##### 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 30, 2006
 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
    
    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
 NONE  NONE
 þ o
  Large Accelerated filer o
    
    Accelerated Filer o
    
    Non-accelerated filer þ
 o þ




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##### 



TABLE OF CONTENTS
 Page #PART IFINANCIAL INFORMATION
    
    
    3Item 1.
Unaudited Condensed Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    25Item 4. Controls and Procedures
    
    
    25PART IIOTHER INFORMATION
    
    
    26Item 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equtiy Securities and Use of Proceeds
    
    
    26Item 3. Defaults Upon Senior Securities
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    26SIGNATURES
    
    
    28EX-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.
  2




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##### Table of Contents



PART IFINANCIAL INFORMATION
 
 Item 1. Financial Statements
 ALTRA INDUSTRIAL MOTION, INC.
 Consolidated Balance Sheets
 Dollars in thousands
 June 30,
    
    
    December 31,2006
    
    
    2005(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    5,573
    
    
    $
    10,060Trade receivables, less allowance for doubtful accounts of $2,129 and $1,797
    
    
    64,653
    
    
    
    46,441Inventories, less allowance for obsolete materials of $9,970 and $6,843
    
    
    73,191
    
    
    
    54,654Deferred income taxes
    
    
    2,194
    
    
    
    2,779Prepaid expenses and other current assets
    
    
    4,527
    
    
    
    1,973Total current assets
    
    
    150,138
    
    
    
    115,907Property, plant and equipment, net
    
    
    80,978
    
    
    
    66,393Intangible assets, net
    
    
    57,823
    
    
    
    44,751Goodwill
    
    
    77,432
    
    
    
    65,345Other assets, net
    
    
    5,848
    
    
    
    5,008Total assets
    
    $
    372,219
    
    
    $
    297,404Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    36,094
    
    
    $
    30,724Accrued payroll
    
    
    15,426
    
    
    
    16,016Accruals and other liabilities
    
    
    19,612
    
    
    
    16,239Deferred income taxes
    
    
    188
    
    
    
    33Current portion of capital leases and short-term bank borrowings
    
    
    1,668
    
    
    
    186Total current liabilities
    
    
    72,988
    
    
    
    63,198Long-term debt, less current portion and net of unaccreted discount
    
    
    223,388
    
    
    
    159,574Deferred income taxes
    
    
    9,941
    
    
    
    7,550Pension liabilities
    
    
    15,053
    
    
    
    14,368Other post retirement benefits
    
    
    12,801
    
    
    
    12,500Other long term liabilities
    
    
    2,431
    
    
    
    1,601Commitments and Contingencies
    
    
    
    
    
    
    Stockholders equity:Common stock (1,000 shares authorized, issued & outstanding, $0.001 par value)
    
    
    
    
    
    
    Additional paid-in capital
    
    
    48,814
    
    
    
    48,814Due from Parent
    
    
    (14,164
    )
    
    
    (1,610
    )Retained earnings (deficit)
    
    
    6,683
    
    
    
    (1,318
    )Cumulative foreign currency translation adjustment
    
    
    (4,294
    )
    
    
    (5,851
    )Minimum pension liability
    
    
    (1,422
    )
    
    
    (1,422
    )Total stockholders equity
    
    
    35,617
    
    
    
    38,613Total liabilities and stockholders equity
    
    $
    372,219
    
    
    $
    297,404
  3




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
 Consolidated Statements of Income and Comprehensive Income (Loss)
 Dollars in thousands
 Quarter Ended
    
    
    Year to Date EndedJune 30, 2006
    
    
    July 1, 2005
    
    
    June 30, 2006
    
    
    July 1, 2005(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)Net sales
    
    $
    119,774
    
    
    $
    93,034
    
    
    $
    234,558
    
    
    $
    188,336Cost of sales
    
    
    87,501
    
    
    
    69,720
    
    
    
    170,431
    
    
    
    143,122Gross profit
    
    
    32,273
    
    
    
    23,314
    
    
    
    64,127
    
    
    
    45,214Selling, general and administrative expenses
    
    
    19,094
    
    
    
    15,364
    
    
    
    37,821
    
    
    
    31,106Research and development expenses
    
    
    1,288
    
    
    
    1,112
    
    
    
    2,492
    
    
    
    2,308Gain on sales of assets
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    (51
    )Income from operations
    
    
    11,891
    
    
    
    6,874
    
    
    
    23,814
    
    
    
    11,851Interest expense, net
    
    
    6,050
    
    
    
    4,295
    
    
    
    11,226
    
    
    
    8,557Other non-operating expense (income), net
    
    
    72
    
    
    
    13
    
    
    
    (87
    )
    
    
    13Income before income taxes
    
    
    5,769
    
    
    
    2,566
    
    
    
