##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the year ended December 31, 2007
 Commission file number: 333-124944
 
 ALTRA INDUSTRIAL MOTION, INC.
  Delaware
    
    30-0283143(State or Other Jurisdiction
    
    (I.R.S. Employerof Incorporation or Organization)
    
    Identification No.)14 Hayward Street, Quincy, Massachusetts
    
    02171(Address of Principal Executive Offices)
    
    (Zip Code)
 (617) 328-3300
 NONE
 NONE
 o þ
 þ o
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
  o þ
    DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PagePART IItem 1.
    
    Business
    
    
    4Item 1A.
    
    Risk Factors
    
    
    13Item 1B.
    
    Unresolved Staff Comments
    
    
    20Item 2.
    
    Properties
    
    
    21Item 3.
    
    Legal Proceedings
    
    
    22Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    22PART IIItem 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer  Repurchases of Equity Securities
    
    
    23Item 6.
    
    Selected Financial Data
    
    
    24Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    36Item 8.
    
    Financial Statements and Supplementary Data
    
    
    37Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    73Item 9A.
    
    Controls and Procedures
    
    
    73Item 9B.
    
    Other Information
    
    
    74PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    75Item 11.
    
    Executive Compensation
    
    
    75Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    75Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    75Item 14.
    
    Principal Accountant Fees and Services
    
    
    75PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    75EX-12.1 - Computation of Earnings to Fixed ChargesEx-31.1 Section 302 Certification of the C.E.O.Ex-31.2 Section 302 Certification of the C.F.O.Ex-32.1 Section 906 Certification of the C.E.O.Ex-32.2 Section 906 Certification of the C.F.O.
  2




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FORWARD-LOOKING STATEMENTS
   3




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Item 1. Business
 Our Company
    http://www.sec.gov.
 www.altramotion.com.
 Our Industry
   Our Strengths
 Leading Market Shares and Brand Names.
 4




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Large Installed Base Supporting Aftermarket Sales.
 Diversified End-Markets.
 Strong Relationships with Distributors and OEMs.
 Experienced, High-Caliber Management Team.
 The Altra Business System.
 Proven Product Development Capabilities.
 Our Business Strategy
  
    
    Leverage Our Sales and Distribution Network.We intend to
continue to leverage our relationships with our distributors to
gain shelf space, further integrate our recently acquired brands
with our core brands and sell new products. We seek to capitalize
on customer brand preference for our products to generate
pull-through aftermarket demand from our distribution channel.
    
    Focus our Strategic Marketing on New Growth
Opportunities.Through a systematic process that leverages our
core brands and products, we seek to identify attractive markets
and product niches, collect customer and market data, identify
market drivers, tailor product and service solutions to specific
market and customer requirements and deploy resources to gain
market share and drive future sales growth.
    
    Accelerate New Product and Technology Development.We focus on
developing new products across our business in response to customer
needs in various markets. In total, new products developed by us
during the past three years generated approximately $70 million in
revenues from continuing operations in 2007.
    
    Capitalize on Growth and Sourcing Opportunities in the
Asia-Pacific Market.We intend to leverage our established sales
offices in China, Taiwan and Singapore, as well as add
representation in Japan and South Korea. We also intend to expand
our manufacturing presence in Asia beyond our current plant in
Shenzhen, China. During 2007, we sourced approximately 19% of our
purchases from low-cost countries, resulting in average cost
reductions of approximately 50% for these products. Within the next
five years, we intend to utilize our sourcing office in Shanghai to
significantly increase our current level of low-cost country
sourced purchases. We may also consider additional opportunities to
outsource some of our production from North
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American and Western
European locations to Asia or lower cost regions.
 
    
    Continue to Improve Operational and Manufacturing Efficiencies
through ABS.We believe we can continue to improve profitability
through cost control, overhead rationalization, global process
optimization, continued implementation of lean manufacturing
techniques and strategic pricing initiatives. We have implemented
these principles with our acquisitions of Hay Hall, Bear Linear,
All Power and TB Woods and intend to apply such principles to
future acquisitions.
    
    Pursue Strategic Acquisitions that Complement our Strong Platform.
Management believes that there may be a number of attractive
potential acquisition candidates in the future, in part due to the
fragmented nature of the industry. As an example, through our
acquisition of TB Woods, we significantly enhanced our position as
a leading manufacturer of MPT products by broadening our offering
of flexible couplings and adding a new product group in belted
drives. We plan to continue our disciplined pursuit of other
strategic acquisitions to accelerate our growth, enhance our
industry leadership and create value.
 Products
   Products
    
    Principal Brands
    
    Principal Markets
    
    Sample ApplicationsClutches and Brakes
    
    Warner Electric,
Wichita Clutch,
Formsprag Clutch,
Stieber Clutch,
Matrix, Inertia
Dynamics, Twiflex,
Industrial Clutch,
Marland Clutch
    
    Aerospace, energy,
material handling,
metals, turf and
garden, mining
    
    Elevators,
forklifts, lawn
mowers, oil well
draw works, punch
presses, conveyorsGearing
    
    Boston Gear,
Nuttall Gear,
Delroyd
    
    Food processing,
material handling,
metals,
transportation
    
    Conveyors, ethanol
mixers, packaging
machinery, metal
processing
equipmentEngineered Couplings
    
    Ameridrives, Bibby
Transmissions,
TB Woods
    
    Energy, metals,
plastics, chemical
    
    Extruders,
turbines, steel
strip mills, pumpsEngineered Bearing
Assemblies
    
    Kilian
    
    Aerospace, material
handling,
transportation
    
    Cargo rollers, seat
storage systems,
conveyorsPower Transmission
Components
    
    Warner Electric,
Boston Gear, Huco
Dynatork, Warner
Linear, Matrix,
Saftek, TB Woods
    
    Material handling,
metals, turf and
garden
    
    Conveyors, lawn
mowers, machine
toolsEngineered Belted
Drives
    
    TB Woods
    
    Aggregate, HVAC,
material handling
    
    Pumps, sand and
gravel conveyors,
industrial fans
 Clutches and Brakes.
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
    
    Electromagnetic Clutches and Brakes.Our industrial products
include clutches and brakes with specially designed controls for
material handling, forklift, elevator, medical mobility, mobile
off-highway, baggage handling and plant productivity applications.
We also offer a line of clutch and brake products for walk-behind
mowers, residential lawn tractors and commercial mowers. While
industrial applications are predominant, we also manufacture
several vehicular niche applications including on-road
refrigeration compressor clutches and agricultural equipment
clutches. We market our electromagnetic products under the Warner
Electric, Inertia Dynamics and Matrix brand names.
    
    Overrunning Clutches.Specific product lines include the Formsprag
Marland and Stieber indexing and backstopping clutches. Primary
industrial applications include conveyors, gear reducers, hoists
and cranes, mining machinery, machine tools, paper machinery,
packaging machinery, pumping equipment and other specialty
machinery. We market and sell these products under the Formsprag
Marland and Stieber brand names.
    
    Heavy Duty Clutches and Brakes.Our heavy duty clutch and brake
product lines serve various markets including metal forming,
off-shore and land-based oil and gas drilling platforms, mining
material handling, marine applications and various off-highway and
construction equipment segments. Our line of heavy duty pneumatic,
hydraulic and caliper clutches and brakes are marketed under the
Wichita Clutch and Twiflex brand names.
 Gearing.
 Engineered Couplings.
 Engineered Bearing Assemblies.
 Engineered Belted Drives.
 Power Transmission Components
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
    
    Warner Linear.Warner Linear is a designer and manufacturer of
rugged service electromechanical linear actuators for off-highway
vehicles, agriculture, turf care, special vehicles, medical
equipment, industrial and marine applications.
    
    Huco Dynatork.Huco Dynatork is a leading manufacturer and
supplier of a complete range of precision couplings, universal
joints, rod ends and linkages.
    
    Other Accessories.Our Boston Gear, Warner Electric, Matrix and TB
Woods businesses make or market several other accessories such as
sensors, sleeve bearings, AC/DC motors, shaft accessories, face
tooth couplings, mechanical variable speed drives, and fluid power
components that are used in numerous end markets.
 Research and Development and Product Engineering
  
    
    lowering the cost of manufacturing our existing products;
    
    redesigning existing product lines to increase their efficiency or enhance their performance; and
    
    developing new product applications.
  Sales and Marketing
   Distribution
  8




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Competition
 Risk Factors  Risks Related to our Business  We
operate in the highly competitive mechanical power transmission industry and if we are not able to
compete successfully our business may be significantly harmed.
 Intellectual Property
    Employees
  9




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Risk Factors  Risks Related to Our Business  We
may be subject to work stoppages at our facilities, or our customers may be subjected to work
stoppages, which could seriously impact our operations and the profitability of our business.
   Suppliers and Raw Materials
  Regulation
  Environmental and Health and Safety Matters
   10




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11




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Executive Officers of Registrant
  Michael L. Hurt (age 62)
 Carl R. Christenson (age 48)
 Christian Storch (age 47)
 Gerald Ferris (age 58)
 Timothy McGowan (age 51)
 Todd B. Patriacca (age 38)
 Craig Schuele (age 44)
 Edward L. Novotny (age 55)
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Item 1A. Risk Factors
 Risks Related to Our Business
 We operate in the highly competitive mechanical power transmission industry and if we are not able
to compete successfully our business may be significantly harmed.
    Changes in general economic conditions or the cyclical nature of our markets could harm our
operations and financial performance.
  We rely on independent distributors and the loss of these distributors could adversely affect our
business.
  We must continue to invest in new technologies and manufacturing techniques; however, our ability
to develop or adapt to changing technology and manufacturing techniques is uncertain and our
failure to do so could place us at a competitive disadvantage.
  13




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
    
    product quality and availability;
    
    price competitiveness;
    
    technical expertise and development capability;
    
    reliability and timeliness of delivery;
    
    product design capability;
    
    manufacturing expertise; and
    
    sales support and customer service.
  Our operations are subject to international risks that could affect our operating results.
  
    
    fluctuations in currency exchange rates;
    
    exchange rate controls;
    
    tariffs or other trade protection measures and import or export licensing requirements;
    
    potentially negative consequences from changes in tax laws;
    
    interest rates;
    
    unexpected changes in regulatory requirements;
    
    changes in foreign intellectual property law;
    
    differing labor regulations;
    
    requirements relating to withholding taxes on remittances and other payments by subsidiaries;
    
    restrictions on our ability to own or operate subsidiaries, make investments or acquire new
businesses in various jurisdictions;
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
    
    potential political instability and the actions of foreign governments; and
    
    restrictions on our ability to repatriate dividends from our subsidiaries.
  Our operations depend on production facilities throughout the world, many of which are located
outside the United States and are subject to increased risks of disrupted production causing delays
in shipments and loss of customers and revenue.
  We rely on estimated forecasts of our OEM customers needs, and inaccuracies in such forecasts
could materially adversely affect our business.
  The materials used to produce our products are subject to price fluctuations that could increase
costs of production and adversely affect our profitability.
  We face potential product liability claims relating to products we manufacture or distribute, which
could result in our having to expend significant time and expense to defend these claims and to pay
material claims or settlement amounts.
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We may be subject to work stoppages at our facilities, or our customers may be subjected to work
stoppages, which could seriously impact our operations and the profitability of our business.
    Changes in employment laws could increase our costs and may adversely affect our business.
   We depend on the services of key executives, the loss of whom could materially harm our business.
  If we lose certain of our key sales, marketing or engineering personnel, our business may be
adversely affected.
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We are subject to environmental laws that could impose significant costs on us and the failure to
comply with such laws could subject us to sanctions and material fines and expenses.
     We may face additional costs associated with our post-retirement and post-employment obligations to
employees which could have an adverse effect on our financial condition.
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Our future success depends on our ability to integrate acquired companies and manage our growth
effectively.
  We may not be able to protect our intellectual property rights, brands or technology effectively,
which could allow competitors to duplicate or replicate our technology and could adversely affect
our ability to compete.
  Goodwill comprises a significant portion of our total assets, and if we determine that goodwill has
become impaired in the future, net income in such years may be materially and adversely affected.
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Unplanned repairs or equipment outages could interrupt production and reduce income or cash flow.
  Our operations are highly dependent on information technology infrastructure and failures could
significantly affect our business.
  Our leverage could adversely affect our financial health and make us vulnerable to adverse economic
and industry conditions.
  
    
    make it more challenging for us to obtain additional financing to fund our business strategy and
acquisitions, debt service requirements, capital expenditures and working capital;
    
    increase our vulnerability to interest rate changes and general adverse economic and industry conditions;
    
    require us to dedicate a substantial portion of our cash flow from operations to service our
indebtedness, thereby reducing the availability of our cash flow to finance acquisitions and to fund
working capital, capital expenditures, research and development efforts and other general corporate
activities;
    
    make it difficult for us to fulfill our obligations under our credit and other debt agreements;
    
    limit our flexibility in planning for, or reacting to, changes in our business and our markets; and
    
    place us at a competitive disadvantage relative to our competitors that have less debt.
  We are subject to tax laws and regulations in many jurisdictions and the inability to successfully
defend claims from taxing authorities related to our current or acquired businesses could adversely
affect our operating results and financial position.
  19




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Item 1B. Unresolved Staff Comments
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Item 2. Properties
  Location
    
    Brand
    
    Major Products
    
    Sq. Ft.
    
