Filed pursuant to Rule 424(b)(4)

Registration No. 333-143471

Registration No. 333-143893

 

PROSPECTUS

 

11,000,000 Shares

 

 

Altra Holdings, Inc.

 

Common Stock

 

 

 

 

We are selling 1,760,229 shares of our common stock and the stockholders identified in this prospectus are selling 9,239,771 shares of our common stock. We will not receive any proceeds from the sale of shares by the selling stockholders.

 

Our common stock is traded on The NASDAQ Global Market under the symbol “AIMC.” On June 19, 2007, the last reported sale price of our common stock on the Nasdaq Global Market was $16.77 per share.

 

Investing in our common stock involves risks that are described in the “Risk Factors” section beginning on page 12 of this prospectus.

 

 

 

 

 

The underwriters may also purchase up to an additional 1,650,000 shares of common stock from us and the selling stockholders, at the public offering price, less underwriting discounts and commissions, within 30 days from the date of this prospectus to cover overallotments, if any.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The shares will be ready for delivery on or about June 25, 2007.

 

 

 

 

 

 

 

 

 

The date of this prospectus is June 20, 2007.

 

TABLE OF CONTENTS

 

 

 

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

 

SUMMARY

	•	Leverage Our Sales and Distribution Network.  We intend to continue to leverage our relationships with our distributors to gain shelf space, further integrate our recently acquired brands with our core brands and sell new products. We seek to capitalize on customer brand preference for our products to generate pull-through aftermarket demand from our distribution channel.
	•	Focus our Strategic Marketing on New Growth Opportunities.  Through a systematic process that leverages our core brands and products, we seek to identify attractive markets and product niches, collect customer and market data, identify market drivers, tailor product and service solutions to specific market and customer requirements and deploy resources to gain market share and drive future sales growth.
	•	Accelerate New Product and Technology Development.  We are highly focused on developing new products across our business in response to customer needs in various markets. In total, we expect new products developed by us during the past three years to generate approximately $60 million in revenues in 2007.
	•	Capitalize on Growth and Sourcing Opportunities in the Asia-Pacific Market.  We intend to leverage our established sales offices in China, Taiwan and Singapore, as well as add representation in Japan and South Korea. We also intend to expand our manufacturing presence in Asia beyond our current plant in Shenzhen, China. During 2006, we sourced approximately 17% of our purchases from low-cost countries, resulting in average cost reductions of approximately 45% for these products. Within the next five years, we intend to utilize our sourcing office in Shanghai to significantly increase our current level of low-cost country sourced purchases. We may also consider additional opportunities to outsource some of our production from North American and Western European locations to Asia.
	•	Continue to Improve Operational and Manufacturing Efficiencies through ABS.  We believe we can continue to improve profitability through cost control, overhead rationalization, global process optimization, continued implementation of lean manufacturing techniques and strategic pricing initiatives. We have implemented these principles with our recent acquisitions of Hay Hall, Bear Linear and TB Wood’s and intend to apply such principles to future acquisitions.
	•	Pursue Strategic Acquisitions that Complement our Strong Platform. Management believes that there may be a number of attractive potential acquisition candidates in the future, in part due to the fragmented nature of the industry. As an example, through the TB Wood’s Acquisition, we significantly enhanced our position as a leading manufacturer of MPT products by broadening our offering of flexible couplings and adding two new product groups in belted drives and electronic adjustable speed drives. We plan to continue our disciplined pursuit of other strategic acquisitions to accelerate our growth, enhance our industry leadership and create value.

	•	if we are unable to address technological advances, or introduce new or improved products to meet customer needs, we may be unable to maintain or enhance our competitive positions with customers and distributors;

	•	if we are unable to continue to effectively implement our ABS operating plan, outsource parts and manufacturing from low cost countries, or introduce new cost effective manufacturing techniques, we may not continue to achieve cost savings;
	•	our ability to improve or sustain operating margins as a result of cost-savings may be further impacted by cost increases in raw materials to the extent we are unable to offset any such cost increases with price increases on a timely basis;
	•	the possibility that we may be unable to identify attractive acquisition candidates, successfully integrate acquired operations or realize the intended benefits of our acquisitions; and
	•	as we expand our international operations we may be further subjected to risks not present in the U.S. markets such as foreign and U.S. government regulations and restrictions, tariffs and other trade barriers, foreign exchange risks and other risks related to political, economic and social instability.

(1)		TB Wood’s (India) Private Ltd. is a joint venture that is 92.05% indirectly owned by Altra Industrial and Rathi Turboflex Pty Ltd. is a joint venture that is 50% indirectly owned by Altra Industrial.

Common Stock offered by Altra Holdings, Inc		1,760,229 shares
Common Stock to be offered by the selling stockholders		9,239,771 shares. Of these shares, 232,705 shares will be sold by certain of our directors and executive officers, including our Chief Executive Officer (which amount excludes 7,058,700 shares to be sold by Genstar Capital Partners III, L.P., our largest stockholder, which has representatives who serve on our Board of Directors). See “Principal and Selling Stockholders.”
Common Stock outstanding after the offering		24,847,820 shares
Use of proceeds		We estimate our net proceeds from this offering without exercise of the over-allotment option will be approximately $26.8 million. We intend to use all of the net proceeds from this offering to purchase a portion of the outstanding 111/4% senior notes due 2013 pursuant to arms-length negotiations with holders of such notes. If we are unable to use all of the net proceeds to purchase the 111/4% senior notes due 2013, we will use the remaining net proceeds for general corporate purposes, including working capital and capital expenditures. We will not receive any of the proceeds from the sale of shares by the selling stockholders. See “Use of Proceeds.”
Risk factors		See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.
Dividend policy		We do not currently intend to pay cash dividends on shares of our common stock.
NASDAQ symbol		AIMC