    12,675
    
    
    
    3,281Provision for income taxes
    
    
    1,852
    
    
    
    999
    
    
    
    4,674
    
    
    
    1,313Net income
    
    
    3,917
    
    
    
    1,567
    
    
    
    8,001
    
    
    
    1,968Other comprehensive income (loss), net of
income taxes:Foreign currency translation adjustment
    
    
    1,085
    
    
    
    (1,125
    )
    
    
    1,557
    
    
    
    (1,918
    )Other comprehensive income (loss)
    
    
    1,085
    
    
    
    (1,125
    )
    
    
    1,557
    
    
    
    (1,918
    )Comprehensive income
    
    $
    5,002
    
    
    $
    442
    
    
    $
    9,558
    
    
    $
    50
  4




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ALTRA INDUSTRIAL MOTION, INC.
 Consolidated Statements of Cash Flows
 Dollars in thousands
 Year to Date EndedJune 30, 2006
    
    
    July 1, 2005(unaudited)
    
    
    (unaudited)Cash flows from operating activities:Net income
    
    $
    8,001
    
    
    $
    1,968Adjustments to reconcile net income to cash provided
by operating activities:Depreciation
    
    
    4,950
    
    
    
    3,924Amortization of intangible assets
    
    
    1,796
    
    
    
    1,477Amortization of deferred loan costs
    
    
    425
    
    
    
    381Accretion of debt discount
    
    
    472
    
    
    
    474Amortization of inventory fair value adjustment
    
    
    2,278
    
    
    
    1,699Gains on sale of fixed assets
    
    
    (7
    )
    
    
    (51
    )Provision for deferred taxes
    
    
    2,209
    
    
    
    420Changes in operating assets and liabilities:Trade receivables
    
    
    (3,667
    )
    
    
    (753
    )Inventories
    
    
    (3,181
    )
    
    
    (714
    )Accounts payable and accrued liabilities
    
    
    (5,231
    )
    
    
    (2,401
    )Other current assets and liabilities
    
    
    (446
    )
    
    
    (2,641
    )Other operating assets and liabilities
    
    
    263
    )
    
    
    (624
    )Net cash provided by operating activities
    
    
    7,862
    
    
    
    3,159Cash flows from investing activities:Purchases of fixed assets
    
    
    (4,110
    )
    
    
    (1,960
    )Sales of fixed assets
    
    
    
    
    
    
    596Payment of additional Kilian purchase price
    
    
    
    
    
    
    (730
    )Acquisitions, net of $441 of cash acquired
    
    
    (54,086
    )
    
    
    Net cash used in investing activities
    
    
    (58,196
    )
    
    
    (2,094
    )Cash flows from financing activities:Proceeds from issuance of senior notes
    
    
    57,625
    
    
    
    Payment of debt issuance costs
    
    
    (1,928
    )
    
    
    Payments made on behalf of Parent company
    
    
    (12,554
    )
    
    
    (956
    )Borrowings under revolving credit agreement
    
    
    5,057
    
    
    
    4,408Payments on revolving credit agreement
    
    
    (5,057
    )
    
    
    Proceeds from mortgages
    
    
    2,510
    
    
    
    Payments of capital leases
    
    
    (61
    )
    
    
    (434
    )Net cash provided by financing activities
    
    
    45,592
    
    
    
    3,018Effect of exchange rates on cash
    
    
    255
    
    
    
    (346
    )(Decrease) increase in cash and cash equivalents
    
    
    (4,487
    )
    
    
    3,737Cash and cash equivalents, beginning of period
    
    
    10,060
    
    
    
    4,729Cash and cash equivalents, end of period
    
    $
    5,573
    
    
    $
    8,466Cash paid during the period for:Interest
    
    $
    8,758
    
    
    $
    8,542Income Taxes
    
    $
    2,020
    
    
    $
    1,074
  5




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
 1. Organization and Nature of Operations
  2. Basis of Presentation
     3. Recent Accounting Pronouncements
  4. Acquisitions
   6




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
  Total purchase price, including closing costs of approximately $1.7 million
    
    $
    50,981Cash and cash equivalents
    
    
    441Trade receivables
    
    
    12,959Inventories
    
    
    16,388Prepaid expenses and other
    
    
    1,099Property, plant and equipment
    
    
    13,996Intangible assets
    
    
    13,881Total assets acquired
    
    
    58,764Accounts payable, accrued payroll, and accruals and other current liabilities
    
    
    11,282Other liabilities
    
    
    3,493Total liabilities assumed
    
    
    14,775Net assets acquired
    
    
    43,989Excess purchase price over the fair value of net assets acquired
    
    $
    6,992
   Customer relationships, subject to amortization
    
    $
    6,931Trade names and trademarks, not subject to amortization
    
    
    6,950Total intangible assets
    
    $
    13,881
      7




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
  Year to Date
    
    Year to Dateended
    
    ended(Pro forma, unaudited, in thousands)
    