    
    Leased
    
    
    ExpirationUnited StatesChambersburg,
Pennsylvania
    
    TB Woods
    
    Couplings, Belted Drives, Castings
    
    
    440,000
    
    
    Owned
    
    N/ASouth Beloit, Illinois
    
    Warner Electric
    
    Electromagnetic Clutches & Brakes
    
    
    104,288
    
    
    Owned
    
    N/ASyracuse, New York
    
    Kilian
    
    Engineered Bearing Assemblies
    
    
    97,000
    
    
    Owned
    
    N/AWichita Falls, Texas
    
    Wichita Clutch
    
    Heavy Duty Clutches and Brakes
    
    
    90,400
    
    
    Owned
    
    N/AWarren, Michigan
    
    Formsprag
    
    Overrunning Clutches
    
    
    79,000
    
    
    Owned
    
    N/AErie, Pennsylvania
    
    Ameridrives
    
    Couplings
    
    
    76,200
    
    
    Owned
    
    N/AChattanooga, Tennessee (6)
    
    TB Woods
    
    
    
    
    60,000
    
    
    Owned
    
    N/AScotland, Pennsylvania (6)
    
    TB Woods
    
    
    
    
    51,300
    
    
    Owned
    
    N/ASan Marcos, Texas
    
    TB Woods
    
    Couplings and Belted Drives
    
    
    51,000
    
    
    Owned
    
    N/AColumbia City, Indiana
    
    Warner Electric
    
    Electromagnetic Clutches & Brakes & Coils
    
    
    35,000
    
    
    Owned
    
    N/AMt. Pleasant, Michigan
    
    TB Woods
    
    Power Transmission Components, Couplings
    
    
    30,000
    
    
    Owned
    
    N/ACharlotte, North Carolina
    
    Boston Gear
    
    Gearing & Power Transmission Components
    
    
    193,000
    
    
    Leased
    
    February 28, 2013Niagara Falls, New York
    
    Nuttall Gear
    
    Gearing
    
    
    155,509
    
    
    Leased
    
    March 31, 2008New Hartford, Connecticut
    
    Inertia Dynamics
    
    Electromagnetic Clutches & Brakes
    
    
    32,000
    
    
    Leased
    
    July 30, 2019Quincy, Massachusetts(1)
    
    Altra, Boston Gear
    
    
    
    
    30,350
    
    
    Leased
    
    February 12, 2009Belvidere, Illinois
    
    Warner Linear
    
    Linear Actuators
    
    
    21,000
    
    
    Leased
    
    June 30, 2009New Braunsfels, Texas
    
    Ameridrives
    
    Couplings
    
    
    16,200
    
    
    Leased
    
    December 31, 2009Green Bay, Wisconsin
    
    Ameridrives
    
    Couplings
    
    
    85,250
    
    
    Leased
    
    March 31, 2011InternationalHeidelberg, Germany
    
    Stieber
    
    Overrunning Clutches
    
    
    57,609
    
    
    Owned
    
    N/ASaint Barthelemy, France
    
    Warner Electric
    
    Electromagnetic Clutches & Brakes
    
    
    50,129
    
    
    Owned
    
    N/ABedford, England
    
    Wichita Clutch
    
    Heavy Duty Clutches and Brakes
    
    
    49,000
    
    
    Owned
    
    N/AAllones, France
    
    Warner Electric
    
    Electromagnetic Clutches & Brakes
    
    
    38,751
    
    
    Owned
    
    N/AToronto, Canada
    
    Kilian
    
    Engineered Bearing Assemblies
    
    
    29,000
    
    
    Owned
    
    N/ADewsbury, England
    
    Bibby Transmissions
    
    Couplings
    
    
    26,100
    
    
    Owned
    
    N/AStratford, Canada(5)
    
    TB Woods
    
    Power Transmission Components, Couplings
    
    
    46,000
    
    
    Owned
    
    N/AShenzhen, China
    
    Warner Electric
    
    Electromagnetic Clutches, Brakes & Precision Components
    
    
    112,271
    
    
    Leased
    
    December 15, 2008San Luis Potosi, Mexico
    
    TB Woods
    
    Couplings and Belted Drives
    
    
    71,800
    
    
    Leased
    
    June 8, 2014Brechin, Scotland
    
    Matrix
    
    Clutch Brakes, Couplings
    
    
    52,500
    
    
    Leased
    
    February 28, 2011Garching, Germany
    
    Stieber
    
    Overrunning Clutches
    
    
    32,292
    
    
    Leased
    
    (2)Toronto, Canada
    
    Kilian
    
    Engineered Bearing Assemblies
    
    
    30,120
    
    
    Leased
    
    (3)Twickenham, England
    
    Twiflex
    
    Heavy Duty Clutches and Brakes
    
    
    27,500
    
    
    Leased
    
    September 30, 2009Hertford, England
    
    Huco Dynatork
    
    Couplings
Components
    
    
    13,565
    
    
    Leased
    
    July 30, 2012Telford, England
    
    Saftek
    
    Friction Material
    
    
    4,400
    
    
    Leased
    
    August 31, 2008
 
 (1)
    
    Corporate Headquarters and selective Boston Gear functions.(2)
    
    Must give the lessor twelve months notice for termination.(3)
    
    Month to month lease.(4)
    
    Must give the lessor six months notice for termination.(5)
    
    Building is currently held for sale(6)
    
    Buildings are currently being leased to tenants 21




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Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a vote of security holders
  22




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PART II
 
 Item 5. Market for the Registrants Common Equity and Related Stockholder Matters and Issuer
Purchases of Equity Securities
  23




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Item 6. Selected Financial Data
  Predecessor(PeriodFrom
    
    
    
    (PeriodAltra
    
    
    
    
    
    
    
    
    
    
    December 1,
    
    
    
    FromYear
    
    
    Altra Year
    
    
    Altra Year
    
    
    2004
    
    
    
    January 1ended
    
    
    ended
    
    
    ended
    
    
    Through
    
    
    
    Through
    
    
    Year EndedDecember
    
    
    December
    
    
    December 31,
    
    
    December
    
    
    
    November 30,
    
    
    December 31,31, 2007
    
    
    31, 2006
    
    
    2005
    
    
    31, 2004)
    
    
    
    2004)
    
    
    2003(dollars in thousands)Income Statement Data:Net sales
    
    $
    584,376
    
    
    $
    462,285
    
    
    $
    363,465
    
    
    $
    28,625
    
    
    
    $
    275,037
    
    
    $
    266,863Cost of sales
    
    
    419,109
    
    
    
    336,836
    
    
    
    271,952
    
    
    
    23,847
    
    
    
    
    209,253
    
    
    
    207,941Gross profit
    
    
    165,267
    
    
    
    125,449
    
    
    
    91,513
    
    
    
    4,778
    
    
    
    
    65,784
    
    
    
    58,922Selling, general and administrative
expenses
    
    
    93,160
    
    
    
    83,256
    
    
    
    61,520
    
    
    
    8,973
    
    
    
    
    45,321
    
    
    
    49,513Research and development expenses
    
    
    6,077
    
    
    
    4,938
    
    
    
    4,683
    
    
    
    378
    
    
    
    
    3,947
    
    
    
    3,455Restructuring charge, asset
impairment and transition expenses
    
    
    2,399
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    947
    
    
    
    11,085Loss (gain) on curtailment of
post-retirement benefit plan
    
    
    2,745
    
    
    
    (3,838
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    (99
    )
    
    
    
    
    
    
    
    (1,300
    )
    
    
    Operating income (loss) from
continuing operations
    
    
    60,886
    
    
    
    41,093
    
    
    
    25,409
    
    
    
    (4,573
    )
    
    
    
    16,869
    
    
    
    (5,131
    )Interest expense, net
    
    
    38,554
    
    
    
    23,522
    
    
    
    17,065
    
    
    
    1,410
    
    
    
    
    4,294
    
    
    
    5,368Other non-operating expense
(income), net
    
    
    612
    
    
    
    856
    
    
    
    (17
    )
    
    
    
    
    
    
    
    148
    
    
    
    465Income (loss) before income taxes
and discontinued operations
    
    
    21,720
    
    
    
    16,715
    
    
    
    8,361
    
    
    
    (5,983
    )
    
    
    
    12,427
    
    
    
    (10,964
    )Provision (benefit) for income taxes
    
    
    8,208
    
    
    
    6,352
    
    
    
    3,917
    
    
    
    (221
    )
    
    
    
    5,532
    
    
    
    (1,658
    )Net income (loss) from continuing
operations
    
    
    13,512
    
    
    
    10,363
    
    
    
    4,444
    
    
    
    (5,762
    )
    
    
    
    6,895
    
    
    
    (9,306
    )Net loss on discontinued
operations, net of taxes of $6,109
    
    
    (2,001
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    11,511
    
    
    $
    10,363
    
    
    $
    4,444
    
    
    $
    (5,762
    )
    
    
    $
    6,895
    
    
    $
    (9,306
    )Other Financial Data:Depreciation and amortization
    
    $
    21,939
    
    
    $
    14,611
    
    
    $
    11,533
    
    
    $
    919
    
    
    
    $
    6,074
    
    
    $
    8,653Purchases of fixed assets
    
    
    11,633
    
    
    
    9,408
    
    
    
    6,199
    
    
    
    289
    
    
    
    
    3,489
    
    
    
    5,294Cash flow provided by (used in):Operating activities
    
    $
    41,858
    
    
    $
    13,413
    
    
    $
    13,835
    
    
    $
    5,623
    
    
    
    $
    3,604
    
    
    $
    (14,289
    )Investing activities
    
    
    (124,672
    )
    
    
    (63,163
    )
    
    
    (5,197
    )
    
    
    (180,401
    )
    
    
    
    953
    
    
    
    (1,573
    )Financing activities
    
    
    72,586
    
    
    
    81,552
    
    
    
    (2,783
    )
    
    
    179,649
    
    
    
    
    (6,696
    )
    
    
    12,746
 PredecessorAltra
    
    Altra
    
    Altra
    
    AltraDecember
    
    December
    
    December
    
    December31,
    
    31,
    
    31,
    
    31,
    
    
    December 31,2007
    
    2006
    
    2005
    
    2004
    
    
    2003Balance Sheet Data:Cash and cash equivalents
    
    
    33,906
    
    
    $
    42,527
    
    
    $
    10,060
    
    
    $
    4,729
    
    
    
    $
    3,163Total assets
    
    
    568,624
    
    
    
    409,368
    
    
    
    297,404
    
    
    
    299,057
    
    
    
    
    174,324Long-term debt
    
    
    291,399
    
    
    
    228,555
    
    
    
    159,574
    
    
    
    158,740
    
    
    
    
    1,025Total stockholders equity (deficit)/Invested capital
    
    
    133,335
    
    
    
    79,519
    
    
    
    38,613
    
    
    
    42,879
    
    
    
    
    (3,004
    )
 24




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion of the financial condition and results of income of Altra Industrial
Motion, Inc. should be read together with the Selected Historical Financial Data, and the financial
statements of Altra Industrial Motion, Inc. and its Predecessor and related notes included
elsewhere in this Form 10-K. 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 and Risk
Factors.
 General
     History and the Acquisitions
    25




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##### Table of Contents



Divestitures
  Critical Accounting Policies
   Revenue Recognition
 26




---



##### Table of Contents



Inventory
  Retirement Benefits
 Goodwill and Intangible Assets
   27




---



##### Table of Contents



Long-lived Assets
 Income Taxes
 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.
   28




---



##### Table of Contents



Results of Operations
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005(Dollars in thousands)Net sales
    
    $
    584,376
    
    
    $
    462,285
    
    
    $
    363,465Cost of sales
    
    
    419,109
    
    
    
    336,836
    
    
    
    271,952Gross profit
    
    
    165,267
    
    
    
    125,449
    
    
    
    91,513Gross profit percentage
    
    
    28.3
    %
    
    
    27.1
    %
    
    
    25.2
    %Selling, general and administrative expenses
    
    
    93,160
    
    
    
    83,256
    
    
    
    61,421Research and development expenses
    
    
    6,077
    
    
    
    4,938
    
    
    
    4,683Restructuring charge, asset impairment and
transition expenses
    
    
    2,399
    
    
    
    
    
    
    
    Loss (gain) on curtailment of post-retirement
benefit plan
    
    
    2,745
    
    
    
    (3,838
    )
    
    
    Operating income from continuing operations
    
    
    60,886
    
    
    
    41,093
    
    
    
    25,409Interest expense, net
    
    
    38,554
    
    
    
    23,522
    
    
    
    17,065Other non-operating expense (income), net
    
    
    612
    
    
    
    856
    
    
    
    (17
    )Income from continuing operations before income taxes
    
    
    21,720
    
    
    
    16,715
    
    
    
    8,361Provision for income taxes
    
    
    8,208
    
    
    
    6,352
    
    
    
    3,917Net income from continuing operations
    
    $
    13,512
    
    
    $
    10,363
    
    
    $
    4,444Net loss from discontinued operations, net of taxes
of 6,109
    
    
    (2,001
    )
    
    
    
    
    
    
    Net Income
    
    $
    11,511
    
    
    $
    10,363
    
    
    $
    4,444
 Year Ended December 31, 2007 Compared with Year Ended December 31, 2006
 Net sales.
 Gross profit.
 Selling, general and administrative expenses.
 Research and development expenses.
 29




---



##### Table of Contents



EBITDA.
 Other non-operating (income) expense.
 Interest expense. 1 4 1 4 1 4 1 4
 Restructuring.
 Curtailment.
  Provision for income taxes.
 Discontinued Operations
   Sales
    
