UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 28,~~September 27, 2008


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission file number 001-33209

ALTRA HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Delaware		61-1478870
(State or other jurisdiction of incorporation or organization)		~~61-1478870~~ (I.R.S. Employer Identification No.)

14 Hayward Street, Quincy, Massachusetts		02171
(Address of principal executive offices)		~~02171~~ (Zip code)

(617) 328-3300
(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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See ~~definition~~the definitions of “large accelerated ~~filer”,~~filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filero	Accelerated filerþ	Non-accelerated filero	Smaller reporting companyo
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

As of ~~August 1,~~November 3, 2008, ~~26,392,209~~26,395,209 shares of Common Stock, $.001 par value per share, were outstanding.

ALTRA HOLDINGS, INC.
Condensed Consolidated BalanceSheets
Amounts in thousands, except share amounts
(unaudited)


	September 27,
	2008			December 31, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	49,822		$	45,807
Trade receivable, less allowance for doubtful accounts of $1,373 and $1,548 at September 27, 2008 and December 31, 2007, respectively		86,631			73,248
Inventories		106,374			101,835
Deferred income taxes		8,447			8,286
Receivable from sale of Electronics Division (See Note 5)		—			17,100
Assets held for sale (See Note 8)		4,676			4,728
Prepaid expenses and other current assets		5,871			5,578

Total current assets		261,821			256,582

Property, plant and equipment, net		111,677			113,043
Intangible assets, net		83,642			88,943
Goodwill		112,932			114,979
Deferred income taxes		151			231
Other non-current assets		4,643			6,747


Total assets	$	574,866		$	580,525


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	42,893		$	41,668
Accrued payroll		19,035			16,988
Accruals and other current liabilities		26,079			22,001
Taxes payable		512
Deferred income taxes		8,060			8,060
Current portion of long-term debt		3,343			2,667

Total current liabilities		99,922			91,384

Long-term debt — less current portion and net of unaccreted discount and premium		259,423			291,399
Deferred income taxes		24,443			24,490
Pension liablities		9,219			13,431
Other post retirement benefits		2,343			3,170
Long-term taxes payable		4,726			5,911
Other long-term liabilities		4,155			4,308
Commitments and contingencies (See Note 17)		—			—
Shareholders’ equity:
Common stock ($0.001 par value, 90,000,000 shares authorized, 25,514,877 and 25,128,873 issued and outstanding at September 27, 2008 and December 31, 2007, respectively)		26			25
Additional paid-in capital		129,169			127,653
Retained earnings		44,068			16,831
Accumulated other comprehensive income		(2,628	)		1,923

Total shareholders’ equity		170,635			146,432


Total liabilities and shareholders’ equity	$	574,866		$	580,525

The accompanying notes are an integral part of these unaudited consolidated financial statements.

ALTRA HOLDINGS, INC.
Condensed ~~Consollidated Balance Sheets~~Consolidated Statements of Income
Amounts in thousands, except per share ~~amounts~~data
(Unaudited)

June 28,
2008 December 31, 2007
(unaudited)
ASSETS

Current assets:
Cash and cash equivalents $ 43,232 $ 45,807
Trade receivable, less allowance for doubtful accounts of $1,258 and $1,548 92,672 73,248
Inventories 104,963 101,835
Deferred income taxes 8,689 8,286
Receivable from sale of Electronics (See Note 5) — 17,100
Assets held for sale (See Note 8) 4,676 4,728
Prepaid expenses and other current assets 7,845 5,578

Total current assets 262,077 256,582

Property, plant and equipment, net 113,745 113,043
Intangible assets, net 86,479 88,943
Goodwill 115,352 114,979
Deferred income taxes 141 231
Other non-current assets 5,052 6,747

Total assets $ 582,846 $ 580,525

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable $ 42,941 $ 41,668
Accrued payroll 15,914 16,988
Accruals and other current liabilities 21,954 22,001
Deferred income taxes 8,060 8,060
Current portion of long-term debt 3,419 2,667

Total current liabilities 92,288 91,384

Long-term debt - less current portion and net of unaccreted discount and premium 272,351 291,399
Deferred income taxes 24,910 24,490
Pension liablities 12,260 13,431
Other post retirement benefits 2,634 3,170
Long-term taxes payable 5,852 5,911
Other long-term liabilities 4,366 4,308
Commitments and contingencies (See Note 17) — —
Shareholders’ equity:
Common stock ($0.001 par value, 90,000,000 shares authorized, 25,476,884 and 25,128,873 issued and outstanding at June 28, 2008 and December 31, 2007, respectively) 25 25
Additional paid-in capital 128,675 127,653
Retained earnings 35,260 16,831
Accumulated other comprehensive income 4,225 1,923

Total shareholders’ equity 168,185 146,432

Total liabilities and shareholders’ equity $ 582,846 $ 580,525


	Quarter Ended					Year to Date Ended
	September 27,			September 29,		September 27,			September 29,
	2008			2007		2008			2007
Net sales	$	159,448		$	147,278	$	490,523		$	433,512
Cost of sales		113,627			105,597		346,517			310,666

Gross profit		45,821			41,681		144,006			122,846

Operating expenses:
Selling, general and administrative expenses		25,655			22,981		76,816			67,386
Research and development expenses		1,663			1,606		5,160			4,465
OPEB curtailment gain		(107	)		—		(276	)		—
Restructuring costs		81			189		1,149			1,180

		27,292			24,776		82,849			73,031

Income from operations		18,529			16,905		61,157			49,815

Other non-operarting income and expense:
Interest expense, net		7,302			11,406		22,456			31,280
Other non-operating (income) expense, net		(1,408	)		438		(2,887	)		522

		5,894			11,844		19,569			31,802

Income from continuing operations before income taxes		12,635			5,061		41,588			18,013
Provision for income taxes		4,000			1,637		14,127			6,485


Net income from continuing operations		8,635			3,424		27,461			11,528
Net income (loss) from discontinued operations, net of income taxes of $43 and $583 for the year to date periods ended September 27, 2008 and September 29, 2007, respectively		172			886		(224	)		1,352

Net income	$	8,807		$	4,310	$	27,237		$	12,880


Consolidated Statement of Comprehensive Income
Pension liability adjustment	$	1,500		$	—	$	1,500		$	—
Foreign currency translation adjustment		(6,051	)		2,643		(8,353	)		3,903

Comprehensive income	$	4,256		$	6,953	$	20,384		$	16,783


Weighted average shares, basic		25,488			25,075		25,479			23,069
Weighted average shares, diluted		26,157			26,119		26,159			24,094

Basic earnings per share:
Net income from continuing operations	$	0.34		$	0.14	$	1.08		$	0.50
Net income (loss) from discontinued operations		0.01			0.03		(0.01	)		0.06

Net income	$	0.35		$	0.17	$	1.07		$	0.56


Diluted earnings per share:
Net income from continuing operations	$	0.33		$	0.13	$	1.05		$	0.48
Net income (loss) from discontinued operations		0.01			0.04		(0.01	)		0.05

Net income	$	0.34		$	0.17	$	1.04		$	0.53

The accompanying notes are an integral part of these unaudited consolidated financial statements.

ALTRA HOLDINGS, INC.
Condensed Consolidated Statements of ~~Income~~
~~Amounts in thousands, except per share data~~
~~(Unaudited)~~

Quarter Ended Year to Date Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Net sales $ 167,893 $ 153,528 $ 331,075 $ 286,234
Cost of sales 117,506 110,411 232,890 205,069

Gross profit 50,387 43,117 98,185 81,165

Operating expenses:
Selling, general and administrative expenses 26,448 23,578 51,161 44,405
Research and development expenses 1,766 1,565 3,497 2,859
OPEB curtailment gain (169 ) — (169 ) —
Restructuring costs 335 198 1,068 991

28,380 25,341 55,557 48,255

Income from operations 22,007 17,776 42,628 32,910

Other non-operarting income and expense:
Interest expense, net 7,713 10,726 15,154 19,874
Other non-operating (income) expense, net (853 ) 131 (1,479 ) 84

6,860 10,857 13,675 19,958

Income from continuing operations before income taxes 15,147 6,919 28,953 12,952
Provision for income taxes 5,278 2,583 10,127 4,848

Net income from continuing operations 9,869 4,336 18,826 8,104
Net income (loss) from discontinued operations, net of income taxes of $124 in 2008 and $220 in 2007 — 466 (397 ) 466

Net income $ 9,869 $ 4,802 $ 18,429 $ 8,570

Consolidated Statement of Comprehensive Income

Foreign currency translation adjustment (674 ) 821 2,302 1,260
��
Comprehensive income $ 9,195 $ 5,623 $ 20,731 $ 9,830

Weighted average shares, basic 25,476 22,250 25,474 22,066
Weighted average shares, diluted 26,121 23,268 26,120 23,075

Basic earnings per share:
Net income from continuing operations $ 0.39 $ 0.20 $ 0.74 $ 0.37
Net income (loss) from discontinued operations — 0.02 (0.02 ) 0.02

Net income $ 0.39 $ 0.22 $ 0.72 $ 0.39

Diluted earnings per share:
Net income from continuing operations $ 0.38 $ 0.19 $ 0.72 $ 0.35
Net income (loss) from discontinued operations — 0.02 (0.01 ) 0.02

Net income $ 0.38 $ 0.21 $ 0.71 $ 0.37

~~The accompanying notes are an integral part of these unaudited consolidated financial statements.~~

~~ALTRA HOLDINGS, INC.~~
~~Condensed Consolidated Statements of~~ Cash Flows
Amounts in thousands
(Unaudited)

