UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FormFORM 10-Q
   
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 2010
or
  For the quarterly period ended September 26, 2009
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to
For the transition period fromto
Commission File NumberNumber: 001-33209
ALTRA HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
   
Delaware
(State or other jurisdiction of
incorporation or organization)		 61-1478870
(I.R.S. Employer
Identification No.)
300 Granite Street, Suite 201, Braintree, MA
(Address of principal executive offices)		 02184
(Zip code)
(781) 917-0600

(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso Noo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” inRule 12b-2 of the Exchange Act.
Large acceleratedAccelerated fileroAccelerated filerþNon-accelerated filero(Do not check if a smaller reporting company.)Smaller reporting companyo
                         (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yeso Noþ
As of NovemberMay 1, 2009, 26,623,1712010, 26,801,631 shares of Common Stock, $.001 par value per share, were outstanding.
 

 

TABLE OF CONTENTS
     
  Page #
 
PART I — FINANCIAL INFORMATION2
    
Item 1. Financial Statements
  2
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
  2622
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk
  4131
 
Item 4. Controls and Procedures
  4131
 
PART II — OTHER INFORMATION
31
    
Item 1. Legal Proceedings
  4231
 
Item 1A. Risk Factors
  4231
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  4232
 
Item 3. Defaults Upon Senior Securities
  4232
 
Item 4. Submission of Matters to a Vote of Security HoldersRemoved and Reserved
  4232
 
Item 5. Other Information
  4232
 
Item 6. Exhibits
  4332
SIGNATURES
34
 
 EX-31.1 Section 302 Certification of CEOExhibit 31.1
 EX-31.2 Section 302 Certification of CFOExhibit 31.2
 EX-32.1 Section 906 Certification of CEOExhibit 32.1
 EX-32.2 Section 906 Certification of CFOExhibit 32.2


1

Item 1.Financial Statements
ALTRA HOLDINGS, INC.
Condensed Consolidated Balance Sheets
Amounts in thousands, except share amounts
         
  September 26,
  December 31,
 
  2009  2008 
  (Unaudited) 
 
ASSETS
Current assets:        
Cash and cash equivalents $71,940  $52,073 
Trade receivable, less allowance for doubtful accounts of $1,413 and $1,277 at September 26, 2009 and December 31, 2008, respectively  58,605   68,803 
Inventories  72,255   98,410 
Deferred income taxes  8,032   8,032 
Assets held for sale (See Note 8)  —   4,676 
Prepaid expenses and other current assets  10,054   6,514 
         
Total current assets  220,886   238,508 
Property, plant and equipment, net  107,769   110,220 
Intangible assets, net  76,447   79,339 
Goodwill  78,955   77,497 
Deferred income taxes  495   495 
Other non-current assets, net  6,319   7,525 
         
Total assets $490,871  $513,584 
         
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:        
Accounts payable $25,819  $33,890 
Accrued payroll  13,438   16,775 
Accruals and other current liabilities  25,533   18,755 
Deferred income taxes  6,906   6,906 
Current portion of long-term debt  995   3,391 
         
Total current liabilities  72,691   79,717 
Long-term debt — less current portion and net of unaccreted discount  231,633   258,132 
Deferred income taxes  23,318   23,336 
Pension liablities  11,730   11,854 
Other post retirement benefits  63   2,270 
Long-term taxes payable  9,075   7,976 
Other long-term liabilities  2,080   1,434 
Commitments and contingencies (See Note 14)  —   — 
Stockholders’ equity:        
Common stock ($0.001 par value, 90,000,000 shares authorized, 25,994,723 and 25,582,543 issued and outstanding at September 26, 2009 and December 31, 2008, respectively)  26   26 
Additional paid-in capital  131,618   129,604 
Retained earnings  23,625   23,325 
Accumulated other comprehensive income  (14,988)  (24,090)
         
Total stockholders’ equity  140,281   128,865 
         
Total liabilities and stockholders’ equity $490,871  $513,584 
         
         
  April 3,  December 31, 
  2010  2009 
  (Unaudited) 
ASSETS
        
Current assets:        
Cash and cash equivalents $53,566  $51,497 
Trade receivables, less allowance for doubtful accounts of $1,424 and $1,434 at April 3, 2010 and December 31, 2009, respectively  65,829   52,855 
Inventories  72,847   71,853 
Deferred income taxes  9,265   9,265 
Income tax receivable  2,781   4,754 
Prepaid expenses and other current assets  5,155   3,647 
       
Total current assets  209,443   193,871 
         
Property, plant and equipment, net  104,584   105,603 
Intangible assets, net  72,772   74,905 
Goodwill  78,644   78,832 
Deferred income taxes  679   679 
Other non-current assets, net  11,347   11,309 
       
         
Total assets $477,469  $465,199 
       
         
LIABILITIES AND STOCKHOLDERS’ EQUITY
        
Current liabilities:        
Accounts payable $35,772  $27,421 
Accrued payroll  10,324   12,133 
Accruals and other current liabilities  24,948   19,971 
Deferred income taxes  7,275   7,275 
Current portion of long-term debt  1,041   1,059 
       
Total current liabilities  79,360   67,859 
         
Long-term debt — less current portion and net of unaccreted discount  216,093   216,490 
Deferred income taxes  20,999   21,051 
Pension liablities  9,206   9,862 
Long-term taxes payable  9,427   9,661 
Other long-term liabilities  1,088   1,333 
Stockholders’ equity:        
Common stock ($0.001 par value, 90,000,000 shares authorized, 26,362,684 and 26,057,993 issued and outstanding at April 3, 2010 and December 31, 2009, respectively)  26   26 
Additional paid-in capital  132,812   132,552 
Retained earnings  26,750   21,011 
Accumulated other comprehensive loss  (18,292)  (14,646)
       
Total stockholders’ equity  141,296   138,943 
       
         
Total liabilities and stockholders’ equity $477,469  $465,199 
       
The accompanying notes are an integral part of these unaudited consolidated financial statements.


2

ALTRA HOLDINGS, INC.
Condensed Consolidated Statements of Income
Amounts in thousands, except per share data
                 
  Quarter Ended  Year to Date Ended 
  September 26,
  September 27,
  September 26,
  September 27,
 
  2009  2008  2009  2008 
  (Unaudited) 
 
Net sales $104,766  $159,448  $341,183  $490,523 
Cost of sales  76,194   113,627   250,950   346,517 
                 
Gross profit  28,572   45,821   90,233   144,006 
Operating expenses:                
Selling, general and administrative expenses  19,290   25,655   60,971   76,816 
Research and development expenses  1,508   1,663   4,569   5,160 
Other post employment benefit plan settlement gain  —   (107)  (1,467)  (276)
Restructuring costs  1,006   81   5,360   1,149 
Loss on disposal of assets  516   —   516   — 
                 
   22,320   27,292   69,949   82,849 
Income from operations  6,252   18,529   20,284   61,157 
Other non-operarting income and expense:                
Interest expense, net  6,290   7,302   18,879   22,456 
Other non-operating (income) expense, net  (371)  (1,408)  1,248   (2,887)
                 
   5,919   5,894   20,127   19,569 
Income from continuing operations before income taxes  333   12,635   157   41,588 
Provision (benefit) for income taxes  (315)  4,000   (143)  14,127 
                 
Net income from continuing operations  648   8,635   300   27,461 
Net income (loss) from discontinued operations, net of income taxes of $43 for the year to date period ended September 27, 2008  —   172   —   (224)
                 
Net income $648  $8,807  $300  $27,237 
                 
Consolidated Statement of Comprehensive Income
                
Pension liability adjustment $—  $1,500  $—  $1,500 
Foreign currency translation adjustment  847   (6,051)  9,102   (8,353)
                 
Comprehensive income $1,495  $4,256  $9,402  $20,384 
                 
Weighted average shares, basic  25,961   25,488   25,940   25,479 
Weighted average shares, diluted  26,213   26,157   26,112   26,159 
Basic earnings per share:                
Net income from continuing operations $0.02  $0.34  $0.01  $1.08 
Net income (loss) from discontinued operations  —   0.01   —   (0.01)
                 
Net income $0.02  $0.35  $0.01  $1.07 
                 
Diluted earnings per share:                
Net income from continuing operations $0.02  $0.33  $0.01  $1.05 
Net income (loss) from discontinued operations  —   0.01   —   (0.01)
                 
Net income $0.02  $0.34  $0.01  $1.04 
                 
         
  Quarter Ended 
  April 3,  March 28, 
  2010  2009 
  (Unaudited) 
Net sales $127,706  $124,540 
Cost of sales  90,303   92,337 
       
Gross profit  37,403   32,203 
         
Operating expenses:        
Selling, general and administrative expenses  20,972   21,743 
Research and development expenses  1,779   1,567 
Other post employment benefit plan settlement gain  —   (1,467)
Restructuring costs  1,046   1,872 
       
   23,797   23,715 
         
Income from operations  13,606   8,488 
         
Other non-operarting income and expense:        
Interest expense, net  4,940   6,349 
Other non-operating (income) expense, net  295   (162)
       
   5,235   6,187 
         
Income before income taxes  8,371   2,301 
Provision for income taxes  2,632   883 
       
         
Net income $5,739  $1,418 
       
         
Consolidated Statement of Comprehensive income (loss)
        
Foreign currency translation adjustment  (3,646)  (2,543)
       
Comprehensive income (loss) $2,093  $(1,125)
       
         
Weighted average shares, basic  26,343   25,911 
Weighted average shares, diluted  26,425   25,943 
         
Net income per share:        
Basic $0.22  $0.05 
Diluted $0.22  $0.05 
The accompanying notes are an integral part of these unaudited consolidated financial statements.


3

ALTRA HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
Amounts in thousands
         
  Year to Date Ended 
  September 26,
  September 27,
 
  2009  2008 
  (Unaudited) 
 
Cash flows from operating activities
        
Net income $300  $27,237 
Adjustments to reconcile net income to net cash flows:        
Depreciation  12,547   12,409 
Amortization of intangible assets  4,137   4,346 
Amortization and write-offs of deferred financing costs  1,560   1,863 
Loss (gain) on foreign currency, net  1,092   (1,597)
Accretion of debt discount, net  621   759 
Loss on sale of Electronics Division  —   224 
Fixed asset impairment/disposal  2,563   — 
Loss on sale of fixed assets  —   193 
Other post employment benefit plan settlement gain  (1,467)  (276)
Stock based compensation  2,273   1,516 
Changes in assets and liabilities:        
Trade receivables  13,025   (14,905)
Inventories  27,626   (5,871)
Accounts payable and accrued liabilities  (11,929)  5,885 
Other current assets and liabilities  71   (383)
Other operating assets and liabilities  (365)  234 
         
Net cash provided by operating activities  52,054   31,634 
         
Cash flows from investing activities
        
Purchase of property, plant and equipment  (5,105)  (12,234)
Proceeds from sale of Electronics Division  —   17,310 
         
Net cash provided by (used in) investing activities  (5,105)  5,076 
         
Cash flows from financing activities
        
Payments on Senior Notes  (4,950)  (1,346)
Payments on Senior Secured Notes  (22,200)  (27,500)
Payments on Revolving Credit Agreement  (3,000)  (1,723)
Proceeds from additional borrowings under an existing mortgage  1,467   — 
Shares repurchased  (259)  — 
Payment on mortgages  (524)  (228)
Payment on capital leases  (614)  (779)
         
Net cash used in financing activities  (30,080)  (31,576)
         
Effect of exchange rate changes on cash and cash equivalents  2,998   (1,119)
         
Net change in cash and cash equivalents  19,867   4,015 
Cash and cash equivalents at beginning of year  52,073   45,807 
         
Cash and cash equivalents at end of period $71,940  $49,822 
         
Cash paid during the period for:        
Interest $12,419  $21,840 
Income taxes $1,033  $11,964 
         
  Quarter ended 
  April 3, 2010  March 28, 2009 
  (Unaudited) 
Cash flows from operating activities
        
Net income $5,739  $1,418 
Adjustments to reconcile net income to net cash flows:        
Depreciation  4,159   4,158 
Amortization of intangible assets  1,383   1,361 
Amortization and write-offs of deferred financing costs  172   430 
Loss (gain) on foreign currency, net  314   (201)
Accretion of debt discount, net  73   154 
Fixed asset impairment/disposal  —   749 
Other post employment benefit plan settlement gain  —   (1,467)
Stock based compensation  548   977 
Changes in assets and liabilities:        
Trade receivables  (15,037)  (2,258)
Inventories  (1,569)  8,072 
Accounts payable and accrued liabilities  14,522   (306)
Other current assets and liabilities  (2,002)  (1,539)
Other operating assets and liabilities  (128)  4 
       
Net cash provided by operating activities  8,174   11,552 
       
 
Cash flows from investing activities
        
Purchase of property, plant and equipment  (2,694)  (1,821)
Additional purchase price paid for acquisition  (1,177)  — 
       
Net cash used in investing activities  (3,871)  (1,821)
       
 
Cash flows from financing activities
        
Payment of bond issuance costs  (63)  — 
Shares forfeited in lieu of tax  (288)  — 
Payment on mortgages  (121)  (120)
Payment on capital leases  (175)  (179)
       
Net cash used in financing activities  (647)  (299)
       
Effect of exchange rate changes on cash and cash equivalents  (1,587)  (102)
       
Net change in cash and cash equivalents  2,069   9,330 
Cash and cash equivalents at beginning of year  51,497   52,073 
       
Cash and cash equivalents at end of period $53,566  $61,403 
       
         
Cash paid during the period for:        
Interest $398  $538 
Income taxes $192  $140 
The accompanying notes are an integral part of these unaudited consolidated financial statements.


4

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
1.  1. Organization and Nature of OperationsOrganization and Nature of Operations
Headquartered in Braintree, Massachusetts, Altra Holdings, Inc. (“the Company”)(the Company), through its wholly-owned subsidiary Altra Industrial Motion, Inc. (“Altra Industrial”), is a leading multi-national designer, producer and marketer of a wide range of mechanical power transmission products. The Company brings together strong brands covering over 40 product lines with production facilities in eight countries and sales coverage in over 70 countries. The Company’s leading brands include Boston Gear, Warner Electric, TB Wood’s, Formsprag Clutch, Ameridrives Couplings, Industrial Clutch, Kilian Manufacturing, Marland Clutch, Nuttall Gear, Stieber Clutch, Wichita Clutch, Twiflex Limited, Bibby Transmissions, Matrix International, Inertia Dynamics, Huco Dynatork, and Warner Linear.
2.  2. Basis of PresentationBasis of Presentation
The Company was formed on November 30, 2004 following acquisitions of certain subsidiaries of Colfax Corporation (“Colfax”) and The Kilian Company (“Kilian”). During 2006, the Company acquired Hay Hall Holdings Limited (“Hay Hall”) and Bear Linear (“Warner Linear”). On April 5, 2007, the Company acquired TB Wood’s Corporation (“TB Wood’s”), and on October 5, 2007, the Company acquired substantially all of the assets of All Power Transmission Manufacturing, Inc. (“All Power”). These acquisitions are discussed in detail in Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The Company’s unaudited consolidated condensed financial statements have been prepared in accordance with the instructions toForm 10-Q Form10-Q and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report onForm 10-K for the year ended December 31, 2008.2009. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position as of September 26, 2009April 3, 2010 and December 31, 2008,2009, and results of operations for the quarter ended and year to date period ended September 26, 2009 and September 27, 2008, and cash flows for the year to date periodsquarters ended September 26, 2009April 3, 2010 and September 27, 2008.
March 28, 2009.
The Company follows a four, four, five week calendar per quarter with all quarters consisting of thirteen weeks of operations with the fiscal year end always on December 31.
3.  3. Fair Value of Financial InstrumentsFair Value of Financial Instruments
The carrying values of financial instruments, including accounts receivable, accounts payable and other accrued liabilities, approximate their fair values due to their short-term maturities. The carrying amount of the 9%81/8% Senior Secured Notes was $220.3 million and $242.5$210 million at September 26, 2009each of April 3, 2010 and December 31, 2008, respectively.2009. The estimated fair value of the 9%81/8% Senior Secured Notes at September 26, 2009April 3, 2010 and December 31, 20082009 was $224.7$213.2 million and $232.8$215.5 million, respectively, based on quoted market prices for such notes.
4.  4. Net Income per ShareNet Income per Share
Basic earnings per share is based on the weighted average number of shares of common stock outstanding, and diluted earnings per share is based on the weighted average number of shares of common stock outstanding and all potentially dilutive common stock equivalents outstanding. Common stock equivalents are included in the per share calculations when the effect of their inclusion would be dilutive.


5

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
The following is a reconciliation of basic to diluted net income per share:
                 
  Quarter Ended  Year to Date Ended 
  September 26,
  September 27,
  September 26,
  September 27,
 
  2009  2008  2009  2008 
 
Income from continuing operations $648  $8,635  $300  $27,461 
Net income (loss) from discontinued operations  —   172   —   (224)
                 
Net income $648  $8,807  $300  $27,237 
Shares used in net income per common share — basic  25,961   25,488   25,940   25,479 
Incremental shares of unvested restricted common stock  252   669   172   680 
                 
Shares used in net income per common share — diluted  26,213   26,157   26,112   26,159 
Earnings per share — Basic:                
Income from continuing operations $0.02  $0.34  $0.01  $1.08 
Net income (loss) from discontinued operations  —   0.01   —  $(0.01)
                 
Net income $0.02  $0.35  $0.01  $1.07 
                 
Earnings per share — Diluted:                
Income from continuing operations $0.02  $0.33  $0.01  $1.05 
Net income (loss) from discontinued operations  —   0.01   —  $(0.01)
                 
Net income $0.02  $0.34  $0.01  $1.04 
                 
5.  Discontinued Operations
On December 31, 2007, the Company completed the divestiture of the TB Wood’s adjustable speed drives business (the “Electronics Division”) to Vacon PLC (“Vacon”) for $29.0 million.
In connection with the sale of the Electronics Division, the Company entered into a transition services agreement. Pursuant to the transition services agreement, the Company provided services such as sales support, warehousing, accounting and IT services to Vacon. The Company recorded the income received as an offset to the related expense of providing the service. During the quarter and year to date periods ended September 27, 2008, the Company recorded a reduction of $0.1 million and $0.3 million against cost of sales, respectively, and $0.2 million and $0.9 million as an offset to selling, general and administrative expenses, respectively. No transition services have been provided in 2009. The Company leases building space to Vacon. The Company recorded $0.1 million and $0.5 million of lease income in other income in the condensed consolidated statement of income during the quarter and year to date periods ended September 26, 2009 and September 27, 2008.
Loss from discontinued operations in the year to date period ended September 27, 2008 was comprised of a working capital adjustment, net of taxes.