    June 30, 2006
    
    July 1, 2005Total Revenues
    
    $
    243,891
    
    
    $
    225,750Net income
    
    $
    9,628
    
    
    $
    2,288
 5. Cash and Cash Equivalents
  6. Inventories
  June 30,
    
    
    December 31,2006
    
    
    2005Raw materials
    
    $
    28,443
    
    
    $
    22,512Work in process
    
    
    16,928
    
    
    
    13,876Finished goods
    
    
    37,790
    
    
    
    25,10983,161
    
    
    
    61,497LessAllowance for excess, slow-moving and obsolete inventory
    
    
    (9,970
    )
    
    
    (6,843
    )$
    73,191
    
    
    $
    54,654
 7. Goodwill and Intangible Assets
  Goodwill
    
    CostBalance December 31, 2005
    
    $
    65,345Additions related to Hay Hall acquisition
    
    
    6,971Additions related to Bear Linear acquisition
    
    
    4,211Impact of changes in foreign currency
    
    
    905Balance June 30, 2006
    
    $
    77,432
 June 30, 2006
    
    
    December 31, 2005Accumulated
    
    
    
    
    
    
    AccumulatedIntangible Assets
    
    Cost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationIntangible assets not subject to amortization:Tradenames and trademarks
    
    $
    23,030
    
    
    $
    
    
    
    $
    16,080
    
    
    $
    Intangible assets subject to amortization:Customer relationships
    
    
    34,733
    
    
    
    3,922
    
    
    
    27,802
    
    
    
    2,515Product technology and patents
    
    
    5,122
    
    
    
    1,074
    
    
    
    5,122
    
    
    
    690Impact of changes in foreign currency
    
    
    (66
    )
    
    
    
    
    
    
    (1,048
    )
    
    
    Total intangible assets
    
    $
    62,819
    
    
    $
    4,996
    
    
    $
    47,956
    
    
    $
    3,205
   8




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
 8. Warranty Costs
  June 30, 2006
    
    
    July 1, 2005Balance at beginning of period
    
    $
    1,876
    
    
    $
    1,528Accrued warranty costs
    
    
    825
    
    
    
    689Payments and adjustments
    
    
    (747
    )
    
    
    (747
    )Balance at end of period
    
    $
    1,954
    
    
    $
    1,470
 9. Income Taxes
 .
 10. Pension and Other Employee Benefits
 Defined Benefit (Pension) and Postretirement Benefit Plans
   Quarter EndedPension Benefits
    
    
    Other BenefitsJune 30, 2006
    
    
    July 1, 2005
    
    
    June 30, 2006
    
    
    July 1, 2005Service cost
    
    $
    151
    
    
    $
    138
    
    
    $
    84
    
    
    $
    94Interest cost
    
    
    334
    
    
    
    305
    
    
    
    150
    
    
    
    180Expected return on plan assets
    
    
    (207
    )
    
    
    (111
    )
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    2
    
    
    
    3
    
    
    
    (101
    )
    
    
    Amortization of net (gain) loss
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    Curtailment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special termination benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    280
    
    
    $
    335
    
    
    $
    150
    
    
    $
    274
 Year to Date EndedPension Benefits
    
    
    Other BenefitsJune 30, 2006
    
    
    July 1, 2005
    
    
    June 30, 2006
    
    
    July 1, 2005Service cost
    
    $
    303
    
    
    $
    265
    
    
    $
    168
    
    
    $
    187Interest cost
    
    
    669
    
    
    
    614
    
    
    
    299
    
    
    
    361Expected return on plan assets
    
    
    (415
    )
    
    
    (216
    )
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    3
    
    
    
    3
    
    
    
    (201
    )
    
    
    Amortization of net (gain) loss
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    Curtailment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special termination benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    560
    
    
    $
    666
    
    
    $
    301
    
    
    $
    548
  9




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
   11. Financing Arrangements
 Revolving Credit Agreement
    9% Senior Secured Notes
   11.25% Senior Notes
   10




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
 Mortgage
 
 Capital Leases
  12. Stockholders Equity
  Stock-Based Compensation
  13. Related-Party Transactions
 Kilian Acquisition
  Management Agreement
  Altra Holdings
  11




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
 14. Concentrations of Credit, Business Risks and Workforce
     15. Geographic Information
  Net Sales
    
    

    Property, Plant and EquipmentQuarter Ended
    
    
    Year to Date EndedJune 30,
    
    
    July 1,
    
    
    June 30,
    
    
    July 1,
    
    
    June 30,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005North America (primarily U.S.)
    
