##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 27, 2009
 or
 o
    
    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 333-124944
 ALTRA INDUSTRIAL MOTION, INC.
  Delaware
(State or other jurisdiction of incorporation or organization)
    
    30-0283143
(I.R.S. Employer Identification No.)300 Granite Street, Suite 201, Braintree, MA
(Address of principal executive offices)
    
    02184
(Zip code)
 (781) 917-0600
 þ o
 o o
  Large Accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
 Yes o No þ




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##### 



TABLE OF CONTENTS
 Page #PART IFINANCIAL INFORMATION
    
    
    1Item 1. Unaudited Condensed Consolidated Financial Statements
    
    
    1Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4. Controls and Procedures
    
    
    33PART IIOTHER INFORMATIONItem 1. Legal Proceedings
    
    
    34Item 1A. Risk Factors
    
    
    34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 3. Defaults Upon Senior Securities
    
    
    34Item 4. Submission of Matters to a Vote of Security Holders
    
    
    34Item 5. Other Information
    
    
    34Item 6. Exhibits
    
    
    35SIGNATURES
    
    
    36Exhibit 10.1Exhibit 10.35Exhibit 10.8Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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ALTRA INDUSTRIAL MOTION, INC.
Condensed Consolidated Balance Sheets
Amounts in thousands, except share amounts
(unaudited)
 June 27, 2009
    
    
    December 31, 2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    63,643
    
    
    $
    52,072Trade receivable, less allowance for doubtful accounts of $1,486
and $1,277 at
June 27, 2009 and December 31, 2008, respectively
    
    
    62,267
    
    
    
    68,803Inventories
    
    
    79,387
    
    
    
    98,410Deferred income taxes
    
    
    7,704
    
    
    
    8,032Assets held for sale (See Note 8)
    
    
    
    
    
    
    4,676Prepaid expenses and other current assets
    
    
    7,019
    
    
    
    5,324Total current assets
    
    
    220,020
    
    
    
    237,317Property, plant and equipment, net
    
    
    109,897
    
    
    
    110,220Intangible assets, net
    
    
    77,905
    
    
    
    79,339Goodwill
    
    
    78,518
    
    
    
    77,497Deferred income taxes
    
    
    463
    
    
    
    495Other non-current assets, net
    
    
    6,771
    
    
    
    7,521Total assets
    
    $
    493,574
    
    
    $
    512,389LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    24,466
    
    
    $
    33,890Accrued payroll
    
    
    12,842
    
    
    
    16,775Accruals and other current liabilities
    
    
    19,369
    
    
    
    18,755Deferred income taxes
    
    
    6,906
    
    
    
    6,906Current portion of long-term debt
    
    
    1,053
    
    
    
    3,391Total current liabilities
    
    
    64,636
    
    
    
    79,717Long-term debt  less current portion and net of unaccreted discount, net
    
    
    246,308
    
    
    
    258,132Deferred income taxes
    
    
    22,945
    
    
    
    23,336Pension liablities
    
    
    11,546
    
    
    
    11,854Other post retirement benefits
    
    
    322
    
    
    
    2,270Long-term taxes payable
    
    
    8,283
    
    
    
    7,976Other long-term liabilities
    
    
    2,369
    
    
    
    1,434Commitments and contingencies (See Note 16)
    
    
    
    
    
    
    Stockholders equity:Common stock (1,000 shares authorized, issued & outstanding, $0.001
par value)
    
    
    
    
    
    
    Additional paid-in capital
    
    
    97,829
    
    
    
    97,829Due to Parent
    
    
    28,650
    
    
    
    27,062Retained earnings
    
    
    26,521
    
    
    
    26,869Accumulated other comprehensive income
    
    
    (15,835
    )
    
    
    (24,090
    )Total stockholders equity
    
    
    137,165
    
    
    
    127,670Total liabilities and stockholders equity
    
    $
    493,574
    
    
    $
    512,389
   1




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Condensed Consolidated Statements of Income (Loss)
Amounts in thousands
(Unaudited)
 Quarter Ended
    
    
    Year to Date EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    111,877
    
    
    $
    167,893
    
    
    $
    236,417
    
    
    $
    331,075Cost of sales
    
    
    82,419
    
    
    
    117,506
    
    
    
    174,756
    
    
    
    232,890Gross profit
    
    
    29,458
    
    
    
    50,387
    
    
    
    61,661
    
    
    
    98,185Operating expenses:Selling, general and administrative expenses
    
    
    19,938
    
    
    
    26,448
    
    
    
    41,681
    
    
    
    51,161Research and development expenses
    
    
    1,494
    
    
    
    1,766
    
    
    
    3,061
    
    
    
    3,497Other post employment benefit plan settlement gain
    
    
    
    
    
    
    (169
    )
    
    
    (1,467
    )
    
    
    (169
    )Restructuring costs
    
    
    2,482
    
    
    
    335
    
    
    
    4,354
    
    
    
    1,06823,914
    
    
    
    28,380
    
    
    
    47,629
    
    
    
    55,557Income from operations
    
    
    5,544
    
    
    
    22,007
    
    
    
    14,032
    
    
    
    42,628Other non-operarting income and expense:Interest expense, net
    
    
    6,240
    
    
    
    7,713
    
    
    
    12,589
    
    
    
    15,154Other non-operating (income) expense, net
    
    
    1,781
    
    
    
    (853
    )
    
    
    1,619
    
    
    
    (1,479
    )8,021
    
    
    
    6,860
    
    
    
    14,208
    
    
    
    13,675Income (loss) from continuing operations before
income taxes
    
    
    (2,477
    )
    
    
    15,147
    
    
    
    (176
    )
    
    
    28,953Provision (benefit) for income taxes
    
    
    (711
    )
    
    
    5,278
    
    
    
    172
    
    
    
    10,127Net income (loss) from continuing operations
    
    
    (1,766
    )
    
    
    9,869
    
    
    
    (348
    )
    
    
    18,826Net loss from discontinued operations, net of
income taxes of $124
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (397
    )Net income (loss)
    
    $
    (1,766
    )
    
    $
    9,869
    
    
    $
    (348
    )
    
    $
    18,429Consolidated Statement of Comprehensive IncomeForeign currency translation adjustment
    
    
    10,798
    
    
    
    (674
    )
    
    
    8,255
    
    
    
    2,302Comprehensive income
    
    $
    9,032
    
    
    $
    9,195
    
    
    $
    7,907
    
    
    $
    20,731
   2




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ALTRA INDUSTRIAL MOTION, INC.
Condensed Consolidated Statements of Cash Flows
Amounts in thousands
(Unaudited)
 Year to date endedJune 27, 2009
    
    
    June 28, 2008Cash flows from operating activitiesNet income (loss)
    
    $
    (348
    )
    
    $
    18,429Adjustments to reconcile net income (loss) to net cash
flows:Depreciation
    
    
    8,190
    
    
    
    8,051Amortization of intangible assets
    
    
    2,732
    
    
    
    2,884Amortization and write-offs of deferred financing costs
    
    
    957
    
    
    
    1,344Loss (gain) on foreign currency, net
    
    
    1,379
    
    
    
    (671
    )Accretion of debt discount, net
    
    
    372
    
    
    
    359Loss on sale of Electronics Division
    
    
    