6

         
  Quarter Ended 
  April 3,  March 28, 
  2010  2009 
         
Net income $5,739  $1,418 
         
Shares used in net income per common share — basic  26,343   25,911 
         
Incremental shares of unvested restricted common stock  82   32 
       
Shares used in net income per common share — diluted  26,425   25,943 
         
Earnings per share:        
Basic $0.22  $0.05 
Diluted $0.22  $0.05 
ALTRA HOLDINGS, INC.
5. Inventories
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
6.  Inventories
Inventories located at certain subsidiaries acquired in connection with the TB Wood’s acquisition are stated at the lower of cost or market, principally using thelast-in, first-out (“LIFO”) method. The remaining subsidiaries are stated at the lower of cost or market, using thefirst-in, first-out (“FIFO”) method. Market is defined as net realizable value. Inventories at September 26, 2009April 3, 2010 and December 31, 20082009 consisted of the following:
         
  September 26,
  December 31,
 
  2009  2008 
 
Raw materials  28,946  $31,925 
Work in process  14,891   21,310 
Finished goods  28,418   45,175 
         
Inventories $72,255  $98,410 
    ��    
         
  April 3,  December 31, 
  2010  2009 
Raw materials $30,630  $28,539 
Work in process  13,950   13,711 
Finished goods  28,267   29,603 
       
Inventories $72,847  $71,853 
       
Approximately 13%14% of total inventories at September 26, 2009April 3, 2010 were valued using the LIFO method. The Company recorded a $0.1 million adjustment and $1.2$0.1 million adjustment as a component of cost of sales to value the inventory on a LIFO basis for the yearquarters ended April 3, 2010 and March 28, 2009, respectively.

6

ALTRA HOLDINGS, INC.
Notes to date periods ended September 26, 2009Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
6. Goodwill and September 27, 2008, respectively. For the quarter ended September 27, 2008, the Company recorded a $0.4 million adjustment as a component of cost of sales to value the inventory on a LIFO basis.
If the LIFO inventory was accounted for using the FIFO method, the inventory balance at September 26, 2009 would be $1.5 million higher.
7.  Intangible AssetsGoodwill and Intangible Assets
Changes to goodwill from December 31, 20082009 through September 26, 2009April 3, 2010 were as follows:
     
Balance December 31, 2008  77,497 
Impact of changes in foreign currency  1,458 
     
Balance September 26, 2009 $78,955 
     
     
  2010 
Gross goodwill balance as of January 1 $110,642 
Adjustments related to additional purchase price paid  532 
Impact of changes in foreign currency  (720)
    
Gross goodwill balance as of April 3  110,454 
    
     
Accumulated impairment as of January 1  (31,810)
Impairment charge during the period  — 
    
Accumulated impairment as of April 3  (31,810)
    
Net goodwill balance April 3, 2010 $78,644 
    
Other intangible assets as of September 26, 2009April 3, 2010 and December 31, 20082009 consisted of the following:
                 
  September 26, 2009  December 31, 2008 
     Accumulated
     Accumulated
 
Other Intangible Assets
 Cost  Amortization  Cost  Amortization 
 
Intangible assets not subject to amortization:                
Tradenames and trademarks $30,730  $—  $30,730  $— 
Intangible assets subject to amortization:                
Customer relationships  62,038   18,494   62,038   15,065 
Product technology and patents  5,435   3,819   5,435   3,111 
Impact of changes in foreign currency  557   —   (688)  — 
                 
Total intangible assets $98,760  $22,313  $97,515  $18,176 
                 
                 
  April 3, 2010  December 31, 2009 
      Accumulated      Accumulated 
Other intangible assets Cost  Amortization  Cost  Amortization 
Intangible assets not subject to amortization:                
Tradenames and trademarks $30,730  $—  $30,730  $— 
Intangible assets subject to amortization:                
Customer relationships  62,038   20,801   62,038   19,655 
Product technology and patents  5,435   4,296   5,435   4,059 
Impact of changes in foreign currency  (334)  —   416   — 
             
Total intangible assets $97,869  $25,097  $98,619  $23,714 
             
The Company recorded $1.4 million of amortization expense in each of the quarters ended September 26, 2009April 3, 2010 and September 27, 2008, and $4.1 million and $4.3 million for the year to date periods ended September 26, 2009 and September 27, 2008, respectively.


7

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
March 28, 2009.
The estimated amortization expense for intangible assets is approximately $1.4$4.1 million for the remainder of 20092010 and $5.5 million in each of the next four years and then $21.8$16.3 million thereafter.

7

8.  
ALTRA HOLDINGS, INC.
Assets Held for Sale
During the fourth quarter of 2007, management entered into a planNotes to exit its building locatedUnaudited Condensed Consolidated Interim Financial Statements
Amounts in Stratford, Canada. thousands, unless otherwise noted
7. Warranty Costs
The operationscontractual warranty period generally ranges from three months to thirty-six months based on product and application of the facility, which was acquired as partproduct. Changes in the carrying amount of accrued product warranty costs for each of the TB Wood’s acquisition, were integrated into certain of the Company’s other existing facilities in 2008.quarters ended April 3, 2010 and March 28, 2009 are as follows:
         
  April 3,  March 28, 
  2010  2009 
 
Balance at beginning of period $4,047  $4,254 
Accrued current period warranty expense  387   241 
Payments  (756)  (395)
       
Balance at end of period $3,678  $4,100 
       
In the second quarter of 2009, due to real estate market conditions in Stratford, Canada, the Company reevaluated the classification of this building as an asset held for sale and reclassified the building, with a net book value of $1.2 million, to held and used. As a result of the change in classification, the Company recorded acatch-up depreciation adjustment of $0.1 million in the second quarter of 2009.
As of December 31, 2008, management planned to exit two buildings, one in Scotland, Pennsylvania and one in Chattanooga, Tennessee. The two buildings were previously the operating facilities for the Electronics Division which was divested on December 31, 2007. The Company leases the space to Vacon.
In the first quarter of 2009, due to real estate market conditions in Scotland, Pennsylvania and Chattanooga, Tennessee, the Company reevaluated the classification of these buildings as assets held for sale and reclassified the buildings, with a net book value of $3.5 million, to held and used. As a result of the change in classification, the Company recorded acatch-up depreciation adjustment of $0.2 million in the first quarter ended September 26, 2009.
9.  8. Income TaxesIncome Taxes
The estimated effective income tax rates recorded for the quarters ended September 26,April 3, 2010 and March 28, 2009 and September 27, 2008 were based upon management’s best estimate of the effective tax rate for the entire year. The change in the effective tax rate from 38.4% for the quarter ended March 28, 2009 to 31.4% for the quarter ended April 3, 2010, principally relates to a change in the earnings mix among tax jurisdictions. During the third quarter of 2009, the Company negotiated an agreement with a foreign taxing authority. The agreement allowsauthority allowing the Company to fully deduct certain interest charges. These interest charges that had previously beenwere classified as non-deductible in 2009. The benefit from this deduction resultedthe first quarter 2009 tax rate and fully deductible in the Company recording a benefit for income taxesfirst quarter 2010 tax rate. Additionally, in the yearfirst quarter of 2010, the Company reversed an unrecognized tax benefit due to the expiration of the statue of limitations. The 2010 tax rate differs from the statutory rate due to the impact of non-U.S. tax rates and quarterpermanent differences.
At April 3, 2010, the Company had $9.4 million of unrecognized tax benefits. We do not expect the amount of unrecognized tax benefits disclosed above to date period ended September 26, 2009.
change significantly over the next 12 months.
The Company and its subsidiaries file a consolidated federal income tax return in the United States as well as consolidated and separate income tax returns in the U.S. federal jurisdiction as well as in various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities in all of these jurisdictions. With the exception of certain foreign jurisdictions, the Company is no longer subject to income tax examinations for the tax years prior to 2005. Additionally, the Company has indemnification agreements with the sellers of the Colfax, Kilian and Hay Hall entities, which provide for reimbursement to the Company for payments made in satisfaction of tax liabilities relating to pre-acquisition periods.
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense in the condensed consolidated statements of income. At December 31, 20082009 and September 26, 2009,April 3, 2010, the Company had $2.7$3.5 million and $3.4$3.6 million of accrued interest and penalties, respectively. The Company accrued $0.4$0.1 million of interest and no penalties during the year to date period ended September 26, 2009.first quarter of 2010.
10.  9. Pension and Other Employee BenefitsPension and Other Employee Benefits
Defined Benefit (Pension) and Post-retirement Benefit Plans
The Company sponsors various defined benefit (pension) and post-retirement (medical, dental and life insurance coverage) plans for certain, primarily unionized, active employees. In March 2009, the Company reached a new collective bargaining agreement with the union at its Erie, Pennsylvania facility. One of the provisions of the new agreement eliminateseliminated benefits that employees were entitled to receive through the applicable other post employment benefit plan (“OPEB”). OPEB benefits will no longer be available to retired


8

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
or active employees. This resulted in an OPEB settlement gain of $1.5 million in the yearquarter ended March 28, 2009.

8

ALTRA HOLDINGS, INC.
Notes to date period ended September 26, 2009. In addition, no additional years of credited service will be accrued on the defined benefit pension plan effective February 28, 2009. There was no curtailment gain or loss as a result of the changeUnaudited Condensed Consolidated Interim Financial Statements
Amounts in the pension plan, the plan had no unrecognized prior service cost and there was no change in the projected benefit obligation.
thousands, unless otherwise noted
The following table represents the components of the net periodic benefit cost associated with the respective plans for the quarters ended April 3, 2010 and March 28, 2009:
                 
  Quarter Ended 
  Pension Benefits  Other Benefits 
  April 3,  March 28,  April 3,  March 28, 
  2010  2009  2010  2009 
Service cost $—  $16  $1  $3 
Interest cost  314   365   6   19 
Expected return on plan assets  (305)  (327)  —   — 
Amortization of prior service income  —   —   (172)  (245)
Other post employment benefit plan settlement gain  —   —   —   (1,467)
Amortization of net gain  —   —   (40)  (7)
             
Net periodic benefit cost (income) $9  $54  $(205) $(1,697)
             
10. Debt
Outstanding debt obligations at April 3, 2010 and December 31, 2009 were as follows:
         
  Amounts in millions 
  April 3,  December 31, 
  2010  2009 
         
Debt:        
Revolving Credit Agreement $—  $— 
Senior Secured Notes  210,000   210,000 
Variable rate demand revenue bonds  5,300   5,300 
Mortgages  2,857   3,144 
Capital leases  1,620   1,821 
Less: debt discount, net of accretion  (2,643)  (2,716)
       
Total long-term debt $217,134  $217,549 
       
Senior Secured Notes
In November 2009, the Company issued $210 million of 81/8% Senior Secured Notes (the “Senior Secured Notes”). The Senior Secured Notes are guaranteed by the Company’s U.S. domestic subsidiaries and are secured by a second priority lien, subject to first priority liens securing the new senior secured credit facility (“Revolving Credit Agreement”), on substantially all of the Company’s assets and those of its domestic subsidiaries. Interest on the Senior Secured Notes is payable semiannually in arrears, on June 1 and December 1 of each year, commencing on June 1, 2010 at an annual rate of 81/8%. The indenture governing the Senior Secured Notes contains covenants which restrict our subsidiaries. These restrictions limit or prohibit, among other things, their ability to date periods ended September 26, 2009incur additional indebtedness; repay subordinated indebtedness prior to stated maturities; pay dividends on or redeem or repurchase stock or make other distributions; make investments or acquisitions; sell certain assets or merge with or into other companies; sell stock in our subsidiaries; and September 27, 2008:
                 
  Quarter Ended 
  Pension Benefits  Other Benefits 
  September 26,
  September 27,
  September 26,
  September 27,
 
  2009  2008  2009  2008 
 
Service cost $5  $16  $32  $13 
Interest cost  267   378   69   50 
Expected return on plan assets  (300)  (326)  —   — 
Amortization of prior service income  —   —   (244)  (244)
Other post employment benefit plan settlement gain  —   —   —   (107)
Amortization of net gain  —   —   (33)  (7)
                 
Net periodic benefit cost (income) $(28) $68  $(176) $(295)
                 
                 
  Year to Date Ended 
  Pension Benefits  Other Benefits 
  September 26,
  September 27,
  September 26,
  September 27,
 
  2009  2008  2009  2008 
 
Service cost $37  $48  $38  $43 
Interest cost  997   1,135   107   154 
Expected return on plan assets  (954)  (979)  —   — 
Amortization of prior service income  —   —   (732)  (731)
Other post employment benefit plan settlement gain  —   —   (1,467)  (276)
Amortization of net gain  —   —   (47)  (19)
                 
Net periodic benefit cost (income) $80  $204  $(2,101) $(829)
                 
create liens on their assets.


9

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
11.  Debt
Outstanding debt obligations at September 26, 2009 and December 31, 2008 were as follows:
         
  September 26,
  December 31,
 
  2009  2008 
 
Senior Revolving Credit Agreement $—  $— 
TB Wood’s Credit Agreement  3,000   6,000 
Overdraft agreements  —   — 
9% Senior Secured Notes  220,300   242,500 
11.25% Senior Notes  —   4,706 
Variable Rate Demand Revenue Bonds  5,300   5,300 
Mortgages  3,285   2,257 
Capital leases  2,036   2,672 
Less: debt discount  (1,293)  (1,912)
         
Total long-term debt $232,628  $261,523 
         
Tender Offer
The Company used the proceeds of the offering of the Senior Secured Notes to repurchase or redeem the 9% Senior Secured Notes (the “Old Senior Secured Notes”). On November 10, 2009, Altra Industrial commenced a cash tender offer to repurchase any and all of its outstanding Old Senior Secured Notes as of the date thereof at a price equal to $1,000.00 per $1,000 principal amount of notes tendered, plus an early tender premium of $25.00 per $1,000 principal amount of notes tendered, payable on notes tendered before the early tender deadline. Holders who tendered their Old Senior Secured Notes also agreed to waive any rights to written notice of redemption. With respect to any Old Senior Secured Notes that were not tendered, Altra Holdings redeemed all Old Senior Secured Notes that remained outstanding after the expiration of the tender offer by issuing a notice of redemption on the early tender deadline. On the early tender deadline, Altra Holdings satisfied and discharged all of its obligations under the indenture governing the Old Senior Secured Notes by depositing funds with the depositary in an amount sufficient to pay and discharge any remaining indebtedness on the Old Senior Secured Notes upon the consummation of the tender offer.
Refinancing Transaction
Concurrently with the closing of the offering of the Senior Secured Notes the Company entered into the Revolving Credit Agreement, which provides for borrowing capacity in an initial amount of up to $50.0 million (subject to adjustment pursuant to a borrowing base and subject to increase from time to time in accordance with the terms of the credit facility). The Revolving Credit Agreement replaced Altra Industrial’s then existing senior secured credit facility (the “Old Revolving Credit Agreement”), and the TB Wood’s existing credit facility (the “Old TB Wood’s Revolving Credit Agreement”).
Altra Industrial and all of its domestic subsidiaries are borrowers, or “Borrowers”, under the Revolving Credit Agreement. Certain of our existing and subsequently acquired or organized domestic subsidiaries that are not Borrowers do and will guarantee (on a senior secured basis) the Revolving Credit Agreement. Obligations of the other Borrowers under the Revolving Credit Agreement and the guarantees are secured by substantially all of Borrowers’ assets and the assets of each of our existing and subsequently acquired or organized domestic subsidiaries that is a guarantor of our obligations under the Revolving Credit Agreement (with such subsidiaries being referred to as the “U.S. subsidiary guarantors”), including but not limited to: (a) a first-priority pledge of all the capital stock of subsidiaries held by Borrowers or any U.S. subsidiary guarantor (which pledge, in the case of any foreign subsidiary, will be limited to 100% of any non-voting stock and 65% of the voting stock of such foreign subsidiary) and (b) perfected first-priority security interests in and mortgages on substantially all tangible and intangible assets of each Borrower and U.S. subsidiary guarantor, including accounts receivable, inventory, equipment, general intangibles, investment property, intellectual property, certain real property, and cash and proceeds of the foregoing (in each case subject to materiality thresholds and other exceptions).
An event of default under the Revolving Credit Agreement would occur in connection with a change of control, among other things, if: (i) Altra Industrial ceases to own or control 100% of each of its Borrower subsidiaries, or (ii) a change of control occurs under the Senior Secured Notes, or any other subordinated indebtedness.
An event of default under the Revolving Credit Agreement would also occur if an event of default occurs under the indentures governing the Senior Secured Notes or if there is a default under any other indebtedness that any Borrower may have involving an aggregate amount of $10 million or more and such default: (i) occurs at final maturity of such debt, (ii) allows the lender there under to accelerate such debt or (iii) causes such debt to be required to be repaid prior to its stated maturity. An event of default would also occur under the Revolving Credit Agreement if any of the indebtedness under the Revolving Credit Agreement with limited exception to be secured by a full lien on the assets of Borrowers and guarantors.
Old Revolving Credit Agreement
ThePrior to entering into the Revolving Credit Agreement, the Company maintainsmaintained the Old Revolving Credit Agreement, a $30 million revolving borrowings facility with a commercial bank (the “Senior“Old Revolving Credit Agreement”) through its wholly owned subsidiary Altra Industrial. The SeniorOld Revolving Credit Agreement iswas subject to certain limitations resulting from the requirement of Altra Industrial to maintain certain levels of collateralized assets, as defined in the SeniorOld Revolving Credit Agreement. Altra Industrial may use up to $10.0 million of its availability underIn connection with the Seniorrefinancing transaction described above, the Old Revolving Credit Agreement for standby letters of credit issued on its behalf, the issuance of which will reduce the amount of borrowings that would otherwise be available to Altra Industrial. Altra Industrial may re-borrow any amounts paid to reduce the amount of outstanding borrowings; however, all borrowings under the Senior Revolving Credit Agreement must be repaid in full as of November 30, 2010.
Substantially all of Altra Industrial’s assets have been pledged as collateral against outstanding borrowings under the Senior Revolving Credit Agreement. The Senior Revolving Credit Agreement requires Altra Industrial to maintain a minimum fixed charge coverage ratio of 1.20 for all four quarter periods when availability under the line falls below $12.5 million. Altra Industrial’s availability under the Senior Revolving Credit Agreement has not dropped below $12.5 million during 2009. The Revolving Credit imposes customary affirmative covenants and restrictions on Altra Industrial.
There were no borrowings under the Senior Revolving Credit Agreement at September 26, 2009 or December 31, 2008. However, the lender had issued $3.2 million and $7.6 million of outstanding letters of credit as of September 26, 2009 and December 31, 2008, respectively, under the Senior Revolving Credit Agreement.
The interest rate on any outstanding borrowings on the line of credit are the lender’s prime rate plus 25 basis points or LIBOR plus 175 basis points. The rate on all outstanding letters of credit are 1.5% and .25% on any unused availability under the Senior Revolving Credit Agreement.
was terminated.
Old TB Wood’s Revolving Credit Agreement
As part of the TB Wood’s acquisition in 2007, the Company refinanced $13.0 million of debt associated with TB Wood’s line of credit. As of September 26, 2009 and December 31, 2008, there were $6.1was $6.0 million andof debt outstanding under the Old TB Wood’s Revolving Credit Agreement. As of December 31, 2008 there was $6.0 million of outstanding letters of credit undercredit. In connection with the TB Wood’s Credit Agreement, respectively. All borrowing underrefinancing transaction described above, the Old TB Wood’s Revolving Credit Agreement are due on November 30, 2010. The interest rate on any outstandingwas paid in full and terminated.