    $
    80,756
    
    
    $
    71,044
    
    
    $
    163,994
    
    
    $
    142,773
    
    
    $
    47,590
    
    
    $
    47,587Europe
    
    
    35,018
    
    
    
    18,195
    
    
    
    62,624
    
    
    
    37,909
    
    
    
    31,577
    
    
    
    16,968Asia and other
    
    
    4,000
    
    
    
    3,795
    
    
    
    7,940
    
    
    
    7,654
    
    
    
    1,811
    
    
    
    1,838Total
    
    $
    119,774
    
    
    $
    93,034
    
    
    $
    234,558
    
    
    $
    188,336
    
    
    $
    80,978
    
    
    $
    66,393
    16. Commitments and Contingencies
 General Litigation
   12




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
 17. Guarantor Subsidiaries
  13




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
 Condensed Consolidating Balance Sheets of the Company
June 30, 2006
 June 30, 2006NonIssuer
    
    
    Guarantor
    
    
    Guarantor
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    2,271
    
    
    $
    (2,271
    )
    
    $
    5,573
    
    
    $
    
    
    
    $
    5,573Trade receivables, less allowance for doubtful accounts
    
    
    
    
    
    
    36,444
    
    
    
    28,209
    
    
    
    
    
    
    
    64,653Loans receivable from related parties
    
    
    7,404
    
    
    
    35,836
    
    
    
    
    
    
    
    (43,240
    )
    
    
    Inventories, less allowances for obsolete materials
    
    
    
    
    
    
    48,439
    
    
    
    24,752
    
    
    
    
    
    
    
    73,191Deferred income taxes
    
    
    
    
    
    
    2,067
    
    
    
    127
    
    
    
    
    
    
    
    2,194Prepaid expenses and other
    
    
    212
    
    
    
    1,416
    
    
    
    2,899
    
    
    
    
    
    
    
    4,527Total current assets
    
    
    9,887
    
    
    
    121,931
    
    
    
    61,560
    
    
    
    (43,240
    )
    
    
    150,138Property, plant and equipment, net
    
    
    
    
    
    
    47,590
    
    
    
    33,388
    
    
    
    
    
    
    
    80,978Intangible assets, net
    
    
    
    
    
    
    35,622
    
    
    
    22,201
    
    
    
    
    
    
    
    57,823Goodwill
    
    
    
    
    
    
    58,809
    
    
    
    18,623
    
    
    
    
    
    
    
    77,432Other assets
    
    
    5,187
    
    
    
    630
    
    
    
    31
    
    
    
    
    
    
    
    5,848Investments in subsidiaries
    
    
    246,317
    
    
    
    
    
    
    
    
    
    
    
    (246,317
    )
    
    
    $
    261,391
    
    
    $
    264,582
    
    
    $
    135,803
    
    
    $
    (289,557
    )
    
    $
    372,219Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    19,735
    
    
    $
    16,359
    
    
    $
    
    
    
    $
    36,094Accrued payroll
    
    
    112
    
    
    
    11,047
    
    
    
    4,267
    
    
    
    
    
    
    
    15,426Accruals and other current liabilities
    
    
    5,841
    
    
    
    10,154
    
    
    
    3,617
    
    
    
    
    
    
    
    19,612Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    188
    
    
    
    
    
    
    
    188Current portion of capital leases and short-term bank
borrowings
    
    
    
    
    
    
    1,423
    
    
    
    245
    
    
    
    
    
    
    
    1,668Loans payable from related parties
    
    
    
    
    
    
    
    
    
    
    43,240
    
    
    
    (43,240
    )
    
    
    Total current liabilities
    
    
    5,953
    
    
    
    42,359
    
    
    
    67,916
    
    
    
    (43,240
    )
    
    
    72,988Long-term debt, less current portion
    
    
    219,821
    
    
    
    111
    
    
    
    3,456
    
    
    
    
    
    
    
    223,388Deferred income taxes
    
    
    
    
    
    
    3,372
    
    
    
    6,569
    
    
    
    
    
    
    
    9,941Pension liabilities
    
    
    
    
    
    
    12,092
    
    
    
    2,961
    
    
    
    
    
    
    
    15,053Other post-retirement benefits
    
    
    
    
    
    
    12,801
    
    
    
    
    
    
    
    
    
    
    
    12,801Other long-term liabilities
    
    
    
    
    
    
    948
    
    
    
    1,483
    
    
    
    
    
    
    
    2,431Total liabilities
    
    
    225,774
    
    
    
    71,683
    
    
    
    82,385
    
    
    
    (43,240
    )
    
    
    336,602Total stockholders equity
    
    
    35,617
    
    
    
    192,899
    
    
    
    53,418
    
    
    
    (246,317
    )
    
