UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~September 30, 2017~~March 31, 2022


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

For the transition period from to

Commission File Number: 001-33209

ALTRA INDUSTRIAL MOTION CORP.

(Exact name of registrant as specified in its charter)


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

300 Granite Street, Suite 201, Braintree, MA		02184
(Address of principal executive offices)		(Zip Code)

~~(781)~~ (781) 917-0600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	AIMC	Nasdaq Global Select Market

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. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 20, 2017, 29,275,362~~April 29, 2022, there were 65,059,097 outstanding shares of ~~Common Stock,~~the registrant’s common stock, $0.001 par value per ~~share, were outstanding.~~share.

TABLE OF CONTENTS


		Page #
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
~~Item 2.~~	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statement of Operations	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Cash Flows	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Notes to Unaudited Condensed Consolidated Interim Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2224
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3233
Item 4.	Controls and Procedures	3233

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	3334
Item 1A.	Risk Factors	3334
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3335
Item 3.	Defaults Upon Senior Securities	3335
Item 4.	Mine Safety Disclosures	3335
Item 5.	Other Information	3335
Item 6.	Exhibits	3436

SIGNATURES		35







		38

PART I - ~~FINANCI~~ALFINANCIAL INFORMATION

Item 1. Financial Statements ~~(unaudited)~~

ALTRA INDUSTRIAL MOTION CORP.

Condensed Consolidated Balance Sheets

Amounts in ~~thousands,~~millions, except share amounts


	September 30, 2017			December 31, 2016			March 31, 2022			December 31, 2021
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	53,151		$	69,118		$	183.7		$	246.1
Trade receivables, less allowance for doubtful accounts of $5,479 and $3,114 at September 30, 2017 and December 31, 2016, respectively		136,511			120,319
Trade receivables, less allowance for credit losses of $4.2 and $4.1 million at March 31, 2022 and December 31, 2021, respectively								269.6			224.5
Inventories		153,014			139,840			308.3			267.8
Income tax receivable		7,822			607			10.2			11.7
Assets held for sale								383.0			377.3
Prepaid expenses and other current assets		16,671			10,429			40.3			40.4
Assets held for sale		364			3,874
Total current assets		367,533			344,187			1,195.1			1,167.8
Property, plant and equipment, net		190,455			177,043			276.4			275.8
Goodwill								1,556.2			1,564.0
Intangible assets, net		160,939			154,683			1,036.0			1,057.2
Goodwill		203,574			188,841
Deferred income taxes		1,383			2,510			1.2			2.3
Other non-current assets, net		2,147			2,560
Other non-current assets								12.9			13.5
Operating lease right of use assets								47.0			50.0
Total assets	$	926,031		$	869,824		$	4,124.8		$	4,130.6
LIABILITIES, AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	59,624		$	60,845		$	179.0		$	173.3
Accrued payroll		29,761			31,302			58.5			81.8
Accruals and other current liabilities		38,137			35,080			81.1			77.0
Income tax payable		8,887			706			13.1			6.0
Current portion of long-term debt		380			43,690			13.2			11.1
Liabilities held for sale								53.1			53.0
Operating lease liabilities								14.1			14.3
Total current liabilities		136,789			171,623			412.1			416.5
Long-term debt - less current portion and net of unaccreted discount		295,223			325,969
Long-term debt, net of current portion								1,390.7			1,401.0
Deferred income taxes		57,471			61,084			243.2			250.5
Pension liabilities		27,269			23,691			29.4			29.9
Long-term taxes payable								1.8			2.7
Other long-term liabilities		25,714			4,109			5.8			7.3
Operating lease liabilities, net of current portion								34.8			37.6

Stockholders’ equity:
Common stock ($0.001 par value, 90,000,000 shares authorized, 29,054,378 and 27,206,162 issued and outstanding at September 30, 2017 and December 31, 2016, respectively)		29			27
Common stock ($0.001 par value per share, 120,000,000 shares authorized, 65,059,097 and 64,923,539 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively)								0.1			0.1
Additional paid-in capital		222,605			168,299			1,718.2			1,718.4
Retained earnings		215,766			191,108			317.2			277.6
Accumulated other comprehensive loss		(54,835	)		(76,086	)		(28.5	)		(11.0	)
Total stockholders’ equity		383,565			283,348			2,007.0			1,985.1
Total liabilities, and stockholders’ equity	$	926,031		$	869,824
Total liabilities and stockholders’ equity							$	4,124.8		$	4,130.6

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

ALTRA INDUSTRIAL MOTION CORP.

Condensed Consolidated Statements of Operations

Amounts in ~~thousands,~~millions, except per share data


	Quarter Ended				Year to Date Ended					Quarter Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016			March 31, 2022			March 31, 2021
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)			(Unaudited)
Net sales	$	214,623	$	173,132	$	653,415	$	536,259		$	511.7		$	472.1
Cost of sales		145,610		118,957		446,109		369,254			331.4			300.4
Gross profit		69,013		54,175		207,306		167,005			180.3			171.7
Operating expenses:
Selling, general and administrative expenses		41,009		36,142		123,012		105,548			88.6			89.8
Impairment charges											6.1			—
Research and development expenses		6,051		4,267		18,434		13,345			17.6			15.9
Restructuring costs		680		3,397		3,776		6,591			0.4			0.9
		47,740		43,806		145,222		125,484			112.7			106.6
Income from operations		21,273		10,369		62,084		41,521			67.6			65.1
Other non-operating income and expense:
Other non-operating (income) and expense:
Interest expense, net		1,811		2,815		5,547		8,615			11.3			16.9
Other non-operating expense (income), net		696		45		30		(438	)
Loss on extinguishment of convertible debt		—		—		1,797		—
Other non-operating income, net											(0.1	)		(1.5	)
		2,507		2,860		7,374		8,177			11.2			15.4
Income before income taxes		18,766		7,509		54,710		33,344			56.4			49.7
Provision for income taxes		5,489		2,196		15,723		9,872			11.6			10.5
Net income	$	13,277	$	5,313	$	38,987	$	23,472		$	44.8		$	39.2
Weighted average shares, basic		29,008		25,726		28,912		25,684			65.0			64.7
Weighted average shares, diluted		29,074		26,021		29,001		25,813			65.3			65.3
Net income per share:
Basic net income	$	0.46	$	0.21	$	1.35	$	0.91
Diluted net income	$	0.46	$	0.20	$	1.34	$	0.91
Cash dividend declared	$	0.17	$	0.15	$	0.49	$	0.45
Basic										$	0.69		$	0.61
Diluted										$	0.69		$	0.60
Cash dividend declared per share										$	0.08		$	0.06

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

ALTRA INDUSTRIAL MOTION CORP.

Condensed Consolidated Statements of Comprehensive Income (Loss)

Amounts in ~~thousands~~millions

Quarter Ended

Year to Date Ended

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net Income

$
13,277

$
5,313

$
38,987

$
23,472

Other Comprehensive income (loss):

Foreign currency translation adjustment

6,673

90

21,157

(1,000
)
Change in defined benefit pension plans

65

14

(232
)

134

Change in fair value of derivative financial instruments, net of tax

(331
)

—

326

—

Other comprehensive income (loss):

6,407

104

21,251

(866
)
Comprehensive income

$
19,684

$
5,417

$
60,238

$
22,606


	Quarter Ended
	March 31, 2022			March 31, 2021
	(Unaudited)			(Unaudited)
Net income	$	44.8		$	39.2
Other comprehensive income:
Reclassification of interest rate swap, net of tax		—			2.4
Amortization of actuarial losses, net of tax		(0.1	)		—
Foreign currency translation adjustment		(17.4	)		(43.0	)
Total other comprehensive loss:		(17.5	)		(40.6	)
Comprehensive income/(loss)	$	27.3		$	(1.4	)

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

ALTRA INDUSTRIAL MOTION CORP.

Condensed Consolidated Statements of Cash Flows

Amounts in ~~thousands~~millions


	Year to Date Ended						Quarter Ended
	September 30, 2017			September 30, 2016			March 31, 2022			March 31, 2021
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Cash flows from operating activities
Net income	$	38,987		$	23,472		$	44.8		$	39.2
Adjustments to reconcile net income to net operating cash flows:
Depreciation		19,764			16,235			10.2			13.1
Amortization of intangible assets		7,139			6,384			14.0			17.6
Amortization of deferred financing costs		449			590			0.3			1.2
Loss/(Gain) on foreign currency, net		241			(130	)
Accretion of debt discount, net		—			2,970
(Gain)/Loss on disposal / impairment of fixed assets		(36	)		582
Loss on extinguishment of debt		1,797			—
Stock based compensation		4,543			3,370
Amortization of inventory fair value adjustment		2,347			—
Gain on foreign currency, net								(0.3	)		(0.2	)
Accretion of debt discount							0.0				0.1
Non-cash amortization of interest rate swap expense								—			3.1
Impairment charges								6.1			—
(Gain)/Loss on disposal and other								(0.3	)		0.1
Benefit for deferred taxes								(4.4	)		—
Stock-based compensation								3.9			3.5
Changes in assets and liabilities:
Trade receivables		(9,701	)		(10,461	)
Trade receivables, net								(56.5	)		(21.5	)
Inventories		(9,478	)		(837	)		(37.9	)		(15.5	)
Accounts payable and accrued liabilities		(8,799	)		3,226			(6.3	)		5.7
Other current assets and liabilities		(2,392	)		728			5.4			(10.7	)
Other operating assets and liabilities		(1,572	)		765			(2.8	)		0.5
Net cash provided by operating activities		43,289			46,894
JVS transaction costs paid								(1.1	)		—
Net cash (used in) provided by operating activities								(24.9	)		36.2
Cash flows from investing activities
Purchase of property, plant and equipment		(23,261	)		(15,684	)		(17.8	)		(9.6	)
Proceeds from sale of Altra Industrial Motion Changzhou		3,221			—
Working capital settlement from prior year acquisitions		2,883			—
Net cash used in investing activities		(17,157	)		(15,684	)		(17.8	)		(9.6	)
Cash flows from financing activities
Payments on 2015 Revolving Credit Facility		(39,036	)		(30,870	)
Payments on Revolving Credit Facility								(5.0	)		—
Payments on Term Loan B Facility								—			(20.0	)
Payments on Term Loan A Facility								(2.5	)		—
Dividend payments		(13,256	)		(7,784	)		(5.2	)		(3.9	)
Borrowing under 2015 Revolving Credit Facility		7,000			3,000
Payments of equipment and working capital notes		(913	)		(3,181	)
Cash paid to redeem Convertible Notes		(954	)		—
Proceeds from mortgages and other debt		—			2,893
Net payments on financing leases, mortgages, and other obligations								(0.3	)		(0.4	)
Net proceeds from China debt								—			0.3
Shares surrendered for tax withholding		(2,089	)		(1,288	)		(4.1	)		(3.1	)
Purchases of common stock under share repurchase program		—			(4,713	)
Net cash used in financing activities		(49,248	)		(41,943	)		(17.1	)		(27.1	)
Effect of exchange rate changes on cash and cash equivalents		7,149			178			(2.6	)		(4.5	)
Net change in cash and cash equivalents		(15,967	)		(10,555	)		(62.4	)		(5.0	)
Cash and cash equivalents at beginning of year		69,118			50,320
Cash and cash equivalents at beginning of period								246.1			254.4
Cash and cash equivalents at end of period	$	53,151		$	39,765		$	183.7		$	249.4
Cash paid during the period for:
Interest	$	5,413		$	5,856
Income taxes		18,505			7,665
Non-cash Financing and Investing
Conversion of Convertible Notes to common stock	$	51,851		$	—
Interest paid on borrowings							$	4.9		$	6.4
Income taxes paid							$	11.5		$	16.6

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

ALTRA INDUSTRIAL MOTION CORP.

Condensed Consolidated Statements of Stockholders’ Equity

Amounts in ~~thousands~~millions

(Unaudited)

Common
Stock

Shares

Additional
Paid
in Capital

Retained
Earnings

Accumulated
Other
Comprehensive Income
(Loss)

Total

Balance at January 1, 2016

$
26

25,773

$
124,834

$
181,539

$
(63,832
)

$
242,567

Stock-based compensation and vesting
   of restricted stock

—

89

2,082

—

—

2,082

Net income

—

—

—

23,472

—

23,472

Dividends declared

—

—

—

(11,667
)

—

(11,667
)
Changes in Accumulated Other Comprehensive Loss

—

—

—

—

(866
)

(866
)
Repurchases of common
   stock - 177,053 shares

—

(177
)

(4,713
)

—

—

(4,713
)
Balance at September 30, 2016

$
26

25,685

$
122,203

$
193,344

$
(64,698
)

$
250,875

Balance at January 1, 2017

$
27

27,206

$
168,299

$
191,108

$
(76,086
)

$
283,348

Stock-based compensation and vesting
   of restricted stock

—

100

2,457

—

—

2,457

Net income

—

—

—

38,987

—

38,987

Conversion of convertible debt

2

1,748

51,849

—

—

51,851

Dividends declared

—

—

—

(14,329
)

—

(14,329
)
Changes in Accumulated Other Comprehensive Income

—

—

—

—

21,251

21,251

Balance at September 30, 2017

$
29

29,054

$
222,605

$
215,766

$
(54,835
)

$
383,565


	Common Stock		Shares		Additional Paid in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at January 1, 2022	$	0.1		64.9	$	1,718.4		$	277.6		$	(11.0	)	$	1,985.1
Stock-based compensation and vesting of restricted stock, net of withholdings		—		0.2		(0.2	)		—			—			(0.2	)
Net income		—		—		—			44.8			—			44.8
Dividends declared, $0.08 per share		—		—		—			(5.2	)		—			(5.2	)
Total comprehensive loss, net of tax		—		—		—			—			(17.5	)		(17.5	)
Balance at March 31, 2022	$	0.1		65.1	$	1,718.2		$	317.2		$	(28.5	)	$	2,007.0

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

ALTRA INDUSTRIAL MOTION CORP.

Condensed Consolidated Statements of Stockholders’ Equity

Amounts in millions

(Unaudited)


	Common Stock		Shares		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at January 1, 2021	$	0.1		64.7	$	1,706.0	$	269.5		$	21.1		$	1,996.7
Stock-based compensation and vesting of restricted stock, net of withholdings		—		0.1		0.4		—			—			0.4
Net income		—		—		—		39.2			—			39.2
Dividends declared, $0.06 per share		—		—		—		(3.9	)		—			(3.9	)
Total comprehensive loss, net of tax		—		—		—		—			(40.6	)		(40.6	)
Balance at March 31, 2021	$	0.1	$	64.8	$	1,706.4	$	304.8		$	(19.5	)	$	1,991.8

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

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in ~~thousands,~~millions, unless otherwise noted

1. Organization and Nature of Operations

Headquartered in Braintree, Massachusetts, Altra Industrial Motion Corp. (the “Company”, “Altra”, “we”, or “our”) is a leading ~~multi-national~~global designer, producer and marketer of a wide range of electro-mechanical power transmission motion control (“PTMC”) products. The Company brings together strong brands ~~covering over 42 product lines~~ with production facilities in ~~twelve~~16 countries. As of March 31, 2022, Altra’s leading brands ~~include~~included Ameridrives Couplings, Bauer Gear Motor, Bibby Turboflex, Boston Gear, Delroyd Worm Gear, Formsprag Clutch, Guardian Couplings, Huco, Industrial Clutch, Inertia Dynamics, Jacobs Vehicle Systems (“JVS”) (see Note 4 to the consolidated financial statements for further information regarding the divestiture of the JVS business), Kilian Manufacturing, Kollmorgen, Lamiflex Couplings, Marland Clutch, Matrix, Nook Industries, Nuttall Gear, Portescap, Stieber Clutch, Stromag, Svendborg Brakes, TB Wood’s, Thomson, Twiflex, Warner Electric, Warner Linear, and Wichita Clutch.

2. Basis of Presentation

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles ~~generally accepted~~ in the United States, ~~of America.~~or GAAP. These statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021, filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 28, 2022. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company’s financial position ~~for the interim periods presented,~~ and cash flows for the interim periods presented. The results are not necessarily indicative of future results. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure.

3. Recent Accounting Standards

Recent Accounting Pronouncements

In ~~August 2017,~~March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial ~~Accounting Standards Board ("FASB"~~Reporting (“ASU 2020-04”)~~issued Accounting Standards Update ("ASU") 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.~~. This ASU provides ~~new guidance about income statement classification and eliminates~~relief from certain accounting consequences that could result from the ~~requirement to separately measure and report hedge ineffectiveness. The entire change in fair value for qualifying hedge instruments included in~~global markets’ anticipated transition away from the ~~effectiveness will be recorded in other comprehensive income (OCI) and amounts deferred in OCI will be reclassified to earnings in the same income statement line item in which the earnings effect~~use of the ~~hedged item~~London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The relief provided by this ASU is ~~reported.~~elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The ~~guidance is~~optional amendments are effective ~~for interim and annual periods for the Company on January 1, 2019, with early adoption permitted.~~as of March 12, 2020 through December 31, 2022. The Company ~~does not expect~~is currently evaluating the effect of the adoption of this ~~ASU to have a material impact~~standard on ~~its Consolidated Financial Statements.~~the Company.

In October ~~2016,~~2021, the FASB issued ~~Accounting Standards Update ("ASU") 2016-16,~~ ~~Income Taxes~~ASU 2021-08, Business Combinations (Topic ~~740)~~805): ~~Intra-Entity Transfers of~~Accounting for Contract Assets ~~Other Than Inventory~~ (“and Contract Liabilities from Contracts with Customers, which amends the accounting related to contract assets and liabilities acquired in business combinations. Under current GAAP, an entity generally recognizes assets and liabilities acquired in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU ~~2016-16”)~~2021-08 requires that entities recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers. ~~This~~ ASU requires entities to recognize the income tax consequences of many intercompany asset transfers at the transaction date. The seller and buyer will immediately recognize the current and deferred income tax consequences of an intercompany transfer of an asset other than inventory. The tax consequences were previously deferred until the asset2021-08 is ~~sold to a third party or recovered through use. This guidance will be~~ effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and should be applied prospectively to business combinations occurring on or after the ~~Company on January 1, 2018. We are currently evaluating this guidance and the impact it will have on our consolidated financial statements.~~

~~In August 2016, the FASB issued Accounting Standards Update ("ASU") 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of certain cash receipts and cash payments (a consensus~~effective date of the ~~emerging issues task force)~~ (“ASU 2016-15”). This ASU addresses the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificantamendment. Early adoption is permitted, including adoption in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. This guidance will be effective for thean interim period. The Company ~~on January 1, 2018. We are~~is currently evaluating the impact of this new guidance ~~will have~~ on ~~our~~the consolidated financial statements.

4. Acquisitions and Divestitures

~~In February 2015,~~

Nook Industries Acquisition

On December 31, 2021, the ~~FASB~~Company acquired all of the issued ~~ASU 2016-02,~~ ~~Leases (Topic 842)~~ ~~(“ASU 2016-02”~~and outstanding equity interests of Nook Industries, LLC ("Nook")., a leader in the U.S. engineered linear motion industry. The ~~ASU requires management~~acquisition expands the Company's current portfolio of linear product offerings. The acquisition was accounted for as a business combination using the acquisition method of accounting and the results have been consolidated into the Company's Automation & Specialty ("A&S") segment.

The aggregate purchase price of approximately $138.5 million, inclusive of certain post-closing adjustments but subject to ~~recognize lease assets~~others, consisted of $125.2 million of cash transferred, net of $5.1 million of cash acquired, and ~~lease liabilities by lessees for all operating leases. The ASU is effective for periods beginning after December 15, 2018 and interim periods therein on~~ a modified retrospective basis. We are currently evaluating the impact this guidance will have on our consolidated financial statements and expect to recognize a significant lease obligation upon adoption.noncontingent purchase price

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in ~~thousands,~~millions, unless otherwise noted

~~In May 2014,~~holdback of $8.2 million. The purchase price holdback was recorded in accruals and other current liabilities at December 31, 2021 and was released in January 2022. The Company borrowed $130.0 million under its Revolving Credit Facility in December 2021 to finance the ~~FASB issued ASU No. 2014-09~~ ~~Revenue from Contracts~~transaction.

The fair value of all the acquired identifiable assets and liabilities summarized below are based on preliminary valuations and are subject to change as the Company obtains additional information during the acquisition measurement period. The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill. The goodwill is deductible for income tax purposes. The Company did not record any measurement period adjustments during the quarter ended March 31, 2022. The purchase price allocation as of the acquisition date is as follows:


	At Acquisition Date
Total cash consideration	$	130.3
Purchase price holdback		8.2
Fair value of consideration transferred		138.5

Recognized identifiable assets acquired and liabilities assumed:
Cash and cash equivalents		5.1
Receivables		3.7
Inventory		10.8
Prepaids and other current assets		0.4
Property, plant and equipment		12.8
Deferred tax asset		0.9
Other non-current assets		5.0
Intangibles		55.1
Accounts payable		(2.9	)
Accrued payroll		(0.7	)
Accrued expenses and other current liabilities		(2.7	)
Other long term liability		(4.6	)
Total identifiable net assets acquired		82.9
Goodwill	$	55.6

Intangible assets acquired consist of:
Customer relationships	$	54.0
Trade name		1.1
Total intangible assets	$	55.1

The following table sets forth the unaudited pro forma results of operations of the Company for the quarter ended March 31, 2021 as if the Company had acquired Nook on January 1, 2021. The pro forma information contains the actual operating results of the Company and the Nook business, adjusted to include the pro forma impact of (i) additional depreciation expense as a result of estimated depreciation based on the fair value of fixed assets; (ii) additional expense as a result of the estimated amortization of identifiable intangible assets; (iii) additional interest expense associated with ~~Customers~~ ~~(“ASU 2014-09”). ASU 2014-09 provides a single principles-based, five-step model~~the borrowings used to finance the acquisition and (iv) inventory fair value adjustment. These pro forma amounts do not purport to be ~~applied to all contracts with customers. The five steps are to (i) identify~~indicative of the ~~contracts with~~results that would have actually been obtained if the ~~customer, (ii) identify~~acquisition occurred at the ~~performance obligations~~beginning of the period or that may be obtained in the ~~contract, (iii) determine~~future.


