UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549   FORM 10-Q/A þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June, 30, 2007oro
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from                   to Commission file number 333-124944 ALTRA INDUSTRIAL MOTION, INC.(Exact name of registrant as specified in its charter) Delaware

30-0283143(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)14 Hayward Street, Quincy, Massachusetts

02171(Address of principal executive offices)

(Zip Code) (617) 328-3300(Registrants telephone number, including area code) 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 þ        No o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and larger accelerated filer in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated filer o

Accelerated Filer o

Non-accelerated filer þ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o      No þ As of August 1, 2007, 1,000 shares of Common Stock, $.001 par value per share, were outstanding.    Explanatory Note

This Amendment No. 1 (Amended Filing) to the Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007 (Original Filing), originally filed August 14, 2007, is being filed solely to amend footnote 3 to the unaudited condensed consolidated financial statements. This Amended Filing is being filed to correct computational errors in the unaudited pro forma disclosure of the Registrants acquisition of TB Woods Inc., to accurately include three months of TB Woods Inc. financial results in the unaudited pro-forma disclosure for the quarter ended June 30, 2006 and to correct certain pro forma adjustments impacting the unaudited pro forma results for the quarter and year to date periods ended June 30, 2006 and 2007.

Other than described above, no changes have been made to any other items in the Original Filing. This Amended Filing does not reflect events occurring after the date of the Original Filing or modify or update those disclosures affected by subsequent events.





TABLE OF CONTENTS

Page #PART IFINANCIAL INFORMATION

2Item 1. Unaudited Condensed Consolidated Financial Statements

2Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

21Item 3. Quantitative and Qualitative Disclosures about Market Risk

26Item 4. Controls and Procedures

26PART IIOTHER INFORMATION

27Item 1. Legal Proceedings

27Item 1A. Risk Factors

27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

27Item 3. Defaults Upon Senior Securities

27Item 4. Submission of Matters to a Vote of Security Holders

27Item 5. Other Information

27Item 6. Exhibits

27SIGNATURES

30EX-31.1 Section 302 Certification of C.E.O.EX-31.2 Section 302 Certification of C.F.O.EX-32.1 Section 906 Certification of C.E.O.EX-32.2 Section 906 Certification of C.F.O.
1




PART IFINANCIAL INFORMATION


Item 1. Financial Statements

ALTRA INDUSTRIAL MOTION, INC.

Condensed Consolidated Balance SheetsDollars in thousands (except share amounts)

June 30,2007

December 31,2006(unaudited)AssetsCurrent assets:Cash and cash equivalents

$
34,373

$
42,527Trade receivables, less allowance for doubtful accounts of $2,044 and $2,017


92,706


61,506Inventories, net


106,418


75,769Deferred income taxes


7,005


6,783Prepaid expenses and other


5,668


7,532Total current assets


246,170


194,117Property, plant and equipment, net


116,380


82,387Intangible assets, net


99,123


59,662Goodwill


121,493


65,397Deferred income taxes


2,283


2,135Other assets


7,141


5,670Total assets

$
592,590

$
409,368Liabilities and stockholders equityCurrent liabilities:Accounts payable

$
41,641

$
34,053Accrued payroll


14,238


14,071Accruals and other liabilities


19,196


15,195Taxes payable


4,762


6,549Deferred income taxes


1,382


1,382Current portion of long-term debt


948


573Total current liabilities


82,167


71,823Long-term debt, less current portion and net of unaccreted discount and premium


321,341


228,555Deferred income taxes


30,034


7,130Pension liabilities


13,593


15,169Other post retirement benefits


3,132


3,262Other long term liabilities


4,279


3,910Commitments and Contingencies (See Note 14)





Stockholders equity:Common stock (1,000 shares authorized, issued & outstanding, $0.001 par value)





Due to parent


24,515


24,724Additional paid-in capital


97,829


48,814Retained earnings


17,504


9,045Accumulated other comprehensive loss


(1,804
)

(3,064
)Total stockholders equity


138,044


79,519Total liabilities and stockholders equity

$
592,590

$
409,368See accompanying notes.

2




ALTRA INDUSTRIAL MOTION, INC.

Condensed Consolidated Statements of Income and Comprehensive IncomeAmounts in thousands(unaudited)

Quarter Ended June 30,

Year to Date EndedJune 30,2007

2006

2007

2006Net sales

$
163,142

$
119,774

$
295,848

$
234,558Cost of sales


117,238


87,501


211,896


170,431Gross profit


45,904


32,273


83,952


64,127Selling, general and administrative expenses


25,035


19,094


45,839


37,821Research and development expenses


2,204


1,288


3,498


2,492Restructuring charges


198





991


Income from operations


18,467


11,891


33,624


23,814Interest expense, net


10,692


6,050


19,840


11,226Other non-operating expense (income), net


123


72


76


(87
)Income before income taxes


7,652


5,769


13,708


12,675Provision for income taxes


2,803


1,852


5,068


4,674Net income

$
4,849

$
3,917

$
8,640

$
8,001Consolidated Statement of Comprehensive IncomeForeign currency translation adjustment


821


1,085


1,260


1,557Comprehensive income

$
5,670

$
5,002

$
9,900

$
9,558See accompanying notes.

3




ALTRA INDUSTRIAL MOTION, INC.Condensed Consolidated Statements of Cash FlowsDollars in thousands(unaudited)

Year to Date Ended June 30,2007

2006Cash flows from operating activities:Net income

$
8,640

$
8,001Adjustments to reconcile net income to cash (used in) provided by operating activities:Depreciation


8,064


4,950Amortization of intangible assets


2,468


1,796Amortization and write-offs of deferred loan costs


1,857


425Loss on foreign currency, net


210


Accretion of debt discount and premium, net


415


472Amortization of inventory fair value adjustment


651


2,278Loss (gain) on sale of fixed assets


112


(7
)Stock based compensation


800


65Provision for deferred taxes





2,209Changes in operating assets and liabilities:Trade receivables


(14,040
)

(3,667
)Inventories


(638
)

(3,181
)Accounts payable and accrued liabilities


(14,833
)

(5,231
)Other current assets and liabilities


3,515


(446
)Other operating assets and liabilities


100


263Net cash (used in) provided by operating activities


(2,679
)

7,927Cash flows from investing activities:Purchases of fixed assets


(4,249
)

(4,110
)Acquisitions, net of $5,222 and $441 of cash acquired


(117,484
)

(54,086
)Net cash used in investing activities


(121,733
)

(58,196
)Cash flows from financing activities:Capital contribution from Parent Company


49,015


Proceeds from issuance of senior notes





57,625Proceeds from issuance of senior secured notes


106,050


Payment of debt issuance costs


(3,405
)

(1,928
)Payments on senior notes


(33,998
)

Borrowings under revolving credit agreement


8,315


5,057Payments on revolving credit agreement


(9,120
)

(5,057
)Payments made on behalf of Parent Company, net


(1,009
)

(12,619
)Proceeds from mortgages





2,510Payments on capital leases


(359
)

(61
)Net cash provided by financing activities


115,489


45,527Effect of exchange rates on cash


769


255Decrease in cash and cash equivalents


(8,154
)

(4,487
)Cash and cash equivalents, beginning of period


42,527


10,060Cash and cash equivalents, end of period

$
34,373

$
5,573Cash paid during the period for:Interest

$
18,284

$
8,758Income Taxes

$
9,738

$
2,020Non-Cash Financing:Acquisition of capital equipment under capital lease

$
1,655

$
See accompanying notes.

4




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted


1. Organization and Nature of Operations


Headquartered in Quincy, Massachusetts, Altra Industrial Motion, Inc. (the Company)., is a leading multi-national designer, producer and marketer of a wide range of mechanical power transmission products. The Company brings together strong brands covering over 40 product lines with production facilities in nine countries and sales coverage in over 70 countries. The Companys leading brands include Boston Gear, Warner Electric, TB Woods, Formsprag Clutch, Ameridrives Couplings, Industrial Clutch, Kilian Manufacturing, Marland Clutch, Nuttall Gear, Stieber Clutch, Wichita Clutch, Twiflex Limited, Bibby Transmissions, Matrix International, Inertia Dynamics, Huco Dynatork and Warner Linear.


2. Basis of Presentation


The Company was formed on November 30, 2004 following acquisitions of certain subsidiaries of Colfax Corporation (Colfax) and The Kilian Company (Kilian). During 2006, the Company acquired Hay Hall Holdings Limited (Hay Hall) and Bear Linear (Warner Linear). On April 5, 2007, the Company acquired TB Woods Corporation (TB Woods).


The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, necessary to present fairly the unaudited condensed consolidated financial statements as of June 30, 2007 and for the quarters and year to date periods ended June 30, 2007 and 2006.


The Company follows a four, four, five week calendar per quarter with all quarters consisting of thirteen weeks of operations with the fiscal year-end always on December 31.


The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year-ended December 31, 2006, contained in the Companys Annual Report on Form 10-K for the year ended December 31, 2006.


Certain prior period amounts have been reclassified in the condensed consolidated financial statements to conform to the current period presentation.