10

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
borrowings on the line of credit are the lender’s Prime Rate plus 25 basis points or LIBOR plus 175 basis points.
Overdraft Agreements
Certain of the Company’s foreign subsidiaries maintain overdraft agreements with financial institutions. There were no borrowings as of September 26, 2009April 3, 2010 or December 31, 20082009 under any of the overdraft agreements.
9%Old Senior Secured Notes
On November 30, 2004, Altra Industrial issued 9%the Old Senior Secured Notes, (the “Senior Secured Notes”), with a face value of $270.0$165.0 million. Interest on the Old Senior Secured Notes is payable semi-annually,semiannually, in arrears, on June 1 and December 1 of each year.year, beginning June 1, 2005, at an annual rate of 9%.
In connection with the acquisition of TB Wood’s on April 5, 2007, Altra Industrial completed a follow-on offering issuing an additional $105.0 million of the Old Senior Secured Notes. The additional $105.0 million had the same terms and conditions as the previously issued Old Senior Secured Notes. The effective interest rate on the Old Senior Secured Notes, mature on December 1, 2011 unless previously redeemed byafter the follow-on offering was approximately 9.6% after consideration of the amortization of $5.6 million net discount and $6.5 million of deferred financing costs.
During 2009, Altra Industrial.
Industrial retired all of the outstanding Old Senior Secured Notes. In connection with the pay-down, Altra Industrial incurred $5.1 million of pre-payment premiums and wrote-off $3.2 million of deferred financing costs, and $1.9 million of discount/premium which was recorded as a component of interest expense.
The Old Senior Secured Notes arewere guaranteed by Altra Industrial’s U.S. domestic subsidiaries and arewere secured by a second priority lien, subject to first priority liens securing the SeniorOld Revolving Credit Agreement, on substantially all of Altra Industrial’s assets. The Old Senior Secured Notes contain manycontained numerous terms, covenants and conditions, which imposeimposed substantial limitations on Altra Industrial.
During the second quarter of 2009, Altra Industrial retired $8.3 million aggregate principal amount of the outstanding Senior Secured Notes at a redemption price of between 94.75% and 97.125% of the principal amount, plus accrued and unpaid interest. In connection with the redemption, Altra Industrial recorded a gain on the extinguishment of debt of $0.4 million, which is recorded as a reduction in interest expense in the condensed consolidated statement of income. In addition, Altra Industrial wrote-off $0.1 million of deferred financing costs and original issue discount/premium which is included in interest expense.
During the third quarter of 2009, Altra Industrial retired $14.0 million aggregate principal amount of the outstanding Senior Secured Notes at a redemption price of between 100.5% and 101.6% of the principal amount, plus accrued and unpaid interest. In connection with the redemption, Altra Industrial recorded a loss on the extinguishment of debt of $0.2 million, which is recorded as interest expense in the condensed consolidated statement of income. In addition, Altra Industrial wrote-off $0.2 million of deferred financing costs and original issue discount/premium included in interest expense.
11.25%Old Senior Notes
On February 8, 2006, Altra Industrial issued 11.25%the Old Senior Notes, (“Senior Notes”), with a face value of £33 million. Interest on the Old Senior Notes was payable semi-annually,semiannually, in arrears, on August 15 and February 15 of each year, beginning August 15, 2006, at an annual rate of 11.25%.
The effective interest rate on the Old Senior Notes was approximately 12.7%, after consideration of the $0.7 million of deferred financing costs (included in other assets). The Old Senior Notes were to mature on February 13, 2013.
During the second quarter of 2009, Altra Industrial retired the remaining principal balance of the Old Senior Notes, of £3.3 million or $5.0 million of principal amount, plus accrued and unpaid interest. In connection with the redemption, Altra Industrial incurred $0.2 million of pre-payment premium and wrote-off the entire remaining balance of $0.1$0.2 million of deferred financing fees, which is recorded as interest expense in the condensed consolidated statement of income (loss).
income. The Old Senior Notes were guaranteed on a senior unsecured basis by Altra Industrial’s U.S. domestic subsidiaries. The Old Senior Notes contained numerous terms, covenants and conditions, which imposed substantial limitations on the Company.
Variable Rate Demand Revenue Bonds
In connection with the acquisition of TB Wood’s, the Company assumed the obligation to make payments due underobligations for certain Variable Rate Demand Revenue Bonds outstanding as of the acquisition date. TB Wood’s had assumed obligations with respect tofor approximately $3.0 million and $2.3 million through the issuance of Variable Rate Demand Revenue Bonds issued under the authority of the industrial development corporations of the


11

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
City of San Marcos, Texas and City of the Chattanooga, Tennessee, respectively. These bonds bear variable interest rates (less than 1% interest on September 26, 2009),as of April 3, 2010) and mature in April 2024 and April 2022, respectively. The bonds were issued to finance production facilities for TB Wood’s manufacturing operations in San Marcos and Chattanooga,those cities, and are secured by letters of credit issued under the terms of the TB Wood’sRevolving Credit Agreement.
As of December 31, 2008, The Company currently is leasing the Company planned to sell the buildingfacility in Chattanooga, Tennessee. AccordingTennessee to the terms of the indenture and lease, before the Company can acquire the building, free of all encumbrances, the outstanding debt under the Variable Rate Demand Revenue Bonds must be paid in full. As a result, the debt was classified as a current liability on the condensed consolidated balance sheet as of December 31, 2008.
In the first quarter of 2009, due to real estate market conditions in Chattanooga, the Company reevaluated the classification of this building as an asset held for sale and reclassified this building to held and used. As a result of the change in classification, the Company reclassified $2.3 million of debt associated with the Chattanooga property to long-term debt on the Company’s condensed consolidated balance sheet.
third party.
Mortgage
In June 2006, the Company entered into a mortgage on its building in Heidelberg, Germany with a local bank. In the third quarter of 2009, the Company re-financedrefinanced the Heidelberg mortgage. The Company borrowed an additional €1.0 million. The newAs of April 3, 2010 the mortgage has a remaining principal of €2.1 million or $2.9 million, and an interest rate of 3.5% and is payable in monthly installments over three15 years. As of September 26, 2009 and December 31, 2008, the mortgage had a remaining principal balance outstanding of €2.2 million, or $3.3 million, and €1.6 million, or $2.3 million, respectively.
Capital Leases
The Company leases certain equipment under capital lease arrangements, whose obligations are included in both short-term and long-term debt.

11

ALTRA HOLDINGS, INC.
12.  
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
11. Stockholders’ Equity
Stockholders’ Equity
Stock-Based Compensation
The Company’s Board of Directors established the 2004 Equity Incentive Plan (the “Plan”) that provides for various forms of stock basedstock-based compensation to independent directors, officers and senior-level employees of the Company. The restricted shares of common stock issued pursuant to the Plan generally vest ratably over a period of 3.5ranging from immediately to 5 years, provided that the vesting of the restricted shares may accelerate upon the occurrence of certain liquidity events, if approved by the Board of Directors in connection with the transactions. Shares grantedCommon stock awarded under the Plan is generally subject to non-management membersrestrictions on transfer, repurchase rights, and other limitations and rights as set forth in the applicable award agreements. The shares are valued based on the share price on the date of the Board of Directors generally vest immediately.
grant.
The Plan permits the Company to grant restricted stock to key employees and other persons who make significant contributions to the success of the Company. The restrictions and vesting schedule for restricted stock granted under the Plan are determined by the Personnel and Compensation Committee of the Board of Directors. Compensation expense recorded during the quarters ended September 26,April 3, 2010 and March 28, 2009 and September 27, 2008 was $0.7$0.5 million and $0.5$1.0 million, respectively. Compensation expense for the year to date periods ended September 26, 2009 and September 27, 2008 was $2.3 million and $1.5 million, respectively. Stock basedStock-based compensation is recorded as an adjustment to selling, general and administrative expenses in the accompanying condensed consolidated statementstatements of income. Stock basedStock-based compensation expense is recognized on a straight-line basis over the vesting period.


12

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
The following table sets forth the activity of the Company’s unvested restricted stock grants in the year to date period ended September 26, 2009:April 3, 2010:
         
    Weighted-Average
    Grant Date Fair
  Shares Value
 
Restricted shares unvested December 31, 2008  797,714  $5.53 
Shares granted  284,941  $6.96 
Forfeitures  (13,649) $7.34 
Shares for which restrictions lapsed  (440,558) $5.35 
         
Restricted shares unvested September 26, 2009  628,448  $6.26 
         
         
      Weighted-average 
  Shares  grant date fair value 
 
Restricted shares unvested December 31, 2009  560,081  $6.55 
Shares granted  207,555  $10.50 
Shares for which restrictions lapsed  (328,717) $4.45 
       
Restricted shares unvested April 3, 2010  438,919  $10.00 
       
Total remaining unrecognized compensation cost was approximately $3.0$3.7 million as of September 26, 2009,April 3, 2010, which will be recognized over a weighted average remaining period of three years. The fair market value of the shares in which the restrictions have lapsed during the year to date periodquarter ended September 26, 2009April 3, 2010 was $3.9$4.1 million. Restricted shares granted are valued based on the fair market value of the stock on the date of grant.
13.  12. Concentrations of Credit, Segment Data and WorkforceConcentrations of Credit, Segment Data and Workforce
Financial instruments, which are potentially subject to counter party performance and concentrations of credit risk, consist primarily of trade accounts receivable. The Company manages these risks by conducting credit evaluations of customers prior to delivery or commencement of services. When the Company enters into a sales contract, collateral is normally not required from the customer. Payments are typically due within thirty days of billing. An allowance for potential credit losses is maintained, and losses have historically been within management’s expectations. No customer represented greater than 10% of total sales for the quarters ended September 26, 2009April 3, 2010 and September 27, 2008.
March 28, 2009.
The Company is also subject to counter party performance risk of loss in the event of non-performance by counterparties to financial instruments, such as cash and investments. Cash and investments are held by international or well established financial institutions.

12

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted
The Company has five operating segments that are regularly reviewed by our chief operating decision maker. Each of these operating segments represents a unit that produces mechanical power transmission products. The Company aggregates all of the operating segments into one reportable segment. The five operating segments have similar long-term average gross profit margins. All of our products are sold by one global sales force and we have one global marketing function. Strategic markets and industries are determined for the entire company and then targeted by the brands. All of our operating segments have common manufacturing and production processes. Each segment includes a machine shop which uses similar equipment and manufacturing techniques. Each of our segments uses common raw materials, such as aluminum, steel and copper. The materials are purchased and procurement contracts are negotiated by one global purchasing function.
We serve the general industrial market by selling to original equipment manufacturers (“OEM”) and distributors. Our OEM and distributor customers serve the general industrial market. Resource allocation decisions such as capital expenditure requirements and headcount requirements are made at a consolidated level and allocated to the individual operating segments.
Discrete financial information is not available by product line at the level necessary for management to assess performance or make resource allocation decisions.


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ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
Net sales to third parties by geographic region are as follows:
                 
  Net Sales 
  Quarter Ended  Year To Date Ended 
  September 26,
  September 27,
  September 26,
  September 27,
 
  2009  2008  2009  2008 
 
North America (primarily U.S.) $74,592  $110,793  $247,921  $347,190 
Europe  23,536   40,028   75,046   121,289 
Asia and other  6,638   8,627   18,216   22,044 
                 
Total $104,766  $159,448  $341,183  $490,523 
                 
         
  Net Sales 
  Quarter Ended 
  April 3,  March 28, 
  2010  2009 
         
North America (primarily U.S.) $93,165  $91,603 
Europe  27,888   27,679 
Asia and other  6,653   5,258 
       
Total $127,706  $124,540 
       
Net sales to third parties are attributed to the geographic regions based on the country in which the shipment originates.
The net assets of our foreign subsidiaries at September 26, 2009April 3, 2010 and December 31, 20082009 were $74.7$80.3 million and $73.5$76.8 million, respectively.
14.  13. Commitments and ContingenciesCommitments and Contingencies
General Litigation
The Company is involved in various pending legal proceedings arising out of the ordinary course of business. None of these legal proceedings are expected to have a material adverse effect on the results of operations, cash flows, or financial condition of the Company. With respect to these proceedings, management believes that the Company will prevail, has adequate insurance coverage or has established appropriate reserves to cover potential liabilities. Any costs that management estimates may be paid related to these proceedings or claims are accrued when the liability is considered probable and the amount can be reasonably estimated. There can be no assurance, however, as to the ultimate outcome of any of these matters, and if all or substantially all of these legal proceedings were to be determined adversely to the Company, there could be a material adverse effect on the results of operations, cash flows, or financial condition of the Company. As of September 26, 2009April 3, 2010 and December 31, 2008,2009, there were no suchproduct liability claims for which management believed a loss was probable. As a result, no amounts were accrued in the accompanying consolidated balance sheets for product liability losses related to such claims at those dates.
The Company is indemnified under the terms of certain acquisition agreements for certain pre-existing matters up to agreed upon limits.
15.  Restructuring, Asset Impairment and Transition Expenses
During 2007, the Company adopted two restructuring programs. The first was intended to improve operational efficiency by reducing headcount, consolidating operating facilities and relocating manufacturing to lower cost areas (the “Altra Plan”). The second was related to the acquisition of TB Wood’s and was intended to reduce duplicate staffing and consolidate facilities (the “TB Wood’s Plan”). The TB Wood’s Plan was initially formulated at the time of the TB Wood’s acquisition and therefore the associated accrual was recorded as part of purchase accounting.


14

13

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
The Company has not incurred any additional expenses related to either the Altra Plan or the TB Wood’s Plan in 2009. The Company’s restructuring expense, by major component for the year to date period ended September 27, 2008 were as follows:
             
  Altra Plan  TB Wood’s Plan  Total 
 
Expenses            
Other cash expenses $—  $—  $— 
Moving and relocation  467   84   551 
Severance  411   —   411 
             
Total cash expenses  878   84   962 
             
Non-cash asset impairment and loss on sale of fixed asset  187   —   187 
             
Total restructuring expenses $1,065  $84  $1,149 
             
14. Restructuring, Asset Impairment and Transition Expenses
In March 2009, the Company adopted a new restructuring plan (“2009 Altra Plan”) to improve the utilization of the manufacturing infrastructure and to realign the business with the current economic conditions. The 2009 Altra Plan is intended to improve operational efficiency by reducing headcount and consolidating facilities. The Company’s total restructuring expense for the quarter ended September 26, 2009April 3, 2010 was $1.0 million.
On April 7, 2009, the Company announced that it would be closing its facility in Mt. Pleasant, Michigan and relocating the manufacturing to certain of theThe Company’s other facilities. In connection with this decision, the Company completed an impairment analysis. The facility which had a carrying value of $1.4 million was written down to the fair value of $0.7 million, resulting in an impairment charge of $0.7 million. The Company estimated the fair value using observable inputs (level 2) by reviewing sale prices of comparable buildings in the Mt. Pleasant, Michigan area. The relocation is expected to be completed by the end of 2009.
On July 7, 2009, the Company announced that it would be closing its manufacturing facility in South Beloit, Illinois and relocating the manufacturing operations to certain of the Company’s other facilities. In connection with this decision, the Company completed an impairment analysis. The facility which had a carrying value of $2.1 million was written down to the fair value of $1.5 million, resulting in an impairment charge of $0.6 million. The Company estimated the fair value using observable inputs (level 2). The Company reviewed sale prices of comparable buildings in the South Beloit, Illinois area. The relocation is expected to be completed by the first quarter of 2010. In September 2009, the Company negotiated a plant closing agreement with the local union at the South Beloit facility. The Company has agreed to pay approximately $0.7 million in severance and performance bonuses to those employees who remain employed through their termination date. The Company expects to pay these amounts in the fourth quarter of 2009 through the first quarter of 2010.
The Company expects to move a majority of the assets at this location to certain other locations. As a result, the Company does not expect to have a significant impairment on these assets.


