royalty income of foreign affiliates, as well as the tax benefits of the credits associated with that income and an extension of the research and experimentation credit. Therefore, as required by U.S. GAAP, a $4.4 benefit was reflected in the three months ended March 31, 2013 as a discrete event.  The “look-through” exemption for foreign earnings provision and the research and experimentation credit has not yet been extended for 2014, causing an increase in the effective tax rateof approximately 1.0 percentage point for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013.

As a result of the devaluation of the Venezuelan bolivar on February 8, 2013, the Company recorded a nondeductible foreign exchange loss in its Consolidated Statement of Income of approximately $3.1 for the three months ended March 31, 2013. Had this amount been deductible, our effective tax rate would have been 1.0 percentage point lower for the nine months ended September 30, 2013.

Certain foreignsubsidiaries are operating under tax holiday arrangements that will expire during 2014 and 2015, subject to potential extensions.  For the nine months ended September 30, 2014 and 2013, the impact of these tax holiday arrangements lowered income tax expense by $4.6 ($0.06 per diluted share) and $5.2 ($0.07 per diluted share), respectively.

Noncontrolling interest.  Noncontrolling interest includes the share of net income and net losses in consolidated entities that are not 100% owned by us.

Bookings and backlog.   Bookings for the nine months ended September 30, 2014, were $2,019.7 compared to $2,207.3 for the nine months ended September 30, 2013, a decrease of $187.6 or 8.5%.  The Company believes that the decrease in bookings is primarily due to delays in majorprojects, principally upstream, by our end-user clients in an effort to address their escalating capital costs relating to those projects.  In addition, due to the change in the tariffs reflected in the Spanish ministerial order discussed above, our 2014 aftermarket bookings are lower by approximately $95.1.The decrease is also attributable to a reduction in bookings for one Latin American national oil company as the Company works collaboratively with this client to reduce outstanding receivables.  The decrease in bookings was partially offset by an increase in aftermarket parts orders, particularly in the U.S. and Latin America.  Backlog was $2,787.9 at September 30, 2014, compared to $2,986.0 at September 30, 2013.

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Segment Analysis —  nine months ended September 30,  2014, compared to nine months ended September 30, 2013:

	Nine Months Ended			Nine Months Ended			Period to Period Change
	September 30, 2014			September 30, 2013			2013 to 2014		% Change
Revenues
New units	$	1,032.7	51.3%	$	1,136.3	51.5%	$	(103.6)	(9.1)%
Aftermarket parts and services		978.6	48.7%		1,069.3	48.5%		(90.7)	(8.5)%
Total revenues	$	2,011.3	100.0%	$	2,205.6	100.0%	$	(194.3)	(8.8)%
Gross profit
New units	$	143.4		$	165.7		$	(22.3)	(13.5)%
Aftermarket parts and services		364.7			387.3			(22.6)	(5.8)%
Total gross profit	$	508.1		$	553.0		$	(44.9)	(8.1)%
Income from operations
New units	$	60.1		$	87.9		$	(27.8)	(31.6)%
Aftermarket parts and services		210.3			234.2			(23.9)	(10.2)%
Unallocated		(90.0)			(88.0)			(2.0)	2.3%
Total income from operations	$	180.4		$	234.1		$	(53.7)	(22.9)%
Bookings
New units	$	936.1		$	966.2		$	(30.1)	(3.1)%
Aftermarket parts and services		1,083.8			1,241.1			(157.3)	(12.7)%
Total bookings	$	2,019.9		$	2,207.3		$	(187.4)	(8.5)%
Backlog - ending
New units	$	2,042.6		$	2,224.8		$	(182.2)	(8.2)%
Aftermarket parts and services		745.3			761.2			(15.9)	(2.1)%
Total backlog	$	2,787.9		$	2,986.0		$	(198.1)	(6.6)%

New Units

Revenues.  Revenues for this segment were $1,032.7 for the nine months ended September 30, 2014, compared to $1,136.3 for the nine months ended September 30, 2013, a decrease of $103.6 or 9.1%.  The business impact of oil prices, other macroeconomic conditions and the timing and size of orders on this segment is more fully described above in the Revenues caption in the section titled Three months ended September 30, 2014, compared to the three months ended September 30, 2013.Based on factors such as measures of labor hours and purchases from suppliers, volumes decreased during the nine months ended September 30, 2014,principally as a result of the timing issues discussed in the section referenced above.Specifically, we have been impacted byprevious delays by the Company’s end-user clients in placing equipment orders for major projects, mostly for upstream applications.  The decrease in revenue on extended scope projects, which are accounted for under the percentage of completion method of accounting, was  $72.0 for the nine months ended September 30, 2014.

Gross profit.  Gross profit was $143.4 for the nine months ended September 30, 2014, compared to $165.7 for the nine months ended September 30, 2013.  Gross profit as a percentage of segment revenues, was 13.9% for the nine months ended September 30, 2014, compared to 14.6% for the nine months ended September 30, 2013.  We experienced decreased gross profit as a percentage of sales in our new units segment primarily due to reduced operating leverage on fixed costs as a result of lower volumes.

Income from operations.  Income from operations was $60.1 for the nine months ended September 30, 2014, compared to $87.9 for the nine months ended September 30, 2013.  As a percentage of segment revenues, income from operations was  5.8%  for the nine months ended September 30, 2014, compared to 7.7% for the nine months ended September 30, 2013.  Income from operations as a percentage of revenues decreased compared to the prior year as a result of the factors discussed above.

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Bookings and backlog.New units bookings for the nine months ended September 30, 2014, were $936.1, compared to $966.2 for the nine months ended September 30, 2013.  The decrease in bookings is primarily a result of the timing issues discussed above in the Revenues caption in the section titled Three months ended September 30, 2014, compared to the three months ended September 30, 2013.Backlog was $2,042.6 at September 30, 2014, compared to $2,224.8 at September 30, 2013.

Aftermarket Parts and Services

Revenues.  Revenues for this segment were $978.6 for the nine months ended September 30, 2014, compared to $1,069.3 for the nine months ended September 30, 2013, a decrease of $90.7 or 8.5%.  Generally, oil prices and other macroeconomic conditions that affect the oil and gas industry have an impact on our business over an extended period of time, but less so in this segment. On a quarterly or annual basis, however, there is typically not a meaningful correlation of those factors to our periodic financial results. The decrease in revenues for the nine months ended September 30, 2014, is primarily attributable to our six cogeneration facilities in Spain.In connection with the change in the tariffs reflected in the Spanish ministerial order discussed above, our 2014 revenues were lower by approximately $95.1.

Gross profit.  Gross profit was $364.7 for the nine months ended September 30, 2014, compared to $387.3 for the nine months ended September 30, 2013.  Gross profit as a percentage of segment revenues for the nine months ended September 30, 2014, of 37.3% increased from 36.2% for the nine months ended September 30, 2013.  Gross profit as a percentage of revenues increased principally due to a more favorable mix, particularly related to higher parts sales, and the suspension of operations at our Spanish cogeneration facilities, partially offset by lower operating leverage on fixed costs caused by lower volumes.

Income from operations.  Income from operations was $210.3 for the nine months ended September 30, 2014, compared to $234.2 for the nine months ended September 30, 2013.  As a percentage of segment revenues, income from operations decreased to 21.5% for the nine months ended September 30, 2014, from 21.9% for the nine months ended September 30, 2013.  The changes in income from operations and income from operations as a percentage of segment revenues resulted principally from the factors discussed aboveas well as less operating leverage on fixed selling and administrative costs caused by lower volumes.

Bookings and backlog.Bookings for the nine months ended September 30, 2014, were $1,083.8, compared to $1,241.1 for the nine months ended September 30, 2013.The decrease in bookings for the nine months ended September 30, 2014, is primarily attributable to our six cogeneration facilities in Spain.In connection with the change in the tariffs reflected in the Spanish ministerial order discussed above, our 2014 bookings are lower by approximately $95.1.The decrease is also partially attributable to a reduction in bookings for one Latin American national oil company as the Company works collaboratively with this client to reduce outstanding receivables.Bookings during the nine months ended September 30, 2013, also included a large long-term service agreement to provide energy in Brazil.The decrease in bookings was partially offset by an increase in aftermarket parts orders, particularly in the U.S. and Latin America.  Backlog was $745.3 at September 30, 2014, compared to $761.2 at September 30, 2013.

Liquidity and Capital Resources

Current Liquidity

As of September 30, 2014, we had cash and cash equivalents of $160.7 and the ability to borrow $635.2 under the $1,163.1 revolving portion of our Amended Credit Facility, as $72.3 was used for outstanding letters of credit and $455.6 of borrowings was outstanding.  In addition  to these letters of credit, $286.3 of letters of credit and bank guarantees were outstanding at September 30, 2014, which were issued by banks offering uncommitted lines of credit.  At September 30, 2014, we were in compliance with our debt covenants.

As of September 30, 2014, approximately $148.1 of our cash was held outside of the U.S.  Except for approximately $8.7 of cash held by our Venezuelan subsidiary, there are no legal restrictions regarding repatriation from any of the countries outside of the U.S. where we have cash; however, as of September 30, 2014, approximately $73.3 of our cash is not available for general corporate use in the U.S. because such cumulative earnings have been indefinitely reinvested in foreign countries or foreign markets. Except for earnings in our Indian subsidiary, and certain current earnings of our Luxembourg subsidiary,  we have no other plans to repatriate any of the foreign-based cash or unremitted earnings based on our intended uses of the foreign-based cash and our existing cash and cash equivalents balances in the U.S. If additional foreign funds are needed for our operations in the U.S., we will be required to accrue and pay U.S. taxes, net of applicable foreign tax credits, at the time of repatriation. However, our intent is to indefinitely reinvest these funds outside the U.S.,

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and our current plans do not demonstrate a need to repatriate any additional indefinitely reinvested earnings to fund our U.S. operations.

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 Amended Credit Facility will be adequate to meet our working capital, capital expenditures, interest payments and other funding requirements for the next 12 months and our long-term future contractual obligations in the U.S. and in foreign countries.

Our pending announced merger with Siemens could impact our future liquidity.  In particular, under certain circumstances, the Company could be required to pay a $200.0 termination fee to Siemens if the transaction is not completed.  In other circumstances, Siemens could be required to pay a $400.0 termination fee to the Company if the transaction is not completed.

Sources and Uses of Liquidity

Net cash provided by operating activities for the nine months ended September 30, 2014, was $188.9, compared to net cash used in operating activities of $162.4 for the nine months ended September 30, 2013. The increase in cash provided by operations in the nine months ended September 30, 2014, is principally the result of a modest reduction in our investment in working capital for the nine months ended September 30, 2014, compared to the significant increase in working capital for the nine months ended September 30, 2013.  Accounts receivable decreased for the nine months ended September 30, 2014, as a result of the receipt of a large payment from a national oil company.  To a much lesser extent, cyclically lower volume and timely cash collections from clients further reduced accounts receivable.  Accounts payable and accruals decreased for the nine months ended September 30, 2014, principally as a result of the timing of payments.The increase in inventories related principally to LNGoTM, the Company’s small-scale distributed-LNG product offering.  In addition, we made $13.8 of minimum required pension contributions in the nine months ended September 30, 2014,  compared to $17.3 in the nine months ended September 30, 2013, in accordance with our funding policy.

Net cash used in investing activities was $64.6for the nine months ended September 30, 2014, compared to $61.6 for the nine months ended September 30, 2013.  Capital expenditures decreased to$43.5 for the nine months ended September 30, 2014, from $56.3 for the nine months ended September 30, 2013.Duringthe nine months ended September 30, 2014, we loaned $18.6 to Bethel Holdco, LLCand $2.1 to Gaelectric CAES NI Ltd., a CAES project in its initial stages of development.  We alsoinvested an additional $3.5 in Echogen Power Systems, LLC, which is discussed more fully in Note 3, Acquisitions and Other Investments in the consolidated financial statements.

Net cash used in financing activities was $149.8 for the nine months ended September 30, 2014, compared to net cash provided by financing activities of$288.4 for the nine months ended September 30, 2013.  Included in net cash used in financing activities for the nine months ended September 30, 2014, are $750.4 of borrowings to fund operating cash flows and $901.6 of repayments on the Company’s Amended Credit Facility.  Borrowings on the Amended Credit Facility during the nine months ended September 30, 2014, primarily relate to changes in working capital requirements and our ability to take advantage of favorable interest rates.  Management views the Amended Credit Facility as a cost efficient funding mechanism and uses it as a primary source of funding.

The Company is required to maintain sinking funds associated with certain of its borrowings, generally based on the short-term debt service requirements of such borrowings. Sinking fund requirements totaled $4.4 at September 30, 2014, and have been classified as restricted cash in the current assets section of the consolidated balance sheet.

New Accounting Standards

The Company has adopted or is required to adopt certain new accounting standards which are described in Note 2, New Accounting Standards to the consolidated financial statements, none of which have had, or are expected to have, a material effect on the consolidated financial statements included herein in Part I, Financial Information, Item 1, Financial Statements (unaudited).

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information.  When used in this Form 10-Q, the

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words “anticipates,” “believes,” “estimates,” “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:

· economic or industry downturns;

· volatility and disruption of the credit markets;

· our ability to implement our business strategy;

· delivery delays by third-party suppliers;

· the risk of cost overruns on fixed price contracts;

· our ability to comply with local content requirements;

· payment and administrative delays of certain of our national oil company customers;

· our ability to generate cash and access capital on reasonable terms;

· competition in our markets;

· the variability of bookings and revenues due to volatile market conditions, client subjectivity in placing orders, potential preference for bundling and timing of large orders;

· failure to integrate, or achieve the expected benefits from, acquisitions, joint ventures or strategic investments;

· economic, political and other risks associated with our international sales and operations;

· fluctuations in currency values and exchange rates;

· loss of our senior management or other key personnel;

· environmental compliance costs and liabilities and responses to concerns regarding climate change;

· new regulations relating to “conflict minerals”;

· failure to maintain safety performance acceptable to our clients;

· failure to negotiate new collective bargaining agreements;

· information systems security threats and computer crime;

· unexpected product claims or regulations;

· infringement of our intellectual property rights or our infringement of others’ intellectual property rights;

· difficulties implementing an Oracle-based information management system;

· certain covenants in our principal debt instruments impose restrictions that may limit our operating and financial flexibility;

· our brand name may be confused with others;

· our pension expenses and funding requirements;

· feed-in tariffs and regulations in our energy generating business;

· the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement, including a termination of the Merger Agreement under circumstances that could require us to pay a termination fee;

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· the failure to receive, on a timely basis or otherwise, the required approvals by the Company’s stockholders and government or regulatory agencies with regard to the Merger Agreement;

· the failure of the Merger to be completed on a timely basis or at all for any other reason;

· the risks that our business may suffer as a result of uncertainties surrounding the Merger;

· our ability to retain and hire key personnel and maintain relationships with customers, suppliers and other business partners pending the consummation of the Merger;

· the diversion of management’s attention from ongoing business concerns due to the impending transaction;

· limitations placed on our ability to operate our business under the Merger Agreement;

· the possibility that costs related to the Merger will be greater than expected;

· the outcome of any legal proceedings that may be instituted against us or others relating to the Merger Agreement or the Merger; and

· other factors described in this Form 10-Q and as set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ($ in millions)

Our results of operations are affected by fluctuations in the value of local currencies in which we transact business. The most significant exposures are to the euro, and to a lesser extent, the Brazilian real, the Indian rupee, the Norwegian krone and the British pound.  Assets and liabilities of non-U.S. consolidated entities that use the local currency as the functional currency are translated at period-end exchange rates, while income and expenses are translated using weighted average-for-the-period exchange rates.  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.  Generally, a weakening of the U.S. dollar improves our reported results when the local currency financial statements are translated into U.S. dollars for inclusion in our consolidated financial statements and the strengthening of the U.S. dollar impacts our results negatively.  During the three and nine months ended September 30, 2014, foreign currency translation adjustments in accumulated other comprehensive loss were $(70.9) and $(69.4), respectively, primarily due to the weakening of the Euro of approximately 7.8% during the three months ended September 30, 2014.An adverse hypothetical 1% change in the exchange rates for the three months ended September 30, 2014, would impact revenues and operating income by approximately $3.5 and $0.4, respectively.

We maintain a minimal level of Venezuelan Bolivars, consistent with the needs of our local operations.  At September 30, 2014, cash held in Venezuelan Bolivars was approximately $2.9, and is included in the net monetary asset balance of $5.3.

We enter into financial instruments to mitigate the impact of changes in currency exchange rates on transactions when we deem appropriate.  Net foreign currencylosses were $(6.9) and $(4.4) for the threeand ninemonths ended September 30, 2014, respectively, compared to $(2.7) and $(7.3) for the three and nine months ended September 30, 2013, respectively. 

The Company has entered into an interest rate swap agreement to minimize the economic impact of unexpected fluctuations in interest rates on the lease of its compressor testing facility in France. The interest rate swap agreement is described further in Note 8, Financial Instrumentsto the consolidated financial statements included herein in Part I, Financial Information, Item 1, Financial Statements (unaudited).

ITEM 4.  CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2014.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2014, our disclosure controls and procedures were effective at a reasonable assurance level.

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Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the three months ended September 30, 2014, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. ― OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The disclosures required in this Item 1 are included in Note 13, Commitments and Contingencies ―Legal Proceedings, in the consolidated financial statements included in Part I, Financial Information, Item 1, Financial Statements (unaudited) and incorporated herein by reference.

ITEM 1A.  RISK FACTORS

Merger-Related Risk Factors

Failure to consummate the Merger, or a delay in consummating the Merger, could negatively impact the market price of our common stock and could adversely affect our business, financial condition and results of operations.