5




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted


3. Acquisition


On April 5, 2007, the Company acquired all of the outstanding shares of TB Woods for $24.80 per share, or aggregate consideration of $93.5 million. As part of the TB Woods Acquisition, the Company retired $18.7 million of TB Woods indebtedness and paid $9.2 million to retire options under the TB Woods equity plan. TB Woods is an established designer, manufacturer and marketer of mechanical and electronic industrial power transmission products.


The TB Woods Acquisition has been accounted for in accordance with SFAS No. 141. The closing date of the TB Woods Acquisition was April 5, 2007, and as such, the Companys consolidated financial statements reflect TB Woods results of operations from that date forward.


The Company has not completed its final purchase price allocation. The preliminary value of the acquired assets, assumed liabilities and identified intangibles from the acquisition of TB Woods, as presented below, are based upon managements estimates of fair value as of the date of the acquisition. Goodwill and intangibles recorded in connection with the acquisition of TB Woods have not yet been allocated across the business units acquired nor have the values been finalized. The final purchase price allocations are not expected to have a material impact on the Companys financial position or results of operations. The preliminary purchase price allocation is as follows:

Total purchase price, including closing costs of approximately $1.6 million

$
123,006Cash and cash equivalents


5,522Trade receivables


16,606Inventories


29,808Prepaid expenses and other


1,791Property, plant and equipment


35,764Intangible assets


41,431Total assets acquired


130,992Accounts payable, accrued payroll, and accruals and other current liabilities


21,395Other liabilities


43,283Total liabilities assumed


64,678Net assets acquired


66,314Excess purchase price over the fair value of net assets acquired

$
56,692The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill.


The estimated amounts recorded as intangible assets consist of the following:

Customer relationships, subject to amortization

$
29,647Trade names and trademarks, not subject to amortization


11,784Total intangible assets

$
41,431Customer relationships are subject to amortization over their estimated useful lives which reflects the anticipated periods over which the Company estimates it will benefit from the acquired assets. The estimated useful lives have not been finalized by the Company.


The following table sets forth the unaudited pro forma results of operations of the Company for the quarter and year to date periods ended June 30, 2007 and 2006 as if the Company had acquired TB Woods at the beginning of the respective periods. The pro forma information contains the actual operating results of the Company and TB Woods with the results prior to April 5, 2007 for TB Woods, adjusted to include the pro forma impact of (i) additional interest expense associated with debt issued on April 5, 2007 in connection with the TB Woods Acquisition; (ii) additional depreciation expense as a result of estimated depreciation on

6




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted


fair value of fixed assets; (iii) additional expense as a result of estimated amortization of identifiable intangible assets; (iv) and an adjustment to the tax provision for the tax effect of the above adjustments.  The unaudited proforma financial information for the quarter and year to date periods ended June 30, 2007 includes a non-recurring charge to step-up the value of acquired inventory sold of $0.7 million.  These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisitions occurred at the beginning of the respective periods or that may be obtained in the future.

Quarter to DateendedJune 30, 2007

Quarter to DateendedJune 30, 2006

Year to DateendedJune 30, 2007

Year to DateendedJune 30, 2006Total revenues

$
164,505

$
149,524

$
326,181

$
293,727Net income

$
3,859

$
3,026

$
5,967

$
5,837During 2006, the Company purchased all of the outstanding share capital of Hay Hall for $51.0 million, including $1.8 million of closing costs. The Company completed its final purchase price allocation during 2006, which resulted in the Company recording approximately $12.4 million in goodwill. In addition, the Company recorded $16.4 million in intangible assets.


4. Inventories


Inventories located at certain subsidiaries acquired in connection with the TB Woods acquisition are stated at the lower of current cost or market, principally using the last-in, first-out (LIFO) method. The remaining subsidiaries are stated at the lower of cost or market, using the first-in, first-out (FIFO) method. Market is defined as net realizable value. Inventories at June 30, 2007 and December 31, 2006 consisted of the following:

June 30,2007

December 31,2006Raw materials

$
40,291

$
29,962Work in process


28,279


19,112Finished goods


51,048


36,858Gross inventories


119,618


85,932LessAllowance for excess, slow-moving and obsolete inventory


(13,070
)

(10,163
)LIFO reserve


(130
)

Inventories, net

$
106,418

$
75,769Approximately 18% of total inventories at June 30, 2007 were valued using the LIFO method. In the year to date period ended June 30, 2007, the LIFO reserve increased $0.1 million which increased Cost of Goods Sold by the same amount.

7




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted


5. Goodwill and Intangible Assets


A rollforward of goodwill from December 31, 2006 through June 30, 2007 was as follows:

Goodwill










CostBalance December 31, 2006










$
65,397Additions related to TB Woods acquisition











56,692Impact of additional tax contingencies











956Adjustments to acquisition related deferred tax liabilities







(2,309
)Impact of changes in foreign currency











757Balance June 30, 2007










$
121,493Other intangibles as of June 30, 2007 and December 31, 2006 consisted of the following:

June 30, 2007

December 31, 2006Other Intangibles

Cost

AccumulatedAmortization

Cost

AccumulatedAmortizationIntangible assets not subject to amortization:Tradenames and trademarks

$
34,794

$


$
23,010

$
Intangible assets subject to amortization:Customer relationships


66,761


7,683


37,114


5,679Product technology and patents


5,232


1,780


5,232


1,316Impact of changes in foreign currency


1,799





1,301


Total intangible assets

$
108,586

$
9,463

$
66,657

$
6,995The Company recorded $1.5 million and $1.0 million of amortization expense for the quarters ended June 30, 2007 and 2006, respectively and $2.5 million and $1.8 million for the year to date periods ended June 30, 2007 and 2006, respectively.


The estimated amortization expense for intangible assets is approximately $5.8 million in each of the next five years and then $33.5 million thereafter.


6. Warranty Costs


Changes in the carrying amount of accrued product warranty costs for the year to date periods ended June 30, 2007 and 2006 are as follows:

June 30, 2007

June 30, 2006Balance at beginning of period







$
2,083

$
1,876Balance assumed with TB Woods acquisition






795


Accrued warranty costs








758


825Payments and adjustments








(1,261
)

(747
)Balance at end of period







$
2,375

$
1,9548




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted


7. Income Taxes


The effective income tax rates recorded for the periods ended June 30, 2007 and 2006 were recorded based upon managements best estimate of the effective income tax rates for the entire years. The 2007 tax rate differs from the statutory rate due to the impact of non-U.S. tax rates and permanent differences.


The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB No. 109 (FIN 48) at the beginning of fiscal 2007, which resulted in a decrease of approximately $0.2 million to the December 31, 2006 retained earnings balance. FIN 48 provides a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. As of January 1, 2007 the Company had $2.3 million of unrecognized tax benefits of which $1.2 million, if recognized would reduce the Companys effective tax rate and $0.9 million would result in a decrease in goodwill.


As a result of the acquisition of TB Woods completed during the second quarter, the Company increased its unrecognized tax benefits by approximately $3.3 million. At June 30, 2007, the Company had $6.1 million of unrecognized tax benefits of which $1.7 million if recognized would reduce the Companys effective tax rate and $4.2 million would result in a decrease to goodwill.


Included in the balance of unrecognized tax benefits are amounts related to proposed tax filing positions currently under review by foreign taxing authorities. The Company expects this review to be completed by December 31, 2007 however it is unable to estimate the impact on its unrecognized tax benefits as of June 30, 2007.


The Company and its subsidiaries file consolidated and separate income tax returns in the U.S. federal jurisdiction as well as in various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities in all of these jurisdictions. With the exception of certain foreign jurisdictions, the Company is no longer subject to income tax examinations for years before 2003 in these major jurisdictions. Additionally, the Company has indemnification agreements with the sellers of the Colfax and Hay Hall entities which provide for reimbursement to the Company for payments made in satisfaction of tax liabilities relating to pre-acquisition periods.


The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense in the condensed consolidated statements of operations. At January 1, 2007 and June 30, 2007, the Company had $0.3 million and $1.6 million of accrued interest and penalties, respectively.


8. Pension and Other Employee Benefits


Defined Benefit (Pension) and Postretirement Benefit Plans


The Company sponsors various defined benefit (pension) and postretirement (medical and life insurance coverage) plans for certain, primarily unionized, active employees (those in the employment of the Company at or hired since November 30, 2004). Additionally, the Company assumed all post-employment and post-retirement welfare benefit obligations with respect to active U.S. employees.