Year to Date ended
June 28, 2008 June 30, 2007
Cash flows from operating activities

Net income $ 18,429 $ 8,570
Adjustments to reconcile net income to net cash flows:
Depreciation 8,051 8,064
Amortization of intangible assets 2,884 2,468
Amortization and write-offs of deferred loan costs 1,344 1,857
Loss (gain) on foreign currency, net (671 ) 210
Accretion of debt discount and premium, net 359 415
Loss on sale of Electronics division 397
Amortization of inventory fair value adjustment — 651
Loss on sale of fixed assets 137 112
OPEB curtailment gain (169 ) —
Stock based compensation 1,022 800
Changes in assets and liabilities:
Trade receivables (18,077 ) (14,040 )
Inventories (2,522 ) (638 )
Accounts payable and accrued liabilities (2,547 ) (16,109 )
Other current assets and liabilities (2,077 ) 3,515
Other operating assets and liabilities 57 101

Net cash provided by (used in) operating activities 6,617 (4,024 )

Cash flows from investing activities

Purchase of fixed assets (7,641 ) (4,249 )
Proceeds from sale of Electronics division 17,210 —
Acquisitions, net of $5,222 cash acquired — (117,484 )

Net cash provided by (used in) investing activities 9,569 (121,733 )

Cash flows from financing activities

Proceeds from issuance of senior secured notes — 106,050
Payments on senior secured notes (15,000 ) —
Payment of debt issuance costs — (3,405 )
Payments on senior notes (1,346 ) (33,998 )
Borrowings under revolving credit agreement — 8,315
Payments on revolving credit agreement (1,723 ) (9,120 )
Payment on mortgages (188 ) —
Proceeds from secondary public offering — 49,583
Payment of public offering costs — (248 )
Payment on capital leases (574 ) (359 )

Net cash (used in) provided by financing activities (18,831 ) 116,818

Effect of exchange rate changes on cash and cash equivalents 70 788

Net change in cash and cash equivalents (2,575 ) (8,151 )
Cash and cash equivalents at beginning of year 45,807 42,527

Cash and cash equivalents at end of period $ 43,232 $ 34,376

Cash paid during the period for:
Interest $ 14,210 $ 18,284
Income taxes 10,300 $ 9,738
Non-cash Financing:
Acquisition of capital equipment under capital lease $ — $ 1,655
Accrued offering costs $ — $ 524

~~The accompanying notes are an integral part of these unaudited consolidated financial statements.~~


	Year to Date ended
	September 27, 2008			September 29, 2007
Cash flows from operating activities
Net income	$	27,237		$	12,880
Adjustments to reconcile net income to net cash flows:
Depreciation		12,409			12,378
Amortization of intangible assets		4,346			3,999
Amortization and write-offs of deferred loan costs		1,863			2,980
Loss (gain) on foreign currency, net		(1,597	)		409
Accretion of debt discount and premium, net		759			594
Amortization of inventory fair value adjustment		—			651
Loss on sale of Electronics Division		224			—
Loss on sale of fixed assets		193			112
OPEB curtailment gain		(276	)		—
Stock based compensation		1,516			1,092
Changes in assets and liabilities:
Trade receivables		(14,905	)		(6,884	)
Inventories		(5,871	)		(2,281	)
Accounts payable and accrued liabilities		5,885			(8,382	)
Other current assets and liabilities		(383	)		4,147
Other operating assets and liabilities		234			6

Net cash provided by operating activities		31,634			21,701


Cash flows from investing activities
Purchase of fixed assets		(12,234	)		(6,803	)
Proceeds from sale of Electronics Division		17,310			—
Acquisitions, net of $5,222 cash acquired		—			(117,911	)

Net cash provided by (used in) investing activities		5,076			(124,714	)


Cash flows from financing activities
Proceeds from issuance of Senior Secured Notes		—			106,050
Payments on Senior Secured Notes		(27,500	)		—
Payment of debt issuance costs		—			(3,692	)
Payments on senior notes		(1,346	)		(58,428	)
Borrowings under Revolving Credit Agreement		—			8,315
Payments on Revolving Credit Agreement		(1,723	)		(9,847	)
Payment on mortgages		(228	)		(178	)
Proceeds from secondary public offering		—			49,583
Payment of public offering costs		—			(1,990	)
Payment on capital leases		(779	)		(534	)

Net cash (used in) provided by financing activities		(31,576	)		89,279

Effect of exchange rate changes on cash and cash equivalents		(1,119	)		1,244

Net change in cash and cash equivalents		4,015			(12,490	)
Cash and cash equivalents at beginning of year		45,807			42,527

Cash and cash equivalents at end of period	$	49,822		$	30,037


Cash paid during the period for:
Interest	$	21,840		$	24,076
Income taxes	$	11,964		$	10,338
Non-cash Financing:
Acquisition of capital equipment under capital lease	$	—		$	1,655
Accrued offering costs	$	—		$	145

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted

1. Organization and Nature of Operations

Headquartered in Quincy, Massachusetts, Altra Holdings, Inc. (“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. Basis 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, which is incorporated herein by reference.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, necessary to present fairly the unaudited condensed consolidated financial statements as of ~~June 28,~~September 27, 2008 and for the quarters and year to date periods ended ~~June 28,~~September 27, 2008 and ~~June 30,~~September 29, 2007.

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.

The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2007 contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

Certain prior period amounts have been reclassified in the condensed consolidated financial statements to conform to the current period presentation.

3. Net 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.

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted

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


	Quarter Ended				Year to Date Ended					Quarter Ended				Year to Date Ended
	June 28,		June 30,		June 28,			June 30,		September 27,		September 29,		September 27,			September 29,
	2008		2007		2008			2007		2008		2007		2008			2007
Net income from continuing operations	$	9,869	$	4,336	$	18,826		$	8,104	$	8,635	$	3,424	$	27,461		$	11,528
Net income (loss) from discontinued operations		—		466		(397	)		466		172		886		(224	)		1,352

Net income	$	9,869	$	4,802	$	18,429		$	8,570	$	8,807	$	4,310	$	27,237		$	12,880

Shares used in net income per common share - basic		25,476		22,250		25,474			22,066		25,488		25,075		25,479			23,069

Incremental shares of unvested restricted common stock		645		1,018		646			1,009		669		1,044		680			1,025

Shares used in net income per common share - diluted		26,121		23,268		26,120			23,075		26,157		26,119		26,159			24,094

Earnings per share - Basic:
Net income from continuing operations	$	0.39	$	0.20	$	0.74		$	0.37	$	0.34	$	0.14	$	1.08		$	0.50
Net income (loss) from discontinued operations	$	—	$	0.02	$	(0.02	)	$	0.02	$	0.01	$	0.03	$	(0.01	)	$	0.06

Net income	$	0.39	$	0.22	$	0.72		$	0.39	$	0.35	$	0.17	$	1.07		$	0.56


Earnings per share - Diluted:
Net income from continuing operations	$	0.38	$	0.19	$	0.72		$	0.35	$	0.33	$	0.13	$	1.05		$	0.48
Net income (loss) from discontinued operations	$	—	$	0.02	$	(0.01	)	$	0.02	$	0.01	$	0.04	$	(0.01	)	$	0.06

Net income	$	0.38	$	0.21	$	0.71		$	0.37	$	0.34	$	0.17	$	1.04		$	0.54

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted

acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. This statement is effective for the Company beginning January 1, 2009. The Company is currently evaluating the potential impact of the adoption of SFAS 141R on the Company’s consolidated financial position, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51(“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This statement is effective for the Company beginning January 1, 2009. The Company is currently evaluating the potential impact of the adoption of SFAS 160 on their consolidated financial position, results of operations and cash flows.

5. 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.

As of December 31, 2007, $11.9 million of cash had been received from Vacon for the purchase of the Electronics Division. The remaining $17.1 million was received in January 2008 and was recorded as a receivable ~~for~~from sale of the Electronics Division on the consolidated balance ~~sheet, which was received in January 2008.~~sheet. In accordance with SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets(“ (“SFAS 144”), the Company determined that the Electronics Division became a discontinued operation in the fourth quarter of 2007. Accordingly, the operating results of the Electronics Division have been segregated from ~~the~~ continuing operations in the consolidated statements of income and comprehensive income for the periods subsequent to the acquisition of TB Wood’s (April 5, 2007) through December 31, 2007.

In connection with the sale of the Electronics Division, the Company entered into a transition services agreement. Pursuant to the Agreement, the Company will provide services such as sales support, warehousing, accounting and IT services to Vacon. The Company has recorded the income received as an offset to the related expense of providing the service. During the ~~quarter and~~ year to date period ended ~~June 28,~~September 27, 2008, ~~$0.1 million and~~ $0.3 million was recorded against cost of ~~sales, respectively,~~sales. During the year to date and ~~$0.3~~quarter to date period ended September 27, 2008, $0.9 million and ~~$0.7~~$0.2 million was recorded as an offset to selling, general and administrative expenses, respectively. The Company also leases building space to Vacon. The Company recorded ~~$0.1~~$0.2 million and ~~$0.3~~$0.5 million of lease income in other income in the condensed consolidated statement of income during the quarter to date and year to date ~~period~~periods ended ~~June 28, 2008.~~September 27, 2008, respectively.