Consummation of the Merger is subject to various customary conditions, including the adoption of the Merger Agreement by the affirmative vote of the holders of at least a majority of the outstanding Company common shares entitled to vote; expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; receipt of specified regulatory approvals; the absence of any newly enacted law, injunction or order prohibiting the Merger; the accuracy of the representations and warranties contained in the Merger Agreement (generally subject to a material adverse effect qualification); and compliance with the covenants and agreements in the Merger Agreement in all material respects. 

If the Merger is not consummated, our ongoing business, financial condition and results of operations may be adversely affected and the market price of our common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the Merger will be consummated. If the consummation of the Merger is delayed, including by a delay in receipt of necessary governmental approvals, our business, financial condition and results of operations may also be adversely affected.

While the Merger Agreement is in effect, we are subject to restrictions on our business activities.

Until the Merger closes or the Merger Agreement is terminated, we are subject to restrictions on our business activities and must generally operate our business in the ordinary course consistent with past practice (subject to certain exceptions). These restrictions may prevent us from exploring and pursing certain business opportunities, which could have an adverse effect on our business, financial condition and results of operations should the Merger not be completed.

In certain instances, the Merger Agreement could require us to pay a termination fee of $200 million to Siemens, a payment which could affect the decisions of a third party considering making an alternative acquisition proposal.

The Merger Agreement contains certain termination rights and provides that we will be required to pay Siemens a termination fee of $200 million in the event the Merger Agreement is terminated under certain circumstances. The payment of a termination fee may have an adverse impact on our financial condition and could affect the structure, pricing and terms proposed by a third party seeking to acquire or merge with us or deter such third party from making a competing acquisition proposal. Further, a failed transaction may result in negative publicity and a negative impression of us in the investment community.

Stockholder litigation could prevent or delay the closing of the Merger or otherwise negatively impact our business and operations.

We may incur additional costs in connection with the defense or settlement of any stockholder litigation in connection with the proposed Merger. Such litigation may adversely affect our ability to complete the Merger, and could also have an adverse effect on our financial condition and results of operations.

Page 46 of 50

The pending Merger may negatively impact our ability to recruit and retain key employees.

Employee retention and recruitment may be particularly challenging prior to the completion of the Merger, as employees and prospective employees may experience uncertainty about their future roles with the Company.  If, despite our retention and recruiting efforts, key employees depart or fail to accept employment with us because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company, our business operations and financial results may be adversely affected.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table contains information about repurchases of our common stock during the three months ended September 30, 2014:

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of  Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
July 2014	-		$	-	-	$	-
August 2014	1,484	(a)	$	67.46	-	$	-
September 2014	-		$	-	-	$	-
Total	1,484				-	$	-

(a) These shares were withheld or purchased as payment for withholding taxes due on the vesting of restricted stock issued under our 2008 Stock Incentive Plan.

ITEM 5.  OTHER INFORMATION

On November 4, 2014, the Compensation Committee of the Company’s Board of Directors approved a First Amendment to Confidentiality, Non-Compete, Severance, and Change in Control Agreement (as amended, the “Agreement”) with the Company’s named executive officers (other than the Chief Executive Officer) that increased the time period by which the executive must provide the Company with written notice of the occurrence of an event or action constituting Good Reason under the Agreement from 15 days to 330 days.  The amendment also provides that a Voluntary Termination with Good Reason shall mean the termination by the executive of employment with the Company within 365 days following the occurrence of any of the specified events, rather than 45 days.The foregoing summary is qualified by reference to the text of the Agreement, a form of which is attached to this Current Report on Form 10-Q as Exhibit 10.1 and is incorporated into this Item 5 by reference.

ITEM 6.  EXHIBITS

The following exhibits are filed with this report:

Exhibit No.	Description
2.1	Share Purchase Agreement by and among Dresser-Rand Group Inc., Grupo Guascor S.L. and the shareholders of Grupo Guascor S.L. dated March 3, 2011 (incorporated by reference to Exhibit 2.1 to Dresser-Rand Group Inc.’s Current Report on Form 8-K, filed March 4, 2011, File No. 001-32586).

Page 47 of 50

2.2	Agreement and Plan of Merger by and among Siemens Energy, Inc., Dynamo Acquisition Corporation and Dresser-Rand Group Inc., dated as of September 21, 2014 (incorporated by reference to Exhibit 2.2 to Dresser Rand-Group Inc.’s Current Report on Form 8-K, filed September 23, 2014, File No. 0001-32586).
2.3	Support Letter between Siemens Aktiengesellschaft and Dresser-Rand Group Inc., dated September 22, 2014 (incorporated by reference to Exhibit 2.2 to Dresser Rand-Group Inc.’s Current Report on Form 8-K, filed September 23, 2014, File No. 0001-32586).
3.1	Amended and Restated Certificate of Incorporation of Dresser-Rand Group Inc. (incorporated by reference to Exhibit 3.1 to Dresser-Rand Group Inc.’s Registration Statement on Form S-1/A, filed July 18, 2005, File No. 333-124963).
3.2	Amended and Restated By-Laws of Dresser-Rand Group Inc. (incorporated by reference to Exhibit 3.2 to Dresser-Rand Group Inc.’s Current Report on Form 8-K, filed August 9, 2013, File No. 001-32586).
3.3	Certificate of Designation, Preferences, and Rights of Series A Junior Participating Preferred Stock of Dresser-Rand Group Inc. (incorporated by reference to Exhibit 3.1 to Dresser Rand-Group Inc.’s Current Report on Form 8-K, filed September 23, 2014, File No. 0001-32586).
4.1	Form of certificate of Dresser-Rand Group Inc. common stock (incorporated by reference to Exhibit 4.1 to Dresser-Rand Group Inc.’s Registration Statement on Form S-1/A, filed July 18, 2005, File No. 333-124963).
4.2	Indenture, dated March 22, 2011, by and among Dresser-Rand Group Inc., the guarantors named therein and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 4.1 to Dresser-Rand Group Inc.’s Current Report on Form 8-K, filed March 24, 2011, File No. 001-32586).
4.3	First Supplemental Indenture, dated as of September 6, 2012, by and among Dresser-Rand Group Inc., DR Acquisition LLC and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.3 to Dresser-Rand Group Inc.’s Quarterly Report on Form 10-Q, filed November 1, 2012, File No. 001-32586).
4.4	Rights Agreement dated as of September 22, 2014, by and between Dresser-Rand Group Inc. and Computershare Inc., as rights agent, which includes as Exhibit B the Form of Rights Certificate (incorporated by reference to Exhibit 2.2 to Dresser Rand-Group Inc.’s Current Report on Form 8-K, filed September 23, 2014, File No. 0001-32586).
(10.1)	Form of First Amendment to Confidentiality, Non-Compete, Severance, and Change In Control Agreement to be entered into with named executive officers other than the chief executive officer.
(31.1)	Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31.2)	Certification of the Executive Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32.1)	Certification of the President and Chief Executive Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). (This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.)

Page 48 of 50

(32.2)

Certification of the Executive Vice President and Chief Financial Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). (This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.)

(101)

The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statement of Income for the three and nine months ended September 30, 2014 and 2013, (ii) Consolidated Statement of Comprehensive Income for the three and nine months ended September 30, 2014 and 2013, (iii) Consolidated Balance Sheet at September 30, 2014 and December 31, 2013, (iv) Consolidated Statement of Cash Flows for the nine months ended September 30, 2014 and 2013, (v) Consolidated Statement of Changes in Stockholders' Equity for the nine months ended September 30, 2014 and 2013, and (vi) Notes to Consolidated Financial Statements.

____________

(  ) Filed or furnished herewith.

Page 49 of 50

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	DRESSER-RAND GROUP INC.
Date:   November 7, 2014	/s/ Raymond L. Carney Jr.
	Raymond L. Carney Jr.
	Vice President, Controller and Chief
	Accounting Officer

Page 50 of 50

EX-10.1

EXHIBIT 10.1

FIRST AMENDMENT TO

CONFIDENTIALITY, NON-COMPETE, SEVERANCE,

AND CHANGE IN CONTROL AGREEMENT

WHEREAS, __________ (“Executive”) and Dresser-Rand Group Inc., a Delaware corporation (“DRG”) are parties to a Confidentiality, Non-Compete, Severance and Change in Control Agreement dated as of __________ (the “Agreement”)

WHEREAS, the parties wish to amend the definition of “Voluntary Termination with Good Reason” in the Agreement to provide Executive an additional period of time following the occurrence of an event constituting Good Reason to resign from the Company, in order to incentivize Executive to remain with DRG for a longer period of time if an event constituting grounds for a Voluntary Termination with Good Reason occurs;

NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree to amend the Agreement as follows:

1.Section 1(f) of the Agreement is amended to read as follows:

(f) Voluntary Termination with Good Reason. For purposes of the Agreement, “Voluntary Termination with Good Reason” shall mean the termination by Executive of Executive’s employment with the Company within three hundred sixty-five (365) days following the occurrence of any of the following events without his/her consent, which is not cured by the Company, if curable, within 30 days as described below:

(i) a material diminution in Executive’s duties and responsibilities;

(ii) the Company materially reduces the compensation or benefits to which Executive is entitled as determined immediately prior to the Change in Control;

(iii) a material breach of any one or more of the covenants of this Agreement by the Company; or

(iv) if, as the result of a Change in Control (as defined below), the Company’s headquarters offices are relocated to a location more than fifty miles away from their location prior to such Change in Control, necessitating Executive’s relocation to such new headquarters location.

Provided, however, that Executive must provide the Company with written notice within three hundred thirty (330) days following the occurrence of an event or action constituting Good Reason and the Company shall have thirty (30) days following receipt of such notice to cure such event or action.

EXHIBIT 10.1

2.Except as specifically modified hereby, the Agreement shall continue in effect pursuant to its terms.

IN WITNESS WHEREOF, the parties hereto have duly executed this First Amendment on the ___ day of ________, 2014.

DRESSER-RAND GROUP INC.

By:

Name:

Title:

EXECUTIVE

By:

EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Vincent R. Volpe Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ending September 30, 2014, of Dresser-Rand Group Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	November 7, 2014	By:	/s/ Vincent R. Volpe Jr.
			Vincent R. Volpe Jr.
			President and Chief Executive Officer

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Jan Kees van Gaalen, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ending September 30, 2014, of Dresser-Rand Group Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	November 7, 2014	By:	/s/ Jan Kees van Gaalen
			Jan Kees van Gaalen
			Executive Vice President and
			Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Dresser-Rand Group Inc. (the “Company”) on Form 10-Q for the quarter ending September 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Vincent R. Volpe Jr., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	November 7, 2014	By:	/s/ Vincent R. Volpe Jr.
			Vincent R. Volpe Jr.
			President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Dresser-Rand Group Inc. (the “Company”) on Form 10-Q for the quarter ending September 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jan Kees van Gaalen, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	November 7, 2014	By:	/s/ Jan Kees van Gaalen
			Jan Kees van Gaalen
			Executive Vice President and
			Chief Financial Officer

XML

Segment Information (Tables)

9 Months Ended

Sep. 30, 2014

Segment Information [Abstract]

Segment Results

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Revenues
New units	$	338.7	$	272.9	$	1,032.7	$	1,136.3
Aftermarket parts and services		345.1		361.0		978.6		1,069.3
Total revenues	$	683.8	$	633.9	$	2,011.3	$	2,205.6
Income from operations
New units	$	17.3	$	33.5	$	60.1	$	87.9
Aftermarket parts and services		90.0		75.0		210.3		234.2
Unallocable		(33.4)		(27.1)		(90.0)		(88.0)
Total income from operations	$	73.9	$	81.4	$	180.4	$	234.1
Depreciation and amortization
New units	$	10.2	$	8.7	$	34.2	$	34.0
Aftermarket parts and services		12.9		12.5		36.5		33.1
Total depreciation and amortization	$	23.1	$	21.2	$	70.7	$	67.1

Total assets by segment were as follows:

	September 30,		December 31,
	2014		2013
Total assets (including goodwill)
New units	$	1,036.3	$	1,113.8
Aftermarket parts and services		1,336.2		1,305.0
Unallocable		1,137.8		1,319.0
Total assets	$	3,510.3	$	3,737.8

XML

Financial Instruments (Foreign Currency Exchange Contracts Accounted For At Fair Value On Recurring Basis) (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Financial Instruments [Abstract]
Foreign currency exchange contracts assets	$ 13.7	$ 5.4
Foreign currency exchange contracts liabilities	$ 12.7	$ 16.3

XML

Inventories, Net (Narrative) (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Inventory, Net [Abstract]
Progress payments to suppliers included in work-in-process	$ 95.1	$ 129.0
Allowance for obsolescence for slow-moving inventory	$ 35.0	$ 30.7

XML

Income Taxes (Narrative) (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended			9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Mar. 31, 2013	Sep. 30, 2014	Sep. 30, 2013
Income Taxes [Line Items]
U.S. federal statutory income tax rate				35.00%
Tax benefit associated with discrete event			$ 4.4
Percentage increase in effective rate, Excluded net operating losses	9.40%			12.60%
Percentage decrease in effective rate, foreign tax credits	7.30%			2.80%
Research and experimentation impact on effective rate				1.00%
Impact of tax holiday arrangements on income tax expense	1.7	1.9		4.6	5.2
Impact of tax holiday arrangements per diluted share	$ 0.02	$ 0.02		$ 0.06	$ 0.07
Devaluation Of Venezuelan Bolivar [Member]
Income Taxes [Line Items]
Foreign exchange loss			$ 3.1
Potential percentage decrease in effective tax rate					(1.00%)

XML

Intangible Assets And Goodwill (Weighted Average Useful Life, Gross Amount And Accumulated Amortization Of Intangible Assets) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Cost	$ 670.5	$ 670.9
Accumulated Amortization	212.9	191.9
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	117.6	120.0
Accumulated Amortization	26.6	24.2
Weighted-Average Useful Lives	36 years
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	323.2	333.2
Accumulated Amortization	88.5	79.4
Weighted-Average Useful Lives	32 years
Non-Compete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	5.3	5.5
Accumulated Amortization	5.2	5.0
Weighted-Average Useful Lives	3 years
Existing Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	171.6	173.3
Accumulated Amortization	62.5	55.6
Weighted-Average Useful Lives	23 years
Contracts And Purchase Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	9.7	10.2
Accumulated Amortization	1.7	1.4
Weighted-Average Useful Lives	11 years
Software [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	28.7	28.7
Accumulated Amortization	28.4	26.3
Weighted-Average Useful Lives	10 years
In-process Research And Development [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	$ 14.4

XML

Property, Plant And Equipment (Tables)

9 Months Ended

Sep. 30, 2014

Property, Plant And Equipment [Abstract]

Property, Plant And Equipment

	September 30,		December 31,
	2014		2013
Cost:
Land	$	30.6	$	33.1
Buildings and improvements		255.6		261.4
Machinery and equipment		514.6		479.0
		800.8		773.5
Less: accumulated depreciation		(335.2)		(301.2)
Property, plant and equipment, net	$	465.6	$	472.3

Conditional Asset Retirement Obligations

	Nine Months Ended September 30,
	2014		2013
Beginning balance	$	-	$	-
Provisions		4.5		-
Adjustments		(0.9)		-
Effects of exchange rate changes		(0.6)		-
Ending balance	$	3.0	$	-

XML

Long-Term Debt (Carrying And Fair Values Of Senior Subordinated Notes) (Details) (6 1/2% Senior Subordinated Notes Due May 2021 [Member], USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
6 1/2% Senior Subordinated Notes Due May 2021 [Member]
Carrying Amounts and Fair Values of Financial Instruments [Line Items]
Long term debt, carrying value	$ 375.0	$ 375.0
Long term debt, fair value	$ 403.6	$ 400.5
Long-term debt, maturity date	2021-05
Long-term debt, interest rate	6.50%

XML

Incentive Stock-Based Compensation Plans

9 Months Ended

Sep. 30, 2014

Incentive Stock-Based Compensation Plans [Abstract]

Incentive Stock-Based Compensation Plans

16.Incentive Stock-Based Compensation Plans

During the nine months ended September 30,  2014, the Compensation Committee of the Company’s Board of Directors, and with respect to the President and Chief Executive Officer, the independent members of the Board of Directors, approved grants of options and stock appreciation rights for 297,007 shares of common stock and grants of 332,737 shares of time-vested restricted stock units to employees under the Dresser-Rand Group Inc. 2008 Stock Incentive Plan and approved the issuance of Performance Restricted Stock Units with a target grant amount of 69,499 restricted stock units.

The Company also granted 15,736 shares of stock to non-employee Directors in February 2014. 

The difference between basic weighted-average shares outstanding and diluted weighted-average shares outstanding in the computation of earnings per share presented in the Consolidated Statement of Income is comprised entirely of the dilutive effect of the stock-based compensation awards described above for all periods presented.

