e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended June, 30, 2007
or
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o |
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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 HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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61-1478870 |
(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.) |
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14 Hayward Street, Quincy, Massachusetts
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02171 |
(Address of principal executive offices)
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(Zip Code) |
(617) 328-3300
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and larger accelerated
filer in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated filer o Accelerated Filer o Non-accelerated filer þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
As of August 1, 2007, 26,266,085 shares of Common Stock, $.001 par value per share, were
outstanding.
PART IFINANCIAL INFORMATION
Item 1. Financial Statements
ALTRA HOLDINGS, INC.
Condensed Consolidated Balance Sheets
Dollars in thousands (except share amounts)
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June 30, |
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December 31, |
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2007 |
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2006 |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
34,376 |
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$ |
42,527 |
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Trade receivables, less allowance for doubtful accounts of $2,044 and $2,017 |
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92,706 |
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61,506 |
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Inventories, net |
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106,418 |
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75,769 |
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Deferred income taxes |
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7,005 |
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6,783 |
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Prepaid expenses and other |
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5,668 |
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7,532 |
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Total current assets |
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246,173 |
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194,117 |
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Property, plant and equipment, net |
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116,380 |
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82,387 |
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Intangible assets, net |
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99,123 |
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59,662 |
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Goodwill |
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121,493 |
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65,397 |
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Deferred income taxes |
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2,283 |
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2,135 |
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Other assets |
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7,141 |
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5,670 |
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Total assets |
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$ |
592,593 |
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$ |
409,368 |
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Liabilities and stockholders equity |
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Current liabilities: |
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Accounts payable |
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$ |
41,641 |
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$ |
34,053 |
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Accrued payroll |
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14,238 |
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14,071 |
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Accruals and other liabilities |
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19,740 |
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16,494 |
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Taxes payable |
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3,570 |
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5,353 |
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Deferred income taxes |
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1,382 |
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1,382 |
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Current portion of long-term debt |
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948 |
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573 |
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Total current liabilities |
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81,519 |
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71,926 |
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Long-term debt, less current portion and net of unaccreted discount and premium |
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321,341 |
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228,555 |
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Deferred income taxes |
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30,034 |
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7,130 |
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Pension liabilities |
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13,593 |
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15,169 |
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Other post retirement benefits |
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3,132 |
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3,262 |
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Other long term liabilities |
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4,279 |
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3,910 |
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Commitments and Contingencies (See Note 15) |
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Stockholders equity: |
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Common stock ($0.001 par value, 90,000,000 shares authorized, 25,076,205 and
21,467,502 issued and outstanding at June 30, 2007 and December 31, 2006,
respectively) |
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25 |
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21 |
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Additional paid-in capital |
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126,514 |
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76,907 |
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Retained earnings |
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13,960 |
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5,552 |
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Accumulated other comprehensive loss |
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(1,804 |
) |
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(3,064 |
) |
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Total stockholders equity |
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138,695 |
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79,416 |
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Total liabilities and stockholders equity |
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$ |
592,593 |
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$ |
409,368 |
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See accompanying notes.
1
ALTRA HOLDINGS, INC.
Condensed Consolidated Statements of Income and Comprehensive Income
Amounts in thousands, except per share data
(unaudited)
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Quarter Ended |
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Year to Date Ended |
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June 30, |
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June 30, |
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2007 |
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2006 |
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2007 |
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2006 |
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Net sales |
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$ |
163,142 |
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$ |
119,774 |
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$ |
295,848 |
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$ |
234,558 |
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Cost of sales |
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117,238 |
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87,501 |
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211,896 |
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170,431 |
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Gross profit |
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45,904 |
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32,273 |
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83,952 |
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64,127 |
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Selling, general and administrative expenses |
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25,063 |
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19,094 |
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45,890 |
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37,821 |
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Research and development expenses |
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2,204 |
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1,288 |
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3,498 |
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2,492 |
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Restructuring charges |
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198 |
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991 |
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Income from operations |
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18,439 |
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11,891 |
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33,573 |
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23,814 |
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Interest expense, net |
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10,692 |
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6,374 |
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19,840 |
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12,815 |
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Other non-operating expense (income), net |
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123 |
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72 |
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76 |
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(87 |
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Income before income taxes |
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7,624 |
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5,445 |
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13,657 |
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11,086 |
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Provision for income taxes |
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2,803 |
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1,749 |
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5,068 |
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4,186 |
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Net income |
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$ |
4,821 |
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$ |
3,696 |
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$ |
8,589 |
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$ |
6,900 |
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Consolidated Statement of Comprehensive Income |
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Foreign currency translation adjustment |
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821 |
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1,085 |
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1,260 |
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1,557 |
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Comprehensive income |
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$ |
4,642 |
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$ |
4,781 |
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$ |
9,849 |
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$ |
8,457 |
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Net Income per share: |
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Basic |
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$ |
0.22 |
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$ |
11.13 |
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$ |
0.39 |
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$ |
24.21 |
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Diluted |
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$ |
0.21 |
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$ |
0.19 |
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$ |
0.37 |
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$ |
0.36 |
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Weighted average common shares outstanding: |
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Basic |
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22,250 |
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|
332 |
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22,066 |
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285 |
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Diluted |
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23,268 |
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19,413 |
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23,075 |
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19,350 |
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See accompanying notes.