    $
    28,715Cost of sales
    
    
    19,120Gross Profit
    
    
    9,595Selling, general and administrative expenses
    
    
    5,334Research and development
    
    
    1,825Operating income from continuing operations
    
    
    2,436Interest income, net
    
    
    (76
    )Other non-operating income
    
    
    (83
    )
 30




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##### Table of Contents



Gain on the sale of the Electronics division
    
    
    1,513Total income from discontinued operations before income taxes
    
    
    4,108Income taxes
    
    
    6,109Total net loss from discontinued operations
    
    $
    (2,001
    )
 Year Ended December 31, 2006 Compared with Year Ended December 31, 2005
 Net sales..
 Gross profit.
 Selling, general and administrative expenses.
 Research and development expenses.
 EBITDA.
 Other non-operating (income) expense.
 Interest expense. 1 4 1 4
 Curtailment.
 Provision for income taxes.
 Liquidity and Capital Resources
 Overview
  31




---



##### Table of Contents



Borrowings
 1 1
 1
 1 4
    11 1/4%
 1 4 1
   Net Cash
   32




---



##### Table of Contents



1 4
 Capital Expenditures
   Pension Plans
  Off-Balance Sheet Arrangements
  Related Party Transactions
  33




---



##### Table of Contents



Contractual Obligations
  Payments Due by Period2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    Total9% senior secured notes(1)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    270.0
    
    
    $
    
    
    
    $
    
    
    
    $
    270.011 1/4% senior notes(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.8
    
    
    
    7.8Operating leases
    
    
    4.5
    
    
    
    3.1
    
    
    
    2.2
    
    
    
    1.6
    
    
    
    1.4
    
    
    
    3.0
    
    
    
    15.7Capital leases
    
    
    1.1
    
    
    
    0.9
    
    
    
    0.8
    
    
    
    0.8
    
    
    
    0.2
    
    
    
    
    
    
    
    3.8Mortgage(3)
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    2.1
    
    
    
    2.6TB Woods Revolving Credit Facility(4)
    
    
    1.5
    
    
    
    0.2
    
    
    
    6.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.7Variable Rate Demand Revenue Bonds(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.3
    
    
    
    5.3Senior Revolving Credit Facility(6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    6.3
    
    
    $
    3.4
    
    
    $
    8.6
    
    
    $
    271.1
    
    
    $
    0.8
    
    
    $
    68.2
    
    
    $
    306.9
 
 (1)
    
    We have semi-annual cash interest requirements due on the 9% senior secured notes with $24.3
million payable in, 2008, 2009, and 2010 and $22.3 million payable in 2011.(2)
    
    Assuming an exchange rate of 1.997 of U.S. Dollars to 1.0 U.K. Pounds as of December 31, 2007,
we have semi-annual cash interest requirements due on the 111/4% senior notes with $0.9 million
payable in 2008, 2009, 2010, 2011 and 2012 and $0.1 million thereafter. The principal balance of
£3.9 million is due in 2013 which, assuming an exchange rate of 1.997 of U.S. Dollars to 1.0 U.K.
Pounds, equals approximately $7.8 million.(3)
    
    In June, 2006, our German subsidiary entered into a mortgage on its building in Heidelberg,
Germany, with a local bank. The mortgage has a principal of 2.0 million, an interest rate of
5.75% and is payable in monthly installments over 15 years.(4)
    
    In April 2007, as part of the acquisition, we refinanced the TB Woods revolving credit
facility with a commercial bank. As of December 31, 2007, there was $7.7 million of outstanding
borrowings and $6.9 million of outstanding letters of credit under this facility.(5)
    
    In April 2007, as part of the TB Woods acquisition, we assumed the Variable Rate Demand
Revenue Bonds. These bonds bear variable interest rates and mature in April 2022 and April 2024.(6)
    
    We have up to $30.0 million of borrowing capacity, through November 2010, under our senior
revolving credit facility (including $10.0 million available for use for letters of credit). As of
December 31, 2007, there were no outstanding borrowings and $6.5 million of outstanding letters of
credit under our senior revolving credit facility.   Stock-based Compensation
   Income Taxes
  34




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##### Table of Contents



Seasonality
  Inflation
  Recent Accounting Pronouncements
 Fair
Value Measurements ,
 The Fair Value Option for Financial Assets and
Financial Liabilities- including an Amendment of FASB Statement No. 115
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements
  35




---



##### Table of Contents



Item 7A. Qualitative and Quantitative Information about Market Risk
  Currency translation.
 Currency transaction exposure.
 Interest rate risk.
 36




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 37




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Consolidated Balance Sheets
Dollars in thousands, except share amounts
 December 31,2007
    
    
    2006AssetsCurrent assets:Cash and cash equivalents
    
    $
    33,906
    
    
    $
    42,527Trade receivables, less allowance for doubtful accounts of $1,548 and $2,017
    
    
    73,248
    
    
    
    61,506Inventories, net
    
    
    101,835
    
    
    
    75,769Deferred income taxes
    
    
    8,286
    
    
    
    6,783Receivable for sale of Electronics (see Note 4)
    
    
    17,100
    
    
    
    Prepaid expenses and other
    
    
    5,578
    
    
    
    7,532Assets held for sale (see Note 6)
    
    
    1,161
    
    
    
    Total current assets
    
    
    241,114
    
    
    
    194,117Property, plant and equipment, net
    
    
    116,610
    
    
    
    82,387Intangible assets, net
    
    
    88,943
    
    
    
    59,662Goodwill
    
    
    114,979
    
    
    
    65,397Deferred income taxes
    
    
    231
    
    
    
    2,135Other assets
    
    
    6,747
    
    
    
    5,670Total assets
    
    $
    568,624
    
    
    $
    409,368Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    41,668
    
    
    $
    34,053Accrued payroll
    
    
    16,988
    
    
    
    15,557Accruals and other liabilities
    
    
    22,001
    
    
    
    13,709Taxes payable
    
    
    1,196
    
    
    
    6,549Deferred income taxes
    
    
    8,060
    
    
    
    1,382Current portion of long-term debt
    
    
    2,667
    
    
    
    573Total current liabilities
    
    
    92,580
    
    
    
    71,823Long-term debt, less current portion and net of unaccreted discount
    
    
    291,399
    
    
    
    228,555Deferred income taxes
    
    
    24,490
    
    
    
    7,130Pension liabilities
    
    
    13,431
    
    
    
    15,169Other post retirement benefits
    
    
    3,170
    
    
    
    3,262Long-term taxes payable
    
    
    5,911
    
    
    
    Other long term liabilities
    
    
    4,308
    
    
    
    3,910Commitments and Contingencies (see Note 16)
    
    
    
    
    
    
    Stockholders equityCommon stock (1,000 shares authorized, issued & outstanding, $0.001 par value)
    
    
    
    
    
    
    Additional paid-in capital
    
    
    97,829
    
    
    
    48,814Due to Parent
    
    
    13,208
    
    
    
    24,724Retained earnings
    
    
    20,375
    
    
    
    9,045Accumulated other comprehensive income (loss)
    
    
    1,923
    
    
    
    (3,064
    )133,335
    
    
    
    79,519Total liabilities and stockholders equity
    
    $
    568,624
    
    
    $
    409,368
  38




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Consolidated Statements of Income and Comprehensive Income (Loss)
Dollars in thousands
 Year-ended December 31,2007
    
    
    2006
    
    
    2005Consolidated Statement of IncomeNet sales
    
    $
    584,376
    
    
    $
    462,285
    
    
    $
    363,465Cost of sales
    
    
    419,109
    
    
    
    336,836
    
    
    
    271,952Gross profit
    
    
    165,267
    
    
    
    125,449
    
    
    
    91,513Selling, general and administrative expenses
    
    
    93,160
    
    
    
    83,256
    
    
    
    61,421Research and development expenses
    
    
    6,077
    
    
    
    4,938
    
    
    
    4,683Restructuring charges
    
    
    2,399
    
    
    
    
    
    
    
    Loss (gain) on curtailment of post-retirement benefit and pension plan, net
    
    
    2,745
    
    
    
    (3,838
    )
    
    
    Operating income from continuing operations
    
    
    60,886
    
    
    
    41,093
    
    
    
    25,409Interest expense, net
    
    
    38,554
    
    
    
    23,522
    
    
    
    17,065Other non-operating expense (income), net
    
    
    612
    
    
    
    856
    
    
    
    (17
    )Income from continuing operations before income taxes
    
    
    21,720
    
    
    
    16,715
    
    
    
    8,361Provision for income taxes
    
    
    8,208
    
    
    
    6,352
    
    
    
    3,917Net income from continuing operations
    
    
    13,512
    
    
    
    10,363
    
    
    
    4,444Net loss from discontinued operations, net of taxes of $6,109
    
    
    (2,001
    )
    
    
    
    
    
    
    Net Income
    
    
    11,511
    
    
    
    10,363
    
    
    
    4,444Consolidated Statement of Comprehensive Income (Loss)Pension liability adjustment
    
    
    482
    
    
    
    696
    
    
    
    (700
    )Foreign currency translation adjustment
    
    
    4,505
    
    
    
    677
    
    
    
    (6,400
    )Other comprehensive income (loss)
    
    
    4,987
    
    
    
    1,373
    
    
    
    (7,100
    )Comprehensive income (loss)
    
    $
    16,498
    
    
    $
    11,736
    
    
    $
    (2,656
    )
  39




---



##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Consolidated Statements of Stockholders Equity
Amounts in thousands
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    OtherCommon
    
    
    Paid-In
    
    
    Retained Earnings
    
    
    
    
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    (Deficit)
    
    
    Due to Parent
    
    
    Income (Loss)
    
    
    TotalBalance at December 31, 2004
    
    $
    
    
    
    $
    48,814
    
    
    $
    (5,762
    )
    
    
    
    
    
    $
    (173
    )
    
    $
    42,879Net income
    
    
    
    
    
    
    
    
    
    
    4,444
    
    
    
    
    
    
    
    
    
    
    
    4,444Payments made on behalf of
parent company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,610
    )
    
    
    
    
    
    
    (1,610
    )Other comprehensive loss,
net of $1,938 tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,100
    )
    
    
    (7,100
    )Balance at December 31, 2005
    
    
    
    
    
    $
    48,814
    
    
    $
    (1,318
    )
    
    $
    (1,610
    )
    
    $
    (7,273
    )
    
    $
    38,613Net income
    
    
    
    
    
    
    
    
    
    
    10,363
    
    
    
    
    
    
    
    
    
    
    
    10,363Net proceeds received from
parent company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,334
    
    
    
    
    
    
    
    26,334Cumulative foreign currency
translation adjustment, net
of $880 tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    677
    
    
    
    677Minimum pension liability
adjustment and cumulative
transition to SFAS No. 158,
net of $2,165 tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,532
    
    
    
    3,532Balance at December 31, 2006
    
    $
    
    
    
    $
    48,814
    
    
    $
    9,045
    
    
    
    24,724
    
    
    $
    (3,064
    )
    
    $
    79,519Net income
    
    
    
    
    
    
    
    
    
    
    11,511
    
    
    
    
    
    
    
    
    
    
    
    11,511Capital contribution by
parent company
    
    
    
    
    
    
    49,015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,015Adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    (181
    )
    
    
    
    
    
    
    
    
    
    
    (181
    )Payments made on behalf of
parent company, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,516
    )
    
    
    
    
    
    
    (11,516
    )Cumulative foreign currency
translation adjustment, net
of $1,873 tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,505
    
    
    
    4,505Pension liability
adjustment, net of $28 tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    482
    
    
    
    482Balance at December 31, 2007
    
    $
    
    
    
    $
    97,829
    
    
    $
    20,375
    
    
    $
    13,208
    
    
    $
    1,923
    
    
    $
    133,335
  40




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Consolidated Statements of Cash Flows
Dollars in thousands
 Year-ended
    
    
    Year-ended
    
    
    Year-endedDecember 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    11,511
    
    
    $
    10,363
    
    
    $
    4,444Adjustments to reconcile net income to cash provided by
operating activities:Depreciation
    
    
    16,447
    
    
    
    10,821
    
    
    
    8,574Amortization of intangible assets
    
    
    5,492
    
    
    
    3,790
    
    
    
    2,959Amortization of deferred loan costs
    
    
    3,448
    
    
    
    968
    
    
    
    621Loss on foreign currency, net
    
    
    732
    
    
    
    1,079
    
    
    
    Accretion of debt discount and premium, net
    
    
    774
    
    
    
    942
    
    
    
    942Gain on sale of Electronics division
    
    
    (2,927
    )
    
    
    
    
    
    
    Amortization of inventory fair value adjustment
    
    
    926
    
    
    
    2,278
    
    
    
    1,699Stock based compensation
    
    
    2,038
    
    
    
    1,945
    
    
    
    Loss (gain) on sale of fixed assets
    
    
    313
    
    
    
    
    
    
    
    (99
    )Loss (gain) on curtailment of pension and
post-retirement benefit obligation, net
    
    
    2,745
    
    
    
    (3,838
    )
    
    
    Provision for deferred taxes
    
    
    5,455
    
    
    
    1,190
    
    
    
    245Changes in operating assets and liabilities:Trade receivables
    
    
    4,318
    
    
    
    (330
    )
    
    
    (2,654
    )Inventories
    
    
    (2,277
    )
    
    
    (3,973
    )
    
