Basic earnings per share is based on the weighted average number of shareshares of common stock outstanding, and diluted earnings per share is based on the weighted average number of shares of common stock outstanding and all dilutive potential common stock equivalents outstanding. Common stock equivalents are included in the per share calculations when the effect of their inclusion would be dilutive.

          The following is a reconciliation of basic to diluted net income per share:

     There were no borrowings under the Revolving Credit Agreement at March 31,June 30, 2007 and December 31, 2006, however, as of both dates, the lender had issued $2.9$3.0 million of outstanding letters of credit on behalf of the Company.

     In April 2007, the CompanyAltra Industrial amended the Revolving Credit Agreement. See footnote 16The interest rate on any outstanding borrowings on the line of credit were reduced to the condensed consolidated financial statements forlenders Prime Rate plus 25 basis points or LIBOR plus 175 basis points. The rate on all outstanding letters of credit were reduced to 1.5% and .25% on any unused availability under the updated termsRevolving Credit Agreement. All borrowings under the amended plan must be repaid by November 30, 2010.

     As part of the TB Wood’s acquisition, the Company refinanced the existing line of credit agreement with a commercial bank. The Company refinanced $13.0 million of debt associated with TB Wood’s line of credit in connection with the acquisition and $6.5 million in letters credit. As of June 30, 2007, there was $12.2 million outstanding on the TB Wood’s Credit Agreement, including $6.5 million of outstanding letters of credit. There are no additional borrowings available under this agreement.

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

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

     The Senior Secured Notes are guaranteed by the Altra Industrial’s U.S. domestic subsidiaries and are secured by a second priority lien, subject to first priority liens securing the Revolving Credit Agreement, on substantially all of the Altra Industrial’s assets. The Senior Secured Notes contain numerous terms, covenants and conditions, which impose substantial limitations on Altra Industrial. Altra Industrial was in compliance with all covenants of the indenture governing the Senior Secured Notes at March 31,June 30, 2007.

     In connection with the acquisition of TB Wood’s on April 5, 2007, the Company issuedAltra Industrial completed a follow-on offering issuing an additional $105$105.0 million of the Senior Secured Notes. Please refer to footnote 16 ofThe additional $105.0 million has the condensed consolidated financial statements forsame terms and conditions as the previously issued Senior Secured Notes. The effective interest rate on the Senior Secured Notes, after the follow-on offering is

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

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

     The Company leases certain equipment under capital lease arrangements, whose obligations are included in both short-term and long-term debt. Capital lease obligations amounted to approximately $3.0$3.1 million and $1.5 million at March 31,June 30, 2007 and December 31, 2006, respectively. Assets under capital leases are included in property, plant and equipment with the related amortization recorded as depreciation expense.

     In June 2007, the Company closed its secondary public offering of 12,650,000 shares of its common stock, par value $0.001 per share (the “Shares”), which included 1,650,000 sold as a result of the underwriters’ exercise of their overallotment option in full at

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

     The net assets of foreign subsidiaries at March 31,June 30, 2007 and December 31, 2006 were $47.7$65.8 million and $46.8 million, respectively.

     Net cash used in investing activities of $51.8$58.2 million for the quarter ended March 31,June 30, 2006 resulted from $50.5$50.3 million used in the purchase of Hay Hall, $3.5 million for the purchase of Bear Linear and $1.2$4.1 million used in the purchases of property, plant and equipment primarily for investment in manufacturing equipment and for the consolidation of our IT infrastructure.

     Net cash provided by financing activities of $46.8$47.3 million for the quarteryear to date period ended March 31,June 30, 2006 resulted primarily from the proceeds of $57.6 million from the issuance of the senior notesSenior Notes in connection with the Hay Hall Acquisition, offset primarily by payment on the subordinated notes of $9.0 million and payment of debt issuance costcosts of $1.8 million.

     Our primary source of liquidity will be cash flow from operations and borrowings under our senior revolving credit facility. See footnote 910 to the Condensed Consolidatedcondensed consolidated financial statements for explanation of our senior revolving credit facility. We expect that our primary ongoing requirements for cash will be for working capital, debt service, capital expenditures and pension plan funding.

     We incurred substantial indebtedness in connection with the Colfax Corporation, and Hay Hall and TB Wood’s Acquisitions. As of March 31,June 30, 2007, taking into account these transactions, we had approximately $212.7$322.3 million of total indebtedness outstanding (including capital leases and mortgages). In April 2007, in connection with the acquisition of TB Wood’s, we issued an additional $105 million of senior secured notes. We expect our interest expense, arising from our existing debt, including the additional $105 million in debt, to be approximately $30.1$31.2 million on an annual basis, through the maturity of the Senior Secured Notes, in 2011.

     Our senior revolving credit facility provides for senior secured financing of up to $30.0 million, including $10.0 million available for letters of credit. As of March 31,June 30, 2007, there were no outstanding borrowings and $2.9$3.0 million of outstanding letters of credit under our senior revolving credit facility.

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

     We made capital expenditures of approximately $1.0$4.2 million and $1.2$4.1 million in the quarters ended March 31,June 30, 2007 and March 31,June 30, 2006, respectively. These capital expenditures will support on-going business needs.

     We have cash funding requirements associated with our pension plan which are estimated to be $2.8$1.6 million during the remainder of 2007, $2.5$3.8 million in 2008, and $1.9 million thereafter.

     Our ability to make scheduled payments of principal and interest, to fund planned capital expenditures and to meet our pension plan funding obligations will depend on our ability to generate cash in the future. Based on our current level of operations, we believe that cash flow from operations and available cash, together with available borrowings under our senior revolving credit facility will be adequate to meet our future liquidity requirements for at least the next two years. However, our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. See the section entitled “Changes in general economic conditions or the cyclical nature of our markets could harm our operations and financial performance”in our Annual Report on Form 10-K for the year ended December 31, 2006 and Form S-1 filed with the SEC on June 4, 2007 for further discussion.

     We cannot assure you that our business will generate sufficient cash flow from operations, that any revenue growth or operating improvements will be realized or that future borrowings will be available under our senior secured credit facility in an amount sufficient to enable us to service our indebtedness, including the notes, or to fund our other liquidity needs. In addition, we cannot assure you that we will be able to refinance any of our indebtedness, including our senior revolving credit facility and the notes as they become due. Our ability to access capital in the long term will depend on the availability of capital markets and pricing on commercially reasonable terms at the time we are seeking funds. See “Our substantial level of indebtedness could adversely affect our financial condition, harm our ability to react to changes to our business and prevent us from fulfilling our obligations on the notes.” in our Annual Report on Form 10-K for the year ended December 31, 2006 and Form S-1 filed with the SEC on June 4, 2007 for further discussion. In addition, our ability to borrow funds under our senior revolving credit facility will depend on our ability to satisfy the financial and non-financial covenants contained in that facility.

     Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of March 31,June 30, 2007.

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

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

     There has been no change in our internal control over financial reporting (as defined in Rules 13(a)-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during our fiscal quarter ended March 31,June 30, 2007, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.