The following table represents the components of the net periodic benefit cost associated with the respective plans for the year to date periods ended and quarters ended June 30, 2007 and 2006:

Quarter EndedPension Benefits

Other BenefitsJune 30, 2007

June 30, 2006

June 30, 2007

June 30, 2006Service cost

$
67

$
151

$
18

$
84Interest cost


319


334


49


150Expected return on plan assets


(265
)

(207
)




Amortization of prior service cost


2


2


(243
)

(101
)Amortization of net (gain) loss








(53
)

17Net periodic benefit cost (income)

$
123

$
280

$
(229
)
$
1509




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted

Year to Date EndedPension Benefits

Other BenefitsJune 30, 2007

June 30, 2006

June 30, 2007

June 30, 2006Service cost

$
132

$
303

$
36

$
168Interest cost


654


669


98


299Expected return on plan assets


(533
)

(415
)




Amortization of prior service cost


3


3


(487
)

(201
)Amortization of net (gain) loss








(105
)

35Net periodic benefit cost (income)

$
256

$
560

$
(458
)
$
3019. Long-Term Debt


Revolving Credit Agreement


The Company maintains a $30 million revolving borrowings facility with a commercial bank (the Revolving Credit Agreement). The Revolving Credit Agreement is subject to certain limitations resulting from the requirement of the Company to maintain certain levels of collateralized assets, as defined in the Revolving Credit Agreement. The Company may use up to $10.0 million of its availability under the Revolving Credit Agreement for standby letters of credit issued on its behalf, the issuance of which will reduce the amount of borrowings that would otherwise be available to the Company. The Company may re-borrow any amounts paid to reduce the amount of outstanding borrowings; however, all borrowings under the Revolving Credit Agreement must be repaid in full as of November 30, 2010.


Substantially all of the Companys assets have been pledged as collateral against outstanding borrowings under the Revolving Credit Agreement. The Revolving Credit Agreement requires the Company to maintain a minimum fixed charge coverage ratio (when availability under the line falls below $12.5 million) and imposes customary affirmative covenants and restrictions on the Company. The Company was in compliance with all requirements of the Revolving Credit Agreement at June 30, 2007.


There were no borrowings under the Revolving Credit Agreement at June 30, 2007 and December 31, 2006, however, as of both dates, the lender had issued $3.0 million of outstanding letters of credit on behalf of the Company.


In April 2007, the Company amended the Revolving Credit Agreement. The interest rate on any outstanding borrowings on the line of credit were reduced to the lenders Prime Rate plus 25 basis points or LIBOR plus 175 basis points. The rate on all outstanding letters of credit were reduced to 1.5% and .25% on any unused availability under the Revolving Credit Agreement. All borrowings under the amended plan must be repaid by November 30, 2010.


TB Woods Revolving Credit Agreement


As part of the TB Woods acquisition, the Company refinanced the existing line of credit agreement with a commercial bank in connection with the acquisition of TB Woods. The Company refinanced $13.0 million of debt associated with TB Woods line of credit and $6.5 million in letters credit. As of June 30, 2007, there was $12.2 million outstanding under the TB Woods Credit Agreement, and $6.5 million of outstanding letters of credit.


Overdraft Agreements


Certain of our foreign subsidiaries maintain overdraft agreements with financial institutions. There were no borrowings as of June 30, 2007 or December 31, 2006 under any of the overdraft agreements.


9% Senior Secured Notes


On November 30, 2004, the Company issued 9% Senior Secured Notes (Senior Secured Notes), with a face value of $165 million. Interest on the Senior Secured Notes is payable semiannually, in arrears, on June 1 and December 1 of each year, beginning June 1, 2005, at an annual rate of 9%. The effective interest rate on the Senior Secured Notes is approximately 10.0%, after consideration of the amortization of $6.6 million related to initial offer discounts (included in long-term debt) and $2.8 million of deferred financing costs (included in other assets). The Senior Secured Notes mature on December 1, 2011 unless previously redeemed by The Company.

10




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted


The Senior Secured Notes are guaranteed by the Companys U.S. domestic subsidiaries and are secured by a second priority lien, subject to first priority liens securing the Revolving Credit Agreement, on substantially all of the Companys assets. The Senior Secured Notes contain numerous terms, covenants and conditions, which impose substantial limitations on the Company. The Company was in compliance with all covenants of the indenture governing the Senior Secured Notes at June 30, 2007.


In connection with the acquisition of TB Woods on April 5, 2007, the Company completed a follow-on offering issuing an additional $105.0 million of the Senior Secured Notes. The additional $105.0 million has the same terms and conditions as the previously issued Senior Secured Notes. The effective interest rate on the Senior Secured Notes, after the follow-on offering is approximately 9.6% after consideration of the amortization of $1.1 million premium and $3.2 million of additional deferred financing costs.


11.25% Senior Notes


On February 8, 2006, the Company issued 11.25% Senior Notes (Senior Notes), with a face value of £33 million. Interest on the Senior Notes is payable semiannually, in arrears, on August 15 and February 15 of each year, beginning August 15, 2006, at an annual rate of 11.25%. The effective interest rate on the Senior Notes is approximately 11.7%, after consideration of the $2.5 million of deferred financing costs (included in other assets). The Senior Secured Notes mature on February 13, 2013.


The Senior Notes are guaranteed on a senior unsecured basis by the Companys U.S. domestic subsidiaries. The Senior Notes contain numerous terms, covenants and conditions, which impose substantial limitations on the Company. The Company was in compliance with all covenants of the indenture governing the Senior Notes at June 30, 2007.


In February 2007, using proceeds from Altra Holdings, Inc.s, our parent, (Holdings) initial public offering, the Company redeemed £11.6 million aggregate principal amount of the outstanding Senior Notes, at a redemption price of 111.25% of the principal amount of the Senior Notes, plus accrued and unpaid interest. In connection with the redemption The Company expensed $0.8 million of deferred financing costs and incurred $2.6 million of a pre-payment premium.


In June 2007, using proceeds from Holdings secondary public offering, the Company redeemed £5.5 million aggregate principal amount of the outstanding Senior Notes at a redemption price of 114.5% of the principal amount of the Senior Notes, plus accrued and unpaid interest. In connection with the redemption the Company expensed $0.4 million of deferred financing costs and incurred $0.8 million of pre-payment premium.


The remaining principal amount of the Senior Notes matures on February 13, 2013, unless previously redeemed by the Company prior to such maturity date. As of June 30, 2007, the remaining principal balance outstanding was £15.9 million, or $31.9 million.


Variable Rate Demand Revenue Bonds


In connection with the acquisition of TB Woods, the Company assumed the Variable Rate Demand Revenue Bonds outstanding as of the acquisition date. TB Woods has borrowed approximately $3.0 and $2.3 million by issuing Variable Rate Demand Revenue Bonds under the authority of the industrial development corporations of the City of San Marcos, Texas and City of Chattanooga, Tennessee, respectively. These bonds bear variable interest rates and mature in April 2024 and April 2022. The bonds were issued to finance production facilities for TB Woods manufacturing operations in those cities, and are secured by letters of credit issued under the terms of the TB Woods Credit Agreement.


Mortgage


In June 2006, the Company entered into a mortgage on its building in Heidelberg, Germany with a local bank. As of June 30, 2007 and December 31, 2006, the mortgage has a principal of 1.9 million, or $2.6 million and 2.0 million or $2.6 million, respectively and an interest rate of 5.75% and is payable in monthly installments over 15 years.


Capital Leases


The Company leases certain equipment under capital lease arrangements, whose obligations are included in both short-term and long-term debt. Capital lease obligations amounted to approximately $3.1 million and $1.5 million at June 30, 2007 and December 31, 2006, respectively. Assets under capital leases are included in property, plant and equipment with the related amortization recorded as depreciation expense.

11




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted


10. Stockholders Equity


The Company has authorized, issued and outstanding 1,000 shares of $0.001 pat-value common stock, all of which is held by Holdings, the Companys parent and sole shareholder.


Stock-Based Compensation


In 2005 Holdings approved the 2004 Equity Incentive Plan that provides for various forms of stock-based compensation to officers, senior-level employees and other persons who make significant contributions to the success of the Company. Awards granted under the 2004 Equity Incentive Plan are for equity instruments of Holdings. As awards are granted in connection with services performed for the benefit of the Company, the related compensation expense is recognized in the accompanying financial statements on a straight-line basis over the service period of the grant. All awards to date have been in the form of restricted stock. Compensation expense recorded during the year to date periods ended June 30, 2007 and 2006 was $0.8 million ($0.5 million net of tax) and $0.1 million (less than $0.1 million, net of tax), respectively and $0.7 million ($0.4 million, net of tax) and less than $0.1
million in the quarters ended June 30, 2007 and 2006, respectively.


In July 2007, the Compensation Committee of Holdings Board of Directors approved a grant to two of the Companys non-employee directors of 3,326 shares each of restricted common stock of Holdings. The fair market value of the restricted shares was calculated using the total number of shares granted multiplied by the average stock price on the date of grant of $18.04, for a total compensation charge of approximately $0.1 million. The shares will fully vest on March 14, 2008. The expense will be recognized on a straight line basis over the service period.


11. Related-Party Transactions


Joy Global Sales


One of the Companys directors, is an Executive of Joy Global, Inc. The Company sold approximately $2.6 million and $1.7 million in goods to divisions of Joy Global, Inc. during the year to date periods ended June 30, 2007 and 2006, respectively. Sales to divisions of Joy Global were $1.2 million and $0.8 million for the quarters ended June 30, 2007 and 2006, respectively. Other than his position as an Executive of Joy Global, Inc., the Companys director has no interest in sales transactions between the Company and Joy Global, Inc.