    
    35,617$
    261,391
    
    
    $
    264,582
    
    
    $
    135,803
    
    
    $
    (289,557
    )
    
    $
    372,219
 14




---



##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
 Condensed Consolidating Balance Sheets of the Company
December 31, 2005
 December 31, 2005NonIssuer
    
    
    Guarantor
    
    
    Guarantor
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    8,819
    
    
    $
    (2,713
    )
    
    $
    3,954
    
    
    $
    
    
    
    $
    10,060Trade receivables, less allowance for doubtful accounts
    
    
    
    
    
    
    32,892
    
    
    
    13,549
    
    
    
    
    
    
    
    46,441Loan receivable from related parties
    
    
    
    
    
    
    34,306
    
    
    
    4,301
    
    
    
    (38,607
    )
    
    
    Inventories, less allowances for obsolete materials
    
    
    
    
    
    
    43,562
    
    
    
    11,092
    
    
    
    
    
    
    
    54,654Deferred income taxes
    
    
    
    
    
    
    2,652
    
    
    
    127
    
    
    
    
    
    
    
    2,779Prepaid expenses and other
    
    
    25
    
    
    
    934
    
    
    
    1,014
    
    
    
    
    
    
    
    1,973Total current assets
    
    
    8,844
    
    
    
    111,633
    
    
    
    34,037
    
    
    
    (38,607
    )
    
    
    115,907Property, plant and equipment, net
    
    
    
    
    
    
    45,405
    
    
    
    20,988
    
    
    
    
    
    
    
    66,393Intangible assets, net
    
    
    
    
    
    
    36,729
    
    
    
    8,022
    
    
    
    
    
    
    
    44,751Goodwill
    
    
    
    
    
    
    53,784
    
    
    
    11,561
    
    
    
    
    
    
    
    65,345Other assets
    
    
    4,804
    
    
    
    167
    
    
    
    37
    
    
    
    
    
    
    
    5,008Investments in subsidiaries
    
    
    225,974
    
    
    
    
    
    
    
    
    
    
    
    (225,974
    )
    
    
    $
    239,622
    
    
    $
    247,718
    
    
    $
    74,645
    
    
    $
    (264,581
    )
    
    $
    297,404Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    44
    
    
    $
    21,931
    
    
    $
    8,749
    
    
    $
    
    
    
    $
    30,724Accrued payroll
    
    
    
    
    
    
    12,487
    
    
    
    3,529
    
    
    
    
    
    
    
    16,016Accruals and other current liabilities
    
    
    2,937
    
    
    
    10,384
    
    
    
    2,918
    
    
    
    
    
    
    
    16,239Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    33Current portion of capital leases and short-term bank
borrowings
    
    
    
    
    
    
    186
    
    
    
    
    
    
    
    
    
    
    
    186Loans payable from related parties
    
    
    38,607
    
    
    
    
    
    
    
    
    
    
    
    (38,607
    )
    
    
    Total current liabilities
    
    
    41,588
    
    
    
    44,988
    
    
    
    15,229
    
    
    
    (38,607
    )
    
    
    63,198Long-term debt, less current portion
    
    
    159,421
    
    
    
    153
    
    
    
    
    
    
    
    
    
    
    
    159,574Deferred income taxes
    
    
    
    
    
    
    1,719
    
    
    
    5,831
    
    
    
    
    
    
    
    7,550Pension liabilities
    
    
    
    
    
    
    11,505
    
    
    
    2,863
    
    
    
    
    
    
    
    14,368Other post-retirement benefits
    
    
    
    
    
    
    12,500
    
    
    
    
    
    
    
    
    
    
    
    12,500Other long-term liabilities
    
    
    
    
    
    
    107
    
    
    
    1,494
    
    
    
    
    
    
    
    1,601Total liabilities
    
    
    201,009
    
    
    
    70,972
    
    
    
    25,417
    
    
    
    (38,607
    )
    
    
    258,791Total stockholders equity
    
    
    38,613
    
    
    
    176,746
    
    
    
    49,228
    
    
    
    (225,974
    )
    
    
    38,613$
    239,622
    
    
    $
    247,718
    
    
    $
    74,645
    
    
    $
    (264,581
    )
    
    $
    297,404
 15




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
 Condensed Consolidating Statements of Operations of the Company
Quarter ended June 30, 2006
 Quarter ended June 30, 2006Non-Issuer
    
    
    Guarantor
    
    
    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 (loss) from operations
    
    
    
    
    
    
    9,419
    
    
    
    2,472
    
    
    
    
    
    
    
    11,891Interest expense (income)
    
    
    6,692
    
    
    
    95
    
    
    
    (737
    )
    
    
    
    
    
    
    6,050Other non-operating expense (income)
    
    
    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
    )
    