XML

Property, Plant And Equipment (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended			9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2013	Sep. 30, 2014 property	Sep. 30, 2013
Property, Plant And Equipment [Abstract]
Depreciation expense	$ 14.8		$ 14.1	$ 45.6	$ 45.4
Number of pig manure treatment facilities				6
Power generation, percentage reduction in tariff				38.00%
Asset impairment charge		$ 40.0

XML

Acquisitions And Other Investments (Narrative) (Details) In Millions, unless otherwise specified	9 Months Ended			3 Months Ended	9 Months Ended			0 Months Ended	9 Months Ended				0 Months Ended		3 Months Ended	9 Months Ended			9 Months Ended
	Sep. 30, 2014 USD ($)	Dec. 31, 2013 USD ($)	May 04, 2011 EUR (€)	Sep. 30, 2014 Bethel Holdco, LLC [Member] USD ($)	Sep. 30, 2014 Bethel Holdco, LLC [Member] USD ($) MW	Sep. 30, 2014 Dresser-Rand Arabia LLC [Member] USD ($)	Apr. 30, 2009 Dresser-Rand Arabia LLC [Member]	Mar. 26, 2014 Echogen Power Systems, LLC [Member] USD ($)	Sep. 30, 2014 Minimum [Member] Bethel Holdco, LLC [Member]	Sep. 30, 2014 Maximum [Member] Bethel Holdco, LLC [Member]	Sep. 30, 2014 Echogen Power Systems, LLC [Member] USD ($)	Feb. 28, 2011 Echogen Power Systems, LLC [Member] USD ($)	Aug. 08, 2014 Ramgen Power Systems LLC. [Member] USD ($)	Aug. 08, 2014 Ramgen Power Systems LLC. [Member] USD ($)	Sep. 30, 2014 Ramgen Power Systems LLC. [Member] USD ($)	Sep. 30, 2014 Ramgen Power Systems LLC. [Member] USD ($)	Jun. 30, 2014 Ramgen Power Systems LLC. [Member]	Dec. 31, 2013 Ramgen Power Systems LLC. [Member] USD ($)	Sep. 30, 2014 Ramgen Power Systems LLC. [Member] In-process Research And Development [Member]	Sep. 30, 2014 Ramgen Power Systems LLC. [Member] Royalty Agreements [Member] USD ($)	Sep. 30, 2014 Ramgen Power Systems LLC. [Member] Minimum [Member] Royalty Agreements [Member]	Sep. 30, 2014 Ramgen Power Systems LLC. [Member] Maximum [Member] Royalty Agreements [Member]
Business Acquisition [Line Items]
Prior equity interest																	42.20%
Aggregate investment in Ramgen																		$ 34.4
Remaining equity interest acquired														57.80%
Cash paid for acquisition														1.0
Contingent consideration arrangement term																				15 years
Maximum royalties payable			124.5																	44.5
Fair value inputs, discount rate																			25.00%	25.00%
Fair value inputs, royalty rate																			5.00%		1.00%	2.00%
Gain (loss) on assets acquired	6.6
Percentage of aggregate non-controlling interest owned				5.70%	5.70%						33.90%
Previous equity interest in Ramgen													10.3
Loss on acquisition																11.7
Remeasurment loss	18.3														18.3	18.3
Energy storage facility, power level					317
Equity investment, cost					5.0			2.5
Equity method investment, un-owned percentage					94.30%
Loan receivable, maximum commitment				25.0	25.0
Loans receivable, interest rate									8.00%	16.00%
Years until maturity of loan receivable										8 years
Loans receivable				18.6	18.6
Equity method Investments				4.9	4.9						14.8
Revenue from equity investment				0	22.4
Minimum royalties that should be paid in first five years of commercialization												6.0
Royalty guarantee term											5 years
Equity method investment, pledged funding	1.0
Investment to acquire noncontrolling interest											26.5
Ownership percentage in joint venture							50.00%
Assets	3,510.3	3,737.8				51.4
Liabilities	$ 2,180.8	$ 2,436.4				$ 82.0

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Post-Retirement Benefits Other Than Pensions (Tables)

9 Months Ended

Sep. 30, 2014

Post-Retiements Benefits Other Than Pensions [Abstract]

Components Of Net Post-Retirement Benefit Expense (Income) and Amounts Recognized in Other Comprehensive Loss (Income)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Interest cost	$	0.2	$	0.1	$	0.5	$	0.5
Amortization of net actuarial loss		-		0.2		-		0.4
Net post-retirement benefits expense	$	0.2	$	0.3	$	0.5	$	0.9

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Property, Plant And Equipment (Conditional Asset Retirement Obligations) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Asset Retirement Obligation [Abstract]
Beginning Balance
Provisions	4.5
Adjustments	(0.9)
Effects of exchange rate changes	(0.6)
Ending Balance	$ 3.0

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Accumulated Other Comprehensive Income (Loss) ("AOCI") (Changes in Accumulated Other Comprehensive Income (Loss) by Component) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ (118.8)	$ (134.7)
Other comprehensive loss before reclassifications	(69.4)	(17.5)
Amounts reclassified from AOCI	1.6	4.3
Net current period other comprehensive (loss) income	(67.8)	(13.2)
Ending balance	(186.6)	(147.9)
Foreign Currency Translation Adjustments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(69.5)	(51.3)
Other comprehensive loss before reclassifications	(69.4)	(17.5)
Net current period other comprehensive (loss) income	(69.4)	(17.5)
Ending balance	(138.9)	(68.8)
Unrealized (Loss) Gain On Derivatives [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(0.4)	(0.7)
Amounts reclassified from AOCI	0.2	0.2
Net current period other comprehensive (loss) income	0.2	0.2
Ending balance	(0.2)	(0.5)
Pension And Other Postretirement Benefit Plans [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(48.9)	(82.7)
Amounts reclassified from AOCI	1.4	4.1
Net current period other comprehensive (loss) income	1.4	4.1
Ending balance	$ (47.5)	$ (78.6)

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Commitments and Contingencies (Details) In Millions, unless otherwise specified	0 Months Ended	1 Months Ended		9 Months Ended							9 Months Ended
	May 04, 2011 USD ($)	Feb. 29, 2012 USD ($)	Feb. 29, 2012 EUR (€)	Sep. 30, 2014 USD ($) item loan employee	Sep. 30, 2014 BRL item loan employee	May 04, 2011 EUR (€)	Sep. 30, 2014 Italian Tax Authorities [Member] USD ($)	Sep. 30, 2014 Italian Tax Authorities [Member] EUR (€)	Sep. 30, 2014 Banco Santos [Member] USD ($)	Sep. 30, 2014 Banco Santos [Member] BRL	Sep. 30, 2014 Maximum [Member]	Sep. 30, 2014 Minimum [Member]
Commitments and Contingencies Disclosure [Line Items]
Purchase agreement price	$ 543.2
Potential purchase price adjustments						124.5
Additional consideration sought	42.4
Bargaining agreement between IUE and the Company expiration date				2016-03	2016-03
Number of employees engaged in misconduct during strike and involuntary terminated				2	2
Estimated appeal processing period											2 years	1 year
Damage sought		5.3	4.2
Cash reserve				1.5	3.6
Estimated aggregate exposure							$ 12.8	€ 10.1	$ 19.0	46.4
Period of available funds				12 months	12 months
Number of banking credit notes				12	12
Number of banking credit notes each month				1	1

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Intangible Assets And Goodwill (Changes In Goodwill In Total And By Segment) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Goodwill [Line Items]
Beginning Balance	$ 927.6
Foreign currency adjustments	(57.9)
Ending Balance	869.7
New Units [Member]
Goodwill [Line Items]
Beginning Balance	488.4
Foreign currency adjustments	(33.7)
Ending Balance	454.7
Aftermarket Parts And Services [Member]
Goodwill [Line Items]
Beginning Balance	439.2
Foreign currency adjustments	(24.2)
Ending Balance	$ 415.0

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Consolidated Statement Of Changes In Stockholders' Equity (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Statement Of Stockholders Equity [Abstract]
Unrealized gain on derivatives, tax	$ 0	$ 0	$ 0.1	$ 0.1
Pensions and other postretirement benefit plans, tax	$ 0.2	$ 0.8	$ 1.0	$ 2.4

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Warranties (Changes In Product Warranty Liability) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Commitments And Contingencies [Abstract]
Beginning balance	$ 21.4	$ 20.1
Provision for warranties issued during period	10.2	13.5
Adjustments to warranties issued in prior periods	1.1	1.7
Payments during the period	(12.7)	(14.9)
Foreign currency adjustments	(0.4)	(0.7)
Ending balance	$ 19.6	$ 19.7

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Acquisitions And Other Investments (Schedule Of Acquisition Price Allocation) (Details) (Ramgen Power Systems LLC. [Member], USD $) In Millions, unless otherwise specified	Aug. 08, 2014
Ramgen Power Systems LLC. [Member]
Business Acquisition [Line Items]
Property, plant and equipment	$ 10.0
Amortizable intangible assets	14.4
Deferred tax liabilities, net	(3.9)
Net assets acquired	20.5
Fair value of previous equity interest as partial consideration	(10.3)
Fair value of consideration, Cash	(1.0)
Fair value of consideration, Contingent consideration (non-cash)	(2.6)
Value of net assets acquired in excess of fair value of consideration	$ 6.6

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Acquisitions And Other Investments (Tables)

9 Months Ended

Sep. 30, 2014

Acquisitions And Other Investments [Abstract]

Schedule Of Acquisition Price Allocation

	August 8, 2014
Property, plant and equipment	$	10.0
Intangible assets		14.4
Deferred tax liabilities, net		(3.9)
Net assets acquired		20.5
Fair value of previous equity interest		(10.3)
Fair value of consideration:
Cash		(1.0)
Contingent consideration (non-cash)		(2.6)
Value of net assets acquired in excess of fair value of consideration	$	6.6

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Basis Of Presentation (Policies)

9 Months Ended

Sep. 30, 2014

Basis Of Presentation [Abstract]

Revenue Recognition

Revenue Recognition

Multiple-element arrangements

We recognize revenue when it is realized or realizable and earned. Generally, we consider revenue realized or realizable and earned when we have persuasive evidence of an arrangement, delivery of the product or service has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Delivery does not occur until products have been shipped or services have been provided to the client, risk of loss has transferred to the client, and either any required client acceptance has been obtained (or such provisions have lapsed) or we have objective evidence that the criteria specified in the client acceptance provisions have been satisfied. The amount of revenue related to any contingency is not recognized until the contingency is resolved.

A substantial portion of our arrangements are multiple-element revenue arrangements or contracts, where multiple products and/or services are involved. Products involved in multiple-element arrangements may include centrifugal compressors, gas turbines, power turbines, power recovery expanders, reciprocating compressors, steam turbines and engines. Our typical arrangement includes one of our classes of compressors and a driver (e.g., a motor, turbine or an engine).  In addition to our products, we perform installation and commissioning, training, and other services, and we purchase any number of standard or engineered items from third parties (“buyouts”) that support the application in which our equipment is being used.  Generally, buyouts, installation and commissioning, training and each of our products listed above are considered separate deliverables for a number of reasons, including the following:

· Clients would purchase each of those products or services apart from other products or services;

· The products and services being provided are at the request of the client and for the client’s sole benefit, apart from any other product or service in the transaction;

· The other deliverables can be performed without the service or product in question being performed or delivered;

· Contractual payments are typically tied to the delivery or performance of the specific product or service;

· The skills or equipment required to perform the services are readily available in the marketplace; and

· Clients attribute significant value to each product or service.

These contracts generally can take fifteen months or more to complete, but occasionally may take longer.The timing between the first deliverable and the last deliverable is generally three to twelve months, and services are typically delivered last.

Because the aforementioned separate deliverables have value to the client on a stand-alone basis, they are typically considered separate units of accounting.  The entire contract value is allocated to each unit of accounting. Revenue allocated to products is recognized upon delivery, while revenue allocated to services is recognized when the service is performed.  We use the selling price hierarchy described below to determine how to separate multiple-element revenue arrangements into separate units of accounting and how to allocate the arrangement consideration among those separate units of accounting:

· Vendor-specific objective evidence (“VSOE”).

· Third-party evidence (“TPE”), if vendor-specific objective evidence is not available.

· Estimated selling price (“ESP”), determined in the same manner as that used to determine the price at which we sell the deliverables on a stand-alone basis, if neither vendor-specific objective evidence nor third-party evidence is available.

In substantially all of our multi-element arrangements, we use ESP to allocate arrangement consideration. We determine ESP based on our normal pricing and discounting practices. In determining ESP, we apply significant judgment as we weigh a variety of factors, based on the facts of the arrangement. We typically arrive at an ESP by considering client and entity-specific factors such as existing pricing, price discounts, geographies, competition, internal costs and profitability objectives.

Our sales arrangements do not include a general right of return of the delivered unit(s). In certain cases, the cancellation terms of a contract provide us with the opportunity to bill for certain incurred costs and penalties.

If it is determined that the separate deliverables do not have value on a stand-alone basis, the entire arrangement is accounted for as one unit of accounting, which results in revenue being recognized when the last unit is delivered based on the revenue recognition policy described above.

It is uncommon for the Company to have contract scope adjustments that impact the selling price for specific units of accounting resulting in changes in the allocation of the selling price.  In the event of such an adjustment, we apply the change in the allocation of the selling price to the units of accounting that are not yet delivered.  As our business and offerings evolve over time, our pricing practices may be required to be modified accordingly, which could result in changes in selling prices in subsequent periods.  Historically, there have been no material impacts, nor do we currently expect material impacts in the next twelve months, on our revenue recognition due to changes in our VSOE, TPE or ESP.

Percentage of completion

We also enter into certain large contracts with expanded construction-type scope and risk.  These contractual arrangements have a scope of activity that differs in substance from the scope of deliverables found in our traditional sales agreements.  For these types of contracts, we apply the guidelines of ASC 605-35 – Construction-Type and Production-Type Contracts and utilize the percentage of completion method of revenue recognition. Non-traditional scope arrangements include activities typically performed by engineering, procurement and construction contractors. Our clients on these projects typically require us to act as a general construction contractor for all or a portion of these projects. These arrangements are often executed in the form of turnkey contracts, where the Company designs, engineers, manufactures, constructs, transports, erects and hands over to the client at the designated destination point the fully commissioned and tested module or facility, which is ready for operation.  Percentage of completion revenue represents approximately3.1% and 6.7% of consolidated revenues for the three months ended September 30, 2014 and 2013, respectively, and4.2% and 7.1% of consolidated revenues for the nine months ended September 30, 2014 and 2013, respectively.

Under the percentage of completion method, revenue is recognized as work on a contract progresses.  For each contractual arrangement that qualifies for the percentage of completion method of accounting, the Company recognizes revenue, cost of sales and gross profit in the amounts that are equivalent to a percentage of the total estimated contract sales value, estimated cost of sales and estimated gross profit to be achieved upon completion of the project.  This percentage is generally determined by dividing the cumulative amount of labor costs and labor converted material costs incurred to date by the sum of the cumulative costs incurred to date plus the estimated remaining costs to be incurred in order to complete the contract.  Preparing these estimates is a process requiring judgment.  Factors influencing these estimates include, but are not limited to, historical performance trends, inflationary trends, productivity and labor disruptions, availability of materials, claims, change orders and other factors as set forth in the Risk Factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.  In the event that the Company experiences changes in estimated revenues, cost of sales and gross profit, they would be recognized using a cumulative catch-up adjustment that recognizes in the current period the cumulative effect of the changes on current and prior periods based on a contract’s updated percentage of completion.

We apply the percentage of completion method of accounting to agreements when the following conditions exist:

· The costs are reasonably estimable;

· The contract includes provisions that clearly specify the enforceable rights regarding products and services to be provided and received by the parties, the consideration to be exchanged and the manner and terms of settlement;

· The customer can be expected to satisfy all obligations under the contract; and

· We expect to perform all of our contractual obligations.

Cost of revenue for our construction-type contracts includes contract costs, such as materials and labor, and indirect costs that are attributable to contract activity.  Generally, we bill our customers based on advance billing terms or completion of certain contract milestones.  Cumulative costs and estimated earnings recognized to date in excess of cumulative billings are included in accounts receivable on the consolidated balance sheet.  Cumulative billings in excess of cumulative costs and estimated earnings recognized to date are included in accounts payable and accruals on the consolidated balance sheet.

We estimate the future costs and estimated gross profit that will be incurred related to sales arrangements to determine whether any arrangement will result in a loss. These costs include material, labor and overhead. Factors influencing these future costs include the availability of materials and skilled laborers. We record provisions for estimated losses on uncompleted contracts in the period in which such losses are identified. 

Fair Value Measurements

Fair Value Measurements

Fair value, as defined in U.S. GAAP, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). U.S. GAAP classifies the inputs used to measure fair value into the following hierarchy:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2	Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability
Level 3	Unobservable inputs for the asset or liability

Recurring Fair Value Measurements —  Fair values of the Company’s cash and cash equivalents, restricted cash, accounts receivable, short-term borrowings, accounts payable and customer advance payments approximate their carrying values due to the short-term nature of these instruments.  The Company’s financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Nonrecurring Fair Value Measurements —Fair value measurements were applied with respect to the Company’s nonfinancial assets and liabilities measured on a nonrecurring basis, which consists primarily of intangible assets, other long-lived assets and other assets acquired and liabilities assumed, including contingent consideration, related to purchased businesses in business combinations and impairments.

Fair Value of Financial Instruments —Recurring fair value measurement of financial instruments consist principally of foreign currency derivatives, interest rate swaps and fixed rate long-term debt.