15

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
The expenses for the year to date period ended September 26, 2009 are classifiedrestructuring expense, by major component for the quarters ended April 3, 2010 and March 28, 2009, respectively, were as follows:
         
  September 27, 2009 
  Year to Date
  Quarter to Date
 
2009 Altra Plan
 Period Ended  Period Ended 
 
Expenses:        
Other cash expenses $154  $107 
Severance  3,159   476 
         
Total cash expenses  3,313   583 
         
Non-cash asset impairment and other non-cash charges  2,047   423 
         
Total restructuring expenses $5,360  $1,006 
         
         
  Quarter Ended  Quarter Ended 
  April 3, 2010  March 28, 2009 
  2009 Altra  2009 Altra 
  Plan  Plan 
         
Expenses        
Other cash expenses $14  $7 
Moving and relocation  263   0 
Severance  769   1,116 
       
         
Total cash expenses  1,046   1,123 
       
         
Non-cash asset impairment and loss on sale of fixed asset  —   749 
       
         
Total restructuring expenses $1,046  $1,872 
       
The following is a reconciliation of the accrued restructuring costs between December 31, 20082009 and September 26, 2009:April 3, 2010:
     
  All Plans 
 
Balance at December 31, 2008 $1,321 
Cash restructuring expense incurred  3,328 
Cash payments  (3,785)
     
Balance at September 26, 2009 $864 
     
16.  Guarantor Subsidiaries
     
  2009 Altra Plan 
 
Balance at December 31, 2009 $915 
Cash restructuring expense incurred  1,046 
Cash payments  (1,061)
    
Balance at April 3, 2010 $900 
    
The Company has filed a Registration Statement onForm S-3 with the Securities and Exchange Commission to allow it to issue debt securities that may be fully and unconditionally guaranteed by each of the Company’s, directly or indirectly, 100% owned U.S. domestic subsidiariestotal restructuring reserve as of April 3, 2010 relates to severance costs to be paid to employees. The Company also expects to incur between $1.3 million and $1.5 million of additional expenses associated with workforce reductions and consolidation of facilities under the date of issuance. 2009 Altra Plan in 2010.
15. Guarantor Subsidiaries
The following condensed consolidating financial statements present separately the financial position, results of operations, and cash flows for (a) the Company, as parent, (b) the guarantor subsidiaries of the Company consisting of all of the, directly or indirectly, 100% owned U.S. domestic subsidiaries of the Company, (c) the non-guarantor subsidiaries of the Company consisting of all non-domestic subsidiaries of the Company, and (d) eliminations necessary to arrive at the Company’s information on a consolidated basis. These statements are presented in accordance with the disclosure requirements under the Securities and Exchange Commission’sRegulation S-X,Rule 3-10. Separate financial statements of the Guarantor Subsidiaries are not presented because their guarantees are full and unconditional and joint and several.


16

14

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
Unaudited condensed consolidating balance sheet
September 26, 2009
April 3, 2010
                    
   Guarantor
 Non Guarantor
                         
 Issuer Subsidiaries Subsidiaries Eliminations Consolidated  Guarantor Non Guarantor     
 Issuer Subsidiaries Subsidiaries Eliminations Consolidated 
ASSETS
ASSETS
 
Current assets:                     
Cash and cash equivalents $1  $35,614  $36,325  $—  $71,940  $1 $22,063 $31,502 $— $53,566 
Trade receivables, less allowance for doubtful accounts  —   36,552   22,053   —   58,605  — 43,170 22,659 — 65,829 
Loans receivable from related parties  —   39,408   —   (39,408)  —  212,244 — —  (212,244) — 
Inventories  —   50,154   22,101   —   72,255  — 51,353 21,494 — 72,847 
Deferred income taxes  —   8,032   —   —   8,032  — 9,087 178 — 9,265 
Assets held for sale  —   —   —   —   — 
Income tax receivable 1,192 1,589 — — 2,781 
Prepaid expenses and other current assets  1,194   5,694   3,166   —   10,054  — 3,179 1,976 — 5,155 
                      
Total current assets  1,195   175,454   83,645   (39,408)  220,886  213,437 130,441 77,809  (212,244) 209,443 
                  —  
Property, plant and equipment, net  —   75,615   32,154   —   107,769  — 75,054 29,530 — 104,584 
Intangible assets, net  —   59,397   17,050   —   76,447  — 57,360 15,412 — 72,772 
Goodwill  —   58,015   20,940   —   78,955  — 58,547 20,097 — 78,644 
Deferred income taxes  —   —   495   —   495  — — 679 — 679 
Investment in subs  139,086   —   —   (139,086)  — 
Investment in subsidiaries 134,817 — —  (134,817) — 
Other non-current assets  —   6,207   112   —   6,319  6,320 4,928 99 — 11,347 
           
            
Total assets $140,281  $374,688  $154,396  $(178,494) $490,871  $354,574 $326,330 $143,626 $(347,061) $477,469 
                      
 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities:                     
Accounts payable $—  $17,663  $8,156  $—  $25,819  $— $24,839 $10,933 $— $35,772 
Accrued payroll  —   7,799   5,639   —   13,438  — 5,278 5,046 — 10,324 
Accruals and other current liabilities  —   16,282   9,251   —   25,533  5,925 11,572 7,451 — 24,948 
Deferred income taxes  —   —   6,906   —   6,906  — — 7,275 — 7,275 
Current portion of long-term debt  —   641   354   —   995  — 670 371 — 1,041 
Loans payable to related parties  —   —   39,408   (39,408)  —  — 188,945 23,299  (212,244) — 
                      
Total current liabilities  —   42,385   69,714   (39,408)  72,691  5,925 231,304 54,375  (212,244) 79,360 
Long-term debt — less current portion and net of unacreted discount and premium  —   228,453   3,180   —   231,633 
 
Long-term debt — less current portion and net of unacreted discount 207,353 6,095 2,645 — 216,093 
Deferred income taxes  —   20,822   2,496   —   23,318  — 17,876 3,123 — 20,999 
Pension liablities  —   8,702   3,028   —   11,730  — 6,136 3,070 — 9,206 
Other post retirement benefits  —   63   —   —   63 
Long-term taxes payables  —   9,075   —   —   9,075  — 9,427 — — 9,427 
Other long-term liabilities  —   788   1,292   —   2,080  — 969 119 — 1,088 
Total stockholders’ equity  140,281   64,400   74,686   (139,086)  140,281  141,296 54,523 80,294  (134,817) 141,296 
                      
 
Total liabilities and stockholders’ equity $140,281  $374,688  $154,396  $(178,494) $490,871  $354,574 $326,330 $143,626 $(347,061) $477,469 
                      


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15

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
Unaudited Condensed Consolidating Balance Sheet
December 31, 20082009
                    
   Guarantor
 Non Guarantor
                         
 Issuer Subsidiaries Subsidiaries Eliminations Consolidated  Guarantor Non Guarantor     
 Issuer Subsidiaries Subsidiaries Eliminations Consolidated 
ASSETS
ASSETS
 
Current assets:                     
Cash and cash equivalents $1  $24,432  $27,640  $—  $52,073  $1 $19,744 $31,752 $— $51,497 
Trade receivables, less allowance for doubtful accounts  —   41,051   27,752   —   68,803  — 33,966 18,889 — 52,855 
Loans receivable from related parties  —   37,649   —   (37,649)  —  214,583 — —  (214,583) — 
Inventories  —   71,304   27,106   —   98,410  — 50,931 20,922 — 71,853 
Deferred income taxes  —   7,923   109   —   8,032  — 9,087 178 — 9,265 
Assets held for sale  —   3,515   1,161   —   4,676  — — — — — 
Income tax receivable 1,192 3,308 254 — 4,754 
Prepaid expenses and other current assets  1,192   6,164   (842)  —   6,514  — 2,309 1,338 — 3,647 
                      
Total current assets  1,193   192,038   82,926   (37,649)  238,508  215,776 119,345 73,333  (214,583) 193,871 
 
Property, plant and equipment, net  —   77,424   32,796   —   110,220  — 74,559 31,044 — 105,603 
Intangible assets, net  —   62,481   16,858   —   79,339  — 58,392 16,513 — 74,905 
Goodwill  —   58,016   19,481   —   77,497  — 58,015 20,817 — 78,832 
Deferred income taxes  —   —   495   —   495  — — 679 — 679 
Investment in subs  127,672   —   —   (127,672)  — 
Investment in subsidiaries 125,792 — —  (125,792) — 
Other non-current assets  —   7,489   36   —   7,525  6,394 4,816 99 — 11,309 
           
            
Total assets $128,865  $397,448  $152,592  $(165,321) $513,584  $347,962 $315,127 $142,485 $(340,375) $465,199 
                      
 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities:                     
Accounts payable $—  $22,105  $11,785  $—  $33,890  $76 $18,156 $9,189 $— $27,421 
Accrued payroll  —   9,610   7,165   —   16,775  — 7,415 4,718 — 12,133 
Accruals and other current liabilities  —   12,478   6,277   —   18,755  1,659 10,711 7,601 — 19,971 
Deferred income taxes  —   —   6,906   —   6,906  — — 7,275 — 7,275 
Current portion of long-term debt  —   2,925   466   —   3,391  — 650 409 — 1,059 
Loans payable to related parties  —   —   37,649   (37,649)  —  — 187,611 26,972  (214,583) — 
                      
Total current liabilities  —   47,118   70,248   (37,649)  79,717  1,735 224,543 56,164  (214,583) 67,859 
 
Long-term debt — less current portion and net of unacreted discount and premium  —   255,933   2,199   —   258,132  207,284 6,267 2,939 — 216,490 
Deferred income taxes  —   20,822   2,514   —   23,336  — 17,876 3,175 — 21,051 
Pension liablities  —   8,922   2,932   —   11,854  — 6,633 3,229 — 9,862 
Other post retirement benefits  —   2,270   —   —   2,270 
Long-term taxes payables  —   7,976   —   —   7,976  — 9,661 — — 9,661 
Other long-term liabilities  —   241   1,193   —   1,434  — 1,177 156 — 1,333 
Total stockholders’ equity  128,865   54,166   73,506   (127,672)  128,865  138,943 48,970 76,822  (125,792) 138,943 
                      
 
Total liabilities and stockholders’ equity $128,865  $397,448  $152,592  $(165,321) $513,584  $347,962 $315,127 $142,485 $(340,375) $465,199 
                      


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16

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
Unaudited Condensed Consolidating Statement of Income
                    
 Year to Date Period Ended September 26, 2009                     
   Guarantor
 Non-Guarantor
      Quarter Ended April 3, 2010 
 Issuer Subsidiaries Subsidiaries Eliminations Consolidated  Guarantor Non-Guarantor     
 Issuer Subsidiaries Subsidiaries Eliminations Consolidated 
Net sales $—  $252,335  $110,847  $(21,999) $341,183  $— $95,084 $41,994 $(9,372) $127,706 
Cost of sales  —   192,110   80,839   (21,999)  250,950  — 71,314 28,361  (9,372) 90,303 
                      
Gross profit  —   60,225   30,008   —   90,233  — 23,770 13,633 — 37,403 
Selling, general and administrative expenses  —   38,145   22,826   —   60,971  26 13,496 7,450 — 20,972 
           
Research and development expenses  —   2,872   1,697   —   4,569  — 1,084 695 — 1,779 
Other post employment benefit plan settlement gain  —   (1,467)  —   —   (1,467)
Restructuring costs  —   3,122   2,238   —   5,360  — 798 248 — 1,046 
Loss on disposal of assets  —   120   396       516 
                      
Income from operations  —   17,433   2,851   —   20,284 
Income (loss) from operations  (26) 8,392 5,240 — 13,606 
Interest expense, net  —   18,806   73   —   18,879  4,496 385 59 — 4,940 
Other non-operating expense, net  —   576   672   —   1,248  — 74 221 — 295 
Equity in earnings of subsidiaries  300   —   —   (300)  —  9,025 — —  (9,025) — 
                      
Income (loss) before income taxes  300   (1,949)  2,106   (300)  157 
Income before income taxes 4,503 7,933 4,960  (9,025) 8,371 
Provision (benefit) for income taxes  —   (1,069)  926   —   (143)  (1,236) 2,380 1,488 — 2,632 
                      
Net income  300   (880)  1,180   (300)  300  $5,739 $5,553 $3,472 $(9,025) $5,739 
                      


19

17

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
Unaudited Condensed Consolidating Statement of Income
                    
 Quarter Ended September 26, 2009                     
   Guarantor
 Non-Guarantor
      Quarter Ended March 28, 2009 
 Issuer Subsidiaries Subsidiaries Eliminations Consolidated  Guarantor Non-Guarantor     
 Issuer Subsidiaries Subsidiaries Eliminations Consolidated 
Net sales $—  $75,377  $37,206  $(7,817) $104,766  $— $93,541 $38,282 $(7,283) $124,540 
Cost of sales  —   56,971   27,040   (7,817)  76,194  — 72,396 27,224  (7,283) 92,337 
                      
Gross profit  —   18,406   10,166   —   28,572  — 21,145 11,058 — 32,203 
Selling, general and administrative expenses  —   11,885   7,405   —   19,290  — 13,946 7,797 — 21,743 
Research and development expenses  —   909   599   —   1,508  — 1,030 537 — 1,567 
Other post employment benefit plan settlement —  (1,467) — —  (1,467)
Restructuring costs  —   983   23   —   1,006  — 1,514 358 — 1,872 
Loss on disposal of assets  —   120   396   —   516 
                      
Income (loss) from operations  —   4,509   1,743   —   6,252 
Interest expense (income), net  —   6,290   —   —   6,290 
Other non-operating expense, net  —   180   (551)  —   (371)
Income from operations — 6,122 2,366 — 8,488 
Interest expense, net — 6,300 49 — 6,349 
Other non-operating income —  (120)  (42) —  (162)
Equity in earnings of subsidiaries  648   —   —   (648)  —  1,418 — —  (1,418) — 
                      
Income (loss) before income taxes  648   (1,961)  2,294   (648)  333 
Provision (benefit) for income taxes  —   (1,310)  995   —   (315)
Income (loss) from before income taxes 1,418  (58) 2,359  (1,418) 2,301 
Provision for income taxes — 10 873 — 883 
                      
Net income (loss)  648   (651)  1,299   (648)  648 
Net income $1,418 $(68) $1,486 $(1,418) $1,418 
                      


20

18

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
Unaudited Condensed Consolidating Statement of IncomeCash Flows
                     
  Year to Date Period Ended September 27, 2008 
     Guarantor
  Non-Guarantor
       
  Issuer  Subsidiaries  Subsidiaries  Eliminations  Consolidated 
 
Net sales $—  $353,805  $176,919  $(40,201) $490,523 
Cost of sales  —   262,405   124,313   (40,201)  346,517 
                     
Gross profit  —   91,400   52,606   —   144,006 
Selling, general and administrative expenses  —   48,034   28,782   —   76,816 
Research and development expenses  —   3,050   2,110   —   5,160 
Other post employment benefit plan settlement gain  —   (276)  —   —   (276)
Restructuring costs  —   555   594   —   1,149 
                     
Income from operations  —   40,037   21,120   —   61,157 
Interest expense, net  —   22,270   186   —   22,456 
Other non-operating (income) expense, net  —   (1,455)  (1,432)  —   (2,887)
Equity in earnings of subsidiaries  27,237   —   —   (27,237)  — 
                     
Income from continuing operations before income taxes  27,237   19,222   22,366   (27,237)  41,588 
Provision (benefit) for income taxes  —   6,523   7,604   —   14,127 
                     
Income from continuing operations  27,237   12,699   14,762   (27,237)  27,461 
Net loss from discountinued operations  —   (224)  —   —   (224)
                     
Net income  27,237   12,475   14,762   (27,237)  27,237 
                     
                     
  Quarter Ended April 3, 2010 
      Guarantor  Non-Guarantor       
  Issuer  Subsidiaries  Subsidiaries  Eliminations  Consolidated 
Cash flows from operating activities
                    
Net income $5,739  $5,553  $3,472  $(9,025) $5,739 
Undistributed equity in earnings of subsidiaries  (9,025)  —   —   9,025   — 
Adjustments to reconcile net income to net cash flows:              —   — 
Depreciation  —   3,268   891   —   4,159 
Amortization of intangible assets  —   1,032   351   —   1,383 
Amortization and write-offs of deferred loan costs  172   —   —   —   172 
Loss on foreign currency, net  —   —   314   —   314 
Accretion of debt discount and premium, net  73   —   —   —   73 
Deferred income tax  —   26   (26)  —   — 
Stock based compensation  —   548   —   —   548 
Changes in assets and liabilities:                    
Trade receivables  —   (10,494)  (4,543)  —   (15,037)
Inventories  —   (421)  (1,148)  —   (1,569)
Accounts payable and accrued liabilities  4,190   7,318   3,014   —   14,522 
Other current assets and liabilities  —   (1,316)  (686)  —   (2,002)
Other operating assets and liabilities  (35)  (113)  20   —   (128)
                
Net cash provided by operating activities  1,114   5,401   1,659   —   8,174 
                
                     
Cash flows from investing activities
                    
Purchase of fixed assets  —   (2,349)  (345)  —   (2,694)
Contingent consideration payment  —   (1,177)  —   —   (1,177)
                
Net cash used in investing activities  —   (3,526)  (345)  —   (3,871)
                
                     
Cash flows from financing activities
                    
Payment of debt issuance costs  (64)  1   —   —   (63)
Shares repurchased  (288)  —   —   —   (288)
Payments on mortgages  —   —   (121)  —   (121)
Change in affiliate debt  (762)  618   144   —   — 
Payment on capital leases  —   (175)  —   —   (175)
                