    
    
    
    397Fixed asset impairment
    
    
    1,395
    
    
    
    Loss on sale of fixed assets
    
    
    
    
    
    
    137Other post employment benefit plan settlement gain
    
    
    (1,467
    )
    
    
    (169
    )Stock based compensation
    
    
    1,587
    
    
    
    1,022Changes in assets and liabilities:Trade receivables
    
    
    8,634
    
    
    
    (18,077
    )Inventories
    
    
    20,446
    
    
    
    (2,522
    )Accounts payable and accrued liabilities
    
    
    (15,384
    )
    
    
    (2,547
    )Other current assets and liabilities
    
    
    (769
    )
    
    
    (2,076
    )Other operating assets and liabilities
    
    
    83
    
    
    
    57Net cash provided by operating activities
    
    
    27,807
    
    
    
    6,618Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    (3,783
    )
    
    
    (7,641
    )Proceeds from sale of Electronics Division
    
    
    
    
    
    
    17,210Net cash provided by (used in) investing activities
    
    
    (3,783
    )
    
    
    9,569Cash flows from financing activitiesPayments on Senior Notes
    
    
    (4,950
    )
    
    
    (1,346
    )Payments on Senior Secured Notes
    
    
    (8,250
    )
    
    
    (15,000
    )Payments on Revolving Credit Agreement
    
    
    (1,000
    )
    
    
    (1,723
    )Net pyaments received from (made on behalf) of Parent
    
    
    
    
    
    
    11,899Payment on mortgages
    
    
    (171
    )
    
    
    (188
    )Payment on capital leases
    
    
    (381
    )
    
    
    (574
    )Net cash used in financing activities
    
    
    (14,752
    )
    
    
    (6,932
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    2,299
    
    
    
    70Net change in cash and cash equivalents
    
    
    11,571
    
    
    
    9,325Cash and cash equivalents at beginning of year
    
    
    52,072
    
    
    
    33,906Cash and cash equivalents at end of period
    
    $
    63,643
    
    
    $
    43,231Cash paid during the period for:Interest
    
    $
    12,047
    
    
    $
    14,210Income taxes
    
    $
    1,014
    
    
    $
    10,300
   3




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
 1. Organization and Nature of Operations
  2. Basis of Presentation
      3. Recent Accounting Pronouncements
    4




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
 4. Discontinued Operations
    5. Inventories
  June 27,
    
    
    December 31,2009
    
    
    2008Raw materials
    
    
    28,331
    
    
    $
    31,925Work in process
    
    
    16,174
    
    
    
    21,310Finished goods
    
    
    34,882
    
    
    
    45,175Inventories
    
    $
    79,387
    
    
    $
    98,410
    5




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ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
 6. Goodwill and Intangible Assets
  Balance December 31, 2008
    
    
    77,497Impact of changes in foreign currency
    
    
    1,021Balance June 27, 2009
    
    $
    78,518
  June 27, 2009
    
    
    December 31, 2008Accumulated
    
    
    
    
    
    
    AccumulatedOther intangible assets
    
    Cost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationIntangible assets not subject to
amortization:Tradenames and trademarks
    
    $
    30,730
    
    
    $
    
    
    
    $
    30,730
    
    
    $
    Intangible assets subject to amortization:Customer relationships
    
    
    62,038
    
    
    
    17,329
    
    
    
    62,038
    
    
    
    15,065Product technology and patents
    
    
    5,435
    
    
    
    3,579
    
    
    
    5,435
    
    
    
    3,111Impact of changes in foreign currency
    
    
    610
    
    
    
    
    
    
    
    (688
    )
    
    
    Total intangible assets
    
    $
    98,813
    
    
    $
    20,908
    
    
    $
    97,515
    
    
    $
    18,176
   7. Assets Held for Sale
      6




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ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
 8. Income Taxes
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB
109
    9. Pension and Other Employee Benefits
 Defined Benefit (Pension) and Post-retirement Benefit Plans
   7




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ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
  Quarter EndedPension Benefits
    
    
    Other BenefitsJune 27, 2009
    
    
    June 28, 2008
    
    
    June 27, 2009
    
    
    June 28, 2008Service cost
    
    $
    16
    
    
    $
    16
    
    
    $
    3
    
    
    $
    15Interest cost
    
    
    365
    
    
    
    378
    
    
    
    19
    
    
    
    52Expected return on plan assets
    
    
    (327
    )
    
    
    (326
    )
    
    
    
    
    
    
    Amortization of prior service income
    
    
    
    
    
    
    
    
    
    
    (244
    )
    
    
    (243
    )Other post employment benefit plan
settlement gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (169
    )Amortization of net gain
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (6
    )Net periodic benefit cost (income)
    
    $
    54
    
    
    $
    68
    
    
    $
    (229
    )
    
    $
    (351
    )
 Year to Date EndedPension Benefits
    
    
    Other BenefitsJune 27, 2009
    
    
    June 28, 2008
    
    
    June 27, 2009
    
    
    June 28, 2008Service cost
    
    $
    32
    
    
    $
    32
    
    
    $
    6
    
    
    $
    31Interest cost
    
    
    730
    
    
    
    757
    
    
    
    38
    
    
    
    104Expected return on plan assets
    
    
    (654
    )
    
    
    (652
    )
    
    
    
    
    
    
    Amortization of prior service income
    
    
    
    
    
    
    
    
    
    
    (488
    )
    
    
    (487
    )Other post employment benefit plan
settlement gain
    
    
    
    
    
    
    
    
    
    
    (1,467
    )
    
    
    (169
    )Amortization of net gain
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    (12
    )Net periodic benefit cost (income)
    
    $
    108
    
    
    $
    137
    
    
    $
    (1,925
    )
    
    $
    (533
    )
 10. Debt
  June 27, 2009
    
    
    December 31, 2008Senior Revolving Credit Agreement
    
    $
    
    
    
    $
    TB Woods Credit Agreement
    
    
    5,000
    
    
    
    6,000Overdraft agreements
    
    
    
    
    
    
    9% Senior Secured Notes
    
    
    234,250
    
    
    
    242,50011.25% Senior Notes
    
    
    
    
    
    
    4,706Variable Rate Demand Revenue Bonds
    
    
    5,300
    
    
    
    5,300Mortgages
    
    
    2,078
    
    
    
    2,257Capital leases
    
    
    2,273
    
    
    
    2,672Less: debt discount, net
    
    
    (1,540
    )
    
    
    (1,912
    )Total long-term debt
    
    $
    247,361
    
    
    $
    261,523
  8




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ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
 Senior Revolving Credit Agreement
     TB Woods Revolving Credit Agreement
  Overdraft Agreements
  9% Senior Secured Notes
     11.25% Senior Notes
   9




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ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
  Variable Rate Demand Revenue Bonds
    Mortgage
  Capital Leases
  11. Stockholders Equity
  Stock-Based Compensation
  12. Concentrations of Credit, Segment Data and Workforce
   10




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ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
      Net SalesQuarter Ended
    
    
    Year to Date EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008North America
(primarily U.S.)
    