    
    (1,353
    )Accounts payable and accrued liabilities
    
    
    (10,691
    )
    
    
    (10,277
    )
    
    
    (1,832
    )Other current assets and liabilities
    
    
    3,735
    
    
    
    (2,297
    )
    
    
    2,226Other operating assets and liabilities
    
    
    (181
    )
    
    
    752
    
    
    
    (1,940
    )Net cash provided by operating activities
    
    
    41,858
    
    
    
    13,413
    
    
    
    13,835Cash flows from investing activities:Purchases of fixed assets
    
    
    (11,633
    )
    
    
    (9,408
    )
    
    
    (6,199
    )Acquisitions, net of $5,522 and $775 of cash acquired in
2007 and 2006, respectively
    
    
    (123,867
    )
    
    
    (53,755
    )
    
    
    1,607Proceeds from sale of adjustable speed drives business, net
of cash of $1,072
    
    
    10,828
    
    
    
    
    
    
    
    Payment of additional Kilian purchase price
    
    
    
    
    
    
    
    
    
    
    (730
    )Proceeds from sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    125Net cash used in investing activities
    
    
    (124,672
    )
    
    
    (63,163
    )
    
    
    (5,197
    )Cash flows from financing activities:Proceeds from issuance of senior secured notes
    
    
    106,050
    
    
    
    
    
    
    
    Payments on senior notes
    
    
    (58,428
    )
    
    
    
    
    
    
    Capital contribution from Parent
    
    
    49,015
    
    
    
    
    
    
    
    Net payments received from (made on behalf of) parent company
    
    
    (13,554
    )
    
    
    24,389
    
    
    
    (1,610
    )Proceeds from issuance of senior notes
    
    
    
    
    
    
    57,625
    
    
    
    Payment of debt issuance costs
    
    
    (4,235
    )
    
    
    (2,731
    )
    
    
    (338
    )Proceeds from mortgages
    
    
    
    
    
    
    2,510
    
    
    
    Borrowings under revolving credit agreement
    
    
    8,315
    
    
    
    5,057
    
    
    
    4,408Payments on revolving credit agreement
    
    
    (13,520
    )
    
    
    (5,057
    )
    
    
    (4,408
    )Payment of capital leases
    
    
    (931
    )
    
    
    (241
    )
    
    
    (835
    )Payments on mortgages
    
    
    (126
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    72,586
    
    
    
    81,552
    
    
    
    (2,783
    )Effect of exchange rates on cash
    
    
    1,607
    
    
    
    665
    
    
    
    (524
    )(Decrease) increase in cash and cash equivalents
    
    
    (8,621
    )
    
    
    32,467
    
    
    
    5,331Cash and cash equivalents, beginning of period
    
    
    42,527
    
    
    
    10,060
    
    
    
    4,729Cash and cash equivalents, end of period
    
    $
    33,906
    
    
    $
    42,527
    
    
    $
    10,060Cash paid during the period for:Interest
    
    $
    36,961
    
    
    $
    23,660
    
    
    $
    15,448Income Taxes
    
    $
    13,277
    
    
    $
    2,341
    
    
    $
    1,761Non-Cash Financing:Acquisition of capital equipment under capital lease
    
    $
    2,364
    
    
    $
    613
    
    
    $
    
  41




---



##### Table of Contents



Notes to Consolidated Financial Statements
 1. Description of Business and Summary of Significant Accounting Policies
 Basis of Preparation and Description of Business
  Principles of Consolidation
  42




---



##### Table of Contents



1. Description of Business and Summary of Significant Accounting Policies (continued)
 Fair Value of Financial Instruments
  Use of Estimates
  Foreign currency translation
   Cash and Cash Equivalents
  Trade Receivables
  Inventories
   Property, Plant and Equipment
   Buildings and improvements
    
    15 to 45 yearsMachinery and equipment
    
    2 to 15 yearsCapital lease
    
    Life of lease
  43




---



##### Table of Contents



1. Description of Business and Summary of Significant Accounting Policies (continued)
 Intangible Assets
  Goodwill
  Impairment of Goodwill and Indefinite-Lived Intangible Assets
  Impairment of Long-Lived Assets Other Than Goodwill and Indefinite-Lived Intangible Assets
  Debt Issuance Costs
  Revenue Recognition
   Shipping and Handling Costs
  Warranty Costs
  44




---



##### Table of Contents



1. Description of Business and Summary of Significant Accounting Policies (continued)
 Self-Insurance
  Research and Development
  Advertising
  Stock-Based Compensation
  Income Taxes
    45




---



##### Table of Contents



Accumulated Other Comprehensive Income (Loss)
  MinimumPension
    
    
    Cumulative
    
    
    AccumulatedLiability/SFAS
    
    
    foreign currency
    
    
    otherNo. 158
    
    
    translation
    
    
    comprehensiveAsset/(liability)
    
    
    adjustment
    
    
    income (loss)Balance at December 31, 2004
    
    
    (722
    )
    
    
    549
    
    
    
    (173
    )Minimum pension liability adjustment
    
    
    (700
    )
    
    
    
    
    
    
    (700
    )Foreign currency translation adjustment
    
    
    
    
    
    
    (6,400
    )
    
    
    (6,400
    )Balance at December 31, 2005
    
    
    (1,422
    )
    
    
    (5,851
    )
    
    
    (7,273
    )Minimum pension liability adjustment
    
    
    696
    
    
    
    
    
    
    
    696Foreign currency translation adjustment
    
    
    
    
    
    
    677
    
    
    
    677Cumulative adjustment for transition to SFAS No. 158
    
    
    2,836
    
    
    
    
    
    
    
    2,836Balance at December 31, 2006
    
    $
    2,110
    
    
    $
    (5,174
    )
    
    $
    (3,064
    )Pension liability adjustment
    
    
    482
    
    
    
    
    
    
    
    482Foreign currency translation adjustment
    
    
    
    
    
    
    4,505
    
    
    
    4,505Balance at December 31, 2007
    
    $
    2,592
    
    
    $
    (669
    )
    
    $
    1,923
 Reclassifications
  2. Recent Accounting Pronouncements
 Fair
Value Measurements ,
 The Fair Value Option for Financial Assets and
Financial Liabilities- including an Amendment of FASB Statement No. 115
 Business Combinations
 46




---



##### Table of Contents



Noncontrolling Interests in Consolidated
Financial Statements
  3. Acquisitions
    Total purchase price, including closing costs of approximately $2.7 million
    
    $
    124,092Cash and cash equivalents
    
    
    5,522Trade receivables
    
    
    16,186Inventories
    
    
    29,215Prepaid expenses and other
    
    
    1,927Property, plant and equipment
    
    
    38,574Intangible assets
    
    
    41,901Total assets acquired
    
    $
    133,325Accounts payable, accrued payroll, and accruals and other current liabilities
    
    $
    22,768Debt
    
    
    18,669Other liabilities
    
    
    24,424Total liabilities assumed
    
    $
    65,861Net assets acquired
    
    $
    67,464Excess purchase price over the fair value of net assets acquired
    
    $
    56,628
   Customer relationships, subject to amortization
    
    $
    30,117Trade names and trademarks, not subject to amortization
    
    
    11,784Total intangible assets
    
    $
    41,901
 47




---



##### Table of Contents



Total purchase price, including closing costs of approximately $1.8 million
and the working capital adjustment of $0.4 million
    
    $
    50,584Cash and cash equivalents
    
    
    775Trade receivables
    
    
    12,111Inventories
    
    
    17,004Prepaid expenses and other
    
    
    510Property, plant and equipment
    
    
    13,670Intangible assets
    
    
    16,352Total assets acquired
    
    
    60,422Accounts payable, accrued payroll, and accruals and other current liabilities
    
    
    12,971Other liabilities
    
    
    8,784Total liabilities assumed
    
    
    21,755Net assets acquired
    
    
    38,667Excess purchase price over the fair value of net assets acquired
    
    $
    12,809
 48




---



##### Table of Contents



Patents, subject to amortization
    
    $
    110Customer relationships, subject to amortization
    
    
    9,312Trade names and trademarks, not subject to amortization
    
    
    6,930Total intangible assets
    
    $
    16,352
      Pro Forma (unaudited)Year Ended
    
    
    Year EndedDecember 31, 2007
    
    
    December 31, 2006Total revenues
    
    $
    623,249
    
    
    $
    591,131Net income from continuing operations
    
    
    11,697
    
    
    
    6,845Net loss from discontinued operations
    
    
    (2,001
    )
    
    
    Net income
    
    $
    9,696
    
    
    $
    6,845
 49




---



##### Table of Contents



4. Discontinued Operations
  Accounting
for the Impairment or Disposal of Long-Lived Assets
  April 5 toDecember 31,2007Sales
    
    $
    28,715Cost of sales
    
    
    19,120Gross Profit
    
    
    9,595Selling, general and administrative expenses
    
    
    5,334Research and development
    
    
    1,825Operating income from continuing operations
    
    
    2,436Interest income, net
    
    
    76Other non-operating income
    
    
    83Gain on the sale of the Electronics division
    
    
    1,513Total income from discontinued operations before income taxes
    
    
    4,108Income taxes
    
    
    (6,109
    )Total net loss from discontinued operations
    
    $
    (2,001
    )
  5. Inventories
  2007
    
    
    2006Raw materials
    
    $
    33,601
    
    
    $
    26,731Work in process
    
    
    20,376
    
    
    
    19,112Finished goods
    
    
    47,858
    
    
    
    29,926Inventories, net
    
    $
    101,835
    
    
    
    75,769
  6. Property, Plant and Equipment
  50




---



##### Table of Contents



2007
    
    
    2006Land
    
    $
    13,993
    
    
    $
    9,599Buildings and improvements
    
    
    33,927
    
    
    
    19,849Machinery and equipment
    
    
    102,678
    
    
    
    71,866150,598
    
    
    
    101,314LessAccumulated depreciation
    
    
    (33,988
    )
    
    
    (18,927
    )$
    116,610
    
    
    $
    82,387
  7. Goodwill and Intangible Assets
  GoodwillBalance December 31, 2006
    
    $
    65,397Additions related to TB Woods acquisition
    
    
    56,628Additions related to All Power acquisition
    
    
    628Impact of additional tax contingencies
    
    
    956Adjustments to acquisition related deferred tax liabilities
    
    
    (2,309
    )Working capital adjustments related to the purchase price of Hay Hall
    
    
    (446
    )Reductions related to sale of the Electronics division
    
    
    (7,931
    )Impact of changes in foreign currency
    
    
    2,056Balance December 31, 2007
    
    $
    114,979
 December 31, 2007
    
    
    December 31, 2006Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationOther IntangiblesIntangible assets not subject to amortization:Tradenames and trademarks
    
    
    30,730
    
    
    $
    
    
    
    $
    23,010
    
    
    $
    Intangible assets subject to amortization:Customer relationships
    
    
    62,038
    
    
    
    10,139
    
    
    
    37,114
    
    
    
    5,679Product technology and patents
    
    
    5,232
    
    
    
    2,348
    
    
    
    5,232
    
    
    
    1,316Impact of changes in foreign currency
    
    
    3,430
    
    
    
    
    
    
    
    1,301
    
    
    
    Total intangible assets
    
    $
    101,430
    
    
    
    12,487
    
    
    $
    66,657
    
    
    $
    6,995
    8. Warranty Costs
  Year  Ended
    
    
    Year  EndedDecember 31,
    
    
    December 31,2007
    
    
    2006Balance at beginning of period
    
    $
    2,083
    
    
    $
    1,876Balance assumed with TB Woods acquisition
    
    
    843
    
    
    
    Accrued warranty costs
    
    
    2,310
    
    
    
    1,666Balance sold with the Electronics division
    
    
    (873
    )
    
    
    Payments and adjustments
    
    
    (265
    )
    
    
    (1,459
    )Balance at end of period
    
    
    4,098
    
    
    $
    2,083
 51




---



##### Table of Contents



9. Income Taxes
  December 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005Domestic
    
    $
    10,241
    
    
    $
    17,946
    
    
    $
    4,635Foreign
    
    
    11,479
    
    
    
    (1,231
    )
    
    
    3,726$
    21,720
    
    
    $
    16,715
    
    
    $
    8,361
  December 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005Current:Federal
    
    $
    781
    
    
    $
    3,171
    
    
    $
    1,631Foreign and State
    
    
    1,972
    
    
    
    1,991
    
    
    
    2,0382,753
    
    
    
    5,162
    
    
    
    3,669Deferred:Federal
    
    
    4,988
    
    
    
    998
    
    
    
    532Foreign and state
    
    
    467
    
    
    
    192
    
    
    
    (284
    )5,455
    
    
    
    1,190
    
    
    
    248Provision (benefit) for income taxes
    
    $
    8,208
    
    
    $
    6,352
    
    
    $
    3,917
  December 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005Tax at U.S. federal income tax rate
    
    $
    7,584
    
    
    $
    5,850
    
    
    $
    2,926State taxes, net of federal income tax effect
    
    
    306
    
    
    
    682
    
    
    
    373Change in tax rate
    
    
    (750
    )
    
    
    
    
    
    
    Foreign Taxes
    
    
    1,761
    
    
    
    944
    
    
    
    786Interest
    
    
    (1,365
    )
    
    
    (1,361
    )
    
    
    Foreign and other
    
    
    672
    
    
    
    237
    
    
    
    (168
    )Provision (benefit) for income taxes
    
    $
    8,208
    
    
    $
    6,352
    
    
    $
    3,917
   Balance at January 1, 2007
    
    $
    922Increases related to prior year tax positions
    
    
    1,916Increases related to acquisitions
    
    
    3,581Decreases related to prior year tax positions
    
    
    (1,970
    )Increases related to current year tax positions
    
    
    1,785Lapse of statute limitations
    
    
    (651
    )Balance at December 31, 2007
    
    $
    5,583
 52




---



##### Table of Contents



53




---



##### Table of Contents



2007
    
    
    2006Deferred tax assets:Post-retirement obligations
    
    $
    5,031
    
    
    $
    5,247Goodwill
    
    
    2,051
    
    
    
    7,555Inventory
    
    
    
    
    
    
    2,036Expenses not currently deductible
    
    
    6,801
    
    
    
    5,852Net operating loss carryover
    
    
    1,761
    
    
    
    2,899Other
    
    
    177
    
    
    
    557Total deferred tax assets
    
    
    15,821
    
    
    
    24,146Valuation allowance for deferred tax assets
    
    
    (1,336
    )
    
    
    (1,252
    )Net deferred tax assets
    
    
    14,485
    
    
    
    22,894Deferred tax liabilities:Property, plant and equipment
    
    
    16,081
    
    
    
    9,650Intangible assets
    
    
    20,331
    
    
    
    11,730Other
    
    
    2,106
    
    
    
    1,108Total deferred tax liabilities
    
    
    38,518
    
    
    
    22,488Net deferred tax liabilities
    
    
    (24,033
    )
    
    
    406
     10.
    