Management Agreement


The Company entered into an advisory services agreement with Genstar Capital, L.P. (Genstar), whereby Genstar agreed to provide certain management, business strategy, consulting, financial advisory and acquisition related services to the Company. Pursuant to the agreement, the Company was required to pay to Genstar an annual consulting fee of $1.0 million (payable quarterly, in arrears at the end of each calendar quarter), reimbursement of out-of-pocket expenses incurred in connection with the advisory services and an advisory fee of 2.0% of the aggregate consideration relating to any acquisition or dispositions completed by the Company. The Company recorded $0.3 million in management fees, included in selling, general and administrative expenses for the quarter ended June 30, 2006 and $0.5 million for the year to date period ended June 30, 2006. Genstar also received a one-time
transaction fee of $1.0 million for the Hay Hall acquisition and it is reflected in selling, general and administrative expenses for the year to date period ended and quarter ended June 30, 2006. In December 2006, the Genstar management agreement was terminated. There are no amounts in accruals or other liabilities payable to Genstar as of June 30, 2007.


12. Concentrations of Credit, Business Risks and Workforce


Financial instruments, which are potentially subject to concentrations of credit risk, consist primarily of trade accounts receivable. The Company manages this risk by conducting credit evaluations of customers prior to delivery or commencement of services. When the Company enters into a sales contract, collateral is normally not required from the customer. Payments are typically due within thirty days of billing. An allowance for potential credit losses is maintained, and losses have historically been within managements expectations.


Credit related losses may occur in the event of non-performance by counterparties to financial instruments. Counterparties typically represent international or well established financial institutions.


No one customer represented 10% or more of the Companys sales for the quarters ended or year to date periods ended June 30, 2007 and 2006.


Approximately 22.8% of the Companys labor force (14.0% and 59.7% in the United States and Europe, respectively) is represented by collective bargaining agreements.

12




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted


13 Geographic Information


The Company operates in a single business segment for the development, manufacturing and sales of mechanical power transmission products. The Companys chief operating decision maker reviews consolidated operating results to make decisions about allocating resources and assessing performance for the entire Company. Net sales to third parties and property, plant and equipment by geographic region are as follows (in thousands):

Net SalesQuarter EndedJune 30,

Year to Date Period EndedJune 30,

Property, Plant and EquipmentJune 30,2007

December 31,20062007

2006

2007

2006North America (primarily U.S.)

$
117,997

$
80,756

$
211,176

$
163,994

$
84,930

$
50,673Europe


39,276


35,018


74,256


62,624


29,675


29,865Asia and other


5,869


4,000


10,416


7,940


1,775


1,849Total

$
163,142

$
119,774

$
295,848

$
234,558

$
116,380

$
82,387Net sales to third parties are attributed to the geographic regions based on the country in which the shipment originates. Amounts attributed to the geographic regions for long-lived assets are based on the location of the entity, which holds such assets.


The net assets of foreign subsidiaries at June 30, 2007 and December 31, 2006 were $65.8 million and $46.8 million, respectively.


The Company has not provided specific product line sales as our general purpose financial statements do not allow us to readily determine groups of similar product sales.


14. Commitments and Contingencies


General Litigation


The Company is involved in various pending legal proceedings arising out of the ordinary course of business. None of these legal proceedings is expected to have a material adverse effect on the financial condition of the Company. With respect to these proceedings, management believes that it will prevail, has adequate insurance coverage or has established appropriate reserves to cover potential liabilities. Any costs that management estimates may be paid related to these proceedings or claims are accrued when the liability is considered probable and the amount can be reasonably estimated. There can be no assurance, however, as to the ultimate outcome of any of these matters, and if all or substantially all of these legal proceedings were to be determined adversely to the Company, there could be a material adverse effect on the financial condition of the Company.


We have been indemnified for certain pre-existing legal and environmental matters for matters prior to acquisitions.


15. Restructuring, Asset Impairment and Transition Expenses


Beginning in the first quarter of 2007, the Company adopted a restructuring program intended to improve operational efficiency by reducing headcount, consolidating its operating facilities and relocating manufacturing to lower cost areas. The restructuring charges for the quarter and year to date periods ended June 30, 2007 were approximately $0.2 million and $1.0 million, respectively.


The Companys asset impairment and losses on sales of assets for the manufacturing consolidation program for the year to date period ended June 30, 2007 were $0.1 million. The Company does not expect any additional asset impairment and losses on sale of assets through the completion of this program.

The Companys total transition expense for the manufacturing consolidation program for the year to date period ended and quarter ended June 30, 2007 was approximately $0.9 million and $0.2 million, respectively. The Company expects to incur during 2007 an additional $0.1 million of transition costs in connection with the completion of this program.


The Companys total restructuring expense, excluding non-cash loss on disposal of fixed assets, by major component for the year to date period ended June 30, 2007 and costs that are expected to be incurred through the completion of the program, were as follows:

13




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted

Costs incurredyear to date periodended June 30,2007

Expected coststhrough programcompletionMoving and relocation costs

$
521

$
Severance


224


30Other


129


Total expenditures

$
874

$
30The following is a reconciliation of the accrued restructuring costs between December 31, 2006 and June 30, 2007:

Balance at December 31, 2006

$
Restructuring expenses incurred


991Cash payments


(755
)Non-cash loss on disposal of fixed assets


(117
)Balance at June 30, 2007

$
119In connection with the Companys acquisition of TB Woods, the Company adopted a restructuring program intended to consolidate operating facilities and reduce duplicate staffing. The estimated costs of this restructuring program were recorded as a part of purchase accounting and increased goodwill.

The following is a summary of accruals related to such restructuring activities:

Balance at December 31, 2006

$
Restructuring accruals established as part of purchase accounting related to severance


952Cash payments


(852
)Balance at June 30, 2007

$
100This is a preliminary estimate of costs associated with this restructuring program.


16. Subsequent Event


On August 6, 2007, the Company redeemed 12.0 million aggregate principal amount of the outstanding Senior Notes at a redemption price of 113.5% of the principal amount of the Senior Notes, plus accrued and unpaid interest. In connection with the redemption the Company incurred $3.3 million of pre-payment premium. Subsequent to the redemption, 3.9 million, or $7.9 million of Senior Notes remain outstanding


17. Guarantor Subsidiaries


The following tables present separately the financial position, results of operations, and cash flows for the Company: (a) the subsidiaries of the Company that are guarantors of the Senior Secured Notes, which are all 100% owned U.S. domestic subsidiaries of the Company (Guarantor Subsidiaries), and (b) the subsidiaries of the Company that are not guaranteeing the Senior Secured Notes, which include all non-domestic subsidiaries of the Company (Non-Guarantor Subsidiaries). Separate financial statements of the Guarantor Subsidiaries are not presented because their guarantees are full and unconditional and joint and several, and the Company believes separate financial statements and other disclosures regarding the Guarantor Subsidiaries are not material to investors.

14




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted

Condensed Consolidating Balance Sheets of the CompanyJune 30, 2007

June 30, 2007Issuer

Guarantor

Non-Guarantor

Eliminations

ConsolidatedAssetsCurrent assets:Cash and cash equivalents

$
34,024

$
(3,893
)
$
4,242

$


$
34,373Trade receivables, less allowance for doubtful accounts





56,096


36,610





92,706Loans receivable from related parties





54,034





(54,034
)

Inventories, less allowances for obsolete materials





71,938


34,480





106,418Deferred income taxes





3,431


3,574





7,005Prepaid expenses and other


(214
)

2,536


3,346





5,668Total current assets


33,810


184,142


82,252


(54,034
)

246,170Property, plant and equipment, net





79,406


36,974





116,380Intangible assets, net





76,450


22,673





99,123Goodwill





94,716


26,777





121,493Deferred income taxes





2,027


256





2,283Other assets


6,585


470


85





7,141Investments in subsidiaries


403,633








(403,633
)

$
444,028

$
437,211

$
169,017

$
(457,667
)
$
592,590Liabilities and stockholders equityCurrent liabilities:Accounts payable


284

$
23,031

$
18,326




$
41,641Accrued payroll


180


8,009


6,049





14,238Accruals and other current liabilities


5,463


8,164


5,569





19,196Taxes payable


(740
)

4,951


551





4,762Deferred income taxes








1,382





1,382Current portion of capital leases and short-term bank borrowings





495


453





948Loans payable to related parties


1,765





52,269


(54,034
)

Total current liabilities


6,952


44,650


84,599


(54,034
)

82,167Long-term debt, less current portion


298,699


19,061


3,581





321,341Deferred income taxes





21,576


8,458





30,034Pension liabilities





10,215


3,378





13,593Other post-retirement benefits





3,132








3,132Other long-term liabilities


333


737


3,208





4,279Total liabilities


305,984


99,371


103,224


(54,034
)

454,546Total stockholders equity


138,044


337,840


65,793


(403,633
)

138,044$
444,028

$
437,211

$
169,017

$
(457,667
)
$
592,59015




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted

Condensed Consolidating Balance Sheets of the CompanyDecember 31, 2006

December 31, 2006Issuer

Guarantor

NonGuarantor

Eliminations

ConsolidatedAssetsCurrent assets:Cash and cash equivalents

$
41,016

$
(5,488
)
$
6,999

$


$
42,527Trade receivables, less allowance for doubtful accounts





37,780


23,726





61,506Loan receivable from related parties


9,866


36,681





(46,547
)