    $
    81,726
    
    
    $
    117,694
    
    
    $
    173,329
    
    
    $
    236,397Europe
    
    
    23,831
    
    
    
    43,022
    
    
    
    51,510
    
    
    
    81,262Asia and other
    
    
    6,320
    
    
    
    7,177
    
    
    
    11,578
    
    
    
    13,416Total
    
    $
    111,877
    
    
    $
    167,893
    
    
    $
    236,417
    
    
    $
    331,075
   13. Commitments and Contingencies
 General Litigation
    11




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
 14. Restructuring, Asset Impairment and Transition Expenses
   TB WoodsAltra Plan
    
    
    Plan
    
    
    TotalExpensesOther cash expenses
    
    $
    
    
    
    $
    
    
    
    $
    Moving and relocation
    
    
    228
    
    
    
    68
    
    
    
    296Severance
    
    
    631
    
    
    
    
    
    
    
    631Total cash expenses
    
    
    859
    
    
    
    68
    
    
    
    927Non-cash asset impairment and loss on sale of fixed asset
    
    
    141
    
    
    
    
    
    
    
    141Total restructuring expenses
    
    $
    1,000
    
    
    $
    68
    
    
    $
    1,068
    12




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ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
   2009 Altra PlanExpenses:Other cash expenses
    
    $
    47Severance
    
    
    2,682Total cash expenses
    
    
    2,729Non-cash asset impairment and other non-cash charges
    
    
    1,625Total restructuring expenses
    
    $
    4,354
  All PlansBalance at December 31, 2008
    
    $
    1,297Cash restructuring expense incurred
    
    
    2,729Cash payments
    
    
    (2,597
    )Balance at June 27, 2009
    
    $
    1,429
 15. Subsequent Event
    13




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ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
 16. Guarantor Subsidiaries
  Unaudited condensed consolidating balance sheet
June 27, 2009
 Issuer
    
    
    Guarantor
    
    
    Non Guarantor
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    35,240
    
    
    $
    (2,441
    )
    
    $
    30,844
    
    
    $
    
    
    
    $
    63,643Trade receivables, less allowance for doubtful accounts
    
    
    
    
    
    
    39,161
    
    
    
    23,106
    
    
    
    
    
    
    
    62,267Loans receivable from related parties
    
    
    
    
    
    
    138,117
    
    
    
    
    
    
    
    (138,117
    )
    
    
    Inventories
    
    
    
    
    
    
    55,162
    
    
    
    24,225
    
    
    
    
    
    
    
    79,387Deferred income taxes
    
    
    
    
    
    
    7,704
    
    
    
    
    
    
    
    
    
    
    
    7,704Assets held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Prepaid expenses and other current assets
    
    
    
    
    
    
    3,683
    
    
    
    3,336
    
    
    
    
    
    
    
    7,019Total current assets
    
    
    35,240
    
    
    
    241,386
    
    
    
    81,511
    
    
    
    (138,117
    )
    
    
    220,020Property, plant and equipment, net
    
    
    880
    
    
    
    75,708
    
    
    
    33,309
    
    
    
    
    
    
    
    109,897Intangible assets, net
    
    
    
    
    
    
    60,434
    
    
    
    17,471
    
    
    
    
    
    
    
    77,905Goodwill
    
    
    
    
    
    
    58,015
    
    
    
    20,503
    
    
    
    
    
    
    
    78,518Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    463
    
    
    
    
    
    
    
    463Investment in subs
    
    
    430,777
    
    
    
    
    
    
    
    
    
    
    
    (430,777
    )
    
    
    Other non-current assets
    
    
    3,055
    
    
    
    3,605
    
    
    
    111
    
    
    
    
    
    
    
    6,771Total assets
    
    $
    469,952
    
    
    $
    439,148
    
    
    $
    153,368
    
    
    $
    (568,894
    )
    
    $
    493,574LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,084
    
    
    $
    14,655
    
    
    $
    8,727
    
    
    $
    
    
    
    $
    24,466Accrued payroll
    
    
    1,170
    
    
    
    6,049
    
    
    
    5,623
    
    
    
    
    
    
    
    12,842Accruals and other current liabilities
    
    
    2,407
    
    
    
    10,425
    
    
    
    6,537
    
    
    
    
    
    
    
    19,369Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    6,906
    
    
    
    
    
    
    
    6,906Current portion of long-term debt
    
    
    
    
    
    
    646
    
    
    
    407
    
    
    
    
    
    
    
    1,053Loans payable to related parties
    
    
    94,896
    
    
    
    
    
    
    
    43,221
    
    
    
    (138,117
    )
    
    
    Total current liabilities
    
    
    99,557
    
    
    
    31,775
    
    
    
    71,421
    
    
    
    (138,117
    )
    
    
    64,636Long-term debt  less current portion and net of unacreted
discount and premium
    
    
    232,710
    
    
    
    11,605
    
    
    
    1,993
    
    
    
    
    
    
    
    246,308Deferred income taxes
    
    
    
    
    
    
    20,822
    
    
    
    2,123
    
    
    
    
    
    
    
    22,945Pension liablities
    
    
    
    
    
    
    8,681
    
    
    
    2,865
    
    
    
    
    
    
    
    11,546Other post retirement benefits
    
    
    
    
    
    
    322
    
    
    
    
    
    
    
    
    
    
    
    322Long-term taxes payables
    
    
    
    
    
    
    8,283
    
    
    
    
    
    
    
    
    
    
    
    8,283Other long-term liabilities
    
    
    520
    
    
    
    271
    
    
    
    1,578
    
    
    
    
    
    
    
    2,369Total stockholders equity
    
    
    137,165
    
    
    
    357,389
    
    
    
    73,388
    
    
    
    (430,777
    )
    
    
    137,165Total liabilities and stockholders equity
    
    $
    469,952
    
    
    $
    439,148
    
    
    $
    153,368
    
    
    $
    (568,894
    )
    
    $
    493,574
  14




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
 Unaudited condensed consolidating balance sheet
December 31, 2008
 Issuer
    
    
    Guarantor
    
    
    Non Guarantor
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    27,134
    
    
    $
    (2,702
    )
    
    $
    27,640
    
    
    $
    
    
    
    $
    52,072Trade receivable, less allowance for doubtful accounts
    
    
    
    
    
    
    41,051
    
    
    
    27,752
    
    
    
    
    
    
    
    68,803Loan receivable from related parties
    
    
    
    
    
    
    112,900
    
    
    
    
    
    
    
    (112,900
    )
    
    
    Inventories
    
    
    
    
    
    
    71,304
    
    
    
    27,106
    
    
    
    
    
    
    
    98,410Deferred income taxes
    
    
    
    
    
    
    7,923
    
    
    
    109
    
    
    
    
    
    
    
    8,032Assets held for sale
    
    
    
    
    
    
    3,515
    
    
    
    1,161
    
    
    
    
    
    
    
    4,676Prepaid expenses and other current assets
    
    
    1,793
    
    
    
    4,373
    
    
    
    (842
    )
    
    
    
    
    
    
    5,324Total current assets
    
    
    28,927
    
    
    
    238,364
    
    
    
    82,926
    
    
    
    (112,900
    )
    
    
    237,317Property, plant and equipment, net
    
    
    838
    
    
    
    76,586
    
    
    
    32,796
    
    
    
    
    
    
    
    110,220Intangible assets, net
    
    
    
    
    
    
    62,481
    
    
    
    16,858
    
    
    