    $
    3,917
 Condensed Consolidating Statements of Operations of the Company
Year to Date ended June 30, 2006
 Year to Date ended June 30, 2006Non-Issuer
    
    
    Guarantor
    
    
    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)
    
    
    11,099
    
    
    
    42
    
    
    
    85
    
    
    
    
    
    
    
    11,226Other non-operating expense (income)
    
    
    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
    )
    
    $
    8,001
 16




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
 Condensed Consolidating Statements of Operations of the Company
Quarter ended July 1, 2005
 Quarter ended July 1, 2005Non-Issuer
    
    
    Guarantor
    
    
    Guarantor
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    71,520
    
    
    $
    23,402
    
    
    $
    (2,152
    )
    
    $
    93,034Cost of sales
    
    
    
    
    
    
    54,868
    
    
    
    17,004
    
    
    
    (2,152
    )
    
    
    69,720Gross profit
    
    
    
    
    
    
    16,916
    
    
    
    6,398
    
    
    
    
    
    
    
    23,314Selling, general and administrative expenses
    
    
    1,756
    
    
    
    9,481
    
    
    
    4,091
    
    
    
    
    
    
    
    15,328Research and development expenses
    
    
    
    
    
    
    630
    
    
    
    482
    
    
    
    
    
    
    
    1,112Income from operations
    
    
    (1,756
    )
    
    
    6,805
    
    
    
    1,825
    
    
    
    
    
    
    
    6,874Interest expense (income)
    
    
    3,997
    
    
    
    271
    
    
    
    27
    
    
    
    
    
    
    
    4,295Other non-operating (income) expense, net
    
    
    
    
    
    
    (13
    )
    
    
    26
    
    
    
    
    
    
    
    13Equity in earnings of subsidiaries
    
    
    7,320
    
    
    
    
    
    
    
    
    
    
    
    (7,320
    )
    
    
    Income before income taxes
    
    
    1,567
    
    
    
    6,547
    
    
    
    1,772
    
    
    
    (7,320
    )
    
    
    2,566Provision for income taxes
    
    
    
    
    
    
    376
    
    
    
    623
    
    
    
    
    
    
    
    999Net income
    
    $
    1,567
    
    
    $
    6,171
    
    
    $
    1,149
    
    
    $
    (7,320
    )
    
    $
    1,567
 Condensed Consolidating Statements of Operations of the Company
Year to Date ended July 1, 2005
 Year to Date ended July 1, 2005Non-Issuer
    
    
    Guarantor
    
    
    Guarantor
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    144,337
    
    
    $
    48,371
    
    
    $
    (4,372
    )
    
    $
    188,336Cost of sales
    
    
    
    
    
    
    111,739
    
    
    
    35,755
    
    
    
    (4,372
    )
    
    
    143,122Gross profit
    
    
    
    
    
    
    32,598
    
    
    
    12,616
    
    
    
    
    
    
    
    45,214Selling, general and administrative expenses
    
    
    1,756
    
    
    
    20,832
    
    
    
    8,467
    
    
    
    
    
    
    
    31,055Research and development expenses
    
    
    
    
    
    
    1,201
    
    
    
    1,107
    
    
    
    
    
    
    
    2,308Income from operations
    
    
    (1,756
    )
    
    
    10,565
    
    
    
    3,042
    
    
    
    
    
    
    
    11,851Interest expense (income)
    
    
    8,107
    
    
    
    46
    
    
    
    404
    
    
    
    
    
    
    
    8,557Other non-operating (income) expense, net
    
    
    
    
    
    
    (13
    )
    
    
    26
    
    
    
    
    
    
    
    13Equity in earnings of subsidiaries
    
    
    11,831
    
    
    
    
    
    
    
    
    
    
    
    (11,831
    )
    
    
    Income before income taxes
    
    
    1,968
    
    
    
    10,532
    
    
    
    2,612
    
    
    
    (11,831
    )
    
    
    3,281Provision for income taxes
    
    
    
    
    
    
    660
    
    
    
    653
    
    
    
    
    
    
    
    1,313Net income
    
    $
    1,968
    
    
    $
    9,872
    
    
    $
    1,959
    
    
    $
    (11,831
    )
    
    $
    1,968
 17




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
 Condensed Consolidating Statements of Cash Flows of the Company
Year to Date ended June 30, 2006
 Non-Issuer
    
    
    Guarantor
    
    
    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 provided by
(used in) 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
    )Provision 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 provided by (used in) operating activities
    
    
    (7,543
    )
    
    
    14,683
    
    
    
    722
    
    
    
    
    
    
    
    7,862Cash 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 subordinated notes
    
    
    57,625
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,625Payment of debt issuance costs
    
    
    (1,928
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,928
    )Payment on behalf of parent company
    