2
ALTRA HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
Dollars in thousands
(unaudited)
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Year to Date Ended June 30, |
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2007 |
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2006 |
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Cash flows from operating activities: |
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Net income |
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$ |
8,589 |
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$ |
6,900 |
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Adjustments to reconcile net income to cash (used in )
provided by operating activities: |
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Depreciation |
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8,064 |
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4,950 |
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Amortization of intangible assets |
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2,468 |
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1,796 |
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Amortization and write-offs of deferred loan costs |
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1,857 |
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|
654 |
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Loss on foreign currency, net |
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210 |
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Accretion of debt discount and premium, net |
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415 |
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472 |
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Amortization of inventory fair value adjustment |
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651 |
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2,278 |
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Loss (gain) on sale of fixed assets |
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112 |
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(7 |
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Stock based compensation |
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800 |
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65 |
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Provision for deferred taxes |
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2,184 |
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Changes in operating assets and liabilities: |
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Trade receivables |
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(14,040 |
) |
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(3,667 |
) |
Inventories |
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(638 |
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(3,181 |
) |
Accounts payable and accrued liabilities |
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(16,109 |
) |
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(6,153 |
) |
Other current assets and liabilities |
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3,515 |
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(446 |
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Other operating assets and liabilities |
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101 |
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263 |
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Net cash (used in ) provided by operating activities |
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(4,005 |
) |
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6,108 |
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Cash flows from investing activities: |
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Purchases of fixed assets |
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(4,249 |
) |
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(4,110 |
) |
Acquisitions, net of $5,222 and $441 of cash acquired |
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(117,484 |
) |
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(54,086 |
) |
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Net cash used in investing activities |
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(121,733 |
) |
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(58,196 |
) |
Cash flows from financing activities: |
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Proceeds from issuance of senior notes |
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57,625 |
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Proceeds from issuance of senior secured notes |
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106,050 |
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Payment of debt issuance costs |
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(3,405 |
) |
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(1,928 |
) |
Payments on senior notes |
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(33,998 |
) |
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Borrowings under revolving credit agreement |
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8,315 |
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|
5,057 |
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Payments on revolving credit agreement |
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(9,120 |
) |
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(5,057 |
) |
Payment on subordinated notes |
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(10,800 |
) |
Proceeds from mortgages |
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2,510 |
|
Proceeds from secondary public offering |
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49,583 |
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Payment of public offering transaction costs |
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(248 |
) |
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Payments on capital leases |
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(359 |
) |
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(61 |
) |
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Net cash provided by financing activities |
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116,818 |
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|
47,346 |
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Effect of exchange rates on cash |
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|
769 |
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255 |
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Decrease in cash and cash equivalents |
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(8,151 |
) |
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(4,487 |
) |
Cash and cash equivalents, beginning of period |
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42,527 |
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10,060 |
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Cash and cash equivalents, end of period |
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$ |
34,376 |
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$ |
5,573 |
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Cash paid during the period for: |
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Interest |
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$ |
18,284 |
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$ |
10,584 |
|
Income Taxes |
|
$ |
9,738 |
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$ |
2,020 |
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Non-Cash Financing: |
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Acquisition of capital equipment under capital lease |
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$ |
1,655 |
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$ |
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Accrued offering costs |
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$ |
524 |
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$ |
1,304 |
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See accompanying notes.