Net cash (used in) provided by financing activities  (1,114)  444   23   —   (647)
                
                     
Effect of exchange rate changes on cash and cash equivalents  —   —   (1,587)  —   (1,587)
                
Net change in cash and cash equivalents  —   2,319   (250)  —   2,069 
Cash and cash equivalents at beginning of year  1   19,744   31,752   —   51,497 
                
Cash and cash equivalents at end of period $1  $22,063  $31,502  $—  $53,566 
                


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19

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
Unaudited Condensed Consolidating Statement of IncomeCash Flows
                     
  Quarter Ended September 27, 2008 
     Guarantor
  Non-Guarantor
       
  Issuer  Subsidiaries  Subsidiaries  Eliminations  Consolidated 
 
Net sales $—  $113,469  $59,203  $(13,224) $159,448 
Cost of sales  —   84,460   42,391   (13,224)  113,627 
                     
Gross profit  —   29,009   16,812   —   45,821 
Selling, general and administrative expenses  —   16,268   9,387   —   25,655 
Research and development expenses  —   955   708   —   1,663 
Other post employment benefit plan settlement  —   (107)  —   —   (107)
Restructuring costs  —   (228)  309   —   81 
                     
Income from operations  —   12,121   6,408   —   18,529 
Interest expense, net  —   7,289   13   —   7,302 
Other non-operating (income) expense, net  —   1,319   (2,727)  —   (1,408)
Equity in earnings of subsidiaries  8,807   —   —   (8,807)  — 
                     
Income from continuing operations before income taxes  8,807   3,513   9,122   (8,807)  12,635 
Provision (benefit) for income taxes  —   766   3,234   —   4,000 
                     
Net income from continuing operations  8,807   2,747   5,888   (8,807)  8,635 
Net income from discontinued operations  —   172           172 
                     
Net income  8,807   2,919   5,888   (8,807)  8,807 
                     
                     
  Quarter Ended March 28, 2009 
      Guarantor  Non-Guarantor       
  Issuer  Subsidiaries  Subsidiaries  Eliminations  Consolidated 
Cash flows from operating activities
                    
Net income (loss) $1,418  $(68) $1,486  $(1,418) $1,418 
Undistributed equity in earnings of subsidiaries  (1,418)  —   —   1,418   — 
Adjustments to reconcile net income to net cash flows:                  — 
Depreciation  —   3,141   1,017   —   4,158 
Amortization of intangibles and deferred loan costs  —   1,462   329   —   1,791 
Gain on foreign currency, net  —   (201)  —   —   (201)
Accretion of debt discount and premium, net  —   154   —   —   154 
Fixed asset impairment/disposal  —   749   —   —   749 
Other post employment benefit plan settlement gain  —   (1,467)  —   —   (1,467)
Stock based compensation  —   977   —   —   977 
Changes in assets and liabilities:  —       —   —   — 
Trade receivables  —   (2,872)  614   —   (2,258)
Inventories  —   7,365   707   —   8,072 
Accounts payable and accrued liabilities  —   1,842   (2,148)  —   (306)
Other current assets and liabilities  —   375   (1,914)  —   (1,539)
Other operating assets and liabilities  —   4   —   —   4 
                
Net cash provided by operating activities  —   11,461   91   —   11,552 
                
                     
Cash flows from investing activities
                    
Purchase of fixed assets  —   (1,494)  (327)  —   (1,821)
                
Net cash used in by investing activities  —   (1,494)  (327)  —   (1,821)
                
                     
Cash flows from financing activities
                    
Payments on mortgages  —   —   (120)  —   (120)
Change in affiliate debt  —   1,229   (1,229)  —   — 
Payment on capital leases  —   (151)  (28)  —   (179)
                
Net cash (used in) provided by financing activities  —   1,078   (1,377)  —   (299)
                
                     
Effect of exchange rate changes on cash and cash equivalents  —   —   (102)  —   (102)
                
Net change in cash and cash equivalents  —   11,045   (1,715)  —   9,330 
Cash and cash equivalents at beginning of year  1   24,432   27,640   —   52,073 
                
Cash and cash equivalents at end of period $1  $35,477  $25,925  $—  $61,403 
                


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ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
Unaudited Condensed Consolidating Statement of Cash Flows
                     
  Year to Date Period Ended September 26, 2009 
     Guarantor
  Non-Guarantor
       
  Issuer  Subsidiaries  Subsidiaries  Eliminations  Consolidated 
 
Cash flows from operating activities
                    
Net income $300  $(880) $1,180  $(300) $300 
Undistributed equity in earnings of subsidiaries $(300) $—  $—  $300   — 
Adjustments to reconcile net income to net cash flows:                  — 
Depreciation  —   9,065   3,482   —   12,547 
Amortization of intangible assets  —   3,099   1,038   —   4,137 
Amortization and write-offs of deferred loan costs  —   1,560   —   —   1,560 
Loss on foreign currency, net  —   270   822   —   1,092 
Accretion of debt discount and premium, net  —   621   —   —   621 
Fixed asset impairment  —   1,703   860   —   2,563 
Other post employment benefit plan settlement gain  —   (1,467)  —   —   (1,467)
Stock based compensation  —   2,273   —   —   2,273 
Changes in assets and liabilities:                    
Trade receivables  —   5,950   7,075   —   13,025 
Inventories  —   21,150   6,476   —   27,626 
Accounts payable and accrued liabilities  —   (4,927)  (7,002)  —   (11,929)
Other current assets and liabilities  —   472   (401)  —   71 
Other operating assets and liabilities  —   (204)  (161)  —   (365)
                     
Net cash (used in) provided by operating activities  —   38,685   13,369   —   52,054 
                     
Cash flows from investing activities
                    
Purchase of fixed assets  —   (4,224)  (881)  —   (5,105)
                     
Net cash used in investing activities  —   (4,224)  (881)  —   (5,105)
                     
Cash flows from financing activities
                    
Payments on Senior Notes  —   (4,950)  —   —   (4,950)
Payments on Senior Secured Notes  —   (22,200)  —   —   (22,200)
Proceeds from additional borrowings under an existing mortgage  —   —   1,467   —   1,467 
Payments on revolving credit agreement  —   (3,000)  —   —   (3,000)
Shares repurchased  (259)      —   —   (259)
Net payments to Parent  —   (259)  —   259   — 
Payments on mortgages  —   —   (524)  —   (524)
Change in affiliate debt  259   7,608   (7,608)  (259)  — 
Payment on capital leases  —   (478)  (136)  —   (614)
                     
Net cash (used in) provided by financing activities  —   (23,279)  (6,801)  —   (30,080)
                     
Effect of exchange rate changes on cash and cash equivalents  —   —   2,998   —   2,998 
                     
Net change in cash and cash equivalents  —   11,182   8,685   —   19,867 
Cash and cash equivalents at beginning of year  1   24,432   27,640   —   52,073 
                     
Cash and cash equivalents at end of period $1  $35,614  $36,325  $—  $71,940 
                     


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ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)16. Subsequent Events
Unaudited Condensed Consolidating Statement of Cash Flows
                     
  Year to Date Period Ended September 27, 2008 
     Guarantor
  Non-Guarantor
       
  Issuer  Subsidiaries  Subsidiaries  Eliminations  Consolidated 
 
Cash flows from operating activities
                    
Net income $27,237  $12,475  $14,762  $(27,237) $27,237 
Undistributed equity in earnings of subsidiaries $(27,237) $—  $—  $27,237   — 
Adjustments to reconcile net income to net cash flows:                  — 
Depreciation  —   8,123   4,286   —   12,409 
Amortization of intangible assets  —   3,106   1,240   —   4,346 
Amortization and write-offs of deferred loan costs  —   1,863   —   —   1,863 
Loss on foreign currency, net  —   (516)  (1,081)  —   (1,597)
Accretion of debt discount and premium, net  —   759   —   —   759 
Loss on sale of fixed assets  —   193   —   —   193 
Other post employment benefit plan settlement gain  —   (276)  —   —   (276)
Loss on sale of Electronics Division  —   224   —   —   224 
Stock based compensation  —   1,516   —   —   1,516 
Changes in assets and liabilities:                    
Trade receivables  —   (3,754)  (11,151)  —   (14,905)
Inventories  —   (3,673)  (2,198)  —   (5,871)
Accounts payable and accrued liabilities  —   947   4,938   —   5,885 
Other current assets and liabilities  (2)  (856)  475   —   (383)
Other operating assets and liabilities  —   16   218   —   234 
                     
Net cash (used in) provided by operating activities  (2)  20,147   11,489   —   31,634 
                     
Cash flows from investing activities
                    
Purchase of fixed assets  —   (8,831)  (3,403)  —   (12,234)
Proceeds from the sale of Electronics  —   17,310   —   —   17,310 
                     
Net cash (used in) provided by investing activities  —   8,479   (3,403)  —   5,076 
                     
Cash flows from financing activities
                    
Payments on Senior Notes  —   (1,346)  —   —   (1,346)
Payments on Senior Secured Notes  —   (27,500)  —   —   (27,500)
Payments on revolving credit agreement  —   (1,723)  —   —   (1,723)
Payments received from Parent Company  —   11,898   —   (11,898)  — 
Payments on mortgages  —   —   (228)  —   (228)
Change in affiliate debt  (11,898)  11,631   (11,631)  11,898   — 
Payment on capital leases  —   (456)  (323)  —   (779)
                     
Net cash (used in) provided by financing activities  (11,898)  (7,496)  (12,182)  —   (31,576)
                     
Effect of exchange rate changes on cash and cash equivalents  —   —   (1,119)  —   (1,119)
                     
Net change in cash and cash equivalents  (11,900)  21,130   (5,215)  —   4,015 
Cash and cash equivalents at beginning of year  11,901   (492)  29,827   —   41,236 
                     
Cash and cash equivalents at end of period $1  $20,638  $24,612  $—  $45,251 
                     


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ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted — (Continued)
17.  Subsequent Events
The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The Company evaluated subsequent events through November 3, 2009 (thethe date the financial statements were issued).issued.


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21

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report onForm 10-Q contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Company’s current estimates, expectations and projections about the Company’s future results, performance, prospects and opportunities. Forward-looking statements include, among other things, the information concerning the Company’s possible future results of operations including revenue, costs of goods sold, and gross margin, business and growth strategies, financing plans, the Company’s competitive position and the effects of competition, the projected growth of the industries in which we operate, and the Company’s ability to consummate strategic acquisitions and other transactions. Forward-looking statements include statements that are not historical facts and can be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “plan,” “may,” “should,” “will,” “would,” “project,” and similar expressions. These forward-looking statements are based upon information currently available to the Company and are subject to a number of risks, uncertainties, and other factors that could cause the Company’s actual results, performance, prospects, or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Important factors that could cause the Corporation’s actual results to differ materially from the results referred to in the forward-looking statements the Corporation makes in this report include:
the Company’s access to capital, credit ratings, indebtedness, and ability to raise additional financings and operate under the terms of the Company’s debt obligations;
• the Company’s access to capital, credit ratings, indebtedness, and ability to raise additional financings and operate under the terms of the Company’s debt obligations;
• the risks associated with our debt leverage;
• the effects of intense competition in the markets in which we operate;
• the Company’s ability to successfully execute, manage and integrate key acquisitions and mergers;
• the Company’s ability to obtain or protect intellectual property rights;
• the Company’s ability to retain existing customers and our ability to attract new customers for growth of our business;
• the effects of the loss or bankruptcy of or default by any significant customer, suppliers, or other entity relevant to the Company’s operations;
• the Company’s ability to successfully pursue the Company’s development activities and successfully integrate new operations and systems, including the realization of revenues, economies of scale, cost savings, and productivity gains associated with such operations;
• the Company’s ability to complete cost reduction actions and risks associated with such actions;
• the Company’s ability to control costs;
• failure of the Company’s operating equipment or information technology infrastructure;
• the Company’s ability to achieve its business plans, including with respect to an uncertain economic environment;
• changes in employment, environmental, tax and other laws and changes in the enforcement of laws;
• the accuracy of estimated forecasts of OEM customers and the impact of the current global economic environment on our customers;
• fluctuations in the costs of raw materials used in our products;
• the Company’s ability to attract and retain key executives and other personnel;
• work stoppages and other labor issues;
• changes in the Company’s pension and retirement liabilities;
the risks associated with our debt leverage;
the effects of intense competition in the markets in which we operate;
the Company’s ability to successfully execute, manage and integrate key acquisitions and mergers;
the Company’s ability to obtain or protect intellectual property rights;
the Company’s ability to retain existing customers and our ability to attract new customers for growth of our business;
the effects of the loss or bankruptcy of or default by any significant customer, suppliers, or other entity relevant to the Company’s operations;
the Company’s ability to successfully pursue the Company’s development activities and successfully integrate new operations and systems, including the realization of revenues, economies of scale, cost savings, and productivity gains associated with such operations;
the Company’s ability to complete cost reduction actions and risks associated with such actions;
the Company’s ability to control costs;
failure of the Company’s operating equipment or information technology infrastructure;
the Company’s ability to achieve its business plans, including with respect to an uncertain economic environment;
changes in employment, environmental, tax and other laws and changes in the enforcement of laws;
the accuracy of estimated forecasts of OEM customers and the impact of the current global economic environment on our customers;
fluctuations in the costs of raw materials used in our products;
the Company’s ability to attract and retain key executives and other personnel;
work stoppages and other labor issues;
changes in the Company’s pension and retirement liabilities;
the Company’s risk of loss not covered by insurance;
the outcome of litigation to which the Company is a party from time to time, including product liability claims;
changes in accounting rules and standards, audits, compliance with the Sarbanes-Oxley Act, and regulatory investigations;
changes in market conditions that could result in the impairment of goodwill or other assets of the Company;
changes in market conditions in which we operate that could influence the value of the Company’s stock;
the effects of changes to critical accounting estimates; changes in volatility of the Company’s stock price and the risk of litigation following a decline in the price of the Company’s stock price;
the cyclical nature of the markets in which we operate;
the risks associated with the global recession and volatility and disruption in the global financial markets;


26

22

political and economic conditions nationally, regionally, and in the markets in which we operate;
• the Company’s risk of loss not covered by insurance;
• the outcome of litigation to which the Company is a party from time to time, including product liability claims;
• changes in accounting rules and standards, audits, compliance with the Sarbanes-Oxley Act, and regulatory investigations;
• changes in market conditions that would result in the impairment of goodwill or other assets of the Company;
• changes in market conditions in which we operate that would influence the value of the Company’s stock;
• the effects of changes to critical accounting estimates; changes in volatility of the Company’s stock price and the risk of litigation following a decline in the price of the Company’s stock price;
• the cyclical nature of the markets in which we operate;
• the risks associated with the global recession and volatility and disruption in the global financial markets;
• political and economic conditions nationally, regionally, and in the markets in which we operate;
• natural disasters, war, civil unrest, terrorism, fire, floods, tornadoes, earthquakes, hurricanes, or other matters beyond the Company’s control;
• the risks associated with international operations, including currency risks; and
• other factors, risks, and uncertainties referenced in the Company’s filings with the Securities and Exchange Commission, including the “Risk Factors” set forth in the Company’s Annual Report onForm 10-K for the year ended December 31, 2008.
natural disasters, war, civil unrest, terrorism, fire, floods, tornadoes, earthquakes, hurricanes, or other matters beyond the Company’s control;
the risks associated with international operations, including currency risks; and
other factors, risks, and uncertainties referenced in the Company’s filings with the Securities and Exchange Commission, including the “Risk Factors” set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.
YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON ANY FORWARD-LOOKING STATEMENTS, ALL OF WHICH SPEAK ONLY AS OF THE DATE OF THIS QUARTERLY REPORT. EXCEPT AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR RELEASE ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT ANY EVENTS OR CIRCUMSTANCES AFTER THE DATE OF THIS QUARTERLY REPORT OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO US OR ANY PERSON ACTING ON THE COMPANY’S BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS CONTAINED OR REFERRED TO IN THIS SECTION AND IN OUR RISK FACTORS SET FORTH IN PART I, ITEM 1A OF THE COMPANY’S ANNUAL REPORT ONFORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2008,2009, AND IN OTHER REPORTS FILED WITH THE SEC BY THE COMPANY.
The following discussion of the financial condition and results of operations of Altra Holdings, Inc. and its subsidiaries should be read together with the audited financial statements of Altra Holdings, Inc. and its subsidiaries and related notes included in the Company’s Annual Report onForm 10-K for the year ended December 31, 2008.2009. Unless the context requires otherwise, the terms “Altra Holdings,” the Company,” “we,” “us,” and “our” refer to Altra Holdings, Inc. and its subsidiaries.


