##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 333-124944
 
 ALTRA INDUSTRIAL MOTION, INC.
  Delaware
(State or other jurisdiction 
of incorporation or organization)
    
    30-0283143
(I.R.S. Employer
Identification No.)300 Granite Street, Suite 201 Braintree, MA
(Address of principal executive offices)
    
    02184
(Zip Code)
 (781) 917-0600
  Title of Each Class
    
    Name of each exchange on which registeredCommon Stock, $0.001 par value
    
    NASDAQ Global Market
 NONE
 o þ
 o þ
 þ o
 o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
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
    
    
    14Item 1B.
    
    Unresolved Staff Comments
    
    
    22Item 2.
    
    Properties
    
    
    23Item 3.
    
    Legal Proceedings
    
    
    24Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    24PART IIItem 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Repurchases of Equity Securities
    
    
    25Item 6.
    
    Selected Financial Data
    
    
    26Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    43Item 8.
    
    Financial Statements and Supplementary Data
    
    
    44Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    85Item 9A.
    
    Controls and Procedures
    
    
    85Item 9B.
    
    Other Information
    
    
    86PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    87Item 11.
    
    Executive Compensation
    
    
    87Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    87Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    87Item 14.
    
    Principal Accountant Fees and Services
    
    
    87PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    87EX-31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICEREX-31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICEREX-32.1 SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICEREX-32.2 SECTION 906 CERTIFICATION OF CHIEF FINANCIAL OFFICER
  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.
 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 $86 million in
revenues from continuing operations in 2008.
    
    Capitalize on Growth and Sourcing Opportunities in the Asia-Pacific
Market.We intend to leverage our established sales offices in the
Asia Pacific region and expand into regions where we currently do not
have sales representation,. We also intend to expand our manufacturing
presence in Asia beyond our current plant in Shenzhen, China. During
2008, we sourced approximately 21% of our purchases from low-cost
countries, resulting in average cost reductions of approximately 45%
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 American and Western European locations to Asia or lower cost
regions.
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
    
    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, Warner 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. 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 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
  MANAGEMENT
 Michael L. Hurt (age 63)
 Carl R. Christenson (age 49)
 Christian Storch (age 49)
 Glenn Deegan (age 42)
 Gerald Ferris (age 59)
 Todd B. Patriacca (age 39)
 Craig Schuele (age 45)
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Chet Shubert (age 52)
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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 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.
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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;
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
    
    restrictions on our ability to own or operate subsidiaries, make investments or acquire new
businesses in various jurisdictions;
    
    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 damages 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.
  17




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If we lose certain of our key sales, marketing or engineering personnel, our business may be
adversely affected.
  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.
    18




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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.
     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.
  19




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Goodwill and indefinite-lived intangibles 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.
  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.
  20




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1 4
  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.
  Continued extreme volatility and disruption in global financial markets could significantly impact
our customers, weaken the markets we serve and harm our operations and financial performance.
  We have taken, and continue to take, cost-reduction actions. Our ability to complete these actions
and the impact of such actions on our business may be limited by a variety of factors. The
cost-reduction actions, in turn, may expose us to additional production risk and have an adverse
effect on our sales, profitability and ability to attract and retain employees.
  21




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Item 1B. Unresolved Staff Comments
  22




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Item 2. Properties
  Location
    
    Brand
    
    Major Products
    
    Sq. Ft.
    
    Leased
    
    ExpirationUnited StatesChambersburg,Pennsylvania
    
    TB Woods
    
    Belted Drives, Couplings, 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
    
    Engineered Couplings
    
    
    76,200
    
    
    Owned
    
    N/AChattanooga, Tennessee(4)
    
    TB Woods
    
    Space is leased to a third party
    
    
    60,000
    
    
    Owned
    
    N/AScotland, Pennsylvania (4)
    
    TB Woods
    
    Space is leased to a third party
    
    
    51,300
    
    
    Owned
    
    N/ASan Marcos, Texas
    
    TB Woods
    
    Engineered Couplings
    
    
    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, 2013New Hartford, Connecticut
    
    Inertia Dynamics
    
    Electromagnetic Clutches & Brakes
    
    
    72,000
    
    
    Leased
    
    July 30, 2019Braintree, Massachusetts(1)
    
    Altra
    
    
    
    
    13,804
    
    
    Leased
    
    November 1, 2016Belvidere, Illinois
    
    Warner Linear
    
    Linear Actuators
    
    
    21,000
    
    
    Leased
    
    June 30, 2009New Braunsfels, Texas
    
    Ameridrives
    
    Engineered Couplings
    
    
    16,200
    
    
    Leased
    
    December 31, 2009Green Bay, Wisconsin
    
    Ameridrives
    
    Engineered 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
    
    Engineered Couplings
    
    
    26,100
    
    
    Owned
    
    N/AStratford, Canada(4)
    
    TB Woods
    
    Power Transmission Components
Vacant
    
    
    46,000
    
    
    Owned
    
    N/AShenzhen, China
    
    Warner Electric
    
    Electromagnetic Clutches & Brakes
    
    
    112,271
    
    
    Leased
    
    (3)San Luis Potosi, Mexico
    
    TB Woods
    
    Precision Components
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)Twickenham, England
    
    Twiflex
    
    Heavy Duty Clutches and Brakes
    
    
    27,500
    
    
    Leased
    
    September 30, 2009Hertford, England
    
    Huco Dynatork
    
    Couplings, Power Transmission
Components
    
    
    13,565
    
    
    Leased
    
    July 30, 2012Telford, England
    
    Saftek
    
    Friction Material
    
    
    4,400
    
    
    Leased
    
    August 31, 2009
 
 (1)
    
    Corporate Headquarters and selective customer service functions. 23




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(2)
    
    Must give the lessor twelve months notice for termination.(3)
    
    Month to month lease.(4)
    
    Building is currently held for sale. 
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  24




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PART II
 
 Item 5. Market for the Registrants Common Equity and Related Stockholder Matters and Issuer
Repurchases of Equity Securities
 None.
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Item 6. Selected Financial Data
  Altra
    
    
    
    Predeccessor(Period From
    
    
    
    (Period FromYear Ended
    
    
    Year Ended
    
    
    Year Ended
    
    
    Year Ended
    
    
    December 1 Through
    
    
    
    January 1 ThroughDecember, 31 2008
    
    
    December, 31 2007
    
    
    December, 31 2006
    
    
    December, 31 2005
    
    
    December 31, 2004)
    
    
    
    November 30, 2004)Net sales
    
    $
    635,336
    
    
    $
    584,376
    
    
    $
    462,285
    
    
    $
    363,465
    
    
    $
    28,625
    
    
    
    $
    275,037Cost of sales
    
    
    449,244
    
    
    
    419,109
    
    
    
    336,836
    
    
    
    271,952
    
    
    
    23,847
    
    
    
    
    209,253Gross profit
    
    
    186,092
    
    
    
    165,267
    
    
    
    125,449
    
    
    
    91,513
    
    
    
    4,778
    
    
    
    
    65,784Operating expenses:Selling, general and
administrative expenses
    
    
    99,185
    
    
    
    93,160
    
    
    
    83,256
    
    
    
    61,520
    
    
    
    8,973
    
    
    
    
    45,321Research and development
expenses
    
    
    6,589
    
    
    
    6,077
    
    
    
    4,938
    
    
    
    4,683
    
    
    
    378
    
    
    
    
    3,947Goodwill impairment
    
    
    31,810Restructuring costs
    
    
    2,310
    
    
    
    2,399
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    947(Gain) loss from curtailment
on post-retirement benefit
plan
    
    
    (925
    )
    
    
    2,745
    
    
    
    (3,838
    )
    
    
    
    
    
    
    
    
    
    
    
    Loss (gain) on sale/disposal
of assets
    
    
    1,584
    
    
    
    
    
    
    
    
    
    
    
    (99
    )
    
    
    
    
    
    
    
    (1,300
    )140,553
    
    
    
    104,381
    
    
    
    84,356
    
    
    
    66,104
    
    
    
    9,351
    
    
    
    
    48,915Income (loss) from operations
    
    
    45,539
    
    
    
    60,886
    
    
    
    41,093
    
    
    
    25,409
    
    
    
    (4,573
    )
    
    
    
    16,869Other non-operating income
and expense:Interest expense, net
    
    
    28,339
    
    
    
    38,554
    
    
    
    23,522
    
    
    
    17,065
    
    
    
    1,410
    
    
    
    
    4,294Other non-operating (income)
expense, net
    
    
    (6,249
    )
    
    
    612
    
    
    
    856
    
    
    
    (17
    )
    
    
    
    
    
    
    
    14822,090
    
    
    
    39,166
    
    
    
    24,378
    
    
    
    17,048
    
    
    
    1,410
    
    
    
    
    4,442Income (loss) from
continuing operations before
income taxes
    
    
    23,449
    
    
    
    21,720
    
    
    
    16,715
    
    
    
    8,361
    
    
    
    (5,983
    )
    
    
    
    12,427Provision (benefit) for
income taxes
    
    
    16,731
    
    
    
    8,208
    
    
    
    6,352
    
    
    
    3,917
    
    
    
    (221
    )
    
    
    
    5,532Income (loss) from
continuing operations
    
    
    6,718
    
    
    
    13,512
    
    
    
    10,363
    
    
    
    4,444
    
    
    
    (5,762
    )
    
    
    
    6,895Loss from discontinued
operations, net of income
taxes of $43 in 2008 and
$6,109 in 2007
    
    
    (224
    )
    
    
    (2,001
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    6,494
    
    
    $
    11,511
    
    
    $
    10,363
    
    
    $
    4,444
    
    
    $
    (5,762
    )
    
    
    $
    6,895Other Financial Data:Depreciation and amortization
    
    $
    21,068
    
    
    $
    21,939
    
    
    $
    14,611
    
    
    $
    11,533
    
    
    $
    919
    
    
    
    $
    6,074Purchases of fixed assets
    
    
    19,289
    
    
    
    11,633
    
    
    
    9,408
    
    
    
    6,199
    
    
    
    289
    
    
    
    
    3,489Cash flow provided by (used
in):Operating activities
    
    
    45,114
    
    
    
    41,858
    
    
    
    13,413
    
    
    
    13,835
    
    
    
    5,623
    
    
    
    
    3,604Investing activities
    
    
    (3,687
    )
    
    
    (124,672
    )
    
    
    (63,163
    )
    
    
    (5,197
    )
    
    
    (180,401
    )
    
    
    
    953Financing activities
    
    
    (31,760
    )
    
    
    72,586
    
    
    
    81,552
    
    
    
    (2,783
    )
    
    
    179,649
    
    
    
    
    (6,696
    )
 26




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##### Table of Contents



December 31,
    
    December 31,
    
    December 31,
    
    December 31,
    
    December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004Balance Sheet Data:Cash and cash equivalents
    
    $
    52,073
    
    
    $
    33,906
    
    
    $
    42,527
    
    
    $
    10,060
    
    
    $
    4,729Total assets
    
    
    513,584
    
    
    
    568,624
    
    
    
    409,368
    
    
    
    297,404
    
    
    
    299,057Long-term debt
    
    
    261,523
    
    
    
    291,399
    
    
    
    228,555
    
    
    
    159,574
    
    
    
    158,740Total stockholders equity (deficit)/Invested capital
    
    
    127,670
    
    
    
    133,335
    
    
    
    79,519
    
    
    
    38,613
    
    
    
    42,879
  
 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
IndustrialMotion, 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
     Business Outlook
  27