    
    
    
    
    79,339Goodwill
    
    
    
    
    
    
    58,016
    
    
    
    19,481
    
    
    
    
    
    
    
    77,497Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    495
    
    
    
    
    
    
    
    495Investments in subsidiaries
    
    
    423,121
    
    
    
    
    
    
    
    
    
    
    
    (423,121
    )
    
    
    Other non-current assets
    
    
    3,857
    
    
    
    3,628
    
    
    
    36
    
    
    
    
    
    
    
    7,521Total assets
    
    $
    456,743
    
    
    $
    439,075
    
    
    $
    152,592
    
    
    $
    (536,021
    )
    
    $
    512,389LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,292
    
    
    $
    19,813
    
    
    $
    11,785
    
    
    $
    
    
    
    $
    33,890Accrued payroll
    
    
    2,731
    
    
    
    6,879
    
    
    
    7,165
    
    
    
    
    
    
    
    16,775Accruals and other current liabilities
    
    
    3,506
    
    
    
    8,972
    
    
    
    6,277
    
    
    
    
    
    
    
    18,755Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    6,906
    
    
    
    
    
    
    
    6,906Current portion of long-term debt
    
    
    
    
    
    
    2,925
    
    
    
    466
    
    
    
    
    
    
    
    3,391Loans payable to related parties
    
    
    75,251
    
    
    
    
    
    
    
    37,649
    
    
    
    (112,900
    )
    
    
    Total current liabilities
    
    
    83,780
    
    
    
    38,589
    
    
    
    70,248
    
    
    
    (112,900
    )
    
    
    79,717Long-term debt  less current portion and net of
unacreted discount and premium
    
    
    245,293
    
    
    
    10,640
    
    
    
    2,199
    
    
    
    
    
    
    
    258,132Deferred income taxes
    
    
    
    
    
    
    20,822
    
    
    
    2,514
    
    
    
    
    
    
    
    23,336Pension liablities
    
    
    
    
    
    
    8,922
    
    
    
    2,932
    
    
    
    
    
    
    
    11,854Other post retirement benefits
    
    
    
    
    
    
    2,270
    
    
    
    
    
    
    
    
    
    
    
    2,270Long-term taxes payables
    
    
    
    
    
    
    7,976
    
    
    
    
    
    
    
    
    
    
    
    7,976Other long-term liabilities
    
    
    
    
    
    
    241
    
    
    
    1,193
    
    
    
    
    
    
    
    1,434Total stockholders equity
    
    
    127,670
    
    
    
    349,615
    
    
    
    73,506
    
    
    
    (423,121
    )
    
    
    127,670Total liabilities and stockholders equity
    
    $
    456,743
    
    
    $
    439,075
    
    
    $
    152,592
    
    
    $
    (536,021
    )
    
    $
    512,389
   15




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
 Unaudited Condensed Consolidating Statement of Income (loss)
 Year to Date Period Ended June 27, 2009Issuer
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    176,958
    
    
    $
    73,641
    
    
    $
    (14,182
    )
    
    $
    236,417Cost of sales
    
    
    
    
    
    
    135,139
    
    
    
    53,799
    
    
    
    (14,182
    )
    
    
    174,756Gross profit
    
    
    
    
    
    
    41,819
    
    
    
    19,842
    
    
    
    
    
    
    
    61,661Selling, general and administrative expenses
    
    
    
    
    
    
    26,260
    
    
    
    15,421
    
    
    
    
    
    
    
    41,681Research and development expenses
    
    
    
    
    
    
    1,963
    
    
    
    1,098
    
    
    
    
    
    
    
    3,061Other post employment benefit plan
settlement gain
    
    
    
    
    
    
    (1,467
    )
    
    
    
    
    
    
    
    
    
    
    (1,467
    )Restructuring costs
    
    
    
    
    
    
    2,139
    
    
    
    2,215
    
    
    
    
    
    
    
    4,354Income from operations
    
    
    
    
    
    
    12,924
    
    
    
    1,108
    
    
    
    
    
    
    
    14,032Interest expense, net
    
    
    12,041
    
    
    
    475
    
    
    
    73
    
    
    
    
    
    
    
    12,589Other non-operating expense, net
    
    
    286
    
    
    
    110
    
    
    
    1,223
    
    
    
    
    
    
    
    1,619Equity in earnings of subsidiaries
    
    
    7,655
    
    
    
    
    
    
    
    
    
    
    
    (7,655
    )
    
    
    Income (loss) before income taxes
    
    
    (4,672
    )
    
    
    12,339
    
    
    
    (188
    )
    
    
    (7,655
    )
    
    
    (176
    )Provision (benefit) for income taxes
    
    
    (4,324
    )
    
    
    4,565
    
    
    
    (69
    )
    
    
    
    
    
    
    172Net income (loss)
    
    
    (348
    )
    
    
    7,774
    
    
    
    (119
    )
    
    
    (7,655
    )
    
    
    (348
    )
 Unaudited Condensed Consolidating Statement of Income (loss)
 Quarter Ended June 27, 2009Issuer
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    83,417
    
    
    $
    35,359
    
    
    $
    (6,899
    )
    
    $
    111,877Cost of sales
    
    
    
    
    
    
    62,743
    
    
    
    26,575
    
    
    
    (6,899
    )
    
    
    82,419Gross profit
    
    
    
    
    
    
    20,674
    
    
    
    8,784
    
    
    
    
    
    
    
    29,458Selling, general and
administrative expenses
    
    
    
    
    
    
    12,314
    
    
    
    7,624
    
    
    
    
    
    
    
    19,938Research and development expenses
    
    
    
    
    
    
    933
    
    
    
    561
    
    
    
    
    
    
    
    1,494Restructuring costs
    
    
    
    
    
    
    625
    
    
    
    1,857
    
    
    
    
    
    
    
    2,482Income (loss) from operations
    
    
    
    
    
    
    6,802
    
    
    
    (1,258
    )
    
    
    
    
    
    
    5,544Interest expense (income), net
    
    
    5,991
    
    
    
    225
    
    
    
    24
    
    
    
    
    
    
    
    6,240Other non-operating expense, net
    
    
    410
    
    
    
    106
    
    
    
    1,265
    
    
    
    
    
    
    
    1,781Equity in earnings of subsidiaries
    
    
    2,472
    
    
    
    
    
    
    
    
    
    
    
    (2,472
    )
    
    
    Income (loss) before income taxes
    
    
    (3,929
    )
    
    
    6,471
    
    
    
    (2,547
    )
    
    
    (2,472
    )
    
    
    (2,477
    )Provision (benefit) for income taxes
    
    
    (2,163
    )
    
    
    2,394
    
    
    
    (942
    )
    
    
    
    
    
    
    (711
    )Net income (loss)
    
    
    (1,766
    )
    
    
    4,077
    
    
    
    (1,605
    )
    
    
    (2,472
    )
    
    
    (1,766
    )
  16




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
 Unaudited Condensed Consolidating Statement of Income
 Year to Date Period Ended June 28, 2008Issuer
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    240,336
    
    
    $
    117,716
    
    
    $
    (26,977
    )
    
    $
    331,075Cost of sales
    
    
    
    
    
    
    177,945
    
    
    
    81,922
    
    
    
    (26,977
    )
    