	Pro forma (unaudited)
	Quarter Ended March 31, 2021
Total revenues	$	481.1
Net income (loss)		37.5
Basic earnings per share	$	0.58
Diluted earnings per share	$	0.57

JVS Divestiture

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

In the fourth quarter of 2021, the Company committed to a plan to sell our JVS business within our A&S reporting segment in an effort to exit the heavy-duty trucks and transportation industry. On February 8, 2022, the Company entered into a purchase and sale agreement with Cummins Inc. (the "Buyer") for $325.0 million in cash subject to customary adjustments, and on April 8, 2022, the Company completed the sale. Transaction costs related to the divestiture totaled approximately $9.4 million. The Company received net cash consideration of approximately $325.9 million, which remains subject to customary purchase price adjustments. The Company determined the criteria to be classified as held for sale were met and the assets and liabilities were presented as held for sale in the Consolidated Balance Sheets and measured at the lower of carrying value or fair value less cost to sell until the transaction ~~price, (iv) allocate~~is completed. The Company determined that the ~~transaction price~~disposal group classified as held for sale does not meet the criteria for classification as discontinued operations as the disposal is not considered a strategic shift that has a major effect on the Company’s operations and financial results. The JVS business is not a significant disposal based on the Company's quantitative and qualitative evaluation.

Before measuring the fair value less costs to sell of the disposal group as a whole, the Company first reviewed individual assets and liabilities to determine if any fair value adjustments were required and concluded no individual asset impairments were required. Then, based on the purchase and sale agreement entered into by the Company and the Buyer, the Company determined the fair value of the disposal group to be equal to the ~~performance obligations~~selling price, less costs to sell. Based on this review, during the fourth quarter of 2021, the Company recorded a non-cash goodwill impairment charge of $60.0 million as the sale was considered to be a triggering event to evaluate goodwill impairment for the JVS reporting unit. Additionally, the Company recorded an asset held for sale impairment charge of $82.4 million, for a total impairment charge of $142.4 million in 2021. The Company recorded an additional asset held for sale impairment charge of $6.1 million during the quarter ended March 31, 2022.

The assets and liabilities of the JVS business classified as held for sale at March 31, 2022 and December 31, 2021 were as follows:


	March 31, 2022				December 31, 2021
Assets
Current Assets
Trade receivables	$	21.5			$	11.3
Inventories		12.6				16.3
Prepaid expenses and other current assets		4.2				2.3
Property, plant and equipment, net		66.7				64.6
Goodwill		—				—
Intangible assets, net		364.7				364.5
Other assets		0.7				0.7
Impairment on carrying value		(87.4	)	(1)		(82.4	)	(2)
Total assets held for sale	$	383.0			$	377.3

Liabilities
Current Liabilities
Accounts payable	$	20.2			$	20.8
Other current liabilities		9.6				9.8
Deferred tax liabilities		22.4				22.3
Other liabilities		0.9				0.1
Total liabilities held for sale	$	53.1			$	53.0
(1) Includes the effect of approximately $11.2 million of favorable cumulative foreign currency translation adjustment and accumulated other post retirement benefit obligation gains. Additionally, assets held for sale balance reflects approximately $9.4 million of estimated transaction costs incurred, approximately $1.1 million of transaction costs paid during the quarter, and a favorable working capital adjustment of approximately $2.0 million.
(2) Includes the effect of approximately $10.8 million of favorable cumulative foreign currency translation adjustment and accumulated other post retirement benefit obligation gains and approximately $11.5 million of estimated transaction costs incurred.

5. Revenue Recognition

We sell our products through 3 primary commercial channels: original equipment manufacturers (OEMs), industrial distributors and direct to end users. Each of our segments sells similar products, which are balanced across end-user industries including, without limitation, energy, food processing, general industrial, material handling, mining, transportation, industrial automation, robotics, medical devices, and turf & garden.

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

As the Company’s standard payment terms are less than one year, the Company has elected the practical expedient under Accounting Standards Codification (“ASC”) 606-10-32-18 to not assess whether a contract ~~and (v) recognize revenue when each performance obligation~~has a significant financing component. Revenue is ~~satisfied. Revenue will be~~ recognized when ~~promised goods or services are~~control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment from the Company’s manufacturing site or delivery to the customer’s named location. In determining whether control has transferred, the Company considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer. In certain circumstances, the Company manufactures customized product without alternative use for its customers, which would generally result in the transfer of control over time. The Company has evaluated the amount of revenue subject to recognition over time and concluded that it is immaterial.

The following table disaggregates our revenue for each reportable segment. The Company believes that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.


	Quarter Ended
	March 31, 2022			March 31, 2021
Power Transmission Technologies	$	253.7		$	221.0
Automation & Specialty		259.2			252.1
Inter-segment eliminations		(1.2	)		(1.0	)
Total net sales	$	511.7		$	472.1

Net sales by geographic region based on point of shipment origin are as follows:


	Quarter Ended
	March 31, 2022		March 31, 2021
North America (primarily U.S.)	$	291.3	$	247.0
Europe excluding Germany		93.4		84.9
Germany		56.4		51.0
China		41.9		64.1
Asia and other excluding China		28.7		25.1
Total net sales	$	511.7	$	472.1

The payment terms and conditions in our customer contracts vary. In some cases, customers will partially prepay for their goods; in other cases, after appropriate credit evaluations, payment will be due in arrears. In addition, there are constraints that cause variability in the ultimate consideration to be recognized. These constraints typically include early payment discounts, volume rebates, rights of return, surcharges, and other customer considerations.

Payments received from customers are recorded as accounts receivable when an ~~amount that reflects~~unconditional right to the consideration ~~expected~~exists. A contract asset is recognized when the Company satisfies a performance obligation by transferring a promised good to the customer before consideration is due. A contract liability is recognized when consideration is received from a customer prior to the Company satisfying the related performance obligation. Contract assets and contract liabilities are recognized in ~~exchange for those goods or services. ASU 2014-09 will be effective~~other current assets and other current liabilities, respectively, in the Company’s consolidated balance sheets.

The Company had inconsequential contract assets for the ~~Company beginning on January 1, 2018.~~ quarters ended March 31, 2022 and March 31, 2021, respectively. The ~~Company commenced its assessment~~opening and closing balances of ~~ASU 2014-09 during the second half of 2015 and developed a project plan to guide the implementation. The project plan includes analyzing the ASU’s impact on~~ the Company’s current contract portfolio, surveying the Company’s business units and discussing the various revenue streams, completing contract reviews, comparing historical accounting policies and practices to the requirements of the new guidance, identifying potential differences from applying the requirements of the new guidance to its contracts and updating and providing training on its accounting policy. As the Company continues its evaluation, it is also identifying and preparing to implement changes to accounting policies, business processes and internal controls to support the new accounting and disclosure requirements. ~~The Company expects to adopt this new guidance using the modified retrospective method that will result in a cumulative effect adjustment~~liabilities as of the ~~date of adoption. The company does not expect the adoption of this ASU~~quarters ended March 31, 2022 and March 31, 2021 are as follows:


	Quarter Ended
	March 31, 2022		March 31, 2021
Beginning balance	$	13.5	$	10.3
Closing balance		17.9		11.7
Increase	$	4.4	$	1.4

ALTRA INDUSTRIAL MOTION CORP.

Notes to ~~have a material impact on its Consolidated Financial Statements.~~

~~Recently Adopted Accounting Standards~~

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ (“ASU 2016-09”). The updated guidance revises aspects of stock-based compensation guidance which include income tax consequences, classification of awards as equity or liabilities, and classification on the statement of cash flows. The Company adopted this guidance on January 1, 2017 which resulted in the recognition of excess tax benefits in our provision for income taxes with the Unaudited Condensed Consolidated Interim Financial Statements ~~of Operations rather than paid-in capital and was not material for~~

Amounts in millions, unless otherwise noted

In the ~~quarter~~three-month period ended ~~September 30, 2017. Additionally, our Unaudited Condensed Consolidated Statements of Cash Flows now present excess tax benefits as an operating activity, effective~~March 31, 2022, substantially all outstanding revenue has been recognized related to contract liabilities outstanding at January 1, 2017. Finally, the Company elected to continue to estimate forfeitures based on historical data and recognizes forfeiture compensation expense over the vesting period of the award. The adoption of this ASU did not have a material impact to our Unaudited Condensed Consolidated Financial Statements.2022.

~~In July 2015, the FASB issued ASU 2015-11,~~ ~~Simplifying the Measurement of Inventory~~ ~~(“ASU 2015-11”).~~ Under this guidance, entities utilizing the first-in-first-out (“FIFO”) or average cost method should measure inventory at the lower of cost or net realizable value, whereas net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company adopted this guidance on January 1, 2017. The adoption of this ASU did not have a material impact to our Unaudited Condensed Consolidated Financial Statements.

4.6. Fair Value of Financial Instruments

Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows:

•

Level 1- Quoted prices in active markets for identical assets or liabilities.

•

Level 2- Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or ~~model-derived,~~

model-derived.

•

Level 3- Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash ~~equivalents.~~

equivalents and are classified as Level 1. The carrying values of financial instruments, including accounts receivable, cash equivalents, accounts payable, and other accrued liabilities ~~approximate~~are carried at cost, which approximates fair ~~value.~~value, and are classified as Level 1. Debt under the ~~Company’s 2015~~ Credit Agreement (as defined herein) is classified as Level 2 and is comprised of the Term Loan Facility and the Revolving Credit Facility (both as defined herein). As of March 31, 2022, the carrying amount of the Term Loan Facility was $397.5 million and the carrying amount of the Revolving Credit Facility was $600.0 million, each approximates ~~the~~ fair value due to the ~~variable rate and the~~ fact that the ~~agreement~~interest rate on the debt is based on variable interest rates. The carrying amount of the Notes (as defined herein) was ~~renegotiated in December 2016~~$400.0 million and ~~there have been no significant changes in our credit rating or pricing~~the estimated fair value of ~~similar debt.~~the Notes was $410.0 million at March 31, 2022. The Notes are classified as Level 2.

~~ALTRA INDUSTRIAL MOTION CORP.~~

~~Notes to Unaudited Condensed Consolidated Interim Financial Statements~~

~~Amounts in thousands, unless otherwise noted~~

The Company determines the fair value of financial instruments using quoted market prices whenever ~~available.~~available and classifies these investments as Level 1. When quoted market prices are not available for various types of financial instruments (such as ~~forwards, options and swaps)~~derivative instruments), the Company uses standard models with market-based inputs, which take into account the present value of estimated future cash flows and the ability of the Company or the financial counterparty to perform. These investments are classified as Level 2. For cross-currency interest rate swaps and ~~cross currency~~interest rate swaps, the significant inputs to these models are interest rate curves for discounting future cash flows and are adjusted for credit risk. For forward foreign currency contracts, the significant inputs are interest rate curves for discounting future cash flows, and exchange rate curves of the foreign currency for translating future cash flows. See additional discussion of the Company’s use of financial instruments including a cross-currency ~~swap~~interest rate swaps and interest rate swaps included in Note ~~15.~~16.

In December 2020, the Company invested $5.0 million for a minority equity interest in a privately held manufacturing software company, MTEK Industry AB (“MTEK”), over which the Company does not exert significant influence. The equity investment does not have a readily determinable fair value and does not qualify for the practical expedient to estimate fair value using the net asset value per share. Therefore, in accordance with ASU 2016-01, the Company elected to measure the investment at its cost less impairment, if any, adjusted for observable price changes in orderly transactions for identical or a similar investment of the same issuer. This investment is considered a Level 3 asset based on the lack of observable inputs and is classified within other non-current assets in the consolidated balance sheets. The Company monitors its equity investment in MTEK for indicators of impairments or upward adjustments on an ongoing basis. If the Company determines that such an indicator is present, an adjustment will be recorded, which will be measured as the difference between the carrying value and estimated fair value. As of March 31, 2022, there were no indicators that support an adjustment to MTEK’s carrying value.

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

5.Amounts in millions, unless otherwise noted

7. Changes in Accumulated Other Comprehensive ~~Loss~~Income/(Loss) by Component

The following is a reconciliation of changes in accumulated other comprehensive ~~loss~~income/(loss) by component for the periods presented:


	Pension & Other Post Retirement Benefit Plans			Cumulative Foreign Currency Translation Adjustment			Total
Accumulated other comprehensive income (loss) by component, January 1, 2022	$	0.2		$	(11.2	)	$	(11.0	)
Amortization of actuarial losses, net of tax		(0.1	)		—			(0.1	)
Foreign currency translation adjustments, net of tax		—			(17.4	)		(17.4	)
Net current-period other comprehensive loss		(0.1	)		(17.4	)		(17.5	)
Accumulated other comprehensive income (loss) by component, March 31, 2022	$	0.1		$	(28.6	)	$	(28.5	)


	Gains and (Losses) on Cash Flow Hedges			Defined Benefit Pension Plans			Cumulative Foreign Currency Translation Adjustment			Total
Accumulated other comprehensive income (loss) by component, January 1, 2021	$	(21.5	)	$	(3.7	)	$	46.3		$	21.1
Reclassification of interest rate swap to income, net of tax		2.4			—			—			2.4
Foreign currency translation adjustments, net of tax		—			—			(43.0	)		(43.0	)
Net current-period other comprehensive income (loss)		2.4			—			(43.0	)		(40.6	)
Accumulated other comprehensive income (loss) by component, March 31, 2021	$	(19.1	)	$	(3.7	)	$	3.3		$	(19.5	)

Gains and
Losses on
Cash Flow
Hedges

Defined
Benefit
Pension
Plans

Cumulative
Foreign
Currency
Translation
Adjustment

Total

Accumulated Other Comprehensive Loss by Component,
January 1, 2017

$
(646
)

$
(5,668
)

$
(69,772
)

$
(76,086
)
Net current-period Other Comprehensive Income (Loss)

326

(232
)

21,157

21,251

Accumulated Other Comprehensive Loss by Component,
September 30, 2017

$
(320
)

$
(5,900
)

$
(48,615
)

$
(54,835
)

Gains and
Losses on
Cash Flow
Hedges

Defined
Benefit
Pension
Plans

Cumulative
Foreign
Currency
Translation
Adjustment

Total

Accumulated Other Comprehensive Loss by
Component, January 1, 2016

$
(140
)

$
(5,807
)

$
(57,885
)

$
(63,832
)
Net current-period Other Comprehensive Income (Loss)

—

134

(1,000
)

(866
)
Accumulated Other Comprehensive Loss by Component,
September 30, 2016

$
(140
)

$
(5,673
)

$
(58,885
)

$
(64,698
)

~~6. Acquisitions~~

On December 30, 2016, we acquired the shares and certain assets and liabilities of the Stromag business from GKN plc., and as a result, the Company’s unaudited condensed consolidated financial statements reflect Stromag’s results of operations from the beginning of business on December 30, 2016 forward. Stromag is a leading global manufacturer of highly engineered clutches and brakes, couplings, and limit switches for use in a variety of end markets including renewable energy, crane & hoist, and marine. We refer to this transaction as the Stromag Acquisition.

As of September 30, 2017, the allocation of the purchase price for the Stromag Acquisition remains preliminary as the company continues to evaluate the fair value of certain inventories located in foreign jurisdictions. The fair value of all the acquired identifiable assets and liabilities is provisional pending finalization of the Company’s acquisition accounting. The Company believes that such preliminary allocations provide a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the Company is waiting for additional information necessary to finalize fair value. The Company recorded certain immaterial measurement period adjustments during the quarter ended September 30, 2017. The preliminary purchase price allocations below include such adjustments.

~~ALTRA INDUSTRIAL MOTION CORP.~~

~~Notes to Unaudited Condensed Consolidated Interim Financial Statements~~

~~Amounts in thousands, unless otherwise noted~~

Preliminary Purchase Price Allocation

Total purchase price, excluding acquisition costs of approximately $2.9 million

$
191,852

Cash and cash equivalents

8,758

Trade receivables

24,087

Inventories

22,935

Property, plant and equipment

40,343

Intangible assets

74,795

Prepaid expenses and other current assets

778

Total assets acquired

$
171,696

Accounts payable

(15,370
)
Accrued payroll

(7,171
)
Accrued expenses and other current liabilities

(4,357
)
Income tax payable

(2,525
)
Deferred tax liability

(27,859
)
Other long-term liabilities

(1,255
)
Pension liability

(15,283
)
Total liabilities assumed

$
(73,820
)
Net assets acquired

97,876

Excess purchase price over fair value of net assets acquired

$
93,976

The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill. This goodwill is not deductible for income tax purposes. The Company expects to develop synergies, such as lower cost country sourcing, global procurement, the ability to cross-sell product, and the ability to penetrate certain geographic areas, as a result of the acquisition of Stromag.

~~During the second quarter, the Company and the seller completed the working capital adjustment under the sale and purchase agreement which reduced the purchase price by $2.9 million.~~

Intangible assets acquired consist of:

Customer relationships

$
56,019

Trade names and trademarks

18,776

Total intangible assets

$
74,795

Customer relationships are subject to amortization which will be amortized on a straight-line basis over their estimated useful lives of 15 years, which represents the anticipated period over which the Company estimates it will benefit from the acquired assets.

The following table sets forth the unaudited pro forma results of operations of the Company for the quarter and year to date periods ended September 30, 2016, as if the Company had acquired Stromag at the beginning of the period. The pro forma information contains the actual operating results of the Company, including Stromag, adjusted to include the pro forma impact of (i) additional depreciation expense as a result of estimated depreciation based on the fair value of fixed assets and; (ii) additional expense as a result of the estimated amortization of identifiable intangible assets; (iii) additional interest expense for borrowings under the Credit Agreement associated with the Stromag Acquisition and (iv) inventory fair value adjustment. These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition occurred at the beginning of the period or that may be obtained in the future.

~~ALTRA INDUSTRIAL MOTION CORP.~~

~~Notes to Unaudited Condensed Consolidated Interim Financial Statements~~

~~Amounts in thousands, unless otherwise noted~~

Proforma (unaudited)

Quarter Ended

Year to date Period Ended

September 30, 2016

September 30, 2016

Total revenues

$
206,424

$
644,361

Net income

$
7,057

$
29,250

Basic earnings per share

$
0.27

$
1.13

Diluted earnings per share

$
0.27

$
1.13

7.8. 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 is dilutive.

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


	Quarter Ended				Year to Date Ended				Quarter Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016		March 31, 2022		March 31, 2021
Net income	$	13,277	$	5,313	$	38,987	$	23,472	$	44.8	$	39.2
Shares used in net income per common share - basic		29,008		25,726		28,912		25,684		65.0		64.7
Dilutive effect of the equity premium on Convertible Notes at the average price of common stock		—		295		—		123
Incremental shares of unvested restricted common stock		66		—		89		6
Effect of dilutive shares										0.3		0.6
Shares used in net income per common share - diluted		29,074		26,021		29,001		25,813		65.3		65.3
Earnings per share:
Basic net income	$	0.46	$	0.21	$	1.35	$	0.91
Diluted net income	$	0.46	$	0.20	$	1.34	$	0.91
Basic									$	0.69	$	0.61
Diluted									$	0.69	$	0.60

~~8. Inventories~~

~~Inventories at September 30, 2017 and December 31, 2016 consisted of the following:~~

September 30, 2017

December 31, 2016

Raw materials

$
50,976

$
45,507

Work in process

24,359

20,128

Finished goods

77,679

74,205

$
153,014

$
139,840

~~9. Goodwill and Intangible Assets~~

~~Changes in goodwill from January 1, 2017 through September 30, 2017 were as follows:~~

Couplings,
Clutches &
Brakes

Electromagnetic Clutches &
Brakes

Gearing

Total

Net goodwill balance January 1, 2017

$
104,465

$
37,161

$
47,215

$
188,841

Measurement period adjustment related to acquisition of Stromag, including working capital settlement (See Note 6)

$
738

$
113

$
-

$
851

Impact of changes in foreign currency and other

12,378

623

881

13,882

Net goodwill balance September 30, 2017

$
117,581

$
37,897

$
48,096

$
203,574

1012

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in ~~thousands,~~millions, unless otherwise noted

9. Inventories

Inventories at March 31, 2022 and December 31, 2021 consisted of the following:


	March 31, 2022		December 31, 2021
Raw materials	$	160.8	$	124.1
Work in process		29.9		26.7
Finished goods		117.6		117.0
	$	308.3	$	267.8

10. Goodwill and Intangible Assets

The Company conducts an annual impairment review of goodwill and indefinite-lived intangible assets in the fourth quarter of each year, unless events occur which trigger the need for an interim impairment review. There were no triggering events during the quarter ended March 31, 2022. The 2021 annual goodwill impairment review indicated that the Thomson reporting unit’s fair value exceeded its carrying value by less than 10%. All other reporting units had fair values that exceeded their carrying value by 10% or more.

Changes in goodwill from January 1, 2022 through March 31, 2022 were as follows:


	Power Transmission Technologies			Automation & Specialty			Total
Goodwill	$	442.8		$	1,352.1		$	1,794.9
Accumulated impairment loss		(31.8	)		(199.1	)		(230.9	)
Balance January 1, 2022	$	411.0		$	1,153.0		$	1,564.0
Impact of changes in foreign currency		(2.2	)		(5.6	)		(7.8	)
Goodwill balance March 31, 2022	$	408.8		$	1,147.4		$	1,556.2

Other intangible assets as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021 consisted of the following:


	September 30, 2017						December 31, 2016							March 31, 2022						December 31, 2021
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net			Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Other intangible assets
Intangible assets not subject to amortization:
Tradenames and trademarks	$	54,408	$	—	$	54,408	$	50,416	$	—	$	50,416
Tradenames and trademarks (1)														$	210.2	$	0.1	$	210.1	$	212.2	$	—	$	212.2
Intangible assets subject to amortization:
Customer relationships		175,842		70,277	$	105,565		164,406		60,761		103,645			953.0		215.1		737.9		960.2		206.4		753.8
Product technology and patents		6,779		5,813	$	966		6,090		5,468		622			141.6		53.6		88.0		141.4		50.2		91.2
Total intangible assets	$	237,029	$	76,090	$	160,939	$	220,912	$	66,229	$	154,683		$	1,304.8	$	268.8	$	1,036.0	$	1,313.8	$	256.6	$	1,057.2
(1) While the majority of the Company's tradenames are considered indefinite lived intangible assets, tradenames acquired through the acquisition of Nook are subject to amortization. The net book value of Nook's tradename was $1.0 million as of March 31, 2022.													(1) While the majority of the Company's tradenames are considered indefinite lived intangible assets, tradenames acquired through the acquisition of Nook are subject to amortization. The net book value of Nook's tradename was $1.0 million as of March 31, 2022.