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##### Table of Contents



History and the Acquisitions
      28




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##### Table of Contents



Divestitures
  Critical Accounting Policies
   Revenue Recognition
 Inventory
  Retirement Benefits
 29




---



##### Table of Contents



Goodwill, Intangibles and other long-lived assets Business Combinations Goodwill and Other Intangible Assets
    30




---



##### Table of Contents



Accounting for the Impairment or Disposal of Long-lived Assets,
   Income Taxes
 31




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##### Table of Contents



Results of Operations
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006Net sales
    
    $
    635,336
    
    
    $
    584,376
    
    
    $
    462,285Cost of sales
    
    
    449,244
    
    
    
    419,109
    
    
    
    336,836Gross profit
    
    
    186,092
    
    
    
    165,267
    
    
    
    125,449Gross profit percentage
    
    
    29.29
    %
    
    
    28.28
    %
    
    
    27.14
    %Selling, general and administrative expenses
    
    
    99,185
    
    
    
    93,160
    
    
    
    83,256Research and development expenses
    
    
    6,589
    
    
    
    6,077
    
    
    
    4,938Goodwill impairment
    
    
    31,810
    
    
    
    
    
    
    
    Loss (gain) on curtailment of post-retirement benefit plan
    
    
    (925
    )
    
    
    2,745
    
    
    
    (3,838
    )Restructuring costs
    
    
    2,310
    
    
    
    2,399
    
    
    
    Loss on sale/disposal of assets
    
    
    1,584
    
    
    
    
    
    
    
    Income from operations
    
    
    45,539
    
    
    
    60,886
    
    
    
    41,093Interest expense, net
    
    
    28,339
    
    
    
    38,554
    
    
    
    23,522Other non-operating (income) expense, net
    
    
    (6,249
    )
    
    
    612
    
    
    
    856Income from continuing operations before income taxes
    
    
    23,449
    
    
    
    21,720
    
    
    
    16,715Provision for income taxes
    
    
    16,731
    
    
    
    8,208
    
    
    
    6,352Income from continuing operations
    
    
    6,718
    
    
    
    13,512
    
    
    
    10,363Net loss from discontinued operations, net of income taxes
of $43 and $6,109
    
    
    (224
    )
    
    
    (2,001
    )
    
    
    Net income
    
    $
    6,494
    
    
    $
    11,511
    
    
    $
    10,363
 Year Ended December 31, 2008 Compared with Year Ended December 31, 2007
 Year EndedDecember 31, 2008
    
    December 31, 2007
    
    Change
    
    %Net sales
    
    $
    635,336
    
    
    $
    584,376
    
    
    $
    50,960
    
    
    
    8.7
    %
 Net sales.
  Year EndedDecember 31, 2008
    
    December 31, 2007
    
    Change
    
    %Gross Profit
    
    $
    186,092
    
    
    $
    165,267
    
    
    $
    20,825
    
    
    
    12.6
    %Gross Profit as a percent of sales
    
    
    29.29
    %
    
    
    28.28
    %
 32




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##### Table of Contents



Gross profit.
   Year EndedDecember 31, 2008
    
    December 31, 2007
    
    Change
    
    %Selling, general and administrative expense (SG&A)
    
    $
    99,185
    
    
    $
    93,160
    
    
    $
    6,025
    
    
    
    6.5
    %SG&A as a percent of sales
    
    
    15.6
    %
    
    
    15.9
    %
 Selling, general and administrative expenses.
   Year EndedDecember 31, 2008
    
    December 31, 2007
    
    Change
    
    %Research and development expenses (R&D)
    
    $
    6,589
    
    
    $
    6,077
    
    
    $
    512
    
    
    
    8.4
    %
 Research and development expenses
 Year EndedDecember 31, 2008
    
    December 31, 2007
    
    Change
    
    %Other non-operating (income) expense, net
    
    $
    (6,249
    )
    
    $
    612
    
    
    $
    (6,861
    )
    
    
    -1121
    %
 33




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##### Table of Contents



Other non-operating (income) expense.
 Year EndedDecember 31, 2008
    
    December 31, 2007
    
    Change
    
    %Interest Expense, net
    
    $
    28,339
    
    
    $
    38,554
    
    
    $
    (10,215
    )
    
    
    -26.5
    %
 Interest expense.
 Goodwill impairment.
 Restructuring.
   Curtailment.
 34




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##### Table of Contents



Loss on disposal of assets.
 Year EndedDecember 31, 2008
    
    December 31, 2007
    
    Change
    
    %Provision for income taxes, continuing operations
    
    $
    16,731
    
    
    $
    8,208
    
    
    $
    8,523
    
    
    
    103.8
    %Provision for income taxes as a % of income before
taxes
    
    
    71.4
    %
    
    
    37.9
    %
 Provision for income taxes.
 Discontinued Operations.
 Year Ended December 31, 2007 Compared with Year Ended December 31, 2006
 Year EndedDecember 31, 2007
    
    December 31, 2006
    
    Change
    
    %Net sales
    
    $
    584,376
    
    
    $
    462,285
    
    
    $
    122,091
    
    
    
    26.4
    %
 Net sales.
 35




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##### Table of Contents



Year to Date EndedDecember 31,2007
    
    December 31,2006
    
    Change
    
    %Gross Profit
    
    $
    165,267
    
    
    $
    125,449
    
    
    $
    39,818
    
    
    
    31.7
    %Gross Profit as a percent of sales
    
    
    28.28
    %
    
    
    27.14
    %
 Gross profit
 Year to Date EndedDecember 31,2007
    
    December 31,2006
    
    Change
    
    %Selling, general and administrative expense (SG&A)
    
    $
    93,160
    
    
    $
    83,256
    
    
    $
    9,904
    
    
    
    11.9
    %SG&A as a percent of sales
    
    
    15.9
    %
    
    
    18.0
    %
 Selling, general and administrative expenses
 Year to Date EndedDecember 31,2007
    
    December 31,2006
    
    Change
    
    %Research and development expenses (R&D)
    
    $
    6,077
    
    
    $
    4,938
    
    
    $
    1,139
    
    
    
    23.1
    %
 Research and development expenses.
 Year to Date EndedDecember 31,2007
    
    December 31,2006
    
    Change
    
    %Other non-operating (income) expense, net
    
    $
    612
    
    
    $
    856
    
    
    $
    (244
    )
    
    
    -29
    %
 Other non-operating (income) expense.
 Year to Date EndedDecember 31,2007
    
    December 31,2006
    
    Change
    
    %Interest Expense, net
    
    $
    38,554
    
    
    $
    23,522
    
    
    $
    15,032
    
    
    
    63.9
    %
 Interest expense.
 36




---



##### Table of Contents



1 4 1 4 1 4 1 4
 Restructuring.
 Curtailment.
  Year to Date EndedDecember 31,2007
    
    December 31,2006
    
    Change
    
    %Provision for income taxes, continuing operations
    
    $
    8,208
    
    
    $
    6,352
    
    
    $
    1,856
    
    
    
    29.2
    %Provision for income taxes as a % of income before taxes
    
    
    37.9
    %
    
    
    38.0
    %
 Provision for income taxes.
 Discontinued Operations
 Liquidity and Capital Resources
 Overview
 1 4
 37




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##### Table of Contents



Borrowings
 Amounts in millionsDecember 31,2008
    
    
    
    
    
    
    December 31,2007Debt:Revolving credit agreement
    
    $
    
    
    
    
    
    
    
    $
    TB Woods revolving credit agreement
    
    
    6.0
    
    
    
    
    
    
    
    7.7Overdraft agreements
    
    
    
    
    
    
    
    
    
    
    9% Senior Secured Notes
    
    
    242.5
    
    
    
    
    
    
    
    270.011.25% Senior Notes
    
    
    4.7
    
    
    
    
    
    
    
    7.8Variable rate demand revenue bonds
    
    
    5.3
    
    
    
    
    
    
    
    5.3Mortgages
    
    
    2.3
    
    
    
    
    
    
    
    2.6Capital leases
    
    
    2.6
    
    
    
    
    
    
    
    3.4Total Debt
    
    $
    263.4
    
    
    
    
    
    
    $
    296.8Cash
    
    $
    52.1
    
    
    
    
    
    
    $
    33.9Net Debt
    
    $
    211.3
    
    
    
    62.3
    %
    
    $
    262.9
    
    
    
    66.4
    %Shareholders Equity
    
    $
    127.7
    
    
    
    37.7
    %
    
    $
    133.3
    
    
    
    33.6
    %Total Capitalization
    
    $
    339.0
    
    
    
    100
    %
    
    $
    396.2
    
    
    
    100
    %
 1 4 1 4
 
     38




---



##### Table of Contents



1 4
 1 4 1 4
   Net Cash
 December 31,2008
    
    December 31,2007(in thousands)Cash and cash equivalents
    
    $
    52,073
    
    
    $
    33,906
   1 4
 39




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##### Table of Contents



Capital Expenditures
   Pension Plans
        Off-Balance Sheet Arrangements
  Related Party Transactions
  40




---



##### Table of Contents



Contractual Obligations
  Payments Due by Period2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    Total9% Senior Secured Notes(1)
    
    $
    
    
    
    $
    
    
    
    $
    242.5
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    242.511 1/4% Senior Notes(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.7
    
    
    
    
    
    
    
    4.7Operating leases
    
    
    4.3
    
    
    
    3.6
    
    
    
    2.9
    
    
    
    2.4
    
    
    
    1.4
    
    
    
    3.1
    
    
    
    17.7Capital leases
    
    
    1.0
    
    
    
    0.9
    
    
    
    0.7
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    2.9Mortgage(3)
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    1.8
    
    
    
    2.3TB Woods Revolving Credit Facility(4)
    
    
    
    
    
    
    6.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.0Variable Rate Demand Revenue Bonds(5)
    
    
    2.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.0
    
    
    
    5.3Senior Revolving Credit Facility(6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    7.7
    
    
    $
    10.6
    
    
    $
    246.2
    
    
    $
    2.8
    
    
    $
    6.2
    
    
    $
    7.9
    
    
    $
    281.4
 
 (1)
    
    We have semi-annual cash interest requirements due on the 9% senior secured notes with $21.8
million payable in, 2009 and 2010 and $20.0 million in 2011.(2)
    
    Assuming an exchange rate of 1.448 U.S. Dollars to 1.0 U.K. Pounds as of December 31, 2008, we
have semi-annual cash interest requirements due on the 111/4% senior notes with $0.5 million payable
in 2009 through 2012 and $0.1 million thereafter. The principal balance of £3.3 million is due in
2013 which, assuming an exchange rate of 1.448 of U.S. Dollars to 1.0 U.K. Pounds, equals
approximately $4.7 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 1.6 million as of December 31, 2008,
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, 2008, there was $6.0 million of outstanding
borrowings and $6.0 million of outstanding letters of credit under this facility.(5)
    
    In April 2007, as part of the TB Woods acquisition, we assumed obligation for payment of
interest and principal on 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, 2008, there were no outstanding borrowings and $7.6 million of outstanding letters of
credit under our senior revolving credit facility.   Stock-based Compensation
   41




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##### Table of Contents



Income Taxes
  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
 42




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##### Table of Contents



Item 7A. Qualitative and Quantitative Disclosures About Market Risk
  Currency translation.
 Currency transaction exposure.
 Interest rate risk.
 Commodity Price Exposure.
 43




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 44




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Consolidated Balance Sheets
Amounts in thousands, except share amounts
 December 31, 2008
    
    
    December 31, 2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    52,072
    
    
    $
    33,906Trade receivable, less allowance for doubtful accounts of $1,277 and
$1,548 at
December 31, 2008 and December 31, 2007, respectively
    