    
    232,890Gross profit
    
    
    
    
    
    
    62,391
    
    
    
    35,794
    
    
    
    
    
    
    
    98,185Selling, general and administrative expenses
    
    
    
    
    
    
    31,766
    
    
    
    19,395
    
    
    
    
    
    
    
    51,161Research and development expenses
    
    
    
    
    
    
    2,095
    
    
    
    1,402
    
    
    
    
    
    
    
    3,497Other post employment benefit plan settlement gain
    
    
    
    
    
    
    (169
    )
    
    
    
    
    
    
    
    
    
    
    (169
    )Restructuring costs
    
    
    
    
    
    
    783
    
    
    
    285
    
    
    
    
    
    
    
    1,068Income from operations
    
    
    
    
    
    
    27,916
    
    
    
    14,712
    
    
    
    
    
    
    
    42,628Interest expense, net
    
    
    14,018
    
    
    
    963
    
    
    
    173
    
    
    
    
    
    
    
    15,154Other non-operating (income) expense, net
    
    
    (2,086
    )
    
    
    (688
    )
    
    
    1,295
    
    
    
    
    
    
    
    (1,479
    )Equity in earnings of subsidiaries
    
    
    26,995
    
    
    
    
    
    
    
    
    
    
    
    (26,995
    )
    
    
    Income from continuing operations before income taxes
    
    
    15,063
    
    
    
    27,641
    
    
    
    13,244
    
    
    
    (26,995
    )
    
    
    28,953Provision (benefit) for income taxes
    
    
    (3,366
    )
    
    
    9,122
    
    
    
    4,371
    
    
    
    
    
    
    
    10,127Income from continuing operations
    
    
    18,429
    
    
    
    18,519
    
    
    
    8,873
    
    
    
    (26,995
    )
    
    
    18,826Net loss from discountinued operations
    
    
    
    
    
    
    (397
    )
    
    
    
    
    
    
    
    
    
    
    (397
    )Net income
    
    
    18,429
    
    
    
    18,122
    
    
    
    8,873
    
    
    
    (26,995
    )
    
    
    18,429
 Unaudited Condensed Consolidating Statement of Income
 Quarter Ended June 28, 2008Issuer
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    120,005
    
    
    $
    61,596
    
    
    $
    (13,708
    )
    
    $
    167,893Cost of sales
    
    
    
    
    
    
    89,081
    
    
    
    42,133
    
    
    
    (13,708
    )
    
    
    117,506Gross profit
    
    
    
    
    
    
    30,924
    
    
    
    19,463
    
    
    
    
    
    
    
    50,387Selling, general and administrative expenses
    
    
    
    
    
    
    16,370
    
    
    
    10,078
    
    
    
    
    
    
    
    26,448Research and development expenses
    
    
    
    
    
    
    1,033
    
    
    
    733
    
    
    
    
    
    
    
    1,766Other post employment benefit plan settlement
    
    
    
    
    
    
    (169
    )
    
    
    
    
    
    
    
    
    
    
    (169
    )Restructuring costs
    
    
    
    
    
    
    287
    
    
    
    48
    
    
    
    
    
    
    
    335Income from operations
    
    
    
    
    
    
    13,403
    
    
    
    8,604
    
    
    
    
    
    
    
    22,007Interest expense, net
    
    
    7,264
    
    
    
    354
    
    
    
    95
    
    
    
    
    
    
    
    7,713Other non-operating (income) expense, net
    
    
    (2,232
    )
    
    
    (533
    )
    
    
    1,912
    
    
    
    
    
    
    
    (853
    )Equity in earnings of subsidiaries
    
    
    13,934
    
    
    
    
    
    
    
    
    
    
    
    (13,934
    )
    
    
    Income from continuing operations before income
taxes
    
    
    8,902
    
    
    
    13,582
    
    
    
    6,597
    
    
    
    (13,934
    )
    
    
    15,147Provision (benefit) for income taxes
    
    
    (967
    )
    
    
    4,201
    
    
    
    2,044
    
    
    
    
    
    
    
    5,278Net income
    
    
    9,869
    
    
    
    9,381
    
    
    
    4,553
    
    
    
    (13,934
    )
    
    
    9,869
  17




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
 Unaudited Condensed Consolidating Statement of Cash Flows
 Year to date period ended June 27, 2009Issuer
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet income (loss)
    
    $
    (348
    )
    
    $
    8,027
    
    
    $
    (371
    )
    
    $
    (7,656
    )
    
    $
    (348
    )Undistributed Equity in subsidiaries
    
    $
    (7,656
    )
    
    
    
    
    
    
    
    
    
    $
    7,656
    
    
    $
    Adjustments to reconcile net income to net cash flows:Depreciation
    
    
    
    
    
    
    5,977
    
    
    
    2,213
    
    
    
    
    
    
    
    8,190Amortization of intangible assets
    
    
    
    
    
    
    2,058
    
    
    
    674
    
    
    
    
    
    
    
    2,732Amortization and write-offs of deferred loan costs
    
    
    921
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    957Gain on foreign currency, net
    
    
    270
    
    
    
    
    
    
    
    1,109
    
    
    
    
    
    
    
    1,379Accretion of debt discount and premium, net
    
    
    372
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    372Other post employment benefit plan settlement gain
    
    
    
    
    
    
    (1,467
    )
    
    
    
    
    
    
    
    
    
    
    (1,467
    )Fixed asset impairment
    
    
    
    
    
    
    1,395
    
    
    
    
    
    
    
    
    
    
    
    1,395Stock based compensation
    
    
    
    
    
    
    1,587
    
    
    
    
    
    
    
    
    
    
    
    1,587Changes in assets and liabilities:Trade receivables
    
    
    
    
    
    
    2,730
    
    
    
    5,904
    
    
    
    
    
    
    
    8,634Inventories
    
    
    
    
    
    
    16,142
    
    
    
    4,304
    
    
    
    
    
    
    
    20,446Accounts payable and accrued liabilities
    
    
    (3,398
    )
    
    
    (6,097
    )
    
    
    (5,889
    )
    
    
    
    
    
    
    (15,384
    )Other current assets and liabilities
    
    
    1,793
    
    
    
    690
    
    
    
    (3,252
    )
    
    
    
    
    
    
    (769
    )Other operating assets and liabilities
    
    
    (68
    )
    
    
    17
    
    
    
    134
    
    
    
    
    
    
    
    83Net cash provided by (used in) operating activities
    
    
    (8,114
    )
    
    
    31,095
    
    
    
    4,826
    
    
    
    
    
    
    
    27,807Cash flows from investing activitiesPurchase of fixed assets
    
    
    
    
    
    
    (3,401
    )
    
    
    (382
    )
    
    
    
    
    
    
    (3,783
    )Net cash used in investing activities
    
    
    
    
    
    
    (3,401
    )
    
    
    (382
    )
    
    
    
    
    
    
    (3,783
    )Cash flows from financing activitiesPayments on Senior Notes
    
    
    (4,950
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,950
    )Payments on Senior Secured Notes
    
    
    (8,250
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,250
    )Payments to Revolver
    
    
    
    
    
    
    (1,000
    )
    
    
    
    
    
    
    
    
    
    
    (1,000
    )Payments on mortgages
    
    
    