3
ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
1. Organization and Nature of Operations
Headquartered in Quincy, Massachusetts, Altra Holdings, Inc., through its wholly-owned
subsidiary Altra Industrial Motion, Inc., is a leading multi-national designer, producer and
marketer of a wide range of mechanical power transmission products. The Company brings together
strong brands covering over 40 product lines with production facilities in nine countries and sales
coverage in over 70 countries. The Companys leading brands include Boston Gear, Warner Electric,
TB Woods, Formsprag Clutch, Ameridrives Couplings, Industrial Clutch, Kilian Manufacturing,
Marland Clutch, Nuttall Gear, Stieber Clutch, Wichita Clutch, Twiflex Limited, Bibby Transmissions,
Matrix International, Inertia Dynamics, Huco Dynatork and Warner Linear.
2. Basis of Presentation
The Company was formed on November 30, 2004 following acquisitions of certain subsidiaries of
Colfax Corporation (Colfax) and The Kilian Company (Kilian). During 2006, the Company acquired
Hay Hall Holdings Limited (Hay Hall) and Bear Linear (Warner Linear). On April 5, 2007, the
Company acquired TB Woods Corporation (TB Woods).
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States. In the opinion of
management, the accompanying unaudited condensed consolidated financial statements contain all
adjustments, which include normal recurring adjustments, necessary to present fairly the unaudited
condensed consolidated financial statements as of June 30, 2007 and for the quarters and year to
date periods ended June 30, 2007 and 2006.
The Company follows a four, four, five week calendar per quarter with all quarters consisting
of thirteen weeks of operations with the fiscal year-end always on December 31.
The accompanying unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements for the year-ended December 31, 2006, contained
in the Companys Annual Report on Form 10-K for the year ended December 31, 2006.
Certain prior period amounts have been reclassified in the condensed consolidated financial
statements to conform to the current period presentation.
3. Net Income per Share
Basic earnings per share is based on the weighted average number of shares of common stock
outstanding, and diluted earnings per share is based on the weighted average number of shares of
common stock outstanding and all dilutive potential common stock equivalents outstanding. Common
stock equivalents are included in the per share calculations when the effect of their inclusion
would be dilutive.
The following is a reconciliation of basic to diluted net income per share:
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Quarter Ended |
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Year to Date Period Ended |
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|
June 30, |
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June 30, |
|
|
|
2007 |
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|
2006 |
|
|
2007 |
|
|
2006 |
|
Net Income |
|
$ |
4,821 |
|
|
$ |
3,696 |
|
|
$ |
8,589 |
|
|
$ |
6,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in net income per common share basic |
|
|
22,250 |
|
|
|
332 |
|
|
|
22,066 |
|
|
|
285 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental shares of unvested restricted common stock |
|
|
1,018 |
|
|
|
1,331 |
|
|
|
1,009 |
|
|
|
1,315 |
|
Preferred Stock |
|
|
|
|
|
|
17,750 |
|
|
|
|
|
|
|
17,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in net income per common share diluted |
|
|
23,268 |
|
|
|
19,413 |
|
|
|
23,075 |
|
|
|
19,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share basic |
|
$ |
0.22 |
|
|
$ |
11.13 |
|
|
$ |
0.39 |
|
|
$ |
24.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share diluted |
|
$ |
0.21 |
|
|
$ |
0.19 |
|
|
$ |
0.37 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
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4
ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
4. Acquisition
On April 5, 2007, the Company acquired all of the outstanding shares of TB Woods for $24.80
per share, or aggregate consideration of $93.5 million. As part of the TB Woods Acquisition, the
Company retired $18.7 million of TB Woods indebtedness and paid $9.2 million to retire options
under the TB Woods equity plan. TB Woods is an established designer, manufacturer and marketer
of mechanical and electronic industrial power transmission products.
The TB Woods Acquisition has been accounted for in accordance with SFAS No. 141. The closing
date of the TB Woods Acquisition was April 5, 2007, and as such, the Companys consolidated
financial statements reflect TB Woods results of operations from that date forward.
The Company has not completed its final purchase price allocation. The preliminary value of
the acquired assets, assumed liabilities and identified intangibles from the acquisition of TB
Woods, as presented below, are based upon managements estimates of fair value as of the date of
the acquisition. Goodwill and intangibles recorded in connection with the acquisition of TB Woods
have not yet been allocated across the business units acquired nor have the values been finalized.