27

General
Altra Holdings, Inc. is the parent company of Altra Industrial Motion, Inc. (“Altra Industrial”) and owns 100% of Altra Industrial’s outstanding capital stock. Altra Industrial, directly or indirectly, owns 100% of the capital stock of its 48 subsidiaries. The following chart illustrates a summary of our corporate structure:
(FLOW CHART)

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Although we were incorporated in Delaware in 2004, much of our current business has its roots with the prior acquisition by Colfax Corporation, or Colfax, of a series of power transmission businesses. In December 1996, Colfax acquired the MPT group of Zurn Technologies, Inc. Colfax subsequently acquired Industrial Clutch Corp. in May 1997, Nuttall Gear Corp. in July 1997 and the Boston Gear and Delroyd Worm Gear brands in August 1997 as part of Colfax’s acquisition of Imo Industries, Inc. In February 2000, Colfax acquired Warner Electric, Inc., which sold products under the Warner Electric, Formsprag Clutch, Stieber, and Wichita Clutch brands. Colfax formed Power Transmission Holding LLC, or PTH,“PTH”, in June 2004 to serve as a holding company for all of these power transmission businesses. Boston Gear was established in 1877, Warner Electric, Inc. in 1927, and Wichita Clutch in 1949.
On November 30, 2004, we acquired our original core business through the acquisition of PTH from Colfax. We refer to this transaction as the PTH Acquisition.
On October 22, 2004, The Kilian Company, or Kilian, a company formed at the direction of Genstar Capital, the then largest stockholder of Altra Holdings, acquired Kilian Manufacturing Corporation from Timken U.S. Corporation. At the completion of the PTH Acquisition, (i) all of the outstanding shares of Kilian capital stock were exchanged for shares of our capital stock and (ii) Kilian and its subsidiaries were transferred to our wholly owned subsidiary.
Altra Industrial.
On February 10, 2006, we purchased all of the outstanding share capital of Hay Hall Holdings Limited, or Hay Hall. Hay Hall iswas a UK-based holding company established in 1996 that iswas focused primarily on the manufacture of couplings and clutch brakes. Hay Hall consistsconsisted of five main businesses that arewere niche focused and havehad strong brand names and established reputations within their primary markets.
Through Hay Hall, we acquired 15 strong brands in complementary product lines, improved customer leverage, and expanded geographic presence in over 11 countries. Hay Hall’s product offerings diversified our revenue base and strengthened our key product areas, such as electric clutches, brakes, and couplings. Matrix International, Inertia Dynamics and Twiflex, three Hay Hall businesses, combined with Warner Electric, Wichita Clutch, Formsprag Clutch and Stieber, make the consolidated company one of the largest individual manufacturers of industrial clutches and brakes in the world.
On May 18, 2006, we acquired substantially all of the assets of Bear Linear Inc., or Warner Linear. BearWarner Linear manufactures high value-added linear actuators which are electromechanical power transmission devices designed to move and position loads linearly for mobile off-highway and industrial applications. BearWarner Linear’s product design


28

and engineering expertise, coupled with our sourcing alliance with a low cost country manufacturer, were critical components in our strategic expansion withininto the motion control market.
On April 5, 2007, the Company acquired all of the outstanding shares of TB Wood’s Corporation, or TB Wood’s. TB Wood’s is an established designer, manufacturer and marketer of mechanical and electronic industrial power transmission products with a history dating back to 1857.
On October 5, 2007, we acquired substantially all of the assets of All Power Transmission Manufacturing, Inc., or All Power.
On December 31, 2007, we sold the TB Wood’s adjustable speed drives business or Electronics Division, to Vacon, Inc.Division. We sold the Electronics Division in order to continue our strategic focus on our core electro-mechanical power transmission business.
The subsidiariesWe are a leading global designer, producer and marketer of Altra Industrial design, produce and market a wide range of mechanical power transmission (“MPT”)MPT and motion control products. The business conducted at our subsidiaries is organized into five operating segments; Electromagnetic Clutches & Brakes, Heavy Duty Clutches & Brakes, Overrunning Clutches & Engineered Bearing Assemblies, Engineered Couplings and Gearing & Belted Drives. We haveproducts with a presence in over 70 countries. Our global sales and marketing network includes over 1,000 direct original equipment manufacturers (“OEM”)OEM customers and over 3,000 distributor outlets. Our product portfolio includes industrial clutches and brakes, enclosed gear drives, open gearing, couplings, engineered bearing assemblies, linear components and other related products. Our products serve a wide variety of end markets including energy, general industrial, material handling, mining, transportation and turf and garden. We are headquarteredprimarily sell our products to a wide range of OEMs and through long-standing relationships with industrial distributors such as Motion Industries, Applied Industrial Technologies, Kaman Industrial Technologies and W.W. Grainger.

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While the power transmission industry has undergone some consolidation, we estimate that in Braintree, Massachusetts.
2009 the top five broad-based MPT companies represented approximately 21% of the U.S. power transmission market. The remainder of the power transmission industry remains fragmented with many small and family-owned companies that cater to a specific market niche often due to their narrow product offerings. We believe that consolidation in our industry will continue because of the increasing demand for global distribution channels, broader product mixes and better brand recognition to compete in this industry.
Our operating segments,products, principal brands and principal markets and sample applications are set forth below:
     
Operating Segment
Products		 Principal Brands Principal MarketsSample Applications
 
Heavy Duty Clutches & BrakesWichita Clutch
Twiflex
Industrial Clutch		Energy
Metals
Marine
Electromagnetic Clutches &and Brakes Warner Electric,
Matrix International
Inertia Dynamics
Warner Linear Wichita		 Turf and Garden
Forklift
Elevator
Material Handling
Overrunning Clutches & BearingsAerospace, energy, Elevators, forklifts, lawn
Clutch, Formsprag
Clutch,		material handling,mowers, oil well draw
Stieber
Kilian
Clutch, Matrix,		metals, turf andworks, punch presses,
Inertia Dynamics, Twiflex,garden, miningconveyors
Industrial Clutch,
Marland Clutch Aerospace
Mining
Material Handling
Transportation
GearingBoston Gear, Nuttall Gear,Food processing,Conveyors, ethanol mixers,
Delroydmaterial handling,packaging machinery, metal
metals, transportationprocessing equipment
Engineered Couplings Ameridrives, BibbyEnergy, metals,Extruders, turbines, steel
Transmissions, TB Wood’s
Ameridrives
Bibby Transmission
Huco Dynatork
All 		plastics, chemicalstrip mills, pumps
Engineered BearingKilianAerospace, materialCargo rollers, seat
Assemblieshandling,storage systems, conveyors
transportation
PowerWarner Electric, BostonMaterial handling,Conveyors, lawn mowers,
Transmission Energy
Metals
Petro/Chem
Medical
MilitaryGear, Huco Dynatork,		metals, turf and Defensegardenmachine tools
Gearing &ComponentsWarner Linear, Matrix, TB
Wood’s
Engineered Belted Drives Boston Gear
TB Wood’s
Nuttall/Delroyd
Centric Clutch		 Food Processing
Material Handling
Energy
Aggregate, HVAC,		Pumps, sand and gravel
material handlingconveyors, industrial fans
Our Internet address is www.altramotion.com. By following the link “Investor Relations” and then “SEC filings” on our Internet website, we make available, free of charge, our Annual Report onForm 10-K, our Quarterly Reports onForm 10-Q, our Current Reports onForm 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after such forms are filed with or furnished to the SEC. We are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, thisForm 10-Q.
Business Outlook
Our future financial performance depends, in large part, on conditions in the markets that we serve and on the U.S. and global economies in general. During NovemberFor 2010, we expect to return to growth activities, but will also continue to focus on generating cash flow, executing on plant consolidations, and December 2008,maintaining a reduced cost base. Among other items, we saw a significant changeexpect our growth initiatives in economic conditions both2010 will include investing in North Americaorganic growth, seeking strategic acquisitions, targeting key underpenetrated geographic regions, entering new high-growth markets, enhancing our efficiency and internationally as mostproductivity through the focusing on the development of our end markets experienced dramatic downturns. people and processes.
During the fourthfirst quarter of 2008, we began to see several of our distributors


29

and OEM customers implement inventory reduction programs which continued throughout the first two quarters of 2009. Beginning in the third quarter of 2009,2010, it appearedappears that inventory reduction efforts previously executed by our customers began to come to an endhave declined significantly as sales to our largest distribution customers improved duringhave improved. While some of our first-quarter sales increase was likely due to some of our OEM customers restocking their channels, we believe the third quarter. However, we continuemajority of the increase was due to expect weaknessimprovement in order rates for the remainder of 2009 as compared with 2008.end market demand.

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In response to the continued challenging economic conditions of 2009, we have taken and continue to take swift and aggressive actions to reduce our expenses and maximize near-term profitability. Our cost-reduction initiatives are centered on three areas: workforce cutbacks, plant consolidations and procurement and other cost reductions. In February 2009, the Company’s discretionary 401(k) match was suspended and a temporary reduction in executive compensation was initiated. On June 1, 2009, the Company announced the temporary suspension of all Company contributions to the 401(k) plan. We also have announced a general hiring freeze, a freeze of all non-union employee salaries and reduced work schedules. During the year to date period ended September 26, 2009, we incurred $5.4 million of restructuring expense including a $2.0 million non-cash charge primarily related to impairment charges at the Mount Pleasant and South Beloit facilities that are expected to close in 2009 and in the first quarter of 2010, respectively. The remaining expense relates mainly to severance. We expect to incur between an additional $2.5 and $3.5 million of expenses associated with workforce reduction and consolidation of facilities in 2009 and between $1.3 million and $1.9 million of such additional expenses in 2010. Beginning in 2010, we expect to see annualized savings from the headcount reductions and consolidation of facilities of approximately $30 million. We expect savings in 2009 to be $17.9 million. Including procurement and other cost reduction efforts, annualized savings would be approximately $77 million (approximately $60 million in 2009). We estimate that once volume returns to prior year levels, between $10 and $12 million of these savings will be permanent in nature.
We will continue our strong focus on working capital management and cash flow generation with the intent of improving our liquidity by reducing inventory and accounts receivable levels. As of September 26, 2009, we have a cash balance of $71.9 million.
Critical Accounting Policies
The preparation of our condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect our reported amounts of assets, revenues and expenses, as well as related disclosure of contingent assets and liabilities. We base our estimates on past experiences and other assumptions we believe to be appropriate, and we evaluate these estimates on an on-going basis. Management believes there have been no significant changes in our critical accounting policies since December 31, 2008, except as listed below.2009. See the discussion of critical accounting policies in our Annual Report onForm 10-K for the year ended December 31, 2008.
Goodwill, Intangibles and other long-lived assets.  In connection with our acquisitions, goodwill and intangible assets were identified and recorded at their fair value. We recorded intangible assets for customer relationships, trade names and trademarks, product technology, patents and goodwill. In valuing the customer relationships, trade names and trademarks, we utilized variations of the income approach. The income approach was considered the most appropriate valuation technique because the inherent value of these assets is their ability to generate current and future income. The income approach relies on historical financial and qualitative information, as well as assumptions and estimates for projected financial information. Projected financial information is subject to risk if our estimates are incorrect. The most significant estimate relates to our projected revenues and profitability. If we do not meet the projected revenues and profitability used in the valuation calculations then the intangible assets could be impaired. In determining the value of customer relationships, we reviewed historical customer attrition rates which were determined to be approximately 4% per year. Most of our customers tend to be long-term customers with very little turnover. While we do not typically have long-term contracts with customers, we have established long-term relationships with customers which make it difficult for competitors to displace us. Additionally, we assessed historical revenue growth within our industry and customers’ industries in determining the value of customer relationships. The value of our customer relationships intangible asset could become impaired if future results differ significantly from any of the underlying assumptions. This could include a higher customer attrition rate or a change in industry


30

trends such as the use of long-term contracts which we may not be able to obtain successfully. Customer relationships and product technology and patents are considered finite-lived assets, with estimated lives ranging from 8 years to 16 years. The estimated lives were determined by calculating the number of years necessary to obtain 95% of the value of the discounted cash flows of the respective intangible asset. Goodwill and trade names and trademarks are considered indefinite lived assets. Trade names and trademarks were determined to be indefinite lived assets. Other intangible assets include trade names and trademarks that identify us and differentiate us from competitors, and therefore competition does not limit the useful life of these assets. Additionally, we believe that our trade names and trademarks will continue to generate product sales for an indefinite period.
As of December 31, 2008, goodwill was allocated to each of our twenty identified reporting units. We conducted an annual impairment review of goodwill and indefinite lived intangible assets as of December 31, 2008 at each of these reporting units.
The breakdown of reporting units by acquisition and acquisition date are as follows:
Colfax acquisition — November 30, 200412 reporting units
Hay Hall acquisition — February 10, 20065 reporting units (including Huco)
Warner Linear acquisition — May 18, 20061 reporting unit
TB Wood’s acquisition — April 5, 20071 reporting unit
All Power Transmission — October 5, 20071 reporting unit
Beginning in the fourth quarter of 2008, almost all of our reporting units were impacted by the general economic decline. The decline in our weekly order rates was significant and almost immediate. Between the week of November 7, 2008 and November 14, 2008 order rates declined 21%. Prior to that week, order rates had been flat or increasing for over a year. On a consolidated basis weekly order rates from the week of November 14, 2008 through the final full week of the year, (the week of December 19, 2008) decreased an additional 33%.
As part of the annual goodwill impairment assessment we estimated the fair value of each of our reporting units using an income approach. We forecasted future cash flows by reporting unit for each of the next five years and applied a long term growth rate to the final year of forecasted cash flows. The cash flows were then discounted using our estimated discount rate. The forecasts of revenue and profitability growth for use in the long-range plan and the discount rate were the key assumptions in our intangible fair value analysis. The following are the assumptions used in 2008 and 2007 in the calculation of estimated fair value for the reporting units that recorded a goodwill impairment as of December 31, 2008 (Huco, Warner Linear and TB Woods) and the reporting units that are at risk of recording a goodwill impairment in the future (TB Woods, Ameridrives, Matrix, All Power and Boston Gear). No goodwill remains at Huco or Warner Linear subsequent to the goodwill impairment in 2008.:
                             
  December 31,
  2007 Assumptions
Assumption
 Huco Warner Linear TB Woods Ameridrives Matrix All Power Boston Gear
 
Revenue growth (1st year)  13.6%
increase		   51%
increase		   10.4%
increase		   (6.7)%
decrease		   12.3%
increase		   33.0%
increase		   (1.1)%
decrease		 
Average revenue growth (2nd — 5th year)  5.8%
increase		   5.8%
increase		   5.8%
increase		   5.8%
increase		   5.8%
increase		   5.8%
increase		   5.8%
increase		 
Profitability growth rate EBITDA as a percent of sales (1st year)  3.6%
increase		   8.9%
increase		   (0.7)%
decrease		   6.6%
increase		   1.7%
increase		   2.4%
increase		   (4.5)%
decrease		 
Average profitability growth rate per year (EBITDA as a percent of sales) (2nd — 5th year)  0.8%
increase		   0.6%
increase		   0.6%
increase		   0.8%
increase		   0.5%
increase		   0.4%
increase		   0.7%
increase		 
Discount Rate  12%   12%   12%   12%   12%   12%   12% 


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  December 31,
  2008 Assumptions
Assumption
 Huco Warner Linear TB Woods Ameridrives Matrix All Power Boston Gear
 
Revenue growth (1st year)  (26.2)%
decrease		   (10.3)%
decrease		   (18)%
decrease		   2.0%
increase		   (36.2)%
decrease		   (5.6)%
decrease		   (16.5)%
decrease		 
Average revenue growth (2nd — 5th year)  5.8%
increase		   5.8%
increase		   5.8%
increase		   5.5%
increase		   5.8%
increase		   5.5%
increase		   5.8%
increase		 
Profitability growth rate EBITDA as a percent of sales (1st year)  (4)%
decrease		   6%
increase		   (1)%
decrease		   7.5%
increase		   (3.1)%
decrease		   (5.7)%
decrease		   (8.1)%
decrease		 
Average profitability growth rate per year (EBITDA as a percent of sales) (2nd — 5th year)  1%
increase		   0.5%
increase		   1%
increase		   .35%
increase		   0.5%
increase		   1.4%
increase		   1%
increase		 
Discount Rate  13%   13%   13%   13%   13%   13%   13% 
A continuation of the significant decrease in order rates in the final weeks of 2008 and into 2009 was a key assumption when developing our long-term revenue and profitability plan for our goodwill impairment analysis as of December 31, 2008. All of our reporting units assumed significantly lower sales and lower profitability for 2009 in their long-term growth plan when compared to the forecast used in the goodwill impairment analysis as of December 31, 2007. The discount rate was not changed significantly from the December 31, 2007 goodwill impairment analysis.
As a result of the goodwill impairment analysis, we recorded a goodwill impairment charge of $31.8 million at the TB Woods, Huco and Warner Linear reporting units as of December 31, 2008. The goodwill remaining at these reporting units, after the adjustment for goodwill impairments, was $23.5 million at TB Woods and there was no goodwill remaining at either Warner Linear or Huco. Due to prevailing market conditions at the time of the acquisitions of these three reporting units, the purchase price paid as consideration for these three acquisitions required a higher premium when compared to the prior 2004 Colfax acquisition and therefore created higher goodwill at these reporting units.
Prior to filing our Annual Report onForm 10-K on March 6, 2009, we reviewed the assumptions used in our goodwill impairment analysis and noted that they had not changed significantly from when we completed our goodwill impairment assessment.
We considered whether the sum of the fair value of all of our reporting units was reasonable when compared to our market capitalization on the date of the goodwill impairment analysis. As of December 31, 2008, our estimated enterprise fair value was $274.2 million. Our market capitalization was $208.7 million. The difference between the fair value of the enterprise and our market capitalization represented a control market premium of between 25% and 35%. We determined that a control market premium of between 25% and 35% was appropriate based on historical experience with purchase and sales transactions, the historical market trends based on our industry and the control market premium paid in relation to these transactions.
Management believes the preparation of revenue and profitability growth rates for use in the long-range plan and the discount rate requires significant use of judgment. If any of our reporting units do not meet our current year forecasted revenueand/or profitability estimates, we could be required to perform an interim goodwill impairment analysis. In addition, if our discount rate increases, we could be required to perform an interim goodwill impairment analysis. The following table shows the number of reporting units that could be required to perform an interim goodwill impairment analysis if forecasted profitability decreases or the estimated discount rate increases and the goodwill recorded at each of these reporting units. In management’s


32

opinion, these are the reasonably likely scenarios to occur and would have a material effect on the outcome of the fair value assessment and could result in a material goodwill impairment.
             