		Pro Forma								Historical												Combined				Period from				Predecessor
						Twelve								Twelve				Twelve				Twelve				December 1,				Eleven
		Three Months				Months				Three Months				Months				Months				Months				2004				Months
		Ended				Ended				Ended				Ended				Ended				Ended				Through				Ended
		March 31,				December 31,				March 31,				December 31,				December 31,				December 31,				December 31,				November 30,
		2007(1)				2006(2)				2007				2006				2005				2004(3)				2004				2004
		(Unaudited)				(Unaudited)				(Unaudited)												(Unaudited)
Statement of Operations Data:
Net sales		$	161,676			$	588,166			$	132,706			$	462,285			$	363,465			$	303,662			$	28,625			$	275,037
Cost of sales			115,238				423,810				94,658				336,836				271,952				233,100				23,847				209,253
Gross profit			46,438				164,356				38,048				125,449				91,513				70,562				4,778				65,784
Selling, general and administrative expenses			29,630				113,437				20,827				83,276				61,579				54,294				8,973				45,321
Research and development expenses			1,294				7,449				1,294				4,938				4,683				4,325				378				3,947
Gain on curtailment of post-retirement benefit plan			—				(3,838	)			—				(3,838	)			—				—				—				—
Gain on sale of assets			—				—				—				—				(99	)			(1,300	)			—				(1,300	)
Restructuring charge, asset impairment and transition expenses			793				—				793				—				—				947				—				947
Income (loss) from operations			14,721				47,308				15,134				41,073				25,350				12,296				(4,573	)			16,869
Net income (loss)(4)		$	1,576			$	4,219			$	3,768			$	8,941			$	2,504			$	1,002			$	(5,893	)		$	6,895
Other Financial Data:
EBITDA(5)(6)		$	21,375			$	70,299			$	19,646			$	54,828			$	36,900			$	19,141			$	(3,654	)		$	22,795
Depreciation and amortization			6,607				23,847				4,465				14,611				11,533				6,993				919				6,074
Capital expenditures			1,372				14,785				1,034				9,408				6,199				3,778				289				3,489

		Altra Holdings, Inc.
		March 31,				December 31,
		2007				2006				2005
		(Unaudited)
		(In thousands)
Balance Sheet Data (at end of period):
Cash and cash equivalents		$	11,588			$	42,527			$	10,060
Working capital(7)			106,597				122,191				60,409
Total assets			389,020				409,368				297,691
Total debt			208,247				229,128				173,760
Convertible preferred stock and other long-term liabilities			28,987				29,471				79,168

(1)		Reflects estimated effects of the TB Wood’s Acquisition and Related Transactions. For further discussion, see “Unaudited Pro Forma Condensed Combined Statement of Operations for the Three Months Ended March 31, 2007” and accompanying Notes contained elsewhere in this prospectus.
(2)		Reflects estimated effects of the TB Wood’s Acquisition and Related Transactions and the Hay Hall Acquisition and the Other Transactions. For further discussion, see “Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 2006” and accompanying Notes contained elsewhere in this prospectus.
(3)		The combined results were prepared by adding the results of Altra from December 1 to December 31, 2004 to those from our Predecessor for the 11 month period ending November 31, 2004. This presentation is not in accordance with GAAP. The primary differences between our Predecessor and the successor entity are the inclusion of Kilian in the successor and the successor’s book basis has been stepped up to fair value such that the successor has additional depreciation, amortization and financing costs. The results of Kilian are included in Altra for the period from December 1, 2004 through December 31, 2004. Management believes that this combined basis presentation provides useful information for our investors

footnotes continued on following page

		in the comparison to Predecessor trends and operating results. The combined results are not necessarily indicative of what our results of operations would have been if the PTH Acquisition and Kilian Transactions had been consummated earlier, nor should they be construed as being a representation of our future results of operations.
(4)		Net income would have been $4.0 million, and $5.3 million for the Pro Forma Three Months Ended March 31, 2007 and Pro Forma Twelve Months Ended December 31, 2006, respectively, if we had taken into account Altra Industrial’s redemption of £11.6 million, or U.S. $22.7 million (based on an exchange rate of 1.963 U.S. Dollars to 1.0 U.K. Pounds as of February 27, 2007), of its 111/4% senior notes as of January 1, 2006.
(5)		EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is used by us as a performance measure. Management believes that EBITDA provides relevant information for our investors because it is useful for trending, analyzing and benchmarking the performance and value of our business. Management also believes that EBITDA is useful in assessing current performance compared with the historical performance of our Predecessor because significant line items within our income statements such as depreciation, amortization and interest expense were significantly impacted by the PTH Acquisition. Internally, EBITDA is used as a financial measure to assess the operating performance and is an important measure in our incentive compensation plans. EBITDA has important limitations, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. For example, EBITDA does not reflect:

	•	cash expenditures, or future requirements for capital expenditures or contractual commitments;
	•	changes in, or cash requirements for, working capital needs;
	•	the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debts;
	•	tax distributions that would represent a reduction in cash available to us; and
	•	any cash requirements for assets being depreciated and amortized that may have to be replaced in the future.

		Pro Forma								Historical												Combined								Predecessor
		Three				Twelve				Three				Twelve				Twelve				Twelve				Period from				Eleven
		Months				Months				Months				Months				Months				Months				December 1,				Months
		Ended				Ended				Ended				Ended				Ended				Ended				2004 Through				Ended
		March 31,				December 31,				March 31,				December 31,				December 31,				December 31,				December 31,				November 30,
		2007				2006				2007				2006				2005				2004				2004				2004
Net income (loss)		$	1,576			$	4,219			$	3,768			$	8,941			$	2,504			$	1,002			$	(5,893	)		$	6,895
Adjustments:
Provision (benefit) for income taxes			1,100				2,572				2,265				5,797				3,349				5,240				(292	)			5,532
Interest expense, net			12,092				39,661				9,148				25,479				19,514				5,906				1,612				4,294
Depreciation and amortization			6,607				23,847				4,465				14,611				11,533				6,993				919				6,074
EBITDA			21,375				70,299				19,646				54,828				36,900				19,141				(3,654	)			22,795

footnotes continued on following page

(6)		Includes expenses and income relating to non-cash inventory step-up costs and LIFO charges, management fees, transaction expenses associated with acquisitions, IPO expenses and loss (gain) on sale of assets and other net non-operating expenses which, if subtracted out, would result in a higher EBITDA. Inventory step-up costs accounted for $2.3 million for the twelve months ended December 31, 2006 and $1.7 million for both the twelve months ended December 31, 2005 and the period from December 1, 2004 through December 31, 2004. Inventory step-up costs accounted for $1.7 million for the combined twelve months ended December 31, 2004. Management fees consisted of $1.0 million for both the twelve months ended December 31, 2006 and December 31, 2005. Transaction fees and expenses associated with acquisitions accounted for $1.1 million, $0.8 million, $4.4 million and $4.4 million, for the pro-forma three months ended March 31, 2007, the pro-forma twelve months ended December 31, 2006, the combined twelve months ended December 31, 2004, and the period from December 1, 2004 through December 31, 2004, respectively. Loss (gain) on sale of assets and other non-operating expenses (income) accounted for $0.9 million, $(0.1) million, $(1.2) million, and $(1.2) million for the twelve months ended December 31, 2006, the twelve months ended December 31, 2005, the combined twelve months ended December 31, 2004, and the eleven months ended November 30, 2004, respectively. We also incurred IPO related expenses of $0.6 million for the twelve months ended December 31, 2006. LIFO charges accounted for $0.1 million and $0.7 million for the pro-forma three months ended March 31, 2007 and the pro-forma twelve months ended December 31, 2006, respectively. Additionally, we recorded a management services termination fee of $3.0 million during the twelve months ended December 31, 2006.
(7)		Working capital consists of total current assets less total current liabilities.