The Company recorded ~~$2.4~~$14.0 million and ~~$2.1~~$17.6 million of amortization expense in the quarters ended ~~September 30, 2017~~March 31, 2022 and ~~2016 respectively, and recorded $7.1 million and $6.4 million of amortization expense in the year to date periods ended September 30, 2017 and September 30, 2016,~~2021, respectively.

The estimated amortization expense for intangible assets is approximately ~~$2.3~~$42.4 million for the remainder of ~~2017, $9.4~~2022, $55.5 million in ~~each of the next four years~~2023, $55.1 million in 2024, $54.5 million in 2025, $53.5 million in 2026 and ~~then $66.6~~$565.9 million thereafter.

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

~~10.~~ Amounts in millions, unless otherwise noted

11. Warranty Costs

The contractual warranty period of the Company's products generally ranges from three months to two years with certain warranties extending for longer periods. Estimated expenses related to product warranties are accrued at the time products are sold to customers and are recorded in accruals and other current liabilities on the unaudited condensed consolidated balance ~~sheet.~~sheets. Estimates are established using historical information as to the nature, frequency and average costs of warranty claims.

Changes in the carrying amount of accrued product warranty costs for each of the quarters ended ~~September 30, 2017~~March 31, 2022 and ~~September 30, 2016 are~~2021 were as follows:


	March 31, 2022			March 31, 2021
Balance at beginning of period	$	8.3		$	9.6
Accrued current period warranty expense		1.3			0.9
Payments and adjustments		(0.9	)		(0.8	)
Balance at end of period	$	8.7		$	9.7

September 30, 2017

September 30, 2016

Balance at beginning of period

$
9,158

$
9,468

Accrued current period warranty expense

511

1,732

Payments and adjustments

(2,047
)

(2,700
)
Balance at end of period

$
7,622

$
8,500

12. Debt

~~11. Debt~~

Outstanding debt obligations at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021 were as ~~follows.~~follows:

September 30, 2017

December 31,
2016

Debt:

Revolving Credit Facility

$
282,440

$
313,620

Convertible Notes

—

45,656

Mortgages

12,904

12,755

Capital leases

259

363

Total debt

295,603

372,394

Less: debt discount, net of accretion

—

(2,735
)
Total debt, net of unaccreted discount

$
295,603

$
369,659

Less current portion of long-term debt

(380
)

(43,690
)
Total long-term debt, net of unaccreted discount

$
295,223

$
325,969


	March 31, 2022			December 31, 2021
Debt:
Term loan	$	397.5		$	400.0
Revolver		600.0			605.0
Notes		400.0			400.0
Mortgages and other		8.4			9.2
Finance leases		0.1			0.1
Total gross debt		1,406.0			1,414.3
Less: debt discount and deferred financing costs		(2.1	)		(2.2	)
Total debt, net of debt discount and deferred financing costs		1,403.9			1,412.1
Less: current portion of long-term debt		(13.2	)		(11.1	)
Total long-term debt	$	1,390.7		$	1,401.0

~~ALTRA INDUSTRIAL MOTION CORP.~~

~~Notes to Unaudited Condensed Consolidated Interim Financial Statements~~

~~Amounts in thousands, unless otherwise noted~~

~~Second Amended and Restated~~2021 Credit Agreement

On ~~October 22, 2015,~~November 17, 2021, the Company entered into a ~~Second Amended and Restated~~new Credit Agreement ~~which may be amended from time to time~~ (the ~~“2015 Credit~~“Credit Agreement”). ~~Under the 2015~~The Credit Agreement ~~the~~provides for a five-year term loan in an aggregate principal amount of ~~the Company’s prior~~$400.0 million (the “Term Loan Facility”) and a five-year revolving credit facility ~~was increased~~in an aggregate committed principal amount of $1.0 billion (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Credit Facilities”). The Company immediately provided notice to ~~$350~~the administrative agent of the Credit Agreement to draw down $480.0 million ~~(the “2015~~under the Revolving Credit ~~Facility”~~Facility. The aggregate proceeds of $880.0 million under the Credit Facilities were used to repay in full and extinguish all outstanding indebtedness for borrowed money under the 2018 Credit Agreement. The remaining availability under the Revolving Credit Facility will be used for working capital and general corporate purposes.

The Credit Facilities are guaranteed on a senior secured basis by certain direct and indirect domestic subsidiaries of the Company (each a “Guarantor” and collectively the “Guarantors”; the Guarantors collectively with the Borrowers, the “Loan Parties”).

The stated maturity date of the Credit Facilities is November 17, 2026, and there are scheduled quarterly principal payments due on the outstanding amount on the Term Loan Facility. The amounts available under the 2015 Revolving Credit Facility can be used for general corporate purposes, including acquisitions, and to repay existing indebtedness. The stated maturity of the 2015 Revolving Credit Facility is October 22, 2020.

~~The amounts available under the 2015~~ Revolving Credit Facility may be drawn upon in accordance with the terms of the ~~2015~~ Credit Agreement. All amounts outstanding under the ~~2015 Revolving~~ Credit ~~Facility~~Facilities are due on the stated maturity or such earlier time, if any, required under the ~~2015~~ Credit Agreement. The amounts owed under either of the ~~2015 Revolving~~ Credit ~~Facility~~Facilities may be prepaid at any time, subject to usual notification and breakage payment provisions. Interest on the amounts outstanding under the ~~2015 Revolving~~ Credit ~~Facility~~Facilities is calculated using either ~~an ABR~~a Base Rate or ~~Eurodollar~~Eurocurrency Rate, plus the applicable margin. The applicable margins for ~~Eurodollar~~

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

Eurocurrency Loans are between ~~1.25%~~1.000% to ~~2.00%~~1.750%, and for ~~ABR~~Base Rate Loans are between ~~0.25%~~0.000% and ~~1.00%~~0.750%. The amounts of the margins are calculated based on ~~either a consolidated total net leverage ratio~~the Total Leverage Ratio (as defined in the ~~2015~~ Credit Agreement)~~, or the then applicable rating(s) of the Company’s debt and then to the extent as provided in the 2015 Credit Agreement. The rate at December 31, 2015 was 1.5%~~. A portion of the ~~2015~~ Revolving Credit Facility may ~~also~~ be used for the issuance of letters of credit, and a portion of the amount of the ~~2015~~ Revolving Credit Facility is available for borrowings in certain agreed upon foreign currencies. The ~~2015~~interest rate on the Credit Facilities was 1.709% at March 31, 2022.

Revolving borrowings and issuances of letters of credit under the Revolving Credit Facility are subject to the satisfaction of customary conditions, including the accuracy of representations and warranties and the absence of defaults.

The Credit Agreement contains ~~various~~usual and customary representations and warranties, usual and customary affirmative and negative covenants and restrictions, which among other things, will require the Borrowers ~~(as defined in the 2015 Credit Agreement)~~ to provide certain financial reports to the Lenders, ~~(as defined in the 2015 Credit Agreement),~~ require the Company to maintain certain financial covenants relating to consolidated leverage and interest coverage, ~~limit maximum annual capital expenditures,~~ and limit the ability of the Company and its subsidiaries to incur or guarantee additional indebtedness, pay dividends or make other equity distributions, purchase or redeem capital stock or debt, make certain investments, sell assets, engage in certain transactions, and effect a consolidation or merger. The ~~2015~~obligations of the borrowers of the Credit Facilities under the Credit Agreement ~~also contains~~may be accelerated upon customary events of ~~default.~~default, including non-payment of principal, interest, fees and other amounts, inaccuracy of representations and warranties, violation of covenants, cross default and cross acceleration, voluntary and involuntary bankruptcy or insolvency proceedings, inability to pay debts as they become due, material judgments, ERISA events, actual or asserted invalidity of security documents or guarantees and change in control.

~~On October 21, 2016,~~

The Company incurred $3.7 million in issuance costs, which is being amortized over the term of the debt as an adjustment to the effective interest rate on the outstanding borrowings.

As of March 31, 2022, the Company entered into an agreement to amend the 2015 Credit Agreement. This amendment, which became effective upon closing of the purchase of Stromag on December 30, 2016, increased the 2015 Revolving Credit Facility by $75 million to $425 million. The Company used additional borrowings under the increased facility to finance its purchase of Stromag. In addition, the amendment increased the multicurrency sublimit to $250 million and adjusted certain financial covenants. The pricing terms and maturity date under the 2015 Credit Agreement remain unchanged. The Company paid $0.6 million in fees in connection with the October 2016 amendment, which is recorded in other non-current assets.

~~As of September 30, 2017 we~~ had ~~$282.4~~$997.5 million outstanding on the ~~USD tranche of our 2015 Revolving~~ Credit ~~Facility at an interest rate of 2.99%.~~Agreement. As of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016, we~~2021, the Company had ~~$3.7~~$4.3 million and ~~$4.1~~$4.8 million in letters of credit outstanding, respectively. WeThe Company had ~~$138.9~~$395.7 million available to borrow under the ~~2015 Revolving~~ Credit ~~Facility~~Facilities at ~~September 30, 2017~~March 31, 2022, subject to customary conditions including the accuracy of representation and ~~may borrow an additional $150 million under certain circumstances.~~warranties and the absence of defaults.

~~Convertible Senior Notes~~

~~In March 2011,~~Notes

On October 1, 2018, upon the closing of the combination of the Company ~~issued Convertible Senior~~with four operating companies from Fortive Corporation’s (“Fortive”) Automation & Specialty platform (excluding Fortive’s Hengstler and Dynapar businesses), the Company assumed $400 million aggregate principal amount of 6.125% senior notes due 2026 (the “Notes”). The Notes ~~(the “Convertible Notes”) due March~~will mature on October 1, ~~2031. The Convertible Notes were guaranteed by the Company’s U.S. domestic subsidiaries.~~2026. Interest on the ~~Convertible~~ Notes ~~was~~accrues from October 1, 2018 and is payable semi-annually ~~in arrears, on March 1 and September 1 of each year,~~ commencing on ~~September~~April 1, ~~2011~~2019. The Notes may be redeemed at ~~an annual rate~~the option of ~~2.75%. Proceeds from~~ the ~~offering were $81.3 million, net of fees and expenses that were capitalized.~~

~~On December 12, 2016~~issuer on or after October 1, 2023. The Notes are guaranteed on a senior unsecured basis by the Company ~~gave notice to the holders of the Convertible Notes~~and certain of its ~~intention to redeem all~~domestic subsidiaries.

2018 Credit Agreement

On October 1, 2018, the Company and certain subsidiaries entered into a credit agreement (the “2018 Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative and collateral agent, and a syndicate of ~~the Convertible Notes outstanding on January 12, 2017 (the “Redemption Date”), pursuant to the optional redemption provisions~~lenders, which provided for a term loan in ~~the Indenture. The redemption price for the Convertible Notes was 100% of the~~an aggregate principal amount ~~thereof, plus accrued~~of $1,340.0 million (the “2018 Term Loan Facility”) and ~~unpaid~~a revolving credit facility in an aggregate committed principal amount of $300.0 million (the “2018 Revolving Credit Facility” and together with the 2018 Term Loan Facility, the “2018 Credit Facilities”).

On November 17, 2021, in connection with the new Credit Agreement, the 2018 Credit Agreement was terminated and all outstanding indebtedness for borrowed money thereunder was repaid in full.

Mortgages and Other Agreements

The Company’s subsidiaries in Europe have entered into certain long-term fixed rate term loans that are generally secured by local property, plant and equipment. The debt has interest ~~if any,~~rates that range from 1.0% to ~~but not including, the Redemption Date plus a Make-Whole Premium equal to the present values of the remaining scheduled payments of interest on any Convertible Notes~~2.5%, with various quarterly and monthly installments through March 1, 2018 (excluding interest accrued to, but excluding, the Redemption Date). In lieu of receiving the redemption price, holders of the Notes could surrender their Convertible Notes for conversion at any time before January 9, 2017. The conversion rate of the Convertible Notes was 39.0809 shares of the Company’s common stock, for each $1,000 of outstanding principal of the Convertible Notes. As of December 31, 2016, Convertible Notes with an outstanding principal of approximately $39.3 million were converted resulting in the issuance of 1.5 million shares of the2028.

1215

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in ~~thousands,~~millions, unless otherwise noted

Company’s common stock. As a result of the conversion, the Company incurred a loss on extinguishment of debt of approximately $1.9 million and the carrying value of the Convertible Notes was $42.9 million as of December 31, 2016. In January 2017, additional Convertible Notes with an outstanding principal of approximately $44.7 million were converted resulting in the issuance of 1.7 million shares of the Company’s common stock, and $0.9 million of Convertible Notes were redeemed for cash. The Company incurred an additional loss on extinguishment of debt of approximately $1.8 million during the quarter ended March 31, 2017. All Convertible Notes were converted or redeemed as of January 12, 2017.Financing Leases

~~Mortgages~~

~~Heidelberg Germany~~

During 2015, a foreign subsidiary of the Company entered into a mortgage with a bank for €1.5 million, or $1.7 million, secured by its facility in Heidelberg, Germany to replace its previously existing mortgage. The mortgage has an interest rate of 1.79%, which is payable in monthly installments through August 2023. The mortgage had a remaining principal balance of € 1.1 million, or $1.3 million, at September 30, 2017.

~~Esslingen Germany~~

During 2015, a foreign subsidiary of the Company entered into a mortgage with a bank for €6.0 million, or $6.7 million, secured by its facility in Esslingen, Germany. The mortgage has an interest rate of 2.5% per year, which is payable in annual interest payments of €0.1 million, or $0.1 million, to be paid in monthly installments. The mortgage had a remaining principal balance of €6.0 million, or $7.1 million, at September 30, 2017. The principal portion of the mortgage will be due in a lump-sum payment in May 2019.

During the quarter ended March 31, 2016, a foreign subsidiary of the Company entered in to a loan with a bank to equip its facility in Zlate Moravce, Slovakia. As of September 30, 2017, the total principal outstanding was €2.1 million, or $2.5 million, and is guaranteed by land security at its parent company facility in Esslingen, Germany. The loan is due in installments from 2016 through 2020, with an interest rate of 1.95%.

~~Angers France~~

During 2015, a foreign subsidiary of the Company entered into a mortgage with a bank for €2.1 million, or $2.3 million, secured by its facility in in Angers, France. The mortgage has an interest rate of 1.85% per year which is payable in monthly installments from June 2016 until May 2025. The mortgage had a balance of €1.7 million, or $2.0 million, at September 30, 2017.

~~Capital Leases~~

The Company leases certain equipment under ~~capital~~finance lease arrangements, whose obligations are included in both short-term and long-term debt. ~~Capital~~Finance lease obligations amounted to approximately ~~$0.3~~$0.1 million and $0.1 million at ~~September 30, 2017~~March 31, 2022 and ~~approximately $0.4 million at~~ December 31, ~~2016. Assets subject to capital leases~~2021, respectively. Finance lease right of use assets are included in property, plant and equipment with the related amortization recorded as depreciation expense. Finance lease liabilities are included in current and non-current other liabilities on the Company’s consolidated balance sheets.

13. Stockholders’ Equity

~~Overdraft Agreements~~

~~Certain~~Common Stock

Effective October 1, 2018, the Company amended its Articles of ~~our foreign subsidiaries maintain overdraft agreements with financial institutions.~~Incorporation to increase the number of authorized shares of the Company's common stock from 90.0 million shares to 120.0 million shares. As of March 31, 2022 and December 31, 2021, there were 65,059,097 and 64,923,539 shares of common stock issued and outstanding, respectively.

Preferred Stock

On December 20, 2006, the Company amended and restated its certificate of incorporation authorizing 10.0 million shares of undesignated Preferred Stock (“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, rights, qualifications, limitations and restrictions as determined by the Company’s Board of Directors. There ~~were no borrowings as of September 30, 2017~~was 0 Preferred Stock issued or outstanding at March 31, 2022 or December 31, ~~2016 under any of the overdraft agreements.~~2021.

Restricted Common Stock

~~12. Stockholders’ Equity~~

~~Stock-Based Compensation~~

The Company’s 2004 Equity Incentive Plan (the “2004 Plan”) permitted the grant of various forms of stock based compensation to our officers and senior level employees. The 2004 Plan expired in 2014 and, upon expiration, there were 750,576 shares subject to outstanding awards under the 2004 Plan. The 2014 Omnibus Incentive Plan (the “2014 Plan”) was approved by the Company’s ~~shareholders~~stockholders at ~~its~~the Company’s 2014 ~~annual meeting.~~Annual Meeting of Stockholders. The 2014 Plan provides for various forms of ~~stock based~~stock-based compensation to our directors, executive personnel and other key employees and consultants. Under the 2014 Plan, the remaining total number of shares of common stock available for delivery pursuant to the grant of awards ~~(“Awards”)~~ was ~~originally 750,000. At the Company’s 2017 Annual Meeting, its shareholders approved amendments to the 2014 Plan which, among other things, made an additional 750,000 shares of common stock~~

~~ALTRA INDUSTRIAL MOTION CORP.~~

~~Notes to Unaudited Condensed Consolidated Interim Financial Statements~~

~~Amounts in thousands, unless otherwise noted~~

~~available for grant under the 2014 Plan. Shares of our common stock subject to Awards awarded under the 2004 Plan and outstanding~~3.7 million as of the effective date of the 2014 Plan (except for substitute awards) that terminate without being exercised, expire, are forfeited or canceled, are exchanged for Awards that did not involve shares of common stock, are not issued on the stock settlement of a stock appreciation right, are withheld by the Company or tendered by a participant (either actually or by attestation) to pay an option exercise price or to pay the withholding tax on any Award, or are settled in cash in lieu of shares will again be available for Awards under the 2014 Plan.March 31, 2022.

The restricted ~~shares~~stock and restricted stock units issued pursuant to the 2014 Plan generally vest ratably over a period ranging from immediately to five years from the date of grant, provided, that the vesting of the restricted ~~shares~~stock or restricted stock units may accelerate upon the occurrence of certain events. Common stock awarded under the 2014 Plan is generally subject to restrictions on transfer, repurchase rights, and other limitations and rights as set forth in the applicable award agreements. ~~The fair value of the shares repurchased are measured based on the share price on the date of grant.~~

The 2014 Plan permits the Company to grant, among other things, restricted stock, restricted stock units, stock options and performance share awards to key ~~employees and other persons who make significant contributions to the success~~employees. Certain awards include vesting based upon achievement of ~~the Company. The restrictions and vesting schedule for restricted stock granted under the 2014 Plan are determined by the Personnel and~~specified performance criteria. Compensation ~~Committee of the Board of Directors.~~

~~Stock-based compensation~~ expense recorded (in selling, general and administrative expense) during the ~~year to date periods~~quarters ended ~~September 30, 2017~~March 31, 2022 and ~~September 30, 2016,~~2021 was ~~$4.5~~$3.9 million and ~~$3.4~~$3.5 million, respectively. The Company recognizes stock-based compensation expense on a straight-line basis for the shares vesting ratably under the plan and uses the graded-vesting method of recognizing stock-based compensation expense for the performance share awards based on the probability of the specific performance metrics being achieved over the requisite service period.

~~The following table sets forth the activity of the Company’s restricted stock and performance share grants in the year to date period ended September 30, 2017:~~

Shares

Weighted-average
grant date fair
value

Shares unvested January 1, 2017

199,712

$
24.68

Shares granted

150,643

39.43

Shares for which restrictions lapsed

(128,265
)

43.76

Shares unvested September 30, 2017

222,090

$
31.92

Total remaining unrecognized compensation cost ~~was $6.3~~is approximately $30.9 million as of ~~September 30, 2017, which~~March 31, 2022, and will be recognized over a weighted average remaining period of 3 years. The fair market value of the shares for which the restrictions have lapsed during the year to date period ended September 30, 2017 was $5.6 million. Restricted shares granted are valued based on the fair market value of the stock on the date of grant.three years.

~~Share Repurchase Program~~

In May 2014, our board of directors approved a share repurchase program (the “2014 Program”) authorizing the buyback of up to $50.0 million of the Company’s common stock. Under the 2014 program, the Company was authorized to purchase shares on the open market, through block trades, in privately negotiated transactions, in compliance with SEC Rule 10b-18 (including through Rule 10b5-1 plans), or in any other appropriate manner. The timing of the shares repurchased was at the discretion of management and depended on a number of factors, including price, market conditions and regulatory requirements. Shares acquired through the repurchase program were retired.