  Profitability
 Profitability
 Profitability
  Decrease 5% (All
 Decrease 10% (All
 Decrease 15% (All
  Other Assumptions
 Other Assumptions
 Other Assumptions
  Remain Constant) Remain Constant) Remain Constant)
 
Number of reporting units that could be required to perform an interim impairment analysis  1   4   5 
Goodwill as of December 31, 2008 at reporting units that would be required to perform an interim impairment analysis $23.5 million  $28.3 million  $40.9 million 
Indefinite lived intangible assets as of December 31, 2008 that would be required to perform an interim impairment analysis $8.0 million  $10.5 million  $14.3 million 
         
  Discount Rate
 Discount Rate
  Increase 50 Basis
 Increase 100 Basis
  Points (All Other
 Points (All Other
  Assumptions Remain
 Assumptions Remain
  Constant) Constant)
 
Number of reporting units that could be required to perform an interim impairment analysis  1   1 
Goodwill as of December 31, 2008 at reporting units that could be required to perform an interim impairment analysis $23.5 million  $23.5 million 
Indefinite lived intangible assets as of December 31, 2008 that would be required to perform an interim impairment analysis $8.0 million  $8.0 million 
There are five reporting units that could be required to perform an interim impairment analysis if profitability decreased 15% and all other assumptions remain constant. The reporting units’ estimated fair value, carrying value and goodwill balance as of December 31, 2008 is as follows:
                 
        Goodwill Balance
Reporting Unit
 Estimated Fair Value Carrying Value Difference 12/31/08
 
Ameridrives  17,823   16,854   969   3,411 
TB Woods  73,283   72,971   312   23,530 
Matrix  8,989   8,223   766   765 
All Power  16,298   14,884   1,414   628 
Boston Gear  67,516   59,799   7,718   12,602 
Long-lived assets, including definite-lived intangible assets, are reviewed for impairment when events or circumstances indicate that the carrying amount of a long-lived asset may not be recovered. Long-lived assets are considered to be impaired if the carrying amount of the asset exceeds the undiscounted future cash flows expected to be generated by the asset over its remaining useful life. If an asset is considered to be impaired, the impairment is measured by the amount by which the carrying amount of the asset exceeds its fair value, and is charged to results of operations at that time.
During the fourth quarter of 2008, a goodwill impairment was identified and recorded at three reporting units which, in turn, triggered an impairment analysis with respect to long-lived assets at those reporting units.
For our definite lived intangible assets, mainly customer relationships, we estimated the future cash flows using the excess earnings method, a derivation of the discounted cash flow method. We estimated total revenue attributable to existing customer relationships and projected customer revenue growth for the remainder of the


33

projection period. Existing customer revenue was then multiplied by an attrition curve based on our historical attrition rates percent (approximately 4%) for each reporting unit. We estimated profitability for the customer relationship based on the overall reporting unit’s profitability. We compared the estimated future undiscounted cash flows to the carrying value of the customer relationship for each reporting unit and did not identify any impairment.
For our indefinite lived intangible assets, mainly trademarks, we estimated the fair value first by estimating the total revenue attributable to the trademarks for each of the reporting units. Second we estimated an appropriate royalty rate using the return on assets method by estimating the required financial return on our assets, excluding trademarks, less the overall return generated by our total asset base. The return as a percentage of revenue provides an indication of our royalty rate (approximately 1.5%). We compared the estimated fair value of our trademarks with the carrying value of the trademarks and did not identify any impairment.
During 2009, we have not identified any events that required us to perform an interim impairment analysis.
2009.
Results of Operations
                        
 Quarter Ended Year To Date Ended  Quarter Ended 
 September 26, September 27, September 26, September 27,  April 3, March 28, 
 2009 2008 2009 2008 
 (In thousands, except per share data) 
(In thousands, except per share data) 2010 2009 
Net sales $104,766  $159,448  $341,183  $490,523  $127,706 $124,540 
Cost of sales  76,194   113,627   250,950   346,517  90,303 92,337 
              
Gross profit  28,572   45,821   90,233   144,006  37,403 32,203 
Gross profit percentage
  27.27%  28.74%  26.45%  29.36%  29.29%  25.86%
Selling, general and administrative expenses  19,290   25,655   60,971   76,816  20,972 21,743 
Research and development expenses  1,508   1,663   4,569   5,160  1,779 1,567 
Other post employment benefit plan settlement gain  —   (107)  (1,467)  (276) —  (1,467)
Restructuring costs  1,006   81   5,360   1,149  1,046 1,872 
Loss on disposal of assets  516   —   516   — 
              
Income from operations  6,252   18,529   20,284   61,157  13,606 8,488 
Interest expense, net  6,290   7,302   18,879   22,456  4,940 6,349 
Other non-operating (income) expense, net  (371)  (1,408)  1,248   (2,887) 295  (162)
              
Income from continuing operations before income taxes  333   12,635   157   41,588 
Provision (benefit) for income taxes  (315)  4,000   (143)  14,127 
         
Income from continuing operations  648   8,635   300   27,461 
Net loss from discontinued operations, net of income taxes of $43 for the year to date period ended September 27, 2008  —   172   —   (224)
Income before income taxes 8,371 2,301 
Provision for income taxes 2,632 883 
              
Net income $648  $8,807  $300  $27,237  $5,739 $1,418 
              


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26

Quarter Ended September 26, 2009April 3, 2010 compared with Quarter Ended September 27, 2008March 28, 2009
(Amounts in thousands unless otherwise noted)
                 
  Quarter Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Net sales
 $104,766  $159,448  $(54,682)  (34.3)%
                 
  Quarter Ended 
  April 3,  March 28,       
  2010  2009  Change  % 
                 
Net sales
 $127,706  $124,540  $3,166   2.5%
The decreasemajority of our increase in sales was almost exclusivelyduring the first quarter of 2010 is due to the overall economic decline which has impacted allstrengthening of our end markets and industries. On athe US dollar. Had the 2010 foreign exchange rates remained constant currency basis,when compared to 2009, sales decreased $50.1would have increased $0.2 million or 31.5%0.2%. Our Heavy Duty Clutch & Brake operating segment and our Global Couplings operating segment began to see decreases in sales in the second quarter of 2009, which has continued into the third quarter of 2009. Both of these operating segments sell into late cycle markets and have been impacted by volume decreases. We have seen some modest increases in our order rates at our other operating segments but until worldwide economic conditions improve, we expect continued weakness in our orders.early cycle markets as our distribution customers have ended their inventory de-stocking and OEM customers have increased production. We expect to see continued increases in sales in 2010 compared to 2009.
                 
  Quarter Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Gross Profit
 $28,572  $45,821  $(17,249)  (37.6)%
Gross Profit as a percent of sales
  27.3%  28.7%        
                 
  Quarter Ended 
  April 3,  March 28,       
  2010  2009  Change  % 
                 
Gross Profit
 $37,403  $32,203  $5,200   16.1%
Gross Profit as a percent of sales
  29.3%  25.9%        
The decreaseincrease in gross profit was primarily due to the significant decreaseour cost saving measures put into place in sales. As a result of our decrease in sales,2009 and productivity improvements we have less leverage on our fixed costs. On aimplemented. Had the 2010 foreign exchange rates remained constant currency basis,when compared to 2009, gross profit decreased $15.8would have increased $4.6 million or 34.4%14.4%. We have taken actions to reduce our expenses and maximize near-term profitability. We expect our full year 20092010 gross profit as a percentage of sales to decreaseincrease when compared to 2008.2009.
                 
  Quarter Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Selling, general and administrative expense (“SG&A”)
 $19,290  $25,655  $(6,365)  (24.8)%
SG&A as a percent of sales
  18.4%  16.1%        
                 
  Quarter Ended 
  April 3,  March 28,       
  2010  2009  Change  % 
 
Selling, general and administrative expense (“SG&A”)
 $20,972  $21,743  $(771)  -3.5%
SG&A as a percent of sales
  16.4%  17.5%        
The decrease in SG&A was due to our cost reduction efforts which began in the fourth quarter of 2008. Our cost reduction efforts were focused on headcount reductions and the elimination of non-critical expenses which decreased our overall SG&A costs. As a resultcosts despite the impact of decreased sales volume we have seen a reduction in outside sales representative commission costs. In addition, during the quarter we required certain U.S. personnelstrengthening US dollar. Due to take furloughs. However, due to the significant decreasean increase in sales, SG&A costs as a percentpercentage of sales increased despite our cost reductions.decreased. During the remainder of 2009,2010, we expect to continue to reducemaintain our SG&A costs through plant consolidations and additional headcount reductions and expense elimination.offset by the reintroduction of certain temporarily suspended employee benefits.
                 
  Quarter Ended 
  April 3,  March 28,       
  2010  2009  Change  % 
 
Research and development expenses (“R&D”)
 $1,779  $1,567  $212   13.5%
                 
  Quarter Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Research and development expenses (“R&D”)
 $1,508  $1,663  $(155)  (9.3)%

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R&D expenses represented approximately 1% of sales in both periods. We do not expect significant variances in future periods.
                 
  Quarter Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Restructuring expenses
 $1,006  $81  $925   1142.0%
During 2007, we adopted two restructuring programs. The first was intended to improve operational efficiency by reducing headcount, consolidating our operating facilities and relocating manufacturing to lower cost areas (the “Altra Plan”). The second was related to the acquisition of TB Wood’s and was intended to reduce duplicative staffing and consolidate facilities (the “TB Wood’s Plan”). We recorded approximately


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$0.1 million of restructuring expenses in the third quarter of 2008 for moving and relocation, severance and non-cash asset impairment. There were no costs related to the Altra Plan or the TB Wood’s Plan incurred in 2009.
                 
  Quarter Ended 
  April 3,  March 28,       
  2010  2009  Change  % 
                 
Restructuring expenses
 $1,046  $1,872  $(826)  -44.1%
In March 2009, we adopted a new restructuring plan (the “2009 Altra Plan”) to continue to improve the utilization of our manufacturing infrastructure and to realign our business with the current economic conditions. We expect the 2009 Altra Plan to improve operational efficiency by reducing headcount and consolidating certain facilities. During the thirdfirst quarter of 2009,2010, we recorded $1.0 million of restructuring expenses, of which $0.5$0.7 million was related to severance, $0.1$0.3 million was related to other restructuring charges, (primarily moving and relocation costs) and $0.4 million was non-cash impairment charges.. We expect to incur between an additional $2.5$1.3 million and $3.5$1.5 million of expenses associated with workforce reductionreductions and consolidation of facilities in 2009 and between $1.3 million and $1.9 million of such additional expenses in 2010. Beginning in 2010, we expect to see annualized savings from the headcount reductions and consolidation of facilities of approximately $30 million. We expect savings in 2009 to be $17.9 million.
                 
  Quarter Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Loss on disposal of assets
 $516  $—  $516   N/A 
During 2009, we entered into a lease agreement at a new facility in China. As of September 26, 2009, we have exited our previous facility and moved into the new location. We recorded a loss to dispose of the leasehold improvements associated with the old location.
                 
  Quarter Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Interest Expense, net
 $6,290  $7,302  $(1,012)  (13.9)%
                 
  Quarter Ended 
  April 3,  March 28,       
  2010  2009  Change  % 
                 
Interest Expense, net
 $4,940  $6,349  $(1,409)  -22.2%
Net interest expense decreased due to the lower average outstanding balance of the Senior Secured Notes and the Senior Notes,debt in 2010 resulting in a reduction of interest expense by $0.9 million. In addition,and due to the impact of a lower interest rate as a result of our refinancing in the third quarter of 2008 we paid additional premiums of $0.5 million associated with the repurchase of Senior Secured Notes.late 2009.
                 
  Quarter Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Other non-operating loss (income), net
 $(371) $(1,408) $1,037   (74)%
                 
  Quarter Ended 
  April 3,  March 28,       
  2010  2009  Change  % 
                 
Other non-operating loss (income), net
 $295  $(162) $457   -282%
Other non-operating income for both quarters included rental income of $0.2 million for facility rentals under lease agreements which were part of the sale of TB Wood’s Electronics Division. The remaining balanceloss (income) in each period relates to changes in foreign currency, primarily the British Pound Sterling and Euro which strengthened significantlyEuro.
                 
  Quarter Ended 
  April 3,  March 28,       
  2010  2009  Change  % 
                 
Provision for income taxes
 $2,632  $883  $1,749   198.1%
Provision for income taxes as a % of income from operations before income taxes
  31.4%  38.4%        
The 2010 provision for income taxes, as a percentage of income before taxes, was lower than that of 2009, primarily due to a change in the third quarter of 2008.
                 
  Quarter Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Provision (benefit) for income taxes
 $(315) $4,000  $(4,315)  (107.9)%
Provision (benefit) for income taxes as a % of income from continuing operations before income taxes
  (94.6)%  31.7%        
earnings mix among tax jurisdictions. During the third quarter of 2009, the Company negotiated an agreement with a foreign taxing authority. The agreement allowsauthority allowing the Company to fully deduct certain interest charges. These interest charges that had previously beenwere classified as non-deductible in 2009. The benefit from this deduction resultedthe first quarter of 2009 tax rate and fully deductible in the Company recording a benefit for income taxesfirst quarter of 2010 tax rate. Additionally, in the first quarter 2010, the Company reversed an unrecognized tax benefit of $0.3 million due to date period ended September 26, 2009.the expiration of the statute of limitations.


36

28

Year to Date Period Ended September 26, 2009 compared with Year to Date Period Ended September 27, 2008
(Amounts in thousands unless otherwise noted)
                 
  Year to Date Period Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Net sales
 $341,183  $490,523  $(149,340)  (30.4)%
The decrease in sales is almost exclusively due to the overall economic decline which has impacted all of our end markets and industries. On a constant currency basis, sales decreased $126.1 million or 25.7%. We saw substantial decreases in sales at our Heavy Duty Clutch & Brake operating segment and at our Global Couplings operating segment beginning in the second quarter of 2009, which has continued into the third quarter of 2009. Both of these operating segments sell into late cycle markets and began to see volume decreases in the second quarter of 2009. As a result, on a year to date basis Heavy Duty Clutch & Brake sales decreased 20.2% and Global Couplings decreased 22.1%. We have seen some modest increases in our order rates in our other operating segments but until worldwide economic conditions improve, we expect continued weakness in our orders.
                 
  Year to Date Period Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Gross Profit
 $90,233  $144,006  $(53,773)  (37.3)%
Gross Profit as a percent of sales
  26.4%  29.4%        
The decrease in gross profit was due to the significant decrease in sales. As a result of our decrease in sales, we have less leverage on our fixed costs. On a constant currency basis, gross profit decreased $45.2 million or 31.4%. We have taken actions to reduce our expenses and maximize near-term profitability. We expect our full year 2009 gross profit as a percentage of sales to decrease when compared to 2008.
                 
  Year to Date Period Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Selling, general and administrative expense (“SG&A”)
 $60,971  $76,816  $(15,845)  (20.6)%
SG&A as a percent of sales
  17.9%  15.7%        
The decrease in SG&A was due to our cost reduction efforts which began in the fourth quarter of 2008. Our cost reduction efforts were focused on headcount reductions and the elimination of non-critical expenses which decreased our overall SG&A costs. As a result of decreased sales volume we have seen a reduction in outside sales representative commission costs. In addition, we have suspended the 401(k) company and matching contributions and required furloughs. However, due to the significant decrease in sales, SG&A as a percent of sales increased despite our cost reductions. During the remainder of 2009, we expect to continue to reduce our SG&A costs through plant consolidations, additional headcount reductions and expense elimination.
                 
  Year to Date Period Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Research and development expenses (“R&D”)
 $4,569  $5,160  $(591)  (11.5)%
R&D expenses represented approximately 1% of sales in both periods. We do not expect significant fluctuations in future periods.
                 
  Year to Date Period Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Restructuring expenses
 $5,360  $1,149  $4,211   366.5%


37

As discussed above, during 2007, we adopted the Altra Plan and the TB Wood’s Plan.. We recorded approximately $1.1 million in the year to date period ended September 27, 2008 of restructuring expenses for moving and relocation, severance and non-cash asset impairment. There were no costs related to the Altra Plan or the TB Wood’s Plan incurred in 2009.
As discussed above, in March 2009, we adopted the 2009 Altra Plan. The 2009 Altra Plan will improve operational efficiency by reducing headcount and consolidating certain facilities. During the third quarter of 2009, we recorded $1.0 million of restructuring $0.5 million related to severance, $0.1 million related to other restructuring charges, mainly moving and relocation costs and $0.4 million of non-cash impairment charges. We expect to incur between an additional $2.5 and $3.5 million of expenses associated with workforce reduction and consolidation of facilities in 2009 and between $1.3 million and $1.9 million of such additional expenses in 2010. Beginning in 2010, we expect to see annualized savings from the headcount reductions and consolidation of facilities of approximately $30 million. We expect savings in 2009 to be $17.9 million.
                 
  Year to Date Period Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Loss on disposal of assets
 $516  $—  $516   N/A 
During 2009, we entered into a lease agreement at a new facility in China. As of September 26, 2009, we have exited our previous facility and moved into the new location. We recorded a loss to dispose of the leasehold improvements associated with the old location.
                 
  Year to Date Period Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Interest Expense, net
 $18,879  $22,456  $(3,577)  (15.9)%
Net interest expense decreased due to the lower average outstanding balance of the Senior Secured Notes and Senior Notes, resulting in a reduction of interest expense by $2.4 million. In addition, in the year to date period ended September 27, 2008, we re-paid $27.5 million of the Senior Secured Notes and $1.3 million of the Senior Notes at a premium of $1.4 million. In the year to date period ended September 26, 2009, we re-paid $22.2 million of the Senior Secured Notes and $5.0 million of the Senior Notes at a net premium of $0.1 million.
Other post employment benefit plan settlement gain
In March 2009, we reached a new collective bargaining agreement with the union at our Erie, Pennsylvania facility. One of the provisions of the new agreement eliminates benefits that employees were entitled to receive through the existing other post employment benefit plan (“OPEB”). OPEB benefits will no longer be available for retired and active employees. This resulted in an OPEB settlement gain of $1.5 million in the year to date period ended September 26, 2009.
                 
  Year to Date Period Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Other non-operating income (loss), net
 $1,248  $(2,887) $4,135   (143)%
Other non-operating income for both quarters included rental income of $0.3 million for facility rentals under lease agreements which were part of the sale of the Electronics Division. This amount is offset by an adjustment to the assets that had previously been held for sale. During the first quarter of 2009, we reclassified two buildings from assets held for sale to assets held and used. We recorded a cumulative catch up of depreciation expense of $0.2 million. In addition, during the second quarter of 2009, we sold Saftek Ltd., Inc. In connection with the sale we recorded a $0.2 million loss on the sale. The remaining balance in each period relates to changes in foreign currency, primarily the Pound Sterling and Euro.