 

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all other information contained in this prospectus, including our financial statements and the related notes, before investing in our common stock. If any of the following risks materialize, our business, financial condition or results of operations could be materially harmed. In that case, the trading price of our common stock could decline significantly and you could lose some or all of your investment.

 

Risks Related to Our Business

 

We operate in the highly competitive mechanical power transmission and adjustable speed drives industries and if we are not able to compete successfully our business may be significantly harmed.

 

We operate in highly fragmented and very competitive markets in the MPT and adjustable speed drives industries. Some of our competitors have achieved substantially more market penetration in certain of the markets in which we operate, such as helical gear drives and adjustable speed drives, and some of our competitors are larger than us and have greater financial and other resources. With respect to certain of our products, we compete with divisions of our OEM customers. Competition in our business lines is based on a number of considerations, including quality, reliability, pricing, availability and design and application engineering support. Our customers increasingly demand a broad product range and we must continue to develop our expertise in order to manufacture and market these products successfully. To remain competitive, we will need to invest regularly in manufacturing, customer service and support, marketing, sales, research and development and intellectual property protection. In the future we may not have sufficient resources to continue to make such investments and may not be able to maintain our competitive position within each of the markets we serve. We may have to adjust the prices of some of our products to stay competitive.

 

Additionally, some of our larger, more sophisticated customers are attempting to reduce the number of vendors from which they purchase in order to increase their efficiency. If we are not selected to become one of these preferred providers, we may lose market share in some of the markets in which we compete.

 

There is substantial and continuing pressure on major OEMs and larger distributors to reduce costs, including the cost of products purchased from outside suppliers such as us. As a result of cost pressures from our customers, our ability to compete depends in part on our ability to generate production cost savings and, in turn, find reliable, cost effective outside suppliers to source components or manufacture our products. If we are unable to generate sufficient cost savings in the future to offset price reductions, then our gross margin could be materially adversely affected.

 

Changes in general economic conditions or the cyclical nature of our markets could harm our operations and financial performance.

 

Our financial performance depends, in large part, on conditions in the markets that we serve and on the U.S. and global economies in general. Some of the markets we serve are highly cyclical, such as the metals, mining, industrial equipment and energy markets. In addition, these markets may experience cyclical downturns. The present uncertain economic environment may result in significant quarter-to-quarter variability in our performance. Any sustained weakness in demand or continued downturn or uncertainty in the economy generally would further reduce our sales and profitability.

 

We rely on independent distributors and the loss of these distributors could adversely affect our business.

 

In addition to our direct sales force and manufacturer sales representatives, we depend on the services of independent distributors to sell our products and provide service and aftermarket support to our customers. We support an extensive distribution network, with over 3,000 distributor locations worldwide. Rather than serving as passive conduits for delivery of product, our independent distributors are active participants in the overall competitive dynamics in the MPT industry. During the year ended December 31, 2006, on a pro forma basis, approximately 39% of our net sales were generated through independent distributors. In particular, on a pro forma basis, sales through our largest distributor accounted for approximately 10% of our net sales for the

year ended December 31, 2006. Almost all of the distributors with whom we transact business offer competitive products and services to our customers. In addition, the distribution agreements we have are typically non-exclusive and cancelable by the distributor after a short notice period. The loss of any major distributor or a substantial number of smaller distributors or an increase in the distributors’ sales of our competitors’ products to our customers could materially reduce our sales and profits.

 

We must continue to invest in new technologies and manufacturing techniques; however, our ability to develop or adapt to changing technology and manufacturing techniques is uncertain and our failure to do so could place us at a competitive disadvantage.

 

The successful implementation of our business strategy requires us to continuously invest in new technologies and manufacturing techniques to evolve our existing products and introduce new products to meet our customers’ needs in the industries we serve and want to serve. For example, motion control products offer more precise positioning and control compared to industrial clutches and brakes. If manufacturing processes are developed to make motion control products more price competitive and less complicated to operate, our customers may decrease their purchases of MPT products.

 

Our products are characterized by performance and specification requirements that mandate a high degree of manufacturing and engineering expertise. If we fail to invest in improvements to our technology and manufacturing techniques to meet these requirements, our business could be at risk. We believe that our customers rigorously evaluate their suppliers on the basis of a number of factors, including:

 

 

Our success depends on our ability to invest in new technologies and manufacturing techniques to continue to meet our customers’ changing demands with respect to the above factors. We may not be able to make required capital expenditures and, even if we do so, we may be unsuccessful in addressing technological advances or introducing new products necessary to remain competitive within our markets. Furthermore, our own technological developments may not be able to produce a sustainable competitive advantage.

 

Our operations are subject to international risks that could affect our operating results.

 

Our net sales outside North America represented approximately 27% of our total net sales for the year ended December 31, 2006 on a pro forma basis. In addition, we sell products to domestic customers for use in their products sold overseas. We also source a significant portion of our products and materials from overseas, which is increasing. Our business is subject to risks associated with doing business internationally, and our future results could be materially adversely affected by a variety of factors, including:

 

 

As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations. However, any of these factors could materially adversely affect our international operations and, consequently, our operating results.

 

Our operations depend on production facilities throughout the world, many of which are located outside the United States and are subject to increased risks of disrupted production causing delays in shipments and loss of customers and revenue.

 

We operate businesses with manufacturing facilities worldwide, many of which are located outside the United States including in Canada, China, France, Germany, Italy, Mexico and the United Kingdom. Serving a global customer base requires that we place more production in emerging markets to capitalize on market opportunities and cost efficiencies. Our international production facilities and operations could be disrupted by a natural disaster, labor strike, war, political unrest, terrorist activity or public health concerns, particularly in emerging countries that are not well-equipped to handle such occurrences.