    Pension and Other Employee Benefits
 Defined Benefit (Pension) and Postretirement Benefit Plans
    54




---



##### Table of Contents



Pension Benefits
    
    
    Post retirement BenefitsYear ended
    
    
    Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Change in benefit obligation:Obligation at beginning of period
    
    $
    26,121
    
    
    $
    27,697
    
    
    $
    3,549
    
    
    $
    10,983Service cost
    
    
    325
    
    
    
    513
    
    
    
    72
    
    
    
    140Interest cost
    
    
    1,452
    
    
    
    1,491
    
    
    
    175
    
    
    
    315Amendments
    
    
    
    
    
    
    57
    
    
    
    (25
    )
    
    
    (2,564
    )Curtailments
    
    
    2,899
    
    
    
    119
    
    
    
    (154
    )
    
    
    (3,838
    )Actuarial loss (gain)
    
    
    (1,756
    )
    
    
    (1,188
    )
    
    
    168
    
    
    
    (1,291
    )Foreign exchange effect
    
    
    374
    
    
    
    326
    
    
    
    
    
    
    
    Benefits paid
    
    
    (1,404
    )
    
    
    (2,894
    )
    
    
    (303
    )
    
    
    (196
    )Obligation at end of period
    
    $
    28,011
    
    
    $
    26,121
    
    
    $
    3,482
    
    
    $
    3,549Change in plan assets:Fair value of plan assets, beginning
of period
    
    $
    10,952
    
    
    $
    5,832
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    1,196
    
    
    
    821
    
    
    
    
    
    
    
    Employer contribution
    
    
    3,836
    
    
    
    7,193
    
    
    
    302
    
    
    
    196Benefits paid
    
    
    (1,404
    )
    
    
    (2,894
    )
    
    
    (302
    )
    
    
    (196
    )Fair value of plan assets, end of period
    
    $
    14,580
    
    
    $
    10,952
    
    
    $
    
    
    
    $
    Funded status
    
    $
    (13,431
    )
    
    $
    (15,169
    )
    
    $
    (3,482
    )
    
    $
    (3,549
    )Amounts Recognized in the balance sheet
consist of:Non current assets
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Current liabilities
    
    
    
    
    
    
    
    
    
    
    (312
    )
    
    
    (287
    )Non-current liabilities
    
    
    (13,431
    )
    
    
    (15,169
    )
    
    
    (3,170
    )
    
    
    (3,262
    )Total
    
    $
    (13,431
    )
    
    $
    (15,169
    )
    
    $
    (3,482
    )
    
    $
    (3,549
    )
   2007
    
    2006Pension benefits
    
    
    6.25
    %
    
    
    5.75
    %Other postretirement benefits
    
    
    6.25
    %
    
    
    5.75
    %
  Pension Benefits
    
    
    Postretirement BenefitsYear ended
    
    
    Year ended
    
    
    Year ended
    
    
    Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Service cost
    
    $
    325
    
    
    $
    513
    
    
    $
    591
    
    
    $
    72
    
    
    $
    140
    
    
    $
    295Interest cost
    
    
    1,452
    
    
    
    1,491
    
    
    
    1,362
    
    
    
    175
    
    
    
    315
    
    
    
    549Recognized net actuarial loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (113
    )
    
    
    Expected return on plan
assets
    
    
    (1,066
    )
    
    
    (829
    )
    
    
    (431
    )
    
    
    
    
    
    
    
    
    
    
    Settlement/Curtailment
    
    
    2,899
    
    
    
    119
    
    
    
    
    
    
    
    (154
    )
    
    
    (3,838
    )
    
    
    Amortization
    
    
    (4
    )
    
    
    6
    
    
    
    72
    
    
    
    (1,022
    )
    
    
    (640
    )
    
    
    (423
    )Net periodic benefit cost
    
    $
    3,606
    
    
    $
    1,300
    
    
    $
    1,594
    
    
    $
    (929
    )
    
    $
    (4,136
    )
    
    $
    421
  55




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##### Table of Contents



Pension Benefits
    
    Postretirement BenefitsYear ended
    
    Year ended
    
    Year ended
    
    Year ended
    
    Year ended
    
    Year endedDecember 31,
    
    December 31,
    
    December 31,
    
    December 31,
    
    December 31,
    
    December 31,2007
    
    2006
    
    2005
    
    2007
    
    2006
    
    2005Discount rate
    
    
    5.75
    %
    
    
    5.5
    %
    
    
    5.5
    %
    
    
    5.75
    %
    
    
    5.5
    %
    
    
    5.5
    %Expected return on
plan assets
    
    
    8.5
    %
    
    
    8.5
    %
    
    
    8.5
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ACompensation rate
increase
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  56




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##### Table of Contents



1-Percentage-
    
    1-Percentage-Point
    
    PointIncrease
    
    DecreaseEffect on service and interest cost components for the period January 1, 2007
through December 31, 2007
    
    $
    31
    
    
    $
    (25
    )Effect on the December 31, 2007 post-retirement benefit obligation
    
    $
    287
    
    
    $
    (239
    )
  Allocation Percentage ofPlan Assets at Year-End2007
    
    2007
    
    2006Actual
    
    Target
    
    ActualAsset CategoryEquity securities
    
    
    66
    %
    
    
    65
    %
    
    
    59
    %Fixed income securities
    
    
    34
    %
    
    
    35
    %
    
    
    41
    %
  57




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##### Table of Contents



Expected cash flows
  Pension
    
    PostretirementBenefits
    
    BenefitsExpected benefit payments (from plan assets)
    
    
    2008
    
    
    $
    1,194
    
    
    $
    3112009
    
    
    
    1,315
    
    
    
    3322010
    
    
    
    1,428
    
    
    
    3352011
    
    
    
    1,533
    
    
    
    3372012
    
    
    
    1,688
    
    
    
    3122013-2017
    
    
    
    9,871
    
    
    
    910
        Defined Contribution Plans
   58




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##### Table of Contents



59




---



##### Table of Contents



Pension as of December 31, 2006Prior to
    
    
    As Reported atAdopting SFAS
    
    
    December 31,No. 158
    
    
    2006Plan Funded Status:Benefit obligation
    
    $
    (26,121
    )
    
    $
    (26,121
    )Allowance for future salary increases
    
    
    
    
    
    
    Projected benefit obligation
    
    
    (26,121
    )
    
    
    (26,121
    )Fair value of assets
    
    
    10,952
    
    
    
    10,952Funded Status
    
    
    (15,169
    )
    
    
    (15,169
    )Unrecognized loss
    
    
    1,154
    
    
    
    N/AUnrecognized prior service cost
    
    
    43
    
    
    
    N/AAccrued benefit cost
    
    $
    (13,972
    )
    
    
    N/ABalance Sheet:Prepaid benefit cost
    
    $
    
    
    
    
    N/AIntangible asset
    
    
    43
    
    
    
    N/AAccrued benefit cost
    
    
    (15,122
    )
    
    
    N/ANet liability
    
    $
    (15,079
    )
    
    $
    (15,169
    )Corresponding charges to equity accounts:Retained earnings
    
    $
    13,972
    
    
    $
    13,972Accumulated other comprehensive loss
    
    
    1,154
    
    
    
    1,197Total charges to equity
    
    $
    15,126
    
    
    $
    15,169
 Post-Retirement Benefits as ofDecember 31, 2006Prior to
    
    
    As Reported atAdopting
    
    
    December 31,SFAS No. 158
    
    
    2006Plan Funded Status:Benefit obligation
    
    $
    (3,549
    )
    
    $
    (3,549
    )Fair value of assets
    
    
    
    
    
    
    Funded Status
    
    
    (3,549
    )
    
    
    (3,549
    )Unrecognized gain
    
    
    (1,016
    )
    
    
    N/AUnrecognized prior service cost
    
    
    (3,602
    )
    
    
    N/AAccrued benefit cost
    
    $
    (8,167
    )
    
    
    N/ABalance Sheet:Prepaid benefit cost
    
    
    N/A
    
    
    
    N/AIntangible asset
    
    
    N/A
    
    
    
    N/AAccrued benefit cost
    
    
    N/A
    
    
    
    N/ANet liability
    
    
    N/A
    
    
    $
    (3,549
    )Corresponding charges to equity accounts:Retained earnings
    
    
    N/A
    
    
    $
    8,167Accumulated other comprehensive loss
    
    
    N/A
    
    
    
    (4,618
    )Total charges to equity
    
    
    N/A
    
    
    $
    3,549
 60




---



##### Table of Contents



11.
    
    Long-Term Debt
 Revolving Credit Agreement
     TB Woods Revolving Credit Agreement
  Overdraft Agreements
  9% Senior Secured Notes
    11.25% Senior Notes
  61




---



##### Table of Contents



Subordinated Notes
  Variable Rate Demand Revenue Bonds
  Mortgage
  
 Capital Leases
  62




---



##### Table of Contents



12.
    
    Stockholders Equity
  Restricted Common Stock
   63




---



##### Table of Contents



13.
    
    Related-Party Transactions
 Joy Global Sales
  Management Agreement
  Transition Services Agreement
  14.
    
    Concentrations of Credit, Business Risks and Workforce
     Net SalesYear-ended
    
    
    Year-ended
    
    
    Year-ended
    
    
    Property, Plant and EquipmentDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006North America (primarily U.S.)
    
    $
    424,031
    
    
    $
    332,647
    
    
    $
    288,883
    
    
    $
    84,850
    
    
    $
    50,673Europe
    
    
    137,908
    
    
    
    113,799
    
    
    
    59,176
    
    
    
    29,767
    
    
    
    29,865Asia and other
    
    
    22,437
    
    
    
    15,839
    
    
    
    15,406
    
    
    
    1,993
    
    
    
    1,849Total
    
    $
    584,376
    
    
    $
    462,285
    
    
    $
    363,465
    
    
    $
    116,610
    
    
    $
    82,387
 64




---



##### Table of Contents



15.
    
    Restructuring, Asset Impairment and Transition Expenses
   Altra Plan
    
    
    TB Woods Plan
    
    
    TotalExpensesNon-cash asset impairment
and loss on sale of fixed
asset
    
    $
    215
    
    
    $
    
    
    
    $
    215Other cash expensesMoving and relocation
    
    
    1,055
    
    
    
    267
    
    
    
    1,322Severance
    
    
    718
    
    
    
    
    
    
    
    718Other
    
    
    144
    
    
    
    
    
    
    
    144Total cash expenses
    
    
    1,917
    
    
    
    267
    
    
    
    2,184Total restructuring expenses
    
    $
    2,132
    
    
    $
    267
    
    
    $
    2,399
  Altra Plan
    
    
    TB Woods Plan
    
    
    TotalBalance at December 31, 2006
    
    $
    
    
    
    $
    
    
    
    $
    Restructuring expense incurred
    
    
    2,132
    
    
    
    267
    
    
    
    2,399Accruals established as part of purchase
accounting related to severance
    
    
    
    
    
    
    1,741
    
    
    
    1,741Cash payments
    
    
    (1,468
    )
    
    
    (979
    )
    
    
    (2,447
    )Non-cash loss on disposal of fixed assets
    
    
    (215
    )
    
    
    
    
    
    
    (215
    )Balance at December 31, 2007
    
    $
    449
    
    
    $
    1,029
    
    
    $
    1,478
  16.
    