    
    68,803
    
    
    
    73,248Inventories
    
    
    98,410
    
    
    
    101,835Deferred income taxes
    
    
    8,032
    
    
    
    8,286Receivable from sale of Electronics Division (See Note 4)
    
    
    
    
    
    
    17,100Assets held for sale (See Note 6)
    
    
    4,676
    
    
    
    4,728Prepaid expenses and other current assets
    
    
    5,324
    
    
    
    5,578Total current assets
    
    
    237,317
    
    
    
    244,681Property, plant and equipment, net
    
    
    110,220
    
    
    
    113,043Intangible assets, net
    
    
    79,339
    
    
    
    88,943Goodwill
    
    
    77,497
    
    
    
    114,979Deferred income taxes
    
    
    495
    
    
    
    231Other non-current assets
    
    
    7,521
    
    
    
    6,747Total assets
    
    $
    512,389
    
    
    $
    568,624LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    33,890
    
    
    $
    41,668Accrued payroll
    
    
    16,775
    
    
    
    16,988Accruals and other current liabilities
    
    
    18,755
    
    
    
    22,001Taxes payable
    
    
    
    
    
    
    1,196Deferred income taxes
    
    
    6,906
    
    
    
    8,060Current portion of long-term debt
    
    
    3,391
    
    
    
    2,667Total current liabilities
    
    
    79,717
    
    
    
    92,580Long-term debt  less current portion and net of unaccreted discount and
premium
    
    
    258,132
    
    
    
    291,399Deferred income taxes
    
    
    23,336
    
    
    
    24,490Pension liablities
    
    
    11,854
    
    
    
    13,431Other post retirement benefits
    
    
    2,270
    
    
    
    3,170Long-term taxes payable
    
    
    7,976
    
    
    
    5,911Other long-term liabilities
    
    
    1,434
    
    
    
    4,308Commitments and contingencies (See Note 16)
    
    
    
    
    
    
    Stockholders equity:Common stock (1,000 shares authorized, issued & outstanding, $0.001 par
value)
    
    
    
    
    
    
    Additional paid-in capital
    
    
    97,829
    
    
    
    97,829Due to Parent
    
    
    27,062
    
    
    
    13,208Retained earnings
    
    
    26,869
    
    
    
    20,375Accumulated other comprehensive (loss) income
    
    
    (24,090
    )
    
    
    1,923Total stockholders equity
    
    
    127,670
    
    
    
    133,335Total liabilities and stockholders equity
    
    $
    512,389
    
    
    $
    568,624
  45




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Consolidated Statements of Income and Comprehensive Income (Loss)
Amounts in thousands
 Year EndedDecember 31,2008
    
    2007
    
    2006Net sales
    
    $
    635,336
    
    
    $
    584,376
    
    
    $
    462,285Cost of sales
    
    
    449,244
    
    
    
    419,109
    
    
    
    336,836Gross profit
    
    
    186,092
    
    
    
    165,267
    
    
    
    125,449Operating expenses:Selling, general and administrative expenses
    
    
    99,185
    
    
    
    93,160
    
    
    
    83,256Research and development expenses
    
    
    6,589
    
    
    
    6,077
    
    
    
    4,938Goodwill impairment
    
    
    31,810
    
    
    
    
    
    
    
    (Gain) loss from post-retirement benefit plan
    
    
    (925
    )
    
    
    2,745
    
    
    
    (3,838
    )Restructuring costs
    
    
    2,310
    
    
    
    2,399
    
    
    
    Loss on sale/disposal of assets
    
    
    1,584
    
    
    
    
    
    
    
    140,553
    
    
    
    104,381
    
    
    
    84,356Income from operations
    
    
    45,539
    
    
    
    60,886
    
    
    
    41,093Other non-operating income and expense:Interest expense, net
    
    
    28,339
    
    
    
    38,554
    
    
    
    23,522Other non-operating (income) expense, net
    
    
    (6,249
    )
    
    
    612
    
    
    
    85622,090
    
    
    
    39,166
    
    
    
    24,378Income from continuing operations before income taxes
    
    
    23,449
    
    
    
    21,720
    
    
    
    16,715Provision for income taxes
    
    
    16,731
    
    
    
    8,208
    
    
    
    6,352Net income from continuing operations
    
    
    6,718
    
    
    
    13,512
    
    
    
    10,363Net loss from discontinued operations, net of income
taxes of $43 and $6,109
    
    
    (224
    )
    
    
    (2,001
    )
    
    
    Net income
    
    $
    6,494
    
    
    $
    11,511
    
    
    $
    10,363Consolidated Statement of Comprehensive Income (Loss)Pension liability adjustment
    
    $
    (2,038
    )
    
    $
    482
    
    
    $
    696Foreign currency translation adjustment
    
    
    (23,975
    )
    
    
    4,505
    
    
    
    677Comprehensive (loss) income
    
    $
    (19,519
    )
    
    $
    16,498
    
    
    $
    11,736
  46




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Consolidated Statements of Stockholders Equity
Amounts in thousands
 Retained
    
    
    
    
    
    Accumulated OtherCommon
    
    Additional Paid
    
    Earnings
    
    Due to (from)
    
    Comprehensive IncomeStock
    
    in Capital
    
    (Deficit)
    
    Parent
    
    (Loss)
    
    TotalBalance 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 expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,505
    
    
    
    4,505Pension liability
adjustment, net of $28 tax
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    482
    
    
    
    482Balance at December 31, 2007
    
    $
    
    
    
    $
    97,829
    
    
    $
    20,375
    
    
    $
    13,208
    
    
    $
    1,923
    
    
    $
    133,335Net income
    
    
    
    
    
    
    
    
    
    
    6,494
    
    
    
    
    
    
    
    
    
    
    
    6,494Net proceeds received from
parent company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,854
    
    
    
    
    
    
    
    13,854Cumulative foreign currency
translation adjustment, net
of $1,594 tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,975
    )
    
    
    (23,975
    )Pension liability
adjustment, net of $1,120
tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,038
    )
    
    
    (2,038
    )Balance at December 31, 2008
    
    $
    
    
    
    $
    97,829
    
    
    $
    26,869
    
    
    $
    27,062
    
    
    $
    (24,090
    )
    
    $
    127,670
  47




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##### Table of Contents



ALTRA INDUSTRIAL MOTION, INC.
Consolidated Statements of Cash Flows
Amounts in thousands
 Year ended December 31,2008
    
    2007
    
    2006Cash flows from operating activitiesNet income
    
    $
    6,494
    
    
    $
    11,511
    
    
    $
    10,363Adjustments to reconcile net income to net cash flows:Depreciation
    
    
    15,379
    
    
    
    16,447
    
    
    
    10,821Amortization of intangible assets
    
    
    5,689
    
    
    
    5,492
    
    
    
    3,790Amortization and write-offs of deferred loan costs
    
    
    2,133
    
    
    
    3,448
    
    
    
    968(Gain) loss on foreign currency, net
    
    
    (5,049
    )
    
    
    732
    
    
    
    1,079Accretion and write-off of debt discount and premium, net
    
    
    898
    
    
    
    774
    
    
    
    942Goodwill impairment charge
    
    
    31,810
    
    
    
    
    
    
    
    Amortization of inventory fair value adjustment
    
    
    
    
    
    
    926
    
    
    
    2,278Loss (gain) on sale of Electronics Division
    
    
    224
    
    
    
    (2,927
    )
    
    
    Loss on disposal of fixed assets
    
    
    1,584
    
    
    
    313
    
    
    
    (Gain) loss on post-retirement benefit plan
    
    
    (925
    )
    
    
    2,745
    
    
    
    (3,838
    )Stock based compensation
    
    
    1,951
    
    
    
    2,038
    
    
    
    1,945Provision for deferred taxes
    
    
    1,401
    
    
    
    5,455
    
    
    
    1,190Changes in assets and liabilities:Trade receivables
    
    
    (933
    )
    
    
    4,318
    
    
    
    (330
    )Inventories
    
    
    (2,074
    )
    
    
    (2,277
    )
    
    
    (3,973
    )Accounts payable and accrued liabilities
    
    
    (13,271
    )
    
    
    (10,691
    )
    
    
    (10,277
    )Other current assets and liabilities
    
    
    1,269
    
    
    
    3,735
    
    
    
    (2,297
    )Other operating assets and liabilities
    
    
    (1,469
    )
    
    
    (181
    )
    
    
    752Net cash provided by operating activities
    
    
    45,111
    
    
    
    41,858
    
    
    
    13,413Cash flows from investing activitiesPurchase of fixed assets
    
    
    (19,289
    )
    
    
    (11,633
    )
    
    
    (9,408
    )Proceeds from sale of Electronics Division, net of cash of
$1,072
    
    
    17,310
    
    
    
    10,828
    
    
    
    Payments for prior year acquisitions
    
    
    (1,708
    )
    
    
    
    
    
    
    Acquisitions, net of $5,222 and $775 of cash acquired in
2007 and 2006, respectively
    
    
    
    
    
    
    (123,867
    )
    
    
    (53,755
    )Net cash used in investing activities
    
    
    (3,687
    )
    
    
    (124,672
    )
    
    
    (63,163
    )Cash flows from financing activitiesProceeds from issuance of Senior Secured Notes
    
    
    
    
    
    
    106,050
    
    
    
    Net payments received from (made on behalf of) Parent
    
    
    11,903
    
    
    
    (13,554
    )
    
    
    24,389Payments on Senior Secured Notes
    
    
    (27,500
    )
    
    
    
    
    
    
    Capital contribution from Parent
    
    
    
    
    
    
    49,015Payment of debt issuance costs
    
    
    
    
    
    
    (4,235
    )
    
    
    (2,731
    )Payments on Senior Notes
    
    
    (1,346
    )
    
    
    (58,428
    )
    
    
    Borrowings under revolving credit agreement
    
    
    
    
    
    
    8,315
    
    
    
    5,057Payments on revolving credit agreement
    
    
    (1,723
    )
    
    
    (13,520
    )
    
    
    (5,057
    )Proceeds from issuance of Senior Notes
    
    
    
    
    
    
    
    
    
    
    57,625Payment on mortgages
    
    
    (266
    )
    
    
    (126
    )
    
    
    Proceeds from mortgages
    
    
    
    
    
    
    
    
    
    
    2,510Payment on capital leases
    
    
    (925
    )
    
    
    (931
    )
    
    
    (241
    )Net cash (used in) provided by financing activities
    
    
    (19,857
    )
    
    
    72,586
    
    
    
    81,552Effect of exchange rate changes on cash and cash equivalents
    
    
    (3,401
    )
    
    
    1,607
    
    
    
    665Net change in cash and cash equivalents
    
    
    18,166
    
    
    
    (8,621
    )
    
    
    32,467Cash and cash equivalents at beginning of year
    
    
    33,906
    
    
    
    42,527
    
    
    
    10,060Cash and cash equivalents at end of period
    
    $
    52,072
    
    
    $
    33,906
    
    
    $
    42,527Cash paid during the period for:Interest
    
    $
    27,253
    
    
    $
    36,961
    
    
    $
    23,660Income taxes
    
    $
    17,277
    
    
    $
    13,277
    
    
    $
    2,341Non-cash Financing:Acquisition of capital equipment under capital lease
    
    $
    352
    
    
    $
    2,364
    
    
    $
    613Accrued offering costs
    
    $
    
    
    
    $
    
    
    