 

Material weaknesses in our internal controls over financial reporting have been identified which could result in a decrease in the value of our common stock.

 

In connection with their audit of our 2006 consolidated financial statements, our independent registered public accounting firm expressed concerns that as of the date of their opinion, certain plant locations had encountered difficulty closing their books in a timely and accurate manner. Our independent registered public accounting firm informed senior management and the Audit Committee of the Board of Directors that they believe this is a material weakness in internal controls. We have actively taken steps to address this material weakness. These steps include standardizing the financial close process, providing greater corporate oversight and review as well as implementing other internal control procedures as part of our on-going Sarbanes-Oxley compliance program. We believe that with the addition of these steps we should be able to deliver financial information in a timely and accurate manner. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — The Sarbanes-Oxley Act of 2002 and Material Weakness in Internal Control.”

 

However, we cannot assure you that our efforts to correct this identified material weakness will be successful or that we will not have other weaknesses in the future. If we fail to correct the existing material weaknesses or have material weaknesses in the future, it could affect the financial results that we report or create a perception that those financial results do not accurately state our financial condition or results of operations. Either of those events could have an adverse effect on the value of our common stock.

 

If we are unable to complete our assessment as to the adequacy of our internal controls over financial reporting as of December 31, 2007 as required by Section 404 of the Sarbanes-Oxley Act of 2002, or if material weaknesses are identified and reported, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of your investment and make it more difficult for us to raise capital in the future.

 

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include in their annual reports on Form 10-K a report of management on the company’s internal controls over financial reporting, including management’s assessment of the effectiveness of the company’s internal controls over financial reporting as of the company’s fiscal year end. In addition, the

accounting firm auditing a public company’s financial statements must also attest to, and report on, management’s assessment of the effectiveness of the company’s internal controls over financial reporting as well as the operating effectiveness of the company’s internal controls. While we will expend significant resources in developing the necessary documentation and testing procedures, fiscal 2007 will be the first year for which we must complete the assessment and undergo the attestation process required by Section 404 and there is a risk that we may not comply with all of its requirements. If we do not timely complete our assessment or if our internal controls are not designed or operating effectively as required by Section 404, our independent registered public accounting firm may either disclaim an opinion as it relates to management’s assessment of the effectiveness of its internal controls or may issue a qualified opinion on the effectiveness of our internal controls. It is possible that material weaknesses in our internal controls could be found. If we are unable to remediate any material weaknesses by December 31, 2007, our independent registered public accounting firm would be required to issue an adverse opinion on our internal controls. If our independent registered public accounting firm disclaim an opinion as to the effectiveness of our internal controls or if they render an adverse opinion due to material weaknesses in our internal controls, then investors may lose confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline and make it more difficult for us to raise capital in the future.

 

We rely on estimated forecasts of our OEM customers’ needs, and inaccuracies in such forecasts could materially adversely affect our business.

 

We generally sell our products pursuant to individual purchase orders instead of under long-term purchase commitments. Therefore, we rely on estimated demand forecasts, based upon input from our customers, to determine how much material to purchase and product to manufacture. Because our sales are based on purchase orders, our customers may cancel, delay or otherwise modify their purchase commitments with little or no consequence to them and with little or no notice to us. For these reasons, we generally have limited visibility regarding our customers’ actual product needs. The quantities or timing required by our customers for our products could vary significantly. Whether in response to changes affecting the industry or a customer’s specific business pressures, any cancellation, delay or other modification in our customers’ orders could significantly reduce our revenue, impact our working capital, cause our operating results to fluctuate from period to period and make it more difficult for us to predict our revenue. In the event of a cancellation or reduction of an order, we may not have enough time to reduce operating expenses to minimize the effect of the lost revenue on our business and we may purchase too much inventory and spend more capital than expected.

 

The materials used to produce our products are subject to price fluctuations that could increase costs of production and adversely affect our profitability.

 

The materials used to produce our products, especially copper and steel, are sourced on a global or regional basis and the prices of those materials are susceptible to price fluctuations due to supply and demand trends, transportation costs, government regulations and tariffs, changes in currency exchange rates, price controls, the economic climate and other unforeseen circumstances. On a pro forma basis for the year ended December 31, 2006, approximately 57% of our cost of goods sold consisted of the purchase of raw materials required for our manufacturing processes. From the first quarter of 2004 to the first quarter of 2007, the average price of copper and steel has increased approximately 135% and 39%, respectively. If we are unable to continue to pass a substantial portion of such price increases on to our customers on a timely basis, our future profitability may be materially and adversely affected. In addition, passing through these costs to our customers may also limit our ability to increase our prices in the future.

 

We face potential product liability claims relating to products we manufacture or distribute, which could result in our having to expend significant time and expense to defend these claims and to pay material claims or settlement amounts.

 

We face a business risk of exposure to product liability claims in the event that the use of our products is alleged to have resulted in injury or other adverse effects. We currently have several product

liability claims against us with respect to our products. Although we currently maintain product liability insurance coverage, we may not be able to obtain such insurance on acceptable terms in the future, if at all, or obtain insurance that will provide adequate coverage against potential claims. Product liability claims can be expensive to defend and can divert the attention of management and other personnel for long periods of time, regardless of the ultimate outcome. An unsuccessful product liability defense could have a material adverse effect on our business, financial condition, results of operations or our ability to make payments under our debt obligations when due. In addition, we believe our business depends on the strong brand reputation we have developed. In the event that our reputation is damaged, we may face difficulty in maintaining our pricing positions with respect to some of our products, which would reduce our sales and profitability.

 

We may be subject to work stoppages at our facilities, or our customers may be subjected to work stoppages, which could seriously impact our operations and the profitability of our business.

 

As of April 30, 2007, we had approximately 3,450 full time employees, of whom approximately 44% were employed outside the United States. Approximately 400 of our North American employees and 45 of our employees in Scotland are represented by labor unions. In addition, our employees in Europe are generally represented by local and national social works councils that hold discussions with employer industry associations regarding wage and work issues every two to three years. Our European facilities, particularly those in France and Germany, may participate in such discussions and be subject to any agreements reached with employees.