Input levels used for fair value measurements are as follows:

		Input
Description	Disclosure	Level	Level 2 Inputs	Level 3 Inputs
Acquired assets and liabilities	Note 3	Level 3	Not applicable	Level 3 inputs are more fully described in Note 3.
Impairment of long-lived assets	Note 7	Level 3	Not applicable	Level 3 inputs are more fully described in Note 7.
Financial derivatives	Note 8	Level 2	Quoted prices of similar assets or liabilities in active markets	Not applicable
Long-term debt (disclosure only)	Note 10	Level 2	Quoted prices in markets that are not active	Not applicable

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Long-Term Debt (Long-Term Debt) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Debt Instrument [Line Items]
Total debt	$ 1,117.1	$ 1,287.0
Less: current portion	(31.3)	(40.1)
Total long-term debt	1,085.8	1,246.9
Amended Credit Facility [Member]
Debt Instrument [Line Items]
Total debt	725.5	884.5
6 1/2% Senior Subordinated Notes Due May 2021 [Member]
Debt Instrument [Line Items]
Total debt	375.0	375.0
Long-term debt, maturity date	2021-05
Long-term debt, interest rate	6.50%
Bank Overdraft Facility [Member]
Debt Instrument [Line Items]
Total debt		4.6
Other Indebtedness [Member]
Debt Instrument [Line Items]
Total debt	$ 16.6	$ 22.9

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Costs And Estimated Earnings On Uncompleted Contracts (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Costs And Estimated Earnings On Uncompleted Contracts [Abstract]
Costs incurred on uncompleted contracts	$ 261.7	$ 195.5
Estimated earnings	70.6	52.4
Costs incurred and estimated billings on uncompleted contracts	332.3	247.9
Less: billings to date	(340.6)	(162.7)
Net estimate billings on uncompleted contracts	(8.3)	85.2
Costs and estimated earnings in excess of billings on uncompleted contracts	16.8	98.1
Billings in excess of costs and estimated earnings	$ (25.1)	$ (12.9)

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Costs And Estimated Earnings On Uncompleted Contracts (Tables)

9 Months Ended

Sep. 30, 2014

Costs And Estimated Earnings On Uncompleted Contracts [Abstract]

Schedule Of Costs And Estimated Earnings In Excess Of Billings On Uncompleted Contracts

	September 30,		December 31,
	2014		2013
Costs incurred on uncompleted contracts	$	261.7	$	195.5
Estimated earnings		70.6		52.4
		332.3		247.9
Less: billings to date		(340.6)		(162.7)
	$	(8.3)	$	85.2
Costs and estimated earnings in excess of billings	$	16.8	$	98.1
Billings in excess of costs and estimated earnings		(25.1)		(12.9)
	$	(8.3)	$	85.2

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Intangible Assets And Goodwill (Tables)

9 Months Ended

Sep. 30, 2014

Intangible Assets And Goodwill [Abstract]

Weighted Average Useful Life, Gross Amount And Accumulated Amortization Of Intangible Assets

	September 30, 2014					December 31, 2013
	Cost		Accumulated Amortization		Weighted-Average Useful Lives	Cost		Accumulated Amortization
Trade names	$	117.6	$	26.6	36 years	$	120.0	$	24.2
Customer relationships		323.2		88.5	32 years		333.2		79.4
Non-compete agreements		5.3		5.2	3 years		5.5		5.0
Existing technology		171.6		62.5	23 years		173.3		55.6
Contracts and purchase agreements		9.7		1.7	11 years		10.2		1.4
Software		28.7		28.4	10 years		28.7		26.3
In-process research and development		14.4		-	(a)		-		-
Total amortizable intangible assets	$	670.5	$	212.9		$	670.9	$	191.9

(a)Research and development intangible assets are considered indefinite-lived until the abandonment or completion of the associated research and development efforts.

Changes In Goodwill, In Total And By Segment

			Aftermarket
	New Units		Parts and Services		Total
Balance, December 31, 2013	$	488.4	$	439.2	$	927.6
Foreign currency adjustments		(33.7)		(24.2)		(57.9)
Balance, September 30, 2014	$	454.7	$	415.0	$	869.7

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Consolidated Statement Of Changes In Stockholders' Equity (USD $) In Millions, unless otherwise specified	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive (Loss) Income [Member]	Non-Controlling Interest [Member]	Total
Beginning Balance at Dec. 31, 2012	$ 0.8	$ 140.5	$ 1,084.6	$ (134.7)	$ 3.7	$ 1,094.9
Stock-based compensation		18.4				18.4
Stock repurchases		(1.5)				(1.5)
Net income			135.6		3.2	138.8
Other comprehensive (loss) income
Foreign currency translation adjustments				(17.5)	(0.7)	(18.2)
Unrealized gain on derivatives, net of tax				0.2		0.2
Pension and other postretirement benefit plans:
Amortization of prior service cost and net actuarial loss included in net periodic costs-net of tax				4.1		4.1
Ending Balance at Sep. 30, 2013	0.8	157.4	1,220.2	(147.9)	6.2	1,236.7
Beginning Balance at Dec. 31, 2013	0.8	162.4	1,253.0	(118.8)	4.0	1,301.4
Stock-based compensation		20.0				20.0
Net income			76.5		0.2	76.7
Other comprehensive (loss) income
Foreign currency translation adjustments				(69.4)	(0.7)	(70.1)
Unrealized gain on derivatives, net of tax				0.2		0.2
Pension and other postretirement benefit plans:
Amortization of prior service cost and net actuarial loss included in net periodic costs-net of tax				1.4		1.4
Ending Balance at Sep. 30, 2014	$ 0.8	$ 182.4	$ 1,329.5	$ (186.6)	$ 3.5	$ 1,329.6

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Inventories, Net (Tables)

9 Months Ended

Sep. 30, 2014

Inventory, Net [Abstract]

Inventories

	September 30,		December 31,
	2014		2013
Raw materials	$	149.3	$	71.0
Finished parts		287.7		262.4
Work-in-process		752.4		845.9
		1,189.4		1,179.3
Less: progress payments from clients		(458.0)		(463.3)
Inventories, net	$	731.4	$	716.0

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Accumulated Other Comprehensive Income (Loss) ("AOCI") (Tables)

9 Months Ended

Sep. 30, 2014

Accumulated Other Comprehensive Income (Loss) ("AOCI") [Abstract]

Changes In Accumulated Other Comprehensive Income (Loss) By Component

	Foreign				Pension and
	Currency		Unrealized		Other
	Translation		(Loss) Gain on		Postretirement
	Adjustments		Derivatives		Benefit Plans		Total
At December 31, 2013	$	(69.5)	$	(0.4)	$	(48.9)	$	(118.8)
Other comprehensive loss before reclassifications		(69.4)		-		-		(69.4)
Amounts reclassified from AOCI		-		0.2		1.4		1.6
Net current period other comprehensive (loss) income		(69.4)		0.2		1.4		(67.8)
At September 30, 2014	$	(138.9)	$	(0.2)	$	(47.5)	$	(186.6)

During the three and nine months ended September 30, 2014, foreign currency translation adjustments in accumulated other comprehensive loss were $(70.9) and $(69.4), respectively, primarily due to the weakening of the Euro of approximately 7.8% during the three months ended September 30, 2014.

	Foreign				Pension and
	Currency		Unrealized		Other
	Translation		(Loss) Gain on		Postretirement
	Adjustments		Derivatives		Benefit Plans		Total
At December 31, 2012	$	(51.3)	$	(0.7)	$	(82.7)	$	(134.7)
Other comprehensive loss before reclassifications		(17.5)		-		-		(17.5)
Amounts reclassified from AOCI		-		0.2		4.1		4.3
Net current period other comprehensive (loss) income		(17.5)		0.2		4.1		(13.2)
At September 30, 2013	$	(68.8)	$	(0.5)	$	(78.6)	$	(147.9)

Schedule Of Amounts Reclassified From Accumulated Other Comprehensive Income (Loss)

	Amount Reclassified From AOCI into Net Income
	Three Months Ended September 30,				Nine Months Ended September 30,				Affected Line Item in the Consolidated Statement
Details About AOCI Components	2014		2013		2014		2013		of Income
Unrealized gain on derivatives	$	(0.1)	$	-	$	(0.3)	$	(0.3)	Interest expense, net
		-		-		0.1		0.1	Provision for income taxes
	$	(0.1)	$	-	$	(0.2)	$	(0.2)	Net of tax
Pension and other postretirement benefit plans
Amortization of net actuarial loss	$	(0.5)	$	(2.2)	$	(2.4)	$	(6.5)	(a)
		0.1		0.8		1.0		2.4	Provision for income taxes
	$	(0.4)	$	(1.4)	$	(1.4)	$	(4.1)	Net of tax
Total reclassifications, net of tax	$	(0.5)	$	(1.4)	$	(1.6)	$	(4.3)	Net of tax

(a)These items are included in the computation of net pension expense and net post-retirement benefits expense. See Note 11, Pension Plans and Note 12, Post-Retirement Benefits Other than Pensionsfor additional information.

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Financial Instruments (Narrative) (Details) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014 USD ($)	Sep. 30, 2013 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2013 USD ($)	Dec. 31, 2013 USD ($)	Sep. 30, 2014 Interest Rate Swap [Member] USD ($)	Sep. 30, 2014 Interest Rate Swap [Member] EUR (€)	Sep. 30, 2014 Foreign Exchange Contract [Member] USD ($)	Dec. 31, 2013 Foreign Exchange Contract [Member] USD ($)	Sep. 30, 2014 Potential Offsetting [Member] USD ($)
Financial Instruments [Line Items]
Notional amount of derivatives						$ 22.7	€ 18.0	$ 590.0	$ 546.6
Interest rate swap, fixed rate of interest rate	3.87%		3.87%
Fair value of the interest rate swap	0.5		0.5		0.7
Fair value of the interest rate swap related unrealized gain	0.1	0	0.2	0.2
Derivative liability, offset										4.2
Derivative asset, net of offset										9.5
Derivative liability, net of offset										8.5
Gain (loss) on forward exchange contracts	$ 7.7	$ (8.1)	$ 12.1	$ (17.4)

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Consolidated Statement Of Income (USD $) In Millions, except Share data in Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Consolidated Statement Of Income [Abstract]
Net sales of products	$ 512.9	$ 430.2	$ 1,503.5	$ 1,592.4
Net sales of services	170.9	203.7	507.8	613.2
Total revenues	683.8	633.9	2,011.3	2,205.6
Cost of products sold	390.6	303.7	1,147.2	1,222.0
Cost of services sold	111.0	147.4	356.0	430.6
Total cost of sales	501.6	451.1	1,503.2	1,652.6
Gross profit	182.2	182.8	508.1	553.0
Selling and administrative expenses	92.0	93.1	296.9	287.7
Research and development expenses	5.8	8.3	20.3	31.2
Transaction-related expenses	10.5		10.5
Income from operations	73.9	81.4	180.4	234.1
Interest expense, net	(13.0)	(7.8)	(38.6)	(35.5)
Other expense, net	(17.7)	(8.1)	(18.2)	(7.1)
Income before income taxes	43.2	65.5	123.6	191.5
Provision for income taxes	11.9	15.5	46.9	52.7
Net income	31.3	50.0	76.7	138.8
Net income attributable to noncontrolling interest	(0.5)	(0.6)	(0.2)	(3.2)
Net income attributable to Dresser-Rand	$ 30.8	$ 49.4	$ 76.5	$ 135.6
Net income attributable to Dresser-Rand per share
Basic	$ 0.40	$ 0.65	$ 1.00	$ 1.78
Diluted	$ 0.40	$ 0.64	$ 0.99	$ 1.77
Weighted-average shares outstanding-(in thousands )
Basic	76,629	76,263	76,508	76,092
Diluted	77,279	76,890	77,107	76,790

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Intangible Assets and Goodwill (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Intangible Assets And Goodwill [Abstract]
Intangible asset amortization expense	$ 8.3	$ 7.1	$ 25.1	$ 21.7
Remainder of fiscal year 2014	8.6		8.6
2015	30.6		30.6
2016	30.0		30.0
2017	29.8		29.8
2018	29.4		29.4
2019	$ 29.1		$ 29.1

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Consolidated Balance Sheet (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Statement Of Financial Position [Abstract]
Accounts receivable, allowance for losses	$ 8.4	$ 9.1
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	76,650,843	76,293,924
Common stock, shares outstanding	76,650,843	76,293,924

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Pension Plans (Components Of Net Pension Expense) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
U.S. plans
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 0.9	$ 0.9	$ 2.7	$ 2.9
Interest cost	3.2	2.9	9.8	8.7
Expected return on plan assets	(4.6)	(4.0)	(13.8)	(12.1)
Amortization of net actuarial loss	0.6	1.9	2.0	5.9
Amortization of prior service cost			0.1
Net plan expense	0.1	1.7	0.8	5.4
Non-U.S. Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	0.6	1.4	1.8	4.2
Interest cost	1.4	1.6	4.1	4.7
Expected return on plan assets	(1.6)	(1.8)	(4.9)	(5.1)
Amortization of net actuarial loss			0.2	0.2
Amortization of prior service cost		0.1	0.1	0.1
Net plan expense	$ 0.4	$ 1.3	$ 1.3	$ 4.1

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Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2014

Long-Term Debt [Abstract]

Long-Term Debt

	September 30,		December 31,
	2014		2013
Amended Credit Facility	$	725.5		$              884.5
6½% Senior Subordinated Notes due May 2021		375.0		375.0
Bank overdraft facility		-		4.6
Other indebtedness		16.6		22.9
Total debt		1,117.1		1,287.0
Less:  current portion		(31.3)		(40.1)
Total long-term debt	$	1,085.8		1,246.9

Carrying And Fair Values Of Senior Subordinated Notes

	September 30, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
6½% senior subordinated notes due May 2021	$	375.0	$	403.6	$	375.0	$	400.5

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Incentive Stock-Based Compensation Plans (Narrative) (Details)	1 Months Ended
	Feb. 28, 2014 Non-Employee Directors [Member]	Sep. 30, 2014 Options And Stock Appreciation Rights [Member]	Sep. 30, 2014 Time-Vested Restricted Stock Units [Member]	Sep. 30, 2014 Performance Restricted Stock Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Maximum number of shares to be issued		297,007	332,737	69,499
Number of shares granted, Directors	15,736

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Commitments And Contingencies

9 Months Ended

Sep. 30, 2014

Commitments And Contingencies [Abstract]

Commitments And Contingencies

13.Commitments and Contingencies (€ and R$ in millions)

Legal Proceedings

We are involved in various litigation, claims and administrative proceedings 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. We are indemnified by our former owner, Ingersoll Rand Company Limited (“Ingersoll Rand”), for certain of these matters as part of Ingersoll Rand’s sale of the Company and by the sellers of Grupo Guascor for certain of these matters in connection with our acquisition of Grupo Guascor, S.L. (“Guascor”) in May 2011.  While adverse decisions in certain of these litigation matters, claims and administrative proceedings could have a material effect on a particular period’s results of operations, subject to the uncertainties inherent in estimating future costs for contingent liabilities and the benefit of the indemnitiesfrom Ingersoll Rand and the sellers of Guascor, management believes that any future accruals with respect to these currently known contingencies would not have a material effect on the financial condition, liquidity or cash flows of the Company.

Shareholder Litigation

A putative class action lawsuit challenging the proposed merger with Siemens Energy, Inc. was filed on September 24, 2014 on behalf of Dresser-RandGroup Inc. stockholders in the Delaware Court of Chancery.  The action is captioned Soffer v. Volpe et al., C.A. No. 10165-CB (Del. Ch.).  The complaint in the Soffer action alleges that the directors of the Company breached their fiduciary duties to stockholders by engaging in a flawed sale process, agreeing to sell the Company for inadequate consideration and agreeing to improper deal protection terms in the Merger Agreement.  In addition, the lawsuit alleges that the Company, Siemens and Dynamo Acquisition Corporation, the Delaware subsidiary formed by Siemens in connection with the transaction, aided and abetted these purported breaches of fiduciary duty.  The lawsuit seeks, among other things, an injunction barring the merger. On October 21, 2014, plaintiffs amended the complaint to allege as additional basis for relief that the directors of the Company engaged in self-dealing because they will benefit from their compensation arrangements and/or the sale of their personal stakes in the Company and that the preliminary proxy statement filed by the Company on October 9, 2014 fails to provide stockholders with material information about the transaction and/or is materially misleading.  On October 24, 2014, Construction Industry & Laborers Union Local 872 Pension A Trust v. Dresser-Rand Group, Inc., et al, C.A. No. 10285-CB (Del. Ch.) was filed in the Delaware Court of Chancery.  This complaint contains claims and allegations similar to those in the pre-amendment Soffer complaint and seeks similar relief on behalf of the same putative class.  The Company believes that the lawsuits are without merit.

Guascor Purchase Price Dispute

On May 4, 2011, the Company acquired all of the issued and outstanding capital stock of Guascor pursuant to a Share Purchase Agreement (the “SPA”) for approximately $543.2.  The purchase price was subject to a further adjustment to the extent that net debt (debt minus cash) at the end of business on May 4, 2011, was different from €124.5. Pursuant to the SPA, this adjustment is to be computed on the basis of Spanish generally accepted accounting principles (“SGAAP”).

The Company and the sellers of Guascor (“Sellers”) are in dispute about the amount of the purchase price adjustment set out in the SPA. In some cases, the Sellers and the Company have opposing views as to the amount that should be included in the price adjustment.  In other cases, the Sellers and the Company are in dispute as to whether certain items should be included in the net debt computation.  In accordance with the provisions of the SPA, the parties are resolving this dispute under an arbitration in the International Court of Commerce (“ICC”) and before a French court-appointed expert.  Based upon its interpretation of Spanish GAAP, the Company has unresolved disputes totaling approximately $42.4 with the Sellers.

The Company has recorded a receivable from the Sellers for the purchase price adjustment, net of an allowance for the Company’s best estimate of amounts collectible.  This allowance was established by considering, for each disputed item, the Company’s view of its position under SGAAP, uncertainties around the expert’s interpretation of SGAAP, and the collectability of the amounts. As additional information becomes known and disputed items are resolved, changes to the allowance will be recorded directly to net income.  The final resolution of these amounts could take several months and potentially years if appeals are pursued.  The final amount could be materially different than the net receivable recorded by the Company.  The Company, however, does not believe that the difference could have a material adverse effect on its operating results, financial condition, liquidity or cash flows.

Painted Post Labor Litigation

In November 2007, Local 313 of IUE-CWA, the union that represents certain employees at the Company’s Painted Post, New York, facility (the “IUE”) made an offer to have its striking members return to work under the terms of the previously expired union agreement.  The Company rejected that offer and locked out these represented employees.  Approximately one week later, after reaching an impasse in negotiations, the Company exercised its right to implement the terms of its last contract offer, ended the lockout, and the employees represented by the IUE agreed to return to work under the implemented terms.  Subsequently, the IUE filed several unfair labor practice (“ULP”) charges against the Company with Region 3 of the National Labor Relations Board (“NLRB”), asserting multiple allegations arising from the protracted labor dispute, its termination, contract negotiations and related matters.