    $
    1,304
  48




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##### Table of Contents



1. Description of Business and Summary of Significant Accounting Policies
 Basis of Preparation and Description of Business
  Principles of Consolidation
  Fair Value of Financial Instruments
  Use of Estimates
  Foreign currency translation
   Cash and Cash Equivalents
  Trade Receivables
  49




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##### Table of Contents



Inventories
   Property, Plant and Equipment
   Buildings and improvements
    
    15 to 45 yearsMachinery and equipment
    
    2 to 15 yearsCapital lease
    
    Life of lease
  Intangible Assets
  Goodwill
   Impairment of Goodwill and Indefinite-Lived Intangible Assets
  50




---



##### Table of Contents



Impairment of Long-Lived Assets Other Than Goodwill and Indefinite-Lived Intangible Assets
 Accounting for the Impairment or Disposal of Long-lived Assets,
   Debt Issuance Costs
  Revenue Recognition
   Shipping and Handling Costs
  Warranty Costs
  51




---



##### Table of Contents



Self-Insurance
  Research and Development
  Advertising
  Stock-Based Compensation
  Income Taxes
    52




---



##### Table of Contents



Accumulated Other Comprehensive Income (Loss)
  Minimum Pension
    
    
    Cumulative foreignLiability/SFAS
    
    
    currency
    
    
    Accumulated otherNo. 158
    
    
    translation
    
    
    comprehensiveAsset/(liability)
    
    
    adjustment
    
    
    income (loss)Balance at December 31, 2005
    
    
    (1,422
    )
    
    
    (5,851
    )
    
    
    (7,273
    )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
    )
    
    $
    1,923Pension liability adjustment
    
    
    (2,038
    )
    
    
    
    
    
    
    (2,038
    )Foreign currency translation adjustment
    
    
    
    
    
    
    (23,975
    )
    
    
    (23,975
    )Balance at December 31, 2008
    
    $
    554
    
    
    $
    (24,644
    )
    
    $
    (24,090
    )
 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
 53




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##### Table of Contents



Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements
 54




---



##### Table of Contents



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 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
   55




---



##### 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
   Patents, subject to amortization
    
    $
    110Customer relationships, subject to amortization
    
    
    9,312Trade names and trademarks, not subject to amortization
    
    
    6,930Total intangible assets
    
    $
    16,352
 56




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##### Table of Contents



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 income from discontinued operations
    
    
    (2,001
    )
    
    
    Net income
    
    $
    9,696
    
    
    $
    6,845Basic earnings per share:Net income from continuing operations
    
    $
    0.50
    
    
    $
    5.37Net loss from discontinued operations
    
    
    (0.09
    )
    
    $
    Net income
    
    $
    0.41
    
    
    $
    5.37Diluted earnings per share:Net income from continuing operations
    
    $
    0.47
    
    
    $
    0.33Net loss from discontinued operations
    
    
    (0.08
    )
    
    
    Net income
    
    $
    0.39
    
    
    $
    0.33
 57




---



##### 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
    
    
    (76
    )Other non-operating income
    
    
    (83
    )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
    )
 Business Combinations Accounting for Income Taxes
   58




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##### Table of Contents



5. Inventories
  December 31,
    
    
    December 31,2008
    
    
    2007Raw Materials
    
    
    31,925
    
    
    $
    33,601Work in process
    
    
    21,310
    
    
    
    20,376Finished goods
    
    
    45,175
    
    
    
    47,858Inventories, net
    
    $
    98,410
    
    
    $
    101,835
  6. Property, Plant and Equipment
  2008
    
    
    2007Land
    
    $
    12,923
    
    
    $
    13,993Buildings and improvements
    
    
    31,597
    
    
    
    30,360Machinery and equipment
    
    
    110,178
    
    
    
    102,678154,698
    
    
    
    147,031Less-Accumulated depreciation
    
    
    (44,478
    )
    
    
    (33,988
    )$
    110,220
    
    
    $
    113,043
  59




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##### Table of Contents



7. Goodwill and Intangible Assets
  Balance December 31, 2007
    
    $
    114,979Goodwill impairment
    
    
    (31,810
    )Adjustments to acquisition related tax contingencies
    
    
    (1,461
    )Impact of changes in foreign currency
    
    
    (4,211
    )Balance December 31, 2008
    
    $
    77,497
   December 31, 2008
    
    
    December 31, 2007Accumulated
    
    
    
    
    
    
    AccumulatedOther Intangible Assets
    
    Cost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationIntangible assets not subject to amortization:Tradenames and trademarks
    
    $
    30,730
    
    
    
    
    
    
    $
    30,730
    
    
    $
    Intangible assets subject to amortization:Customer relationships
    
    
    62,038
    
    
    
    15,065
    
    
    
    62,038
    
    
    
    10,139Product technology and patents
    
    
    5,435
    
    
    
    3,111
    
    
    
    5,232
    
    
    
    2,348Impact of changes in foreign currency
    
    
    (688
    )
    
    
    
    
    
    
    3,430
    
    
    
    Total intangible assets
    
    $
    97,515
    
    
    $
    18,176
    
    
    $
    101,430
    
    
    $
    12,487
    8. Warranty Costs
  December 31,
    
    
    December 31,2008
    
    
    2007Balance at beginning of period
    
    $
    4,098
    
    
    $
    2,083Accrued warranty costs
    
    
    2,919
    
    
    
    2,310Balance assumed with TB Woods acquisition
    
    
    
    
    
    
    843Balance sold with the Electronics Division
    
    
    
    
    
    
    (873
    )Payments and adjustments
    
    
    (2,763
    )
    
    
    (265
    )Balance at end of period
    
    $
    4,254
    
    
    $
    4,098
 60




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##### Table of Contents



9. Income Taxes
  December 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006Domestic
    
    $
    2,324
    
    
    $
    10,190
    
    
    $
    15,969Foreign
    
    
    21,125
    
    
    
    11,479
    
    
    
    (1,231
    )Balance at end of period
    
    $
    23,449
    
    
    $
    21,669
    
    
    $
    14,738
  December 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006Current:Federal
    
    $
    8,511
    
    
    $
    781
    
    
    $
    2,616Foreign and State
    
    
    6,819
    
    
    
    1,972
    
    
    
    1,991$
    15,330
    
    
    $
    2,753
    
    
    $
    4,607Deferred:Federal
    
    
    128
    
    
    
    4,988
    
    
    
    998Foreign and state
    
    
    1,273
    
    
    
    467
    
    
    
    1921,401
    
    
    
    5,455
    
    
    
    1,190Provision for income taxes
    
    $
    16,731
    
    
    $
    8,208
    
    
    $
    5,797
  December 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006Tax at U.S. federal income tax rate
    
    $
    8,209
    
    
    $
    7,584
    
    
    $
    5,158State taxes, net of federal income tax effect
    
    
    486
    
    
    
    306
    
    
    
    674Change in tax rate
    
    
    9
    
    
    
    (750
    )
    
    
    53Foreign Taxes
    
    
    1,091
    
    
    
    1,761
    
    
    
    944Interest
    
    
    (1,831
    )
    
    
    (1,365
    )
    
    
    (1,361
    )Goodwill Impairment
    
    
    8,061
    
    
    
    
    
    
    
    Other
    
    
    706
    
    
    
    672
    
    
    
    329Provision for income taxes
    
    $
    16,731
    
    
    $
    8,208
    
    
    $
    5,797
  61




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##### Table of Contents



December 31, 2008
    
    
    December 31, 2007Balance at beginning of period
    
    $
    5,583
    
    
    $
    922Increases related to prior year tax positions
    
    
    2,134
    
    
    
    1,916Increases related to acquisitions
    
    
    
    
    
    
    3,581Decreases related to prior year tax positions
    
    
    (46
    )
    
    
    (1,970
    )Increases related to current year tax
positions
    
    
    72
    
    
    
    1,785Settlements
    
    
    (398
    )
    
    
    Lapse of statute of limitations
    
    
    (1,132
    )
    
    
    (651
    )Balance at end of period
    
    $
    6,213
    
    
    $
    5,583
    62




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##### Table of Contents



2008
    
    
    2007Deferred tax assets:Post-retirement obligations
    
    $
    4,538
    
    
    $
    5,031Goodwill
    
    
    5,112
    
    
    
    2,051Expenses not currently deductible
    
    
    3,464
    
    
    
    6,801Net operating loss carryover
    
    
    767
    
    
    
    1,761Other
    
    
    
    
    
    
    177Total deferred tax assets
    
    
    13,881
    
    
    
    15,821Valuation allowance for deferred tax assets
    
    
    (767
    )
    
    
    (1,336
    )Net deferred tax assets
    
    
    13,114
    
    
    
    14,485Deferred tax liabilities:Property, plant and equipment
    
    
    15,279
    
    
    
    16,081Intangible assets
    
    
    18,035
    
    
    
    20,331Other
    
    
    1,515
    
    
    
    2,106Total deferred tax liabilities
    
    
    34,829
    
    
    
    38,518Net deferred tax liabilities
    
    
    (21,715
    )
    
    
    (24,033
    )
    10. Pension and Other Employee Benefits
 Defined Benefit (Pension) and Postretirement Benefit Plans
   63




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Pension Benefits
    
    
    Other BenefitsYear Ended
    
    
    
    
    
    
    Year EndedYear Ended
    
    
    December 31,
    
    
    Year Ended
    
    
    December 31,December 31, 2008
    
    
    2007
    
    
    December 31, 2008
    
    
    2007Change in benefit obligation:Obligation at beginning of period
    
    $
    28,011
    
    
    $
    26,121
    
    
    $
    3,482
    
    
    $
    3,549Service cost
    
    
    239
    
    
    
    325
    
    
    
    58
    
    
    
    72Interest cost
    
    
    1,561
    
    
    
    1,452
    
    
    
    213
    
    
    
    175Amendments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25
    )Curtailments, settlements and special
termination benefits
    
    
    
    
    
    
    2,899
    
    
    
    (1,029
    )
    
    
    (154
    )Actuarial (gains) losses
    
    
    (2,240
    )
    
    
    (1,756
    )
    
    
    224
    
    
    
    168Foreign exchange effect
    
    
    (133
    )
    
    
    374
    
    
    
    (365
    )
    
    
    Benefits paid
    
    $
    (762
    )
    
    $
    (1,404
    )
    
    $
    
    
    
    $
    (303
    )Obligation at end of period
    
    $
    26,676
    
    
    $
    28,011
    
    
    $
    2,583
    
    
    $
    3,482Change in plan assets:Fair value of plan assets, beginning of period
    
    $
    14,580
    
    
    $
    10,952
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    (2,943
    )
    
    
    1,196
    
    
    
    
    
    
    
    Employer contributions
    
    
    3,947
    
    
    
    3,836
    
    
    
    364
    
    
    
    302Benefits paid
    
    
    (762
    )
    
    
    (1,404
    )
    
    
    (364
    )
    
    
    (302
    )Fair value of plan assets, end of period
    
    $
    14,822
    
    
    $
    14,580
    
    
    $
    
    
    
    $
    Funded status
    
    $
    (11,854
    )
    
    $
    (13,431
    )
    
    $
    (2,583
    )
    
    $
    (3,482
    )Amounts Recognized in the balance sheet
cosist of:Non current assets
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Current liabilities
    
    
    
    
    
    
    
    
    
    
    (313
    )
    
    
    (312
    )Non-current liabilities
    
    
    (11,854
    )
    
    
    (13,431
    )
    
    
    (2,270
    )
    
    
    (3,170
    )Total
    
    $
    (11,854
    )
    
    $
    (13,431
    )
    
    $
    (2,583
    )
    