Loss from discontinued operations in the year to date period ended ~~June 28,~~September 27, 2008 was comprised of a purchase price working capital adjustment, ~~of $107 after~~an adjustment to deferred taxes and an adjustment to ~~deferred~~the tax provision. The tax provision is comprised of taxes on the working capital adjustment and a revision of ~~$290, which decreased~~tax estimates made during 2007 based on the ~~previously recorded gain~~actual amounts filed on ~~sale.~~the Company’s tax return in 2008.

6. Inventories

Inventories located at certain subsidiaries acquired in connection with the TB Wood’s acquisition are stated at the lower of current cost or market, principally using the last-in, first-out (“LIFO”) method. The remaining subsidiaries are stated at the lower of cost or market, using the first-in, first-out (“FIFO”) method. Market is defined as net realizable value. Inventories at ~~June 28,~~September 27, 2008 and December 31, 2007 consisted of the following:


	June 28,		December 31,		September 27,		December 31,
	2008		2007		2008		2007
Raw Materials		36,104	$	33,601		35,674	$	33,601
Work in process		22,416		20,376		22,932		20,376
Finished goods		46,443		47,858		47,769		47,858

Inventories, net	$	104,963	$	101,835	$	106,374	$	101,835

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted

The curtailment and special termination benefits were approximately $2.9 million for the year ended December 31, 2007.

In August 2008, an announcement was made that the Company would no longer be closing the plant in Erie, Pennsylvania and that the Company would continue to employ those employees that had not previously been terminated. As a result of this announcement, the remaining employees are no longer eligible for the special retirement pension feature under the pension plan. The Company has recorded a $1.5 million adjustment to the minimum pension liability and the pension liability. The minimum pension liability, recorded in accumulated other comprehensive income, will be amortized over the average expected remaining life expectancy of the participants of the plan.

The following table represents the components of the net periodic benefit cost associated with the respective plans for the quarters and year to date periods ended ~~June 28,~~September 27, 2008 and ~~June 30,~~September 29, 2007:


	Quarter Ended
	Pension Benefits						Other Benefits
	September 27, 2008			September 29, 2007			September 27, 2008			September 29, 2007
Service cost	$	16		$	66		$	13		$	18
Interest cost		378			327			50			49
Expected return on plan assets		(326	)		(266	)		—			—
Amortization of prior service cost (income)		—			2			(244	)		(243	)
OPEB curtailment gain		—			—			(107	)		—
Amortization of net (gain)		—			—			(7	)		(53	)

Net periodic benefit cost (income)	$	68		$	129		$	(295	)	$	(229	)


	Year to Date Ended
	Pension Benefits						Other Benefits
	September 27, 2008			September 29, 2007			September 27, 2008			September 29, 2007
Service cost	$	48		$	198		$	43		$	54
Interest cost		1,135			981			154			147
Expected return on plan assets		(979	)		(799	)		—			—
Amortization of prior service cost (income)		—			5			(731	)		(730	)
OPEB curtailment gain		—			—			(276	)		—
Amortization of net (gain)		—			—			(19	)		(158	)

Net periodic benefit cost (income)	$	204		$	385		$	(829	)	$	(687	)

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted

9% Senior Secured Notes

On November 30, 2004, Altra Industrial issued 9% Senior Secured Notes (“Senior Secured Notes”), with a face value of $165.0 million. Interest on the Senior Secured Notes is payable semi-annually, in arrears, on June 1 and December 1 of each year, beginning June 1, 2005, at an annual rate of 9%. The Senior Secured Notes mature on December 1, 2011 unless previously redeemed by Altra Industrial.

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 Senior Secured Notes. The additional $105.0 million has the same 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 approximately 9.6% after consideration of the amortization of $5.5 million net discount and $6.5 million of deferred financing ~~costs.~~costs (included in other assets).

During the second quarter of 2008, the Company retired $15.0 million aggregate principal amount of the outstanding senior secured notes at a redemption price of 102.0% of the principal amount of the Senior Secured Notes, plus accrued and unpaid interest. In connection with the redemption, the Company incurred $0.3 million of pre-payment premium. In addition, the Company wrote-off $0.2 million of deferred financing costs.

During the third quarter of 2008, the Company retired $12.5 million aggregate principal amount of the outstanding senior secured notes at a redemption price of approximately 104.0% of the principal amount of the Senior Secured Notes, plus accrued and unpaid interest. In connection with the redemption, the Company incurred $0.5 million of pre-payment premium. In addition, the Company wrote-off $0.2 million of deferred financing costs.

The Senior Secured Notes are guaranteed by 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 Altra Industrial’s assets. The Senior Secured Notes contain many 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 ~~June 28,~~September 27, 2008.

As of September 27, 2008, the remaining principal balance outstanding on the Senior Secured Notes was $242.5 million.

11.25% Senior Notes

On February 8, 2006, Altra Industrial issued 11.25% Senior Notes (“Senior Notes”), with a face value of £33 million. Interest on the Senior Notes is payable semi-annually, 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 Senior Notes is approximately 12.4%, after consideration of the $2.6 million of deferred financing costs (included in other assets). The Senior Notes mature on February 13, 2013.

The Senior Notes are guaranteed on a senior unsecured basis by Altra Industrial’s U.S. domestic subsidiaries. The Senior Notes contain many 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 Notes at ~~June 28,~~September 27, 2008.

On March, 19, 2008, Altra Industrial retired ~~£0.7~~0.7 million, or $1.3 million, aggregate principal amount of the outstanding Senior Notes at a redemption price of 106.0% of the principal amount of the Senior Notes, plus accrued and unpaid interest. In connection with the redemption, Altra Industrial incurred $0.1 million of pre-payment premium and wrote-off $0.1 million of deferred financing costs.

As of ~~June 28,~~September 27, 2008, the remaining principal balance outstanding on the Senior Notes was ~~£3.3~~3.3 million, or ~~$6.4~~$6.0 million.

Variable Rate Demand Revenue Bonds

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 had borrowed approximately $3.0 million 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 ~~(2.36%~~(8.11% interest at ~~June 28,~~September 27, 2008), and mature in April 2024 and April 2022. The bonds were issued to finance production facilities for TB Wood’s manufacturing operations in those cities, and are secured by letters of credit issued under the terms of the TB Wood’s Credit Agreement.

~~ALTRA HOLDINGS, INC.~~
~~Notes to Unaudited Condensed Consolidated Interim Financial Statements~~
~~Amounts in thousands, unless otherwise noted~~

Capital Leases

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 ~~$2.9~~$2.6 million and $3.4 million at ~~June 28,~~September 27, 2008 and December 31, 2007, respectively. Assets under capital leases are included in property, plant and equipment with the related amortization recorded as depreciation expense.

13. Stockholder’s Equity

As of ~~June 28,~~September 27, 2008, the Company had 10,000,000 shares of undesignated Preferred Stock authorized (“Preferred Stock”). The Preferred Stock may be issued from time to time in one or more classes or series, the shares of each class or series to have such designations and powers, preferences, and rights, and qualifications, limitations and restrictions as determined by the Company’s Board of Directors. There was no Preferred Stock issued or outstanding at ~~June 28,~~September 27, 2008.

Stock-Based Compensation

In January 2005, the Company’s Board of Directors established the 2004 Equity Incentive Plan (the “Plan”) that provides for various forms of stock based compensation to independent directors, officers and senior-level employees of the ~~Company~~Company. The restricted shares of common stock issued pursuant to the Plan generally vest ratably between 3.5 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.

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 Compensation Committee of the Board of Directors. Compensation expense recorded during the quarters ended ~~June 28,~~September 27, 2008 and ~~June 30,~~September 29, 2007 was ~~$0.6~~$0.5 million ($0.3 million net of tax) and ~~$0.7~~$0.3 million ($~~0.4~~0.2 million net of tax), respectively. Stock compensation expense is recognized on a straight-line basis over the vesting period. Compensation expense during the year to date period ended ~~June 28,~~September 27, 2008 and ~~June 30,~~September 29, 2007 was ~~$1.0~~$1.5 million ($1.0 million, net of tax) and ~~$0.8~~$1.1 million ($0.7 million, net of tax), respectively.

The following table sets forth the activity of the Company’s unvested restricted stock grants in the quarter ending ~~June 28,~~September 27, 2008:


				Weighted-average					Weighted-average
	Shares			grant date fair value		Shares			grant date fair value
Restricted shares unvested December 31, 2007		1,120,864		$	3.76		1,120,864		$	3.76
Shares granted		159,962		$	13.64		162,962		$	13.72
Shares forfeited		(17,490	)	$	4.59		(17,490	)	$	4.59
Shares for which restrictions lapsed		(348,011	)	$	3.37		(386,004	)	$	4.37

Restricted shares unvested June 28, 2008		915,325		$	5.62
Restricted shares unvested September 27, 2008							880,332		$	5.32

~~ALTRA HOLDINGS, INC.~~
~~Notes to Unaudited Condensed Consolidated Interim Financial Statements~~
~~Amounts in thousands, unless otherwise noted~~

Financial instruments which are potentially subject to concentrations of credit risk consist primarily of trade accounts receivable. The Company manages this risk 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.

�� Credit related losses may occur in the event of non-performance by counterparties to financial instruments. Counterparties typically represent international or well established financial institutions.

No single customer represented 10% or more of the Company’s sales for ~~either of~~ the quarters or year to date periods ended ~~June 28,~~September 27, 2008 and ~~June 30,~~September 29, 2007.

Approximately ~~19.8%~~19.3% of the Company’s labor force ~~(14.9%~~(13.2% and ~~53.0%~~52.8% in the United States and Europe, respectively) is represented by collective bargaining agreements.