Region 3 of the NLRB decided to proceed to complaint on only one-third of the ULP allegations asserted by the IUE, while the remaining claims were dismissed.  Notably, the NLRB found that many of the critical aspects of the Company’s negotiations with the IUE were handled appropriately, including the NLRB’s findings that the union’s strike was not an unfair labor practice strike and the Company’s declaration of impasse and its unilateral implementation of its last offer were lawful. The Company, therefore, continued to operate under a more contemporary and competitive implemented contract offer while contract negotiations with the IUE continued in 2008 and 2009.  In November 2009, a collective bargaining agreement between the IUE and the Company was ratified, which agreement was renegotiated in 2013 and extended to March 2016.

The claims that proceeded to complaint before the NLRB included the Company’s handling of the one week lockout, the negotiation of the recall process used to return employees to the facility after reaching impasse and lifting the lockout, and the termination of two employees who engaged in misconduct on the picket line during the strike.  The trial of this matter took place before a NLRB Administrative Law Judge (the “ALJ”) in Elmira and Painted Post, New York, during the summer of 2009.  On January 29, 2010, the ALJ issued his decision in which he found in favor of the union on some issues and upheld the Company’s position on others.  The Company timely appealed the ALJ’s rulings against the Company to the NLRB in Washington, D.C.  On August 6, 2012, the NLRB affirmed the ALJ’s rulings.  The Company timely appealed the matter to the U.S. Fifth Circuit Court of Appeals, which stayed the proceedings in July 2013 pending a ruling by the U.S. Supreme Court on a constitutional issue, in an unrelated case, that is also in controversy in the Company’s appeal.  The U.S. Supreme Court’s decision on the constitutional matter was decided in June 2014. That decision held that the NLRB that ruled on this and other cases was invalidly appointed by the President and the matters decided by that NLRB were also set aside as invalid. As a result, this matter has been returned to the current and validly appointed NLRB to be reheard in its entirety. The Company continues to believe it complied with the law and that it will ultimately prevail with respect to these ULP allegations.  The litigation process, including further appeals, could reasonably take one to two years to resolve with finality.  Given the broad scope of possible remedies that may apply pursuant to conflicting case law, the Company cannot estimate the range of loss, if any, at this time.  Although the ultimate outcome of these matters cannot be ascertained at this time, it is the opinion of management that the resolution of such matters will not have a material adverse effect on the Company’s financial condition.

Banco Santos Litigation

In July 2004, Guascor SA and Jaguari Energetica SA, subsidiaries of Guascor (collectively, the “GG Entities”), entered into an agreement (the “BNDES Agreement”) with the Bank of National Economic and Social Development (“BNDES”) for the construction of a hydroelectric dam in Rio Grande do Sul, Brazil (the “Project”).  Pursuant to the terms of the BNDES Agreement, in August 2004, the GG Entities entered into a separate agreement (the “Banco Santos Agreement”) with Banco Santos, a Brazilian bank previously based in Sao Paulo, Brazil.  Per the terms of the Banco Santos Agreement, Banco Santos and the GG Entities agreed that: (i) in exchange for a fee paid by the GG Entities, Banco Santos would establish a reserve in favor of the GG Entities in the amount of R$3.6 (approximately $1.5) (the “Reserve”) to ensure that funds for a twelve month term would be available (if needed) by the GG Entities to fund their performance obligations under the BNDES Agreement; (ii) the GG Entities would issue twelve banking credit notes (the “Notes”) to Banco Santos (one for each of the twelve months), under which Notes the GG Entities would be obligated to make a payment to Banco Santos if the GG Entities used the applicable portion of the Reserve associated with a Note; and (iii) no portion of the Reserve would be invested by Banco Santos in any high risk investments.  The GG Entities completed the Project in December 2006 and fulfilled their obligations under the BNDES Agreement, without using any portion of the Reserve.  Accordingly, the Company believes that, pursuant to the terms of the Banco Santos Agreement, none of the Notes securing the Reserve became due or payable by the GG Entities to Banco Santos.  

In September 2004, Banco Santos, without the knowledge or consent of the GG Entities, transferred the Reserve to its affiliates, Santos Credit Yield (“SCY”) and Santos Credit Master (“SCM,” and together with SCY, the “BS Affiliates”).  Upon the receipt of the Reserve, the BS Affiliates invested the funds in a high risk investment, resulting in the loss of the entire Reserve.  In addition, concurrently with the transfer of the Reserve, Banco Santos assigned its rights in the Notes to the BS Affiliates.  Shortly after the assignment of the Notes, Banco Santos declared bankruptcy.        

The GG Entities commenced an action (the “Declaratory Action”) in the Civil Courts in the State of Sao Paulo, Brazil, in April 2005 seeking a declaratory judgment that the BS Affiliates were barred from recovering any amounts with regard to the Notes because such Notes were null and void pursuant to the terms of the Banco Santos Agreement.  In December 2010, while the Declaratory Action was still pending, the BS Affiliates filed a separate action (the “BS Action”) in the Sao Paulo Civil Court seeking to recover from the GG Entities the amount of the Reserve.  The Court stayed the BS Action in September 2011 pending a final ruling in the Declaratory Action.  The GG Entities appealed the Court’s denial of their request for declaratory relief, and the Appellate Court ruled in our favor, and we were not ordered to pay any amounts.  Banco Santos did not agree with the decision and has appealed to the Supreme Court.

The Company believes that the chances of losing the case in the Supreme Court are remote, based on the factual circumstances and the applicable law, that Banco Santos and the BS Affiliates violated the terms of the Banco Santos Agreement and the payment terms of the Notes, and that the GG Entities should prevail in the final decision of the Declaratory Action and a similar case filed by the BS Affiliates.  Notwithstanding, the ultimate outcome of these proceedings is pending the Supreme Court’s decision and cannot be ascertained at this time.  The Company estimates that the total aggregate exposure for damages, interest and attorneys’ fees could be up to R$46.4 (approximately $19.0).  Moreover, the Company has an indemnification claim against the sellers of Guascor with regard to this matter.

Italian Value-Added Tax Claim

The Company is in litigation with the Italian tax authorities regarding value-added taxes for tax years 2005-2008 and the application of Italian and European Union laws.  The Company received an adverse judgment from the Italian Tax Court (i.e., the Commissione Tributaria Provinciale Di Genova) in February 2012 for tax years 2005-2006 for approximately €4.2 ($5.3).  On March 6, 2014, as requested by the Italian Tax Court with regard to tax years 2007 and 2008, the Court of Justice of the European Union issued an advisory, preliminary ruling, which ruling supported the Company’s position with regard to the value-added tax regulations that no such taxes are owed.  The Company then requested that the Italian Tax Court issue its judgment with regard to tax years 2007 and 2008, which judgment the Company intends to present to the appeals court in connection with its appeal of the Italian Tax Court’s adverse judgment with respect to tax years 2005 and 2006.On September 24, 2014, the Italian Tax Court issued its judgment with regard to tax years 2007 and 2008 in accordance with European Union recommendations.  The Italian tax authorities have six months to file an appeal.  The next hearing which will review tax years 2005 and 2006 is scheduled for November 2014.  The Company intends to request the withdrawal of the tax authority’s claim with respect to tax years 2005 and 2006.  The Company estimates the total aggregate exposure for taxes, interest and penalties could be up to €10.1 ($12.8).

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Pension Plans (Tables)

9 Months Ended

Sep. 30, 2014

Pension Plans [Abstract]

Components Of Net Pension Expense Amounts Recognized in Consolidated Statement of Comprehensive Income

	U.S. Plans								Non-U.S. Plans
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013		2014		2013		2014		2013
Service cost	$	0.9	$	0.9	$	2.7	$	2.9	$	0.6	$	1.4	$	1.8	$	4.2
Interest cost		3.2		2.9		9.8		8.7		1.4		1.6		4.1		4.7
Expected return on plan assets		(4.6)		(4.0)		(13.8)		(12.1)		(1.6)		(1.8)		(4.9)		(5.1)
Amortization of net actuarial
loss		0.6		1.9		2.0		5.9		-		-		0.2		0.2
Amortization of prior service
cost		-		-		0.1		-		-		0.1		0.1		0.1
Net pension expense	$	0.1	$	1.7	$	0.8	$	5.4	$	0.4	$	1.3	$	1.3	$	4.1

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Segment Information

9 Months Ended

Sep. 30, 2014

Segment Information [Abstract]

Segment Information

15.Segment Information

The Company has 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 predominately highly engineered solutions to new requests from clients. New units also include standardized equipment such as engines and single stage steam turbines. The segment includes engineering, manufacturing, project management, packaging, testing, sales and administrative support.

2) Aftermarket parts and services consist of support solutions for the existing population of installed equipment and the operation and maintenance of several types of energy plants. The segment includes engineering, manufacturing, project management, installation, commissioning, start-up and other field services, repairs, overhauls, refurbishment, sales and administrative support.

These functions have been defined as the operating segments of the Company because they are the segments (1) that engage in business activities from which revenues are earned and expenses are incurred; (2) whose operating results are regularly reviewed by the Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and (3) for which discrete financial information is available.

Unallocated amounts represent expenses and assets that cannot be assigned directly to either reportable segment because of their nature.  Unallocated net expenses include certain corporate expenses and research and development expenses.  Assets that are directly assigned to the two reportable segments are trade accounts receivable, net inventories and goodwill.  Unallocated assets include cash, prepaid expenses and other, deferred taxes, property, plant and equipment and intangible assets. There are no significant intercompany transactions between our reportable segments.

Segment results for the three and nine months ended September 30, 2014 and 2013 were as follows:  

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Revenues
New units	$	338.7	$	272.9	$	1,032.7	$	1,136.3
Aftermarket parts and services		345.1		361.0		978.6		1,069.3
Total revenues	$	683.8	$	633.9	$	2,011.3	$	2,205.6
Income from operations
New units	$	17.3	$	33.5	$	60.1	$	87.9
Aftermarket parts and services		90.0		75.0		210.3		234.2
Unallocable		(33.4)		(27.1)		(90.0)		(88.0)
Total income from operations	$	73.9	$	81.4	$	180.4	$	234.1
Depreciation and amortization
New units	$	10.2	$	8.7	$	34.2	$	34.0
Aftermarket parts and services		12.9		12.5		36.5		33.1
Total depreciation and amortization	$	23.1	$	21.2	$	70.7	$	67.1

Total assets by segment were as follows:

	September 30,		December 31,
	2014		2013
Total assets (including goodwill)
New units	$	1,036.3	$	1,113.8
Aftermarket parts and services		1,336.2		1,305.0
Unallocable		1,137.8		1,319.0
Total assets	$	3,510.3	$	3,737.8

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Accumulated Other Comprehensive Income (Loss) ("AOCI") (Schedule of Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest expense, net	$ (13.0)		$ (7.8)		$ (38.6)		$ (35.5)
Provision for income taxes	11.9		15.5		46.9		52.7
Net income	31.3		50.0		76.7		138.8
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net income	(0.5)		(1.4)		(1.6)		(4.3)
Unrealized (Loss) Gain On Derivatives [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest expense, net	(0.1)				(0.3)		(0.3)
Provision for income taxes					0.1		0.1
Net income	(0.1)				(0.2)		(0.2)
Pension And Other Postretirement Benefit Plans [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Amortization of net actuarial loss	(0.5)	[1]	(2.2)	[1]	(2.4)	[1]	(6.5)	[1]
Provision for income taxes	0.1		0.8		1.0		2.4
Net income	$ (0.4)		$ (1.4)		$ (1.4)		$ (4.1)

[1] These items are included in the computation of net pension expense and net post-retirement benefits expense. See Note 11, Pension Plans and Note 12, Post-Retirement Benefits Other than Pensions for additional information.

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Consolidated Statement Of Cash Flows (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Cash flows from operating activities
Net income	$ 76.7	$ 138.8
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	70.7	67.1
Deferred income taxes	(30.9)	4.4
Stock-based compensation	19.4	22.8
Loss on re-measurement of previously held equity interest	18.3
Gain on fair value of assets acquired in excess of fair value of consideration	(6.6)
Excess tax benefits from stock-based compensation	(2.3)	(6.8)
Amortization of debt financing costs	1.7	2.9
Provision for losses on inventory	3.8	0.9
Provision for losses on accounts receivable	3.3	0.5
Loss from equity investments	3.6	4.0
Gain on disposal of assets	(3.4)	(0.4)
Changes in working capital and other, net of acquisitions
Accounts receivable	83.1	(143.2)
Inventories	(38.0)	(165.4)
Prepaid expenses and other	1.1	(13.8)
Accounts payable and accruals	(93.9)	57.8
Customer advances	53.3	(109.0)
Taxes payable	12.4	(9.3)
Pension and other post-retirement benefits	(16.6)	(9.1)
Other	33.2	(4.6)
Net cash provided by (used in) operating activities	188.9	(162.4)
Cash flows from investing activities
Capital expenditures	(43.5)	(56.3)
Loans made to investees and others	(20.7)
Proceeds from sales of assets	0.7	1.4
Acquisitions, net of cash acquired	(1.0)
Other investments	(3.5)	(12.5)
Decrease in restricted cash balances	3.4	5.8
Net cash used in investing activities	(64.6)	(61.6)
Cash flows from financing activities
Proceeds from exercise of stock options	4.3	4.0
Proceeds from borrowings	750.4	1,445.6
Repayments of borrowings	(901.6)	(1,161.8)
Excess tax benefits from stock-based compensation	2.3	6.8
Repurchase of common stock	(5.4)	(1.5)
Payments for debt financing costs	0.2	(4.7)
Net cash (used in) provided by financing activities	(149.8)	288.4
Effect of exchange rate changes on cash and cash equivalents	(4.2)	(12.8)
Net (decrease) increase in cash and cash equivalents	(29.7)	51.6
Cash and cash equivalents, beginning of period	190.4	122.8
Cash and cash equivalents, end of period	$ 160.7	$ 174.4

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Consolidated Statement Of Comprehensive Income (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Consolidated Statement Of Comprehensive Income [Abstract]
Net income	$ 31.3	$ 50.0	$ 76.7	$ 138.8
Other comprehensive (loss) income
Foreign currency translation adjustments	(71.6)	22.4	(70.1)	(18.2)
Unrealized gain on derivatives - net of tax of $0.0 and $0.0 for the three months ended September 30, 2014 and 2013, respectively, and $0.1 and $0.1 for the nine months ended September 30, 2014 and 2013, respectively	0.1		0.2	0.2
Pension and other postretirement benefit plans:
Amortization of prior service cost and net actuarial loss included in net periodic costs - net of tax of $0.2 and $0.8 for the three months ended September 30, 2014 and 2013, respectively, and $1.0 and $2.4 for the nine months ended September 30, 2014 and 2013, respectively	0.4	1.4	1.4	4.1
Total other comprehensive (loss) income	(71.1)	23.8	(68.5)	(13.9)
Total comprehensive (loss) income	(39.8)	73.8	8.2	124.9
Comprehensive loss (income) attributable to noncontrolling interest	0.2	(0.8)	0.5	(2.5)
Comprehensive (loss) income attributable to Dresser-Rand	$ (39.6)	$ 73.0	$ 8.7	$ 122.4

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Financial Instruments

9 Months Ended

Sep. 30, 2014

Financial Instruments [Abstract]

Financial Instruments

8. Financial Instruments (€ in millions)

The Company manages exposure to changes in foreign currency exchange rates and interest rates through its normal operating and financing activities as well as through the use of financial instruments.

The purpose of the Company’s hedging activities is to mitigate the economic impact of changes in foreign currency exchange rates and interest rates.  The Company attempts to hedge transaction exposures through natural offsets.  To the extent that this is not practicable, the Company may enter into forward exchange contracts or interest rate swaps.  Major exposure areas considered for hedging include foreign currency denominated receivables and payables, firm committed transactions, forecast sales and purchases and variable interest rates.

The Company has entered into an interest rate swap agreement to minimize the economic impact of fluctuations in interest rates on the lease of its compressor testing facility in France. The interest rate swap has a notional amount of €18.0 (approximately $22.7) and effectively converts substantially the entire interest component of the lease from a variable rate of interest to a fixed rate of interest of approximately 3.87% per annum. The interest rate swap has been designated as a cash flow hedge for accounting purposes, and unrealized gains and losses are recognized in other comprehensive income.  The fair value of the interest rate swap at September 30, 2014, and December 31, 2013 was $0.5 and $0.7, respectively, and the related unrealized gain for the three and nine months ended September 30, 2014, was $0.1 and$0.2, respectively, and$0.0 and$0.2 for the three and nine months ended September 30, 2013, respectively.

None of the Company’s other derivative financial instruments are designated as hedges for accounting purposes.  Changes in the fair values of derivatives that are not designated as hedges for accounting purposes are immediately recognized in the consolidated statement of income in other expense, net.

All of the Company’s foreign currency derivative contracts are subject to master netting arrangements.  These arrangements provide for the option to settle contracts with a given counterparty on a net basis when they settle on the same day and the same currency.  In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event, and do not require the Company to post any cash collateral.  The Company has elected to present the derivative contracts on a gross basis in the consolidated balance sheet.  The Company recognizes derivatives in prepaid expenses and other, or accounts payable and accruals, as appropriate, on the consolidated balance sheet and measures them at fair value each reporting period.  As of September 30, 2014, had the Company presented its derivative contracts on a net basis, the assets and liabilities presented in the table below would be offset by $4.2, resulting in net foreign currency exchange contracts assets and liabilities of $9.5 and $8.5, respectively.