    $
    (3,482
    )
   2008
    
    2007Pension benefits
    
    
    6.25
    %
    
    
    6.25
    %Other postretirement benefits
    
    
    6.25
    %
    
    
    5.75
    %
 64




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##### Table of Contents



Pension Benefits
    
    Other BenefitsYear Ended
    
    Year Ended
    
    Year Ended
    
    Year Ended
    
    Year Ended
    
    Year EndedDecember 31,
    
    December 31,
    
    December 31,
    
    December 31,
    
    December 31,
    
    December 31,2008
    
    2007
    
    2006
    
    2008
    
    2007
    
    2006Service cost
    
    $
    239
    
    
    $
    325
    
    
    $
    513
    
    
    $
    58
    
    
    $
    72
    
    
    $
    140Interest cost
    
    
    1,561
    
    
    
    1,452
    
    
    
    1,491
    
    
    
    213
    
    
    
    175
    
    
    
    315Recognized net
actuarial loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25
    )
    
    
    
    
    
    
    (113
    )Expected return on
plan assets
    
    
    (1,374
    )
    
    
    (1,066
    )
    
    
    (829
    )
    
    
    
    
    
    
    
    
    
    
    Settlement/Curtailment/
Special Termination
Benefit
    
    
    
    
    
    
    2,899
    
    
    
    119
    
    
    
    (924
    )
    
    
    (154
    )
    
    
    (3,838
    )Amortization
    
    
    (35
    )
    
    
    (4
    )
    
    
    6
    
    
    
    (975
    )
    
    
    (1,022
    )
    
    
    (640
    )Net periodic benefit
(income) cost
    
    $
    391
    
    
    $
    3,606
    
    
    $
    1,300
    
    
    $
    (1,653
    )
    
    $
    (929
    )
    
    $
    (4,136
    )
  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 31,2008
    
    2007
    
    2006
    
    2008
    
    2007
    
    2006Discount rate
    
    
    6.25
    %
    
    
    5.75
    %
    
    
    5.5
    %
    
    
    6.25
    %
    
    
    5.75
    %
    
    
    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
  65




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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, 2008
    
    $
    26
    
    
    $
    (32
    )Effect on the December 31, 2008 post-retirement benefit obligation
    
    $
    280
    
    
    $
    (176
    )
  Allocation Percentage ofPlan Assets at Year-End2008
    
    2008
    
    2007Asset Category
    
    Actual
    
    Target
    
    ActualEquity securities
    
    
    8
    %
    
    
    15
    %
    
    
    66
    %Fixed income securities
    
    
    76
    %
    
    
    85
    %
    
    
    34
    %Cash and cash equivalents
    
    
    16
    %
    
    
    
    
    
    
    
  66




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##### Table of Contents



Expected cash flows
  Pension
    
    PostretirementBenefits
    
    BenefitsExpected benefit payments (from plan assets)
    
    
    2009
    
    
    $
    803
    
    
    $
    3812010
    
    
    
    945
    
    
    
    3742011
    
    
    
    1,080
    
    
    
    3762012
    
    
    
    1,258
    
    
    
    3132013
    
    
    
    1,399
    
    
    
    220Thereafter
    
    
    9,116
    
    
    
    989
        Defined Contribution Plans
  67




---



##### Table of Contents



11. Long-Term Debt
 December 31,
    
    
    December 31,2008
    
    
    2007Debt:Revolving credit agreement
    
    $
    
    
    
    $
    TB Woods revolving credit agreement
    
    
    6,000
    
    
    
    7,700Overdraft agreements
    
    
    
    
    
    
    9% Senior Secured Notes
    
    
    242,500
    
    
    
    270,00011.25% Senior Notes
    
    
    4,706
    
    
    
    7,790Variable rate demand revenue bonds
    
    
    5,300
    
    
    
    5,300Mortgages
    
    
    2,257
    
    
    
    2,639Capital leases
    
    
    2,672
    
    
    
    3,449Less: debt discount and premium, net of accretion
    
    
    (1,912
    )
    
    
    (2,812
    )Total long-term debt
    
    $
    261,523
    
    
    $
    294,066
 Revolving Credit Agreement
   68




---



##### Table of Contents



TB Woods Revolving Credit Agreement
  Overdraft Agreements
  9% Senior Secured Notes
      11.25% Senior Notes
    69




---



##### Table of Contents



Variable Rate Demand Revenue Bonds
  Mortgage
  
 Capital Leases
  70




---



##### Table of Contents



12. Stockholders Equity
  Restricted Common Stock
    71




---



##### Table of Contents



13. Related-Party Transactions
 Joy Global Sales
  Management Agreement
  14. Concentrations of Credit, Segment Data and Workforce
   Disclosures about
Segments of an Enterprise and Related Information
 
    
    The component engages in business activities from which it may earn revenues and incur
expenses
    
    The operating results of the component are regularly reviewed by the Companys chief
operating decision maker to assess performance of the individual component and make decisions
about the allocation of resources
    
    Discrete financial information of the component is available
  (i)
    
    The nature of the products and services(ii)
    
    The nature of the production processes(iii)
    
    The type or class of customer for their products or services(iv)
    
    The methods used to distribute their products or services(v)
    
    The nature of the regulatory environment
  72




---



##### Table of Contents



Net SalesYear Ended
    
    
    Property, Plant and EquipmentDecember 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006
    
    
    December 31, 2008
    
    
    December 31, 2007North America
(primarily U.S.)
    
    $
    451,235
    
    
    $
    424,031
    
    
    $
    332,647
    
    
    $
    82,577
    
    
    $
    81,283Europe
    
    
    154,463
    
    
    
    137,908
    
    
    
    113,799
    
    
    
    24,552
    
    
    
    29,767Asia and other
    
    
    29,638
    
    
    
    22,437
    
    
    
    15,839
    
    
    
    3,091
    
    
    
    1,993Total
    
    $
    635,336
    
    
    $
    584,376
    
    
    $
    462,285
    
    
    $
    110,220
    
    
    $
    113,043
    15. Restructuring, Asset Impairment and Transition Expenses
  73




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##### Table of Contents



Year Ended
    
    Year EndedDecember 31, 2008
    
    December 31, 2007Altra Plan
    
    TB Woods Plan
    
    Total
    
    Altra Plan
    
    TB Woods Plan
    
    TotalExpensesExpenses
Moving and relocation
    
    $
    563
    
    
    $
    89
    
    
    $
    652
    
    
    $
    1,055
    
    
    $
    267
    
    
    $
    1,322Severance
    
    
    1,471
    
    
    
    
    
    
    
    1,471
    
    
    
    718
    
    
    
    
    
    
    
    718Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144
    
    
    
    
    
    
    
    144Total cash expenses
    
    
    2,034
    
    
    
    89
    
    
    
    2,123
    
    
    
    1,917
    
    
    
    267
    
    
    
    2,184Loss on disposal of fixed assets
    
    
    187
    
    
    
    
    
    
    
    187
    
    
    
    215
    
    
    
    
    
    
    
    215Total restructuring expenses
    
    $
    2,221
    
    
    $
    89
    
    
    $
    2,310
    
    
    $
    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
    
    
    $
    1,478Restructuring expense incurred
    
    
    2,221
    
    
    
    89
    
    
    
    2,310Cash payments
    
    
    (1,162
    )
    
    
    (1,118
    )
    
    
    (2,280
    )Non-cash loss on disposal of fixed assets
    
    
    (187
    )
    
    
    
    
    
    
    (187
    )Balance at December 31, 2008
    
    $
    1,321
    
    
    $
    
    
    
    $
    1,321
  74




---



##### Table of Contents



16. Commitments and Contingencies
 Minimum Lease Obligations
  Operating
    
    
    CapitalYear ending December 31:
    
    Leases
    
    
    Leases2009
    
    $
    4,313
    
    
    $
    9602010
    
    
    3,591
    
    
    
    8822011
    
    
    2,912
    
    
    
    7482012
    
    
    2,438
    
    
    
    3102013
    
    
    1,389
    
    
    
    Thereafter
    
    
    3,122
    
    
    
    Total lease obligations
    
    $
    17,765
    
    
    
    2,900Less amounts representing interest
    
    
    
    
    
    
    (228
    )Present value of minimum capital lease obligations
    
    
    
    
    
    $
    2,672
  General Litigation
   75




---



##### Table of Contents



17. Unaudited Quarterly Results of Operations:
 Year ending December 31, 2008
 Fourth
    
    
    Third
    
    
    Second
    
    
    FirstNet Sales
    
    $
    144,813
    
    
    $
    159,448
    
    
    $
    167,893
    
    
    $
    163,182Gross Profit
    
    
    42,086
    
    
    
    45,821
    
    
    
    50,387
    
    
    
    47,798Net income (loss) from continuing operations
    
    
    (20,743
    )
    
    
    8,635
    
    
    
    9,869
    
    
    
    8,957Net income (loss) from discontinued operations
    
    
    
    
    
    
    173
    
    
    
    
    
    
    
    (397
    )Net (loss) income
    
    
    (20,743
    )
    
    
    8,808
    
    
    
    9,869
    
    
    
    8,560
  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 (loss)
    
    
    (1,420
    )
    
    
    4,310
    
    
    
    4,853
    
    
    
    3,768
  18. Subsequent Events (unaudited)
     76




---



##### Table of Contents



19. Guarantor Subsidiaries
  77




---



##### Table of Contents



Condensed Consolidating Balance Sheet
December 31, 2008
 Issuer
    
    Guarantor
    
    Non Guarantor
    
    Eliminations
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    27,134
    
    
    $
    (2,702
    )
    
    $
    27,640
    
    
    $
    
    
    
    $
    52,072Trade receivables, less allowance for doubtful accounts
    
    
    
    
    
    
    41,051
    
    
    
    27,752
    
    
    
    
    
    
    
    68,803Loans receivable from related parties
    
    
    
    
    
    
    112,900
    
    
    
    
    
    
    
    (112,900
    )
    
    
    Inventories
    
    
    
    
    
    
    71,304
    
    
    
    27,106
    
    
    
    
    
    
    
    98,410Deferred income taxes
    
    
    
    
    
    
    7,923
    
    
    
    109
    
    
    
    
    
    
    
    8,032Assets held for sale
    
    
    
    
    
    
    3,515
    
    
    
    1,161
    
    
    
    
    
    
    
    4,676Prepaid expenses and other current assets
    
    
    1,793
    
    
    
    4,373
    
    
    
    (842
    )
    
    
    
    
    
    
    5,324Total current assets
    
    
    28,927
    
    
    
    238,364
    
    
    
    82,926
    
    
    
    (112,900
    )
    
    
    237,317Property, plant and equipment, net
    
    
    838
    
    
    
    76,586
    
    
    
    32,796
    
    
    
    
    
    
    
    110,220Intangible assets, net
    
    
    
    
    
    
    62,481
    
    
    
    16,858
    
    
    
    
    
    
    
    79,339Goodwill
    
    
    
    
    
    
    58,016
    
    
    
    19,481
    
    
    
    
    
    
    
    77,497Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    495
    
    
    
    
    
    
    
    495Investment in subs
    
    
    423,121
    
    
    
    
    
    
    
    
    
    
    
    (423,121
    )
    
    
    Other non-current assets
    
    
    3,857
    
    
    
    3,628
    
    
    
    36
    
    
    
    
    
    
    
    7,521Total assets
    
    $
    456,743
    
    
    $
    439,075
    
    
    $
    152,592
    
    
    $
    (536,021
    )
    
    $
    512,389LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,292
    
    
    $
    19,813
    
    
    $
    11,785
    
    
    $
    
    
    
    $
    33,890Accrued payroll
    
    
    2,731
    
    
    