    Commitments and Contingencies
 65




---



##### Table of Contents



Minimum Lease Obligations
  Year ending December 31:
    
    Operating Leases
    
    
    Capital Leases2008
    
    $
    4,452
    
    
    $
    1,0692009
    
    
    3,090
    
    
    
    8942010
    
    
    2,199
    
    
    
    8052011
    
    
    1,600
    
    
    
    7652012
    
    
    1,357
    
    
    
    215Thereafter
    
    
    3,009
    
    
    
    34Total lease obligations
    
    $
    15,707
    
    
    
    3,782Less amounts representing interest
    
    
    
    
    
    
    (440
    )Present value of minimum capital lease obligations
    
    
    
    
    
    $
    3,342
  General Litigation
  17. Unaudited Quarterly Results of Operations:
 Year ending December 31, 2007
 Fourth
    
    
    Third
    
    
    Second
    
    
    FirstNet Sales
    
    $
    150,864
    
    
    $
    147,278
    
    
    $
    153,528
    
    
    $
    132,706Gross Profit
    
    
    42,421
    
    
    
    41,681
    
    
    
    43,117
    
    
    
    38,048Net income from continuing operations
    
    
    1,933
    
    
    
    3,424
    
    
    
    4,387
    
    
    
    3,768Net income (loss) from discontinued operations
    
    
    (3,353
    )
    
    
    886
    
    
    
    466
    
    
    
    Net income
    
    
    (1,420
    )
    
    
    4,310
    
    
    
    4,853
    
    
    
    3,768
 Year ending December 31, 2006
 Fourth
    
    
    Third
    
    
    Second
    
    
    FirstNet Sales
    
    $
    114,774
    
    
    $
    112,953
    
    
    $
    119,774
    
    
    $
    114,784Gross Profit
    
    
    30,897
    
    
    
    30,425
    
    
    
    32,273
    
    
    
    31,854Net income (loss)
    
    
    (1,587
    )
    
    
    3,949
    
    
    
    3,917
    
    
    
    4,084
  66




---



##### Table of Contents



18. Guarantor Subsidiaries
  Condensed Consolidating Balance Sheets of the Company
December 31, 2007
 December 31, 2007NonIssuer
    
    
    Guarantor
    
    
    Guarantor
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    4,571
    
    
    $
    (492
    )
    
    $
    29,827
    
    
    $
    
    
    
    $
    33,906Trade receivables, less allowance for doubtful accounts
    
    
    
    
    
    
    45,938
    
    
    
    27,310
    
    
    
    
    
    
    
    73,248Loan receivable from related parties
    
    
    
    
    
    
    78,992
    
    
    
    
    
    
    
    (78,992
    )
    
    
    Inventories, less allowances for obsolete materials
    
    
    
    
    
    
    69,720
    
    
    
    32,115
    
    
    
    
    
    
    
    101,835Deferred income taxes
    
    
    
    
    
    
    8,468
    
    
    
    (182
    )
    
    
    
    
    
    
    8,286Receivable for sale of Electronics
    
    
    17,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,100Prepaid expenses and other
    
    
    1,165
    
    
    
    1,634
    
    
    
    2,779
    
    
    
    
    
    
    
    5,578Assets held for sale
    
    
    
    
    
    
    
    
    
    
    1,161
    
    
    
    
    
    
    
    1,161Total current assets
    
    
    22,836
    
    
    
    204,260
    
    
    
    93,010
    
    
    
    (78,992
    )
    
    
    241,114Property, plant and equipment, net
    
    
    
    
    
    
    80,138
    
    
    
    36,472
    
    
    
    
    
    
    
    116,610Intangible assets, net
    
    
    
    
    
    
    66,432
    
    
    
    22,511
    
    
    
    
    
    
    
    88,943Goodwill
    
    
    
    
    
    
    89,323
    
    
    
    25,656
    
    
    
    
    
    
    
    114,979Deferred income taxes
    
    
    
    
    
    
    (66
    )
    
    
    297
    
    
    
    
    
    
    
    231Other assets
    
    
    5,778
    
    
    
    469
    
    
    
    500
    
    
    
    
    
    
    
    6,747Investments in subsidiaries
    
    
    391,493
    
    
    
    
    
    
    
    
    
    
    
    (391,493
    )
    
    
    $
    420,107
    
    
    $
    440,556
    
    
    $
    178,446
    
    
    $
    (470,485
    )
    
    $
    568,624Liabilities and stockholders (deficit) equityCurrent liabilities:Accounts payable
    
    $
    2,241
    
    
    $
    23,378
    
    
    $
    16,049
    
    
    $
    
    
    
    $
    41,668Accrued payroll
    
    
    2,328
    
    
    
    7,231
    
    
    
    7,429
    
    
    
    
    
    
    
    16,988Accruals and other current liabilities
    
    
    4,010
    
    
    
    13,223
    
    
    
    4,768
    
    
    
    
    
    
    
    22,001Taxes payable
    
    
    
    
    
    
    1,196
    
    
    
    
    
    
    
    
    
    
    
    1,196Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    8,060
    
    
    
    
    
    
    
    8,060Current portion of long-term debt
    
    
    
    
    
    
    2,096
    
    
    
    571
    
    
    
    
    
    
    
    2,667Loans payable from related parties
    
    
    3,215
    
    
    
    
    
    
    
    75,777
    
    
    
    (78,992
    )
    
    
    Total current liabilities
    
    
    11,794
    
    
    
    47,124
    
    
    
    112,654
    
    
    
    (78,992
    )
    
    
    92,580Long-term debt, less current portion
    
    
    274,978
    
    
    
    13,436
    
    
    
    2,985
    
    
    
    
    
    
    
    291,399Deferred income taxes
    
    
    
    
    
    
    25,343
    
    
    
    (853
    )
    
    
    
    
    
    
    24,490Pension liabilities
    
    
    
    
    
    
    10,227
    
    
    
    3,204
    
    
    
    
    
    
    
    13,431Other post-retirement benefits
    
    
    
    
    
    
    3,170
    
    
    
    
    
    
    
    
    
    
    
    3,170Long-term taxes payable
    
    
    
    
    
    
    4,221
    
    
    
    1,690
    
    
    
    
    
    
    
    5,911Other long-term liabilities
    
    
    
    
    
    
    1,139
    
    
    
    3,169
    
    
    
    
    
    
    
    4,308Total liabilities
    
    
    286,772
    
    
    
    104,660
    
    
    
    122,849
    
    
    
    (78,992
    )
    
    
    435,289Total stockholders equity
    
    
    133,335
    
    
    
    335,896
    
    
    
    55,597
    
    
    
    (391,493
    )
    
    
    133,335$
    420,107
    
    
    $
    440,556
    
    
    $
    178,446
    
    
    $
    (470,485
    )
    
    $
    568,624
 67




---



##### Table of Contents



Condensed Consolidating Balance Sheets of the Company
December 31, 2006
 December 31, 2006NonIssuer
    
    
    Guarantor
    
    
    Guarantor
    
    
    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
    
    
    
    2,304
    
    
    
    
    
    
    
    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 (deficit) equityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    18,316
    
    
    $
    15,737
    
    
    $
    
    
    
    $
    34,053Accrued payroll
    
    
    330
    
    
    
    9,714
    
    
    
    5,513
    
    
    
    
    
    
    
    15,557Accruals and other current liabilities
    
    
    7,485
    
    
    
    3,428
    
    
    
    2,796
    
    
    
    
    
    
    
    13,709Taxes payable
    
    
    3,935
    
    
    
    1,509
    
    
    
    1,105
    
    
    
    
    
    
    
    6,549Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,382
    
    
    
    
    
    
    
    1,382Current portion of long-term debt
    
    
    
    
    
    
    254
    
    
    
    319
    
    
    
    
    
    
    
    573Loans payable from 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
    )
    
    $
    409,368
 68




---



##### Table of Contents



Condensed Consolidating Statements of Operations of the Company
Year ended December 31, 2007
 Year ended December 31, 2007Non-Issuer
    
    
    Guarantor
    
    
    Guarantor
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    430,168
    
    
    $
    204,181
    
    
    $
    (49,973
    )
    
    $
    584,376Cost of sales
    
    
    
    
    
    
    319,322
    
    
    
    149,760
    
    
    
    (49,973
    )
    
    
    419,109Gross profit
    
    
    
    
    
    
    110,846
    
    
    
    54,421
    
    
    
    
    
    
    
    165,267Selling, general and administrative expenses
    
    
    
    
    
    
    57,783
    
    
    
    35,377
    
    
    
    
    
    
    
    93,160Research and development costs
    
    
    
    
    
    
    3,562
    
    
    
    2,515
    
    
    
    
    
    
    
    6,077Restructuring expense
    
    
    
    
    
    
    1,776
    
    
    
    623
    
    
    
    
    
    
    
    2,399Other post-retirement benefit plan curtailment
    
    
    
    
    
    
    2,745
    
    
    
    
    
    
    
    
    
    
    
    2,745Income from operations
    
    
    
    
    
    
    44,980
    
    
    
    15,906
    
    
    
    
    
    
    
    60,886Interest expense (income)
    
    
    37,093
    
    
    
    1,281
    
    
    
    180
    
    
    
    
    
    
    
    38,554Other non-operating expense (income)
    
    
    2,862
    
    
    
    236
    
    
    
    (2,486
    )
    
    
    
    
    
    
    612Equity in earnings of subsidiaries
    
    
    33,585
    
    
    
    
    
    
    
    
    
    
    
    (33,585
    )
    
    
    Income before income taxes
    
    
    (6,370
    )
    
    
    43,463
    
    
    
    18,212
    
    
    
    (33,585
    )
    
    
    21,720Provision for income taxes
    
    
    (17,881
    )
    
    
    18,816
    
    
    
    7,273
    
    
    
    
    
    
    
    8,208Net income from continuing operations
    
    
    11,511
    
    
    
    24,647
    
    
    
    10,939
    
    
    
    
    
    
    
    13,512Net loss from discontinued operations
    
    
    
    
    
    
    130
    
    
    
    (2,131
    )
    
    
    
    
    
    
    (2,001
    )Net (loss) income
    
    $
    11,511
    
    
    $
    24,777
    
    
    $
    8,808
    
    
    $
    (33,585
    )
    
    $
    11,511
 Condensed Consolidating Statements of Operations of the Company
Year ended December 31, 2006
 Year ended December 31, 2006Non-Issuer
    
    
    Guarantor
    
    
    Guarantor
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    325,684
    
    
    $
    152,641
    
    
    $
    (16,040
    )
    
    $
    462,285Cost of sales
    
    
    
    
    
    
    237,138
    
    
    
    115,738
    
    
    
    (16,040
    )
    
    
    336,836Gross profit
    
    
    
    
    
    
    88,546
    
    
    
    36,903
    
    
    
    
    
    
    
    125,449Selling, general and administrative expenses
    
    
    4,005
    
    
    
    50,082
    
    
    
    29,169
    
    
    
    
    
    
    
    83,256Research and development expenses
    
    
    
    
    
    
    2,689
    
    
    
    2,249
    
    
    
    
    
    
    
    4,938Other post-retirement benefit plan curtailment
    
    
    
    
    
    
    (3,838
    )
    
    
    
    
    
    
    
    
    
    
    (3,838
    )Income from operations
    
    
    (4,005
    )
    
    
    39,613
    
    
    
    5,485
    
    
    
    
    
    
    
    41,093Interest expense (income)
    
    
    17,444
    
    
    
    (124
    )
    
    
    6,202
    
    
    
    
    
    
    
    23,522Other non-operating expense (income)
    
    
    435
    
    
    
    (93
    )
    
    
    514
    
    
    
    
    
    
    
    856Equity in earnings of subsidiaries
    
    
    32,247
    
    
    
    
    
    
    
    
    
    
    
    (32,247
    )
    
    
    Income before income taxes
    
    
    10,363
    
    
    
    39,830
    
    
    
    (1,231
    )
    
    
    (32,247
    )
    
    
    16,715Provision for income taxes
    
    
    
    
    
    
    5,144
    
    
    
    1,208
    
    
    
    
    
    
    
    6,352Net income
    
    $
    10,363
    
    
    $
    34,686
    
    
    $
    (2,439
    )
    
    $
    (32,247
    )
    
    $
    10,363
   Condensed
    Consolidating Statements of Operations of the Company
    Year ended December 31, 2005
  Year Ended December 31, 2005Non-Issuer


Guarantor


Guarantor


Eliminations


ConsolidatedNet sales

$



$
279,292


$
93,201


$
(9,028
)

$
363,465Cost of sales






211,898



69,082



(9,028
)


271,952Gross profit






67,394



24,119







91,513Selling, general and
    administrative expenses






43,729



17,692







61,421Research and development expenses






2,478



2,205







4,683Income from operations






21,187



4,222







25,409Interest expense (income)


16,908



(339
)


496







17,065Other non-operating expense
    (income)


(17
)














(17
)Equity in earnings of subsidiaries


21,335











(21,335
)


Income before income taxes


4,444



21,526



3,726



(21,335
)


8,361Provision for income taxes






2,655



1,262







3,917Net income

$
4,444


$
18,871


$
2,464


$
(21,335
)

$
4,444 69




---



##### Table of Contents



Condensed Consolidating Statements of Cash Flows of the Company
Year ended December 31, 2007
 Non-Issuer
    
    
    Guarantor
    
    
    Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income
    
    $
    11,511
    
    
    $
    24,777
    
    
    $
    8,808
    
    
    $
    (33,585
    )
    
    $
    11,511Undistributed equity in earnings of subsidiaries
    
    
    (33,585
    )
    
    
    
    
    
    
    
    
    
    
    33,585
    
    
    
    Adjustments to reconcile net loss to cash provided by operating
activities:Depreciation
    
    
    
    
    
    
    10,835
    
    
    
    5,612
    
    
    
    
    
    
    
    16,447Amortization of intangible assets
    
    
    
    
    
    
    3,920
    
    
    
    1,572
    
    
    
    
    
    
    
    5,492Amortization and write-off of deferred loan costs
    
    
    3,368
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    3,448Accretion of debt discount and premium, net
    