38

                 
  Year to Date Period Ended
  September 26,
 September 27,
    
  2009 2008 Change %
 
Provision (Benefit) for income taxes, continuing operations
 $(143) $14,127  $(14,270)  (101.0)%
Provision for income taxes as a % of income before taxes
  (91.1)%  34.0%        
During the third quarter of 2009, the Company negotiated an agreement with a foreign taxing authority. The agreement allows the Company to fully deduct certain interest charges that had previously been classified as non-deductible in 2009. The benefit from this deduction resulted in the Company recording a benefit for income taxes in the year to date period ended September 26, 2009.
Discontinued Operations
On December 31, 2007, the Company completed the divestiture of the TB Wood’s adjustable speed drives business (“Electronics Division”) to Vacon PLC (“Vacon”) for $29.0 million. The decision to sell the Electronics Division was made to allow the Company to continue its strategic focus on its core electro-mechanical power transmission business.
The $0.2 million loss from discontinued operations in the year to date period ended September 27, 2008 was comprised of a working capital adjustment, net of taxes.
Liquidity and Capital Resources
Overview
We finance our capital and working capital requirements through a combination of cash flows from operating activities and borrowings under our Senior senior secured revolving credit facility (“Revolving Credit Agreement.Agreement”). We expect that our primary ongoing requirements for cash will be for working capital, debt service, capital expenditures, expenditures in connection with restructuring activities and pension plan funding. In the event additional funds are needed, we could borrow additional funds under our Senior Revolving Credit Agreement, attempt to refinance our 9% Senior Secured Notes, or attempt to raise capital in the equity and debt or equity markets. Presently, we have capacity under our Senior Revolving Credit Agreementsenior secured revolving credit facility to borrow $26.8up to $50.0 million. Of this total capacity, we can borrow up to approximately $14.3$27.1 million without being required to comply with any financial covenants under the agreement. In order to refinance the existing 9% Senior Secured Notes, we would incur a pre-payment premium of 4.5% of the principal balance through December 1, 2009, 2.3% through December 1, 2010 and 0% after that date. There can be no assurance however that additional debt financing will be available on commercially acceptable terms, if at all. Similarly, there can be no assurance that equity financing will be available on commercially acceptable terms, if at all.
Borrowings
Despite
         
  Amounts in millions 
  April 3,  December 31, 
  2010  2009 
         
Debt:        
Revolving Credit Agreement $—  $— 
Senior Secured Notes  210.0   210.0 
Variable rate demand revenue bonds  5.3   5.3 
Mortgages  2.9   3.2 
Capital leases  1.6   1.8 
       
Total Debt $219.8  $220.3 
       
Senior Secured Notes
In November 2009, the Company issued $210 million of 81/8% Senior Secured Notes (the “Senior Secured Notes”). The Senior Secured Notes are guaranteed by the Company’s U.S. domestic subsidiaries and are secured by a net incomesecond priority lien, subject to first priority liens securing our senior secured revolving credit facility, on substantially all of $0.3our assets and those of our domestic subsidiaries. Interest on the Senior Secured Notes is payable in arrears, semiannually on June 1 and December 1 of each year, commencing on June 1, 2010. The indenture governing the Senior Secured Notes contains covenants which restrict the Company and our subsidiaries. These restrictions limit or prohibit, among other things, their ability to incur additional indebtedness; repay subordinated indebtedness prior to stated maturities; pay dividends on or redeem or repurchase stock or make other distributions; make investments or acquisitions; sell certain assets or merge with or into other companies; sell stock in our subsidiaries; and create liens on their assets. We were in compliance in all material respects with all covenants of the indenture governing the Senior Secured Notes at April 3, 2010.

29

Senior Secured Credit Facility
Concurrently with the closing of the offering of the Senior Secured Notes, Altra Industrial entered into the Revolving Credit Agreement, which provides for borrowing capacity in an initial amount of up to $50.0 million (subject to adjustment pursuant to a borrowing base and subject to increase from time to time in accordance with the terms of the credit facility). The Revolving Credit Agreement replaced Altra Industrial’s then existing senior secured credit facility and the TB Wood’s existing credit facility.
Altra Industrial and all of its domestic subsidiaries are borrowers, or “Borrowers”, under the Revolving Credit Agreement. Certain of our existing and subsequently acquired or organized domestic subsidiaries that are not Borrowers do and will guarantee (on a senior secured basis) the Revolving Credit Agreement. Obligations of the other Borrowers under the Revolving Credit Agreement and the guarantees are secured by substantially all of Borrowers’ assets and the assets of each of our existing and subsequently acquired or organized domestic subsidiaries that is a guarantor of our obligations under the Revolving Credit Agreement (with such subsidiaries being referred to as the “U.S. subsidiary guarantors”), including but not limited to: (a) a first-priority pledge of all the capital stock of subsidiaries held by Borrowers or any U.S. subsidiary guarantor (which pledge, in the case of any foreign subsidiary, will be limited to 100% of any non-voting stock and 65% of the voting stock of such foreign subsidiary) and (b) perfected first-priority security interests in and mortgages on substantially all tangible and intangible assets of each Borrower and U.S. subsidiary guarantor, including accounts receivable, inventory, equipment, general intangibles, investment property, intellectual property, certain real property, cash and proceeds of the foregoing (in each case subject to materiality thresholds and other exceptions).
An event of default under the Revolving Credit Agreement would occur in connection with a change of control, among other things, if: (i) Altra Industrial ceases to own or control 100% of each of its Borrower subsidiaries, or (ii) a change of control occurs under the Senior Secured Notes, or any other subordinated indebtedness.
An event of default under the Revolving Credit Agreement would also occur if an event of default occurs under the indentures governing the Senior Secured Notes or if there is a default under any other indebtedness that any Borrower may have involving an aggregate amount of $10 million or more and such default: (i) occurs at final maturity of such debt, (ii) allows the lender there under to accelerate such debt or (iii) causes such debt to be required to be repaid prior to its stated maturity. An event of default would also occur under the Revolving Credit Agreement if any of the indebtedness under the Revolving Credit Agreement ceases with limited exception to be secured by a full lien of the assets of Borrowers and guarantors.
As of April 3, 2010, we were in compliance in all material respects with all covenant requirements associated with all of our borrowings. As of April 3, 2010, we had no borrowings and $10.4 million in letters of credit outstanding under the first nine months of 2009, during that period we saw an increase in our cash balance of $19.9 million versus an increase in our cash balance of $4.0 million in the same period in 2008. Our continued focus on managing working capital allowed us to continue to generate cash flows from operations. We expect to continue to be able to generate cash flows from operations for the remainder of 2009 primarily from working capital management.
Revolving Credit Agreement.
Net Cash
         
  September 26,
 December 31,
  2009 2008
  (In thousands)
 
Cash and cash equivalents
 $71,940  $52,073 
         
  April 3,  December 31, 
  2010  2009 
  (in thousands) 
 
Cash and cash equivalents
 $53,566  $51,497 
Cash and cash equivalents increased $19.9$2.1 million in the year to date periodquarter ended September 26, 2009.April 3, 2010.
Cash Flows for quarter ended April 3, 2010
Net cashThe primary source of funds provided by operating activities for the year to date period ended September 26, 2009 was $52.1 million. Thisof $8.2 million resulted primarily from cash provided fromfrom: (i) net income of $5.7 million; and (ii) the add-back of non-cash

39

depreciation, amortization, stock based compensation, accretion of net debt discount, deferred financing costs, and non-cash loss on foreign currency and a fixed asset impairment charge all totaling $25.1$6.6 million. In addition, thereThis was offset by a net decreaseincrease in working capital of $28.4$4.1 million. The decreaseincrease in working capital was mainly due to a decreasean increase in inventoryaccounts receivable of $27.6$15.1 million, due to a focus on reducing our inventoryincreased sales levels throughout the organization. ThisThe total working capital increase was partially offset by a non-cash other post employment benefit plan settlement gainan increase in accrued expenses of $1.5 million.$15.7 million, due to the increased level of sales activity and higher interest expense accruals.

30

Net cash used in investing activities was $5.1$3.9 million for the year to date periodquarter ended September 26, 2009.April 3, 2010. This resulted from the purchase of manufacturing equipment.
equipment of $2.7 million and $1.2 million of additional purchase price paid for settlement of contingent consideration related to the acquisition of Hay Hall.
Net cash used by financing activities was $30.1$0.6 million for the year to date periodquarter ended September 26, 2009.April 3, 2010. This resulted primarily from repurchases of our Senior Notes of $5.0 million and our Senior Secured Notes of $22.2 million, payment on our Senior Revolving Credit Agreement of $3.0 million, payments of capital lease obligations of $0.6$0.2 million,$0.5 $0.1 million of payments on mortgages, and $0.3 million of shares repurchased due to tax withholding. This was offset by the proceeds from additional borrowings under an existing mortgage of $1.5 million.
Liquidity
                 
  September 26,
     December 31,
    
  2009     2008    
  Amounts in millions 
 
Debt:                
Senior Revolving Credit Agreement $—      $—     
TB Wood’s Credit Agreement  3.0       6.0     
Overdraft agreements  —       —     
9% Senior Secured Notes  220.3       242.5     
11.25% Senior Notes  —       4.7     
Variable Rate Demand Revenue Bonds  5.3       5.3     
Mortgages  3.3       2.3     
Capital leases  2.0       2.6     
                 
Total Debt $233.9      $263.4     
Cash $71.9      $52.1     
Net Debt $162.0   53.6% $211.3   62.1%
Shareholders’ Equity $140.3   46.4% $128.9   37.9%
Total Capitalization $302.3   100% $340.2   100%
As of September 26, 2009, we had approximately $233.9 million of total indebtedness outstanding including capital leases and mortgages. Approximately 98% of our borrowings are fixed rate loans and therefore we do not believe that our vulnerability to interest rate changes is significant.
Our Senior Revolving Credit Agreement provides for senior secured financing of up to $30.0 million, including $10.0 million available for letters of credit through November 30, 2010. The Senior Revolving Credit Agreement requires us to comply with a minimum fixed charge coverage ratio of 1.20 for all four quarter periods when availability falls below $12.5 million. Our availability under the Senior Revolving Credit Agreement has never dropped below $12.5 million and we do not believe that it will in the foreseeable future. Our 9% Senior Secured Notes do not contain any financial covenants. As of September 26, 2009, there were no outstanding borrowings, but there were $3.2 million of outstanding letters of credit issued under our Senior Revolving Credit Agreement.
We were in compliance with all financialintend to use our remaining existing cash and non-financial covenants under the Senior Revolving Credit Agreementcash equivalents and Senior Secured Notes as of September 26, 2009.
We had $3.0 million of principal borrowings outstanding and $6.1 million of outstanding letters of credit as of September 26, 2009 under the TB Wood’s Revolving Credit Agreement, which is due in 2010.


40

We made capital expenditures of approximately $5.1 million and $12.2 million in the year to date periods ended September 26, 2009 and September 27, 2008, respectively. These capital expenditures were used to support on-going manufacturing requirements. We expect to have additional capital expenditures of between $3.0 million and $4.0 million for the remainder of 2009.
We have cash funding requirements associated with our pension plan which are estimated to be zero for the remainder of 2009, $0.5 million for 2010, $1.5 million for 2011, $1.5 million for 2012 and $1.5 million for 2013.
Our ability to make scheduled payments of principal and interest, to fund planned capital expenditures and to meet our pension plan funding obligations will depend on our ability to generate cash in the future. Based on our current level of operations, we believe that cash flow from operations to provide for our working capital needs and availableto fund potential future acquisitions, debt services, capital expenditures, and pension funding. We believe our future operating cash together with available borrowings under our Senior Revolving Credit Agreementflows will be adequatesufficient to meet our future liquidity requirements for at leastoperating and investing cash needs. Furthermore, the next two years. However, our ability to generateexisting cash is subject to general economic, financial, competitive, legislative, regulatorybalances and other factors that are beyond our control.
There can be no assurance that our business will generate sufficient cash flow from operations, that any revenue growth or operating improvements will be realized or that futurethe availability of additional borrowings will be available under our senior secured credit facility in an amount sufficient to enable us to service our indebtedness, including the notes, or to fund our other liquidity needs. In addition, there can be no assurance that we will be able to refinance any of our indebtedness, including our Senior Revolving Credit Agreement and the Senior Secured Notes asprovide additional potential sources of liquidity should they become due. Our ability to access capital in the long term will depend, among other things, on the condition of capital markets and on the availability of capital to us on commercially reasonable terms, if at all, at the time we are seeking funds. See the Risk Factors in our Annual Report onForm 10-K for the year ended December 31, 2008 for further discussion of certain factors that may affect our liquidity. In addition, our ability to borrow funds under our Senior Revolving Credit Agreement will depend on our ability to satisfy the financial and non-financial covenants contained in that agreement.
be required.
Contractual Obligations
From time to time, we may repurchase our Senior Secured Notes in open market transactions or privately negotiated transactions, subject to certain restrictions in our Senior Revolving Credit Agreement. As of September 26, 2009, the remaining principal balance on our Senior Secured Notes was $220.3 million. The balance is due December 1, 2011.
Other than repayments of debt, thereThere were no significant changes in our contractual obligations subsequent to December 31, 2008.2009.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
We have exposureare exposed to various market risk factors such as fluctuating interest rates, changes in foreign currency rates, and changes in commodity prices principally related to metals including steel, copper and aluminum. We primarily manage the risk associated with such increases through the use of surcharges or general pricing increases for the related products. Weprices. At present, we do not engage in the use of financialutilize any derivative instruments to hedge our commodities price exposure.
manage these risks. During the reporting period, there have been no material changes to the quantitative and qualitative disclosures regarding our market risk set forth in our Annual Report onForm 10-K for the year ended December 31, 2008.2009.
Item 4.Controls and Procedures
The term “disclosure controls and procedures” is defined inRules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934, as amended or the Exchange Act. These rules refer to the controls and other procedures of a company that are designed to ensure that information required to be disclosed in reports filed under the Exchange Act, such as thisForm 10-Q, is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including the principal executive and financial officers, as appropriate to allow timely decisions


41

regarding required disclosures. As of September 26, 2009,April 3, 2010, or the Evaluation Date, our management, under the supervision and with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective at thea reasonable assurance level.
There has been no change in our internal control over financial reporting (as defined in Rule 13(a) — 15(f)13a-15(f) under the Exchange Act) that occurred during our fiscal quarter ended September 26, 2009,April 3, 2010, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1.Legal Proceedings
We are, from time to time, party to various legal proceedings arising out of our business. During the reporting period, there have been no material changes to the description of legal proceedings set forth in our Annual Report onForm 10-K for the year ended December 31, 2008.2009.
Item 1A.Risk Factors
The reader should carefully consider the Risk Factors described in our Annual Report onForm 10-K for the year ended December 31, 20082009 filed with the Securities and Exchange Commission. Those risk factors described elsewhere in this report on Form10-Q and in our Annual Report onForm 10-K for the year ended December 31, 20082009 are not the only ones we face, but are considered to be the most material. These risk factors could cause our actual results to differ materially from those stated in forward looking statements contained in thisForm 10-Q and elsewhere. All risk factors stated in our Annual Report onForm 10-K for the year ended December 31, 20082009 are incorporated herein by reference.

31

During the reporting period, there have been no material changes to the risk factors set forth in our Annual Report onForm 10-K for the year ended December 31, 2008.2009.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.Defaults Upon Senior Securities
None.
Item 4.Submission of Matters to a Vote of Security HoldersRemoved and Reserved
None.
Item 5.Other Information
None.


42

Item 6.Exhibits
The following exhibits are filed as part of this report:

32

     
Exhibit
  
Number
 
Description
 
 3.1(1) Second Amended and Restated Certificate of Incorporation of the Registrant.
 3.2(2) Second Amended and Restated Bylaws of the Registrant.
 31.1* Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 31.2* Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 32.1** Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 32.2** Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
Exhibit  
Number Description
 
 3.1(1) Second Amended and Restated Certificate of Incorporation of the Registrant.
     
 3.2(2) Second Amended and Restated Bylaws of the Registrant.
     
 31.1* Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
 31.2* Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
 32.1** Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
 32.2** Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*Filed herewith.
 
**Furnished herewith.
 
(1)Incorporated by reference to Altra Holdings, Inc.’s Registration Statement onForm S-1,S-1A, as amended, filed with the Securities and Exchange Commission on December 4, 2006.
 
(2)Incorporated by reference to Altra Holdings, Inc.’s Current Report onform 8-K filed on October 27, 2008.


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33

SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ALTRA HOLDINGS, INC.
November 4, 2009
By: /s/  Carl R. Christenson
Name:     Carl R. Christenson
Title: President and Chief Executive Officer
November 4, 2009
By: /s/  Christian Storch
Name:     Christian Storch
Title: Vice President and Chief Financial Officer
November 4, 2009
By: /s/  Todd B. Patriacca
Name:     Todd B. Patriacca
Title: Vice President of Finance, Corporate Controller and Assistant Treasurer


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EXHIBIT INDEX
     
ExhibitALTRA HOLDINGS, INC.
May 5, 2010 By:  /s/ Carl R. Christenson  
Name:  Carl R. Christenson 
Title:     President and Chief Executive Officer 
  
Number
May 5, 2010 		By:  
Description
/s/ Christian Storch  
 
 31.1*Name:  Christian Storch 
Title:  Vice President and Chief Financial Officer 
May 5, 2010 By:  /s/ Todd B. Patriacca  
Name:  Todd B. Patriacca 
Title:  Vice President of Finance, Corporate Controller and Treasurer 

34

EXHIBIT INDEX
Exhibit
NumberDescription
31.1* Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 31.2*
31.2* Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 32.1*
32.1** Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 32.2*
32.2** Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*Filed herewith.
 
**Furnished herewith.


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35