 

Our four U.S. collective bargaining agreements will expire on August 10, 2007, September 19, 2007, June 2, 2008 and February 1, 2009. We may be unable to renew these agreements on terms that are satisfactory to us, if at all. In addition, two of our four U.S. collective bargaining agreements contain provisions for additional, potentially significant, lump-sum severance payments to all employees covered by the agreements who are terminated as the result of a plant closing and one of our collective bargaining agreements contains provisions restricting our ability to terminate or relocate operations. Additionally, approximately 94 employees in the TB Wood’s production facilities in Mexico are unionized under collective bargaining agreements that are subject to annual renewals.

 

If our unionized workers or those represented by a works council were to engage in a strike, work stoppage or other slowdown in the future, we could experience a significant disruption of our operations. Such disruption could interfere with our ability to deliver products on a timely basis and could have other negative effects, including decreased productivity and increased labor costs. In addition, if a greater percentage of our work force becomes unionized, our business and financial results could be materially adversely affected. Many of our direct and indirect customers have unionized work forces. Strikes, work stoppages or slowdowns experienced by these customers or their suppliers could result in slowdowns or closures of assembly plants where our products are used and could cause cancellation of purchase orders with us or otherwise result in reduced revenues from these customers.

 

Changes in employment laws could increase our costs and may adversely affect our business.

 

Various federal, state and international labor laws govern our relationship with employees and affect operating costs. These laws include minimum wage requirements, overtime, unemployment tax rates, workers’ compensation rates paid, leaves of absence, mandated health and other benefits, and citizenship requirements. Significant additional government-imposed increases or new requirements in these areas could materially affect our business, financial condition, operating results or cash flow.

 

In the event our employee-related costs rise significantly, we may have to curtail the number of our employees or shut down certain manufacturing facilities. Any such actions would be not only costly but could also materially adversely affect our business.

 

We depend on the services of key executives, the loss of whom could materially harm our business.

 

Our senior executives are important to our success because they are instrumental in setting our strategic direction, operating our business, maintaining and expanding relationships with distributors,

identifying, recruiting and training key personnel, identifying expansion opportunities and arranging necessary financing. Losing the services of any of these individuals could adversely affect our business until a suitable replacement could be found. We believe that our senior executives could not easily be replaced with executives of equal experience and capabilities. Although we have entered into employment agreements with certain of our key domestic executives, we cannot prevent our key executives from terminating their employment with us. We do not maintain key person life insurance policies on any of our executives.

 

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

 

Our success depends on our ability to recruit, retain and motivate highly skilled sales, marketing and engineering personnel. Competition for these persons in our industry is intense and we may not be able to successfully recruit, train or retain qualified personnel. If we fail to retain and recruit the necessary personnel, our business and our ability to obtain new customers, develop new products and provide acceptable levels of customer service could suffer. If certain of these key personnel were to terminate their employment with us, we may experience difficulty replacing them, and our business could be harmed.

 

We are subject to environmental laws that could impose significant costs on us and the failure to comply with such laws could subject us to sanctions and material fines and expenses.

 

We are subject to a variety of federal, state, local, foreign and provincial environmental laws and regulations, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances and wastes and the responsibility to investigate and cleanup contaminated sites that are or were owned, leased, operated or used by us or our predecessors. Some of these laws and regulations require us to obtain permits, which contain terms and conditions that impose limitations on our ability to emit and discharge hazardous materials into the environment and periodically may be subject to modification, renewal and revocation by issuing authorities. Fines and penalties may be imposed for non-compliance with applicable environmental laws and regulations and the failure to have or to comply with the terms and conditions of required permits. From time to time our operations may not be in full compliance with the terms and conditions of our permits. We periodically review our procedures and policies for compliance with environmental laws and requirements. We believe that our operations generally are in material compliance with applicable environmental laws, requirements and permits and that any lapses in compliance would not be expected to result in us incurring material liability or cost to achieve compliance. Historically, the costs of achieving and maintaining compliance with environmental laws, and requirements and permits have not been material; however, the operation of manufacturing plants entails risks in these areas, and a failure by us to comply with applicable environmental laws, regulations, or permits could result in civil or criminal fines, penalties, enforcement actions, third party claims for property damage and personal injury, requirements to clean up property or to pay for the costs of cleanup, or regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, including the installation of pollution control equipment or remedial actions. Moreover, if applicable environmental laws and regulations, or the interpretation or enforcement thereof, become more stringent in the future, we could incur capital or operating costs beyond those currently anticipated.

 

Certain environmental laws in the United States, such as the federal Superfund law and similar state laws, impose liability for the cost of investigation or remediation of contaminated sites upon the current or, in some cases, the former site owners or operators and upon parties who arranged for the disposal of wastes or transported or sent those wastes to an off-site facility for treatment or disposal, regardless of when the release of hazardous substances occurred or the lawfulness of the activities giving rise to the release. Such liability can be imposed without regard to fault and, under certain circumstances, can be joint and several, resulting in one party being held responsible for the entire obligation. As a practical matter, however, the costs of investigation and remediation generally are allocated among the viable responsible parties on some form of equitable basis. Liability also may include damages to natural resources. We have not been notified that we are a potentially responsible party in connection with any sites we currently or formerly owned or operated or for liability at any off-site waste disposal facility.

 

However, there is contamination at some of our current facilities, primarily related to historical operations at those sites, for which we could be liable for the investigation and remediation under certain environmental laws. The potential for contamination also exists at other of our current or former sites, based on historical uses of those sites. We currently are not undertaking any remediation or investigations and our costs or liability in connection with potential contamination conditions at our 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 we attempt to evaluate the risk of liability associated with our facilities at the time we acquire them, there may be environmental conditions currently unknown to us relating to our prior, existing or future sites or operations or those of predecessor companies whose liabilities we may have assumed or acquired which could have a material adverse effect on our business.

 

We are being indemnified, or expect to 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 environmental consultants who we have hired, we do not expect such costs and liabilities to have a material adverse effect on our business, operations or earnings. We 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 we are obligated is not subject to these indemnities, we could become subject to significant liabilities.

 

We face additional costs associated with our post-retirement and post-employment obligations to employees which could have an adverse effect on our financial condition.