Inventories, less allowances for obsolete materials





50,573


25,196





75,769Deferred income taxes





7,159


(376
)




6,783Prepaid expenses and other


1,875


3,353


2,340





7,532Total current assets


52,757


130,058


57,849


(46,547
)

194,117Property, plant and equipment, net





48,762


33,625





82,387Intangible assets, net





36,708


22,954





59,662Goodwill





41,660


23,737





65,397Deferred income taxes





2,120


15





2,135Other assets


5,302


279


89





5,670Investments in subsidiaries


258,221








(258,221
)

$
316,280

$
259,587

$
138,269

$
(304,768
)
$
409,368Liabilities and stockholders equityCurrent liabilities:Accounts payable

$


$
18,316

$
15,737

$


$
34,053Accrued payroll


2,469


6,089


5,513





14,071Accruals and other current liabilities


5,346


7,053


2,796





15,195Taxes payable





1,509


1,105





6,549Deferred income taxes








1,382





1,382Current portion of long-term debt





254


319





573Loans payable to related parties








46,547


(46,547
)

Total current liabilities


11,750


33,221


73,399


(46,547
)

71,823Long-term debt, less current portion


225,011


349


3,195





228,555Deferred income taxes





(1,156
)

8,286





7,130Pension liabilities





11,797


3,372





15,169Other post-retirement benefits





3,262








3,262Other long-term liabilities





682


3,228





3,910Total liabilities


236,761


48,155


91,480


(46,547
)

329,849Total stockholders equity


79,519


211,432


46,789


(258,221
)

79,519$
316,280

$
259,587

$
138,269

$
(304,768
)
$
409,36816




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted

Condensed Consolidating Statements of Operations of the CompanyQuarter ended June 30, 2007

Quarter ended June 30, 2007Issuer

Guarantor

Non-Guarantor

Eliminations

ConsolidatedNet sales

$


$
119,613

$
57,126

$
(13,597
)
$
163,142Cost of sales





88,305


42,530


(13,597
)

117,238Gross profit





31,308


14,596





45,904Selling, general and administrative expenses





15,700


9,335





25,035Research and development expenses





1,262


942





2,204Restructuring charges





36


162





198Income from operations





14,310


4,157





18,467Interest expense, net


8,332


385


1,975





10,692Other non-operating (income) expense, net


(115
)

(93
)

331





123Equity in earnings of subsidiaries


13,066








(13,066
)

Income before income taxes


4,849


14,018


1,851


(13,066
)

7,652Provision for income taxes





2,365


438





2,803Net income

$
4,849

$
11,653

$
1,413

$
(13,066
)
$
4,849Condensed Consolidating Statements of Operations of the CompanyYear to date ended June 30, 2007

Year to Date ended June 30, 2007Issuer

Guarantor

Non-Guarantor

Eliminations

ConsolidatedNet sales

$


$
213,237

$
102,664

$
(20,053
)
$
295,848Cost of sales





156,310


75,639


(20,053
)

211,896Gross profit





56,927


27,025





83,952Selling, general and administrative expenses





28,356


17,483





45,839Research and development expenses





1,956


1,542





3,498Restructuring charges





613


378





991Income from operations





26,002


7,622





33,624Interest expense (income), net


15,507


418


3,915





19,840Other non-operating (income) expense, net


(151
)

(118
)

345





76Equity in earnings of subsidiaries


23,996








(23,996
)

Income before income taxes


8,640


25,702


3,362


(23,996
)

13,708Provision for income taxes





4,061


1,007





5,068Net income

$
8,640

$
21,641

$
2,355

$
(23,996
)
$
8,64017




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted

Condensed Consolidating Statements of Operations of the CompanyQuarter to Date ended June 30, 2006

Quarter ended June 30, 2006Issuer

Guarantor

Non-Guarantor

Eliminations

ConsolidatedNet sales

$


$
81,350

$
40,938

$
(2,514
)
$
119,774Cost of sales





59,605


30,410


(2,514
)

87,501Gross profit





21,745


10,528





32,273Selling, general and administrative expenses





11,614


7,480





19,094Research and development expenses





712


576





1,288Income from operations





9,419


2,472





11,891Interest expense (income), net


6,692


95


(737
)




6,050Other non-operating (income) expense, net


238


(25
)

(141
)




72Equity in earnings of subsidiaries


10,847








(10,847
)

Income before income taxes


3,917


9,349


3,350


(10,847
)

5,769Provision for income taxes





1,761


91





1,852Net income

$
3,917

$
7,588

$
3,259

$
(10,847
)
$
3,917Condensed Consolidating Statements of Operations of the CompanyYear to Date ended June 30, 2006

Year to Date ended June 30, 2006Issuer

Guarantor

Non-Guarantor

Eliminations

ConsolidatedNet sales

$


$
165,964

$
74,069

$
(5,475
)
$
234,558Cost of sales





121,296


54,610


(5,475
)

170,431Gross profit





44,668


19,459





64,127Selling, general and administrative expenses


1,005


23,458


13,358





37,821Research and development expenses





1,378


1,114





2,492Income (loss) from operations


(1,005
)

19,832


4,987





23,814Interest expense (income), net


11,099


42


85





11,226Other non-operating (income) expense, net


238


(135
)

(190
)




(87
)Equity in earnings of subsidiaries


20,343








(20,343
)

Income before income taxes


8,001


19,925


5,092


(20,343
)

12,675Provision for income taxes





3,772


902





4,674Net income

$
8,001

$
16,153

$
4,190

$
(20,343
)
$
8,00118




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted

Condensed Consolidating Statements of Cash Flows of the CompanyYear to Date ended June 30, 2007

Issuer

Guarantor

Non-Guarantor

Eliminations

ConsolidatedCash flows from operating activities:Net income

$
8,640

$
21,641

$
2,355

$
(23,996
)
$
8,640Undistributed equity in earnings of subsidiaries


(23,996
)







23,996


Adjustments to reconcile net income to cash provided by (used in) operating activities:Depreciation





5,212


2,852





8,064Amortization of intangible assets





1,698


770





2,468Amortization and write-off of deferred loan costs


1,857











1,857Accretion of debt discount and premium


415











415Loss (gain) on foreign currency


(151
)




361





210Amortization of inventory fair value adjustment








651





651Loss on sale of fixed assets








112





112Stock based compensation


800











800Changes in operating assets and liabilities:Trade receivables





(7,704
)

(6,336
)




(14,040
)Inventories





695


(1,333
)




(638
)Accounts payable and accrued liabilities


(7,554
)

(6,288
)

(991
)




(14,833
)Other current assets and liabilities


3,232


526


(243
)




3,515Other operating assets and liabilities


265


(126
)

(39
)




100Net cash provided by (used in) operating activities


(16,492
)

15,654


(1,841
)




(2,679
)Cash flows from investing activities:Purchases of fixed assets





(3,191
)

(1,058
)




(4,249
)Acquisition, net of cash acquired


(117,484
)










(117,484
)Net cash used in investing activities


(117,484
)

(3,191
)

(1,058
)




(121,733
)Cash flows from financing activities:Capital contribution from Parent Company


49,015











49,015Proceeds from issuance of senior secured notes


106,050











106,050Payment of debt issuance costs


(3,405
)










(3,405
)Payments on senior notes


(33,998
)










(33,998
)Borrowings under revolving credit agreements


8,315











8,315Payments on revolving credit agreements


(8,315
)

(805
)







(9,120
)Payments made on behalf of Parent Company


(1,009
)










(1,009
)Change in affiliate debt


10,331


(9,984
)

(347
)




Change in capital leases





(79
)

(280
)




(359
)Net cash provided by (used in) financing activities


126,984


(10,868
)

(627
)




(115,489
)Effect of exchange rates on cash








769





769Increase (decrease) in cash and cash equivalents


(6,992
)

1,595


(2,757
)




(8,154
)Cash and cash equivalents, beginning of the period


41,016


(5,488
)

6,999





42,527Cash and cash equivalents, end of period

$
34,024

$
(3,893
)
$
4,242

$


$
34,37319




ALTRA INDUSTRIAL MOTION, INC.Notes to Unaudited Condensed Consolidated Interim Financial StatementsDollars in thousands, unless otherwise noted

Condensed Consolidating Statements of Cash Flows of the CompanyYear to Date Ended June 30, 2006

Issuer

Guarantor

Non-Guarantor

Eliminations

ConsolidatedCash flows from operating activities:Net income

$
8,001

$
16,153

$
4,190

$
(20,343
)
$
8,001Undistributed equity in earnings of subsidiaries


(20,343
)







20,343


Adjustments to reconcile net income to cash (used in) provided by operating activities:Depreciation





3,284


1,666





4,950Amortization of intangible assets





1,139


657





1,796Amortization of deferred loan costs


425











425Accretion of debt discount


472











472Amortization of inventory fair value adjustment





245


2,033





2,278Gain on sale of fixed assets








(7
)