The following table sets forth the Company’s gross foreign currency exchange contracts that were accounted for at fair value on a recurring basis:

	September 30,		December 31,
	2014		2013
Foreign currency exchange contracts assets	$	13.7	$	5.4
Foreign currency exchange contracts liabilities	$	12.7	$	16.3

The notional amount for the forward exchange contracts outstanding as of September 30, 2014, and December 31, 2013, was $590.0 and $546.6, respectively.  The net foreign currency gains (losses) recognized for forward currency contracts were $7.7 and$12.1 for the three and nine months ended September 30, 2014, respectively, compared to$(8.1) and $(17.4) for the threeand nine months ended September 30, 2013, respectively.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Oct. 30, 2014
Document Documentand Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Trading Symbol	drc
Entity Registrant Name	Dresser-Rand Group Inc.
Entity Central Index Key	0001316656
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		76,651,104

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Income Taxes

9 Months Ended

Sep. 30, 2014

Income Taxes [Abstract]

Income Taxes

9.Income taxes

We operate in numerous countries and tax jurisdictions around the world and there is no assurance that future tax audits will not result in significant tax adjustments. Management believes that it has provided adequate estimated liabilities for taxes based on its understanding of the tax laws and regulations in those countries.

Our estimated income tax provisions for the three and nine months ended September 30, 2014 and 2013, result in effective rates that differ from the U.S. federal statutory rate of 35% principally because of different tax rates in foreign tax jurisdictions and certain deductions and credits allowable for income tax purposes, offset by state and local income taxes and valuation allowances on net operating loss carryforwards that more-likely-than-not will not be realized.  We will adjust the valuation allowances in the future if it becomes more-likely-than-not that the benefits of deferred tax assets will not be realized.

The increase in the effective tax rate for the three and nine months ended September 30, 2014, as compared to the three and nine months ended September 30, 2013, is principally due to an increased amount of net operating losses in certain foreign countries for which we could not record benefits under U.S. GAAP, thus increasing the effective tax rate by approximately 9.4 and 12.6 percentage points, respectively.  In the three months ended September 30, 2014, the company was able to benefit previously unrecognized foreign tax credits, thus reducing the effective tax rate for the three and nine months ended September 30, 2014, by approximately 7.3 percentage points and 2.8 percentage points, respectively.

On January 2, 2013, the American Taxpayer Relief Act (“ATRA”) of 2012 was signed into law. Some of the provisions were retroactive to January 1, 2012, including the exclusion from U.S. federal taxable income of certain interest, dividends, rents, and royalty income of foreign affiliates, as well as the tax benefits of the credits associated with that income and an extension of the research and experimentation credit. Therefore, as required by U.S. GAAP, a $4.4 benefit was reflected in the three months ended March 31, 2013 as a discrete event. The “look-through” exemption for foreign earnings provision and the research and experimentation credit has not yet been extended for 2014, causing an increase in the effective tax rate of approximately 1.0 percentage point for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013.  The increase in the effective tax rate for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013, was not significant.

As a result of the devaluation of the Venezuelan bolivar on February 8, 2013, the Company recorded a nondeductible foreign exchange loss in its Consolidated Statement of Income of approximately $3.1 for the three months ended March 31, 2013.  Had this amount been deductible, our effective tax rate would have been 1.0 percentage point lower for the nine months ended September 30, 2013. 

Certain foreign subsidiaries are operating under tax holiday arrangements that will expire during 2014 and 2015, subject to potential extensions.  For the three and nine months ended September 30, 2014, the impact of these tax holiday arrangements lowered income tax expense by $1.7($0.02 per diluted share) and$4.6  ($0.06 per diluted share), respectively, and by$1.9  ($0.02  per diluted share) and $5.2  ($0.07 per diluted share) for the three and nine months ended September 30, 2013, respectively.

Except for earnings in our Indian subsidiary, and certain current earnings of our Luxembourg subsidiary, management has decided to indefinitely reinvest the unremitted earnings of the Company’s foreign subsidiaries and, therefore, no provision for U.S. federal or state income taxes has been provided on those foreign earnings. If any indefinitely reinvested foreign earnings are distributed, in the form of dividends or otherwise, the Company could be subject to additional U.S. income taxes (subject to adjustment for foreign tax credits), as well as withholding taxes imposed by certain foreign jurisdictions.

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Consolidated Statement Of Comprehensive Income (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Consolidated Statement Of Comprehensive Income [Abstract]
Unrealized gain on derivatives, tax	$ 0	$ 0	$ 0.1	$ 0.1
Pensions and other postretirement benefit plans, tax	$ 0.2	$ 0.8	$ 1.0	$ 2.4

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Acquisitions And Other Investments

9 Months Ended

Sep. 30, 2014

Acquisitions And Other Investments [Abstract]

Acquisitions And Other Investments

3. Acquisitions and Other Investments

Acquisitions

On August 8, 2014, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) to acquirefinancial control of Ramgen Power Systems, LLC (“Ramgen”), an entity in which the Company held a42.2% equity interest immediately preceding the acquisition date. The Asset Purchase Agreement superseded all prior agreements between the Company and Ramgen.  Ramgen was developing compressor technology that applies proven supersonic aircraft technology to ground-based air and gas compressors.

The Company previously acquired its equity interest in Ramgen through various investments totaling $34.4 from 2008 to 2013.  Pursuant to the terms of the Asset Purchase Agreement, the Company acquired the remaining 57.8% of Ramgen’s assets ina business combination, in exchange for cash of approximately $1.0 and the rights to royalty payments from certain future sales made by the Company (“contingent consideration”).  The acquisition gives the Company sole ownership of the supersonic compressor technology and, therefore, control over the continued development and commercialization of the supersonic compressor program.

The purchase of Ramgen resulted in a net loss to the Company of $11.7, which consisted of two components: (1) a loss on the re-measurement of the Company’s previously held interest, and (2) a gain related to the fair value of the assets acquired in excess of the fair value of the consideration.

Because the business combination was achieved in stages, the Company re-measured its previously held equity interest in Ramgen at its acquisition-date fair value and recognized the resulting loss of $18.3 in other expense, net for the three and nine months ended September 30, 2014, in the consolidated statement of income. The acquisition-date fair value of the previous equity interest of $10.3 was estimated using the cost aggregation approach based upon the underlying fair value of the assets of Ramgen.  Since Ramgen was a private company, the fair value measurement was based on significant inputs that are not observable in the market and represent a Level 3 measurement as defined in ASC 820.  The cost approach was applied to the property, plant and equipment based on the type of use, condition, square footage and other similar factors to determine the fair value of assets acquired.  The income approach was applied to the intangible assets using projected results, a  market-based discount rate of 25.0% and a market-based royalty rate of 5.0%.  Acquired intangible assets consist of in-process research and development.

The Company believes that there are various factors that resulted in a negotiated purchase price for which the fair value of identifiable assets acquired exceeded the fair value of the consideration transferred.  Prior to the acquisition, Ramgen did not have a commercial function, and Dresser-Rand has a history of bringing new products to market.  There is considerable interest in the product as the Company has experienced significant inquiry volume since 2012.  In parallel with our efforts to gain a significant understanding of the technology, the Company continued to provide funding to Ramgen.  Ramgen would have incurred significant cost and delays in order to identify and engage another partner, arrange new funding, and commercialize the product.  Finally, there were certain protective provisions in the joint venture agreements which were negotiated in good faith, limiting the parties’ ability to sell shares, subcontract rights, or sell the technology without the other party’s consent.

The recorded amounts of the net assets acquired are as follows:

	August 8, 2014
Property, plant and equipment	$	10.0
Intangible assets		14.4
Deferred tax liabilities, net		(3.9)
Net assets acquired		20.5
Fair value of previous equity interest		(10.3)
Fair value of consideration:
Cash		(1.0)
Contingent consideration (non-cash)		(2.6)
Value of net assets acquired in excess of fair value of consideration	$	6.6

The contingent consideration arrangement requires the Company to pay royalties to Ramgen based on future sales related to the purchased products and technology for fifteen years upon commercialization.  The maximum amount payable shall not exceed $44.5.  The fair value of the contingent consideration was estimated using a discounted cash flow model based on projected sales related to the purchased products and technology. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820.  The income approach was applied to the contingent consideration using projected results, an estimated discount rate of 25.0% and contractually negotiated royalty rates of 1.0% to 2.0%.

Consequently, the Company reassessed the recognition and measurement of identifiable assets acquired and concluded that all acquired assets were recognized and that the valuation procedures and resulting measures were appropriate.  As a result, the Company recorded the fair value of the assets acquired in excess of the fair value of the consideration paid as a gain of $6.6 in other expense, net in the consolidated statement of income.

Pro forma financial information for the Ramgen acquisition, assuming it occurred at the beginning of 2013, has not been presented because the effect on our financial results was not considered material.  The financial results of Ramgen have been included in our consolidated financial results from the date of acquisition.  Since the activities are principally research and development activities, the financial results of Ramgen have remained unallocated and have not been incorporated into the Company’s existing new units and aftermarket parts and services segments.

Other Investments

On June 28, 2013, the Company and Apex Compressed Air Energy Storage, LLC (“APEX”) formed Bethel Holdco, LLC (“Bethel”) to develop a 317 megawatt compressed air energy storage (“CAES”) facility to be constructed in the north zone of Texas.  The Company expects to manufacture and supply the compression trains, expansion trains, balance of plant process equipment and installation, commissioning, start-up and on-site testing services to a subsidiary of Bethel, subject to the project reaching full financing.   Although the project is not yet fully financed, management believes that the ability to finance the project will not have a material adverse effect on the Company’s financial condition.  As of September 30, 2014, the Company had invested a total of$5.0for a5.7% ownership interest in Bethel.  The remaining 94.3% interest is held by APEX.  The Company has certain rights, but no obligations, to make additional capital contributions to Bethel.In connection with its investment in Bethel, the Company received an option tosell all ofitsinitial ownership interests in Bethelto APEX at such time on or after the second anniversary of the CAES facility achieving commercial operation that Bethel has a net positive amount of available cash to distribute to its members for a trailing twelve-month period.  The sale price under the option is the Company’s purchase price for the Bethel interests.On February 14, 2014, the Company entered into a term loan agreement with Bethel to help fund the construction of the CAES facility.  The Company may loan Bethel an aggregate principal amount of up to $25.0, with interest rates ranging from 8.0% to 16.0% per annum.  Loans made under the arrangement mature no later than eight years from the date of issuance.  As of September 30, 2014, Bethel has borrowed $18.6 from the Company.  The Company’s maximum exposure to loss on its investment in Bethel is limited to amounts invested (including amounts loaned) plus any amounts the Company may choose to invest in the future. In determining whether the Company should consolidate Bethel, the Company considered that its board participation, ownership interest and loan would not give the Company the power to direct the activities of Bethel and, consequently, would not result in the Company being the primary beneficiary.  The investment in Bethel is being accounted for under the equity method of accounting, and the amount of the investment recorded in other noncurrent assets on the consolidated balance sheet is $4.9 at September 30, 2014.  The Company recognized revenues from APEX of $0.0 and $22.4 for the three and nine months ended September 30, 2014, respectively.

In February 2011, the Company entered into an agreement to acquire a noncontrolling interest in Echogen Power Systems, LLC (“Echogen”), a privately-held technology company that is developing and commercializing power generation systems that harness waste heat for power and cooling applications using a proprietary supercritical carbon dioxide process technology. The Company will pay Echogen a royalty based on future equipment sales in these markets. Aggregate minimum royalties of $6.0 must be paid in the first five years of commercialization, which has not begun, regardless of the amount of revenues generated, or the license will become non-exclusive.  On March 26, 2014, the Company entered into an agreement for exclusive license rights to certain of Echogen’s intellectual property in exchange for $2.5 of cash and the relief of the Company’s obligation to provide certain equipment which was required under the original agreement. These exclusive license rights are represented by the remaining shares of Echogen held by the Company, which will be exchanged for an exclusive license if Echogen’s intellectual property is proven. Additionally, the Company matched other funding of $1.0 during the three months ended September 30, 2014. As of September 30, 2014, the Company had invested a total of $26.5 for a 33.9% noncontrolling interest in Echogen. The Company’s maximum exposure to loss on its investment in Echogen is limited to amounts invested plus any amounts the Company may choose to invest in the future, if any.In determining whether the Company should consolidate Echogen, the Company considered that its board participation and ownership interest would not give the Company the power to direct the activities of Echogen and, consequently, would not result in the Company being the primary beneficiary.  The investment in Echogen is being accounted for under the equity method of accounting, and the amount of the investment recorded in other noncurrent assets on the consolidated balance sheet is $14.8 at September 30, 2014.

In April 2009, the Company and Al Rushaid Petroleum Investment Company (“ARPIC”) executed a Business Venture Agreement to form a joint venture, Dresser-Rand Arabia LLC (“D-R Arabia”). D-R Arabia was formed to execute manufacturing, repair, and other services, and to provide technical expertise and training in the Kingdom of Saudi Arabia. The Company and ARPIC each own approximately 50% of D-R Arabia. In determining whether the Company should consolidate D-R Arabia, the Company determined that its ownership, board participation and other related contractual rights would give the Company the ability to direct the activities of D-R Arabia, which would result in the Company being the primary beneficiary. Consequently, D-R Arabia is consolidated in the financial results of the Company.

D-R Arabia has total assets of approximately $51.4, consisting principally of property, plant and equipment, and total liabilities of approximately $82.0, consisting principally of intercompany loans. The assets have been classified accordingly in the Company’s consolidated balance sheet, and the loans have been eliminated in consolidation. Both parties to the joint venture have signed a resolution committing to provide financial support to D-R Arabia, as needed, to meet the Company’s obligations as they become due.

The Company and ARPIC, as shareholders of D-R Arabia, and their respective director nominees provided approvals to enable D-R Arabia to satisfy two issues raised by the Saudi Arabian General Investment Authority (“SAGIA”), concerning adding licensing to provide additional services and repairs and increasing its capitalization.  The necessary filings have been made with SAGIA, which approved the filings on August 27, 2014.  Additional filings are being pursued with the Ministry of Commerce to increase the share capital of the Company. 

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New Accounting Standards

9 Months Ended

Sep. 30, 2014

New Accounting Standards [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

2.New Accounting Standards

Effective January 1, 2014, the Company adopted FASB ASU 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date (“ASU 2013-04”). The amendments in ASU 2013-04 provide guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. In accordance with the amendments, an entity will measure the obligation as the sum of (1) the amount the reporting entity agreed to pay on the basis of its arrangements among its co-obligors, and (2) any additional amount the reporting entity expects to pay on behalf of its co-obligors. The amendments in ASU 2013-04 also require an entity to disclose the nature and amount of the obligation as well as other information about those obligations. The adoption of ASU 2013-04 did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2014, the Company adopted FASB ASU 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU 2013-05”). The amendments in ASU 2013-05 resolve the diversity in practice in applying Subtopic 810-10, Consolidation, and Subtopic 830-30, Foreign Currency Matters, when a reporting entity ceases to have a controlling financial interest in a subsidiary within a foreign entity. The amendments in ASU 2013-05 require the reporting entity to release any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary resided.  For an equity method investment that is a foreign entity, a pro rata portion of the cumulative translation adjustment should be released into net income upon a partial sale of such an equity method investment, if significant influence is retained.  Additionally, the amendments clarify that the sale of an investment in a foreign entity includes both (1) events that result in the loss of a controlling financial interest in a foreign entity; and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date (step acquisition). The adoption of ASU 2013-05 did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2014, the Company adopted FASB ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). The amendments in ASU 2013-11 clarify that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward ifthe settlement of the deferred tax asset is required or expected in the event the uncertain tax position is disallowed.  In situations where a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The adoption of ASU 2013-11 did not have a material impact on the Company’s consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”). The amendments in ASU 2014-08 change the criteria for reporting discontinued operations while enhancing disclosures in this area. Under the new guidance, disposals representing a strategic shift in operations should be presented as discontinued operations. Additionally, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income and expenses of discontinued operations. The amendments in ASU 2014-08 are effective prospectively for all disposals (or classifications as held for sale) of components of an entity, and for all businesses that, on acquisition, are classified as held for sale that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. The Company is currently evaluating the new guidance to determine the impact it may have to its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, with early application not permitted.  Companies may use either a full retrospective or a modified retrospective approach to adopt this ASU and the Company is currently evaluating which transition approach to use.  The Company is currently evaluating the new pronouncement to determine the impact it may have to its consolidated financial statements.

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation (“ASU 2014-10”). The amendments in ASU 2014-10 remove an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity. The revised consolidation standards are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, with early application permitted.  The Company is evaluating the new pronouncement to determine the impact it may have to its consolidated financial statements.

In June 2014, the FASB issued ASU 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period (“ASU 2014-12”). The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, with early application permitted.  Companies may use either a prospective or a retrospective approach to adopt this ASU and the Company is currently evaluating which transition approach to use.  The Company is evaluating the new pronouncement to determine the impact it may have to its consolidated financial statements.

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Warranties

9 Months Ended

Sep. 30, 2014

Warranties [Abstract]

Warranties

14.   Warranties

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 based on historical experience and is adjusted as required.

The following table represents the changes in the product warranty liability:

	Nine Months Ended September 30,
	2014		2013
Beginning balance	$	21.4	$	20.1
Provision for warranties issued during period		10.2		13.5
Adjustments to warranties issued in prior periods		1.1		1.7
Payments during the period		(12.7)		(14.9)
Foreign currency adjustments		(0.4)		(0.7)
Ending balance	$	19.6	$	19.7

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Long-Term Debt

9 Months Ended

Sep. 30, 2014

Long-Term Debt [Abstract]

Long-Term Debt

10.Long-Term Debt

Long-term debt consists of the following:

	September 30,		December 31,
	2014		2013
Amended Credit Facility	$	725.5		$              884.5
6½% Senior Subordinated Notes due May 2021		375.0		375.0
Bank overdraft facility		-		4.6
Other indebtedness		16.6		22.9
Total debt		1,117.1		1,287.0
Less:  current portion		(31.3)		(40.1)
Total long-term debt	$	1,085.8		1,246.9

On June 27, 2014, we entered into an amendment (the “First Amendment”) to our committed credit agreement (as amended by the First Amendment, the “Amended Credit Facility”).  The First Amendment amends certain terms and provisions of our committed credit agreement to incorporate recent changes to the ownership structure of certain legal entities completed by the Company in order to facilitate the Company’s cash management activities.