 

As part of the PTH Acquisition, we agreed to assume pension plan liabilities for active U.S. employees under the Retirement Plan for Power Transmission Employees of Colfax and the Ameridrives International Pension Fund for Hourly Employees Represented by United Steelworkers of America, Local 3199-10, collectively referred to as the Prior Plans. We have established a defined benefit plan, the Altra Industrial Motion, Inc. Retirement Plan or New Plan, mirroring the benefits provided under the Prior Plans. The New Plan accepted a spin-off of assets and liabilities from the Prior Plans, in accordance with Section 414(l) of the Internal Revenue Code, or the Code, with such assets and liabilities relating to active U.S. employees as of the closing of the PTH Acquisition. Given the funded status of the Prior Plans and the asset allocation requirements of Code Section 414(l), liabilities under the New Plan greatly exceed the assets that were transferred from the Prior Plans. The accumulated benefit obligation (not including accumulated benefit obligations of non-U.S. pension plans in the amount of $3.4 million) was approximately $22.7 million as of December 31, 2006 while the fair value of plan assets was approximately $11.0 million as of December 31, 2006. As the New Plan has a considerable funding deficit, the cash funding requirements are expected to be substantial over the next several years, and could have a material adverse effect on our financial condition. As of March 31, 2007, funding requirements were estimated to be $2.8 million for the remainder of 2007, $2.5 million in 2008 and $1.9 million annually thereafter until 2011. These amounts are based on actuarial assumptions and actual amounts could be materially different.

 

Additionally, as part of the PTH Acquisition, we agreed to assume all pension plan liabilities related to non-U.S. employees. The accumulated benefit obligations of non-U.S. pension plans were approximately $3.4 million as of December 31, 2006. There are no assets associated with these plans.

 

Finally, as part of the PTH Acquisition, we also agreed to assume all post-employment and post-retirement welfare benefit obligations with respect to active U.S. employees. The benefit obligation for post-retirement benefits, which are not funded, was approximately $3.3 million as of March 31, 2007.

 

For a description of the post-retirement and post-employment costs, see Note 9 to our audited financial statements included elsewhere in this prospectus.

 

Our future success depends on our ability to integrate acquired companies and manage our growth effectively.

 

Our growth through acquisitions has placed, and will continue to place, significant demands on our management, operational and financial resources. Realization of the benefits of acquisitions often requires integration of some or all of the acquired companies’ sales and marketing, distribution, manufacturing, engineering, finance and administrative organizations. Integration of companies demands substantial attention from senior management and the management of the acquired companies. In addition, we will continue to pursue new acquisitions, some of which could be material to our business if completed. We may not be able to integrate successfully our recent acquisitions, including TB Wood’s, or any future acquisitions, operate these acquired companies profitably, or realize the potential benefits from these acquisitions.

 

We may not be able to protect our intellectual property rights, brands or technology effectively, which could allow competitors to duplicate or replicate our technology and could adversely affect our ability to compete.

 

We rely on a combination of patent, trademark, copyright and trade secret laws in the United States and other jurisdictions, as well as on license, non-disclosure, employee and consultant assignment and other agreements and domain names registrations in order to protect our proprietary technology and rights. Applications for protection of our intellectual property rights may not be allowed, and the rights, if granted, may not be maintained. In addition, third parties may infringe or challenge our intellectual property rights. In some cases, we rely on unpatented proprietary technology. It is possible that others will independently develop the same or similar technology or otherwise obtain access to our unpatented technology. In addition, in the ordinary course of our operations, we pursue potential claims from time to time relating to the protection of certain products and intellectual property rights, including with respect to some of our more profitable products. Such claims could be time consuming, expensive and divert resources. If we are unable to maintain the proprietary nature of our technologies or proprietary protection of our brands, our ability to market or be competitive with respect to some or all of our products may be affected, which could reduce our sales and profitability.

 

Goodwill comprises a significant portion of our total assets, and if we determine that goodwill has become impaired in the future, net income in such years may be materially and adversely affected.

 

Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. We review goodwill and other intangibles annually for impairment and any excess in carrying value over the estimated fair value is charged to the results of operations. Reduction in net income resulting from the write down or impairment of goodwill would affect financial results. We expect to recognize additional goodwill in connection with the TB Wood’s Acquisition. See “Unaudited Pro Forma Condensed Combined Financial Statements.”

 

Unplanned repairs or equipment outages could interrupt production and reduce income or cash flow.

 

Unplanned repairs or equipment outages, including those due to natural disasters, could result in the disruption of our manufacturing processes. Any interruption in our manufacturing processes would interrupt our production of products, reduce our income and cash flow and could result in a material adverse effect on our business and financial condition.

 

Our operations are highly dependent on information technology infrastructure and failures could significantly affect our business.

 

We depend heavily on our information technology, or IT, infrastructure in order to achieve our business objectives. If we experience a problem that impairs this infrastructure, such as a computer virus, a problem with the functioning of an important IT application, or an intentional disruption of our IT systems by a third party, the resulting disruptions could impede our ability to record or process orders, manufacture and ship in a timely manner, or otherwise carry on our business in the ordinary course. Any such events could

cause us to lose customers or revenue and could require us to incur significant expense to eliminate these problems and address related security concerns.

 

Our leverage could adversely affect our financial health and make us vulnerable to adverse economic and industry conditions.

 

We have incurred indebtedness that is substantial relative to our stockholders’ investment. As of April 30, 2007, we had approximately $334.0 million of indebtedness outstanding and $25.3 million available under lines of credit. Our indebtedness has important consequences; for example, it could:

 

 

Substantially all of our assets have been pledged as collateral against any outstanding borrowings under the credit agreements, or the Credit Agreements, governing our senior revolving credit facility and the credit facility we entered into in connection with the TB Wood’s Acquisition, or the TB Wood’s senior secured credit facility. In addition, the Credit Agreements require us to maintain specified financial ratios and satisfy certain financial condition tests, which may require that we take action to reduce our debt or to act in a manner contrary to our business objectives. If an event of default under the Credit Agreements, then the lenders could declare all amounts outstanding under the senior revolving credit facility and the TB Wood’s senior secured credit facility, together with accrued interest, to be immediately due and payable. In addition, our senior revolving credit facility, the TB Wood’s senior secured credit facility and the indentures governing the 9% senior secured notes and 111/4% senior notes have cross-default provisions such that a default under any one would constitute an event of default in any of the others.

 

We are subject to tax laws and regulations in many jurisdictions and the inability to successfully defend claims from taxing authorities related to our current or acquired businesses could adversely affect our operating results and financial position.