The final purchase price allocations are not expected to have a material impact on the Companys
financial position or results of operations. The preliminary purchase price allocation is as
follows:
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|
|
|
Total purchase price, including closing costs of approximately $1.6 million |
|
$ |
123,006 |
|
|
|
|
|
Cash and cash equivalents |
|
|
5,522 |
|
Trade receivables |
|
|
16,606 |
|
Inventories |
|
|
29,808 |
|
Prepaid expenses and other |
|
|
1,791 |
|
Property, plant and equipment |
|
|
35,764 |
|
Intangible assets |
|
|
41,431 |
|
|
|
|
|
Total assets acquired |
|
|
130,992 |
|
Accounts payable, accrued payroll, and accruals and other current liabilities |
|
|
21,395 |
|
Other liabilities |
|
|
43,283 |
|
|
|
|
|
Total liabilities assumed |
|
|
64,678 |
|
|
|
|
|
Net assets acquired |
|
|
66,314 |
|
|
|
|
|
Excess purchase price over the fair value of net assets acquired |
|
$ |
56,692 |
|
|
|
|
|
The excess of the purchase price over the fair value of the net assets acquired was recorded
as goodwill.
The estimated amounts recorded as intangible assets consist of the following:
|
|
|
|
|
Customer relationships, subject to amortization |
|
$ |
29,647 |
|
Trade names and trademarks, not subject to amortization |
|
|
11,784 |
|
|
|
|
|
Total intangible assets |
|
$ |
41,431 |
|
|
|
|
|
Customer relationships are subject to amortization over their estimated useful lives
which reflects the anticipated periods over which the Company estimates it will benefit from the
acquired assets. The estimated useful lives have not been finalized by the Company.
5
ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
The following table sets forth the unaudited pro forma results of operations of the Company
for the periods ended June 30, 2007 and 2006 as if the Company had acquired TB Woods at the
beginning of the respective periods. The pro forma information contains the actual operating
results of the Company and TB Woods with the results prior to April 5, 2007, for TB Woods,
adjusted to include the pro forma impact of (i) the elimination of additional expense as a result
of the fair value adjustment to inventory recorded in connection with the TB Woods Acquisition;
(ii) additional interest expense associated with debt issued on April 5, 2007 in connection with
the TB Woods Acquisition; (iii) additional depreciation expense as a result of estimated
depreciation on fair value of fixed assets; (iv) additional expense as a result of estimated
amortization of identifiable intangible assets; (v) and an adjustment to the tax provision for the
tax effect of the above adjustments. These pro forma amounts do not purport to be indicative of the
results that would have actually been obtained if the acquisitions occurred at the beginning of the
respective periods or that may be obtained in the future.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter to Date |
|
|
Quarter to Date |
|
|
Year to Date |
|
|
Year to Date |
|
|
|
ended |
|
|
ended |
|
|
ended |
|
|
ended |
|
|
|
June 30, 2007 |
|
|
June 30, 2006 |
|
|
June 30, 2007 |
|
|
June 30, 2006 |
|
Total revenues |
|
$ |
164,505 |
|
|
$ |
178,943 |
|
|
$ |
326,181 |
|
|
$ |
293,727 |
|
Net income |
|
|
2,182 |
|
|
|
4,460 |
|
|
$ |
7,697 |
|
|
$ |
4,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per share |
|
$ |
0.10 |
|
|
$ |
13.43 |
|
|
$ |
0.35 |
|
|
$ |
16.11 |
|
Diluted Earnings per share |
|
$ |
0.09 |
|
|
$ |
0.23 |
|
|
$ |
0.33 |
|
|
$ |
0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2006, the Company purchased all of the outstanding share capital of Hay Hall for
$51.0 million, including $1.8 million of closing costs. The Company completed its final purchase
price allocation during 2006, which resulted in the Company recording approximately $12.4 million
in goodwill. In addition, the Company recorded $16.4 million in intangible assets.
5. Inventories
Inventories located at certain subsidiaries acquired in connection with the TB Woods
acquisition are stated at the lower of current cost or market, principally using the last-in,
first-out (LIFO) method. The remaining subsidiaries are stated at the lower of cost or market,
using the first-in, first-out (FIFO) method. Market is defined as net realizable value.