On October 19, 2016, our board of directors approved a new share repurchase program authorizing the buyback of up to $30.0 million of the Company's common stock through December 31, 2019. This plan replaces the 2014 Program which was terminated. The Company expects to purchase shares on the open market, through block trades, in privately negotiated transactions, in compliance with SEC Rule 10b-18 (including through Rule 10b5-1 plans), or in any other appropriate manner. The timing of the shares repurchased will be at the discretion of management and will depend on a number of factors, including price, market conditions and regulatory requirements. Shares acquired through the repurchase program will be retired. The Company retains the right to limit, terminate or extend the share repurchase program at any time without prior notice. ~~The Company expects to fund any further~~

1416

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in ~~thousands,~~millions, unless otherwise noted

~~repurchases of its common~~Stock Options

The following table summarizes the stock ~~through a combination of cash on hand and cash generated by operations. During the year to date period ended September 30, 2017, the Company did not repurchase any of its common stock~~option activity under the ~~share repurchase program.~~

~~Dividends~~

~~The Company declared a dividend of $0.17 per share of common stock related to~~Company’s plan for the quarter ended ~~September 30, 2017 which was accrued in~~March 31, 2022:


	Weighted Average Remaining Contractual Life in Years		Options (In thousands)		Weighted- average grant date fair value		Aggregate Intrinsic Value (In millions)
Outstanding at January 1, 2022				500.0	$	39.26
Granted				176.2		45.05
Outstanding at March 31, 2022		8.3		676.2	$	40.77	$	2.3
Exercisable at March 31, 2022		7.5		241.3	$	35.87	$	1.4
Unvested and expected to vest at March 31, 2022		8.7		407.2	$	43.34	$	0.9

Restricted Stock Units

The following table summarizes the ~~balance sheet at September 30, 2017.~~ Restricted Stock Unit activity under the Company’s plan for the quarter ended March 31, 2022:

~~Future declarations of quarterly cash dividends are subject to approval by~~


	Shares (In thousands)			Weighted- average grant date fair value		Aggregate Intrinsic Value (In millions)
Unvested at January 1, 2022		420.5		$	42.21
Granted		173.5			45.05
Vested		(90.4	)		38.72
Canceled/Forfeited		(1.9	)		44.15
Unvested at March 31, 2022		501.7		$	43.81	$	19.5

Performance Share Awards

The following table summarizes the ~~Board of Directors and~~Performance Share Award activity under the Company’s plan for the quarter ended March 31, 2022:


	Shares (In thousands)			Weighted- average grant date fair value		Aggregate Intrinsic Value (In millions)
Unvested at January 1, 2022		286.5		$	40.23
Granted		81.6			45.45
Vested		(125.9	)		32.02
Unvested at March 31, 2022		242.2		$	46.64	$	9.4

See Note 12, Stockholders’ Equity, to the ~~Board’s continuing determination that the declaration of dividends are in the best interest~~audited consolidated financial statements of the ~~Company’s stockholders and are in compliance with all laws and agreements of~~Company's Annual Report on Form 10-K for the ~~Company applicable to the declaration and payment of cash dividends.~~year ended December 31, 2021 for further information regarding stock-based compensation.

14. Restructuring Costs

~~13. Restructuring, Asset Impairment, and Transition Expenses~~

From time to time, the Company has initiated various restructuring programs and incurred severance and other restructuring costs.

During 2015, the Company commenced a restructuring plan (“2015 Altra Plan”) as a result of weak demand in Europe and to make certain adjustments to improve business effectiveness, reduce the number of facilities and streamline the Company's cost structure. The actions taken pursuant to the 2015 Altra Plan included reducing headcount, facility consolidations and related asset impairments, and limiting discretionary spending to improve profitability.

~~The following table details restructuring charges incurred by segment for the periods presented under the 2015 Altra Plan.~~

Quarter Ended

Year to Date Period Ended

September 30,
2017

September 30,
2016

September 30,
2017

September 30,
2016

Couplings, Clutches & Brakes

$
—

$
3,022

$
1,849

$
4,425

Electromagnetic Clutches & Brakes

—

169

—

1,276

Gearing

25

68

809

84

Corporate (1)

24

138

487

806

Total

$
49

$
3,397

$
3,145

$
6,591

~~(1)~~

Certain expenses are maintained at the corporate level and not allocated to the segments. These include various administrative expenses related to corporate headquarters, depreciation on capitalized software costs, non-capitalizable software implementation costs and acquisition related expenses and non-cash partial pension settlements.

The amounts for the quarter ended September 30, 2017 were comprised of approximately $0.1 million in consolidation costs. The amounts for the year to date period ended September 30, 2017 were comprised of approximately $0.9 million in severance, $1.2 million in consolidation costs, and $1.1 million in other restructuring, and are classified in the accompanying unaudited condensed consolidated statement of income as restructuring costs.

~~During the quarter ended September 30,~~ 2017, the Company commenced a ~~new~~ restructuring plan (“2017 Altra Plan”) as a result of the Company’s acquisition of Stromag ~~acquisition~~ and to rationalize its global renewable energy business. The actions taken pursuant to the 2017 Altra Plan included reducing

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

headcount, facility consolidations and the elimination of certain costs.

The ~~following table details restructuring charges incurred by segment for the periods presented under~~Company did 0t incur any costs as a result of the 2017 Altra ~~Plan.~~

Quarter Ended

Year to Date Period Ended

September 30,
2017

September 30,
2016

September 30,
2017

September 30,
2016

Couplings, Clutches & Brakes

$
631

$
—

$
631

$
—

Electromagnetic Clutches & Brakes

—

—

—

—

Gearing

—

—

—

—

Corporate (1)

—

—

—

—

Total

$
631

$
—

$
631

$
—

~~ALTRA INDUSTRIAL MOTION CORP.~~

~~Notes to Unaudited Condensed Consolidated Interim Financial Statements~~

~~Amounts in thousands, unless otherwise noted~~

~~(1)~~

~~The amounts for~~Plan during the quarter ended ~~September 30,~~March 31, 2022. The Company does not expect to incur any additional material costs as a result of the 2017 ~~were comprised~~Altra Plan.

During 2019, the Company commenced a restructuring plan (“2019 Altra Plan”) to drive efficiencies, reduce the number of ~~approximately $0.4~~facilities and optimize its operating margin. The Company expects to incur an additional $1 - $2 million in restructuring expenses under the 2019 Altra Plan over the next two years, primarily related to headcount reductions and plant consolidations. During the quarter ended March 31, 2022, the Company incurred expenses of $0.4 million comprised mainly of severance ~~and $0.2 million in consolidation costs, and are classified in the accompanying unaudited condensed consolidated statement of income as restructuring~~ costs.

The following is a reconciliation of the accrued restructuring costs between January 1, ~~2017~~2022 and ~~September 30, 2017.~~March 31, 2022:


	2017 Altra Plan		2019 Altra Plan			Total All Plans
Balance at January 1, 2022	$	—	$	0.5		$	0.5
Restructuring expense incurred		—		0.4			0.4
Cash payments		—		(0.3	)		(0.3	)
Balance at March 31, 2022	$	—	$	0.6		$	0.6

The following is a reconciliation of the accrued restructuring costs between January 1, 2021 and March 31, 2021:


	2017 Altra Plan			2019 Altra Plan			Total All Plans
Balance at January 1, 2021	$	0.5		$	1.8		$	2.3
Restructuring expense incurred		—			0.9			0.9
Cash payments		(0.1	)		(1.4	)		(1.5	)
Balance at March 31, 2021	$	0.4		$	1.3		$	1.7

2015 Plan

2017 Plan

Total All Plans

Balance at January 1, 2017
$
1,971

$
—

$
1,971

Restructuring expense incurred

3,145

631

3,776

Cash payments

(4,441
)

(88
)

(4,529
)
Balance at September 30, 2017
$
675

$
543

$
1,218

The following is a reconciliation of restructuring expense by segment for the quarter ended March 31, 2022:


	2017 Altra Plan		2019 Altra Plan		Total All Plans
Power Transmission Technologies	$	—	$	—	$	—
Automation & Specialty		—		0.4		0.4
Total restructuring expense	$	—	$	0.4	$	0.4

The following is a reconciliation of restructuring expense by segment for the quarter ended March 31, 2021:


	2017 Altra Plan		2019 Altra Plan		Total All Plans
Power Transmission Technologies	$	—	$	0.6	$	0.6
Automation & Specialty		—		0.3		0.3
Total restructuring expense	$	—	$	0.9	$	0.9

The total accrued restructuring reserve as of ~~September 30, 2017~~March 31, 2022, relates to severance ~~costs~~ to be paid to former employees ~~which are expected to be paid during 2017~~ and ~~are~~facility consolidation and relocation costs under the 2019 Altra Plan and is recorded in accruals and other current liabilities on the accompanying unaudited condensed consolidated balance sheet. ~~The Company does not expect~~

ALTRA INDUSTRIAL MOTION CORP.

Notes to ~~incur any additional material restructuring expenses related to the 2015 Altra Plan. The company expects to incur approximately $2.0 to $4.0 million~~Unaudited Condensed Consolidated Interim Financial Statements

Amounts in ~~expense under the 2017 Plan through 2019.~~millions, unless otherwise noted

The Company sold its entity in Changzhou China and obtained proceeds of approximately $3.2 million at the close of the transaction. There was no additional gain or loss recorded on the sale of the building associated with this entity which was classified as assets held for sale.

~~14.~~15. Segments, Concentrations and Geographic Information

Segments

The ~~Company currently operates through three business~~internal reporting structure used by our Chief Operating Decision Maker (“CODM”) to assess performance and allocate resources determines the basis for our reportable operating segments. Our CODM is our Chief Executive Officer, and he evaluates operations and allocates resources based on a measure of income from operations. Our operations are organized in 2 reporting segments that are aligned with key product types and end markets ~~served:~~served, Power Transmission Technologies (“PTT”) and Automation & Specialty (“A&S”):

•

Power Transmission Technologies - PTT. This segment included the following key product offerings as of March 31, 2022:

Couplings, Clutches & Brakes.

Couplings are the interface between two shafts, which enable power to be transmitted from one shaft to the other. Clutches in this segment are devices ~~which~~that use mechanical, hydraulic, pneumatic, or friction type connections to facilitate engaging or disengaging two rotating members. Brakes are combinations of interacting parts that work to slow or stop machinery. Products in this segment are generally used in heavy industrial applications and energy markets.

Electromagnetic Clutches & Brakes.

Products in this segment include brakes and clutches that are used to electronically slow, stop, engage or disengage equipment utilizing electromagnetic friction type connections. Products in this segment are used in industrial and commercial markets including agricultural machinery, material handling, motion control, and turf & garden.

~~Gearing.~~

Gearing.Gears are utilized to reduce the speed and increase the torque of an electric motor or engine to the level required to drive a particular piece of equipment. Gears produced by the Company are primarily utilized in industrial applications.

•

Automation & Specialty – A&S. This segment included the following key brands as of March 31, 2022:

Kollmorgen: Provides rotary precision motion solutions, including servo motors, stepper motors, high performance electronic drives and motion controllers and related software, and precision linear actuators. These products are used in advanced material handling, aerospace and defense, factory automation, medical, packaging, printing, semiconductor, robotic and other applications.

Portescap: Provides high-efficiency miniature motors and motion control products, including brush and brushless DC motors, can stack motors and disc magnet motors. These products are used in medical, industrial power tool and general industrial equipment applications.

Thomson: Provides systems that enable and support the transition of rotary motion to linear motion. Products include linear bearings, guides, glides, lead and ball screws, industrial linear actuators, clutch brakes, precision gears, resolvers and inductors. These products are used in factory automation, medical, mobile off-highway, material handling, food processing and other niche applications.

Jacobs Vehicle Systems (JVS): Provides renowned “Jake Brake” diesel engine braking systems and valve actuation mechanisms for the commercial vehicle market, including compression release, bleeder and exhaust brakes. These products are primarily used in heavy duty Class 8 truck applications (see Note 18 to the consolidated financial statements for further information regarding the divestiture of the JVS business).

1619

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in ~~thousands,~~millions, unless otherwise noted

Segment financial information and a reconciliation of segment results to unaudited condensed consolidated results are as follows:


	Quarter Ended
	March 31, 2022			March 31, 2021
Net Sales:
Power Transmission Technologies	$	253.7		$	221.0
Automation & Specialty		259.2			252.1
Inter-segment eliminations		(1.2	)		(1.0	)
Net sales	$	511.7		$	472.1
Income from operations:
Segment earnings:
Power Transmission Technologies	$	32.3		$	27.8
Automation & Specialty (1)		35.6			41.4
Corporate expenses (2)		0.1			(3.2	)
Restructuring costs		(0.4	)		(0.9	)
Income from operations	$	67.6		$	65.1
Other non-operating expense:
Net interest expense		11.3			16.9
Other non-operating income, net		(0.1	)		(1.5	)
Total non-operating expense	$	11.2		$	15.4
Income before income taxes		56.4			49.7
Provision for income taxes		11.6			10.5
Net income	$	44.8		$	39.2

Quarters Ended September 30,

Year to Date Period Ended September 30,

2017

2016

2017

2016

Net Sales:

Couplings, Clutches & Brakes

$
110,109

$
77,446

$
327,310

$
231,225

Electromagnetic Clutches & Brakes

58,304

50,680

187,463

165,083

Gearing

48,368

47,023

144,545

145,038

Inter-segment eliminations

(2,158
)

(2,017
)

(5,903
)

(5,087
)
Net sales

$
214,623

$
173,132

$
653,415

$
536,259

Income from operations:

Segment earnings:

Couplings, Clutches & Brakes

$
12,679

$
6,596

$
33,031

$
20,441

Electromagnetic Clutches & Brakes

6,138

6,589

21,894

20,120

Gearing

5,689

5,650

17,804

17,280

Restructuring

(680
)

(3,397
)

(3,776
)

(6,591
)
Corporate expenses (1)

(2,553
)

(5,069
)

(6,869
)

(9,729
)
Income from operations

$
21,273

$
10,369

$
62,084

$
41,521

Other non-operating (income) expense:

Net interest expense

$
1,811

$
2,815

$
5,547

$
8,615

Other non-operating expense (income), net

696

45

30

(438
)
Loss on extinguishment of convertible debt

—

—

1,797

—

2,507

2,860

7,374

8,177

Income before income taxes

18,766

7,509

54,710

33,344

Provision for income taxes

5,489

2,196

15,723

9,872

Net income

$
13,277

$
5,313

$
38,987

$
23,472

(1)

The Company recorded a non-cash impairment charge of $6.1 million at the JVS reporting unit during the first quarter of 2022 related to the held for sale classification.

(2)

Certain expenses are maintained at the corporate level and are not allocated to the segments. These include various administrative expenses related to the corporate headquarters, depreciation on capitalized software costs, non-capitalizable software implementation costs and acquisition related expenses.

~~(1)~~

Selected information by segment (continued):


	Quarter Ended
	March 31, 2022		March 31, 2021
Depreciation and amortization:
Power Transmission Technologies	$	7.4	$	8.0
Automation & Specialty		16.2		22.0
Corporate		0.6		0.7
Total depreciation and amortization	$	24.2	$	30.7


	March 31, 2022		March 31, 2021
Total assets:
Power Transmission Technologies	$	1,085.6	$	1,059.9
Automation & Specialty		2,893.8		2,966.9
Corporate (3)		145.4		140.7
Total assets	$	4,124.8	$	4,167.5

Quarter Ended

Year to Date Period Ended

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Depreciation and amortization:

Couplings, Clutches & Brakes

$
5,387

$
4,028

$
15,658

$
11,485

Electromagnetic Clutches & Brakes

1,274

1,176

3,690

3,501

Gearing

1,776

1,862

5,077

5,261

Corporate

851

791

2,478

2,372

Total depreciation and amortization

$
9,288

$
7,857

$
26,903

$
22,619

September 30, 2017

December 31, 2016

Total assets:

Couplings, Clutches & Brakes

$
570,266

$
511,934

Electromagnetic Clutches & Brakes

181,766

169,507

Gearing

139,039

147,829

Corporate (2)

34,960

40,554

Total assets

$
926,031

$
869,824

(3)

Corporate assets are primarily cash and cash equivalents, tax related asset accounts, certain capitalized software costs, property, plant and equipment and deferred financing costs.

1720

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in ~~thousands,~~millions, unless otherwise noted

~~(2)~~

~~Corporate assets are primarily cash and cash equivalents, tax related asset accounts, certain capitalized software costs, property, plant and equipment and deferred financing costs.~~

Net sales to third parties by geographic region are as follows:


	Net Sales								Net Sales
	Quarter Ended				Year to Date Period Ended				Quarter Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016		March 31, 2022		March 31, 2021
North America (primarily U.S.)	$	101,569	$	99,995	$	331,945	$	316,957	$	291.3	$	247.0
Europe		87,866		54,344		256,142		165,694
Asia and other		25,188		18,793		65,328		53,608
Europe excluding Germany										93.4		84.9
Germany										56.4		51.0
China										41.9		64.1
Asia and other excluding China										28.7		25.1
Total	$	214,623	$	173,132	$	653,415	$	536,259	$	511.7	$	472.1

Net sales to third parties are attributed to the geographic regions based on the country in which the shipment originates. Amounts attributed to the geographic regions for property, plant and equipment are based on the location of the entity, which holds such assets.

~~Concentrations~~

Financial instruments, which are potentially subject to counter party performance and concentrations of credit risk, consist primarily of trade accounts receivable. The Company manages these risks by conducting credit evaluations of customers prior to delivery or commencement of services. When the Company enters into a sales contract, collateral is normally not required from the customer. Payments are typically due within 30 days of billing. An allowance for potential credit losses is maintained, and losses have historically been within management’s expectations. While the Company did not have any customers that represented total sales greater than 10% for each of the quarters ended September 30, 2017 and 2016, the Gearing business had one customer that approximated 10% of total sales for that segment during the quarter ended September 30, 2017.

The Company is also subject to counter party performance risk of loss in the event of non-performance by counterparties to financial instruments, such as cash and investments. Cash and cash equivalents are held by well-established financial institutions and invested in AAA rated mutual funds. The Company is exposed to swap counterparty credit risk with well-established financial institutions.

~~15.~~16. Derivative Financial Instruments

The Company ~~enters into contractual derivative arrangements to~~may manage changes in market conditions related to interest on debt obligations and foreign currency ~~exposures. Derivative~~exposures by entering into derivative instruments, ~~utilized during the period include~~including interest rate ~~swap agreements~~ and foreign currency ~~contracts.~~swap agreements. All derivative instruments are recognized as either assets or liabilities on the balance sheet at fair value at the end of each period. ~~The counterparties to the Company's contractual derivative agreements are all major international financial institutions.~~ The Company ~~is exposed to credit loss in~~determines the ~~event~~fair value of ~~nonperformance by these counterparties. The~~financial instruments using quoted market prices whenever available. When quoted market prices are not available for various types of financial instruments (such as forwards, options and swaps), the Company ~~continually monitors its positions~~uses standard models with market-based inputs, which take into account the present value of estimated future cash flows and the ability of Altra or the financial counterparty to perform. For cross-currency interest rate swaps, the significant inputs are interest rate curves for discounting future cash flows, and exchange rate curves of the foreign currency for translating future cash flows. For interest rate swaps, the significant inputs to these models are interest rate curves for discounting future cash flows that are adjusted for credit ~~ratings~~risk. Both cross-currency interest rate swaps and interest rate swaps are Level 2 investments. Refer to Note 6 for a description of ~~its counterparties, and does not anticipate nonperformance by~~ the ~~counterparties.~~fair value levels. For designated hedging relationships, the Company formally documents the hedging relationship ~~and its risk management objective and strategy for undertaking~~consistent with the ~~hedge, the hedging instrument, the hedged item, the nature~~requirements of the risk being hedged, how the hedging instrument's effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method of measuring ineffectiveness. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting cash flows of hedged items.ASC 815, Derivatives.

~~Cross Currency~~

Cross-Currency Interest Rate Swaps

The Company is exposed to foreign currency and interest rate cash flow exposure related to non-functional currency long-term debt of the Company’s wholly owned Dutch subsidiary. To manage this foreign currency and interest rate cash flow exposure,

~~ALTRA INDUSTRIAL MOTION CORP.~~

~~Notes to Unaudited Condensed Consolidated Interim Financial Statements~~

~~Amounts in thousands, unless otherwise noted~~

In December 2018, the Company entered into cross-currency swap agreements to hedge its net investment in Euro-denominated assets against future volatility in the exchange rate between the U.S. dollar and the Euro. By doing so, the Company synthetically converted a portion of its U.S. dollar-based long-term debt into Euro-denominated long-term debt. At inception, the cross-currency swaps were designated as net investment hedges.

For net investment hedges, changes in the fair value of the effective portion of the derivatives’ gains or losses are reported as foreign currency translation gains or losses in accumulated other comprehensive income (loss) (“AOCIL”). The gains or losses on derivative instruments reported in AOCIL are reclassified to earnings in the period in which earnings are affected by the underlying item, such as a disposal or substantial liquidations of the entities being hedged. During the first quarter of 2020, the Company terminated the cross-currency interest rate ~~swap that converts $100.0 million of U.S. dollar denominated floating interest payments to functional currency (euro) fixed interest payments during~~swaps. The Company received the life of the hedging instrument. In addition, the Company has two cross-currency interest rate swaps that convert an additional $70.0 million of the U.S. dollar denominated floating interest payments to functional currency (euro) floating interest payments during the life of the hedging instruments. The effective period of onecash value of the cross-currency interest rate swaps of approximately $56.2 million upon termination. In addition, the Company paid the interest owed and received the interest due, resulting in the ~~amount~~recognition of ~~$30~~approximately $3.3 million ~~(the “Initial Swap”) that~~in net interest income, and paid termination fees of approximately $0.9 million. At March 31, 2022 and March 31, 2021, the Company ~~entered~~had a gain in toAOCIL of approximately $44.8 million, net of $11.4 million of tax. That balance will remain in AOCIL until the period in which earnings are affected by the underlying item, such as ~~of December 21, 2016 expired as of June 30, 2017. The Company net settled the Initial Swap and~~ a ~~new $30 million cross-currency swap transaction was entered into which will amortize down to $20 million after six-months. The effective period~~disposal or substantial liquidations of the second of these two cross-currency interest rate swaps in the amount of $40 million expires on December 31, 2018. As changes in foreign exchange and interest rates impact the future cash flow of interest payments, the hedges are intended to offset changes in cash flows attributable to interest rate and foreign exchange movements.entities being hedged.

The Company designated the $100.0 million swap as a cash flow hedge, with the effective portion of the gain or loss on the derivative reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction impacts earnings. There were no amounts recorded for ineffectiveness for the periods reported herein related to the cross-currency interest rate swaps. Changes in the fair value of the derivatives that are not designated as a cash flow hedge are recorded in other operating (income) expense, net.

Changes in the fair value of a derivative that is designated as and meets all the required criteria for a cash flow hedge are recorded in accumulated other comprehensive income and reclassified into earnings as the underlying hedged item affects earnings. As of September 30, 2017, approximately $0.3 million of net unrealized gains related to the cross-currency interest rate swaps were included in accumulated other comprehensive income.