 

We conduct business in many countries, which requires us to interpret the income tax laws and rulings in each of those taxing jurisdictions. Due to the subjectivity of tax laws between those jurisdictions as well as the subjectivity of factual interpretations, our estimates of income tax liabilities may differ from actual payments or assessments. Claims from taxing authorities related to these differences could have an adverse impact on our operating results and financial position.

 

Risks Related to this Offering

 

The market price of our common stock may be volatile, which could cause the value of your investment to decline.

 

Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, war and incidents of terrorism and acts of God could reduce the market price of our common stock notwithstanding our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors and, in

response, the market price of our common stock could decrease significantly. You may be unable to resell your shares of our common stock at or above the public offering price.

 

Furthermore, following periods of market volatility in the price of a company’s securities, security holders have sometimes instituted class action litigation. If the market value of our stock experiences adverse fluctuations and we become involved in this type of litigation, regardless of the outcome, we could incur substantial legal costs and our management’s attention could be diverted from the operation of our business, causing our business to suffer.

 

We may apply the proceeds of this offering to uses that do not improve our operating results or increase the value of your investment.

 

We intend to use all of the net proceeds from this offering to purchase the outstanding 111/4% senior notes pursuant to arms-length negotiations with holders of such notes. If we are unable to use all of the net proceeds to purchase a portion of the 111/4% senior notes, we will use the remaining net proceeds for general corporate purposes, including working capital and capital expenditures. The proceeds could be applied in ways that do not improve our operating results or increase the value of your investment.

 

Following this offering, Genstar Capital Partners III, L.P. and Stargen III, L.P. (together, the Genstar Funds) will no longer have a beneficial interest in our common stock and this may result in a change of control and possible default under the terms of our indentures.

 

Under the terms of the indentures governing the 9% senior secured notes and 111/4% senior notes, a change of control will result if Genstar Capital, L.P. or its affiliates no longer owns any shares of our common stock and any person or entity other than Genstar Capital, L.P. or its affiliates owns more than 35% of the shares of our common stock. After this offering, the Genstar Funds will no longer have any beneficial interest in our common stock. If a person or entity owns more than 35% of the shares of our common stock, we would be required to repurchase all of the outstanding 9% senior secured notes and 111/4% senior notes at 101% of the aggregate principal amount of the notes, plus accrued and unpaid interest, and additional interest. We may not have sufficient funds available at the time of a change of control to repurchase all of the notes, and so, we will be in default under the indentures.

 

A substantial number of our shares of common stock may be sold in the public market by our principal stockholders, which could adversely affect the market price of our shares, which in turn could negatively impact your investment in us.

 

Future sales of substantial amounts of our shares of common stock in the public market (or the perception that such sales may occur) could adversely affect market prices of our common stock prevailing from time to time and could impair our ability to raise capital through future sales of our equity or equity-related securities at a time and price that we deem appropriate. Such sales could create public perception of difficulties or problems with our business.

 

Upon completion of this offering, we will have 24,847,820 shares of common stock issued and outstanding and no options to purchase shares of our common stock. All of the shares we and the selling stockholders are selling in this offering, plus any shares sold by us upon the exercise of the underwriters’ over-allotment option, will be freely tradeable without restriction under the Securities Act of 1933, as amended, or the Securities Act, unless purchased by our affiliates. Upon completion of this offering, 2,347,820 shares of our common stock will be restricted or controlled securities within the meaning of Rule 144 under the Securities Act. The rules affecting the sale of these securities are summarized under “Shares Eligible for Future Sale.”

 

Subject to certain exceptions described under the caption “Underwriting,” we and all of our directors and executive officers and certain of our stockholders have agreed not to offer, sell or agree to sell, directly or indirectly, any shares of common stock without the permission of the underwriters for a period of 90 days from the date of this prospectus. The 90-day restricted period will be automatically extended if (1) during the last 17 days of the 90-day restricted period we issue an earning release or material news or a material event

relating to our business occurs or (2) prior to the expiration of the 90-day restricted period, we announce that we will release earnings results or become aware that material news or a material event will occur during the 16-day period beginning on the last day of the 90-day restricted period, in which case the restrictions described above will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. When this period expires we and our locked-up stockholders will be able to sell our shares in the public market. Sales of a substantial number of such shares upon expiration, or early release, of the lock-up (or the perception that such sales may occur) could cause our share price to decline.

 

We also may issue our shares of common stock from time to time as consideration for future acquisitions and investments or for other reasons. If any such acquisition or investment is significant, the number of shares that we may issue may in turn be significant. We may also grant registration rights covering those shares in connection with any such acquisitions and investments.

 

Because we have not paid dividends in the past and do not anticipate paying dividends on our common stock in the foreseeable future, you should not expect to receive dividends on shares of our common stock.

 

We have no present plans to pay cash dividends to our stockholders and, for the foreseeable future, intend to retain all of our earnings for use in our business. The decision whether to pay dividends will be made by our board of directors in light of conditions then existing, including factors such as our results of operations, financial condition and capital requirements, and business conditions. In addition, the Credit Agreements governing the senior revolving credit facility and the TB Wood’s senior secured credit facility and the indentures governing the 9% senior secured notes and 111/4% senior notes contain covenants limiting the payment of cash dividends. Consequently, you should not rely on dividends in order to receive a return on your investment.

 

Market and industry data included in this prospectus, including all market share and market size data about the energy, general industrial, material handling, mining, transportation and turf and garden markets, mechanical power transmission and motion control industry, and other markets for mechanical power transmission and motion control products, as well as our position and the position of our competitors within these markets, including our products relative to our competitors, are based on estimates of our management. These estimates have been derived from our management’s knowledge and experience in the markets in which we operate, as well as information obtained from surveys, reports by market research firms, our customers, distributors, suppliers, trade and business organizations and other contacts in the markets in which we operate. Data herein related to TB Wood’s is based on information received from TB Wood’s. References herein to our being a leader in a market or product category refers to our belief that we have a leading market share position in each specified market, unless the context otherwise requires, and do not take into account competitive products outside our industry. Statements in this prospectus relating to our market share do not include data for products that are produced internally by other vertically integrated manufacturers.

 

This prospectus, including information generally located under the headings “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements. These forward-looking statements generally relate to our strategies, plans and objectives for, and potential results of, future operations and are based upon management’s current plans and beliefs or current estimates of future results or trends. Whenever you read a statement that is not solely a statement of historical fact, such as when we state that we “believe,” “expect,” “anticipate” or “plan” that an event will occur and other similar statements, you should understand that our expectations may not be correct, although we believe they are reasonable, and that our plans may change. We do not guarantee that the transactions and events described in this prospectus will happen as described or that any positive trends noted in this prospectus will continue.