Inventories at June 30, 2007 and December 31, 2006 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
Raw materials |
|
$ |
40,291 |
|
|
$ |
29,962 |
|
Work in process |
|
|
28,279 |
|
|
|
19,112 |
|
Finished goods |
|
|
51,048 |
|
|
|
36,858 |
|
|
|
|
|
|
|
|
Gross inventories |
|
|
119,618 |
|
|
|
85,932 |
|
|
|
|
|
|
|
|
|
|
LessAllowance for excess, slow-moving and obsolete inventory |
|
|
(13,070 |
) |
|
|
(10,163 |
) |
|
|
|
|
|
|
|
|
|
LIFO reserve |
|
|
(130 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net |
|
$ |
106,418 |
|
|
$ |
75,769 |
|
|
|
|
|
|
|
|
Approximately 18% of total inventories at June 30, 2007 were valued using the LIFO
method. In the year to date period ended June 30, 2007, the LIFO reserve increased $0.1 million
which increased Cost of Goods Sold by the same amount.
6
ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
6. Goodwill and Intangible Assets
A rollforward of goodwill from December 31, 2006 through June 30, 2007 was as follows:
|
|
|
|
|
Goodwill |
|
Cost |
|
|
|
|
|
Balance December 31, 2006 |
|
$ |
65,397 |
|
Additions related to TB Woods acquisition |
|
|
56,692 |
|
Impact of additional tax contingencies |
|
|
956 |
|
Adjustments to acquisition related deferred tax liabilities |
|
|
(2,309 |
) |
Impact of changes in foreign currency |
|
|
757 |
|
|
|
|
|
Balance June 30, 2007 |
|
$ |
121,493 |
|
|
|
|
|
Other intangibles as of June 30, 2007 and December 31, 2006 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007 |
|
|
December 31, 2006 |
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Accumulated |
|
Other Intangibles |
|
Cost |
|
|
Amortization |
|
|
Cost |
|
|
Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets not subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradenames and trademarks |
|
$ |
34,794 |
|
|
$ |
|
|
|
$ |
23,010 |
|
|
$ |
|
|
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
|
66,761 |
|
|
|
7,683 |
|
|
|
37,114 |
|
|
|
5,679 |
|
Product technology and patents |
|
|
5,232 |
|
|
|
1,780 |
|
|
|
5,232 |
|
|
|
1,316 |
|
Impact of changes in foreign currency |
|
|
1,799 |
|
|
|
|
|
|
|
1,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets |
|
$ |
108,586 |
|
|
$ |
9,463 |
|
|
$ |
66,657 |
|
|
$ |
6,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recorded $1.5 million and $1.0 million of amortization expense for the quarters
ended June 30, 2007 and 2006, respectively and $2.5 million and $1.8 million for the year to date
periods ended June 30, 2007 and 2006, respectively.
The estimated amortization expense for intangible assets is approximately $5.8 million in each
of the next five years and then $33.5 million thereafter.
7. Warranty Costs
Changes in the carrying amount of accrued product warranty costs for the year to date periods
ended June 30, 2007 and 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007 |
|
|
June 30, 2006 |
|
Balance at beginning of period |
|
$ |
2,083 |
|
|
$ |
1,876 |
|
Balance assumed with TB Woods acquisition |
|
|
795 |
|
|
|
|
|
Accrued warranty costs |
|
|
758 |
|
|
|
825 |
|
Payments and adjustments |
|
|
(1,261 |
) |
|
|
(747 |
) |
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
2,375 |
|
|
$ |
1,954 |
|
|
|
|
|
|
|
|
8. Income Taxes
The effective income tax rates recorded for the periods ended June 30, 2007 and 2006 were
recorded based upon managements best estimate of the effective income tax rates for the entire
years. The 2007 tax rate differs from the statutory rate due to the impact of non-U.S. tax rates
and permanent differences.
The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes An Interpretation of FASB No. 109 (FIN 48) at the beginning of fiscal 2007,
which resulted in a decrease of approximately $0.2 million to the December 31, 2006 retained
earnings balance. FIN 48 provides a comprehensive model for the financial statement recognition,
measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken
in income tax returns.
7
ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
As of January 1, 2007 the Company had $2.3 million of unrecognized tax
benefits of which $1.2 million, if recognized would reduce the Companys effective tax rate and
$0.9 million would result in a decrease in goodwill.