Interest Rate ~~Swap~~Swaps

In January 2017, the Company entered into an interest rate swap agreement ~~designed~~ to fix the variable interest rate payable on a portion of its outstanding borrowings. This interest rate swap matured on January 31, 2020.Additionally, in December 2018, the Company entered into an interest rate swap agreement designed to manage the cash flow risk caused by interest rate changes on the forecasted interest payments expected to occur related to a portion of its outstanding borrowings under the ~~2015~~2018 Credit ~~Agreement, for a notional value of $50.0 million, at 1.625%. The effective date was January 31, 2017 and the maturity date is January 31, 2020.~~Agreement.

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

The interest rate swap agreement was designed to manage exposure to interest rates on the Company’s variable rate ~~indebtedness. The Company recognizes all derivatives~~indebtedness and was recognized on ~~its~~the balance sheet at fair value. The Company ~~has~~ designated this interest rate swap agreement as a cash flow ~~hedge. Changes~~hedge and changes in the fair value of the swap ~~will be~~were recognized in other comprehensive income until the hedged items ~~are~~were recognized in earnings. ~~Hedge ineffectiveness, if any, associated with the swap will be reported by~~

During 2020, the Company ~~in interest expense. As of September 30, 2017, approximately $35 thousand of unrealized gain related to~~terminated the interest rate swap ~~was included in accumulated other comprehensive income.~~

agreement. The ~~following table summarizes outstanding~~Company paid the cash value of the interest rate swaps ~~which~~of approximately $34.7 million upon termination. In addition, the Company ~~has recorded at September 30, 2017.~~

Initial US$

Date

Derivative

Notional

Entered

Financial

Amount

Floating Leg

Floating Leg

Settlement

Effective
into

Instrument

(thousands)

(swap counterparty)

Fixed Rate

(Company)

Dates

Period of swap
12/21/2016

Cross currency interest rate swap

$
100,000

Variable rate 1-month USD Libor plus 1.50% to 3/31/17 and 1.75% thereafter

1.027%
EUR

N/A

Monthly on the last banking day of each month commencing December 30, 2016

12/23/2016 - 12/31/2019
12/21/2016

Cross currency interest rate swap

40,000

Variable rate 1-month USD Libor plus 1.50% to 3/31/17 and 1.75% thereafter

N/A

Variable rate 1-month EURIBOR, floored at 0.00%, plus 0.920%

Monthly on the last banking day of each month commencing December 30, 2016

12/23/2016 - 12/31/2018
6/28/2017

Cross currency interest rate swap

30,000

Variable rate 1-month USD Libor plus 1.75% thereafter

N/A

Variable rate 1-month EURIBOR, floored at 0.00%, plus 1.11%

Monthly on the last banking day of each month commencing July 31, 2017

6/30/2017 - 12/31/2017
1/31/2017

Interest rate swap

50,000

Variable rate 1-month USD Libor

1.625%
USD

N/A

Monthly on the last banking day of each month commencing February 28, 2017

1/31/2017 - 1/31/2020

~~ALTRA INDUSTRIAL MOTION CORP.~~

~~Notes to Unaudited Condensed Consolidated Interim Financial Statements~~

~~Amounts~~paid the interest owed and received the interest due, resulting in ~~thousands, unless otherwise noted~~

~~The following table summarizes~~ the ~~location~~recognition of approximately $0.1 million in net interest expense, and ~~fair value, using Level 2 inputs (see Note 4 for~~paid termination fees of approximately $0.1 million. In November 2021, the Company terminated the 2018 Credit Agreement. As a ~~description~~result of the ~~fair value levels),~~decision to terminate the 2018 Credit Agreement, the remaining balance of the ~~Company's derivatives designated and not designated as hedging instruments~~unrealized loss in AOCIL was immediately reclassified to “Interest expense, net” in the ~~Unaudited Condensed Consolidated Balance Sheets (in thousands).~~

September 30,

December, 31

Balance Sheet Location

2017

2016

Designated as hedging instruments:

Cross currency swap agreements

Other long-term liabilities

$
13,699

$
1,642

Interest rate swap agreement

Other long-term assets

(35)

-

Not designated as hedging instruments:

Cross currency swap agreements

Other long-term liabilities

8,714

889

$
22,378

$
2,531

accompanying condensed consolidated statements of operations. The ~~following table summarizes the location~~Company reclassified $2.4 million, net of ~~(gain) loss reclassified~~$0.7 million of tax benefit, of non-cash interest expense from ~~Accumulated other comprehensive loss into~~AOCIL to earnings for ~~derivatives designated as hedging instruments and~~ the ~~location of (gain) loss for our derivatives not designated as hedging instruments in the Consolidated Statements of Income (in thousands).~~quarter ended March 31, 2021.

September 30,

Income Statement Location

2017

Designated as hedging instruments:

Cross currency swap agreements

Other non-operating (income) expense, net

$
11,867

Not designated as hedging instruments:

Cross currency swap agreements

Other non-operating (income) expense, net

7,825

$
19,692

~~16.~~17. Commitments and Contingencies

General Litigation

The Company is involved in various pending legal proceedings arising out of the ordinary course of business. These proceedings primarily involve commercial claims, product liability claims, personal injury claims, and workers’ compensation claims. ~~None of these legal proceedings are expected to have a material adverse effect on the results of operations, cash flows, or financial condition of the Company. Wi~~thWith respect to these proceedings, management believes that the Company will prevail, has adequate insurance coverage or has established appropriate reserves to cover potential liabilities. Any costs that management estimates may be paid related to these proceedings or claims are accrued when the liability is considered probable and the amount can be reasonably estimated. There can be no assurance, however, as to the ultimate outcome of any of these matters, and if all or substantially all of these legal proceedings were to be determined adversely to the Company, there could be a material adverse effect on the results of operations, cash flows, or financial condition of the Company. We have established loss provisions for matters in which losses are probable and can be reasonably estimated. ~~There were no material amounts accrued in the accompanying unaudited condensed consolidated balance sheet for potential litigation as of September 30, 2017 or December 31, 2016.~~ For matters where a reserve has not been established and for which we believe a loss is reasonably possible, as well as for matters where a reserve has been recorded but for which an exposure to loss in excess of the amount accrued is reasonably possible, we believe that such losses, individually and in the aggregate, will not have a material effect on our unaudited condensed consolidated financial statements.

Our estimates regarding potential losses and materiality are based on our judgment and assessment of the claims utilizing currently available information. Although we will continue to reassess our reserves and estimates based on future developments, our objective assessment of the legal merits of such claims may not always be predictive of the outcome and actual results may vary from our current estimates. We will continue to consider the applicable guidance in ASC 450-20, based on the facts known at the time of our future filings, as it relates to legal contingencies, and will adjust our disclosures as may be required under the guidance.

There were 0 material amounts accrued in the accompanying unaudited condensed consolidated balance sheets for potential litigation as of March 31, 2022 or December 31, 2021.

The Company also risks exposure to product liability claims in connection with products it has sold and those sold by businesses that the Company acquired. Although in some cases third parties have retained responsibility for product liability claims relating to products manufactured or sold prior to the acquisition of the relevant business and in other cases the persons from whom the Company has acquired a business may be required to indemnify the Company for certain product liability claims subject to certain caps or limitations on indemnification, the Company cannot assure that those third parties will in fact satisfy their obligations with respect to liabilities retained by them or their indemnification obligations. If those third parties become unable to or otherwise do not comply with their respective obligations including indemnity obligations, or if certain product liability claims for which the Company is obligated were not retained by third parties or are not subject to these indemnities, the Company could become subject to significant liabilities or other adverse consequences. Moreover, even in cases where third parties retain

~~ALTRA INDUSTRIAL MOTION CORP.~~

~~Notes to Unaudited Condensed Consolidated Interim Financial Statements~~

~~Amounts in thousands, unless otherwise noted~~

responsibility for product liability claims or are required to indemnify the Company, significant claims arising from products that have been acquired could have a material adverse effect on the Company’s ability to realize the benefits from an acquisition, could result in the reduction of the value of goodwill that the Company recorded in connection with an acquisition, or could otherwise have a material adverse effect on the Company’s business, financial condition, or operations.

~~Disclosure~~22

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

Environmental

There is contamination at some of ~~an Amendment~~the Company’s current facilities, primarily related to historical operations at those sites, for which the Company could be liable for the investigation and remediation under certain environmental laws. The potential for contamination also exists at other of the Company’s current or former sites, based on historical uses of those sites. The Company currently is not undertaking any material remediation or investigations and the costs or liability in connection with potential contamination conditions at these facilities cannot be predicted at this time because the potential existence of contamination has not been investigated or not enough is known about the environmental conditions or likely remedial requirements. Currently, other parties with contractual liability are addressing or have plans or obligations to address those contamination conditions that may pose a material risk to human health, safety or the environment. In addition, while the Company attempts to evaluate the risk of liability associated with these facilities at the time the Company acquired them, there may be environmental conditions currently unknown to the ~~Altra Industrial Motion, Inc. Retirement Plan (the “Pension Plan”)~~

~~Effective June 30, 2017,~~Company relating to prior, existing or future sites or operations or those of predecessor companies whose liabilities the Company ~~amended~~may have assumed or acquired which could have a material adverse effect on the ~~Altra Industrial Motion, Inc. Retirement Plan (the “Pension Plan”), its frozen U.S. defined benefit pension plan, to terminate the Pension Plan effective as of June 30, 2017.~~ Company’s business.

The Company ~~has commenced the plan termination process and~~is being indemnified, or expects to ~~distribute a portion~~be indemnified, by third parties subject to certain caps or limitations on the indemnification, for certain environmental costs and liabilities associated with certain owned or operated sites. Accordingly, based on the indemnification and the experience with similar sites of the ~~Pension Plan assets by the end of 2017 and the remainder in the first quarter of 2018. Upon regulatory approval and the distribution of plan assets,~~environmental consultants who the Company ~~expects~~has hired, the Company does not expect such costs and liabilities to ~~recognize~~have a ~~loss up~~material adverse effect on its business, operations or earnings. The Company cannot assure you, however, that those third parties will in fact satisfy their indemnification obligations. If those third parties become unable to, or otherwise do not, comply with their respective indemnity obligations, or if certain contamination or other liability for which the Company is obligated is not subject to these indemnities, the Company could become subject to significant liabilities.

From time to time, the Company is notified that it is a ~~total~~potentially responsible party and may have liability in connection with off-site disposal facilities. To date, the Company has generally resolved matters involving off-site disposal facilities for a nominal sum but there can be no assurance that the Company will be able to resolve pending or future matters in a similar fashion.

18. Subsequent Events

On April 8, 2022, the Company completed the previously announced sale of ~~approximately $8.0 million during~~all of the ~~fourth quarter~~issued and outstanding equity interests of ~~2017 and first quarter of 2018 associated with~~ the ~~plan termination. The loss will include up~~entities which collectively constitute its JVS business segment to ~~$1.1~~Cummins Inc., an Indiana corporation, for $325.0 million in cash ~~required~~subject to ~~terminate the pension plan and the remainder will be non-cash in nature.~~customary adjustments. The ~~unrecognized loss will be triggered upon the distribution of Pension Plan assets.~~net cash consideration received was approximately $325.9 million.

~~17. Subsequent Events~~

~~Dividend~~

On ~~October 17, 2017~~April 26, 2022, the Company declared a dividend of ~~$0.17~~$0.09 per share for the quarter ended ~~December 31, 2017,~~June 30, 2022, payable on ~~January 3, 2017~~July 6, 2022 to ~~shareholders~~stockholders of record as of June 17, 2022.

On April 26, 2022, the Company announced that its Board of Directors approved a new share repurchase program authorizing the buyback of up to $300 million of the Company's common stock through December ~~18, 2017.~~31, 2024.

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

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Company’s current estimates, expectations and projections about the Company’s future results, performance, prospects and opportunities. Forward-looking statements include, among other things, the information concerning the Company’s possible future results of operations including revenue, costs of goods sold, gross margin, future profitability, future economic improvement, business and growth strategies, financing plans, expected leverage levels, the Company’s competitive position and the effects of competition, the projected growth of the industries in which we operate, and the Company’s ability to consummate strategic acquisitions and other transactions. In addition, all statements regarding the anticipated effects of the novel coronavirus, or COVID-19, pandemic and the responses thereto, including the pandemic’s impact on general economic and market conditions, as well as on our business, customers, end markets, results of operations and financial condition and anticipated actions to be taken by management to sustain the Company during the economic uncertainty caused by the pandemic and related governmental and business actions, as well as other statements that are not strictly historic in nature are forward looking. Forward-looking statements include statements that are not historical facts and can be identified by forward-looking words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” ~~“expect,~~“expect” “forecast,” “intend,” “plan,” “may,” “project,” “should,” “will,” “would,” ~~“project,” “forecast”~~ and similar ~~expressions.~~expressions or variations. These forward-looking statements are based upon information currently available to the Company and are subject to a number of risks, uncertainties, and other factors that could cause the Company’s actual results, performance, prospects, or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.

Important factors that could cause the Company’s actual results to differ materially from the results referred to in the forward-looking statements the Company makes in this report include:

•

the effects of intense competition in the markets in which we operate;

•

the cyclical nature of the markets in which we operate;

•

~~developments stemming from the recent U.S. federal elections;~~

~~the loss of independent distributors on which we rely;~~

~~changes in market conditions in which we operate that would influence the value of the Company’s stock;~~

the Company’s ability to ~~achieve its business plans, including with respect~~invest in new technologies and manufacturing techniques and to ~~an uncertain economic environment;~~

develop or adapt to changing technology and manufacturing techniques;

•

~~the risks associated with international operations, including currency risks;~~

~~the Company’s ability to retain existing customers and our ability to attract new customers for growth of our business;~~

~~the effects of the loss or bankruptcy of or default by any significant customer, suppliers, or other entity relevant to the Company’s operations;~~

political and economic conditions globally, nationally, regionally, and in the markets in which we operate;

•

international operations, including currency risks;

•

the loss of independent distributors on which we rely;

•

the accuracy of estimated forecasts of OEM customers;

•

the scope and duration of the COVID-19 global pandemic and its impact on global economic systems, our employees, sites, operations, customers, and supply chain, including the impact of the pandemic on manufacturing and supply capabilities throughout the world;

•

disruption of our supply chain including the impact of the global semiconductor chip shortage;

•

the disruption of the Company’s production or commercial activities;

•

natural disasters, war, civil unrest, terrorism, fire, floods, tornadoes, earthquakes, hurricanes, pandemics, including, but not limited to, the COVID-19 pandemic, and the ongoing military action between Russia and Ukraine, or other matters beyond the Company’s control;

•

~~the Company’s risk of loss not covered by insurance;~~

~~the accuracy of estimated forecasts of OEM customers and the impact of the current global and European economic environment on our customers;~~

~~the risks associated with certain minimum purchase agreements we have with suppliers;~~

~~disruption of our supply chain;~~

fluctuations in the costs of raw materials used in our products;

•

~~the outcome of litigation to which the Company is a party from time to time, including product liability claims;~~

work stoppages and other labor ~~issues;~~

issues involving the Company’s facilities or the Company’s customers;

•

~~changes in employment, environmental, tax and other laws and changes in the enforcement of laws;~~

the Company’s ability to ~~attract and~~ retain key ~~executives and other personnel;~~

executives;

•

the Company’s ability to ~~successfully pursue the Company’s development activities~~recruit, retain and ~~successfully integrate new operations and systems, including the realization of revenues, economies of scale, cost savings, and productivity gains associated with such operations;~~

motivate key sales, marketing or engineering personnel;

•

the Company’s ability to obtain or protect intellectual property rights and avoid infringing on the intellectual property rights of others;

•

~~the risks associated with the portion of the Company’s total assets comprised of goodwill and indefinite lived intangibles;~~

unplanned repairs or equipment outages;

•

~~changes in market conditions that would result in the impairment of goodwill or other assets of the Company;~~

~~changes in accounting rules and standards, audits, compliance with the Sarbanes-Oxley Act, and regulatory investigations;~~

~~the effects of changes to critical accounting estimates;~~

~~changes in volatility of the Company’s stock price and the risk of litigation following a decline in the price of the Company’s stock;~~

failure of the Company’s operating equipment or information technology ~~infrastructure;~~

infrastructure, including cyber-attacks or other security breaches, and failure to comply with data privacy laws or regulations;

•

the Company’s ability to implement ~~our~~and maintain enhancements to its Enterprise Resource Planning (ERP) system;

•

~~the Company’s access to capital, credit ratings, indebtedness, and ability to raise additional capital and operate under the terms of the Company’s debt obligations;~~

~~the risks associated with our debt;~~

~~the risks associated with the Company’s exposure to variable interest rates and foreign currency exchange rates;~~

~~the risks associated with interest rate swap contracts;~~

~~the risks associated with the Company’s being subject to tax laws and regulations in various jurisdictions;~~

~~the risks associated with~~ the Company’s exposure to renewable energy markets;

•

~~the risks related to regulations regarding conflict minerals;~~

~~the risks associated with the volatility and disruption in the global financial markets;~~

the Company’s ability to successfully execute, manage and integrate key acquisitions and mergers, including but not limited to the Svendborg Acquisition, the Guardian Acquisition and the Stromag Acquisition;

~~the risks associated with the Company’s closure of its manufacturing facility in Changzhou, China;~~

the Company’s ability to achieve the efficiencies, savings and other benefits anticipated from our cost reduction, margin improvement, restructuring, plant consolidation and other business optimization initiatives;

•

the Company’s ability to achieve its business plans, including with respect to an uncertain economic environment;

•

global economic changes and continued volatility and disruption in global financial markets;

•

adverse conditions in the credit and capital markets limiting or preventing the Company’s and its customers’ and suppliers’ ability to borrow or raise capital;

•

changes in market conditions that would result in the impairment of goodwill, indefinite lived intangibles or other assets of the Company;

•

any negative effects of the Company’s leverage, which could adversely affect its financial health;

•

the significant operating and financial restrictions imposed by the Credit Agreement;

•

the Company’s exposure to variable interest rates and foreign currency exchange rates, including risks related to transitioning from LIBOR to a replacement alternative reference rate and risks related to the use of hedging arrangements to manage interest rate and currency risk;

•

changes in accounting rules and standards, audits, compliance with the Sarbanes-Oxley Act, and regulatory investigations;

•

changes to trade policies, legislation, treaties, regulations and tariffs both in and outside of the United States;

•

exposure to United Kingdom political developments, including the effect of its withdrawal from the European Union, and the uncertainty surrounding the effect of Brexit and related negative developments in the European Union and elsewhere;

•

defects, quality issues, inadequate disclosure or misuse with respect to our products and capabilities and related potential product liability claims;

•

the outcome of litigation to which the Company is a party from time to time;

•

changes in labor or employment laws;

•

environmental laws and regulations and the Company’s failure to comply with such laws;

•

tax laws and regulations in various jurisdictions to which the Company is subject and the inability to successfully defend claims from taxing authorities related to the Company’s current or acquired businesses;

•

changes in the Company’s tax rates or exposure to additional income tax liabilities or assessments, as well as audits by tax authorities;

•

changes in volatility of the Company’s stock price and the risk of litigation following a decline in the price of the Company’s stock;

•

the Company’s ability to successfully execute, manage and integrate key acquisitions and mergers, including the Nook acquisition and the combination (the “Fortive Transaction”) of the Company with four operating companies from Fortive Corporation’s (“Fortive”) Automation & Specialty platform (excluding Fortive’s Hengstler and Dynapar businesses);

•

the risks associated with the ~~UK vote~~Company’s ability to ~~leave~~successfully divest or otherwise dispose of businesses that that are deemed not to fit with our strategic plan or are not achieving the ~~European Union; and~~

desired return on investment;

•

the Company’s debt and access to capital, credit ratings, indebtedness, and ability to raise additional capital and operate under the terms of the Company’s debt obligations;

•

restrictions relating to the tax free treatment of the Fortive Transaction; and

•

other factors, risks, and uncertainties referenced in the Company’s filings with the Securities and Exchange Commission, including the “Risk Factors” set forth in ~~this document.~~

our Annual Report on Form 10-K.

ALL FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS REPORT. EXCEPT AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR RELEASE ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT ANY EVENTS OR CIRCUMSTANCES AFTER THE DATE OF THIS REPORT OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO US OR ANY PERSON ACTING ON THE COMPANY’S BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS CONTAINED OR REFERRED TO IN THIS SECTION AND IN OUR RISK FACTORS SET FORTH (1) IN THE SECTION TITLED “RISK FACTORS,” SET FORTH IN PART II, ITEM 1A OF THIS QUARTERLY REPORT ON FORM 10-Q; (2) IN PART I, ITEM 1A OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, ~~2016, AND IN OTHER REPORTS~~2021, FILED WITH THE ~~SECURITIES~~SEC ON FEBRUARY 28, 2022; AND ~~EXCHANGE COMMISSION BY~~(3) IN THE ~~COMPANY.~~COMPANY’S OTHER SEC FILINGS.

The following discussion of the financial condition and results of operations of Altra Industrial Motion Corp. and its subsidiaries should be read together with (1) the ~~audited~~unaudited condensed consolidated financial statements of Altra Industrial Motion Corp. and its subsidiaries and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and (2) the audited consolidated financial statements of Altra Industrial Motion Corp. and its subsidiaries and the related notes and management’s discussion and analysis of financial conditions and results of operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021. The following discussion includes forward-looking statements. For a discussion of important factors that could cause actual results to differ materially from the results referred to in the forward-looking statements, see “Forward-Looking Statements” and “Risk Factors” in this Quarterly Report on Form 10-Q and “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Unless the context requires otherwise, the terms “Altra,” “Altra Industrial Motion Corp.,” “the Company,” “we,” “us,” and “our” refer to Altra Industrial Motion Corp. and its subsidiaries.