16. Geographic Information

The Company operates in a single business segment for the development, manufacturing and sales of mechanical power transmission products. The Company’s chief operating decision maker reviews consolidated operating results in order to make decisions about allocating resources and assessing performance for the entire Company. Net sales to third parties and property, plant and equipment by geographic region are as follows:


													Net Sales
	Net Sales												Quarter Ended				Year to Date Ended				Property, Plant and Equipment
	Quarter Ended				Year to Date ended				Property, Plant and Equipment				September 27,		September 29,		September 27,		September 29,		September 27,		December 31,
	June 28,		June 30,		June 28,		June 30,		June 28,		December		2008		2007		2008		2007		2008		2007
	2008		2007		2008		2007		2008		31, 2007
North America (primarily U.S.)	$	117,694	$	113,518	$	236,397	$	206,697	$	81,768	$	81,283	$	110,793	$	106,599	$	347,190	$	313,297	$	81,423	$	81,283
Europe		43,022		34,668		81,262		69,649		2,632		29,767		40,028		34,015		121,289		103,670		27,459		29,767
Asia and other		7,177		5,342		13,416		9,888		29,345		1,993		8,627		6,664		22,044		16,545		2,795		1,993

Total	$	167,893	$	153,528	$	331,075	$	286,234	$	113,745	$	113,043	$	159,448	$	147,278	$	490,523	$	433,512	$	111,677	$	113,043

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted

The Company has not provided specific product line sales, as our general purpose financial statements do not allow us to readily determine groups of similar product sales.

17. Commitments 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 financial condition of the Company. With respect to these proceedings, management believes that it 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 financial condition of the Company.

~~ALTRA HOLDINGS, INC.~~
~~Notes to Unaudited Condensed Consolidated Interim Financial Statements~~
~~Amounts in thousands, unless otherwise noted~~

The Company is indemnified under the terms of certain acquisition agreements for pre-existing matters up to agreed upon limits.

18. 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 is intended to reduce duplicate staffing and consolidate facilities (the “TB Wood’s Plan”). The ~~plan~~TB Wood’s Plan was initially formulated at the time of the TB Wood’s acquisition and therefore the accrual has been recorded as part of purchase price accounting. The restructuring ~~charge~~charges for the quarters ended ~~June 28,~~September 27, 2008 and ~~June 30,~~September 29, 2007 were ~~$0.3~~$0.1 million and $0.2 million, respectively. The Company’s total restructuring expense, by major component for the year to date period ended ~~June 28,~~September 27, 2008 were as follows:

TB Wood’s
Altra Plan Plan Total

Expenses
Other cash expenses $ — $ — $ —
Moving and relocation 228 68 296
Severance 631 — 631

Total cash expenses 859 68 927

Non-cash asset impairment and loss on sale of fixed asset 141 — 141

Total restructuring expenses $ 1,000 $ 68 $ 1,068

~~The following is a reconciliation of the accrued restructuring costs between December 31, 2007 and June 28, 2008:~~

TB Wood’s
Altra Plan Plan Total

Balance at December 31, 2007 $ 449 $ 1,029 $ 1,478
Restructuring expense incurred 1,000 68 1,068
Cash payments (457 ) (1,072 ) (1,529 )
Non-cash loss on disposal of fixed assets (141 ) — (141 )

Balance at June 28, 2008 $ 851 $ 25 876

The Company expects to incur an additional $0.8 million in severance expense over the remainder of the Altra Plan restructuring program, and an additional $0.5 million of moving and relocation costs.


	TB Wood’s
	Altra Plan		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

1716

ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Amounts in thousands, unless otherwise noted

~~19. Subsequent Event~~

~~One of our four U.S. collective bargaining agreements expired in June 2008 and was extended until~~The following is a ~~new agreement was reached in July 2008. The new agreement extends the collective bargaining agreement through June 2011. One~~reconciliation of the provisions of the new agreement reduces benefits that employees are entitled to receive through the other post employment benefit plan. This is considered a curtailment in accordance with SFAS No. 88 (Employer’s Accounting for Settlementsaccrued restructuring costs between December 31, 2007 and ~~Curtailments of Defined Benefit Plans and for Termination Benefits).~~ September 27, 2008:


	TB Wood’s
	Altra Plan			Plan			Total

Balance at December 31, 2007	$	449		$	1,029		$	1,478
Restructuring expense incurred		1,579			84			1,663
Adjustments to previously accrued amounts		(514	)
Cash payments		(874	)		(1,113	)		(1,987	)
Non-cash loss on disposal of fixed assets		(187	)		—			(187	)

Balance at September 27, 2008	$	453		$	—		$	453

The Company expects to ~~record~~incur an additional $0.1 million in restructuring expense over the remainder of the Altra Plan restructuring program.

As part of the original Altra Plan, one of the Company’s manufacturing facilities was scheduled to close. As part of the plan and the plant closure agreement, employees were offered severance for continued service to the Company through their date of termination. The Company was accruing the severance ratably from the communication date through the date of termination. In August 2008, the Company announced that the plant would not be closing and one manufacturing line would remain in operation at the facility. In connection with the announcement, the Company recorded a ~~non-cash curtailment gain~~reduction of $0.5 million included as a component of restructuring costs in ~~future~~the accompanying condensed consolidated statement of income for the quarter and year to date periods ~~but is currently evaluating~~ended September 27, 2008. Such amounts reflect the ~~amount.~~previously recorded severance estimated for those employees who will no longer be terminated.

1817

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of Altra Holdings, Inc. should be read together with the audited financial statements of Altra Holdings, Inc. and related notes included in the Company’s Annual Report onForm 10-K for the year ended December 31, 2007. The following discussion includes forward-looking statements. For a discussion of important factors that could cause actual results to differ materially from the results referred to in the forward-looking statements, see “Forward-Looking Statements.” in the Company’s Annual Report onForm 10-K for the year ended December 31, 2007.

General

We are a leading global designer, producer and marketer of a wide range of mechanical power transmission and motion control products with a presence in over 70 countries. Our global sales and marketing network includes over 1,000 direct original equipment manufacturers (“OEM”) and over 3,000 distributor outlets. We are headquartered in Quincy, Massachusetts.

Our product portfolio includes industrial clutches and brakes, open and enclosed gearing, couplings, engineered belted drives, engineered bearing assemblies and other related power transmission components which are sold across a wide variety of industries, including energy, general industrial, material handling, mining, transportation and turf and garden. Our products benefit from our industry leading brand names including Warner Electric, Boston Gear, TB Wood’s, Kilian, Nuttall Gear, Ameridrives, Wichita Clutch, Formsprag Clutch, Bibby Transmissions, Stieber, Matrix, Inertia Dynamics, Twiflex, Industrial Clutch, Huco Dynatork, Marland Clutch, Delroyd, Warner Linear, and Saftek. We primarily sell our products to OEMs and through long-standing relationships with the industry’s leading industrial distributors such as Motion Industries, Applied Industrial Technologies, Kaman Industrial Technologies and W.W. Grainger.

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 of America 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~~ongoing basis. Management believes there have been no significant changes in our critical accounting policies since December 31, 2007. See the discussion of critical accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2007.

Recent Accounting Pronouncements

In February 2007, the ~~FASB~~Financial Accounting Standards Board (FASB) issued ~~SFAS~~Statement of Financial Accounting Standards (SFAS) No. 159,The Fair Value Option for Financial Assets and Financial Liabilities — including an Amendment of FASB Statement No. 115 (“(“SFAS 159”), which allows an entity to choose to measure certain financial instruments and liabilities at fair value. Subsequent measurements for the financial instruments and liabilities an entity elects to fair value will be recognized in earnings. SFAS 159 also establishes additional disclosure requirements. SFAS 159 was effective for ~~the Company~~us beginning January 1, 2008. The adoption of SFAS 159 did not have a material impact on our condensed consolidated statement of financial position, results of operations and cash flows. We did not elect to remeasure any existing financial assets or liabilities under the provisions of SFAS 159.

In September 2006, the ~~Financial Accounting Standards Board (FASB)~~FASB issued ~~Statement of Financial Accounting Standards (SFAS)~~SFAS No. 157, ~~“Fair~~Fair Value Measurements”(“SFAS 157”) effective for financial statements issued for fiscal years beginning after November 15, 2007. SFAS ~~No.~~ 157 replaces multiple existing definitions of fair value with a single definition, establishes a consistent framework for measuring fair value and expands financial statement disclosures regarding fair value measurements. This Statement applies only to fair value measurements that already are required or permitted by other accounting standards and does not require any new fair value measurements. In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-2, which delayed until the first quarter of 2009 the effective date of SFAS ~~No.~~ 157 for nonfinancial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis.

The adoption of SFAS ~~No.~~ 157 for our financial assets and liabilities in the first quarter of 2008 did not have a material impact on our financial position or results of operations. Our nonfinancial assets and liabilities that meet the deferral criteria set forth in FSP No. 157-2 include goodwill, intangible assets, property, plant and equipment. We do not expect that the adoption of SFAS ~~No.~~ 157 for these nonfinancial assets and liabilities will have a material impact on our financial position or results of operations.

1918

In December 2007, the FASB issued SFAS No. 141 (revised 2007),Business Combinations (“(“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. This statement is effective for ~~the Company~~us beginning January 1, 2009. ~~The Company is~~We are currently evaluating the potential impact of the adoption of SFAS 141R on the Company’s consolidated financial position, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51(“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This statement is effective for ~~the Company~~us beginning January 1, 2009. ~~The Company is~~We are currently evaluating the potential impact of the adoption of SFAS 160 on their consolidated financial position, results of operations and cash flows.