As a result of the acquisition of TB Woods completed during the second quarter, the Company
increased its unrecognized tax benefits by approximately $3.3 million. At June 30, 2007, the
Company had $6.1 million of unrecognized tax benefits of which $1.7 million if recognized would
reduce the Companys effective tax rate and $4.2 million would result in a decrease to goodwill.
Included in the balance of unrecognized tax benefits are amounts related to proposed tax
filing positions currently under review by foreign taxing authorities. The Company expects this
review to be completed by December 31, 2007 however it is unable to estimate the impact on its
unrecognized tax benefits as of June 30, 2007.
The Company and its subsidiaries file consolidated and separate income tax returns in the U.S.
federal jurisdiction as well as in various state and foreign jurisdictions. In the normal course of
business, the Company is subject to examination by taxing authorities in all of these
jurisdictions. With the exception of certain foreign jurisdictions, the Company is no longer
subject to income tax examinations for years before 2003 in these major jurisdictions.
Additionally, the Company has indemnification agreements with the sellers of the Colfax and Hay
Hall entities which provide for reimbursement to the Company for payments made in satisfaction of
tax liabilities relating to pre-acquisition periods.
The Company recognizes interest and penalties related to unrecognized tax benefits in income
tax expense in the condensed consolidated statements of operations. At January 1, 2007 and June 30,
2007, the Company had $0.3 million and $1.6 million of accrued interest and penalties,
respectively.
9. Pension and Other Employee Benefits
Defined Benefit (Pension) and Postretirement Benefit Plans
The Company sponsors various defined benefit (pension) and postretirement (medical and life
insurance coverage) plans for certain, primarily unionized, active employees (those in the
employment of the Company at or hired since November 30, 2004). Additionally, the Company assumed
all post-employment and post-retirement welfare benefit obligations with respect to active U.S.
employees.
The following table represents the components of the net periodic benefit cost associated with
the respective plans for the year to date periods ended and quarters ended June 30, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
|
Pension Benefits |
|
|
Other Benefits |
|
|
|
June 30, 2007 |
|
|
June 30, 2006 |
|
|
June 30, 2007 |
|
|
June 30, 2006 |
|
Service cost |
|
$ |
67 |
|
|
$ |
151 |
|
|
$ |
18 |
|
|
$ |
84 |
|
Interest cost |
|
|
319 |
|
|
|
334 |
|
|
|
49 |
|
|
|
150 |
|
Expected return on plan assets |
|
|
(265 |
) |
|
|
(207 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
2 |
|
|
|
2 |
|
|
|
(243 |
) |
|
|
(101 |
) |
Amortization of net (gain) loss |
|
|
|
|
|
|
|
|
|
|
(53 |
) |
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (income) |
|
$ |
123 |
|
|
$ |
280 |
|
|
$ |
(229 |
) |
|
$ |
150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to Date Ended |
|
|
|
Pension Benefits |
|
|
Other Benefits |
|
|
|
June 30, 2007 |
|
|
June 30, 2006 |
|
|
June 30, 2007 |
|
|
June 30, 2006 |
|
Service cost |
|
$ |
132 |
|
|
$ |
303 |
|
|
$ |
36 |
|
|
$ |
168 |
|
Interest cost |
|
|
654 |
|
|
|
669 |
|
|
|
98 |
|
|
|
299 |
|
Expected return on plan assets |
|
|
(533 |
) |
|
|
(415 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
3 |
|
|
|
3 |
|
|
|
(487 |
) |
|
|
(201 |
) |
Amortization of net (gain) loss |
|
|
|
|
|
|
|
|
|
|
(105 |
) |
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (income) |
|
$ |
256 |
|
|
$ |
560 |
|
|
$ |
(458 |
) |
|
$ |
301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
10. Long-Term Debt
Revolving Credit Agreement
The Company maintains a $30 million revolving borrowings facility with a commercial bank (the
Revolving Credit Agreement) through its wholly owned subsidiary Altra Industrial Motion, Inc.
(Altra Industrial). The Revolving Credit Agreement is subject to certain limitations resulting from
the requirement of the Company to maintain certain levels of collateralized assets, as defined in
the Revolving Credit Agreement. The Company may use up to $10.0 million of its availability under
the Revolving Credit Agreement for standby letters of credit issued on its behalf, the issuance of
which will reduce the amount of borrowings that would otherwise be available to the Company. The
Company may re-borrow any amounts paid to reduce the amount of outstanding borrowings; however, all
borrowings under the Revolving Credit Agreement must be repaid in full as of November 30, 2010.