    
    774
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    774Amortization of inventory fair value adjustment
    
    
    
    
    
    
    275
    
    
    
    651
    
    
    
    
    
    
    
    926Provision for deferred taxes
    
    
    
    
    
    
    5,455
    
    
    
    
    
    
    
    
    
    
    
    5,455Stock-based compensation
    
    
    2,038
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,038Loss on foreign currency, net
    
    
    586
    
    
    
    
    
    
    
    146
    
    
    
    
    
    
    
    732Los on sale of assets
    
    
    
    
    
    
    313
    
    
    
    
    
    
    
    
    
    
    
    313Gain on sale of Electronics division
    
    
    (2,927
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,927
    )Loss on curtailment of pension and post-retirement benefit
plan, net
    
    
    
    
    
    
    2,745
    
    
    
    
    
    
    
    
    
    
    
    2,745Changes in operating assets and liabilities:Trade receivables
    
    
    
    
    
    
    6,453
    
    
    
    (2,135
    )
    
    
    
    
    
    
    4,318Inventories
    
    
    
    
    
    
    2,807
    
    
    
    (5,084
    )
    
    
    
    
    
    
    (2,277
    )Accounts payable and accrued liabilities
    
    
    (3,171
    )
    
    
    (9,205
    )
    
    
    1,685
    
    
    
    
    
    
    
    (10,691
    )Other current assets and liabilities
    
    
    710
    
    
    
    3,281
    
    
    
    (256
    )
    
    
    
    
    
    
    3,735Other operating assets and liabilities
    
    
    (2
    )
    
    
    431
    
    
    
    (610
    )
    
    
    
    
    
    
    (181
    )Net cash (used in) provided by continuing operating activities
    
    $
    (20,698
    )
    
    $
    52,167
    
    
    $
    10,389
    
    
    
    
    
    
    $
    41,858Cash flows from investing activities:Purchases of fixed assets
    
    
    
    
    
    
    (7,959
    )
    
    
    (3,674
    )
    
    
    
    
    
    
    (11,633
    )Proceeds from sale of Electronics division
    
    
    10,828
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,828Acquisitions, net of cash acquired
    
    
    (123,867
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (123,867
    )Net cash used in investing activities
    
    $
    (113,039
    )
    
    $
    (7,959
    )
    
    $
    (3,674
    )
    
    
    
    
    
    $
    (124,672
    )Cash flows from financing activities:Payments on senior notes
    
    
    (58,428
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58,428
    )Proceeds from issuance of senior secured notes
    
    
    106,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,050Capital contribution from parent
    
    
    49,015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,015Payment of debt issuance costs
    
    
    (3,842
    )
    
    
    (393
    )
    
    
    
    
    
    
    
    
    
    
    (4,235
    )Payment on behalf of parent company
    
    
    (13,554
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,554
    )Borrowings under revolving credit agreements
    
    
    8,315
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,315Payment on mortgage
    
    
    
    
    
    
    
    
    
    
    (126
    )
    
    
    
    
    
    
    (126
    )Payments on revolving credit agreements
    
    
    (8,315
    )
    
    
    (5,205
    )
    
    
    
    
    
    
    
    
    
    
    (13,520
    )Payment of capital leases
    
    
    
    
    
    
    (464
    )
    
    
    (467
    )
    
    
    
    
    
    
    (931
    )Change in affiliated debt
    
    
    18,051
    
    
    
    (33,150
    )
    
    
    15,099
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    $
    97,292
    
    
    $
    (39,212
    )
    
    $
    14,506
    
    
    
    
    
    
    
    72,586Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    1,607
    
    
    
    
    
    
    
    1,607Increase (decrease) in cash and cash equivalents
    
    
    (36,445
    )
    
    
    4,996
    
    
    
    22,828
    
    
    
    
    
    
    
    (8,621
    )Cash and cash equivalents, beginning of the period
    
    
    41,016
    
    
    
    (5,488
    )
    
    
    6,999
    
    
    
    
    
    
    
    42,527Cash and cash equivalents, end of period
    
    $
    4,571
    
    
    $
    (492
    )
    
    $
    29,827
    
    
    $
    
    
    
    $
    33,906
 70




---



##### Table of Contents



Condensed Consolidating Statements of Cash Flows of the Company
Year ended December 31, 2006
 Non-Issuer
    
    
    Guarantor
    
    
    Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income
    
    $
    10,363
    
    
    $
    34,686
    
    
    $
    (2,439
    )
    
    $
    (32,247
    )
    
    $
    10,363Undistributed equity in earnings of subsidiaries
    
    
    (32,247
    )
    
    
    
    
    
    
    
    
    
    
    32,247
    
    
    
    Adjustments to reconcile net loss to cash provided by operating
activities:Depreciation
    
    
    
    
    
    
    6,593
    
    
    
    4,228
    
    
    
    
    
    
    
    10,821Amortization of intangible assets
    
    
    
    
    
    
    3,469
    
    
    
    321
    
    
    
    
    
    
    
    3,790Amortization and write-off of deferred loan costs
    
    
    968
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    968Accretion of debt discount
    
    
    942
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    942Amortization of inventory fair value adjustment
    
    
    
    
    
    
    245
    
    
    
    2,033
    
    
    
    
    
    
    
    2,278Provision for deferred taxes
    
    
    
    
    
    
    2,341
    
    
    
    (1,151
    )
    
    
    
    
    
    
    1,190Stock-based compensation
    
    
    1,945
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,945Loss on foreign currency, net
    
    
    415
    
    
    
    
    
    
    
    664
    
    
    
    
    
    
    
    1,079Gain on curtailment of post-retirement benefit plan
    
    
    
    
    
    
    (3,838
    )
    
    
    
    
    
    
    
    
    
    
    (3,838
    )Changes in operating assets and liabilities:Trade receivables
    
    
    
    
    
    
    (2,363
    )
    
    
    2,033
    
    
    
    
    
    
    
    (330
    )Inventories
    
    
    
    
    
    
    (4,285
    )
    
    
    312
    
    
    
    
    
    
    
    (3,973
    )Accounts payable and accrued liabilities
    
    
    8,769
    
    
    
    (15,905
    )
    
    
    (3,141
    )
    
    
    
    
    
    
    (10,277
    )Other current assets and liabilities
    
    
    (1,849
    )
    
    
    128
    
    
    
    (576
    )
    
    
    
    
    
    
    (2,297
    )Other operating assets and liabilities
    
    
    1,265
    
    
    
    280
    
    
    
    (793
    )
    
    
    
    
    
    
    752Net cash (used in) provided by continuing operating activities
    
    $
    (9,429
    )
    
    $
    21,351
    
    
    $
    1,491
    
    
    
    
    
    
    $
    13,413Cash flows from investing activities:Purchases of fixed assets
    
    
    
    
    
    
    (7,213
    )
    
    
    (2,195
    )
    
    
    
    
    
    
    (9,408
    )Acquisitions, net of cash acquired
    
    
    
    
    
    
    (13,065
    )
    
    
    (40,690
    )
    
    
    
    
    
    
    (53,755
    )Net cash used in investing activities
    
    $
    
    
    
    $
    (20,278
    )
    
    $
    (42,885
    )
    
    
    
    
    
    $
    (63,163
    )Cash flows from financing activities:Proceeds from issuance of senior notes, net of costs
    
    
    57,625
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,625Proceeds from mortgage s
    
    
    
    
    
    
    
    
    
    
    2,510
    
    
    
    
    
    
    
    2,510Payment of debt issuance costs
    
    
    (2,731
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,731
    )Payment on behalf of parent company
    
    
    24,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,389Borrowings under revolving credit agreements
    
    
    5,057
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,057Payments on revolving credit agreements
    
    
    (5,057
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,057
    )Payment of capital leases
    
    
    
    
    
    
    (183
    )
    
    
    (58
    )
    
    
    
    
    
    
    (241
    )Change in affiliated debt
    
    
    (37,657
    )
    
    
    (3,665
    )
    
    
    41,322
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    $
    41,626
    
    
    $
    (3,848
    )
    
    $
    43,774
    
    
    
    
    
    
    
    81,552Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    665
    
    
    
    
    
    
    
    665Increase (decrease) in cash and cash equivalents
    
    
    32,197
    
    
    
    (2,775
    )
    
    
    3,045
    
    
    
    
    
    
    
    32,467Cash and cash equivalents, beginning of the period
    
    
    8,819
    
    
    
    (2,713
    )
    
    
    3,954
    
    
    
    
    
    
    
    10,060Cash and cash equivalents, end of period
    
    $
    41,016
    
    
    $
    (5,488
    )
    
    $
    6,999
    
    
    $
    
    
    
    $
    42,527
 71




---



##### Table of Contents



ALTRA
    INDUSTRIAL MOTION, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Statements of Cash Flows of the Company
    Year Ended December 31, 2005
  Non-Issuer


Guarantor


Guarantor


Eliminations


ConsolidatedCash flows from operating
    activities:Net income

$
4,444


$
18,871


$
2,464


$
(21,335
)

$
4,444Undistributed equity in earnings of
    subsidiaries


(21,335
)










21,335



Adjustments to reconcile net loss
    to cash provided by operating activities:Depreciation






5,845



2,729







8,574Amortization of intangible assets






2,261



698







2,959Amortization and write-off of
    deferred loan costs


621















621Accretion of debt discount


942















942Amortization of inventory fair
    value adjustment






1,270



429







1,699Gain on sale of fixed assets










(99
)






(99
)Provision for deferred taxes






568



(320
)






248Changes in operating assets and
    liabilities:Trade receivables






(1,608
)


(1,046
)






(2,654
)Inventories






(2,894
)


1,541







(1,353
)Accounts payable and accrued
    liabilities


(882
)


(6,632
)


5,682







(1,832
)Other current assets and liabilities


(26
)


2,727



475







2,226Other operating assets and
    liabilities


(1,746
)


87



(281
)






(1,940
)Net cash (used in) provided by
    continuing operating activities


(17,982
)


20,495



11,322







13,835Cash flows from investing
    activities:Purchases of fixed assets






(4,099
)


(2,100
)






(6,199
)Acquisitions, net of cash acquired






1,607











1,607Payment of additional Kilian
    purchase price






(730
)










(730
)Proceeds from sale of fixed assets






20



105







125Net cash used in investing
    activities






(3,202
)


(1,995
)






(5,197
)Cash flows from financing
    activities:Payment of debt issuance costs


(338
)














(338
)Payment on behalf of parent company


(1,610
)














(1,610
)Borrowings under revolving credit
    agreements


4,408















4,408Payments on revolving credit
    agreements


(4,408
)














(4,408
)Payment of capital leases






(169
)


(666
)






(835
)Change in affiliated debt


26,530



(17,924
)


(8,606
)






Net cash provided by (used in)
    financing activities


24,582



(18,093
)


(9,272
)






(2,783
)Effect of exchange rates on cash










(524
)






(524
)Increase (decrease) in cash and
    cash equivalents


6,600



(800
)


(469
)






5,331Cash and cash equivalents,
    beginning of the period


2,219



(1,913
)


4,423







4,729Cash and cash equivalents, end of
    period

$
8,819


$
(2,713
)

$
3,954


$



$
10,060  72




---



##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures
 1. Disclosure Controls and Procedures
  2. Internal Control over Financial Reporting
 (a) Managements Report on Internal Control over Financial Reporting
  
    
    pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect our transactions;
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP, and that receipts and expenditures
are being made only in accordance with authorizations of our management and directors; and
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect on the financial
statements.
    73




---



##### Table of Contents



(b) Changes in Internal Control over Financial Reporting
  
 Item 9B. Other Information
  74




---



##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
 Principal Accountant Fees and Services
  2007
    
    
    2006Audit Fees
    
    $
    3,284
    
    
    $
    2,562Audit-Related Fees
    
    
    242
    
    
    
    Tax Fees
    
    
    236
    
    
    
    109All Other Fees
    
    
    
    
    
    
    Total
    
    $
    3,762
    
    
    $
    2,671
    
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a) List of documents filed as part of this report:
 (1)
    
    Financial StatementsSee Item 8.(2)
    
    Financial Statement ScheduleSee Item 21(b) Schedule II  Valuation and Qualifying Accounts
 75




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##### Table of Contents



(3)
    
    Exhibits
 EXHIBITNUMBER
    
    DESCRIPTION2.1(1)
    
    LLC Purchase Agreement, dated as of October 25, 2004, among Warner Electric Holding, Inc., Colfax
Corporation and Altra Industrial Motion Inc.2.2(1)
    
    Assignment and Assumption Agreement, dated as of November 21, 2004, between Registrant and Altra
Holdings, Inc.2.3(2)
    
    Share Purchase Agreement, dated as of November 7, 2005, among Altra Industrial Motion, Inc. and
the stockholders of Hay Hall Holdings Limited listed therein2.4(11)
    
    Agreement and Plan of Merger, dated
February 17, 2007, among Altra Holdings, Inc., Forest Acquisition
Corp. and TB Woods Corp.2.5(12)
    
    Amendment No. 1 to the Agreement
and Plan of Merger, dated as of March 11, 2007, among Altra Holdings,
Inc., Forest Acquisition Corp. and TB Woods Corp.3.1(1)
    
    Certificate of Incorporation of
Altra Industrial Motion, Inc.3.2(1)
    
    Bylaws of Altra Industrial Motion, Inc.4.1(3)
    