    6,879
    
    
    
    7,165
    
    
    
    
    
    
    
    16,775Accruals and other current liabilities
    
    
    3,506
    
    
    
    8,972
    
    
    
    6,277
    
    
    
    
    
    
    
    18,755Taxes payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    6,906
    
    
    
    
    
    
    
    6,906Current portion of long-term debt
    
    
    
    
    
    
    2,925
    
    
    
    466
    
    
    
    
    
    
    
    3,391Loans payable from related parties
    
    
    75,251
    
    
    
    
    
    
    
    37,649
    
    
    
    (112,900
    )
    
    
    Total current liabilities
    
    
    83,780
    
    
    
    38,589
    
    
    
    70,248
    
    
    
    (112,900
    )
    
    
    79,717Long-term debt  less current portion and net of unacreted
discount and premium
    
    
    245,293
    
    
    
    10,640
    
    
    
    2,199
    
    
    
    
    
    
    
    258,132Deferred income taxes
    
    
    
    
    
    
    20,822
    
    
    
    2,514
    
    
    
    
    
    
    
    23,336Pension liablities
    
    
    
    
    
    
    8,922
    
    
    
    2,932
    
    
    
    
    
    
    
    11,854Other post retirement benefits
    
    
    
    
    
    
    2,270
    
    
    
    
    
    
    
    
    
    
    
    2,270Long-term taxes payables
    
    
    
    
    
    
    7,976
    
    
    
    
    
    
    
    
    
    
    
    7,976Other long-term liabilities
    
    
    
    
    
    
    241
    
    
    
    1,193
    
    
    
    
    
    
    
    1,434Total stockholders equity
    
    
    127,670
    
    
    
    349,615
    
    
    
    73,506
    
    
    
    (423,121
    )
    
    
    127,670Total liabilities and shareholders equity
    
    $
    456,743
    
    
    $
    439,075
    
    
    $
    152,592
    
    
    $
    (536,021
    )
    
    $
    512,389
 78




---



##### Table of Contents



Condensed Consolidating Balance Sheet
December 31, 2007
 Issuer
    
    Guarantor
    
    Non Guarantor
    
    Eliminations
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,571
    
    
    $
    (492
    )
    
    $
    29,827
    
    
    $
    
    
    
    $
    33,906Trade receivable, less allowance for doubtful accounts
    
    
    
    
    
    
    45,938
    
    
    
    27,310
    
    
    
    
    
    
    
    73,248Loan receivable from related parties
    
    
    
    
    
    
    78,992
    
    
    
    
    
    
    
    (78,992
    )
    
    
    Inventories
    
    
    
    
    
    
    69,720
    
    
    
    32,115
    
    
    
    
    
    
    
    101,835Deferred income taxes
    
    
    
    
    
    
    8,468
    
    
    
    (182
    )
    
    
    
    
    
    
    8,286Receivable from sale of Electronics Division
    
    
    17,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,100Assets held for sale
    
    
    
    
    
    
    3,567
    
    
    
    1,161
    
    
    
    
    
    
    
    4,728Prepaid expenses and other current assets
    
    
    1,165
    
    
    
    1,634
    
    
    
    2,779
    
    
    
    
    
    
    
    5,578Total current assets
    
    
    22,836
    
    
    
    207,827
    
    
    
    93,010
    
    
    
    (78,992
    )
    
    
    244,681Property, plant and equipment, net
    
    
    
    
    
    
    76,571
    
    
    
    36,472
    
    
    
    
    
    
    
    113,043Intangible assets, net
    
    
    
    
    
    
    66,432
    
    
    
    22,511
    
    
    
    
    
    
    
    88,943Goodwill
    
    
    
    
    
    
    89,323
    
    
    
    25,656
    
    
    
    
    
    
    
    114,979Deferred income taxes
    
    
    
    
    
    
    (66
    )
    
    
    297
    
    
    
    
    
    
    
    231Investments in subsidiaries
    
    
    391,493
    
    
    
    
    
    
    
    
    
    
    
    (391,493
    )
    
    
    Other non-current assets
    
    
    5,778
    
    
    
    469
    
    
    
    500
    
    
    
    
    
    
    
    6,747Total assets
    
    $
    420,107
    
    
    $
    440,556
    
    
    $
    178,446
    
    
    $
    (470,485
    )
    
    $
    568,624LIABILITIES AND SHAREHOLDERS 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 and net of
unacreted discount and premium
    
    
    274,978
    
    
    
    13,436
    
    
    
    2,985
    
    
    
    
    
    
    
    291,399Deferred income taxes
    
    
    
    
    
    
    25,343
    
    
    
    (853
    )
    
    
    
    
    
    
    24,490Pension liablities
    
    
    
    
    
    
    10,227
    
    
    
    3,204
    
    
    
    
    
    
    
    13,431Other post retirement benefits
    
    
    
    
    
    
    3,170
    
    
    
    
    
    
    
    
    
    
    
    3,170Long-term taxes payables
    
    
    
    
    
    
    4,221
    
    
    
    1,690
    
    
    
    
    
    
    
    5,911Other long-term liabilities
    
    
    
    
    
    
    1,139
    
    
    
    3,169
    
    
    
    
    
    
    
    4,308Total stockholders equity
    
    
    133,335
    
    
    
    335,896
    
    
    
    55,597
    
    
    
    (391,493
    )
    
    
    133,335Total liabilities and shareholders equity
    
    $
    420,107
    
    
    $
    440,556
    
    
    $
    178,446
    
    
    $
    (470,485
    )
    
    $
    568,624
 79




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##### Table of Contents



Condensed Consolidating Statement of Income of the Company
 Year ended December 31, 2008Issuer
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    462,427
    
    
    $
    222,441
    
    
    $
    (49,532
    )
    
    $
    635,336Cost of sales
    
    
    
    
    
    
    343,380
    
    
    
    155,396
    
    
    
    (49,532
    )
    
    
    449,244Gross profit
    
    
    
    
    
    
    119,047
    
    
    
    67,045
    
    
    
    
    
    
    
    186,092Selling, general and administrative expenses
    
    
    
    
    
    
    63,055
    
    
    
    36,130
    
    
    
    
    
    
    
    99,185Research and development expenses
    
    
    
    
    
    
    4,024
    
    
    
    2,565
    
    
    
    
    
    
    
    6,589Goodwill impairment
    
    
    
    
    
    
    29,913
    
    
    
    1,897
    
    
    
    
    
    
    
    31,810OPEB curtailment gain
    
    
    
    
    
    
    (925
    )
    
    
    
    
    
    
    
    
    
    
    (925
    )Restructuring costs
    
    
    
    
    
    
    978
    
    
    
    1,332
    
    
    
    
    
    
    
    2,310Loss on sale/disposal of assets
    
    
    
    
    
    
    790
    
    
    
    794
    
    
    
    
    
    
    
    1,584Income from operations
    
    
    
    
    
    
    21,212
    
    
    
    24,327
    
    
    
    
    
    
    
    45,539Interest expense, net
    
    
    27,043
    
    
    
    1,260
    
    
    
    36
    
    
    
    
    
    
    
    28,339Other non-operating income, net
    
    
    (2,231
    )
    
    
    (1,174
    )
    
    
    (2,844
    )
    
    
    
    
    
    
    (6,249
    )Equity in earnings of subsidiaries
    
    
    31,628
    
    
    
    
    
    
    
    
    
    
    
    (31,628
    )
    
    
    Income from continuing operations before
income taxes
    
    
    6,816
    
    
    
    21,126
    
    
    
    27,135
    
    
    
    (31,628
    )
    
    
    23,449Provision for income taxes
    
    
    322
    
    
    
    7,183
    
    
    
    9,226
    
    
    
    
    
    
    
    16,731Net income from continuing operations
    
    
    6,494
    
    
    
    13,943
    
    
    
    17,909
    
    
    
    (31,628
    )
    
    
    6,718Net loss from discontinued operations
    
    
    
    
    
    
    (224
    )
    
    
    
    
    
    
    
    
    
    
    (224
    )Net income
    
    $
    6,494
    
    
    $
    13,719
    
    
    $
    17,909
    
    
    $
    (31,628
    )
    
    $
    6,494
 80




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##### Table of Contents



Condensed Conolidating Statements of Income of the Company
 Year ended December 31, 2007Issuer
    
    
    Guarantor
    
    
    Non-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 expenses
    
    
    
    
    
    
    3,562
    
    
    
    2,515
    
    
    
    
    
    
    
    6,077Restructuring costs
    
    
    
    
    
    
    1,776
    
    
    
    623
    
    
    
    
    
    
    
    2,399Loss from post-retirement benefit plan
    
    
    
    
    
    
    2,745
    
    
    
    
    
    
    
    
    
    
    
    2,745Income from operations
    
    
    
    
    
    
    44,980
    
    
    
    15,906
    
    
    
    
    
    
    
    60,886Interest expense, net
    
    
    37,093
    
    
    
    1,281
    
    
    
    180
    
    
    
    
    
    
    
    38,554Other non-operating (income) expense, net
    
    
    2,862
    
    
    
    236
    
    
    
    (2,486
    )
    
    
    
    
    
    
    612Equity in earnings of subsidiaries
    
    
    33,585
    
    
    
    
    
    
    
    
    
    
    
    (33,585
    )
    
    
    Income from continuing operations before income taxes
    
    
    (6,370
    )
    
    
    43,463
    
    
    
    18,212
    
    
    
    (33,585
    )
    
    
    21,720Provision (benefit) for income taxes
    
    
    (17,881
    )
    
    
    18,816
    
    
    
    7,273
    
    
    
    
    
    
    
    8,208Income from continuing operations
    
    
    11,511
    
    
    
    24,647
    
    
    
    10,939
    
    
    
    (33,585
    )
    
    
    13,512Income (loss) from discontinued operations
    
    
    
    
    
    
    130
    
    
    
    (2,131
    )
    
    
    
    
    
    
    (2,001
    )Net income
    
    $
    11,511
    
    
    $
    24,777
    
    
    $
    8,808
    
    
    $
    (33,585
    )
    
    $
    11,511
 Condensed Consolidating Statements of Income of the Company
 Year ended December 31, 2006Issuer
    
    
    Guarantor
    
    
    Non-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
    
    
    
    
    
    
    
    4,938Gain from post-retirement benefit plan
    
    
    
    
    
    
    (3,838
    )
    
    
    
    
    
    
    
    
    
    
    (3,838
    )Income (loss) from operations
    
    
    (4,005
    )
    
    
    39,613
    
    
    
    5,485
    
    
    
    
    
    
    
    41,093Interest expense, net
    
    
    17,444
    
    
    
    (124
    )
    
    
    6,202
    
    
    
    
    
    
    
    23,522Other non-operating (income) expense, net
    
    
    435
    
    
    
    (93
    )
    
    
    514
    
    
    
    
    
    
    
    856Equity in earnings of subsidiaries
    
    
    32,247
    
    
    
    
    
    
    
    
    
    
    
    (32,247
    )
    
    
    Income (loss) from continuing operations
before income taxes
    
    
    10,363
    
    
    
    39,830
    
    
    
    (1,231
    )
    
    
    (32,247
    )
    
    
    16,715Provision for income taxes
    
    
    
    
    
    
    5,144
    
    
    
    1,208
    
    
    
    
    
    
    
    6,352Income (loss) from continuing operations
    
    
    10,363
    
    
    
    34,686
    
    
    
    (2,439
    )
    
    
    (32,247
    )
    
    
    10,363Net income
    
    $
    10,363
    
    
    $
    34,686
    
    
    $
    (2,439
    )
    