At September 30, 2014, the Company was in compliance with its debt covenants.

Senior Subordinated Notes

The carrying and fair values of the Company’s Senior Subordinated Notes were as follows:

	September 30, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
6½% senior subordinated notes due May 2021	$	375.0	$	403.6	$	375.0	$	400.5

Due to the variable rate nature of all of the Company’s other long-term debt, the carrying values materially approximate their fair values as the rates are comparable to current market rates at which debt with similar terms could be obtained.

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Inventories, Net

9 Months Ended

Sep. 30, 2014

Inventory, Net [Abstract]

Inventories, net

6. Inventories, net

Inventories were as follows:

	September 30,		December 31,
	2014		2013
Raw materials	$	149.3	$	71.0
Finished parts		287.7		262.4
Work-in-process		752.4		845.9
		1,189.4		1,179.3
Less: progress payments from clients		(458.0)		(463.3)
Inventories, net	$	731.4	$	716.0

Finished parts may be used in production or sold to customers.  Progress payments represent payments from clients based on milestone completion schedules or advance billing terms.  Any payments received in excess of inventory investment are classified as “Customer Advance Payments” in the current liabilities section of the consolidated balance sheet.  Progress payments to suppliers are included in work-in-process and were $95.1 and $129.0  at September 30, 2014, and December 31, 2013, respectively.  The total allowance for obsolescence for slow-moving inventory for all categories of inventory was $35.5 and $30.7 at September 30, 2014, and December 31, 2013, respectively.

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Post-Retirement Benefits Other Than Pensions (Components Of Net Post-Retirement Benefits Expense) (Details) (Post-Retirement Benefits [Member], USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Post-Retirement Benefits [Member]
Defined Benefit Plan Disclosure [Line Items]
Interest cost	$ 0.2	$ 0.1	$ 0.5	$ 0.5
Amortization of net actuarial loss		0.2		0.4
Net plan expense	$ 0.2	$ 0.3	$ 0.5	$ 0.9

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Costs And Estimated Earnings On Uncompleted Contracts

9 Months Ended

Sep. 30, 2014

Costs And Estimated Earnings On Uncompleted Contracts [Abstract]

Costs And Estimated Earnings In Excess Of Billings On Uncompleted Contracts

4.Costs and Estimated Earnings on Uncompleted Contracts

Costs and estimated earnings on uncompleted contracts were as follows:  

	September 30,		December 31,
	2014		2013
Costs incurred on uncompleted contracts	$	261.7	$	195.5
Estimated earnings		70.6		52.4
		332.3		247.9
Less: billings to date		(340.6)		(162.7)
	$	(8.3)	$	85.2
Costs and estimated earnings in excess of billings	$	16.8	$	98.1
Billings in excess of costs and estimated earnings		(25.1)		(12.9)
	$	(8.3)	$	85.2

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Intangible Assets And Goodwill

9 Months Ended

Sep. 30, 2014

Intangible Assets And Goodwill [Abstract]

Intangible Assets And Goodwill

5.Intangible Assets and Goodwill

The following table sets forth the weighted-average useful life, gross amount and accumulated amortization of intangible assets:

	September 30, 2014					December 31, 2013
	Cost		Accumulated Amortization		Weighted-Average Useful Lives	Cost		Accumulated Amortization
Trade names	$	117.6	$	26.6	36 years	$	120.0	$	24.2
Customer relationships		323.2		88.5	32 years		333.2		79.4
Non-compete agreements		5.3		5.2	3 years		5.5		5.0
Existing technology		171.6		62.5	23 years		173.3		55.6
Contracts and purchase agreements		9.7		1.7	11 years		10.2		1.4
Software		28.7		28.4	10 years		28.7		26.3
In-process research and development		14.4		-	(a)		-		-
Total amortizable intangible assets	$	670.5	$	212.9		$	670.9	$	191.9

(a)Research and development intangible assets are considered indefinite-lived until the abandonment or completion of the associated research and development efforts.

Intangible asset amortization expense was $8.3 and $25.1 for the three and nine months ended September 30, 2014, respectively, and $7.1 and $21.7 for the three and nine months ended September 30, 2013, respectively, and is estimated to be $8.6 for the remainder of fiscal year 2014.  Estimated amortization expense for each of the subsequent five fiscal years is expected to be as follows: $30.6 in 2015,  $30.0 in 2016,  $29.8 in 2017,  $29.4 in 2018 and $29.1 in 2019.

In-process research and development was acquired in the Ramgen acquisition (see Note 3).  Upon completion of the associated research and development efforts, in-process research and development is reclassified to existing technology and amortized based upon the Company’s estimate of its useful life at that time.

The following table represents the changes in goodwill in total and by segment (see Note 15 for additional segment information):

			Aftermarket
	New Units		Parts and Services		Total
Balance, December 31, 2013	$	488.4	$	439.2	$	927.6
Foreign currency adjustments		(33.7)		(24.2)		(57.9)
Balance, September 30, 2014	$	454.7	$	415.0	$	869.7

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Property, Plant And Equipment

9 Months Ended

Sep. 30, 2014

Property, Plant And Equipment [Abstract]

Property, Plant And Equipment

7. Property, plant and equipment

Property, plant and equipment were as follows:

	September 30,		December 31,
	2014		2013
Cost:
Land	$	30.6	$	33.1
Buildings and improvements		255.6		261.4
Machinery and equipment		514.6		479.0
		800.8		773.5
Less: accumulated depreciation		(335.2)		(301.2)
Property, plant and equipment, net	$	465.6	$	472.3

Depreciation expense was$14.8 and $45.6 for the three and nine months ended September 30, 2014, respectively, and $14.1 and $45.4 for the three and nine months ended September 30, 2013, respectively.

Impairment of Spanish Cogeneration Facilities

The Company has whole or majority ownership ofsix cogeneration facilities in Spain. The Spanish government published a ministerial order on June 20, 2014, that reflected a reduction in existing tariffs of approximately 38%, which was retroactive to July 2013.

The enacted order was issued in draft form in February 2014 and is an implementation of a law that was passed in 2013.  The 2013 law did not have sufficient specificity to reasonably estimate the change in the tariff without the further order, but did provide that the existing tariffs would be paid on a provisional basis until the order was issued.  Before the initial draft was issued, the Company believed there would not be a material change in the tariff, and therefore did not believe that assets would be impaired. Once the initial draft was issued, the Company determined that operating the cogeneration facilities would not be economical under the proposed reduced tariff level and decided to suspend operations at the facilities.  Because the initial draft related to the 2013 law, the Company recorded the resulting impairment charge of $40.0 in the three months ended December 31, 2013.  The impairment charge solely impacted the aftermarket parts and services segment.

The impaired assets included land, power generation equipment, cogeneration plant equipment and structures. The land was valued using the market approach and the machinery and equipment was valued using the cost approach. The income approach was considered and applied to the total operations, but the income approach was not applied to the individual assets because these assets contribute to earnings jointly with many other economic factors.  No value was placed on the structures because it was determined that buildings would not be necessary for the highest and best use of the land.

The market approach was applied to the land based on discussions with local brokers considering the land’s size, shape, zoning, location, and other similar factors. This methodology was used because comparable land transactions and comparable current listings could not be located. 

The current replacement cost of a typical similar cogeneration facility was the basis used to estimate the replacement cost of the machinery and equipment.  Recoverability adjustments were applied to the current replacement cost based upon production hours since the last overhaul to reduce the estimated fair value accordingly.

The Company has initiated the liquidation process for four of the cogeneration facilities.  The liquidation of all six facilities is subject to final approval by each of the legal entities’ boards of directors as well as the Spanish government, which is expected to occur in the three months ended December 31, 2014.  Because the Company continues to maintain financial control over these legal entities and the liquidation process is still subject to board and governmental approval, the balance sheets and the results of operations of the cogeneration facilities have been included in the consolidated continuing operations of the Company for all periods presented. 

Conditional Asset Retirement Obligations

Any 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 is recognized as a liability at the fair value of the conditional asset retirement obligation, if the fair value of the liability can be reasonably estimated. U.S. GAAP acknowledges that, in some cases, sufficient information may not be available to reasonably estimate the fair value of an asset retirement obligation.

We are legally obligated to decommission some of our cogeneration sites in Brazil and Spain upon site exit.  The Company has not recorded any conditional asset retirement obligations on its cogeneration facilities in Brazil because there is no current active market in which the obligations could be transferred and we do not have sufficient information to reasonably estimate the range of settlement dates and their related probabilities. The Company believes any obligations arising from decommissioning activities in Brazil are immaterial to the financial statements.  In connection with the suspension of its cogeneration facilities in Spain, the Company recordeda  conditional asset retirement obligation related to its Spanish cogeneration facilities in 2014.  The changes in the Company’s asset retirement obligations were as follows:

	Nine Months Ended September 30,
	2014		2013
Beginning balance	$	-	$	-
Provisions		4.5		-
Adjustments		(0.9)		-
Effects of exchange rate changes		(0.6)		-
Ending balance	$	3.0	$	-

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Segment Information (Segment Results) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Segment Reporting Information [Line Items]
Revenues	$ 683.8	$ 633.9	$ 2,011.3	$ 2,205.6
Income from operations	73.9	81.4	180.4	234.1
Depreciation and amortization	23.1	21.2	70.7	67.1
Assets	3,510.3		3,510.3		3,737.8
Unallocable [Member]
Segment Reporting Information [Line Items]
Income from operations	(33.4)	(27.1)	(90.0)	(88.0)
Assets	1,137.8		1,137.8		1,319.0
New Units [Member]
Segment Reporting Information [Line Items]
Revenues	338.7	272.9	1,032.7	1,136.3
Income from operations	17.3	33.5	60.1	87.9
Depreciation and amortization	10.2	8.7	34.2	34.0
Assets	1,036.3		1,036.3		1,113.8
Aftermarket Parts And Services [Member]
Segment Reporting Information [Line Items]
Revenues	345.1	361.0	978.6	1,069.3
Income from operations	90.0	75.0	210.3	234.2
Depreciation and amortization	12.9	12.5	36.5	33.1
Assets	$ 1,336.2		$ 1,336.2		$ 1,305.0

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Accumulated Other Comprehensive Income (Loss) ("AOCI") (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2014
Accumulated Other Comprehensive Income (Loss) [Line Items]
Foreign currency translation adjustments in AOCI	$ (70.9)	$ (69.4)
Euro Member Countries, Euro
Accumulated Other Comprehensive Income (Loss) [Line Items]
Foreign currency translation, Percentage decrease in exchange rate	7.80%

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Segment Information (Narrative) (Details)	9 Months Ended
	Sep. 30, 2014 segment
Segment Information [Abstract]
Number of reportable segments	2

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Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2014

Financial Instruments [Abstract]

Foreign Currency Exchange Contracts Accounted For At Fair Value On Recurring Basis

	September 30,		December 31,
	2014		2013
Foreign currency exchange contracts assets	$	13.7	$	5.4
Foreign currency exchange contracts liabilities	$	12.7	$	16.3

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Property, Plant And Equipment (Property, Plant And Equipment) (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Property Plant And Equipment [Line Items]
Property, plant and equipment, gross	$ 800.8	$ 773.5
Less: accumulated depreciation	(335.2)	(301.2)
Property, plant and equipment, net	465.6	472.3
Land [Member]
Property Plant And Equipment [Line Items]
Property, plant and equipment, gross	30.6	33.1
Building And Improvements [Member]
Property Plant And Equipment [Line Items]
Property, plant and equipment, gross	255.6	261.4
Machinery And Equipment [Member]
Property Plant And Equipment [Line Items]
Property, plant and equipment, gross	$ 514.6	$ 479.0

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Post-Retirement Benefits Other Than Pensions

9 Months Ended

Sep. 30, 2014

Post-Retiements Benefits Other Than Pensions [Abstract]

Post-Retirement Benefits Other Than Pensions

12.Post-Retirement Benefits Other than Pensions

The components of the net post-retirement benefit expense were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Interest cost	$	0.2	$	0.1	$	0.5	$	0.5
Amortization of net actuarial loss		-		0.2		-		0.4
Net post-retirement benefits expense	$	0.2	$	0.3	$	0.5	$	0.9

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Accumulated Other Comprehensive Income (Loss) ("AOCI")

9 Months Ended

Sep. 30, 2014

Accumulated Other Comprehensive Income (Loss) ("AOCI") [Abstract]

Accumulated Other Comprehensive Income (Loss) ("AOCI")

17.Accumulated Other Comprehensive Income (Loss) (“AOCI”)

AOCI and the changes in AOCI by component were as follows:

	Foreign				Pension and
	Currency		Unrealized		Other
	Translation		(Loss) Gain on		Postretirement
	Adjustments		Derivatives		Benefit Plans		Total
At December 31, 2013	$	(69.5)	$	(0.4)	$	(48.9)	$	(118.8)
Other comprehensive loss before reclassifications		(69.4)		-		-		(69.4)
Amounts reclassified from AOCI		-		0.2		1.4		1.6
Net current period other comprehensive (loss) income		(69.4)		0.2		1.4		(67.8)
At September 30, 2014	$	(138.9)	$	(0.2)	$	(47.5)	$	(186.6)

During the three and nine months ended September 30, 2014, foreign currency translation adjustments in accumulated other comprehensive loss were $(70.9) and $(69.4), respectively, primarily due to the weakening of the Euro of approximately 7.8% during the three months ended September 30, 2014.

	Foreign				Pension and
	Currency		Unrealized		Other
	Translation		(Loss) Gain on		Postretirement
	Adjustments		Derivatives		Benefit Plans		Total
At December 31, 2012	$	(51.3)	$	(0.7)	$	(82.7)	$	(134.7)
Other comprehensive loss before reclassifications		(17.5)		-		-		(17.5)
Amounts reclassified from AOCI		-		0.2		4.1		4.3
Net current period other comprehensive (loss) income		(17.5)		0.2		4.1		(13.2)
At September 30, 2013	$	(68.8)	$	(0.5)	$	(78.6)	$	(147.9)

Items reclassified out of AOCI into net income for the three and nine months ended September 30, 2014 and 2013 were as follows:

	Amount Reclassified From AOCI into Net Income
	Three Months Ended September 30,				Nine Months Ended September 30,				Affected Line Item in the Consolidated Statement
Details About AOCI Components	2014		2013		2014		2013		of Income
Unrealized gain on derivatives	$	(0.1)	$	-	$	(0.3)	$	(0.3)	Interest expense, net
		-		-		0.1		0.1	Provision for income taxes
	$	(0.1)	$	-	$	(0.2)	$	(0.2)	Net of tax
Pension and other postretirement benefit plans
Amortization of net actuarial loss	$	(0.5)	$	(2.2)	$	(2.4)	$	(6.5)	(a)
		0.1		0.8		1.0		2.4	Provision for income taxes
	$	(0.4)	$	(1.4)	$	(1.4)	$	(4.1)	Net of tax
Total reclassifications, net of tax	$	(0.5)	$	(1.4)	$	(1.6)	$	(4.3)	Net of tax

(a)These items are included in the computation of net pension expense and net post-retirement benefits expense. See Note 11, Pension Plans and Note 12, Post-Retirement Benefits Other than Pensionsfor additional information.

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Inventories, Net (Inventories) (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Inventory, Net [Abstract]
Raw materials	$ 149.3	$ 71.0
Finished parts	287.7	262.4
Work-in-process	752.4	845.9
Inventories, gross	1,189.4	1,179.3
Less: progress payments from clients	(458.0)	(463.3)
Inventories, net	$ 731.4	$ 716.0

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Basis of Presentation (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Requested exclusive negotiation term			28 days
Cash paid, per share	$ 83.00		$ 83.00
Transaction-related expenses	$ 10.5		$ 10.5
Preferred shares authorized	1,000,000		1,000,000
Preferred shares, par value per share	$ 0.01		$ 0.01
Dividend declared, number of rights			1
Number of shares issuable per right	0.001		0.001
Exercise price per right	$ 300		$ 300
Beneficial ownership, qualifying percentage			10.00%
Percentage of completion, consolidated revenues percentage	3.10%	6.70%	4.20%	7.10%
Exercise price of rights, prior to flip-in-event			$ 0.01
Minimum [Member]
Period to complete multiple-element revenue arrangements			15 months
Period to deliver items for multiple-element revenue arrangements			3 months
Maximum [Member]
Period to deliver items for multiple-element revenue arrangements			12 months
Scenario, Forecast [Member]
Cash paid, per share	$ 0.55		$ 0.55
Triggering Event One [Member]
Period from triggering event from which rights are exercisable			10 days
Beneficial ownership, qualifying percentage			10.00%
Triggering Event Two [Member]
Period from triggering event from which rights are exercisable			10 days
Beneficial ownership, qualifying percentage			10.00%
Triggering Event Three [Member]
Beneficial ownership, qualifying percentage			10.00%
Percentage increase by previous owner triggering rights exercisability			1.00%
Exercise price of rights as percentage of market price			50.00%
Triggering Event Four [Member]
Beneficial ownership, qualifying percentage			10.00%
Exercise price of rights as percentage of market price			50.00%
Flip-over event, percent qualification			50.00%

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Consolidated Balance Sheet (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Current assets
Cash and cash equivalents	$ 160.7	$ 190.4
Restricted cash	4.4	8.1
Accounts receivable, less allowance for losses of $8.4 at 2014 and $9.1 at 2013	618.2	727.4
Inventories, net	731.4	716.0
Prepaid expenses and other	65.9	68.8
Deferred income taxes	22.2	25.2
Total current assets	1,602.8	1,735.9
Property, plant and equipment, net	465.6	472.3
Goodwill	869.7	927.6
Intangible assets, net	457.6	479.0
Deferred income taxes	12.0	11.8
Other assets	102.6	111.2
Total assets	3,510.3	3,737.8
Current liabilities
Accounts payable and accruals	620.7	729.1
Customer advance payments	223.1	164.5
Accrued income taxes payable	39.7	36.1
Short-term borrowings and current portion of long-term debt	31.3	40.1
Total current liabilities	914.8	969.8
Deferred income taxes	34.9	55.4
Postemployment and other employee benefit liabilities	58.3	74.0
Long-term debt	1,085.8	1,246.9
Other noncurrent liabilities	87.0	90.3
Total liabilities	2,180.8	2,436.4
Commitments and contingencies (Note 13)
Stockholders' equity
Common stock, $0.01 par value, 250,000,000 shares authorized; and 76,650,843 and 76,293,924 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively	0.8	0.8
Additional paid-in capital	182.4	162.4
Retained earnings	1,329.5	1,253.0
Accumulated other comprehensive loss	(186.6)	(118.8)
Total Dresser-Rand stockholders' equity	1,326.1	1,297.4
Noncontrolling interest	3.5	4.0
Total stockholders' equity	1,329.6	1,301.4
Total liabilities and stockholders' equity	$ 3,510.4	$ 3,737.8

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Basis Of Presentation

9 Months Ended

Sep. 30, 2014

Basis Of Presentation [Abstract]

Organization Consolidation And Presentation Of Financial Statements Disclosure [Text Block]

1.Basis of Presentation

Unless the context otherwise indicates, the terms “we,” “our,” “us,” the “Company,” “Dresser-Rand” and similar terms refer to Dresser-Rand Group Inc. and its consolidated subsidiaries.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information.  The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for the fair presentation of the Company's Consolidated Balance Sheets as of September 30, 2014, and December 31, 2013; the Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2014 and 2013; and the Consolidated Statements of Cash Flows and Changes in Stockholders’ Equity for the nine months ended September 30, 2014 and 2013.  The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. 