(7
)Stock based compensation


65











65Provision for deferred taxes





2,083


126





2,209Changes in operating assets and liabilities:Trade receivables





(1,008
)

(2,659
)




(3,667
)Inventories





(2,298
)

(883
)




(3,181
)Accounts payable and accrued liabilities


2,972


(4,866
)

(3,337
)




(5,231
)Other current assets and liabilities


(186
)

727


(987
)




(446
)Other operating assets and liabilities


1,116


(776
)

(77
)




(263
)Net cash (used in) provided by operating activities


(7,478
)

14,683


722





7,927Cash flows from investing activities:Purchases of fixed assets





(3,354
)

(756
)




(4,110
)Acquisitions, net of cash acquired





(9,251
)

(44,835
)




(54,086
)Net cash used in investing activities





(12,605
)

(45,591
)




(58,196
)Cash flows from financing activities:Proceeds from issuance of senior notes


57,625











57,625Payment of debt issuance costs


(1,928
)










(1,928
)Payments made on behalf of Parent company


(12,619
)










(12,619
)Borrowings under revolving credit agreements


5,057











5,057Payments under revolving credit agreements


(5,057
)










(5,057
)Proceeds from mortgages








2,510





2,510Change in affiliate debt


(42,148
)

(1,530
)

43,678





Change in capital leases





(106
)

45





(61
)Net cash (used in) provided by financing activities


930


(1,636
)

46,233





45,527Effect of exchange rates on cash








255





255Increase (decrease) in cash and cash equivalents


(6,548
)

442


1,619





(4,487
)Cash and cash equivalents, beginning of the period


8,819


(2,713
)

3,954





10,060Cash and cash equivalents, end of period

$
2,271

$
(2,271
)
$
5,573

$


$
5,57320




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 its Predecessor and related notes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2006 and the Form S-4 filed with the Securities and Exchange Commission on August 9, 2007. 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, 2006 and the Form S-4 filed with the Securities and Exchange Commission on August 9, 2007.


General


We are a leading multinational designer, producer and marketer of a wide range of mechanical power transmission products. Our product portfolio includes industrial clutches and brakes, enclosed gear drives, open gearing, couplings, machined-race bearings, belted drives and other related products which are sold across a wide variety of industries. Our products serve a wide variety of end markets including general industrial, material handling, mining, power generation, transportation, automotive and turf and garden. We primarily sell our products to OEMs such as John Deere, Carrier and General Electric and through long-standing relationships with industrial distributors such as Motion Industries, Applied Industrial Technologies, Kaman Industrial Technologies, Bearing Distributions, Inc. and W.W. Grainger.


Recent Acquisition


On April 5, 2007, the Company completed its acquisition of TB Woods Corporation (TB Woods) pursuant to a cash tender offer for all of the outstanding shares of TB Woods common stock for $24.80 per share. This was followed by a short form merger (the Merger) of Forest Acquisition Corporation, the Companys wholly-owned subsidiary, with and into TB Woods. This resulted in TB Woods becoming a wholly-owned subsidiary of the Company. In connection with the merger, all remaining outstanding shares of TB Woods common stock (other than those held by shareholders who properly perfect dissenters rights under Delaware law), were converted into the right to receive the same $24.80 cash price per share paid in the tender offer (net of the holder without interest and less any required withholding taxes).


Critical Accounting Policies


The preparation of our condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect our reported amounts of assets, revenues and expenses, as well as related disclosure of contingent assets and liabilities. Management believes there have been no significant changes in our critical accounting policies since December 31, 2006. See the discussion of critical accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2006.


Recent Accounting Pronouncements


In June 2006, the FASB issued FASB Interpretation No. (FIN) 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company adopted FIN 48 on January 1, 2007. See Note 7 to the condensed consolidated financial statements for the impact of adoption of this pronouncement.


Non-GAAP Financial Measures


The discussion of EBITDA (earnings before interest, income taxes, depreciation and amortization) included in the discussion of Results of Operations below is being provided because management considers EBITDA to be an important measure of financial performance. Among other things, management believes that EBITDA provides useful information for our investors because it is useful for trending, analyzing and benchmarking the performance and value of our business. Management also believes that EBITDA is useful in assessing current performance compared with our historical performance because significant line items within our statements of operations such as depreciation, amortization and interest expense are significantly impacted by acquisitions. Internally, EBITDA is used as a financial measure to assess the operating performance and is an important measure in our incentive compensation
plans.


EBITDA has important limitations, and should not be considered in isolation or as a substitute for analysis of our results as reported under generally accepted accounting principles in the United States (GAAP). For example, EBITDA does not reflect:

21





cash expenditures, or future requirements, for capital expenditures or contractual commitments;
changes in, or cash requirements for, working capital needs;
the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debts;
tax distributions that would represent a reduction in cash available to us; and
any cash requirements for assets being depreciated and amortized that may have to be replaced in the future.EBITDA is not a recognized measurement under GAAP, and when analyzing our operating performance, investors should use EBITDA in addition to, and not as an alternative for, operating income and net income (each as determined in accordance with GAAP). Because not all companies use identical calculations, our presentation of EBITDA may not be comparable to similarly titled measures of other companies. The amounts shown for EBITDA also differ from the amounts calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges and are used to determine compliance with financial covenants and our ability to engage in certain activities, such as incurring additional debt and making certain restricted payments.


To compensate for the limitations of EBITDA we utilize several GAAP measures to review our performance. These GAAP measures include, but are not limited to, net income, operating income, cash provided by (used in) operations, cash provided by (used in) investing activities and cash provided by (used in) financing activities. These important GAAP measures allow our management to, among other things, review and understand our uses of cash period to period, compare our operations with competitors on a consistent basis and understand the revenues and expenses matched to each other for the applicable reporting period. We believe that the use of these GAAP measures, supplemented by the use of EBITDA, allows us to have a greater understanding of our performance and allows us to adapt to changing trends and business opportunities.


Results of Operations

Quarter Ended


Year to Date EndedJune 30, 2007

June 30, 2006

June 30, 2007

June 30, 2006Net sales

$
163,142

$
119,774

$
295,848

$
234,558Cost of sales


117,238


87,501


211,896


170,431Gross profit


45,904


32,273


83,952


64,127Gross profit percentage


28.1
%

26.9
%

28.4
%

27.3
%Selling, general and administrative expenses


25,035


19,094


45,839


37,821Research and development expenses


2,204


1,288


3,498


2,492Restructuring charges


198





991


Income from operations


18,467


11,891


33,624


23,814Interest expense, net


10,692


6,050


19,840


11,226Other non-operating income, net


123


72


76


(87
)Income before income taxes


7,652


5,769


13,708


12,675Provision for income taxes


2,803


1,852


5,068


4,674Net income

$
4,849

$
3,917

$
8,640

$
8,001Quarter Ended June 30, 2007 Compared with Quarter Ended June 30, 2006


Net sales.Net sales increased by $43.4 million, or 36.2%, from $119.8 million for the quarter ended June 30, 2006 to $163.1 million for the quarter ended June 30, 2007. The increase in sales was primarily due to the inclusion of TB Woods which contributed $29.8 million. Without including the impact of Hay Hall, acquired February 10, 2006, Warner Linear, acquired May 18, 2006 and TB Woods acquired April 5, 2007, sales increased 10.6%. The remaining increase was driven by price increases, new product initiatives, continued strength in key late cycle markets, defense applications and global clutch brake sales.


Gross profit.Gross profit increased by $13.6 million, or 42.2%, from $32.3 million (26.9% of net sales), for the quarter ended June 30, 2006 to $45.9 million (28.1% of net sales) for the same period of 2007. The increase is primarily due to the inclusion of TB

22




Woods during the second quarter 2007, additional low cost country material sourcing and implementation of productivity improvements at recently acquired businesses.


Selling, general and administrative expenses.Selling, general and administrative expenses increased by $5.9 million, or 31.1%, from $19.1 million for the quarter ended June 30, 2006 to $25.0 million for the quarter ended June 30, 2007. The increase in selling, general and administrative expenses is primarily due to the inclusion of TB Woods and Warner Linear for the full quarter ended June 30, 2007, additional amortization of intangible assets associated with the TB Woods acquisition and increased costs associated with being a public company, partially offset by the termination of the management advisory fee agreement.


Research and development expenses.Research and development expenses increased $0.9 million or 71.1% from $1.3 million to $2.2 million. The increase in research and development expense is due to the inclusion of TB Woods in the quarter ended June 30, 2007.


RestructuringDuring the first quarter of 2007, we initiated a restructuring program intended to improve operational efficiency by reducing headcount, consolidating our operating facilities and relocating manufacturing to lower cost areas. We recorded approximately $0.2 million of restructuring expense in the second quarter of 2007.


EBITDA.To reconcile net income to EBITDA for the quarter ended June 30, 2007, we added back to net income $2.8 million provision of income taxes, $10.7 million of interest expense and $6.1 million of depreciation and amortization expenses. To reconcile net income to EBITDA for the quarter ended June 30, 2006, we added back to net income $1.9 million provision of income taxes, $6.1 million of interest expense and $3.8 million of depreciation and amortization expenses. Taking into account the foregoing adjustments, our resulting EBITDA was $24.4 million for the quarter ended June 30, 2007 and $15.6 million for the quarter ended June 30, 2006. The increase is due to the acquisition of TB Woods and Warner Linear, price increases, volume, and cost savings measures.