~~Non-GAAP Financial Measures~~

The discussion of EBITDA (earnings before interest, income taxes, depreciation and amortization) included in the discussion of Results of Operations below is being provided because management considers EBITDA to be an important measure of financial performance. Among other things, management believes that EBITDA provides useful information for our investors because it is useful for trending, analyzing and benchmarking the performance and value of our business. Management also believes that EBITDA is useful in assessing current performance compared with our historical performance because significant line items within our statements of operations such as depreciation, amortization and interest expense are significantly impacted by acquisitions. Internally, EBITDA is used as a financial measure to assess the operating performance and is an important measure in our incentive compensation plans.

EBITDA has important limitations, and should not be considered in isolation or as a substitute for analysis of our results as reported under generally accepted accounting principles in the United States (“GAAP”). For example, EBITDA does not reflect:

•		~~cash expenditures, or future requirements, for capital expenditures or contractual commitments;~~

•		~~changes in, or cash requirements for, working capital needs;~~

•		~~the significant interest expense, or the cash requirements necessary to service interest or principal payments on debts;~~

•		~~tax distributions that would represent a reduction in cash available to us; and~~

•		~~any cash requirements for assets being depreciated and amortized that may have to be replaced in the future.~~

EBITDA is not a recognized measurement under GAAP, and when analyzing our operating performance, investors should use EBITDA in addition to, and not as an alternative for, operating income and net income (each as determined in accordance with GAAP). Because not all companies use identical calculations, our presentation of EBITDA may not be comparable to similarly titled measures of other companies. The amounts shown for EBITDA also differ from the amounts calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges and are used to determine compliance with financial covenants and our ability to engage in certain activities, such as incurring additional debt and making certain restricted payments.

To compensate for the limitations of EBITDA we utilize several GAAP measures to review our performance. These GAAP measures include, but are not limited to, net income, operating income, cash provided by (used in) operations, cash provided by (used in) investing activities and cash provided by (used in) financing activities. These important GAAP measures allow our management to, among other things, review and understand our uses of cash period to period, compare our operations with competitors on a consistent basis and understand the revenues and expenses matched to each other for the applicable reporting period. We believe that the use of these GAAP measures, supplemented by the use of EBITDA, allows us to have a greater understanding of our performance and allows us to adapt to changing trends and business opportunities.

2019

Results of Operations


	Quarter Ended						Year to date ended						Quarter Ended						Year to date ended
	June 28,			June 30,			June 28,			June 30,			September 27,			September 29,			September 27,			September 29,
(In thousands, except per share data)	2008			2007			2008			2007			2008			2007			2008			2007
Net sales	$	167,893		$	153,528		$	331,075		$	286,234		$	159,448		$	147,278		$	490,523		$	433,512
Cost of sales		117,506			110,411			232,890			205,069			113,627			105,597			346,517			310,666

Gross profit		50,387			43,117			98,185			81,165			45,821			41,681			144,006			122,846
Gross profit percentage		30.01	%		28.08	%		29.66	%		28.36	%		28.74	%		28.30	%		29.36	%		28.34	%
Selling, general and administrative expenses		26,448			23,578			51,161			44,405			25,655			22,981			76,816			67,386
Research and development expenses		1,766			1,565			3,497			2,859			1,663			1,606			5,160			4,465
OPEB Curtailment gain		(169	)		—			(169	)		—			(107	)		—			(276	)		—
Restructuring costs		335			198			1,068			991			81			189			1,149			1,180

Income from operations		22,007			17,776			42,628			32,910			18,529			16,905			61,157			49,815
Interest expense, net		7,713			10,726			15,154			19,874			7,302			11,406			22,456			31,280
Other non-operating (income) expense, net		(853	)		131			(1,479	)		84			(1,408	)		438			(2,887	)		522

Income from continuing operations before income taxes		15,147			6,919			28,953			12,952			12,635			5,061			41,588			18,013
Provision for income taxes		5,278			2,583			10,127			4,848			4,000			1,637			14,127			6,485

Income (loss) from continuing operations		9,869			4,336			18,826			8,104			8,635			3,424			27,461			11,528
Income from discontinued operations, net of income taxes of $124 in 2008 and $220 in 2007.		—			466			(397	)		466
Net income (loss) from discontinued operations, net of income taxes of $43 and $583 for the year to date periods ended September 27, 2008 and September 29, 2007, respectively														172			886			(224	)		1,352

Net income	$	9,869		$	4,802		$	18,429		$	8,570		$	8,807		$	4,310		$	27,237		$	12,880

Quarter Ended ~~June 28,~~September 27, 2008 Compared with Quarter Ended ~~June 30,~~September 29, 2007

(Amounts in thousands unless otherwise noted)

Quarter Ended
June 28, 2008 June 30, 2007 Change %

Net sales
$ 167,893 $ 153,528 $ 14,365 9.4 %


	Quarter Ended
	September 27, 2008		September 29, 2007		Change		%

Net sales	$	159,448	$	147,278	$	12,170		8.3	%

The increase in net sales was primarily due to the 2007 acquisition of All Power, which contributed ~~$4.3~~$4.6 million to quarterly sales, as well as price increases. The price increases ~~strong after market~~were across all product lines and impacted all markets served and were a result of material cost increases, primarily copper and steel. Market share gains also contributed to the increase in sales as we were able to gain share in turf and garden, mining and materials handling. The increase was also due to the strength of several key markets including energy, driven by global power generation, oil and gas, primary metals and ~~mining. In addition, on~~mining, due to greater global demand for coal and metals. These increases were partially offset by a general weakening in other non-core markets served. On a constant currency basis, sales increased by ~~$10.5~~$11.3 million or ~~6.8%~~7.1% in ~~2008.~~the third quarter of 2008 compared to the same quarter in 2007.


	Quarter Ended											Quarter Ended
	June 28, 2008			June 30, 2007			Change		%			September 27, 2008			September 29, 2007			Change		%

Gross Profit	$	50,387		$	43,117		$	7,270		16.9	%	$	45,821		$	41,681		$	4,140		9.9	%
Gross Profit as a percent of sales		30.01	%		28.08	%							28.74	%		28.30	%

~~Cost~~the third quarter of ~~sales benefited from warehousing fees of $0.1 million billed as a part of our transition services provided~~2008 compared to ~~Vacon~~the same quarter in ~~connection with the sale of TB Wood’s Electronics Division to Vacon. These warehousing services may be provided until December 31, 2009.~~2007.

Quarter Ended
June 28, 2008 June 30, 2007 Change %

Selling, general and administrative expense (“SG&A”)
$ 26,448 $ 23,578 $ 2,870 12.2 %
SG&A as a percent of sales
15.8 % 15.4 %


	Quarter Ended
	September 27, 2008			September 29, 2007			Change		%

Selling, general and	$	25,655		$	22,981		$	2,674		11.6	%
administrative expense (“SG&A”) SG&A as a percent of sales		16.1	%		15.6	%

The SG&A increase was partially due ~~primarily~~ to the inclusion of All Power’s SG&A in the ~~second~~third quarter 2008, which added $0.6 million. The remaining increase resulted from increased ~~professional fees and increased~~ wages and ~~benefits. On a constant currency basis, SG&A expenses increased by $2.3 million or 9.7%~~benefits including healthcare costs.

Included in ~~2008.~~

SG&A was ~~net~~the receipt of ~~a credit of $0.3~~$0.2 million for billings related to our transition services agreement with Vacon for sales commissions, information technology, accounts payable and payroll services. ~~These~~A portion of these transition services may be provided until December 31, 2009.

Quarter Ended
June 28, 2008 June 30, 2007 Change %

Research and development expenses (“R&D”)
$ 1,766 $ 1,565 $ 201 12.8 %


	Quarter Ended
	September 27, 2008		September 29, 2007		Change		%

Research and development expenses (“R&D”)	$	1,663	$	1,606	$	57		3.5	%

R&D represents approximately 1% of sales in both periods.

Quarter Ended
June 28, 2008 June 30, 2007 Change %

Restrctructuring expenses
$ 335 $ 198 $ 137 69.2 %


	Quarter Ended
	September 27, 2008		September 29, 2007		Change			%

Restructuring expenses	$	81	$	189	$	(108	)		-57.1	%

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.~~areas (“Altra Plan”). The second was related to the acquisition of TB Wood’s and was intended to reduce duplicative staffing and consolidate ~~facilities..~~facilities (“TB Wood’s Plan”). We recorded approximately ~~$0.3~~$0.1 million in the ~~second~~third quarter of 2008 of restructuring expenses for moving and relocation, severance and non-cash asset impairment.

As part of the original Altra Plan, one of the Company’s manufacturing facilities was scheduled to close. As part of the plan and the plant closure agreement, employees were offered severance ~~pay. Non-cash asset impairment~~for continued service to the Company through their date of termination. The Company was ~~$0.1~~accruing the severance ratably from the communication date through the date of termination. In August 2008, the Company announced that the plant would not be closing and one manufacturing line would remain in operation at the facility. In connection with the announcement, the Company recorded a reduction of $0.5 million included as a component of restructuring costs in the accompanying condensed consolidated statement of income for the quarter to date period ended ~~June 28,~~September 27, 2008. Such amounts reflect the previously recorded severance estimated for those employees who will no longer be terminated.