Substantially all of the Companys assets have been pledged as collateral against outstanding
borrowings under the Revolving Credit Agreement. The Revolving Credit Agreement requires the
Company to maintain a minimum fixed charge coverage ratio (when availability under the line falls
below $12.5 million) and imposes customary affirmative covenants and restrictions on the Company.
The Company was in compliance with all requirements of the Revolving Credit Agreement at June 30,
2007.
There were no borrowings under the Revolving Credit Agreement at June 30, 2007 and December
31, 2006, however, as of both dates, the lender had issued $3.0 million of outstanding letters of
credit on behalf of the Company.
In April 2007, Altra Industrial amended the Revolving Credit Agreement. The interest rate on
any outstanding borrowings on the line of credit were reduced to the lenders Prime Rate plus 25
basis points or LIBOR plus 175 basis points. The rate on all outstanding letters of credit were
reduced to 1.5% and .25% on any unused availability under the Revolving Credit Agreement. All
borrowings under the amended plan must be repaid by November 30, 2010.
TB Woods Revolving Credit Agreement
As part of the TB Woods acquisition, the Company refinanced the existing line of credit
agreement with a commercial bank. The Company refinanced $13.0 million of debt associated with TB
Woods line of credit in connection with the acquisition and $6.5 million in letters credit. As of
June 30, 2007, there was $12.2 million outstanding on the TB Woods Credit Agreement, including
$6.5 million of outstanding letters of credit. There are no additional borrowings available under
this agreement.
Overdraft Agreements
Certain of our foreign subsidiaries maintain overdraft agreements with financial institutions.
There were no borrowings as of June 30, 2007 or December 31, 2006 under any of the overdraft
agreements.
9% Senior Secured Notes
On November 30, 2004, Altra Industrial Motion, Inc., (Altra Industrial), a wholly owned
subsidiary of the Company, issued 9% Senior Secured Notes (Senior Secured Notes), with a face
value of $165 million. Interest on the Senior Secured Notes is payable semiannually, in arrears, on
June 1 and December 1 of each year, beginning June 1, 2005, at an annual rate of 9%. The effective
interest rate on the Senior Secured Notes is approximately 10.0%, after consideration of the
amortization of $6.6 million related to initial offer discounts (included in long-term debt) and
$2.8 million of deferred financing costs (included in other assets). The Senior Secured Notes
mature on December 1, 2011 unless previously redeemed by Altra Industrial.
The Senior Secured Notes are guaranteed by the Altra Industrials U.S. domestic subsidiaries
and are secured by a second priority lien, subject to first priority liens securing the Revolving
Credit Agreement, on substantially all of the Altra Industrials assets. The Senior Secured Notes
contain numerous terms, covenants and conditions, which impose substantial limitations on Altra
Industrial. Altra Industrial was in compliance with all covenants of the indenture governing the
Senior Secured Notes at June 30, 2007.
In connection with the acquisition of TB Woods on April 5, 2007, Altra Industrial completed a
follow-on offering issuing an additional $105.0 million of the Senior Secured Notes. The
additional $105.0 million has the same terms and conditions as the previously issued Senior Secured
Notes. The effective interest rate on the Senior Secured Notes, after the follow-on offering is
9
ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
approximately 9.6% after consideration of the amortization of $1.1 million premium and $3.2 million
of additional deferred financing costs.
11.25% Senior Notes
On February 8, 2006, Altra Industrial issued 11.25% Senior Notes (Senior Notes), with a face
value of £33 million. Interest on the Senior Notes is payable semiannually, in arrears, on August
15 and February 15 of each year, beginning August 15, 2006, at an annual rate of 11.25%. The
effective interest rate on the Senior Notes is approximately 11.7%, after consideration of the $2.5
million of deferred financing costs (included in other assets). The Senior Secured Notes mature on
February 13, 2013.
The Senior Notes are guaranteed on a senior unsecured basis by Altra Industrials U.S.
domestic subsidiaries. The Senior Notes contain numerous terms, covenants and conditions, which
impose substantial limitations on Altra Industrial. Altra Industrial was in compliance with all
covenants of the indenture governing the Senior Notes at June 30, 2007.