Interest expense.We recorded interest expense of $10.7 million during the quarter ended June 30, 2007, which was an increase of $4.6 million, from the quarter ended June 30, 2006. The increase was due to $2.4 million of interest associated with the Senior Secured Notes that were issued in the second quarter of 2007, the $1.6 million pre-payment premium and the $0.3 million amortization of deferred financing costs associated with the pay-down of the Senior Notes. For a description of the Senior Secured Notes and the Senior Notes please see Note 9 to our Condensed Consolidated Financial Statements in Item I of this Form 10-Q.


Provision for income taxes.The provision for income taxes was $2.8 million, or 36.6%, of income before taxes, for the quarter ended June 30, 2007, versus a provision of $1.9 million, or 32.1%, of income before taxes, for the quarter ended June 30, 2006. The 2007 provision as a percentage of income before taxes was higher than that of 2006, primarily due to a greater proportion of taxable income in jurisdictions having higher statutory tax rates. Additionally, the Companys overall estimated effective tax rate for all of 2006 is lower than the rate recorded in the first quarter of 2006 and therefore the second quarter rate was driven down to get the year to date effective rate at the estimated full year rate.


Year to Date Ended June 30, 2007 Compared with Year to Date Ended June 30, 2006


Net sales.Net sales increased by $61.3 million, or 26.1%, from $234.6 million for the year to date period ended June 30, 2006 to $295.8 million for the year to date period ended June 30, 2007. Without including the impact of Hay Hall, acquired February 10, 2006 Warner Linear, acquired May 18, 2006, and TB Woods acquired April 5, 2007, sales increased 9.4%. The increase is due to price increases, new product initiatives, continued strength in key late cycle markets, defense applications and global clutch brake sales.


Gross profit.Gross profit increased by $19.8 million, or 30.9%, from $64.1 million (27.3% of net sales), for the year to date period ended June 30, 2006 to $84.0 million (28.4% of net sales) for the same period of 2007. The increase is primarily due to the inclusion of Hay Hall, TB Woods and Warner Linear for the full year to date period ended June 30, 2007, additional low cost country material sourcing and implementation of productivity improvements at recently acquired businesses.


Selling, general and administrative expenses.Selling, general and administrative expenses increased by $8.0 million, or 21.2%, from $37.8 million for the year to date period ended June 30, 2006 to $45.8 million for the year to date period ended June 30, 2007. The increase in selling, general and administrative expenses is primarily due to the inclusion of TB Woods, Hay Hall and Warner Linear for the full year to date period ended June 30, 2007, additional amortization of intangible assets associated with the TB Woods acquisition and increased costs associated with being a public company, partially offset by the termination of the management advisory fee agreement.


Research and development expenses.Research and development expenses increased $1.0 million, or 40.4%, from $2.5 million to $3.5 million. The increase is mainly due to the inclusion of TB Woods in the year to date period ended June 30, 2007.

23




RestructuringDuring the first quarter of 2007, we adopted a restructuring program intended to improve operational efficiency by reducing headcount, consolidating our operating facilities and relocating manufacturing to lower cost areas. We incurred approximately $1.0 million of restructuring expense in the year to date period ended June 30, 2007.


EBITDA.To reconcile net income to EBITDA for the year to date period ended June 30, 2007, we added back to net income $5.1 million provision of income taxes, $19.8 million of interest expense and $10.6 million of depreciation and amortization expenses. To reconcile net income to EBITDA for the year to date period ended June 30, 2006, we added back to net income $4.7 million provision of income taxes, $11.2 million of interest expense and $6.7 million of depreciation and amortization expenses. Taking into account the foregoing adjustments, our resulting EBITDA was $44.1 million for the year to date period ended June 30, 2007 and $30.6 million for the year to date period ended June 30, 2006. The increase is due to the acquisitions of TB Woods, Hay Hall and Warner Linear, price increases, volume, cost savings measures and the termination of the management advisory services
agreement.


Interest expense.We recorded interest expense of $19.8 million during the year to date period ended June 30, 2007, which was an increase of $8.6 million, from the year to date period ended June 30, 2006. The increase was due to the interest associated with the Senior Notes being outstanding for an additional six weeks during the first quarter of 2007, the $1.6 million pre-payment premium and $0.3 million of amortization of deferred financing costs associated with the pay-down of the Senior Notes issued during the second quarter of 2007. The increase was partially offset by a decrease in interest on the Senior Notes after the February redemption. For a description of the Senior Notes and Senior Secured Notes, please see Note 9 to our Condensed Consolidated Financial Statements in Item I of this Form 10-Q.


Provision for income taxes.The provision for income taxes was $5.1 million, or 37.0%, of income before taxes, for the year to date period ended June 30, 2007, versus a provision of $4.7 million, or 36.9%, of income before taxes, for the year to date period ended June 30, 2006.


Liquidity and Capital Resources


Net Cash


Cash and cash equivalents totaled $34.4 million at June 30, 2007 compared to $42.5 million at December 31, 2006. Net cash used in operating activities for the year to date period ended June 30, 2007 resulted mainly from cash provided by net income of $8.6 million and the add-back of non-cash depreciation, amortization, stock based compensation, amortization of inventory fair value adjustment, disposal of fixed assets, loss on foreign currency, accretion of debt discount and deferred financing costs of $14.3 million offset by a net increase in operating assets of $11.1 million and a net decrease in operating liabilities of $14.8 million.


Net cash used in investing activities of $121.7 million for the year to date period ended June 30, 2007 resulted from $117.5 million used in the purchase of TB Woods and $4.2 million used in the purchases of property, plant and equipment primarily for investment in manufacturing equipment.


Net cash provided by financing activities of $115.5 million for the year to date period ended June 30, 2007 consisted primarily of proceeds from the issuance of Senior Secured Notes for $106.1 million, a capital contribution, from Holdings of $49.0 million and borrowings from the revolving line of credit of $8.3 million. This was offset by the payment of debt issuance costs of $3.4 million, payments on the revolving line of credit for $9.1 million, the payment of $34.0 million on the Senior Notes, payments made on behalf of Holdings of $1.0 million and payments of capital lease obligations of $0.4 million.


Net cash flow used in operating activities, for the year to date period ended June 30, 2006 resulted mainly from cash provided by net income of $6.9 million and the add-back of non-cash depreciation, amortization, accretion and deferred financing costs of $8.0 million, stock based compensation of $0.1 million, deferred tax expense of $2.2 million, non-cash amortization of $1.8 million and $2.3 million for inventory step-ups recorded as part of the Hay Hall Acquisition and a net increase in operating liabilities of $0.2 million, offset by cash used from a net increase in operating assets of $12.5 million.


Net cash used in investing activities of $58.2 million for the quarter ended June 30, 2006 resulted from $50.3 million used in the purchase of Hay Hall, $3.5 million for the purchase of Bear Linear and $4.1 million used in the purchases of property, plant and equipment primarily for investment in manufacturing equipment and for the consolidation of our IT infrastructure.


Net cash provided by financing activities of $45.5 million for the year to date period ended June 30, 2006 resulted primarily from the proceeds of $57.6 million from the issuance of the Senior Notes in connection with the Hay Hall Acquisition, proceeds from mortgages of $2.5 million offset by payments made on behalf of Holdings of $12.6 million and payment of debt issuance cost of $1.9 million.

24




Liquidity


Our primary source of liquidity will be cash flow from operations and borrowings under our senior revolving credit facility. See footnote 9 to the Condensed Consolidated financial statements for explanation of our senior revolving credit facility. We expect that our primary ongoing requirements for cash will be for working capital, debt service, capital expenditures and pension plan funding.


We incurred substantial indebtedness in connection with the Colfax Corporation, Hay Hall and TB Woods Acquisitions. As of June 30, 2007, taking into account these transactions, we had approximately $322.3 million of total indebtedness outstanding (including capital leases and mortgages). We expect our interest expense, arising from our existing debt, to be approximately $31.2 million on an annual basis, through the maturity of the Senior Secured Notes, in 2011.


Our senior revolving credit facility provides for senior secured financing of up to $30.0 million, including $10.0 million available for letters of credit. As of June 30, 2007, there were no outstanding borrowings and $3.0 million of outstanding letters of credit under our senior revolving credit facility.


We had $12.2 million outstanding on the TB Woods revolving credit facility as of June 30, 2007. No additional borrowing are allowed under this agreement.


We made capital expenditures of approximately $4.2 million and $4.1 million in the quarters ended June 30, 2007 and June 30, 2006, respectively. These capital expenditures will support on-going business needs.


We have cash funding requirements associated with our pension plan which are estimated to be $1.6 million during the remainder of 2007, $3.8 million in 2008, and $1.9 million thereafter.