Quarter Ended
June 28, 2008 June 30, 2007 Change %

Interest Expense, net
$ 7,713 $ 10,726 $ (3,013 ) -28.1 %


	Quarter Ended
	September 27, 2008		September 29, 2007		Change			%

Interest Expense, net	$	7,302	$	11,406	$	(4,104	)		-36.0	%

Net interest expense decreased due to the lower average outstanding balance of 11.25% Senior Notes and 9% Senior Secured Notes during the ~~second~~third quarter of 2008, which resulted in lower interest of ~~$1.0~~$0.6 million. In addition, during the quarter ended ~~June 30,~~September 29, 2007 there were ~~$2.0~~$2.8 million of additional prepayment premiums and other fees associated with the paydown of the Senior ~~Notes and a bridge loan fee of $0.5 million.~~Notes. For a more detailed description of the 9% Senior Secured Notes and the 11.25% Senior Notes, please see Note 12 to our Condensed Consolidated Financial Statements in Part I Item I1 of this Form 10-Q.

Quarter Ended
June 28, 2008 June 30, 2007 Change %

Other non-operating (income) expense, net
$ (853 ) $ 131 $ (984 ) -751 %


	Quarter Ended
	September 27, 2008			September 29, 2007		Change			%

Other non-operating (income) expense, net	$	(1,408	)	$	438	$	(1,846	)		-421	%

Other non-operating (income) expense included rental income of ~~$0.1~~$0.2 million for facility rentals under lease agreements which were part of the sale of TB Wood’s Electronics Division and have a term of two years, with annual extensions thereafter at the lessee’s, or the Company’s, option. ~~In addition, the Company received securities in a bankruptcy settlement and in turn sold the securities in the open market.~~ The ~~Company received $0.3 million for the securities. The remaining~~ increase was primarily due to the net gain on foreign currency ~~transactions.~~

Quarter Ended
June 28, 2008 June 30, 2007 Change %

Earnings before interest, taxes, depreciation and amortization (“EBITDA”)
$ 28,255 $ 24,178 $ 4,077 16.9 %

To reconcile EBITDA to net income for the quarter ended June 28, 2008, we added back to net income $5.3 million provision for income taxes, $7.7 million of net interest expense and $5.4 million of depreciation and amortization expenses. To reconcile net income to EBITDA for the quarter ended June 30, 2007, we added back to net income $2.6 million provision for income taxes, $10.7 million of net interest expense and $6.1 million of depreciation and amortization expenses. The EBITDA increase was duetransactions primarily in relation to the ~~acquisition of All Power’s EBITDA of $0.6 million, strategic price increases, sales volume gains~~British Pound Sterling and Euro, which both experienced a decline against the US dollar in ~~our base products, and cost savings measures.~~Q3 2008.


	Quarter Ended											Quarter Ended
	June 28, 2008			June 30, 2007			Change		%			September 27, 2008			September 29, 2007			Change		%

Provision for income taxes, continuing operations	$	5,278		$	2,583		$	2,695		104.3	%	$	4,000		$	1,637		$	2,363		144.3	%
Provision for income taxes as a % of income before taxes		34.8	%		37.3	%							31.7	%		32.3	%

occurred after the first quarter of 2007, there is no impact on the first quarter 2007. The Electronics Division’s operating activity for the remaining quarters of 2007 were reclassified as a discontinued operation. For the approximately nine-month period from April 5, 2007 to December 31, 2007, the Electronics Division recorded $28.7 million in sales, income before taxes of $4.1 million, and net loss after taxes of $2.0 million, which was classified as discontinued operations in the remaining three quarters of 2007 for comparative purposes.

~~Year to Date Period Ended June 28, 2008 Compared with Year to Date Period Ended June 30, 2007~~

~~(Amounts in thousands unless otherwise noted)~~

Year to Date Period Ended
June 28, 2008 June 30, 2007 Change %

Net sales
$ 331,075 $ 286,234 $ 44,841 15.7 %

The increase in net sales was primarily due to the 2007 acquisitions of TB Wood’s and All Power, which contributed $27.1 million to year to date sales. The remaining increase in net sales was due to price increases, strong after market sales, the strength of several key markets including energy, primary metals and mining. On a constant currency basis sales, increased by $38.1 million or 13.3% in 2008.

Year to Date Period Ended
June 28, 2008 June 30, 2007 Change %

Gross Profit
$ 98,185 $ 81,165 $ 17,020 21.0 %
Gross Profit as a percent of sales
29.7 % 28.4 %

The increase in gross profit was primarily due to the 2007 acquisitions of TB Wood’s and All Power, which added gross profit of $7.0 million. Gross profit of other operations also increased due to price increases, an increase in low cost country material sourcing and manufacturing, and further manufacturing efficiencies as a result of continued application of the Altra Business System, including lean management with emphasis on quality, delivery, and operational cost improvements. On a constant currency basis, gross profit increased by $14.9 million or 18.4% during 2008.

Cost of sales benefited from warehousing fees of $0.3 million billed as a part of our transition services which was entered into in connection with the sale of TB Wood’s Electronics Division. These warehousing services may be provided until December 31, 2009.

Year to Date Period Ended
June 28, 2008 June 30, 2007 Change %

Selling, general and administrative expense (“SG&A”)
$ 51,161 $ 44,405 $ 6,756 15.2 %
SG&A as a percent of sales
15.5 % 15.5 %

The SG&A increase was due primarily to the inclusion of TB Wood’s and All Power’s SG&A in the year to date period ended June 28, 2008, which added $3.8 million. The remaining increase resulted from additional amortization of intangible assets associated with the TB Wood’s acquisition, and wage and benefits increases and increased professional fees. On a constant currency basis, SG&A increased by $5.7 million or 12.9%.

SG&A was net of a credit of $0.7 million for billings related to our transition services agreement with Vacon for sales commissions, information technology, accounts payable and payroll services. These transition services may be provided until December 31, 2009.

Net interest expense decreased due to the lower average outstanding balance of 11.25% Senior Notes during the year to date period ended June 28, 2008, which resulted in lower interest and of $2.4 million compared to the prior year period. In addition, in 2007, the Company incurred $3.4 million of prepayment premiums associated with the paydown of the senior notes. This was offset by $2.4 million of interest associated with the additional Senior Secured Notes that were issued in the second quarter of 2007. For a more detailed description of the 9% Senior Secured Notes and the 11.25% Senior Notes, please see Note 12 to our Condensed Consolidated Financial Statements in Item I of this Form 10-Q.

Year to Date Period Ended
June 28, 2008 June 30, 2007 Change %

Other non-operating (income) expense, net
$ (1,479 ) $ 84 $ (1,563 ) -1861 %

Other non-operating (income) expense included rental income of $0.3 million for facility rentals under lease agreements which were part of the sale of TB Wood’s Electronics Division and have a term of two years, with annual extensions thereafter at the lessee’s, or the Company’s, option. The remaining increase was primarily due to the net gain on foreign currency transactions and the receipt of $0.3 million in securities as part of a bankruptcy settlement.

Year to Date Period Ended
June 28, 2008 June 30, 2007 Change %

Earnings before interest, taxes, depreciation and amortization (“EBITDA”)
$ 54,645 $ 43,824 $ 10,821 24.7 %

To reconcile EBITDA to net income for the year to date period ended June 28, 2008, we added back to net income $10.1 million provision for income taxes, $15.2 million of net interest expense and $10.9 million of depreciation and amortization expenses. To reconcile net income to EBITDA for the year to date period ended June 30, 2007, we added back to net income $4.9 million provision for income taxes, $19.9 million of net interest expense and $10.5 million of depreciation and amortization expenses. The EBITDA increase was due to the acquisition of TB Wood’s and All Power’s EBITDA of $4.7 million, strategic price increases, sales volume gains in our base products, and cost savings measures.

Year to Date Period Ended
June 28, 2008 June 30, 2007 Change %

Provision for income taxes, continuing operations
$ 10,127 $ 4,848 $ 5,279 108.9 %
Provision for income taxes as a % of income before taxes
35.0 % 37.4 %

The 2008 provision for income taxes, as a percentage of income before taxes, was lower than that of 2007, primarily due to the effect of reductions of tax rates in several foreign jurisdictions and change in earnings mix among tax jurisdictions.

~~Discontinued Operations~~

On December 31, 2007, we completed the divestiture of our TB Wood’s adjustable speed drives business (“Electronics Division”) to Vacon for $29.0 million. The decision to sell the Electronics Division was made to allow us to continue our strategic focus on our core electro-mechanical power transmission business. As of December 31, 2007, $11.9 million of cash had been received for the purchase of the Electronics Division, and the remaining $17.1 million was recorded as a receivable for the sale of the Electronics Division on the consolidated balance sheet, which was received in January 2008.

The Electronics Division was classified as a discontinued operation in the fourth quarter of 2007 and, accordingly, the operating results of the Electronics Division were segregated from continuing operations in the consolidated statements of income for the periods subsequent to the acquisition of TB Wood’s on April 5, 2007 through December 31, 2007.

Year to Date Period Ended September 27, 2008 Compared with Year to Date Period Ended September 29, 2007

(Amounts in thousands unless otherwise noted)


	Year to Date Period Ended
	September 27, 2008		September 29, 2007		Change		%

Net sales	$	490,523	$	433,512	$	57,011		13.2	%

The increase in net sales was primarily due to the 2007 acquisitions of TB Wood’s and All Power, which contributed $31.7 million to year to date sales. The remaining increase in net sales was due to price increases. The price increases were across all product lines and impacted all markets served and were a result of material cost increases, primarily copper and steel. Due to our focus on OEM customers we benefited during the first half of 2008 from strong aftermarket sales as customers repaired or replaced equipment which contained our products. Market share gains also contributed to the increase in sales as we were able to gain share in turf and garden, mining and materials handling. The increase was also due to the strength of several key markets including energy, driven by global power generation, oil and gas, primary metals and mining, due to greater global demand for coal and metals. These increases were partially offset by a general weakening during the third quarter of 2008 in other non-core markets served. On a constant currency basis, sales increased by $49.4 million or 11.4% for the year to date period ended September 27, 2008 compared to the comparable period in 2007.