    
    
    
    
    
    
    
    (171
    )
    
    
    
    
    
    
    (171
    )Payment on capital leases
    
    
    
    
    
    
    (341
    )
    
    
    (40
    )
    
    
    
    
    
    
    (381
    )Change in affiliate debt
    
    
    29,420
    
    
    
    (26,092
    )
    
    
    (3,328
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    16,220
    
    
    
    (27,433
    )
    
    
    (3,539
    )
    
    
    
    
    
    
    (14,752
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    2,299
    
    
    
    
    
    
    
    2,299Net change in cash and cash equivalents
    
    
    8,106
    
    
    
    261
    
    
    
    3,204
    
    
    
    
    
    
    
    11,571Cash and cash equivalents at beginning of year
    
    
    27,134
    
    
    
    (2,702
    )
    
    
    27,640
    
    
    
    
    
    
    
    52,072Cash and cash equivalents at end of period
    
    $
    35,240
    
    
    $
    (2,441
    )
    
    $
    30,844
    
    
    $
    
    
    
    $
    63,643
  18




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
 Unaudited Condensed Consolidating Statement of Cash Flows
 Year to Date Period Ended June 28, 2008Issuer
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet income
    
    $
    18,429
    
    
    $
    18,122
    
    
    $
    8,873
    
    
    $
    (26,995
    )
    
    $
    18,429Undistributed equity in earnings of subsidiaries
    
    $
    (26,995
    )
    
    $
    
    
    
    $
    
    
    
    $
    26,995
    
    
    
    Adjustments to reconcile net income to net cash flows:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation
    
    
    
    
    
    
    5,279
    
    
    
    2,772
    
    
    
    
    
    
    
    8,051Amortization of intangible assets
    
    
    
    
    
    
    2,046
    
    
    
    838
    
    
    
    
    
    
    
    2,884Amortization and write-offs of deferred loan costs
    
    
    1,151
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    1,344Loss on foreign currency, net
    
    
    (71
    )
    
    
    
    
    
    
    (600
    )
    
    
    
    
    
    
    (671
    )Accretion of debt discount and premium, net
    
    
    359
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    359Loss on sale of fixed assets
    
    
    
    
    
    
    137
    
    
    
    
    
    
    
    
    
    
    
    137Other post employment benefit plan settlement gain
    
    
    
    
    
    
    (169
    )
    
    
    
    
    
    
    
    
    
    
    (169
    )Loss on sale of Electronics Division
    
    
    
    
    
    
    397
    
    
    
    
    
    
    
    
    
    
    
    397Stock based compensation
    
    
    1,022
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,022Changes in assets and liabilities:Trade receivables
    
    
    
    
    
    
    (8,399
    )
    
    
    (9,678
    )
    
    
    
    
    
    
    (18,077
    )Inventories
    
    
    
    
    
    
    1,078
    
    
    
    (3,600
    )
    
    
    
    
    
    
    (2,522
    )Accounts payable and accrued liabilities
    
    
    (2,220
    )
    
    
    (5,738
    )
    
    
    5,411
    
    
    
    
    
    
    
    (2,547
    )Other current assets and liabilities
    
    
    139
    
    
    
    (1,299
    )
    
    
    (916
    )
    
    
    
    
    
    
    (2,076
    )Other operating assets and liabilities
    
    
    16
    
    
    
    (250
    )
    
    
    291
    
    
    
    
    
    
    
    57Net cash (used in) provided by operating activities
    
    
    (8,170
    )
    
    
    11,397
    
    
    
    3,391
    
    
    
    
    
    
    
    6,618Cash flows from investing activitiesPurchase of fixed assets
    
    
    
    
    
    
    (5,860
    )
    
    
    (1,781
    )
    
    
    
    
    
    
    (7,641
    )Proceeds from the sale of Electronics
    
    
    17,000
    
    
    
    210
    
    
    
    
    
    
    
    
    
    
    
    17,210Net cash (used in) provided by investing activities
    
    
    17,000
    
    
    
    (5,650
    )
    
    
    (1,781
    )
    
    
    
    
    
    
    9,569Cash flows from financing activitiesPayments on Senior Notes
    
    
    (1,346
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,346
    )Payments on Senior Secured Notes
    
    
    (15,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,000
    )Payments on revolving credit agreement
    
    
    
    
    
    
    (1,723
    )
    
    
    
    
    
    
    
    
    
    
    (1,723
    )Payments received from Parent Company
    
    
    11,899
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,899Payments on mortgages
    
    
    
    
    
    
    
    
    
    
    (188
    )
    
    
    
    
    
    
    (188
    )Change in affiliate debt
    
    
    16,074
    
    
    
    (9,276
    )
    
    
    (6,798
    )
    
    
    
    
    
    
    Payment on capital leases
    
    
    
    
    
    
    (319
    )
    
    
    (255
    )
    
    
    
    
    
    
    (574
    )Net cash (used in) provided by financing activities
    
    
    11,627
    
    
    
    (11,318
    )
    
    
    (7,241
    )
    
    
    
    
    
    
    (6,932
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    
    
    
    
    70Net change in cash and cash equivalents
    
    
    20,457
    
    
    
    (5,571
    )
    
    
    (5,561
    )
    
    
    
    
    
    
    9,325Cash and cash equivalents at beginning of year
    
    
    4,571
    
    
    
    (492
    )
    
    
    29,827
    
    
    
    
    
    
    
    33,906Cash and cash equivalents at end of period
    
    $
    25,028
    
    
    $
    (6,063
    )
    
    $
    24,266
    
    
    $
    
    
    
    $
    43,231
  19




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion of the financial condition and results of operations of Altra
Industrial Motion, Inc. should be read together with the audited financial statements of Altra
Industrial Motion, Inc. and related notes included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2008. The following discussion includes forward-looking statements. For a
discussion of important factors that could cause actual results to differ materially from the
results referred to in the forward-looking statements, see Forward-Looking Statements. in the
Companys Annual Report on Form 10-K for the year ended December 31, 2008.
 General
  
   Operating Segment
    
    Principal Brands
    
    Principal MarketsHeavy Duty Clutches & Brakes
    
    Wichita Clutch,
Twiflex
Industrial Clutch
    
    Energy
Metals
MarineElectro-Magnetic Clutches &
Brakes
    
    Warner Electric,
Matrix Engineering,
Inertia Dynamics
Warner Linear
    
    Turf and Garden
Forklift
Elevator
Material HandlingOverrunning Clutches & Bearings
    
    Formsprag
Stieber
Kilian
Marland Clutch
    
    Aerospace
Mining
Material Handling
TransportationEngineered Couplings
    
    TB Woods
Ameridrives
Bibby Transmission
Huco Dynatork
    
    Energy
Metals
Petro/ChemGearing and Belted Drives
    
    Boston Gear,
TB Woods
Nuttall/Delroyd,
Centric Clutch
    
    Food Processing
Material Handling
Energy
  20




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##### Table of Contents



Business Outlook
      21




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##### Table of Contents



Critical Accounting Policies
  Goodwill, Intangibles and other long-lived assets Goodwill and Other Intangible Assets
   Colfax acquisition  November 30, 2004
    