~~General~~

General

We are a leading global designer, producer and marketer of a wide range of electromechanical power transmission ~~and~~ motion control products with a presence in over 70 countries. Our global sales and marketing network includes over 1,000 direct OEM customers and over 3,000 distributor outlets. Our product portfolio includes industrial clutches and brakes, enclosed gear drives, open gearing, couplings, engineered bearing assemblies, linear components, gear motors, and other related(“PTMC”) products. Our ~~products serve~~technologies are used in various motion related applications and across a wide variety of ~~end markets including energy, general industrial, material handling, mining, transportation~~high-volume manufacturing and ~~turf~~non-manufacturing processes in which reliability and ~~garden.~~ precision are critical to avoid costly down time and enhance the overall efficiency of operations.

We ~~primarily sell~~market our products tounder well recognized and established brands, which have been in existence for an average of over 85 years. We serve a ~~wide range~~diversified group of ~~OEMs~~customers comprised of over 1,000 direct original equipment manufacturers (“OEMs”) including GE, Honeywell and ~~through long-standing~~Siemens, and also benefit from established, long-term relationships with leading industrial distributors, ~~such as Motion Industries,~~including Applied Industrial Technologies, Grainger, Kaman Industrial Technologies and ~~W.W. Grainger.~~Motion Industries. Many of our customers operate globally across a large number of industries, ranging from transportation, turf and agriculture, energy and mining to factory automation, medical and robotics. Our relationships with these customers often span multiple decades, which we believe reflects the high level of performance, quality and service we deliver, supplemented by the breadth of our offering, vast geographic footprint and our ability to rapidly develop custom solutions for complex customer requirements.

~~Business Segments~~

On December 31, 2021, the Company acquired all of the issued and outstanding equity interests of Nook Industries, LLC ("Nook"), a leader in the U.S. engineered linear motion industry. The acquisition expands the Company's current portfolio of linear product offerings. The acquisition is being accounted for as a business combination using the acquisition method of accounting and the results have been consolidated into the Company's Automation & Specialty segment. The aggregate purchase price of approximately $138.5 million, inclusive of certain post-closing adjustments but subject to others, consisted of $125.2 million of cash transferred, net of $5.1 million of cash acquired, and a noncontingent purchase price holdback of $8.2 million. The purchase price holdback was released in January 2022. The Company ~~currently operates through three business segments that are aligned with key product types and end markets served:~~

~~Couplings, Clutches & Brakes.~~

~~Couplings are~~borrowed $130.0 million under its Revolving Credit Facility (as defined below) in December 2021 to finance the interface between two shafts, which enable power to be transmitted from one shaft to the other. Clutches in this segment are devices which use mechanical, hydraulic, pneumatic, or friction type connections to facilitate engaging or disengaging two rotating members. Brakes are combinations of interacting parts that work to slow or stop machinery. Products in this segment are generally used in heavy industrial applications and energy markets.transaction.

~~Electromagnetic Clutches & Brakes.~~

~~Gearing.~~

~~Gears are utilized to reduce the speed and increase the torque of an electric motor or engine to the level required to drive a particular piece of equipment. Gears produced by~~On April 8, 2022, the Company ~~are primarily utilized~~completed the previously announced sale of all of the issued and outstanding equity interests of the entities which collectively constitute its Jacobs Vehicle Systems (“JVS”) business segment to Cummins Inc., an Indiana corporation, for $325.0 million in ~~industrial applications.~~cash subject to customary adjustments. The net cash consideration received was approximately $325.9 million, which remains subject to customary purchase price adjustments.

~~The following tables show the percentage of net sales and operating income generated by each of our three segments for the quarters and year to date periods ended September 30, 2017 and 2016:~~

Net Sales

Quarter Ended

Year to Date Period Ended

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Couplings, Clutches & Brakes

52%

45%

51%

43%

Electromagnetic Clutches & Brakes

27%

29%

29%

31%

Gearing

21%

26%

20%

26%

Operating Income

Quarter Ended

Year to Date Period Ended

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Couplings, Clutches & Brakes

52%

35%

45%

35%

Electromagnetic Clutches & Brakes

25%

35%

30%

35%

Gearing

23%

30%

25%

30%

Our ~~Internet address~~website is www.altramotion.com. By following the link “Investor Relations” and then “SEC ~~filings”~~Filings” on our ~~Internet~~ website, ~~we make available, free of charge,~~you can access our Annual ~~Report~~Reports on Form 10-K, our Quarterly Reports on Form 10-Q, ~~our~~ Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which we make available free of charge, as soon as reasonably practicable after such forms are filed with or furnished to the ~~Securities and Exchange Commission.~~SEC. We are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, this Quarterly Report on Form 10-Q.

Business Outlook

~~During~~Our future financial performance depends, in large part, on conditions in the markets that we serve and on conditions in the U.S., European, and global economies in general. In the quarter ended ~~September 30, 2017,~~March 31, 2022, we ~~saw~~experienced strong sales as our team executed very well in spite of continued ~~improvement in certain~~challenges including supply chain constraints, labor shortages, inflation pressures, and the continued impact of COVID-19. Our pricing initiatives helped improve earnings and our backlog levels remain strong. In April 2022, we also completed the sale of our ~~end markets that previously had been challenged. As~~Jacobs Vehicle Systems business and used the proceeds to pay down approximately $315 million in debt and strengthen our ~~markets strengthen, we expect~~balance sheet.

We will remain focused on leveraging the Altra Business System to ~~benefit increasingly from~~drive organic growth initiatives, to manage our ~~work during~~portfolio through disciplined mergers and acquisitions, to integrate the ~~past few years~~Nook business, and to execute on our ~~facility consolidation, supply chain and operational excellence initiatives. Moreover, we believe we are now in~~strategy to position Altra as a ~~position to capitalize on the positive momentum in the~~premier industrial economy by driving growth initiatives. To this end, our sales and engineering teams are targeting specific strategic end markets with focused activities to generate new opportunities. We continue to be encouraged by the progress of the integration of our Stromag acquisition and we have already experienced an increase in cross-selling opportunities. We continue to seek further acquisitions, but remain highly disciplined in that pursuit. company.

Critical Accounting Policies

The preparation of our unaudited condensed consolidated financial statements and related disclosures in conformity with generally accepted accounting principles ~~generally accepted~~ in the United States (“GAAP”) requires management to make judgments, assumptions and estimates that affect our reported amounts of assets, revenues and expenses, as well as related disclosures of contingent assets and liabilities. We base our estimates on past experiences and other assumptions we believe to be appropriate, and we evaluate these estimates on an on-going basis. See the discussion of critical accounting policies in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021. There have been no changes in the identification or application of the Company’s critical accounting policies during the quarter ended ~~September 30, 2017.~~March 31, 2022.

Recent Accounting Standards

See Part 1, Notes to Unaudited Condensed Consolidated Interim Financial Statements, Note 3 – Recent Accounting Standards.

Results of Operations

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


	Quarter Ended						Year to Date Period Ended						Quarter Ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			March 31, 2022			March 31, 2021
Net sales	$	214,623		$	173,132		$	653,415		$	536,259		$	511.7		$	472.1
Cost of sales		145,610			118,957			446,109			369,254			331.4			300.4
Gross profit		69,013			54,175			207,306			167,005			180.3			171.7
Gross profit percentage		32.2	%		31.3	%		31.7	%		31.1	%		35.2	%		36.4	%
Selling, general and administrative expenses		41,009			36,142			123,012			105,548			88.6			89.8
Impairment of Goodwill and Intangible Asset														6.1			—
Research and development expenses		6,051			4,267			18,434			13,345			17.6			15.9
Restructuring costs		680			3,397			3,776			6,591			0.4			0.9
Income from operations		21,273			10,369			62,084			41,521			67.6			65.1
Interest expense, net		1,811			2,815			5,547			8,615			11.3			16.9
Other non-operating income (loss), net		696			45			30			(438	)
Loss on extinguishment of debt		—			—			1,797			—
Other non-operating income, net														(0.1	)		(1.5	)
Income before income taxes		18,766			7,509			54,710			33,344			56.4			49.7
Provision for income taxes		5,489			2,196			15,723			9,872			11.6			10.5
Net income	$	13,277		$	5,313			38,987			23,472		$	44.8		$	39.2

Quarter Ended ~~September 30, 2017~~March 31, 2022 compared with Quarter Ended ~~September 30, 2016~~March 31, 2021

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

Amounts in thousands, except percentage data	Quarter-Ended

Amounts in millions, except percentage data										Quarter Ended
	September 30, 2017		September 30, 2016		Change		%			March 31, 2022		March 31, 2021		Change		%
Net sales	$	214,623	$	173,132	$	41,491		24.0	%	$	511.7	$	472.1	$	39.6		8.4	%

Net Sales The increase in net sales during the quarter ended March 31, 2022 when compared to the quarter ended March 31, 2021 was primarily due to strength across most end markets, especially the turf and garden and factory automation end markets as well as the addition of approximately $11.2 million of sales from Nook. Changes in foreign exchange had an unfavorable impact on

net sales of $8.7 million for the quarter ended March 31, 2022. Price had a favorable impact on net sales of $17.7 million for the quarter ended March 31, 2022.


Amounts in millions, except percentage data	Quarter Ended
	March 31, 2022			March 31, 2021			Change		%
Gross profit	$	180.3		$	171.7		$	8.6		5.0	%
Gross profit as a percent of sales		35.2	%		36.4	%

Gross Profit The decrease in gross profit as a percent of sales during the quarter ended March 31, 2022 when compared to the quarter ended March 31, 2021 was primarily due to increasing costs associated with logistics, supply chain and labor as well as changes in foreign exchange, which had an unfavorable impact of $3.2 million. This decrease was partially offset by price, which had a favorable impact of $17.7 million for the quarter ended March 31, 2022.


Amounts in millions, except percentage data	Quarter Ended
	March 31, 2022			March 31, 2021			Change			%
Selling, general and administrative expense (“SG&A”)	$	88.6		$	89.8		$	(1.2	)		(1.3	)%
SG&A as a percent of sales		17.3	%		19.0	%

Selling, general and administrative expenses The decrease in SG&A during the quarter ended March 31, 2022 when compared to the quarter ended March 31, 2021 was primarily driven by the decrease in amortization expense as a result of the JVS disposal group being classified as held for sale. Refer to Note 4 for further information on the held for sale classification. This decrease was partially offset due to the inclusion of the SG&A expenses from Nook of $2.8 million as well as changes in foreign exchange, which had an unfavorable impact on SG&A of $2.1 million.


Amounts in millions, except percentage data	Quarter Ended
	March 31, 2022		March 31, 2021		Change		%
Research and development expenses (“R&D”)	$	17.6	$	15.9	$	1.7		10.7	%

Research and development expense The increase in research and development expenses for the quarter ended March 31, 2022 when compared to the quarter ended March 31, 2021 was primarily due to expenses returning that were deferred such as backfilling open positions. Foreign exchange had an unfavorable impact on R&D of $0.2 million. We expect R&D costs to be approximately 2.5% - 3.5% of sales in future periods.


Amounts in millions, except percentage data	Quarter Ended
	March 31, 2022		March 31, 2021		Change			%
Restructuring costs	$	0.4	$	0.9	$	(0.5	)		(55.6	)%

Restructuring costs During the quarter ended September 30, 2017, was due to the acquisition of Stromag, price increases, higher sales levels in several end markets and the favorable effect of changes in foreign exchange rates of $2.5 million. Of the increase in sales, approximately $34.9 million relates to the inclusion of additional saleswe commenced a restructuring plan (“2017 Altra Plan”) as a result of ~~the~~Altra’s acquisition of Stromag for the quarter. In addition, price increases contributed $1.7 million to the increase during the quarter. The rest of the increase related to a recovery in sales levels in various end markets in the Couplings, Clutches, and Brakes business segment.

Amounts in thousands, except percentage data

Quarter Ended

September 30, 2017

September 30, 2016

Change

%

Gross Profit

$
69,013

$
54,175

$
14,838

27.4
%
Gross Profit as a percent of sales

32.2
%

31.3
%

Gross profit as a percentage of sales increased during the quarter ended September 30, 2017 primarily due to improvements realized from our consolidation and cost saving efforts as well as a modest improvement in some of our more profitable end markets.

Amounts in thousands, except percentage data

Quarter Ended

September 30, 2017

September 30, 2016

Change

%

Selling, general and administrative expense (“SG&A”)

$
41,009

$
36,142

$
4,867

13.5
%
SG&A as a percent of sales

19.1
%

20.9
%

The increase in SG&A is primarily due to the inclusion of SG&A related to the Stromag business. This amount is partially offset by a decrease in year over year US healthcare costs and certain reductions as a result of our plant consolidations.

Amounts in thousands, except percentage data

Quarter Ended

September 30, 2017

September 30, 2016

Change

%

Research and development expenses (“R&D”)

$
6,051

$
4,267

$
1,784

41.8
%

~~The increase in R&D is due to the inclusion of Stromag for the quarter ended September 30, 2017.~~

Amounts in thousands, except percentage data

Quarter Ended

September 30, 2017

September 30, 2016

Change

%

Restructuring Costs

$
680

$
3,397

$
(2,717
)

(80.0
)%

~~During 2015, the Company adopted a restructuring plan (“2015 Altra Plan”) in response to weak demand~~ and to ~~make certain adjustments to improve business effectiveness, reduce the number of facilities and streamline the Company’s cost structure.~~rationalize our global renewable energy business. The actions taken pursuant to the ~~2015~~2017 Altra Plan included reducing headcount, facility consolidations and ~~limiting discretionary spending to improve profitability. Approximately $1.9 million~~the elimination of ~~the decrease is related to activity~~certain costs. The total 2017 Altra Plan savings are in ~~the Couplings, Clutches and Brakes segment not present in the current quarter under the 2015 Altra Plan. The Company does~~line with our expectations. We do not expect to incur any additional material costs as a result of the ~~2015~~2017 Altra Plan.

During 2019, we commenced a restructuring plan (“2019 Altra Plan”) to drive efficiencies, reduce the number of facilities and optimize our operating margin. We expect to incur an additional $1 - $2 million in restructuring expenses under the 2019 Altra Plan over the next two years, primarily related to headcount reductions and plant consolidations. We achieved savings of $0.6 million during the quarter ended ~~September 30, 2017,~~March 31, 2022 under the ~~Company commenced a new restructuring plan (“2017~~2019 Altra ~~Plan”)~~Plan and estimate additional future savings to be approximately $1 - $2 million over the next two years. The cost savings for the quarter ended March 31, 2022 were recognized as reductions in SG&A and Cost of Sales of approximately $0.4 million and $0.2 million, respectively.


Amounts in millions, except percentage data	Quarter Ended
	March 31, 2022		March 31, 2021		Change			%
Interest expense, net	$	11.3	$	16.9	$	(5.6	)		(33.1	)%

Interest expense, net The decrease in interest expense during the quarter ended March 31, 2022 when compared to the quarter ended March 31, 2021 was primarily due to the lower average interest rates as a result of our November 2021 refinancing. In addition, interest expense decreased during the ~~Stromag acquisition and to rationalize its global renewable energy business. The actions taken pursuant~~quarter ended March 31, 2022 when compared to the ~~2017 Altra Plan include reducing headcount, facility consolidations and the elimination of certain costs. Approximately $0.6~~quarter ended March 31, 2021 because we recorded $3.1 million of non-cash interest expense related to the termination of the interest rate swap during the quarter ended March 31, 2021. Since the remaining balance of the unrealized loss from the termination of the interest rate swap was reclassified from accumulated other comprehensive income (loss) to interest expense in the ~~current~~fourth quarter ~~is related to activity~~of 2021 in connection with the ~~Couplings, Clutches and Brakes segment under the 2017 Altra Plan. The company expects to incur approximately $2.0 to $4.0 million in additional~~refinancing, no non-cash interest expense ~~through 2019~~ related to the ~~2017 Altra Plan.~~

Amounts in thousands, except percentage data

Quarter Ended

September 30, 2017

September 30, 2016

Change

%

Interest Expense, net

$
1,811

$
2,815

$
(1,004
)

(35.7
)%

~~Interest expense decreased significantly~~termination of the interest rate swap was recorded during the quarter ended March 31, 2022. We expect our interest expense in 2022 to continue to decrease as ~~a result of the conversion and redemption of~~additional principal payments on our ~~convertible notes and the favorable impact of the cross currency interest rate swaps despite the higher borrowing under our Credit Facility~~debt are made.


Amounts in millions, except percentage data	Quarter Ended
	March 31, 2022			March 31, 2021			Change		%
Provision for income taxes	$	11.6		$	10.5		$	1.1		10.5	%
Provision for income taxes as a percent of income before income taxes		20.6	%		21.1	%

Provision for ~~the Stromag Acquisition.~~

Amounts in thousands, except percentage data

Quarter Ended

September 30, 2017

September 30, 2016

Change

%

Other non-operating income, net

$
696

$
45

$
651

1446.7
%

Other non-operating expense increased primarily due to foreign currency transaction gains and losses arising from changes in exchange rates related primarily to the Euro, British Pound, and Chinese Renminbi.

Amounts in thousands, except percentage data

Quarter Ended

September 30, 2017

September 30, 2016

Change

%

Provision for income taxes

$
5,489

$
2,196

$
3,293

150.0
%
Provision for income taxes as a % of income before
income taxes

29.2
%

29.2
%

Income TaxesThe provision for income tax as a ~~percentage~~percent of income before income taxes ~~was flat~~decreased for the quarter ended ~~September 30, 2017 as~~March 31, 2022 when compared to the quarter ended ~~September 30, 2016.~~

~~Year to Date Ended September 30, 2017 compared with Year to Date Ended September 30, 2016~~

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

Amounts in thousands, except percentage data

Year to Date Ended

September 30, 2017

September 30, 2016

Change

%

Net sales

$
653,415

$
536,259

$
117,156

21.8
%

March 31, 2021 . The increase in sales during the year to date period ended September 30, 2017 was due to the acquisition of Stromag, price increases, and higher sales levels in several end markets partially offset by the effect of changes in foreign exchange rates of $5.4 million. Of the increase in sales, approximately $103.0 million relates to the inclusion of additional sales as a result of the acquisition of Stromag. In addition, price increases contributed $4.9 million to the increase. The rest of the increase related to a recovery in sales levels in various end marketsdecrease in the ~~Couplings, Clutches, and Brakes business segment~~

Amounts in thousands, except percentage data

Year to Date Ended

September 30,
2017

September 30,
2016

Change

%

Gross Profit

$
207,306

$
167,005

$
40,301

24.1
%
Gross Profit as a percent of sales

31.7
%

31.1
%

Gross profit as a percentage of sales increased slightly during the year to date period ended September 30, 2017 primarily as a result of our plant consolidations, price increases, and improving end markets. The increase in gross profit was partially offset by the impact of acquired inventory related to the Stromag acquisition in the amount of $2.3 million which was recorded at fair value rather than cost.

Amounts in thousands, except percentage data

Year to Date Ended

September 30,
2017

September 30,
2016

Change

%

Selling, general and administrative expense (“SG&A”)

$
123,012

$
105,548

$
17,464

16.5
%
SG&A as a percent of sales

18.8
%

19.7
%

~~The increase in SG&A is primarily due to the inclusion of SG&A related to the Stromag business.~~

Amounts in thousands, except percentage data

Year to Date Ended

September 30,
2017

September 30,
2016

Change

%

Research and development expenses (“R&D”)

$
18,434

$
13,345

$
5,089

38.1
%

~~The increase in R&D is due to the inclusion of Stromag for the year.~~

Amounts in thousands, except percentage data

Year to Date Ended

September 30,
2017

September 30,
2016

Change

%

Restructuring Costs

$
3,776

$
6,591

$
(2,815
)

(42.7
)%

During 2015, the Company adopted a restructuring plan (“2015 Altra Plan”) in response to weak demand and to make certain adjustments to improve business effectiveness, reduce the number of facilities and streamline the Company’s cost structure. The actions taken pursuant to the 2015 Altra Plan included reducing headcount and limiting discretionary spending to improve

profitability. Approximately $1.8 million, $0.8 million, and $0.5 million of the restructuring costs, associated with the 2015 Altra Plan, were related to the Couplings, Clutches and Brakes, Gearing, and Corporate, respectively. The Company does not expect to incur any additional material costs as a result of the 2015 Plan. During the quarter ended September 30, 2017, the Company commenced a new restructuring plan (“2017 Altra Plan”) as a result of the Stromag acquisition and to rationalize its global renewable energy business. The actions taken pursuant to the 2017 Altra Plan include reducing headcount, facility consolidations and the elimination of certain costs. Approximately $0.6 million of the expense in the current quarter is related to activity in the Couplings, Clutches and Brakes segment under the 2017 Altra Plan. The company expects to incur approximately $2.0 to $4.0 million in additional expense through 2019 related to the 2017 Altra Plan.

Amounts in thousands, except percentage data

Year to Date Ended

September 30,
2017

September 30,
2016

Change

%

Interest Expense, net

$
5,547

$
8,615

$
(3,068
)

(35.6
)%

Interest expense decreased significantly during the period as a result of the conversion and redemption of our convertible notes and the favorable impact of the cross currency interest rate swaps despite the higher borrowing under our 2015 Revolving Credit Facility for the Stromag Acquisition.

Amounts in thousands, except percentage data

Year to Date Ended

September 30,
2017

September 30,
2016

Change

%

Other non-operating income, net

$
30

$
(438
)

$
468

(106.8
)%

Amounts in thousands, except percentage data

Year to Date Ended

September 30,
2017

September 30,
2016

Change

%

Provision for income taxes

$
15,723

$
9,872

$
5,851

59.3
%
Provision for income taxes as a % of income before
income taxes

28.7
%

29.6
%

~~The~~2022 provision for income tax as a ~~percentage~~percent of income before income taxes ~~decreased for~~is mainly due to a net benefit of $2.5 million mainly related to the ~~year to date period~~JVS divestiture recorded in the quarter ended ~~September 30, 2017 as~~March 31, 2022, partially offset by a higher annual effective tax rate in 2022 compared to 2021.