	Year to Date Period Ended
	September 27, 2008			September 29, 2007			Change		%

Gross Profit	$	144,006		$	122,846		$	21,160		17.2	%
Gross Profit as a percent of sales		29.4	%		28.3	%

The increase in gross profit was primarily due to the 2007 acquisitions of TB Wood’s and All Power, which added gross profit of $8.2 million. Gross profit of other operations also increased due to price increases, an increase in low cost country material sourcing and manufacturing and further manufacturing efficiencies as a result of continued application of the Altra Business System, including lean management with emphasis on quality, delivery, and operational cost improvements. These increases were partially offset by material cost increases, primarily copper and steel. On a constant currency basis, gross profit increased by $18.8 million or 15.3% during the year to date period ended September 27, 2008 compared with the comparable period in 2007.

Cost of sales include receipt of warehousing fees of $0.3 million billed as a part of our transition services agreement which was entered into in connection with the sale of TB Wood’s Electronics Division, which increased our gross profit. These warehousing services may be provided until December 31, 2009.


	Year to Date Period Ended
	September 27, 2008			September 29, 2007			Change		%

Selling, general and administrative expense (“SG&A”)	$	76,816		$	67,386		$	9,430		14.0	%
SG&A as a percent of sales		15.7	%		15.5	%

The SG&A increase was due primarily to the inclusion of TB Wood’s and All Power’s SG&A in the year to date period ended September 27, 2008, which added $4.8 million. The remaining increase resulted from additional amortization of intangible assets associated with the TB Wood’s acquisition, and wage and benefits increases, including healthcare costs and increased professional fees. On a constant currency basis, SG&A increased by $8.2 million or 12.2%.

Included in SG&A was the receipt of $0.9 million for billings related to our transition services agreement with Vacon for sales commissions, information technology, accounts payable and payroll services, which reduces SG&A for the period. These transition services may be provided until December 31, 2009.


	Year to Date Period Ended
	September 27, 2008		September 29, 2007		Change		%

Research and development expenses (“R&D”)	$	5,160	$	4,465	$	695		15.6	%

R&D increased primarily due to the inclusion of TB Wood’s in the year to date period ended September 27, 2008, which amounted to $0.4 million additional R&D.


	Year to Date Period Ended
	September 27, 2008		September 29, 2007		Change			%

Restrctructuring expenses	$	1,149	$	1,180	$	(31	)		-2.6	%

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 (“Altra Plan”). The second was related to the acquisition of TB Wood’s and was intended to reduce duplicative staffing and consolidate facilities (“TB Wood’s Plan”). We recorded approximately $1.1 million in the year to date period 2008 of restructuring expenses for moving and relocation, and severance. Non-cash asset impairment was $0.2 million for the year to date period ended September 27, 2008.

As part of the original Altra Plan, one of the Company’s manufacturing facilities was scheduled to close. As part of the plan and the plant closure agreement, employees were offered severance for continued service to the Company through their date of termination. The Company was accruing the severance ratably from the communication date through the date of termination. In August 2008, the Company announced that the plant would not be closing and one manufacturing line would remain in operation at the facility. In connection with the announcement, the Company recorded a reduction of $0.5 million included as a component of restructuring costs in the accompanying condensed consolidated statement of income for the year to date period ended September 27, 2008. Such amounts reflect the previously recorded severance estimated for those employees who will no longer be terminated.


	Year to Date Period Ended
	September 27, 2008		September 29, 2007		Change			%

Interest Expense, net	$	22,456	$	31,280	$	(8,824	)		-28.2	%

Net interest expense decreased due to the lower average outstanding balance of 11.25% Senior Notes during the year to date period ended September 27, 2008, which resulted in lower interest of $2.8 million compared to the prior year period. In addition, in 2007, the Company incurred an additional $6.6 million of prepayment premiums associated with the paydown of the senior notes and $0.5 million in a bridge fee. This was offset by $2.2 million of interest associated with the additional Senior Secured Notes that were issued in the second quarter of 2007. For a more detailed description of the 9% Senior Secured Notes and the 11.25% Senior Notes, please see Note 12 to our Condensed Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.


	Year to Date Period Ended
	September 27, 2008			September 29, 2007		Change			%

Other non-operating (income) expense, net	$	(2,887	)	$	522	$	(3,409	)		-653	%

Other non-operating (income) expense included rental income of $0.5 million for facility rentals under lease agreements which were part of the sale of TB Wood’s Electronics Division and have a term of two years, with annual extensions thereafter at the lessee’s, or the Company’s, option. The remaining increase was primarily due to the net gain on foreign currency transactions in the third quarter of 2008 and the receipt of $0.3 million in securities as part of a bankruptcy settlement.


	Year to Date Period Ended
	September 27, 2008			September 29, 2007			Change		%

Provision for income taxes, continuing operations	$	14,127		$	6,485		$	7,642		117.8	%
Provision for income taxes as a % of income before taxes		34.0	%		36.0	%

Discontinued Operations

On December 31, 2007, we completed the divestiture of our TB Wood’s adjustable speed drives business (“Electronics Division”) to Vacon for $29.0 million. The decision to sell the Electronics Division was made to allow us to continue our strategic focus on our core electro-mechanical power transmission business. As of December 31, 2007, $11.9 million of cash had been received for the purchase of the Electronics Division, and the remaining $17.1 million which was received in January 2008 and was recorded as a receivable for the sale of the Electronics Division on the consolidated balance sheet on December 31, 2007.

The Electronics Division was classified as a discontinued operation in the fourth quarter of 2007 and, accordingly, the operating results of the Electronics Division were segregated from the continuing operations in the consolidated statements of income for the periods subsequent to the acquisition of TB Wood’s on April 5, 2007 through December 31, 2007. ~~Since the purchase of TB Wood’s~~

Loss from discontinued operations in the year to date period ended June 28, 2008 was comprised of a purchase price working capital adjustment of $0.1 million after taxes and an adjustment to deferred taxes of $0.3 million, which decreased the previously recorded gain on sale.

Liquidity and Capital Resources

Net Cash

June 28, 2008 December 31, 2007
(in thousands)

Cash and cash equivalents
$ 43,232 $ 45,807


	September 27, 2008		December 31, 2007
	(in thousands)
Cash and cash equivalents	$	49,822	$	45,807

Cash and cash equivalents ~~decreased $2.6~~increased $4.0 million in the year to date period ended ~~June 28,~~September 27, 2008 due to the following:

Net cash provided by operating activities for the year to date period ended ~~June 28,~~September 27, 2008 of ~~$6.6~~$31.6 million resulted mainly from cash provided by net income of ~~$18.4~~$27.2 million, plus the add-back of non-cash depreciation, amortization, stock based compensation, disposal of fixed assets, accretion of debt discount/premium ~~loss on sale of the Electronics division~~ and deferred financing costs of ~~$14.3~~$21.1 million, offset by a net increase in operating assets and liabilities of ~~$25.2~~$14.9 million, due mainly to ~~an $18.1~~a $14.9 million increase in trade receivables, ~~$0.7~~$1.6 million of income from foreign currency transactions and ~~$0.2~~$0.3 million of OPEB curtailment gain. The increase in ~~A/R~~accounts receivable was primarily due to ~~record sales in June 2008 versus December 2007 and~~ timing of payments from certain large customers who paid balances in full at December 31, 2007.

Net cash received from investing activities of ~~$9.6~~$5.1 million for the year to date period ended ~~June 28,~~September 27, 2008 resulted ~~primarily~~ from ~~$17.2~~$17.3 million from the proceeds from the sale of the Electronics Division, offset by the purchase of manufacturing equipment of ~~$7.6~~$12.2 million.

Net cash used by financing activities of ~~$18.8~~$31.6 million for the year to date period ended ~~June 28,~~September 27, 2008 consisted ~~primarily~~ of payments on the Senior Secured Notes of ~~$15.0~~$27.5 million, payments on the TB Wood’s revolving line of credit of $1.7 million, payments on the Senior Notes of $1.3 million, payments on mortgages of $0.2 million and payments of capital lease obligations of ~~$0.6~~$0.8 million.

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, 2007 for further discussion of the factors that may affect our liquidity.~~

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, if at all, at the time we are seeking funds. See the ~~section~~Risk factor entitled “Our ~~substantial level of indebtedness~~leverage could adversely affect our financial ~~condition, harm our ability~~health and make us vulnerable to ~~react to changes to our business~~adverse economic and ~~prevent us from fulfilling our obligations on the notes~~industry conditions” in our Annual Report on Form 10-K for the year ended December 31, 2007 for further discussion of the factors that may affect our liquidity. 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.

Contractual Obligations

As of ~~June 28,~~September 27, 2008, the outstanding principal balance of our Senior Notes was ~~£3.3~~3.3 million, or approximately ~~$6.4~~$6.0 million. The remaining principal balance is due February 13, 2013.

In April 2007, we completed a follow-on offering of an aggregate of $105.0 million of the existing Senior Secured Notes. As of ~~June 28,~~September 27, 2008, the remaining principal balance on our Senior Secured Notes was ~~$255.0~~$242.5 million. The balance is due December 1, 2011.