Our ability to make scheduled payments of principal and interest, to fund planned capital expenditures and to meet our pension plan funding obligations will depend on our ability to generate cash in the future. Based on our current level of operations, we believe that cash flow from operations and available cash, together with available borrowings under our senior revolving credit facility will be adequate to meet our future liquidity requirements for at least the next two years. However, our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. See the section entitled Changes in general economic conditions or the cyclical nature of our markets could harm our operations and financial performancein our Annual Report on Form 10-K for the year ended December 31, 2006
for further discussion.


We cannot assure you that our business will generate sufficient cash flow from operations, that any revenue growth or operating improvements will be realized or that future borrowings will be available under our senior secured credit facility in an amount sufficient to enable us to service our indebtedness, including the notes, or to fund our other liquidity needs. In addition, we cannot assure you that we will be able to refinance any of our indebtedness, including our senior revolving credit facility and the notes as they become due. Our ability to access capital in the long term will depend on the availability of capital markets and pricing on commercially reasonable terms at the time we are seeking funds. See Our substantial level of indebtedness could adversely affect our financial condition, harm our ability to react to changes to our business and prevent us from fulfilling our
obligations on the notes. in our Annual Report on Form 10-K for the year ended December 31, 2006 for further discussion. In addition, our ability to borrow funds under our senior revolving credit facility will depend on our ability to satisfy the financial and non-financial covenants contained in that facility.


Contractual Obligations


During the year to date period ended June 30, 2007 the Company redeemed 11.6 million and 5.5 million aggregate principal amount of their outstanding Senior Notes. As of June 30, 2007, the remaining principal balance was 15.9 million, or approximately $31.9 million. In August, 2007, the Company redeemed 12.0 million aggregate principal amount of the outstanding Senior Notes at a redemption price of 113.5% of the principal amount of the Senior Notes, plus accrued and unpaid interest. Subsequent to the redemption, 3.9 million, or $7.9 million of Senior Notes remain outstanding The remaining principal balance is due February 2013.


In April 2007, we completed a follow-on offering of an aggregate of $105.0 million of the existing Senior Secured Notes. As of June 30, 2007, the remaining principal balance was $270.0 million. The balance is due in December 2011.


In connection with the TB Woods acquisition, we assumed $5.3 million of variable rate demand revenue bonds. $3.0 million of these bonds mature in 2024 and $2.3 million mature in 2022. In addition, we refinanced concurrent with the acquisition $13.0 million of TB Woods revolving credit agreement. Payments of $0.8 million are due over the remainder of 2007. $1.5 million, $1.5 million, $8.8 million are due in 2008, 2009 and 2010, respectively.

25




Item 3. Quantitative and Qualitative Disclosures about Market Risk


Information concerning market risk is contained in the Managements Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2006. There were no material changes in our exposure to market risk from December 31, 2006.


Item 4. Controls and Procedures


Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness 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 June 30, 2007.


In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.


Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.


There has been no change in our internal control over financial reporting (as defined in Rules 13(a)-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during our fiscal quarter ended June 30, 2007, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

26




PART IIOTHER INFORMATION


Item 1. Legal Proceedings


The Company is involved in various pending legal proceedings arising out of the ordinary course of business. None of these legal proceedings is expected to have a material adverse effect on the financial condition of the Company. With respect to these proceedings, management believes that it will prevail, has adequate insurance coverage or has established appropriate reserves to cover potential liabilities. There can be no assurance, however, as to the ultimate outcome of any of these matters, and if all or substantially all of these legal proceedings were to be determined adversely to the Company, there could be a material adverse effect on the financial condition of the Company.


Item 1A. Risk Factors


The reader should carefully consider the Risk Factors listed in our Annual Report on Form 10-K for the year ended December 31, 2006 and the Form S-4 filed with the Securities and Exchange Commission on August 9, 2007. These factors could cause our actual results to differ materially from those stated in forward looking statements contained in this Form 10-Q and elsewhere. Management does not believe there have been any material changes in our risk factors as stated in our Annual Report on Form 10-K for the year ended December 31, 2006 other than those contained in the risk factors section of the Companys Form S-4 filed with the Securities and Exchange Commission on August 9, 2007 (which is incorporated by reference).


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


None.


Item 3. Defaults Upon Senior Securities


None.


Item 4. Submission of Matters to a Vote of Security Holders


None


Item 5. Other Information


None.


Item 6. Exhibits


The following exhibits are filed as part of this report:

27




EXHIBIT INDEX

ExhibitNumber
Description2.1(1)
Agreement and Plan of Merger, dated as of February 17, 2007, among Altra Holdings, Inc., Forest Acquisition Corporation and TB Woods Corporation.2.2(2)
Amendment No. 1 to the Agreement and Plan of Merger, dated as of March 11, 2007, among Altra Holdings, Inc., Forest Acquisition Corporation and TB Woods Corporation.3.1(3)
Certificate of Incorporation of the Registrant.3.3(3)
Bylaws of the Registrant.4.1(4)
Indenture, dated as of November 30, 2004, among Altra Industrial Motion, Inc., the Guarantors party thereto and The Bank of New York Trust Company, N.A. as trustee.4.2(5)
First Supplemental Indenture, dated as of February 7, 2006, among Altra Industrial Motion, Inc., the guarantors party thereto, and The Bank of New York Trust Company, N.A. as trustee.4.3(6)
Second Supplemental Indenture, dated as of February 8, 2006, among Altra Industrial Motion, Inc., the guarantors party thereto, and The Bank of New York Trust Company, N.A. as trustee.4.4(5)
Third Supplemental Indenture, dated as of April 24, 2006, among Altra Industrial Motion, Inc., the guarantors party thereto, and The Bank of New York Trust Company, N.A. as trustee.4.5(7)
Fourth Supplemental Indenture, dated as of March 21, 2007, among Altra Industrial Motion, Inc., the guarantors party thereto, and The Bank of New York Trust Company, N.A. as trustee.4.6(8)
Fifth Supplemental Indenture, dated as of April 5, 2007, among Altra Industrial Motion, Inc., the guarantors party thereto, and The Bank of New York Trust Company, N.A. as trustee.4.7(4)
Form of 9% Senior Secured Notes due 2011.4.8(4)
Registration Rights Agreement, dated as of November 30, 2004, among Altra Industrial Motion, Inc., Jefferies & Company, Inc., and the subsidiary guarantors party thereto.4.9(9)
Registration Rights Agreement, dated as of April 5, 2007, among Altra Industrial Motion, Inc., Jefferies & Company, Inc., and the subsidiary guarantors party thereto.4.10(6)
Indenture, dated as of February 8, 2006, among Altra Industrial Motion, Inc., the guarantors party thereto, The Bank of New York, as trustee and paying agent and The Bank of New York (Luxembourg) SA, as Luxembourg paying agent.4.11(5)
First Supplemental Indenture, dated as of April 24, 2006, among Altra Industrial Motion, Inc., the guarantors party thereto, and The Bank of New York as trustee.4.12(7)
Second Supplemental Indenture, dated as of March 26, 2007, among Altra Industrial Motion, Inc., the guarantors party thereto, and The Bank of New York, as trustee.4.13(8)
Third Supplemental Indenture, dated as of April 5, 2007, among Altra Industrial Motion, Inc., the guarantors party thereto, and The Bank of New York, as trustee.4.14(6)
Form of 111⁄4% Senior Notes due 2013.4.15(6)
Registration Rights Agreement, dated as of February 8, 2006, among Altra Industrial Motion, Inc., the guarantors party thereto, and Jefferies International Limited, as initial purchasers.28




10.2(9)
Fifth Amendment to, and Consent and Waiver under, Credit Agreement and Joinder to Loan Documents, dated as of April 5, 2007, among Altra Industrial Motion, Inc., the financial institutions listed therein, as Lenders, and Wells Fargo Foothill, Inc.31.1*
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 Current Report on Form 8-K filed with the Securities and Exchange Commission on February 20, 2007.


(2)          Incorporated by reference to Altra Holdings, Inc.s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 13, 2007.


(3)          Incorporated by reference Altra Industrial Motion, Inc.s Registration Statement on Form 10, as amended (No. 333-124944), filed with the Securities and Exchange Commission on May 16, 2005.


(4)          Incorporated by reference to Altra Industrial Motion, Inc. Registration Statement on Form S-4 (File No. 333-124944) filed with the Securities and Exchange Commission on May 16, 2005.


(5)          Incorporated by reference to Altra Industrial Motion, Inc.s Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 15, 2006.


(6)          Incorporated by reference to Altra Industrial Motion, Inc.s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 14, 2006.


(7)          Incorporated by reference to Altra Industrial Motion, Inc.s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 26, 2007.


(8)          Incorporated by reference to Altra Industrial Motion, Inc.s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 11, 2007.


(9)          Incorporated by reference to Altra Industrial Motion, Inc.s Registration Statement on Form S-4 (File No. 333-142692-06) filed with the Securities and Exchange Commission on May 8, 2007.

29




SIGNATURES


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

ALTRA INDUSTRIAL MOTION, INC.August 30, 2007
By:
/s/ Michael L. HurtName:
Michael L. HurtTitle
Chairman and Chief Executive OfficerAugust 30, 2007
By:
/s/ David WallName:
David WallTitle:
VP Finance and Chief Financial Officer30