    
    (12,554
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,554
    )Borrowings under revolving credit agreements
    
    
    5,057
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,057Payments on revolving credit agreements
    
    
    (5,057
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,057
    )Change in affiliate debt
    
    
    (42,148
    )
    
    
    (1,530
    )
    
    
    43,678
    
    
    
    
    
    
    
    Proceeds from mortgages
    

    
    
    
    
    
    
    
    
    
    2,510
    
    
    
    

    
    
    
    2,510Net proceeds
(payment) of capital leases
    
    
    
    
    
    
    (106
    )
    
    
    45
    
    
    
    
    
    
    
    (61
    )Net cash provided by (used in) financing activities
    
    
    995
    
    
    
    (1,636
    )
    
    
    46,233
    
    
    
    
    
    
    
    45,592Effect 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
    
    
    $
    
    
    
    $
    5,573
 18




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
 Condensed Consolidating Statements of Cash Flows of the Company
Year to Date ended July 1, 2005
 Non-Issuer
    
    
    Guarantor
    
    
    Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income
    
    $
    1,968
    
    
    $
    9,872
    
    
    $
    1,959
    
    
    $
    (11,831
    )
    
    $
    1,968Undistributed equity in earnings of subsidiaries
    
    
    (11,831
    )
    
    
    
    
    
    
    
    
    
    
    11,831
    
    
    
    Adjustments to reconcile net income to cash (used in)
provided by operating activities:Depreciation
    
    
    
    
    
    
    3,128
    
    
    
    796
    
    
    
    
    
    
    
    3,924Amortization of intangible assets
    
    
    
    
    
    
    1,165
    
    
    
    312
    
    
    
    
    
    
    
    1,477Amortization and write-off of deferred loan costs
    
    
    381
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    381Accretion of debt discount
    
    
    474
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    474Amortization of inventory fair value adjustment
    
    
    
    
    
    
    1,270
    
    
    
    429
    
    
    
    
    
    
    
    1,699Gain on sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    
    
    
    
    (51
    )Provision for deferred taxes
    
    
    
    
    
    
    420
    
    
    
    
    
    
    
    
    
    
    
    420Changes in operating assets and liabilities:Trade receivables
    
    
    
    
    
    
    54
    
    
    
    (807
    )
    
    
    
    
    
    
    (753
    )Inventories
    
    
    
    
    
    
    (1,428
    )
    
    
    714
    
    
    
    
    
    
    
    (714
    )Accounts payable and accrued liabilities
    
    
    (2,780
    )
    
    
    (803
    )
    
    
    1,182
    
    
    
    
    
    
    
    (2,401
    )Other current assets and liabilities
    
    
    
    
    
    
    (2,066
    )
    
    
    (575
    )
    
    
    
    
    
    
    (2,641
    )Other operating assets and liabilities
    
    
    (2,251
    )
    
    
    (293
    )
    
    
    1,920
    
    
    
    
    
    
    
    (624
    )Net cash (used in) provided by operating activities
    
    
    (14,039
    )
    
    
    11,319
    
    
    
    5,879
    
    
    
    
    
    
    
    3,159Cash flows from investing activities:Purchases of fixed assets
    
    
    
    
    
    
    (1,678
    )
    
    
    (282
    )
    
    
    
    
    
    
    (1,960
    )Payment of additional Kilian purchase price
    
    
    
    
    
    
    (730
    )
    
    
    
    
    
    
    
    
    
    
    (730
    )Sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    596
    
    
    
    
    
    
    
    596Net cash used in investing activities
    
    
    
    
    
    
    (2,408
    )
    
    
    314
    
    
    
    
    
    
    
    (2,094
    )Cash flows from financing activities:Payments made on behalf of Parent company
    
    
    (956
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (956
    )Borrowings under revolving credit agreements
    
    
    4,408
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,408Change in affiliate debt
    
    
    12,689
    
    
    
    (6,673
    )
    
    
    (6,016
    )
    
    
    
    
    
    
    Change in capital leases
    
    
    
    
    
    
    (156
    )
    
    
    (278
    )
    
    
    
    
    
    
    (434
    )Net cash (used in) provided by financing activities
    
    
    16,141
    
    
    
    (6,829
    )
    
    
    (6,294
    )
    
    
    
    
    
    
    3,018Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    (346
    )
    
    
    
    
    
    
    (346
    )Increase (decrease) in cash and cash equivalents
    
    
    2,102
    
    
    
    2,082
    
    
    
    (447
    )
    
    
    
    
    
    
    3,737Cash and cash equivalents, beginning of the period
    
    
    2,219
    
    
    
    (1,913
    )
    
    
    4,423
    
    
    
    
    
    
    
    4,729Cash and cash equivalents, end of period
    
    $
    4,321
    
    
    $
    169
    
    
    $
    3,976
    
    
    $
    
    
    