    12 reporting unitsHay Hall acquisition  February 10, 2006
    
    5 reporting unitsWarner Linear acquisition  May 18, 2006
    
    1 reporting unitTB Woods acquisition  April 5, 2007
    
    1 reporting unitAll Power Transmission  October 5, 2007
    
    1 reporting unit
   22




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##### Table of Contents



2007 goodwill impairment
    
    2008 goodwill impairmentassumptions
    
    assumptionsHuco (Hay Hall acquisition)Revenue growth (1st year)
    
    13.6% increase
    
    (26.2%) decreaseAverage revenue growth (2nd  5th year)
    
    5.8% increase
    
    5.8% increaseProfitability growth rate EBITDA as a percent of sales (1st year)
    
    3.6% increase
    
    (4%) decreaseAverage profitability growth rate per year (EBITDA as a percent
of sales) (2nd  5th year)
    
    0.8% increase
    
    1% increaseDiscount Rate
    
    12%
    
    13%TB WoodsRevenue growth (1st year)
    
    10.4% increase
    
    (18%) decreaseAverage revenue growth (2nd  5th year)
    
    5.8% increase
    
    5.8% increaseProfitability growth rate EBITDA as a percent of sales (1st year)
    
    (0.7%) decrease
    
    (1%) decreaseAverage profitability growth rate per year (EBITDA as a percent
of sales) (2nd  5th year)
    
    0.6% increase
    
    1% increaseDiscount Rate
    
    12%
    
    13%Warner LinearRevenue growth (1st year)
    
    51%
    
    (10.3%) decreaseAverage revenue growth (2nd  5th year)
    
    5.8% increase
    
    5.8% increaseProfitability growth rate EBITDA as a percent of sales (1st year)
    
    8.9% increase
    
    6% increaseAverage profitability growth rate per year (EBITDA as a percent
of sales) (2nd  5th year)
    
    0.6% increase
    
    0.5% increaseDiscount Rate
    
    12%
    
    13%
      23




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##### Table of Contents



Profitability decrease
    
    Profitability decrease
    
    Profitability decrease5% (all other
    
    10% (all other
    
    15% (all otherassumptions remain
    
    assumptions remain
    
    assumptions remainconstant)
    
    constant)
    
    constant)Number of reporting units that could be required to perform an interim impairment analysis
    
    1
    
    4
    
    5Goodwill as of December 31, 2008 at reporting units that would be required to perform an
interim impairment analysis
    
    $23.5 million
    
    $28.3 million
    
    $40.9 million
 Discount rate increase 50 basis
    
    Discount rate increase 100 basispoints (all other assumptions
    
    points (all other assumptionsremain constant)
    
    remain constant)Number of reporting units that could be required to perform an interim impairment analysis
    
    1
    
    1Goodwill as of December 31, 2008 at reporting units that could be required to perform an
interim impairment analysis
    
    $23.5 million
    
    $23.5 million
 Accounting for the Impairment or Disposal of Long-lived
Assets,
      24




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##### Table of Contents



Recent Accounting Pronouncements
   Results of Operations
 Quarter Ended
    
    
    Year to date endedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,(In thousands, except per share data)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    111,877
    
    
    $
    167,893
    
    
    $
    236,417
    
    
    $
    331,075Cost of sales
    
    
    82,419
    
    
    
    117,506
    
    
    
    174,756
    
    
    
    232,890Gross profit
    
    
    29,458
    
    
    
    50,387
    
    
    
    61,661
    
    
    
    98,185Gross profit percentage
    
    
    26.33
    %
    
    
    30.01
    %
    
    
    26.08
    %
    
    
    29.66
    %Selling, general and administrative expenses
    
    
    19,938
    
    
    
    26,448
    
    
    
    41,681
    
    
    
    51,161Research and development expenses
    
    
    1,494
    
    
    
    1,766
    
    
    
    3,061
    
    
    
    3,497Other post employment benefit plan settlement gain
    
    
    
    
    
    
    (169
    )
    
    
    (1,467
    )
    
    
    (169
    )Restructuring costs
    
    
    2,482
    
    
    
    335
    
    
    
    4,354
    
    
    
    1,068Income from operations
    
    
    5,544
    
    
    
    22,007
    
    
    
    14,032
    
    
    
    42,628Interest expense, net
    
    
    6,240
    
    
    
    7,713
    
    
    
    12,589
    
    
    
    15,154Other non-operating (income) expense, net
    
    
    1,781
    
    
    
    (853
    )
    
    
    1,619
    
    
    
    (1,479
    )Income (loss) from continuing operations before income taxes
    
    
    (2,477
    )
    
    
    15,147
    
    
    
    (176
    )
    
    
    28,953Provision (benefit) for income taxes
    
    
    (711
    )
    
    
    5,278
    
    
    
    172
    
    
    
    10,127Income (loss) from continuing operations
    
    
    (1,766
    )
    
    
    9,869
    
    
    
    (348
    )
    
    
    18,826Net loss from discontinued operations, net of income taxes
of $124
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (397
    )Net income (loss)
    
    $
    (1,766
    )
    
    $
    9,869
    
    
    $
    (348
    )
    
    $
    18,429
  25




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##### Table of Contents



Quarter Ended June 27, 2009 compared with Quarter Ended June 28, 2008
 (Amounts in thousands unless otherwise noted)
 Quarter EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Net sales
    
    $
    111,877
    
    
    $
    167,893
    
    
    $
    (56,016
    )
    
    
    -33.4
    %
  Quarter EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Gross Profit
    
    $
    29,458
    
    
    $
    50,387
    
    
    $
    (20,929
    )
    
    
    -41.5
    %Gross Profit as a percent of sales
    
    
    26.3
    %
    
    
    30.0
    %
  Quarter EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Selling, general and administrative expense (SG&A)
    
    $
    19,938
    
    
    $
    26,448
    
    
    $
    (6,510
    )
    
    
    -24.6
    %SG&A as a percent of sales
    
    
    17.8
    %
    
    
    15.8
    %
  Quarter EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Research and development expenses (R&D)
    
    $
    1,494
    
    
    $
    1,766
    
    
    $
    (272
    )
    
    
    -15.4
    %
  26




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##### Table of Contents



Quarter EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Restructuring expenses
    
    $
    2,482
    
    
    $
    335
    
    
    $
    2,147
    
    
    
    640.9
    %
   Quarter EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Interest Expense, net
    
    $
    6,240
    
    
    $
    7,713
    
    
    $
    (1,473
    )
    
    
    -19.1
    %
  Quarter EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Other non-operating loss (income), net
    
    $
    1,781
    
    
    $
    (853
    )
    
    $
    2,634
    
    
    
    -309
    %
  27




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##### Table of Contents



Quarter EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Provision (benefit) for income taxes
    
    $
    (711
    )
    
    $
    5,278
    
    
    $
    (5,989
    )
    
    
    -113.5
    %Provision for income taxes as a % of
income from continuing operations
before income taxes
    
    
    -28.7
    %
    
    
    34.8
    %
  Year to Date Period Ended June 27, 2009 compared with Year to Date Period Ended June 28, 2008
 (Amounts in thousands unless otherwise noted)
 Year to Date Period EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Net sales
    
    $
    236,417
    
    
    $
    331,075
    
    
    $
    (94,658
    )
    
    
    -28.6
    %
  Year to Date Period EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Gross Profit
    