Segment Performance

(Amounts in millions unless otherwise noted)


	Quarter Ended
	March 31, 2022			March 31, 2021
Net Sales:
Power Transmission Technologies	$	253.7		$	221.0
Automation & Specialty		259.2			252.1
Inter-segment eliminations		(1.2	)		(1.0	)
Net sales	$	511.7		$	472.1
Income from operations:
Segment earnings:
Power Transmission Technologies	$	32.3		$	27.8
Automation & Specialty		35.6			41.4
Corporate expenses (1)		0.1			(3.2	)
Restructuring costs		(0.4	)		(0.9	)
Income from operations	$	67.6		$	65.1

(1)

Certain expenses are maintained at the ~~year~~corporate level and not allocated to ~~date period ended September 30, 2016. This decrease is a combined result of~~ the ~~income in China associated with the closure of~~segments. These include various administrative expenses related to the Company’s ~~Changzhou facility which was offset by previously recognized net operating losses,~~corporate headquarters, certain U.S. healthcare costs and ~~the adoption of FASB Accounting Standards Update 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09")~~credits, depreciation on ~~January 1, 2017. Income tax expense included a benefit of $0.6 million arising from a cash tax deduction on restricted stock awards that vested in 2017.~~capitalized software costs, non-capitalizable software implementation costs and acquisition related expenses.

Power Transmission Technologies

~~Segment Performance.~~

~~Amounts in thousands~~

Quarters Ended September 30,

Year to date periods Ended
September 30,

2017

2016

2017

2016

Net Sales:

Couplings, Clutches & Brakes

$
110,109

$
77,446

$
327,310

$
231,225

Electromagnetic Clutches & Brakes

58,304

50,680

187,463

165,083

Gearing

48,368

47,023

144,545

145,038

Intra-segment eliminations

(2,158
)

(2,017
)

(5,903
)

(5,087
)
Net sales

$
214,623

$
173,132

$
653,415

$
536,259

Income from operations:

Segment earnings:

Couplings, Clutches & Brakes

$
12,679

$
6,596

$
33,032

$
20,441

Electromagnetic Clutches & Brakes

6,138

6,589

21,894

20,120

Gearing

5,689

5,650

17,804

17,280

Restructuring

(680
)

(3,397
)

(3,776
)

(6,591
)
Corporate expenses (1)

(2,553
)

(5,069
)

(6,870
)

(9,729
)
Income from operations

$
21,273

$
10,369

$
62,084

$
41,521

~~(1)~~

Certain expenses are maintained at the corporate level and not allocated to the segments. These include various administrative expenses related to the corporate headquarters, depreciation on capitalized software costs, non-capitalizable software implementation costs and acquisition related expenses.

~~Couplings, Clutches & Brakes~~

Net sales in the ~~Couplings, Clutches & Brakes~~Power Transmission Technologies segment were ~~$110.1~~$253.7 million infor the quarter ended ~~September 30, 2017, an~~March 31, 2022. The increase of approximately $32.7 million or ~~42.2%,~~14.8% from the quarter ended ~~September 30, 2016. Approximately $28.8~~March 31, 2021 was primarily due to the broad based strength across most of our end markets, especially material handling, metals and mining, turf and garden and agriculture end markets. In addition, price had a favorable impact on net sales for the quarter ended March 31, 2022 of $11.5 million. The increase in net sales was partially offset by changes in foreign exchange for the quarter ended March 31, 2022, which had an unfavorable impact on net sales of $5.2 million. Income from operations for the quarter ended March 31, 2022 was $32.3 million, an increase of 16.2%, which was primarily driven by the increase in sales and partially offset by increasing costs from logistics, supply chain and labor.

Automation & Specialty

Net sales in the Automation & Specialty segment were $259.2 million for the quarter ended March 31, 2022. The increase of approximately $7.1 million, or 2.8% from the quarter ended March 31, 2021 was primarily due to the inclusion of sales from the newly acquired ~~Stromag~~Nook business, which were approximately $11.1 million for the ~~quarter. The remainder of~~quarter ended March 31, 2022. In addition, the increase was due to a modest recovery in certain of our more profitable end markets. Segment operating income increased approximately $6.1 million compared to the prior period primarily as a result of the addition of Stromag and plant consolidations.

~~Electromagnetic Clutches & Brakes~~

~~Net sales~~continued strength in the ~~Electromagnetic Clutches & Brakes segment were $58.3~~factory automation end market, as well as price, which had a favorable impact on net sales of $6.2 million infor the quarter ended ~~September 30, 2017,~~March 31, 2022. The increase in net sales was partially offset by a decline in the China class 8 heavy duty truck market as well as changes in foreign exchange, which had an ~~increase~~unfavorable impact on net sales of ~~approximately $7.6~~$3.5 million ~~or 15.0%, from~~for the quarter ended ~~September 30, 2016. Approximately $6.0 million of the increase was due to the inclusion of sales~~March 31, 2022. Income from ~~the newly acquired Stromag business in the quarter. Segment operating income decreased $0.5 million compared to the prior period primarily as a result of the impact of foreign exchange.~~

~~Gearing~~

~~Net sales in the Gearing segment were $48.4 million in~~operations for the quarter ended ~~September 30, 2017,~~March 31, 2022 was $35.6 million, a decrease of 14.0%, which ~~were similar~~was primarily driven by the asset held for sale impairment charge of $6.1 million recorded at the JVS reporting unit related to the ~~prior year. Segment operating income was consistent compared to the prior period.~~ held for sale classification.

Liquidity and Capital Resources

~~Overview~~

Overview

We finance our capital and working capital requirements through a combination of cash flows from operating activities and borrowings under ~~our 2015~~the Revolving Credit Facility ~~(defined below)~~(as defined herein). At March 31, 2022, we had the ability under the Revolving Credit Facility to borrow an additional $395.7 million subject to satisfying customary conditions. We expect that our primary ongoing requirements for cash will be for working capital, debt service, capital expenditures, acquisitions, pensions, ~~dividends~~other post-employment benefits and ~~share repurchases.~~ dividends.

We believe, based on current and projected levels of cash flows from operating activities, together with our ability to borrow under the Revolving Credit Facility, that we have sufficient liquidity to meet our short-term and long-term needs to make required payments of interest on our debt, to make amortization payments under the Altra Credit Facilities, to fund our operating needs, to fund working capital and capital expenditure requirements and to comply with the financial ratios in our debt agreements.

In the event additional funds are needed for operations, we could ~~borrow additional funds available under our existing 2015 Revolving Credit Facility, request an expansion by up to $150 million of the amount available to be borrowed under the 2015 Credit Agreement,~~ attempt to ~~secure~~obtain new debt ~~attempt to~~and/or refinance ~~our loans under the 2015 Credit Agreement,~~existing debt, or attempt to raise capital in the equity markets. ~~As of September 30, 2017, we have the ability under our 2015 Revolving Credit Facility to borrow an additional $138.9 million based on current availability calculations.~~ There can be no assurance, however, that additional debt ~~financing will be available on commercially acceptable terms, if at all. Similarly, there can be no assurance that~~or equity financing will be available on commercially acceptable terms, if at all.

~~Second Amended~~

Notes

On September 26, 2018, Stevens Holding Company, Inc., a wholly owned subsidiary of the Company (“Stevens Holding”), announced the pricing of $400.0 million aggregate principal amount of Stevens Holding’s 6.125% senior notes due 2026 (the “Notes”) in a private debt offering pursuant to Rule 144A and ~~Restated~~Regulation S under the Securities Act of 1933 (the “Private Placement”). On October 1, 2018, the Private Placement closed, and Stevens Holding sold $150.0 million aggregate principal amount of the Notes (the “Primary Notes”) and an unaffiliated selling securityholder sold $250.0 million aggregate principal amount of the Notes (the “Selling Securityholder Notes”). The Notes will mature on October 1, 2026. Interest on the Notes accrues from October 1, 2018, and the first interest payment date on the Notes was April 1, 2019. The Notes may be redeemed at the option of Stevens Holding on or after October 1, 2023, in the manner and at the redemption prices specified in the indenture governing the Notes, plus accrued and unpaid interest thereon, if any, to, but excluding, the date of redemption. The Notes are guaranteed on a senior unsecured basis by Altra and certain of its domestic subsidiaries.

The unaffiliated selling securityholder received the Selling Securityholder Notes from Fortive prior to the closing of the Private Placement in exchange for certain outstanding Fortive debt held or acquired by the unaffiliated selling securityholder. Stevens Holding used the net proceeds of the Primary Notes to fund a dividend payment to Fortive prior to the consummation of the merger that was part of the Fortive Transaction, pursuant to which such merger Stevens Holdings became a wholly-owned subsidiary of the Company, and Stevens Holding did not receive any proceeds from the sale of the Selling Securityholder Notes.

2021 Altra Credit Agreement

On ~~October 22, 2015,~~November 17, 2021, the Company entered into a ~~Second Amended and Restated~~new Credit Agreement ~~by and among~~(the “Credit Agreement” or the "Altra Credit Agreement") with certain subsidiaries of the Company ~~Altra Industrial Motion Netherlands, B.V. (“Altra Netherlands”), one of the Company’s foreign subsidiaries (collectively~~(together with the Company, the “Borrowers”), the lenders party to the ~~Second Amended and Restated~~ Credit Agreement from time to time (collectively, the “Lenders”), ~~J.P. Morgan Securities LLC, Wells Fargo Securities, LLC, and KeyBanc Capital Markets, Inc., as joint lead arrangers and joint bookrunners, and JPMorgan Chase~~ Bank ~~N.A.,~~of Montreal as administrative agent (the “Administrative Agent”), as sustainability structuring agent and collateral agent thereunder, and under the security and guarantee documents for the Lenders, and BMO Capital Markets Corp., Citizens Bank, N.A., JPMorgan Chase Bank, N.A., and Wells Fargo Securities, LLC as joint lead arrangers and joint bookrunners. Pursuant to the Credit Agreement, the Lenders made available to the Borrowers a term loan facility of $400.0 million (the “Term Loan Facility” or "Term Loan" or “Term Loan A”) and a revolving credit facility of $1,000.0 million (the “Revolving Credit Facility” or "Revolver", and together with the Term Loan Facility, the “Credit Facilities”). The aggregate proceeds of the Credit Facilities were used to repay in full and extinguish all outstanding indebtedness for borrowed money under the 2018 Credit Agreement. The amounts available under the Credit Facilities are to be available for general corporate purposes and to

repay existing indebtedness. The stated maturity of both of the Credit Facilities is November 17, 2026, and there are scheduled quarterly principal payments due on the outstanding amount of the Term Loan Facility.

The Credit Facilities are guaranteed ~~through~~on a ~~Guarantee Agreement~~senior secured basis by certain direct and indirect domestic subsidiaries of the Company (each a “Guarantor” and collectively the “Guarantors”; the Guarantors collectively with the Borrowers, the “Loan Parties”)~~, and which may be amended from time to time (the “2015 Credit Agreement”)~~.

~~Under the 2015 Credit Agreement, the amount of our Revolving Credit Facility was increased to $350 million (the “2015 Revolving Credit Facility”).~~

The amounts available under the ~~2015 Revolving Credit Facility can be used for general corporate purposes, including acquisitions, and to repay existing indebtedness.~~

~~The stated maturity of the 2015 Revolving Credit Facility is October 22, 2020.~~

at any time, subject to usual notification and breakage payment provisions. Interest on the amounts outstanding under the ~~credit facilities~~Credit Facilities is calculated using either ~~an ABR~~a Base Rate or ~~Eurodollar~~Eurocurrency Rate, plus the applicable margin. The applicable margins for ~~Eurodollar~~Eurocurrency Loans are between ~~1.25%~~1.000% to ~~2.00%~~1.750%, and for ~~ABR~~Base Rate Loans are between ~~0.25%~~0.000% and ~~1.00%~~0.750%. The amounts of the margins are calculated based on ~~either a consolidated total net leverage ratio~~the Total Leverage Ratio (as defined in the ~~2015~~ Credit Agreement)~~, or the then applicable rating(s) of the Company’s debt if and then to the extent as provided in the 2015 Credit Agreement.~~. A portion of the ~~2015~~ Revolving Credit Facility may ~~also~~ be used for the issuance of letters of credit, and a portion of the amount of the ~~2015~~ Revolving Credit Facility is available for borrowings in certain agreed upon foreign currencies. The ~~2015~~interest rate on the Credit Facilities was 1.709% at March 31, 2022.

The Credit Agreement contains ~~various~~usual and customary representations and warranties, usual and customary affirmative and negative covenants and restrictions, which among other things, will require the Borrowers to provide certain financial reports to the Lenders, require the ~~Company~~Borrowers to maintain certain financial covenants relating to consolidated leverage and interest coverage, ~~limit maximum annual capital expenditures,~~ and limit the ability of the Company and its subsidiaries to incur or guarantee additional indebtedness, pay dividends or make other equity distributions, purchase or redeem capital stock or debt, make certain investments, sell assets, engage in certain transactions, and effect a consolidation or merger. The ~~2015~~obligations of the borrowers of the Credit Facilities under the Credit Agreement ~~also contains~~may be accelerated upon customary events of ~~default.~~default, including non-payment of principal, interest, fees and other amounts, inaccuracy of representations and warranties, violation of covenants, cross default and cross acceleration, voluntary and involuntary bankruptcy or insolvency proceedings, inability to pay debts as they become due, material judgments, ERISA events, actual or asserted invalidity of security documents or guarantees and change in control.

On October 21, 2016, the Company entered into an agreement to amend its 2015 Credit Agreement. This amendment, which became effective upon closing of Altra’s purchase of Stromag, which was December 30, 2016, increased the Company’s 2015 Revolving Credit Facility by $75 million to $425 million. The Company borrowed additional funds under the increased facility to finance its purchase of Stromag. The amendment also reset the possible expansion of up to $150 million of additional future loan commitments. In addition, the amendment increased the multicurrency sublimit to $250 million and adjusted certain financial covenants.

~~Ratification Agreement~~

Pursuant to ~~an Omnibus Reaffirmation and Ratification and Amendment of Collateral Documents entered into on October 22, 2015 in connection with~~ the ~~2015~~ Credit Agreement, ~~by and among the Company,~~on November 17, 2021, the Loan Parties and the Administrative Agent entered into a Guarantee and Collateral Agreement (the ~~“Ratification Agreement”), the Loan Parties (exclusive of the foreign subsidiary Borrower) have reaffirmed their obligations to the Lenders under the Pledge~~“Guarantee and ~~Security Agreement dated November 20, 2012 (the “Pledge and Security~~Collateral Agreement”), pursuant to which each Loan Party pledges, assigns and grants to the Administrative Agent, on behalf of and for the ratable benefit of the Lenders, a security interest in all of its right, title and interest in, to and under all personal property, whether now owned by or owing to, or after acquired by or arising in favor of such Loan Party (including under any trade name or derivations), and whether owned or consigned by or to, or leased from or to, such Loan Party, and regardless of where located, except for specific excluded personal property identified in the ~~Pledge~~Guarantee and ~~Security~~Collateral Agreement (collectively, the “Collateral”). Notwithstanding the foregoing, the Collateral does not include, among other items, more than 65% of the capital stock of the first tier foreign subsidiaries of the Company. The ~~Pledge~~Guarantee and ~~Security~~Collateral Agreement contains other customary representations, warranties and covenants of the parties. The 2015 Credit Agreement provides that the obligation to grant the security interest can cease upon the obtaining of certain corporate family credit ratings for the Company, but the obligation to grant a security interest is subject to subsequent reinstatement if the ratings are not maintained as provided in the 2015 Credit Agreement.

Pursuant to the Ratification Agreement, the Loan Parties (other than the foregoing subsidiary Borrower) have also reaffirmed their obligations under each of the Patent Security Agreement and a Trademark Security Agreement in favor of the Administrative Agent dated November 20, 2012 (the “2012 Security Agreements”) pursuant to which each of the Loan Parties signatory thereto pledges, assigns and grants to the Administrative Agent, on behalf of and for the ratable benefit of the Lenders, a security interest in all of its right, title and interest in, to and under all registered patents, patent applications, registered trademarks and trademark applications owned by such Loan Parties.

~~Additional Trademark Security Agreement and Patent Security Agreement~~

In connection with the ~~reaffirmation of the Pledge~~Guarantee and ~~Security~~Collateral Agreement, certain of the Loan Parties delivered a ~~new~~ Patent Security Agreement and a ~~new~~ Trademark Security Agreement in favor of the Administrative Agent pursuant to which each of the Loan Parties signatory thereto pledges, assigns and grants to the Administrative Agent, on behalf of and for the ratable benefit of the Lenders, a security interest in all of its right, title and interest in, to and under all registered patents, patent applications, registered trademarks and trademark applications owned by such Loan ~~Parties and not covered by the 2012 Security Agreements.~~Parties.

~~As of September 30, 2017 and December 31,2016 we had $282.4 million and $313.6 million outstanding on our 2015 Revolving~~

2018 Altra Credit Facility, respectively. As of September 30, 2017 and December 31, 2016, we had $3.7 million, and $4.1 million in letters of credit outstanding, respectively. We had $138.9 million available to borrow under the 2015 Revolving Credit Facility at September 30, 2017. Agreement

On October ~~21, 2016,~~1, 2018, the Company entered into a ~~First Amendment~~Credit Agreement (the “2018 Credit Agreement”) with certain subsidiaries of Altra, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and a syndicate of lenders. The 2018 Credit Agreement provided for a seven-year senior secured term loan to the ~~Second Amended~~Company in an aggregate principal amount of $1,340.0 million (the “2018 Term Loan Facility”) and ~~Restated~~a five-year senior secured revolving credit facility available to the Company and certain of its subsidiaries in an aggregate committed principal amount of $300.0 million (the “2018 Revolving Credit ~~Agreement.~~

~~We were in compliance in all material respects~~Facility” and together with ~~all covenants~~the 2018 Term Loan Facility, the “2018 Credit Facilities”). The initial proceeds of the ~~indenture governing~~2018 Term Loan Facility were used to (i) consummate the ~~2015~~Direct Sales, (ii) repay in full and extinguish all outstanding indebtedness for borrowed money under the Company’s previous credit agreement and (iii) pay certain fees, costs, and expenses in connection with the consummation of the Fortive Transaction. Any proceeds of the 2018 Term Loan Facility not so used could be used for general corporate purposes and the proceeds of the 2018 Revolving Credit Facility were used for working capital and general corporate purposes.

On November 17, 2021, in connection with the new Credit Agreement, ~~at September 30, 2017.~~the 2018 Credit Agreement was terminated and all outstanding indebtedness for borrowed money thereunder was repaid in full.

~~Convertible Senior Notes~~

~~In March 2011, the Company issued Convertible Senior Notes (the “Convertible Notes”) due March 1, 2031.~~ 31

Borrowings

The ~~Convertible Notes were guaranteed by the Company’s U.S. domestic subsidiaries. Interest on the Convertible Notes was payable semi-annually in arrears, on March 1 and September 1~~following is a summary of ~~each year, commencing on September 1, 2011 at an annual rate of 2.75%. Proceeds from the offering were $81.3 million, net of fees and expenses that were capitalized.~~

On December 12, 2016 the Company gave notice to the holders of the Convertible Notes of its intention to redeem all of the Convertible Notes outstanding on January 12, 2017 (the “Redemption Date”), pursuant to the optional redemption provisions in the Indenture. The redemption price for the Convertible Notes was 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the Redemption Date plus a Make-Whole Premium equal to the present values of the remaining scheduled payments of interest on any Convertible Notes through March 1, 2018 (excluding interest accrued to, but excluding, the Redemption Date). In lieu of receiving the redemption price, holders of the Notes could surrender their Convertible Notes for conversion at any time before January 9, 2017. The conversion rate of the Convertible Notes was 39.0809 shares of the Company’s common stock, for each $1,000 of outstanding principal of the Convertible Notes. As of December 31, 2016 approximately $39.3 million notes were converted resulting in the issuance of 1.5 million shares of the Company’s common stock. As a result of the conversion, the Company incurred a loss on extinguishment of debt of approximately $1.9 million and the carrying value of the Convertible Notes was $42.9 millionour borrowings as of December 31, 2016. In January 2017, the remaining principal was converted to common stock, with the exception of $0.9 million that was redeemed for cash. The Company incurred an additional loss on extinguishment of debt of approximately $1.8 million during the quarter ended March 31, ~~2017.~~2022 and March 31, 2021, respectively:

~~Borrowings~~


	Amounts in millions
	March 31, 2022		March 31, 2021
Debt:
Term loan A	$	397.5	$	—
Term loan B		—		1,010.0
Revolver		600.0		—
Notes		400.0		400.0
Mortgages and other		8.4		12.2
Finance leases		0.1		0.2
Total gross debt	$	1,406.0	$	1,422.4

Amounts in millions

September 30, 2017

December 31,
2016

Debt:

Revolving Credit Facility

$
282.4

$
313.6

Convertible Notes

-

45.7

Mortgages

12.9

12.7

Capital leases

0.3

0.4

Total debt

$
295.6

$
372.4

Cash and Cash Equivalents

The following is a summary of our cash balances and cash flows (in ~~thousands)~~millions) as of and for the ~~year to date periods~~quarter ended ~~September 30, 2017~~March 31, 2022 and ~~September 30, 2016,~~March 31, 2021, respectively:

September 30, 2017

September 30, 2016

Change

Cash and cash equivalents at the beginning of the year

$
69,118

$
50,320

$
18,798

Cash flows used in operating activities

43,289

46,894

(3,605
)
Cash flows used in investing activities

(17,157
)

(15,684
)

(1,473
)
Cash flows used in financing activities

(49,248
)

(41,943
)

(7,305
)
Effect of exchange rate changes on cash and cash
equivalents

7,149

178

6,971

Cash and cash equivalents at the end of the period

$
53,151

$
39,765

$
13,386


	March 31, 2022			March 31, 2021			Change
Cash and cash equivalents at the beginning of the period	$	246.1		$	254.4		$	(8.3	)
Net cash (used in) provided by operating activities		(24.9	)		36.2			(61.1	)
Net cash used in investing activities		(17.8	)		(9.6	)		(8.2	)
Net cash used in financing activities		(17.1	)		(27.1	)		10.0
Effect of exchange rate changes on cash and cash equivalents		(2.6	)		(4.5	)		1.9
Cash and cash equivalents at the end of the period	$	183.7		$	249.4		$	(65.7	)

Cash Flows for ~~2017~~2022

Net cash ~~provided from~~used in operating activities was approximately ~~$43.3~~$24.9 million for the ~~year~~quarter ended March 31, 2022, an increase of $61.1 million of net cash used as compared to ~~date period ended September 30, 2017. This was generated by net income of $39.0 million and~~ the net impact of the add-back of certain items including non-cash depreciation, amortization of intangible assets, stock-based compensation, accretion of debt discount, amortization of deferred financing costs, loss on extinguishment of debt, loss on disposal of fixed assets, amortization of inventory fair value adjustment and

~~non-cash loss on foreign currency which was approximately $36.2 million. This was partially offset by a net~~prior year. The increase in ~~current~~net cash used was primarily due to unfavorable changes in operating assets and liabilities of approximately ~~$31.9 million.~~$56.6 million, which reflect timing difference between the receipt and payment of cash associated with transactions and when they are recognized in our results of operations.