    $
    8,466
 19




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Conditiona 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 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, 2005. 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, 2005.
 General
  Recent Acquisition
   Parent Debt Repayment
  Retirement Benefits
  20




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##### Table of Contents



Critical Accounting Policies
  Recent Accounting Pronouncements
  Non-GAAP Financial Measures
   
    
    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.
   21




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##### Table of Contents



Results of Operations
 Quarter Ended
    
    
    Year to Date EndedJune 30, 2006
    
    
    July 1, 2005
    
    
    June 30, 2006
    
    
    July 1, 2005Net sales
    
    $
    119,774
    
    
    $
    93,034
    
    
    $
    234,558
    
    
    $
    188,336Cost of sales
    
    
    87,501
    
    
    
    69,720
    
    
    
    170,431
    
    
    
    143,122Gross profit
    
    
    32,273
    
    
    
    23,314
    
    
    
    64,127
    
    
    
    45,214Gross profit percentage
    
    
    26.9
    %
    
    
    25.1
    %
    
    
    27.3
    %
    
    
    24.0
    %Selling, general and administrative expenses
    
    
    19,094
    
    
    
    15,328
    
    
    
    37,821
    
    
    
    31,055Research and development expenses
    
    
    1,288
    
    
    
    1,112
    
    
    
    2,492
    
    
    
    2,308Income from operations
    
    
    11,891
    
    
    
    6,874
    
    
    
    23,814
    
    
    
    11,851Interest expense
    
    
    6,050
    
    
    
    4,295
    
    
    
    11,226
    
    
    
    8,557Other non-operating (income) expense
    
    
    72
    
    
    
    13
    
    
    
    (87
    )
    
    
    13Income before income taxes
    
    
    5,769
    
    
    
    2,566
    
    
    
    12,675
    
    
    
    3,281Provision for income taxes
    
    
    1,852
    
    
    
    999
    
    
    
    4,674
    
    
    
    1,313Net income
    
    $
    3,917
    
    
    $
    1,567
    
    
    $
    8,001
    
    
    $
    1,968
 Quarter Ended June 30, 2006 Compared with Quarter Ended July 1, 2005
 Net sales.
 Gross profit.
 Selling, general and administrative expenses.
 Research and development expenses.
 EBITDA.
 Interest expense.
 22




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##### Table of Contents



Provision for income taxes.
 Year to Date Ended June 30, 2006 Compared with Year to Date Ended July 1, 2005
 Net sales.
 Gross profit.
 Selling, general and administrative expenses.
 Research and development expenses.
 EBITDA.
 Interest expense.
 Provision for income taxes.
 23




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##### Table of Contents



Liquidity and Capital Resources
       Liquidity
      24




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##### Table of Contents



Changes in general economic conditions or the cyclical nature of our markets could harm
our operations and financial performance .
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
   25




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##### Table of Contents



PART IIOTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equtiy 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
  
 Item 6. Exhibits
 The following exhibits are filed as part of this report:
 26




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description3.1 (1)
    
    Certificate of Incorporation of Altra Industrial Motion, Inc.3.2 (1)
    
    By-laws of Altra Industrial Motion, Inc.4.1 (1)
    
    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 trustee4.2 (1)
    
    Form of 9% Senior Secured Notes due 2011 (included in Exhibit 4.1)4.3 (2)
    
    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) S.A., as Luxembourg paying agent4.4 (2)
    
    Form of 11 1/4% Senior Notes due 20134.5 (2)
    
    Registration Rights Agreement, dated as of February 8, 2006, among Altra Industrial Motion, Inc.,
the guarantors party thereto and Jefferies International Limited, as initial purchasers4.6 (3)
    
    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 trustee4.7 (2)
    
    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 trustee4.8 (3)
    
    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 trustee4.9 (3)
    
    First 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 trustee31.1
    
    Certification of Chief Executive Officer31.2
    
    Certification of Chief Financial Officer32.1
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Incorporated by reference to the Registration Statement on Form S-4 (File No.333-124944)
filed with the Securities and Exchange Commission on May 16, 2005(2)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K (File No.
333-124944) filed with the Securities and Exchange Commission on Februrary 14, 2006(3)
    
    Incorporated by reference to the Registrants Annual Report on Form 10-K (File No.
333-124944) filed with the Securities and Exchange Commission on May 15, 2006 27




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##### Table of Contents



SIGNATURES
  ALTRA INDUSTRIAL MOTION, INC.August 10,2006
    By:
    /s/ Michael L. HurtName:
    Michael L. HurtTitle:
    Chief Executive Officer August 10, 2006
    By:
    /s/ David WallName:
    David WallTitle:
    Chief Financial Officer 28