    $
    (32,247
    )
    
    $
    10,363
 81




---



##### Table of Contents



Condensed Consolidating Statement of Cash Flows
 Year ended December 31, 2008Issuer
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet income
    
    $
    6,494
    
    
    $
    13,719
    
    
    $
    17,909
    
    
    $
    (31,628
    )
    
    $
    6,494Undistributed Equity in subs
    
    $
    (31,628
    )
    
    
    
    
    
    
    
    
    
    $
    31,628
    
    
    $
    Adjustments to reconcile net income to net cash flows:Depreciation
    
    
    12
    
    
    
    11,059
    
    
    
    4,308
    
    
    
    
    
    
    
    15,379Amortization of intangible assets
    
    
    
    
    
    
    4,120
    
    
    
    1,569
    
    
    
    
    
    
    
    5,689Amortization and write-offs of deferred loan costs
    
    
    1,921
    
    
    
    212
    
    
    
    
    
    
    
    
    
    
    
    2,133Gain on foreign currency, net
    
    
    (2,231
    )
    
    
    (239
    )
    
    
    (2,579
    )
    
    
    
    
    
    
    (5,049
    )Goodwill impairment
    
    
    
    
    
    
    29,912
    
    
    
    1,898
    
    
    
    
    
    
    
    31,810Accretion of debt discount and premium, net
    
    
    898
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    898Loss on disposal of fixed assets
    
    
    
    
    
    
    790
    
    
    
    794
    
    
    
    
    
    
    
    1,584Gain on post-retirement benefit plan
    
    
    
    
    
    
    (925
    )
    
    
    
    
    
    
    
    
    
    
    (925
    )Deferred tax provision
    
    
    
    
    
    
    92
    
    
    
    1,309
    
    
    
    
    
    
    
    1,401Loss on sale of Electronics Division
    
    
    224
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    224Stock based compensation
    
    
    1,951
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,951Changes in assets and liabilities:Trade receivables
    
    
    
    
    
    
    4,887
    
    
    
    (5,820
    )
    
    
    
    
    
    
    (933
    )Inventories
    
    
    
    
    
    
    (1,584
    )
    
    
    (490
    )
    
    
    
    
    
    
    (2,074
    )Accounts payable and accrued liabilities
    
    
    (151
    )
    
    
    (14,470
    )
    
    
    1,350
    
    
    
    
    
    
    
    (13,271
    )Other current assets and liabilities
    
    
    (628
    )
    
    
    (1,351
    )
    
    
    3,248
    
    
    
    
    
    
    
    1,269Other operating assets and liabilities
    
    
    (450
    )
    
    
    407
    
    
    
    (1,426
    )
    
    
    
    
    
    
    (1,469
    )Net cash provided by (used in) operating activities
    
    
    (23,588
    )
    
    
    46,629
    
    
    
    22,070
    
    
    
    
    
    
    
    45,111Cash flows from investing activitiesPurchase of fixed assets
    
    
    (400
    )
    
    
    (13,137
    )
    
    
    (5,752
    )
    
    
    
    
    
    
    (19,289
    )Payments for prior year acquisitions
    
    
    
    
    
    
    (1,708
    )
    
    
    
    
    
    
    
    
    
    
    (1,708
    )Proceeds from the sale of Electronics
    
    
    17,310
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,310Net cash provided by (used in) investing activities
    
    
    16,910
    
    
    
    (14,845
    )
    
    
    (5,752
    )
    
    
    
    
    
    
    (3,687
    )Cash flows from financing activitiesPayments on Senior Secured Notes
    
    
    (27,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,500
    )Payments on Senior Notes
    
    
    (1,346
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,346
    )Net payments received from Parent
    
    
    11,903
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,903Payments on revolving credit agreement
    
    
    
    
    
    
    (1,723
    )
    
    
    
    
    
    
    
    
    
    
    (1,723
    )Payments on mortgages
    
    
    
    
    
    
    
    
    
    
    (266
    )
    
    
    
    
    
    
    (266
    )Payment on capital leases
    
    
    
    
    
    
    (596
    )
    
    
    (328
    )
    
    
    
    
    
    
    (924
    )Change in affiliate debt
    
    
    46,184
    
    
    
    (31,675
    )
    
    
    (14,509
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    29,241
    
    
    
    (33,994
    )
    
    
    (15,103
    )
    
    
    
    
    
    
    (19,856
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    (3,402
    )
    
    
    
    
    
    
    (3,402
    )Net change in cash and cash equivalents
    
    
    22,563
    
    
    
    (2,210
    )
    
    
    (2,187
    )
    
    
    
    
    
    
    18,166Cash and cash equivalents at beginning of year
    
    
    4,571
    
    
    
    (492
    )
    
    
    29,827
    
    
    
    
    
    
    
    33,906Cash and cash equivalents at end of period
    
    $
    27,134
    
    
    $
    (2,702
    )
    
    $
    27,640
    
    
    $
    
    
    
    $
    52,072
 82




---



##### Table of Contents



Condensed Consolidating Statement of Cash Flows
 Year ended December 31, 2007Issuer
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet income
    
    $
    11,511
    
    
    $
    24,777
    
    
    $
    8,808
    
    
    $
    (33,585
    )
    
    $
    11,511Undistributed equity in earnings of subsidiaries
    
    $
    (33,585
    )
    
    $
    
    
    
    $
    
    
    
    $
    33,585
    
    
    
    Adjustments to reconcile net income to net cash flows:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation
    
    
    
    
    
    
    10,835
    
    
    
    5,612
    
    
    
    
    
    
    
    16,447Amortization of intangible assets
    
    
    
    
    
    
    3,920
    
    
    
    1,572
    
    
    
    
    
    
    
    5,492Amortization and write-offs of deferred loan costs
    
    
    3,368
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    3,448Loss on foreign currency, net
    
    
    586
    
    
    
    
    
    
    
    146
    
    
    
    
    
    
    
    732Accretion of debt discount and premium, net
    
    
    774
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    774Amortization of inventory fair value adjustment
    
    
    
    
    
    
    275
    
    
    
    651
    
    
    
    
    
    
    
    926Loss on disposal of fixed assets
    
    
    
    
    
    
    313
    
    
    
    
    
    
    
    
    
    
    
    313Gain on sale of electronics division
    
    
    (2,927
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,927
    )Loss on post-retirement benefit plan
    
    
    
    
    
    
    2,745
    
    
    
    
    
    
    
    
    
    
    
    2,745Provision for deferred taxes
    
    
    
    
    
    
    5,455
    
    
    
    
    
    
    
    
    
    
    
    5,455Stock based compensation
    
    
    2,038
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,038Changes in 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 operating activities
    
    
    (20,698
    )
    
    
    52,167
    
    
    
    10,389
    
    
    
    
    
    
    
    41,858Cash flows from investing activitiesPurchase of fixed assets
    
    
    
    
    
    
    (7,959
    )
    
    
    (3,674
    )
    
    
    
    
    
    
    (11,633
    )Proceeds from sale of Electronics division
    
    
    10,828
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,828Acquisitions, net of $5,222 cash acquired
    
    
    (123,867
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (123,867
    )Net cash used in investing activities
    
    
    (113,039
    )
    
    
    (7,959
    )
    
    
    (3,674
    )
    
    
    
    
    
    
    (124,672
    )Cash flows from financing activitiesProceeds from issuance of Senior Secured Notes
    
    
    106,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,050Capital contribution from Parent Company
    
    
    49,015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,015Payment of debt issuance costs
    
    
    (3,842
    )
    
    
    (393
    )
    
    
    
    
    
    
    
    
    
    
    (4,235
    )Payments on Senior Notes
    
    
    (58,428
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58,428
    )Borrowings under revolving credit agreement
    
    
    8,315
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,315Payments on revolving credit agreement
    
    
    (8,315
    )
    
    
    (5,205
    )
    
    
    
    
    
    
    
    
    
    
    (13,520
    )Payments made on behalf of Parent Company
    
    
    (13,554
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,554
    )Payments on mortgages
    
    
    
    
    
    
    
    
    
    
    (126
    )
    
    
    
    
    
    
    (126
    )Change in affiliate debt
    
    
    18,051
    
    
    
    (33,150
    )
    
    
    15,099
    
    
    
    
    
    
    
    Payment on capital leases
    
    
    
    
    
    
    (464
    )
    
    
    (467
    )
    
    
    
    
    
    
    (931
    )Net cash (used in) financing activities
    
    
    97,292
    
    
    
    (39,212
    )
    
    
    14,506
    
    
    
    
    
    
    
    72,586Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    1,607
    
    
    
    
    
    
    
    1,607Net change in cash and cash equivalents
    
    
    (36,445
    )
    
    
    4,996
    
    
    
    22,828
    
    
    
    
    
    
    
    (8,621
    )Cash and cash equivalents at beginning of year
    
    
    41,016
    
    
    
    (5,488
    )
    
    
    6,999
    
    
    
    
    
    
    
    42,527Cash and cash equivalents at end of period
    
    $
    4,571
    
    
    $
    (492
    )
    
    $
    29,827
    
    
    $
    
    
    
    $
    33,906
  83




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##### Table of Contents



Condensed Consolidating Statement of Cash Flows
 Year ended December 31, 2006Issuer
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet income
    
    $
    10,363
    
    
    $
    34,686
    
    
    $
    (2,439
    )
    
    $
    (32,247
    )
    
    $
    10,363Undistributed equity in earnings of subsidiaries
    
    $
    (32,247
    )
    
    $
    
    
    
    $
    
    
    
    $
    32,247
    
    
    
    Adjustments to reconcile net income to net cash flows:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation
    
    
    
    
    
    
    6,593
    
    
    
    4,228
    
    
    
    
    
    
    
    10,821Amortization of intangible assets
    
    
    
    
    
    
    3,469
    
    
    
    321
    
    
    
    
    
    
    
    3,790Amortization and write-offs of deferred loan costs
    
    
    968
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    968Loss on foreign currency, net
    
    
    415
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    415Accretion of debt discount and premium, net
    
    
    942
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    942Amortization of inventory fair value adjustment
    
    
    
    
    
    
    245
    
    
    
    2,033
    
    
    
    
    
    
    
    2,278Loss (gain) on sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    664
    
    
    
    
    
    
    
    664Loss on curtailment of pension and post-retirement
benefit
plan, net
    
    
    
    
    
    
    (3,838
    )
    
    
    
    
    
    
    
    
    
    
    (3,838
    )Provision for deferred taxes
    
    
    
    
    
    
    2,341
    
    
    
    (1,151
    )
    
    
    
    
    
    
    1,190Stock based compensation
    
    
    1,945
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,945Changes in 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 operating activities
    
    
    (9,429
    )
    
    
    21,351
    
    
    
    1,491
    
    
    
    
    
    
    
    13,413Cash flows from investing activitiesPurchase of fixed assets
    
    
    
    
    
    
    (7,213
    )
    
    
    (2,195
    )
    
    
    
    
    
    
    (9,408
    )Acquisitions, net of $5,222 cash acquired
    
    
    
    
    
    
    (13,065
    )
    
    
    (40,690
    )
    
    
    
    
    
    
    (53,755
    )Net cash used in investing activities
    
    
    
    
    
    
    (20,278
    )
    
    
    (42,885
    )
    
    
    
    
    
    
    (63,163
    )Cash flows from financing activitiesProceeds from issuance of Senior Notes
    
    
    57,625
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,625Payment of debt issuance costs
    
    
    (2,731
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,731
    )Borrowings under revolving credit agreement
    