Net cash used in investing activities for the ~~year to date period~~quarter ended ~~September 30, 2017~~March 31, 2022 increased approximately ~~$1.5~~$8.2 million compared to the ~~year~~quarter ended March 31, 2021, primarily due to ~~date period ended September 30, 2016. The increase is attributed to higher purchases of manufacturing~~increased property, plant and equipment and plant construction projects at certain facilities. This increase is partially offset by proceeds from the sale of Changzhou equity and the completion of the working capital adjustment under the Stromag sale and purchase agreement. purchases.

Net cash used in financing activities infor the ~~year to date period~~quarter ended ~~September 30, 2017~~March 31, 2022 as compared to the ~~year~~quarter ended March 31, 2021 decreased by $10.0 million, primarily due decreased debt paydowns of approximately $12.5 million when compared to ~~date period~~the quarter ended ~~September 30, 2016 increased by $7.3 million. This increase relates primarily to increased net debt payments on the Revolving Credit Facility as of the year to date period ended September 30, 2017.~~March 31, 2021.

We intend to use our remaining cash and cash equivalents and cash flow from operations to provide for our working capital needs, to ~~fund potential future acquisitions, to~~ service our debt, including principal payments, for capital expenditures, for pension funding, ~~share repurchases~~for other post-retirement benefits funding and to pay dividends to our stockholders. As of ~~September 30, 2017~~March 31, 2022 we have approximately ~~$49.9~~$165.8 million of cash and cash equivalents held by foreign ~~subsidiaries that are generally subject to U.S. income taxation on repatriation to the U.S.~~subsidiaries. We believe, ~~our future operating~~based on current and projected levels of cash flows ~~will be sufficient~~from operating activities, together with our ability to ~~meet our future operating and investing cash needs. Furthermore,~~borrow under the ~~existing cash balances and the availability of additional borrowings under our 2015~~ Revolving Credit Facility, ~~provide additional potential sources~~that we have sufficient liquidity to make required payments of ~~liquidity should they be required.~~interest on our debt, to make amortization payments under the Credit Facilities, to fund our operating needs, to fund working capital and capital expenditure requirements and to comply with the financial ratios in our debt agreements.

Contractual Obligations

There were no material changes in our contractual obligations during the period ended ~~September 30, 2017.~~March 31, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risk factors such as fluctuating interest rates, changes in foreign currency rates, and changes in commodity prices. During the reporting period, there have been no material changes to the quantitative and qualitative disclosures regarding our market risk set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of ~~September 30, 2017,~~March 31, 2022, our management, under the supervision and with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports ~~filed~~that we file or submit under the Exchange Act, such as this Quarterly Report on Form 10-Q, is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including ~~the~~our principal executive officer and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that, as of ~~September 30, 2017,~~March 31, 2022, our disclosure controls and procedures ~~are~~were effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our fiscal quarter ended ~~September 30, 2017,~~March 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - ~~OTHE~~ROTHER INFORMATION

Item 1. Legal Proceedings

We are, from time to time, party to various legal proceedings arising out of our business. During the reporting period, there have been no material changes to the description of legal proceedings set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

Item 1A. Risk Factors

The reader should carefully consider the Risk Factors described in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2021 filed with the Securities and Exchange Commission. Those risk factors described elsewhere in this report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2021 are not the only ~~ones~~risks 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. All risk factors stated in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2021 are incorporated herein by reference.

~~During~~Below are additional risk factors that should be carefully considered by the ~~reporting period there were no material changes~~reader in addition to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

The ongoing military action between Russia and Ukraine could adversely affect our business, financial condition and operating results.

On February 24, 2022, Russian military forces invaded Ukraine, and sustained conflict and disruption in the region is likely. This conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increase in cyberattacks and espionage.

Russia’s recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military action against Ukraine have led to an unprecedented expansion of sanction programs imposed by the United States, the European Union, the United Kingdom, Canada, Switzerland, Japan and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic and the so-called Luhansk People’s Republic, including, among others:

•blocking sanctions against some of the largest state-owned and private Russian financial institutions (and their subsequent removal from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system) and certain Russian businesses, some of which have significant financial and trade ties to the European Union;

•blocking sanctions against Russian and Belarusian individuals, including the Russian President, other politicians and those with government connections or involved in Russian military activities; and

•blocking of Russia’s foreign currency reserves as well as expansion of sectoral sanctions and export and trade restrictions, limitations on investments and access to capital markets and bans on various Russian imports.

The situation is rapidly evolving as a result of the conflict in Ukraine, and the United States, the European Union, the United Kingdom and other countries may implement additional sanctions, export controls or other measures against Russia, Belarus and other countries, regions, officials, individuals or industries in the respective territories. Such sanctions and other measures, as well as the existing and potential further responses from Russia or other countries to such sanctions, tensions and military actions, could adversely affect the global economy and financial markets and could adversely affect our business, financial condition and results of operations.

We are actively monitoring the situation in Ukraine and assessing its impact on our business, including our business partners and customers. We have no way to predict the progress or outcome of the conflict in Ukraine or its impacts in Ukraine, Russia or Belarus as the conflict, and any resulting government reactions, are rapidly developing and beyond our control. The extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time. Any of the above mentioned factors could affect our business, financial condition and operating results. Any such disruptions may also magnify the impact of other risks described in our Annual Report on Form 10-K for the year ended December 31, 2021.

New or more stringent government regulations or standards designed to address climate change could increase our operational costs, and severe weather associated with a changing climate could negatively impact our operations and those of our customers and suppliers.

We are subject to domestic and foreign regulations and standards governing emissions controls which are, in part, designed to address climate change. Due to increasing global concern over the effects of climate change, new or more stringent regulations and standards may be mandated. In addition, various stakeholders may demand additional controls beyond what is required by such regulations or standards. Such additional regulations, standards and demands may expose us to increased operational costs associated with compliance, data collection and disclosure, and raw material sourcing, our manufacturing operations, and the distribution of our products may be adversely affected. Further, tighter emissions controls as a result of these actions could increase our operational costs and could lead to disruptions in our operations as compliance is attained. Severe weather associated with a changing climate could also negatively impact our facilities, information systems and infrastructure, as well as those of our customers and suppliers. This could disrupt supply, customer demand and negatively affect our ability to fulfill orders, manufacture products and maintain operations. In addition, certain markets and industries which Altra serves may be negatively impacted by global trends and market adjustment in response to a changing climate which could have an adverse impact on our financial performance. There can be no assurance that our efforts to address these regulations, standards, or stakeholder demands will be successful or that any future investments we make in furtherance of achieving climate change targets and goals will meet investor expectations or any regulatory or legal standards regarding sustainability performance. If we fail to sufficiently address applicable regulations, standards and stakeholder demands or fail to achieve or improperly report on our progress toward achieving our goals and commitments to reduce our carbon footprint or address sustainability programs and initiatives, the results could have an adverse impact on our business, results of operations and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~The following table summarizes our share repurchase activity by month for the quarter ended September 30, 2017.~~

(a) Recent Sales of Unregistered Equity Securities

Period

Total Number
of Shares
Purchased

Average
Price Paid
per Share

Total Number of
Shares
Purchased as
Part of Publicly
Announced Plans
or Programs (1)

Approximate
Dollar Value of
Shares That May
Yet be
Purchased Under
The Plans or
Programs

July 1, 2017 to July 31, 2017

—

$
—

—

$
30,000,000

August 1, 2017 to August 30, 2017

—

$
—

—

$
—

September 1, 2017 to September 30, 2017

—

$
—

—

$
—

~~(1)~~

None.

(b) Use of Proceeds

None.

On October 19, 2016, our board of directors approved a new share repurchase program authorizing the buyback of up to $30.0 million of the Company's common stock through December 31, 2019. This plan, which was announced on October 21, 2016, replaces the previous share repurchase program which was terminated. The Company expects to purchase shares on the open market, through block trades, in privately negotiated transactions, in compliance with SEC Rule 10b-18 (including through Rule 10b5-1 plans), or in any other appropriate manner. The timing of the shares repurchased will be at the discretion of management and will depend on a number of factors, including price, market conditions and regulatory requirements. Shares acquired through the repurchase program will be retired. The Company retains the right to limit, terminate or extend the share repurchase program at any time without prior notice. The Company expects to fund any further repurchases of its common stock through a combination of cash on hand and cash generated by operations.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

~~Disclosure of Activities Under Section 13(r) of the Securities Exchange Act of 1934~~

Under Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, as amended, we are required to disclose whether Altra or any of its affiliates knowingly engaged in

certain activities, transactions or dealings relating to Iran or certain designated individuals or entities. Disclosure is required even when the activities were conducted outside the United States by non-U.S. entities and even when such activities were conducted in compliance with applicable law. The following information is disclosed pursuant to Section 13(r). None of the following activities involved U.S. affiliates of Altra.None.

During the reporting period, Bibby Transmissions Limited, a subsidiary of Altra organized and existing under the laws of England (“Bibby”), sold couplings to a customer in the United Kingdom, for ultimate re-sale to an Iranian end user for use in a gas treating plant. Gross revenues received by Bibby in connection with this transaction were approximately GBP 12.3 thousand and net profits were approximately GBP 5.9 thousand. Bibby intends to continue pursuing opportunities with this direct customer and end user, to the extent compliant with applicable law.

Item 6. Exhibits

The following exhibits are filed as part of this report:


Exhibit Number		Description

3.1(1)		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Altra industrial Motion Corp., as filed with the Secretary of State of the State of Delaware.

3.2(2)		Second Amended and Restated Certificate of Incorporation of the Registrant

~~3.2(2)~~3.3(3)		Second Amended and Restated Bylaws of the Registrant

31.1*10.1(4)		Purchase and Sale Agreement, dated February 8, 2022, between Cummins Inc. and Altra Industrial Motion Corp.

10.2*		Amendment No. 1 to the Purchase and Sale Agreement, dated April 8, 2022, by and between Cummins Inc. and Altra Industrial Motion Corp.

10.3*		Release Letter, dated April 8, 2022,made by Altra Industrial Motion Corp. to Bank of Montreal under that certain Credit Agreement, dated as of November 17, 2021, by and among Altra Industrial Motion Corp, the designated subsidiary borrowers party thereto, the lenders party thereto and Bank of Montreal, as administrative agent, sustainability structuring agent and collateral agent.

10.4*		Supplement to Guarantee and Collateral Agreement, dated April 6, 2022, to the Guarantee and Collateral Agreement, dated November 17, 2021, by and among Altra Industrial Motion Corp., the Guarantors from time to time party thereto and Bank of Montreal, as collateral agent for the Secured Parties.

10.5*		Release of Patent Security Interest, dated April 8, 2022, by Bank of Montreal in favor of American Precision Industries, Inc., Inertia Dynamics, LLC, Jacobs Vehicle Systems, Inc., Kilian Manufacturing Corporation, Kollmorgen Corporation, TV Wood’s Incorporated, Thomson Industries, Inc., and Warner Electric, LLC.

10.6*		Patent Security Agreement, dated as of April 6, 2022, made by Nook Industries, LLC in favor of Bank of Montreal.

10.7*		Release of Security Interest in Trademarks, dated April 8, 2022, by Bank of Montreal, as Administrative Agent, in favor of Altra Industrial Motion Corp., American Precision Industries, Inc., Ameridrives International, LLC, Boston Gear, LLC, Guardian Couplings, LLC, Inertia Dynamics, LLC, Formsprag LLC, Jacobs Vehicle Systems, Inc., Kilian Manufacturing Corporation, Kollmorgen Corporation, TV Wood’s Incorporated, and Thomson Industries, Inc.

10.8*		Trademark Security Agreement, dated as of April 6, 2022, made by Nook Industries, LLC in favor of Bank of Montreal.

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.

101*		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017,~~March 31, 2022, formatted in ~~XBRL (Extensible~~iXBRL (Inline Extensible Business Reporting Language): (i) the Unaudited Condensed Consolidated Statement of Operations, (ii) the Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss), (iii) the Unaudited Condensed Consolidated Balance Sheet, (iv) the Unaudited Condensed Consolidated Statement of Cash Flows, (v) the Unaudited Consolidated Statement of Stockholders’ Equity and (vi) Notes to Unaudited Condensed Consolidated Interim Financial Statements.

104		Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.

*	~~Filed herewith.~~

**	~~Furnished herewith.~~

†	~~Management contract or compensatory plan or arrangement.~~

~~(1)~~

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

~~(2)~~

~~Incorporated by reference to Altra Industrial Motion Corp.’s Current Report on Form 8-K filed on October 27, 2008.~~

~~SIGNATURES~~

* Filed herewith.

** This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

(1) Incorporated by reference to Altra Industrial Motion Corp.’s Current Report on Form 8-K, filed with the SEC on October 1, 2018.

(2) Incorporated by reference to Altra Industrial Motion Corp.’s (formerly known as Altra Holdings, Inc.) Amendment No. 4 to Registration Statement on Form S-1/A filed with the SEC on December 4, 2006.

(3) Incorporated by reference to Altra Industrial Motion Corp.’s Current Report on Form 8-K, filed with the SEC on October 27, 2008.

(4) Incorporated by reference to Altra Industrial Motion Corp.’s Annual Report on Form 10-K, filed with the SEC on February 28, 2022.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			ALTRA INDUSTRIAL MOTION CORP.

~~October 25, 2017~~ May 2, 2022	By:		/s/ Carl R. Christenson
	Name:		Carl R. Christenson
	Title		Chairman and Chief Executive Officer
		(Principal Executive Officer)
~~October 25, 2017~~May 2, 2022	By:		~~/s/ Christian Storch~~
	~~Name:~~		~~Christian Storch~~
	~~Title:~~		~~Vice President and Chief Financial Officer~~

~~October 25, 2017~~	~~By:~~		/s/ Todd B. Patriacca
	Name:		Todd B. Patriacca
	Title:	Executive V.P., Chief Financial Officer and Treasurer
	~~Vice President of Finance, Corporate Controller~~	(Principal Financial Officer and ~~Treasurer~~Principal Accounting Officer)

	Gains and Losses on Cash Flow Hedges			Defined Benefit Pension Plans			Cumulative Foreign Currency Translation Adjustment			Total
Accumulated Other Comprehensive Loss by Component, January 1, 2017	$	(646	)	$	(5,668	)	$	(69,772	)	$	(76,086	)
Net current-period Other Comprehensive Income (Loss)		326			(232	)		21,157			21,251
Accumulated Other Comprehensive Loss by Component, September 30, 2017	$	(320	)	$	(5,900	)	$	(48,615	)	$	(54,835	)

	Preliminary Purchase Price Allocation
Total purchase price, excluding acquisition costs of approximately $2.9 million	$	191,852
Cash and cash equivalents		8,758
Trade receivables		24,087
Inventories		22,935
Property, plant and equipment		40,343
Intangible assets		74,795
Prepaid expenses and other current assets		778
Total assets acquired	$	171,696
Accounts payable		(15,370	)
Accrued payroll		(7,171	)
Accrued expenses and other current liabilities		(4,357	)
Income tax payable		(2,525	)
Deferred tax liability		(27,859	)
Other long-term liabilities		(1,255	)
Pension liability		(15,283	)
Total liabilities assumed	$	(73,820	)
Net assets acquired		97,876
Excess purchase price over fair value of net assets acquired	$	93,976

Intangible assets acquired consist of:
Customer relationships	$	56,019
Trade names and trademarks		18,776
Total intangible assets	$	74,795

	Proforma (unaudited)
	Quarter Ended		Year to date Period Ended
	September 30, 2016		September 30, 2016
Total revenues	$	206,424	$	644,361
Net income	$	7,057	$	29,250
Basic earnings per share	$	0.27	$	1.13
Diluted earnings per share	$	0.27	$	1.13

	Couplings, Clutches & Brakes		Electromagnetic Clutches & Brakes		Gearing		Total
Net goodwill balance January 1, 2017	$	104,465	$	37,161	$	47,215	$	188,841
Measurement period adjustment related to acquisition of Stromag, including working capital settlement (See Note 6)	$	738	$	113	$	-	$	851
Impact of changes in foreign currency and other		12,378		623		881		13,882
Net goodwill balance September 30, 2017	$	117,581	$	37,897	$	48,096	$	203,574

	September 30, 2017			December 31, 2016
Debt:
Revolving Credit Facility	$	282,440		$	313,620
Convertible Notes		—			45,656
Mortgages		12,904			12,755
Capital leases		259			363
Total debt		295,603			372,394
Less: debt discount, net of accretion		—			(2,735	)
Total debt, net of unaccreted discount	$	295,603		$	369,659
Less current portion of long-term debt		(380	)		(43,690	)
Total long-term debt, net of unaccreted discount	$	295,223		$	325,969

	Shares			Weighted-average grant date fair value
Shares unvested January 1, 2017		199,712		$	24.68
Shares granted		150,643			39.43
Shares for which restrictions lapsed		(128,265	)		43.76
Shares unvested September 30, 2017		222,090		$	31.92

	Quarter Ended				Year to Date Period Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Couplings, Clutches & Brakes	$	—	$	3,022	$	1,849	$	4,425
Electromagnetic Clutches & Brakes		—		169		—		1,276
Gearing		25		68		809		84
Corporate (1)		24		138		487		806
Total	$	49	$	3,397	$	3,145	$	6,591

	2015 Plan			2017 Plan			Total All Plans
Balance at January 1, 2017	$	1,971		$	—		$	1,971
Restructuring expense incurred		3,145		631				3,776
Cash payments		(4,441	)		(88	)		(4,529	)
Balance at September 30, 2017	$	675		$	543		$	1,218

	Quarters Ended September 30,						Year to Date Period Ended September 30,
	2017			2016			2017			2016
Net Sales:
Couplings, Clutches & Brakes	$	110,109		$	77,446		$	327,310		$	231,225
Electromagnetic Clutches & Brakes		58,304			50,680			187,463			165,083
Gearing		48,368			47,023			144,545			145,038
Inter-segment eliminations		(2,158	)		(2,017	)		(5,903	)		(5,087	)
Net sales	$	214,623		$	173,132		$	653,415		$	536,259
Income from operations:
Segment earnings:
Couplings, Clutches & Brakes	$	12,679		$	6,596		$	33,031		$	20,441
Electromagnetic Clutches & Brakes		6,138			6,589			21,894			20,120
Gearing		5,689			5,650			17,804			17,280
Restructuring		(680	)		(3,397	)		(3,776	)		(6,591	)
Corporate expenses (1)		(2,553	)		(5,069	)		(6,869	)		(9,729	)
Income from operations	$	21,273		$	10,369		$	62,084		$	41,521
Other non-operating (income) expense:
Net interest expense	$	1,811		$	2,815		$	5,547		$	8,615
Other non-operating expense (income), net		696			45			30			(438	)
Loss on extinguishment of convertible debt		—			—			1,797			—
		2,507			2,860			7,374			8,177
Income before income taxes		18,766			7,509			54,710			33,344
Provision for income taxes		5,489			2,196			15,723			9,872
Net income	$	13,277		$	5,313		$	38,987		$	23,472


		September 30,		December, 31
	Balance Sheet Location	2017		2016
Designated as hedging instruments:
Cross currency swap agreements	Other long-term liabilities	$	13,699	$	1,642
Interest rate swap agreement	Other long-term assets		(35)		-
Not designated as hedging instruments:
Cross currency swap agreements	Other long-term liabilities		8,714		889
		$	22,378	$	2,531

		September 30,
	Income Statement Location	2017
Designated as hedging instruments:
Cross currency swap agreements	Other non-operating (income) expense, net	$	11,867
Not designated as hedging instruments:
Cross currency swap agreements	Other non-operating (income) expense, net		7,825
		$	19,692

	Operating Income
	Quarter Ended				Year to Date Period Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Couplings, Clutches & Brakes		52%		35%		45%		35%
Electromagnetic Clutches & Brakes		25%		35%		30%		35%
Gearing		23%		30%		25%		30%

	Quarters Ended September 30,						Year to date periods Ended September 30,
	2017			2016			2017			2016
Net Sales:
Couplings, Clutches & Brakes	$	110,109		$	77,446		$	327,310		$	231,225
Electromagnetic Clutches & Brakes		58,304			50,680			187,463			165,083
Gearing		48,368			47,023			144,545			145,038
Intra-segment eliminations		(2,158	)		(2,017	)		(5,903	)		(5,087	)
Net sales	$	214,623		$	173,132		$	653,415		$	536,259
Income from operations:
Segment earnings:
Couplings, Clutches & Brakes	$	12,679		$	6,596		$	33,032		$	20,441
Electromagnetic Clutches & Brakes		6,138			6,589			21,894			20,120
Gearing		5,689			5,650			17,804			17,280
Restructuring		(680	)		(3,397	)		(3,776	)		(6,591	)
Corporate expenses (1)		(2,553	)		(5,069	)		(6,870	)		(9,729	)
Income from operations	$	21,273		$	10,369		$	62,084		$	41,521

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Approximate Dollar Value of Shares That May Yet be Purchased Under The Plans or Programs
July 1, 2017 to July 31, 2017		—	$	—		—	$	30,000,000
August 1, 2017 to August 30, 2017		—	$	—		—	$	—
September 1, 2017 to September 30, 2017		—	$	—		—	$	—

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