From time to time, ~~the Company~~we may repurchase ~~its~~our 9% ~~senior secured notes~~Senior Secured Notes or ~~the~~our 11¹/4% ~~senior notes~~Senior Notes in open market transactions or privately negotiated ~~transactions.~~transactions, subject to certain restrictions in our senior credit facility.

In connection with the TB Wood’s acquisition, we assumed $5.3 million of variable rate demand revenue bonds. $3.0 million of these bonds mature in 2024 and $2.3 million mature in 2022. We expect to pay the bonds associated with the Chattanooga, Tennessee facility within 12 months, totaling $2.3 million. In addition, we refinanced, concurrent with the acquisition, $13.0 million ofthen outstanding under the TB Wood’s revolving credit agreement. As of ~~June 28,~~September 27, 2008, there iswas $6.0 million outstanding, which is due in 2010.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~Information~~We have exposure to changes in commodity prices principally related to metals including steel, copper and aluminum. The Company primarily manages the risk associated with such increases through the use of surcharges or general pricing increases for the related products. The Company does not engage in the use of financial instruments to hedge its commodities price exposure.

Additional information concerning market risk is contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2007. There were no additional material changes in our exposure to market risk from December 31, 2007.

Item 4. Controls and Procedures

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 ~~June 28,~~September 27, 2008.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide 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 ~~June 28,~~September 27, 2008, 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

The Company is involved in various pending legal proceedings arising out of its ordinary course of business. None of these legal proceedings is expected to have a material adverse effect on the financial condition of the Company. With respect to these proceedings, management believes that it will prevail, has adequate insurance coverage or has established appropriate reserves to cover potential liabilities. 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 financial condition of the Company.

Item 1A. Risk Factors

The reader should carefully consider the Risk Factors ~~listed~~described below and in our Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission. Those risk factors described below, elsewhere in this report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2007 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 this Form 10-Q and elsewhere. ~~Management does not believe there have been any material changes in our risk factors as stated in our Annual Report on Form 10-K for the year ended December 31, 2007.~~ All risk factors stated in our Annual Report on Form 10-K for the year ended December 31, 2007 are incorporated herein by reference.

Continued extreme volatility and disruption in global financial markets could significantly impact our customers, weaken the markets we serve and harm our operations and financial performance.

Our financial performance depends, in large part, on conditions in the markets that we serve and on the U.S. and global economies in general. As widely reported, U.S. and global financial markets have been experiencing extreme disruption recently, including, among other things, a tightening in the credit markets, a low level of liquidity in many financial markets, and extreme volatility in credit and equity markets. The present financial crisis and uncertain economic environment may significantly impact customers in the markets we serve and as a result could reduce our sales, profitability and long-term anticipated growth rate.

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 Holders

~~Our annual meeting of stockholders was held on May 8, 2008. The following matters were voted upon:~~

Edmund M. Carpenter, Carl R. Christenson, Lyle G. Ganske, Michael L. Hurt, Michael S. Lipscomb, Larry P. McPherson and James H. Woodward, Jr. were elected to serve as Directors of the Company until the 2009 Annual Meeting of Stockholders and until the successors are duly elected and qualified.

Mr. Carpenter was elected with 22,164,561 votes “FOR” and 91,267 votes “WITHHELD”, Mr. Christenson was elected with 22,164,726 votes “FOR” and 91,102 votes “WITHHELD”, Mr. Ganske was elected with 22,150,741 votes “FOR” and 105,087 votes “WITHHELD”, Mr. Hurt was elected with 22,024,424 votes “FOR” and 231,404 “WITHHELD”, Mr. Lipscomb was elected with 22,151,061 votes “FOR” and 104,767 votes “WITHHELD”, Mr. McPherson was elected with 21,702,824 votes “FOR” and 553,004 votes “WITHHELD” and Mr. Woodward was elected with 19,566,670 votes “FOR” and 2,689,158 votes “WITHHELD”.

The stockholders approved the ratification of the Audit Committee’s selection of Ernst & Young, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2008, with 22,203,424 votes “FOR”, 46,247 votes “AGAINST” and 6,156 votes “ABSTAINING”.None.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are filed as part of this report:


Balance December 31, 2007	$	114,979		$	114,979
Adjustments to acquisition related tax contingencies		(194	)		(995	)
Impact of changes in foreign currency		567			(1,052	)

Balance June 28, 2008	$	115,352
Balance September 27, 2008				$	112,932


	June 28, 2008				December 31, 2007				September 27, 2008				December 31, 2007
			Accumulated				Accumulated				Accumulated				Accumulated
	Cost		Amortization		Cost		Amortization		Cost		Amortization		Cost		Amortization
Other Intangible assets
Intangible assets not subject to amortization:
Tradenames and trademarks	$	30,730		—		30,730		—	$	30,730	$	—	$	30,730	$	—
Intangible assets subject to amortization:
Customer relationships		62,038		12,756		62,038		10,139		62,038		13,952		62,038		10,139
Product technology and patents		5,232		2,615		5,232		2,348		5,232		2,881		5,232		2,348
Impact of changes in foreign currency		3,850		—		3,430		—		2,475		—		3,430		—

Total intangible assets	$	101,850	$	15,371	$	101,430	$	12,487	$	100,475	$	16,833	$	101,430	$	12,487


	June 28, 2008			June 30, 2007			September 27, 2008			September 29, 2007
Balance at beginning of period	$	4,098		$	2,083		$	4,098		$	2,083
Accrued warranty costs		1,028			758			1,562			1,428
Balance assumed with TB Wood’s acquisition		—			795			—			224
Payments and adjustments		(2,006	)		(1,261	)		(2,413	)		(336	)

Balance at end of period	$	3,120		$	2,375		$	3,247		$	3,399


				December 31,						December 31,
	June 28, 2008			2007			September 27, 2008			2007
Revolving credit agreement	$	—		$	—		$	—		$	—
TB Wood’s revolving credit agreement		6,000			7,700			6,000			7,700
Overdraft agreements		—			—			—			—
9% Senior Secured Notes		255,000			270,000			242,500			270,000
11.25% Senior Notes		6,434			7,790			6,017			7,790
Variable rate demand revenue bonds		5,300			5,300			5,300			5,300
Mortgages		2,623			2,639			2,399			2,639
Capital leases		2,867			3,449			2,603			3,449
Less: debt discount and premium, net of accretion		(2,454	)		(2,812	)		(2,053	)		(2,812	)

Total long-term debt	$	275,770		$	294,066		$	262,766		$	294,066


	Page #
PART I—FINANCIAL INFORMATION		2
Item 1. Unaudited Condensed Consolidated Financial Statements		2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1918
Item 3. Quantitative and Qualitative Disclosures about Market Risk		29
Item 4. Controls and Procedures		29

PART II—OTHER INFORMATION
Item 1. Legal Proceedings		30
Item 1A. Risk Factors		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3. Defaults Upon Senior Securities		30
Item 4. Submission of Matters to a Vote of Security Holders		30
Item 5. Other Information		30
Item 6. Exhibits		30

SIGNATURES		32
~~EX-31.1 Section 302~~Ex-31.1 Certification of CEO
~~EX-31.2 Section 302~~Ex-31.2 Certification of CFO
~~EX-32.1 Section 906~~Ex-32.1 Certification of CEO
~~EX-32.2 Section 906~~Ex-32.2 Certification of CFO


	Amounts in millions
					December 31,				Amounts in millions
	June 28, 2008				2007				September 27, 2008				December 31,2007
Debt:
Revolving credit agreement	$	—			$	—			$	—			$	—
TB Wood’s revolving credit agreement		6.0				7.7				6.0				7.7		��
Overdraft agreements		—				—				—				—
9% Senior Secured Notes		255.0				270.0				242.5				270.0
11.25% Senior Notes		6.4				7.8				6.0				7.8
Variable rate demand revenue bonds		5.3				5.3				5.3				5.3
Mortgages		2.6				2.6				2.4				2.6
Capital leases		2.9				3.4				2.6				3.4

Total Debt	$	278.2			$	296.8			$	264.8			$	296.8
Cash	$	43.2			$	45.8			$	49.8			$	45.8
Net Debt	$	235.0	58.3	%	$	251.0	63.2	%	$	215.0	55.8	%	$	251.0	63.2	%

Shareholders’ Equity	$	168.2	41.7	%	$	146.4	36.8	%	$	170.5	44.2	%	$	146.4	36.8	%
Total Capitalization	$	403.2	100	%	$	397.4	100	%	$	385.5	100	%	$	397.4	100	%


Exhibit
Number		Description

3.1(1)		Second Amended and Restated Certificate of Incorporation of the Registrant.

~~3.2(1)~~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.

(1)		Incorporated by reference to Altra Holdings, Inc.’s Registration Statement on Form S-1, as amended, filed with the Securities and Exchange Commission on December 4, 2006.

(2)		Incorporated by reference to Exhibit 3.1 of Altra Holdings, Inc.’s Current Report on Form 8-K filed on October 27, 2008.


	ALTRA HOLDINGS, INC.

~~August 5,~~November 6, 2008	By: Name:	/s/ Michael L. Hurt
Michael L. Hurt
	~~Name:~~	~~Michael L. Hurt~~
	Title	Chairman and Chief Executive Officer

~~August 5,~~November 6, 2008	By: Name:	/s/ Christian Storch
Christian Storch
	~~Name:~~	~~Christian Storch~~
	Title:	Vice President and Chief Financial Officer