    
    5,057
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,057Payments on revolving credit agreement
    
    
    (5,057
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,057
    )Payments made on behalf of Parent Company
    
    
    24,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,389Proceeds from mortgages
    
    
    
    
    
    
    
    
    
    
    2,510
    
    
    
    
    
    
    
    2,510Payments on mortgages
    
    
    
    
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    (58
    )Change in affiliate debt
    
    
    (37,657
    )
    
    
    (3,665
    )
    
    
    41,322
    
    
    
    
    
    
    
    Payment on capital leases
    
    
    
    
    
    
    (183
    )
    
    
    
    
    
    
    
    
    
    
    (183
    )Net cash provided by (used in) financing activities
    
    
    41,626
    
    
    
    (3,848
    )
    
    
    43,774
    
    
    
    
    
    
    
    81,552Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    665
    
    
    
    
    
    
    
    665Net change in cash and cash equivalents
    
    
    32,197
    
    
    
    (2,775
    )
    
    
    3,045
    
    
    
    
    
    
    
    32,467Cash and cash equivalents at beginning of year
    
    
    8,819
    
    
    
    (2,713
    )
    
    
    3,954
    
    
    
    
    
    
    
    10,060Cash and cash equivalents at end of period
    
    $
    41,016
    
    
    $
    (5,488
    )
    
    $
    6,999
    
    
    $
    
    
    
    $
    42,527
 84




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##### 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.
    85




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##### Table of Contents



(b) Changes in Internal Control over Financial Reporting
  
 Item 9B. Other Information
      86




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##### 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
  2008
    
    2007Audit Fees
    
    
    2,380
    
    
    
    3,284Audit Related Fees
    
    
    
    
    
    
    242Tax Fees
    
    
    8
    
    
    
    236All Other Fees
    
    
    
    
    
    
    Total
    
    
    2,388
    
    
    
    3,762
    
 PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
 (a) List of documents filed as part of this report:
 (1)
    
    Financial StatementsSee Item 8.(2)
    
    Financial Statement SchedulesSee Item 21(b) Schedule II  Valuation and Qualifying Accounts.
 87




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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 Registrant2.2(1)*
    
    Assignment and Assumption Agreement, dated as of November 21, 2004, between Registrant and Altra
Industrial Motion, 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(3)*
    
    Asset Purchase Agreement, dated May 18, 2006, among Warner Electric LLC, Bear Linear LLC and the
other guarantors listed therein3.1(4)*
    
    Second Amended and Restated Certificate of Incorporation of the Registrant3.2(4)*
    
    Amended and Restated Bylaws of the Registrant4.1(1)*
    
    Indenture, dated as of November 30, 2004, among Altra Industrial Motion, Inc., the Guarantors
party thereto and The Bank of New York Trust Company, N.A. as trustee4.2(5)*
    
    First Supplemental Indenture, dated as of February 7, 2006, among Altra Industrial 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 Inc., the
guarantors party thereto, and The Bank of New York Trust Company, N.A. as trustee4.4(5)*
    
    Third Supplemental Indenture, dated as of April 24, 2006, among Altra Industrial Inc., the
guarantors party thereto, and The Bank of New York Trust Company, N.A. as trustee4.5(6)*
    
    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(7)*
    
    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(5)*
    
    First Supplemental Indenture, dated as of April 24, 2006, among Altra Industrial Inc., the
guarantors party thereto, and The Bank of New York as trustee.4.11(7)
    
    Second Supplemental Indenture, dated as of March 26, 2007, among Altra Industrial Motion, Inc.,
the guarantors party thereto and The Bank of New York as trustee4.12(2)
    
    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 20134.14(2)*
    
    Registration Rights Agreement, dated as of February 8, 2006, among Altra Industrial Motion, Inc.,
the guarantors party thereto, and Jefferies International Limited, as initial purchasers4.14(8)*
    
    Amended and Restated Stockholders Agreement, dated January 6, 2005, among the Registrant and the
stockholders listed therein4.15(8)*
    
    First Amendment to the Amended and Restated Stockholders Agreement, dated May 1, 2005, among the
Registrant and the stockholders listed therein4.16(4)*
    
    Form of Common Stock Certificate4.17(4)*
    
    Second Amendment to the Amended and Restated Stockholders Agreement among the Registrant and the
stockholders listed therein10.1(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(1)*
    
    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.
 88




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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(1)*
    
    Agreement, dated as of October 24, 2004, between Ameridrives International, L.P. and United Steel
Workers of America Local 3199-1010.7(9)*
    
    Labor Agreement, dated as of August 11, 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 277110.8(3)*
    
    Labor Agreement, dated May 17, 2006, between Warner Electric LLC and United Steelworkers and
Local Union No. 324510.9(3)*
    
    Labor Agreement, dated June 6, 2005, between Formsprag LLC and UAW Local 15510.10(1)*
    
    Employment Agreement, dated as of January 6, 2005, among Altra Industrial Motion, Inc., the
Registrant and Michael L. Hurt.10.11(1)*
    
    Employment Agreement, dated as of January 6, 2005, among Altra Industrial Motion, Inc., the
Registrant and Carl Christenson.10.11(9)*
    
    Employment Agreement, dated as of October 30, 2007, among Altra Industrial Motion, Inc., the
Registrant and Christian Storch.10.12(13)*
    
    Amended and Restated Employment Agreement, dated as of January 1, 2009, among Altra Industrial
Motion, Inc., the Registrant and Carl Christenson10.13(1)*
    
    Registrants 2004 Equity Incentive Plan10.14(3)*
    
    Amendment to Registrants 2004 Equity Incentive Plan10.21(4)*
    
    Second Amendment to Registrants 2004 Equity Incentive Plan10.15(1)*
    
    Form of Registrants Restricted Stock Award Agreement10.16(3)*
    
    Subscription Agreement, dated November 30, 2004, among Registrant, the preferred purchasers and
the common purchasers as listed therein.10.18(1)*
    
    Transition Services Agreement, dated as of November 30, 2004, among Warner Electric Holding,
Inc., Colfax Corporation and Altra Industrial Motion, Inc.10.19(1)*
    
    Trademarks and Technology License Agreement, dated November 30, 2004, among Registrant, Colfax
Corporation and Altra Industrial Motion, Inc.10.22(10)*
    
    First Amendment to Employment Agreement, dated December 5, 2006, among Altra Industrial Motion,
Inc., the Registrant and Michael L. Hurt10.23(4)*
    
    Form of Amendment to Restricted Stock Agreements with Michael Hurt10.24(4)*
    
    Form of Transition Agreement10.28(11)*
    
    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.10.29(11)*
    
    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.10.30(11)*
    
    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.10.31(11)*
    
    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.10.32(12)*
    
    Supplement Number 1 to Security Agreement, dated as of April 5, 2007, among TB Woods
Incorporated, TB Woods Corporation, Plant Engineering Consultants, LLC, TB Woods Enterprises,
Inc. and Wells Fargo Foothill, Inc.10.33(12)*
    
    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.10.34(12)*
    
    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.10.35(12)*
    
    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 Agent10.36(12)*
    
    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.10.37(12)*
    
    Patent 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.10.38(12)*
    
    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.
 89




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##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION10.39(12)*
    
    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 Industrial
Motion, Inc. and certain subsidiaries of Altra10.40(12)*
    
    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.31.1
    
    Certification of Chief Executive Officer31.2
    
    Certification of Chief Financial Officer32.1
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Incorporated by reference to Altra Industrial Motion, Inc.s 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 Registrants Registration Statement on Form S-1 (File No.
333-137660) filed with the Securities and Exchange Commission on September 29, 2006.(4)
    
    Incorporated by reference to Registrants Registration Statement on Form S-1/A (File No.
333-137660) filed with the Securities and Exchange Commission on December 4, 2006.(5)
    
    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 for the fiscal year
ended December 31, 2005.(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 March 26, 2007.(7)
    
    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.(8)
    
    Incorporated by reference to Registrants Registration Statement on Form S-1/A (File No.
333-137660) filed with the Securities and Exchange Commission on November 3, 2006.(9)
    
    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 for the fiscal year
ended December 31, 2007.(10)
    
    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 December 5, 2006.(11)
    
    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 for the fiscal year
ended December 31, 2006.(12)
    
    Incorporated by reference to Altra Industrial Motion, Inc.s Registration Statement on Form
S-4 (File No. 333-142692) filed with the Securities and Exchange Commission on May 8, 2007.(13)
    
    Incorporated by reference to Altra Holdings, Inc. Annual
Report on Form 10-K (File No. 001-33209) filed with Securities
and Exchange Commission on March 6, 2009.*
    
    Filed previously. 90




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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, 2006
    
    $
    6,843
    
    
    $
    5,596
    
    
    $
    (2,276
    )
    
    $
    10,163For the year ended December 31, 2007
    
    $
    10,163
    
    
    $
    7,170
    
    
    $
    (3,926
    )
    
    $
    13,407For the year ended December 31, 2008
    
    $
    13,407
    
    
    $
    1,963
    
    
    $
    (4,054
    )
    
    $
    11,316
 Balance atbeginning of
    
    
    
    
    
    
    
    
    
    Balance atReserve for uncollectible accounts:
    
    period
    
    Additions
    
    Deductions
    
    end of periodFor the year ended December 31, 2006
    
    $
    1,797
    
    
    $
    923
    
    
    $
    (703
    )
    
    $
    2,017For the year ended December 31, 2007
    
    $
    2,017
    
    
    $
    682
    
    
    $
    (1,151
    )
    
    $
    1,548For the year ended December 31, 2008
    
    $
    1,548
    
    
    $
    935
    
    
    $
    (1,206
    )
    
    $
    1,277
 Balance atbeginning of
    
    
    
    
    
    
    
    
    
    Balance atIncome tax assets valuation allowance:
    
    period
    
    Additions
    
    Deductions
    
    end of periodFor the year ended December 31, 2006
    
    $
    16,389
    
    
    $
    1,252
    
    
    $
    (16,389
    )
    
    $
    1,252For the year ended December 31, 2007
    
    $
    1,252
    
    
    $
    84
    
    
    
    
    
    
    $
    1,336For the year ended December 31, 2008
    
    $
    1,336
    
    
    $
    247
    
    
    $
    (816
    )
    
    $
    767
 91




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##### Table of Contents



SIGNATURES
  ALTRA INDUSTRIAL MOTION, INC.March 20, 2009
    By:
    /s/ Carl R. ChristensonName:
    Carl R. ChristensonTitle:
    Chief Executive Officer & DirectorMarch 20, 2009
    By:
    /s/ Christian StorchName:
    Christian StorchTitle:
    Chief Financial OfficerMarch 20, 2009
    By:
    /s/ Todd B. PatriaccaName:
    Todd B. PatriaccaTitle:
    Chief Accounting OfficerMarch 20, 2009
    By:
    /s/  Michael L. HurtName:
    Michael L. HurtTitle:
    Executive Chairman & DirectorMarch 20, 2009
    By:
    /s/ Edmund M. CarpenterName:
    Edmund M. CarpenterTitle:
    DirectorMarch  20, 2009
    By:
    /s/ Lyle G. GanskeName:
    Lyle G. GanskeTitle:
    DirectorMarch 20, 2009
    By:
    /s/ Michael S. LipscombName:
    Michael S. LipscombTitle:
    DirectorMarch 20, 2009
    By:
    /s/ Larry P. McPhersonName:
    Larry P. McPhersonTitle:
    DirectorMarch 20, 2009
    By:
    /s/ James H. Woodward, Jr.Name:
    James H. Woodward, Jr.Title:
    Director 92