    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(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 trustee4.3(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 trustee4.4(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 trustee4.5(5)
    
    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 trustee4.6(6)
    
    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 trustee4.7(1)
    
    Form of 9% Senior Secured Notes due 2011 (included in Exhibit 4.1)4.8(1)
    
    Registration Rights Agreement, dated as of November 30, 2004, among Altra Industrial Motion,
Inc., Jefferies & Company, Inc., and the Subsidiary Guarantors party thereto4.9(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)
SA, as Luxembourg paying agent.4.10(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 as trustee.4.11(5)
    
    Second Supplemental Indenture, dated as of March 26, 2007, among Altra Industrial Motion, Inc.,
the guarantors party thereto and The Bank of New York Trust as trustee4.12(6)
    
    Third Supplemental Indenture, dated as of April 5, 2007, among Altra Industrial Motion, Inc., the
guarantors party thereto and the Bank of New York Trust as trustee4.13(2)
    
    Form of 111/4% Senior Notes due 2013 (included in Exhibit 4.10)4.14(2)
    
    Registration Rights Agreement, dated as of February 8, 2006, among Altra Industrial Motion, Inc.,
the guarantors party thereto, Jeffries & Company, Inc. and Jefferies International Limited, as
initial purchasers10.1(1)
    
    Credit Agreement, dated as of November 30, 2004, among Altra Industrial Motion, Inc. and certain
subsidiaries of the Company, as Guarantors, the financial institutions listed therein, as
Lenders, and Wells Fargo Bank, as Lead Arranger10.2(1)
    
    Security Agreement, dated as of November 30, 2004, among Altra Industrial Motion, Inc., the other
Grantors listed therein and The Bank of New York Trust Company, N.A.10.3(3)
    
    Patent Security Agreement, dated as of November 30, 2004, among Kilian Manufacturing Corporation,
Warner Electric Technology LLC, Formsprag LLC, Boston Gear LLC, Ameridrives International, L.P.
and The Bank of New York Trust Company, N.A.10.4(1)
    
    Trademark Security Agreement, dated as of November 30, 2004, among Warner Electric Technology
LLC, Boston Gear LLC and The Bank of New York Trust Company, N.A.
 76




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##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION10.5(1)
    
    Intercreditor and Lien Subordination Agreement, dated as of November 30, 2004, among Wells Fargo
Foothill, Inc., The Bank of New York Trust Company, N.A. and Altra Industrial Motion, Inc.10.6(10)
    
    First Amendment to Credit Agreement, dated as of December 30, 2004, among Altra Industrial
Motion, Inc. the financial institutions listed therein, as Lenders, and Wells Fargo Foothill,
Inc.10.7(10)
    
    Second Amendment to Credit Agreement, dated as of January 14, 2005, among Altra Industrial
Motion, Inc., the financial institutions listed therein, as Lenders, and Wels Fargo Foothill,
Inc.10.8(10)
    
    Third Amendment to Credit Agreement, dated as of January 31, 2005, among Altra Industrial Motion,
Inc., the financial institutions listed therein, as Lenders, and Wells Fargo Foothill, Inc.10.9(10)
    
    Fourth Amendment to Credit Agreement, dated as of February 16, 2007, among Altra Industrial
Motion, Inc., the financial institutions listed therein, as Lenders, and Wells Fargo Foothill,
Inc.10.10(4)
    
    Supplement Number 1 to Security Agreement, dated as of April 5, 2007, among TB Woods
Incorporate, TB Woods Corporation, Plant Engineering Consultants, LLC, TB Woods Enterprises,
Inc. and Wells Fargo Foothill, Inc.10.11(4)
    
    Supplement Number 2 to Security Agreement, dated as of April 5, 2007, among Altra Industrial
Motion, Inc., the other Grantors listed therein and The Bank of New York Trust Company, N.A.10.12(4)
    
    Fifth Amendment to, and Consent and Waiver under, Credit Agreement and Joinder to Loan Documents,
dated April 5, 2007, by and among, Altra Industrial Motion, Inc., as Administrative Borrower for
the borrowers of each of the New Loan Parties, the Lenders thereto and Wells Fargo Foothill, Inc.10.13(4)
    
    Credit Agreement, dated as of April 5, 2007, among Altra Industrial Motion, Inc. and certain of
its subsidiaries, as Guarantors, the financial institutions listed therein, as Lenders, and Wells
Fargo Foothill, Inc., as Arranger and Administrative Agent10.14(4)
    
    Security Agreement, dated as of April 5, 2007, among TB Woods Incorporate, Plant Engineering
Consultants, LLC, TB Woods Enterprises, Inc., TB Woods Corporation and Wells Fargo Foothill,
Inc.10.15(4)
    
    Patent Security Agreement, dated as of April 5, 2007, among TB Woods Incorporate, Plant
Engineering Consultants, LLC, TB Woods Enterprises, Inc., TB Woods Corporation and Wells Fargo
Foothill10.16(4)
    
    Trademark Security Agreement, dated as of April 5, 2007, among TB Woods Incorporated, Plant
Engineering Consultants, LLC, TB Woods Enterprises, Inc., TB Woods Corporation and Wells Fargo
Foothill, Inc.10.17(4)
    
    Amended and Restated Intercreditor and Lien Subordination Agreement, dated as of April 5, 2007,
among Wells Fargo Foothill, Inc., The Bank of New York Trust Company, N.A., Altra Indsutrial
Motion, Inc. and certain subsidiaries of Altra
 77




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##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION10.18(4)
    
    Intercompany Subordination Agreement, dated as of April 5, 2007, among TB Woods Corporation,
Plant Engineering Consultants, LLC, TB Woods Enterprises, Inc., TB Woods Corporation and Wells
Fargo Foothill, Inc.10.19(4)
    
    Patent Security Agreement, dated as of April 5, 2007, among TB Woods Corporation, TB Woods
Incorporated, Plant Engineering Consultants, LLC, TB Woods Enterprises, Inc. and Wells Fargo
Foothill, Inc.10.20(4)
    
    Trademark Security Agreement, dated as of April 5, 2007, among TB Woods Corporation, TB Woods
Incorporated, Plant Engineering Consultants, LLC, TB Woods Enterprises, Inc. and Wells Fargo
Foothill, Inc.10.21(4)
    
    Patent Security Agreement, dated as of April 5, 2007, among TB Woods Corporation, TB Woods
Incorporated, Plant Engineering Consultants, LLC, TB Woods Enterprises, Inc. and Wells Fargo
Foothill, Inc.10.22(4)
    
    Trademark Security Agreement, dated as of April 5, 2007, among TB Woods Corporation, TB Woods
Incorporated, Plant Engineering Consultants, LLC, TB Woods Enterprises, Inc. and Wells Fargo
Foothill, Inc.10.23(9)
    
    Agreement, dated as of September 19, 2007, between Ameridrives International, L.P. and United
Steel Workers of America Local 3199-1010.24(9)
    
    Labor Agreement, dated as of August 13, 2007, between Warner Electric LLC (formerly Warner
Electric Inc.) and International Association of Machinists and Aerospace Works, AFL-CIO, and
Aeronautical Industrial District Lode 776, Local Lodge 277110.25(7)
    
    Labor Agreement, dated May 17, 2006, between Warner Electric LLC and United Steelworkers and
Local Union No. 324510.26(7)
    
    Labor Agreement, dated June 6, 2005, between Formsprag LLC and UAW Local 15510.27(1)
    
    Employment Agreement, dated as of January 6, 2005, among Altra Industrial Motion, Inc., the
Registrant and Michael L. Hurt.10.28(8)
    
    First Amendment to Employment Agreement, dated December 5, 2006, among Altra Industrial Motion,
Inc., the Registrant and Michael L. Hurt10.29(1)
    
    Employment Agreement, dated as of January 6, 2005, among Altra Industrial Motion, Inc., the
Registrant and Carl Christenson.10.30(9)
    
    Employment Agreement, dated as of December 14, 2007, among Altra Industrial Motion, Inc., the
Registrant and Christian Storch.12.1
    
    Computation of Earnings to Fixed
Charges31.1
    
    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)
    
    Incorporate 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.(2)
    
    Incorporated by reference to Altra Industrial Motion, Inc.s Current Report on Form 8-K (File
No. 333-124944) filed with the Securities and Exchange Commission on February 14, 2006.(3)
    
    Incorporated by reference to Altra Industrial Motion, Inc.s Annual Report on Form 10-K
(File. No. 333-124944) filed with the Securities and Exchange
Commission on May 15, 2006.(4)
    
    Incorporate by reference to Altra Industrial Motion, Inc.s registration Statement on Form
S-4 (File No. 333-124944) filed with the Securities and Exchange Commission on May 8, 2007.(5)
    
    Incorporated by reference to Altra Industrial Motion, Inc.s Current Report on Form 8-K (File
No. 333-124944) filed with the Securities and Exchange Commission on March 26, 2007.(6)
    
    Incorporated by reference to Altra Industrial Motion, Inc.s Current Report on Form 8-K (File
No. 333-124944) filed with the Securities and Exchange Commission on April 11, 2007.(7)
    
    Incorporated by reference to Altra Holdings, Inc. Registration Statement on Form
S-1/A (File No. 333-137660) filed with the Securities and
Exchange Commission on September 29, 2006.(8)
    
    Incorporated by reference to Altra Industrial Motion, Inc. Registration Statement on Form
8-K (File No. 333-124944) filed with the Securities and Exchange Commission on December 5,
2006(9)
    
    Incorporated by reference to Altra Holdings, Inc. Annual
Report on Form 10-K (File No. 001-33209) filed with the Securities
and Exchange Commission on March 17, 2008.(10)
    
    Incorporated by reference to Altra Industrial Motion,
Inc.s Annual
Report on Form 10-K (File No. 333-124944) filed with the Securities
and Exchange Commission on March 19, 2007.(11)
    
    Incorporated by reference to Altra Holdings, Inc.s
Current Report on Form 8-K (File No. 001-33209) filed with the Securities
and Exchange Commission on February 20, 2007.(12)
    
    Incorporated by reference to Altra Holdings, Inc.s
Current Report on Form 8-K (File No. 001-33209) filed with the Securities
and Exchange Commission on March 13, 2007. 78




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##### Table of Contents



Item 21(b)
 Altra Industrial Motion, Inc.
SCHEDULE II-Valuation and Qualifying Accounts
 Balance atbeginning of
    
    
    
    
    
    
    
    
    
    Balance atReserve for excess, slow-moving and obsolete inventory:
    
    period
    
    Additions
    
    Deductions
    
    end of periodFor the year ended December 31, 2005
    
    
    6,361
    
    
    
    2,385
    
    
    
    (1,903
    )
    
    
    6,843For the year ended December 31, 2006
    
    $
    6,843
    
    
    $
    5,596
    
    
    $
    (2,276
    )
    
    $
    10,163For the year ended December 31, 2007
    
    
    10,163
    
    
    $
    7,170
    
    
    $
    (3,926
    )
    
    $
    13,407
 Balance atbeginning of
    
    
    
    
    
    
    
    
    
    Balance atReserve for uncollectible accounts:
    
    period
    
    Additions
    
    Deductions
    
    end of periodFor the year ended December 31, 2005
    
    
    1,424
    
    
    
    687
    
    
    
    (314
    )
    
    
    1,797For the year ended December 31, 2006
    
    $
    1,797
    
    
    $
    923
    
    
    $
    (703
    )
    
    $
    2,017For the year ended December 31, 2007
    
    $
    2,017
    
    
    $
    682
    
    
    $
    (1,151
    )
    
    $
    1,548
 Balance atbeginning of
    
    
    
    
    
    
    
    
    
    Balance atIncome tax assets valuation allowance:
    
    period
    
    Additions
    
    Deductions
    
    end of periodFor the year ended December 31, 2005
    
    
    18,374
    
    
    
    
    
    
    
    (1,985
    )
    
    
    16,389For the year ended December 31, 2006
    
    
    16,389
    
    
    
    1,252
    
    
    
    (16,389
    )
    
    
    1,252For the year ended December 31, 2007
    
    $
    1,252
    
    
    $
    84
    
    
    
    
    
    
    $
    1,336
 79




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##### Table of Contents



SIGNATURES
  ALTRA INDUSTRIAL MOTION, INC.March 28, 2008
    By:
    /s/  Michael L. HurtName:
    Michael L. HurtTitle:
    Chairman and
Chief Executive OfficerMarch 28, 2008
    By:
    /s/ Christian StorchName:
    Christian StorchTitle:
    Chief Financial OfficerMarch 28, 2008
    By:
    /s/ Todd PatriaccaName:
    Todd PatriaccaTitle:
    Chief Accounting OfficerMarch 28, 2008
    By:
    /s/ Edmund M. CarpenterName:
    Edmund M. CarpenterTitle:
    DirectorMarch 28, 2008
    By:

/s/ Carl R. ChristensonName:
    Carl R. ChristensonTitle:
    Director, President and Chief Operating OfficerMarch  28, 2008
    By:
    /s/ Lyle G. GanskeName:
    Lyle G. GanskeTitle:
    DirectorMarch 28, 2008
    By:
    /s/ Michael S. LipscombName:
    Michael S. LipscombTitle:
    DirectorMarch 28, 2008
    By:
    /s/ Larry P. McPhersonName:
    Larry P. McPhersonTitle:
    DirectorMarch 28, 2008
    By:
    /s/ James H. Woodward, Jr.Name:
    James H. Woodward, Jr.Title:
    Director 80