In preparing financial statements in accordance with U.S. GAAP, management makes informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses.  Management evaluates its estimates and related assumptions regularly, including those related to fair values, allowance for losses on receivables, depreciation and amortization, inventory adjustments related to lower of cost or market, the carrying value and estimated useful lives of long-lived assets, valuation of assets including goodwill and other intangible assets, product warranties, sales allowances, taxes, pensions, postemployment benefits, stock-based compensation, stage of completion and ultimate profitability for certain long-term revenue contracts accounted for under the percentage of completion method, contract losses, penalties, environmental contingencies, product liability, self-insurance programs and other contingencies (including purchase price contingencies).  Changes in facts and circumstances or additional information may result in revised estimates and actual results may differ from these estimates. 

These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2013, and our other filings with the Securities and Exchange Commission.  Operating results for the three and nine months ended September 30, 2014, are not indicative of the results that may be expected for the year ending December 31, 2014.  Certain amounts in the prior periods consolidated financial statements have been reclassified to conform to the current period’s presentation.

On August 6, 2014, representatives of the Company received a non-binding indicative term sheet for a potential merger-of-equals from a strategic partner.  Among other items, the non-binding indicative term sheet requested a four-week period of exclusive negotiation between the Company and the strategic partner.  The potential merger-of-equals with the strategic partner was not consummated.  On September 21, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Siemens Energy, Inc. (“Siemens”) whereby Siemens will acquire the Company.  The completion of the transaction (“Merger”) is subject to satisfaction or waiver of certain closing conditions including, among others, customary regulatory approvals and the approval of the transaction by our stockholders.

At the time the merger becomes effective, each outstanding share of Dresser-Rand common stock (excluding any shares held by Siemens, its subsidiaries, Dresser-Rand and dissenting shares in accordance with Delaware law), will be cancelled and converted into the right to receive cash in the amount of (i) $83.00 per share plus (ii) $0.55on the first of each month until the date of closing beginning on March 1, 2015.

In connection with these acquisition related activities, the Company incurred $10.5 of legal, accounting and investment bank transaction related expenses for the three and nine months ended September 30, 2014.

On September 21, 2014, the board of directors of the Company also adopted a limited duration Shareholder Rights Plan (the “Plan”) and created 1,000,000 shares of preferred stock designated as Series A Junior Participating Preferred Stock, with a par value of $0.01 per share, if any.  Pursuant to the Plan, the board of directors declared a dividend of one preferred stock purchase right (each a “Right” and collectively, the “Rights”) on each outstanding share of the Company’s common stock as of the close of business on October 2, 2014.  Each Right, once exercisable, will entitle shareholders to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock at a price of $300 per Right, subject to adjustment.

The Rights are exercisable ten days following a public announcement that certain persons or groups (other than Siemens or any of its affiliates or associates acting pursuant to the Merger Agreement) have acquired beneficial ownership of 10.0% or more of the outstanding shares of the Company’s common stock or ten business days after the commencement of an offer, that if completed, would result in certain persons or groups having beneficial ownership of 10.0% or more of the outstanding shares of the Company’s common stock (a “flip-in event”).  The Plan provides that the ownership of shareholders that beneficially own 10.0% or more of the Company’s common stock on the date of adoption of the Plan will be grandfathered, but the Rights would become exercisable if at any time any such shareholder increases its ownership percentage by 1.0% or more.  The Rights become exercisable for shares of the Company’s common stock at 50.0% of the then-market price of the common stock.  Derivative interests in the Company’s common stock, such as swap arrangements, regardless of whether such arrangements carry with them the right to control voting or disposition of the underlying securities, are also considered beneficial ownership of the underlying common stock for purposes of the Plan.

If a 10.0% or more shareholder of the Company acquires Dresser-Rand, by merger or otherwise, in a transaction where the Company does not survive, the Company’s common stock is changed or exchanged or 50.0% or more of the Company’s assets, cash flow or earnings power is sold or transferred (a “flip-over event”), the Rights become exercisable for shares of the common stock of the company acquiring Dresser-Rand at 50.0% of the then-market price for Dresser-Rand common stock.

Any Rights that are or were beneficially owned by a person who has acquired 10.0% or more of the outstanding shares of the Company’s common stock and who engages in certain transactions or realizes the benefits of certain transactions with the Company will become null and void.  If an offer to acquire all of the Company’s outstanding shares of common stock is determined to be fair by the board of directors, the transaction will not trigger a flip-in event or a flip-over event.  The Company may also redeem the Rights at $0.01 per Right at any time prior to a flip-in event.  These Rights are set to expire no later than September 22, 2015.

Revenue Recognition

Multiple-element arrangements

We recognize revenue when it is realized or realizable and earned. Generally, we consider revenue realized or realizable and earned when we have persuasive evidence of an arrangement, delivery of the product or service has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Delivery does not occur until products have been shipped or services have been provided to the client, risk of loss has transferred to the client, and either any required client acceptance has been obtained (or such provisions have lapsed) or we have objective evidence that the criteria specified in the client acceptance provisions have been satisfied. The amount of revenue related to any contingency is not recognized until the contingency is resolved.

A substantial portion of our arrangements are multiple-element revenue arrangements or contracts, where multiple products and/or services are involved. Products involved in multiple-element arrangements may include centrifugal compressors, gas turbines, power turbines, power recovery expanders, reciprocating compressors, steam turbines and engines. Our typical arrangement includes one of our classes of compressors and a driver (e.g., a motor, turbine or an engine).  In addition to our products, we perform installation and commissioning, training, and other services, and we purchase any number of standard or engineered items from third parties (“buyouts”) that support the application in which our equipment is being used.  Generally, buyouts, installation and commissioning, training and each of our products listed above are considered separate deliverables for a number of reasons, including the following:

· Clients would purchase each of those products or services apart from other products or services;

· The products and services being provided are at the request of the client and for the client’s sole benefit, apart from any other product or service in the transaction;

· The other deliverables can be performed without the service or product in question being performed or delivered;

· Contractual payments are typically tied to the delivery or performance of the specific product or service;

· The skills or equipment required to perform the services are readily available in the marketplace; and

· Clients attribute significant value to each product or service.

These contracts generally can take fifteen months or more to complete, but occasionally may take longer.The timing between the first deliverable and the last deliverable is generally three to twelve months, and services are typically delivered last.

Because the aforementioned separate deliverables have value to the client on a stand-alone basis, they are typically considered separate units of accounting.  The entire contract value is allocated to each unit of accounting. Revenue allocated to products is recognized upon delivery, while revenue allocated to services is recognized when the service is performed.  We use the selling price hierarchy described below to determine how to separate multiple-element revenue arrangements into separate units of accounting and how to allocate the arrangement consideration among those separate units of accounting:

· Vendor-specific objective evidence (“VSOE”).

· Third-party evidence (“TPE”), if vendor-specific objective evidence is not available.

· Estimated selling price (“ESP”), determined in the same manner as that used to determine the price at which we sell the deliverables on a stand-alone basis, if neither vendor-specific objective evidence nor third-party evidence is available.

In substantially all of our multi-element arrangements, we use ESP to allocate arrangement consideration. We determine ESP based on our normal pricing and discounting practices. In determining ESP, we apply significant judgment as we weigh a variety of factors, based on the facts of the arrangement. We typically arrive at an ESP by considering client and entity-specific factors such as existing pricing, price discounts, geographies, competition, internal costs and profitability objectives.

Our sales arrangements do not include a general right of return of the delivered unit(s). In certain cases, the cancellation terms of a contract provide us with the opportunity to bill for certain incurred costs and penalties.

If it is determined that the separate deliverables do not have value on a stand-alone basis, the entire arrangement is accounted for as one unit of accounting, which results in revenue being recognized when the last unit is delivered based on the revenue recognition policy described above.

It is uncommon for the Company to have contract scope adjustments that impact the selling price for specific units of accounting resulting in changes in the allocation of the selling price.  In the event of such an adjustment, we apply the change in the allocation of the selling price to the units of accounting that are not yet delivered.  As our business and offerings evolve over time, our pricing practices may be required to be modified accordingly, which could result in changes in selling prices in subsequent periods.  Historically, there have been no material impacts, nor do we currently expect material impacts in the next twelve months, on our revenue recognition due to changes in our VSOE, TPE or ESP.

Percentage of completion

We also enter into certain large contracts with expanded construction-type scope and risk.  These contractual arrangements have a scope of activity that differs in substance from the scope of deliverables found in our traditional sales agreements.  For these types of contracts, we apply the guidelines of ASC 605-35 – Construction-Type and Production-Type Contracts and utilize the percentage of completion method of revenue recognition. Non-traditional scope arrangements include activities typically performed by engineering, procurement and construction contractors. Our clients on these projects typically require us to act as a general construction contractor for all or a portion of these projects. These arrangements are often executed in the form of turnkey contracts, where the Company designs, engineers, manufactures, constructs, transports, erects and hands over to the client at the designated destination point the fully commissioned and tested module or facility, which is ready for operation.  Percentage of completion revenue represents approximately3.1% and 6.7% of consolidated revenues for the three months ended September 30, 2014 and 2013, respectively, and4.2% and 7.1% of consolidated revenues for the nine months ended September 30, 2014 and 2013, respectively.

Under the percentage of completion method, revenue is recognized as work on a contract progresses.  For each contractual arrangement that qualifies for the percentage of completion method of accounting, the Company recognizes revenue, cost of sales and gross profit in the amounts that are equivalent to a percentage of the total estimated contract sales value, estimated cost of sales and estimated gross profit to be achieved upon completion of the project.  This percentage is generally determined by dividing the cumulative amount of labor costs and labor converted material costs incurred to date by the sum of the cumulative costs incurred to date plus the estimated remaining costs to be incurred in order to complete the contract.  Preparing these estimates is a process requiring judgment.  Factors influencing these estimates include, but are not limited to, historical performance trends, inflationary trends, productivity and labor disruptions, availability of materials, claims, change orders and other factors as set forth in the Risk Factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.  In the event that the Company experiences changes in estimated revenues, cost of sales and gross profit, they would be recognized using a cumulative catch-up adjustment that recognizes in the current period the cumulative effect of the changes on current and prior periods based on a contract’s updated percentage of completion.

We apply the percentage of completion method of accounting to agreements when the following conditions exist:

· The costs are reasonably estimable;

· The contract includes provisions that clearly specify the enforceable rights regarding products and services to be provided and received by the parties, the consideration to be exchanged and the manner and terms of settlement;

· The customer can be expected to satisfy all obligations under the contract; and

· We expect to perform all of our contractual obligations.

Cost of revenue for our construction-type contracts includes contract costs, such as materials and labor, and indirect costs that are attributable to contract activity.  Generally, we bill our customers based on advance billing terms or completion of certain contract milestones.  Cumulative costs and estimated earnings recognized to date in excess of cumulative billings are included in accounts receivable on the consolidated balance sheet.  Cumulative billings in excess of cumulative costs and estimated earnings recognized to date are included in accounts payable and accruals on the consolidated balance sheet.

We estimate the future costs and estimated gross profit that will be incurred related to sales arrangements to determine whether any arrangement will result in a loss. These costs include material, labor and overhead. Factors influencing these future costs include the availability of materials and skilled laborers. We record provisions for estimated losses on uncompleted contracts in the period in which such losses are identified. 

Fair Value Measurements

Fair value, as defined in U.S. GAAP, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). U.S. GAAP classifies the inputs used to measure fair value into the following hierarchy:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2	Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability
Level 3	Unobservable inputs for the asset or liability

Recurring Fair Value Measurements —  Fair values of the Company’s cash and cash equivalents, restricted cash, accounts receivable, short-term borrowings, accounts payable and customer advance payments approximate their carrying values due to the short-term nature of these instruments.  The Company’s financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Nonrecurring Fair Value Measurements —Fair value measurements were applied with respect to the Company’s nonfinancial assets and liabilities measured on a nonrecurring basis, which consists primarily of intangible assets, other long-lived assets and other assets acquired and liabilities assumed, including contingent consideration, related to purchased businesses in business combinations and impairments.

Fair Value of Financial Instruments —Recurring fair value measurement of financial instruments consist principally of foreign currency derivatives, interest rate swaps and fixed rate long-term debt.

Input levels used for fair value measurements are as follows:

		Input
Description	Disclosure	Level	Level 2 Inputs	Level 3 Inputs
Acquired assets and liabilities	Note 3	Level 3	Not applicable	Level 3 inputs are more fully described in Note 3.
Impairment of long-lived assets	Note 7	Level 3	Not applicable	Level 3 inputs are more fully described in Note 7.
Financial derivatives	Note 8	Level 2	Quoted prices of similar assets or liabilities in active markets	Not applicable
Long-term debt (disclosure only)	Note 10	Level 2	Quoted prices in markets that are not active	Not applicable

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Pension Plans (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Pension Plans [Abstract]
Fair value of plan assets, percentage	3.50%		3.50%
Contribution by employer	$ 4.8	$ 7.2	$ 13.8	$ 17.3

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Significant Concentration Of Credit Risk (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Concentration Risk [Line Items]
Proceeds from Customers	$ 53.3
Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration percentage	16.20%

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Significant Concentration Of Credit Risk

9 Months Ended

Sep. 30, 2014

Significant Concentration Of Credit Risk [Abstract]

Significant Concentration Of Credit Risk

18. Significant Concentration of Credit Risk

At September 30, 2014, approximately 16.2%of the Company’s net accounts receivable was from Petroleos de Venezuela, S.A. (“PDVSA”).  Historically, the Company has collected its outstanding receivables from PDVSA. Payments of approximately $53.3 were received during the nine months ended September 30, 2014.  The Company believes that, based on this historical experience and discussions with PDVSA, the outstanding balance is ultimately collectible.  Consequently, a provision for bad debts has not been recorded for these accounts receivable.

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Warranties (Tables)

9 Months Ended

Sep. 30, 2014

Warranties [Abstract]

Changes In Product Warranty Liability

	Nine Months Ended September 30,
	2014		2013
Beginning balance	$	21.4	$	20.1
Provision for warranties issued during period		10.2		13.5
Adjustments to warranties issued in prior periods		1.1		1.7
Payments during the period		(12.7)		(14.9)
Foreign currency adjustments		(0.4)		(0.7)
Ending balance	$	19.6	$	19.7

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Pension Plans

9 Months Ended

Sep. 30, 2014

Pension Plans [Abstract]

Pension Plans

11. Pension Plans

The components of net pension expense were as follows:

	U.S. Plans								Non-U.S. Plans
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013		2014		2013		2014		2013
Service cost	$	0.9	$	0.9	$	2.7	$	2.9	$	0.6	$	1.4	$	1.8	$	4.2
Interest cost		3.2		2.9		9.8		8.7		1.4		1.6		4.1		4.7
Expected return on plan assets		(4.6)		(4.0)		(13.8)		(12.1)		(1.6)		(1.8)		(4.9)		(5.1)
Amortization of net actuarial
loss		0.6		1.9		2.0		5.9		-		-		0.2		0.2
Amortization of prior service
cost		-		-		0.1		-		-		0.1		0.1		0.1
Net pension expense	$	0.1	$	1.7	$	0.8	$	5.4	$	0.4	$	1.3	$	1.3	$	4.1

The fair value measurement of certain plan assets (approximately 3.5% of total plan assets) is derived using significant unobservable inputs (Level 3).  Level 3 assets consist of annuities held as investments within the plan that cover a set amount of liabilities and the effects of changes in the values of the related assets and liabilities are generally offsetting.  Level 3 assets also consist of annuities that require contribution premiums to fund ongoing liabilities as required by foreign governmental regulations.  Annuities are valued using standard actuarial calculations such as discount rates, mortality rates and participant population.

The Company made pension contributions of$4.8 and $13.8, respectively, during the three and nine months ended September 30, 2014, and $7.2 and $17.3, respectively, during the three and nine months ended September 30, 2013.