 

Forward-looking statements regarding management’s present plans or expectations for new product offerings, capital expenditures, increasing sales, cost-saving strategies and growth involve risks and uncertainties relative to return expectations, allocation of resources and changing economic or competitive conditions, which could cause actual results to differ from present plans or expectations and such differences could be material. Similarly, forward-looking statements regarding management’s present expectations for operating results and cash flow involve risks and uncertainties relative to these and other factors including:

 

We caution you that the foregoing list of important factors is not exclusive. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this prospectus may not in fact occur. The forward-looking statements contained in this prospectus are current as of the date of the prospectus. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

You should read this prospectus completely and with the understanding that actual future results may be materially different from what we expect.

 

We will receive net proceeds from this offering of approximately $26.8 million, after deducting underwriting discounts and commissions and other estimated expenses of $2.1 million payable by us. This estimate is based on our public offering price of $16.40 per share. We will not receive any of the proceeds from the sale of shares by the selling stockholders. We intend to use all of the net proceeds from this offering to purchase a portion of the outstanding 111/4% senior notes due 2013 pursuant to arms-length negotiations with holders of such notes. If we are unable to use all of the net proceeds to purchase the 111/4% senior notes due 2013, we will use the remaining net proceeds for general corporate purposes, including working capital and capital expenditures.

 

Our common stock, $0.001 par value per share, is quoted on the Nasdaq Global Market under the symbol “AIMC.” The following table sets forth the high and low sales prices per share of our common stock for the period indicated, as reported on the Nasdaq Global Market.

 

 

As of June 19, 2007, the closing sale price of our common stock as reported on the Nasdaq Global Market was $16.77 per share. As of June 19, 2007, there were 25 holders of record of our common stock, not including beneficial owners of shares registered in nominee or “street name” on such date.

 

We intend to retain all future earnings, if any, for use in the operation of our business and to fund future growth. We do not anticipate paying any dividends for the foreseeable future, and the Credit Agreements governing the senior revolving credit facility and the TB Wood’s senior secured credit facility and the indentures governing the 9% senior secured notes and 111/4% senior notes limit our ability to pay dividends or other distributions on our common stock. See “Description of Indebtedness.” We may incur other obligations in the future that will further limit our ability to pay dividends. The decision whether to pay dividends will be made by our board of directors in light of conditions then existing, including factors such as our results of operations, financial condition and requirements, business conditions and covenants under any applicable contractual arrangements.

 

The following table sets forth our capitalization as of March 31, 2007:

 

 

The table below should be read in conjunction with “Use of Proceeds,” “Unaudited Pro Forma Condensed Combined Financial Statements,” “Selected Historical Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes included elsewhere in this prospectus.

 

 

 

The following unaudited pro forma condensed combined financial statements are presented to illustrate the estimated effects of (i) the Hay Hall Acquisition in February 2006 and the Other Transactions, and (ii) the TB Wood’s Acquisition and Related Transactions on our financial condition and results of operations.

 

We have derived the historical consolidated financial data of our company for the three months ended March 31, 2007 from the unaudited consolidated interim financial statements and related notes included elsewhere in this prospectus. We have derived our historical consolidated financial data for the year ended December 31, 2006 from the audited consolidated financial statements and related notes included elsewhere in this prospectus. We have derived the historical consolidated financial data of TB Wood’s for the three months ended March 30, 2007 from the unaudited consolidated interim financial statements and related notes included elsewhere in this prospectus. We have derived the historical consolidated financial data of TB Wood’s for the year ended December 31, 2006 from the audited consolidated financial statements of TB Wood’s included elsewhere in this prospectus. The unaudited pro forma condensed combined balance sheet as of March 31, 2007 assumes that the TB Wood’s Acquisition and Related Transactions occurred on March 31, 2007. Hay Hall historical financial information has been reconciled from U.K. GAAP to U.S. GAAP in all periods presented and all amounts have been converted from U.K. Pounds to U.S. Dollars for the purpose of these pro forma financial statements.

 

The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2007 and the year ended December 31, 2006 assumes that the TB Wood’s Acquisition and Related Transactions, as applicable, occurred on January 1, 2006, the beginning of our 2006 fiscal year. The information presented in the unaudited pro forma condensed combined financial statements is not necessarily indicative of our financial position or results of operations that would have occurred if the TB Wood’s Acquisition and Related Transactions had been completed as of the dates indicated, nor should it be construed as being a representation of our future financial position or results of operations.

 

The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances. These adjustments are more fully described in the notes to the unaudited pro forma condensed combined financial statements below.

 

The unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes and assumptions, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated financial statements and related notes, the consolidated financial statements of Hay Hall and TB Wood’s and the related notes and the other financial information included elsewhere in this prospectus.

 

These unaudited pro forma condensed combined financial statements do not give effect to the offering or the use of proceeds therefrom.

Unaudited Pro Forma Condensed Combined Statement of Operations

 

For the Three Months Ended March 31, 2007

(amounts in thousands except per share data)

 

 

 

 

See accompanying “Notes to the Unaudited Pro Forma Condensed Combined Statements of Operations.”

Notes to Unaudited Pro Forma Condensed Combined Statement of Operations

 

Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2006

(amounts in thousands, except per share data)

 

 

 

See accompanying “Notes to the Unaudited Pro Forma Condensed Combined Statement of Operations.”

Notes to Unaudited Pro Forma Condensed Combined Statement of Operations

 

Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 2007
(in thousands)

 

 

 

See accompanying “Notes to the Unaudited Pro Forma Condensed Combined Balance Sheet.”

Notes to Unaudited Pro Forma Condensed Combined Balance Sheet
(in thousands)

 

 

The following table contains selected financial data for us for the three months ended March 31, 2007 and March 31, 2006, the years ended December 31, 2006 and December 31, 2005 and the period from inception (December 1, 2004) to December 31, 2004, and for PTH, or our Predecessor, for the period from January 1, 2004 through November 30, 2004 and for the years ended December 31, 2003 and 2002. The following should be read in conjunction with “Use of Proceeds,” “Capitalization,” “Unaudited Pro Forma Condensed Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes included elsewhere in this prospectus.