    $
    61,661
    
    
    $
    98,185
    
    
    $
    (36,524
    )
    
    
    -37.2
    %Gross Profit as a percent of sales
    
    
    26.1
    %
    
    
    29.7
    %
  Year to Date Period EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Selling, general and administrative expense (SG&A)
    
    $
    41,681
    
    
    $
    51,161
    
    
    $
    (9,480
    )
    
    
    -18.5
    %SG&A as a percent of sales
    
    
    17.6
    %
    
    
    15.5
    %
  28




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##### Table of Contents



Year to Date Period EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Research and development expenses (R&D)
    
    $
    3,061
    
    
    $
    3,497
    
    
    $
    (436
    )
    
    
    -12.5
    %
  Year to Date Period EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Restructuring expenses
    
    $
    4,354
    
    
    $
    1,068
    
    
    $
    3,286
    
    
    
    307.7
    %
   Year to Date Period EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Interest Expense, net
    
    $
    12,589
    
    
    $
    15,154
    
    
    $
    (2,565
    )
    
    
    -16.9
    %
  Other post employment benefit plan settlement gain
  Year to Date Period EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Other non-operating income (loss), net
    
    $
    1,619
    
    
    $
    (1,479
    )
    
    $
    3,098
    
    
    
    -209
    %
  29




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##### Table of Contents



Year to Date Period EndedJune 27, 2009
    
    
    June 28, 2008
    
    
    Change
    
    
    %Provision for income taxes, continuing operations
    
    $
    172
    
    
    $
    10,127
    
    
    $
    (9,955
    )
    
    
    -98.3
    %Provision for income taxes as a % of income before taxes
    
    
    97.7
    %
    
    
    35.0
    %
  Discontinued Operations
   Liquidity and Capital Resources
 Overview
   30




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##### Table of Contents



Net Cash
 June 27,
    
    
    December 31,2009
    
    
    2008(in thousands)Cash and cash equivalents
    
    $
    63,643
    
    
    $
    52,072
      31




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##### Table of Contents



Liquidity
 Amounts in millionsJune 27, 2009
    
    
    
    
    
    
    December 31, 2008Debt:Senior Revolving Credit Agreement
    
    $
    
    
    
    
    
    
    
    $
    TB Woods Credit Agreement
    
    
    5.0
    
    
    
    
    
    
    
    6.0Overdraft agreements
    
    
    
    
    
    
    
    
    
    
    9% Senior Secured Notes
    
    
    234.3
    
    
    
    
    
    
    
    242.511.25% Senior Notes
    
    
    
    
    
    
    
    
    
    
    4.7Variable Rate Demand Revenue Bonds
    
    
    5.3
    
    
    
    
    
    
    
    5.3Mortgages
    
    
    2.1
    
    
    
    
    
    
    
    2.3Capital leases
    
    
    2.3
    
    
    
    
    
    
    
    2.6Total Debt
    
    $
    249.0
    
    
    
    
    
    
    $
    263.4Cash
    
    $
    63.6
    
    
    
    
    
    
    $
    52.1Net Debt
    
    $
    185.4
    
    
    
    57.5
    %
    
    $
    211.3
    
    
    
    62.3
    %Shareholders Equity
    
    $
    137.2
    
    
    
    42.5
    %
    
    $
    127.7
    
    
    
    37.7
    %Total Capitalization
    
    $
    322.6
    
    
    
    100
    %
    
    $
    339.0
    
    
    
    100
    %
       Our leverage could adversely affect our financial health and make us vulnerable to
adverse economic and industry conditions
  32




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##### Table of Contents



Contractual Obligations
      
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4.
    
    Controls and Procedures
      33




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##### Table of Contents



PART IIOTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  
 Item 5.
    
    Other Information
   34




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##### Table of Contents



Item 6.
    
    Exhibits
  EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    (1)
    
    Second Amended and Restated Certificate of Incorporation of the Registrant.3.2
    (2)
    
    Second Amended and Restated Bylaws of the Registrant.10.1
    *
    
    Credit Agreement, dated as of November 30, 2004, among Altra Industrial Motion, Inc. and certain
subsidiaries of the Company, as Guarantors, the financial institutions listed therein, as Lenders,
and Wells Fargo Bank, as Lead Arranger10.35
    *
    
    Credit Agreement, dated as of April 5, 2007, among Altra Industrial Motion, Inc. and certain of its
subsidiaries, as Guarantors, the financial institutions listed therein, as Lenders, and Wells Fargo
Foothill, Inc., as Arranger and Administrative Agent10.41
    (2)
    
    Form of Indemnification Agreement entered into between the Company and the Directors and Certain
Officers10.8
    *
    
    Labor Agreement, effective as of February 1, 2009, between Warner Electric LLC and United
Steelworkers and Local Union No. 324531.1
    *
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    *
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    **
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    **
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 *
    
    Filed herewith.**
    
    Furnished herewith.(1)
    
    Incorporated by reference to Altra Holdings, Inc.s Registration Statement on Form S-1,
as amended, filed with the Securities and Exchange Commission on December 4, 2006.(2)
    
    Incorporated by reference to Altra Holdings, Inc.s Current Report on form 8-K filed on
October 27, 2008.  35




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##### Table of Contents



SIGNATURES
  ALTRA INDUSTRIAL MOTION, INC.August 7, 2009
    
    By:
    
    /s/ Carl R. ChristensonName:
    
    Carl R. ChristensonTitle
    
    President and Chief Executive OfficerAugust 7, 2009
    
    By:
    
    /s/ Christian StorchName:
    
    Christian StorchTitle:
    
    Vice President and Chief Financial OfficerAugust 7, 2009
    
    By:
    
    /s/ Todd B. PatriaccaName:
    
    Todd B. PatriaccaTitle:
    
    Vice President of Finance, Assistant Treasurer
and Corporate Controller
  36




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    (1)
    
    Second Amended and Restated Certificate of Incorporation of the Registrant.3.2
    (2)
    
    Second Amended and Restated Bylaws of the Registrant.10.1
    *
    
    Credit Agreement, dated as of November 30, 2004, among Altra Industrial Motion, Inc. and certain
subsidiaries of the Company, as Guarantors, the financial institutions listed therein, as Lenders,
and Wells Fargo Bank, as Lead Arranger10.35
    *
    
    Credit Agreement, dated as of April 5, 2007, among Altra Industrial Motion, Inc. and certain of its
subsidiaries, as Guarantors, the financial institutions listed therein, as Lenders, and Wells Fargo
Foothill, Inc., as Arranger and Administrative Agent10.41
    (2)
    
    Form of Indemnification Agreement entered into between the Company and the Directors and Certain
Officers10.8*
    
    
    Labor Agreement, effective as of February 1, 2009, between Warner Electric LLC and United
Steelworkers and Local Union No. 324531.1
    *
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    *
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    **
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    **
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 *
    
    Filed herewith.**
    
    Furnished herewith.(1)
    
    Incorporated by reference to Altra Holdings, Inc.s Registration Statement on Form S-1,
as amended, filed with the Securities and Exchange Commission on December 4, 2006.(2)
    
    Incorporated by reference to Altra Holdings, Inc.s Current Report on form 8-K filed on
October 27, 2008.  37