In February 2007, using proceeds from the Companys initial public offering, Altra Industrial
redeemed £11.6 million aggregate principal amount of the outstanding Senior Notes, at a redemption
price of 111.25% of the principal amount of the Senior Notes, plus accrued and unpaid interest. In
connection with the redemption Altra Industrial expensed $0.8 million of deferred financing costs
and incurred $2.6 million of a pre-payment premium.
In June 2007,
using proceeds from the Companys secondary public offering, Altra Industrial
redeemed £5.5 million aggregate principal amount of the outstanding Senior Notes at a redemption
price of 114.5% of the principal amount of the Senior Notes, plus accrued and unpaid interest. In
connection with the redemption Altra Industrial expensed $0.4 million of deferred financing costs
and incurred $0.8 million of pre-payment premium.
The remaining principal amount of the Senior Notes matures on February 13, 2013, unless
previously redeemed by Altra Industrial prior to such maturity date. As of June 30, 2007, the
remaining principal balance outstanding was £15.9 million, or $31.9 million.
Variable Rate Demand Revenue Bonds
In connection with the acquisition of TB Woods, the Company assumed the Variable Rate Demand
Revenue Bonds outstanding as of the acquisition date. TB Woods has borrowed approximately $3.0
and $2.3 million by issuing Variable Rate Demand Revenue Bonds under the authority of the
industrial development corporations of the City of San Marcos, Texas and City of Chattanooga,
Tennessee, respectively. These bonds bear variable interest rates and mature in April 2024 and
April 2022. The bonds were issued to finance production facilities for TB Woods manufacturing
operations in those cities, and are secured by letters of credit issued under the terms of the
TB Woods Revolving Credit Agreement.
Mortgage
In June 2006, the Company entered into a mortgage on its building in Heidelberg, Germany with
a local bank. As of June 30, 2007 and December 31, 2006, the mortgage has a principal of 1.9
million, or $2.6 million and 2.0 million or $2.6 million, respectively and an interest rate of
5.75% and is payable in monthly installments over 15 years.
Capital Leases
The Company leases certain equipment under capital lease arrangements, whose obligations are
included in both short-term and long-term debt. Capital lease obligations amounted to approximately
$3.1 million and $1.5 million at June 30, 2007 and December 31, 2006, respectively. Assets under
capital leases are included in property, plant and equipment with the related amortization recorded
as depreciation expense.
11. Stockholders Equity
In June 2007, the Company closed its secondary public offering of 12,650,000 shares of its
common stock, par value $0.001 per share (the Shares), which included 1,650,000 sold as a result
of the underwriters exercise of their overallotment option in full at
10
ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
closing. In the offering the Company sold 3,178,494 Shares and certain selling stockholders,
including Genstar Capital, the Companys largest stockholder, sold an aggregate of 9,471,506
Shares.
As of June 30, 2007, the Company had 10,000,000 shares of undesignated Preferred Stock
authorized (Preferred Stock). The Preferred Stock may be issued from time to time in one or more
classes or series, the shares of each class or series to have such designations and powers,
preferences, and rights, and qualifications, limitations and restrictions as determined by the
Companys Board of Directors. There was no Preferred Stock issued or outstanding at June 30, 2007.
Stock-Based Compensation
The Companys Board of Directors established the 2004 Equity Incentive Plan (the Plan) that
provides for various forms of stock based compensation to independent directors, officers and
senior-level employees of the Company The restricted shares of common stock issued pursuant to the
plan generally vest ratably over each of the five years from the date of grant, provided, that the
vesting of the restricted shares may accelerate upon the occurrence of certain liquidity events, if
approved by the Board of Directors in connection with the transactions.
The Plan permits the Company to grant restricted stock to key employees and other persons who
make significant contributions to the success of the Company. The restrictions and vesting schedule
for restricted stock granted under the Plan are determined by the Compensation Committee of the
Board of Directors. Compensation expense recorded during the year to date periods ended June 30,
2007 and 2006 was $0.8 million ($0.5 million net of tax) and $0.1 million (less than $0.1 million,
net of tax), respectively and $0.7 million ($0.4 million, net of tax) and less than $0.1 million in
the quarter ended June 30, 2007 and 2006, respectively. Compensation expense is recognized on a
straight-line basis over the vesting period.
The following table sets forth the activity of the Companys unvested restricted stock grants
to date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average |
|
|
|
|
|
|
|
grant date fair |
|
|
|
Shares |
|
|
value |
|
Restricted shares unvested December 31, 2006 |
|
|
1,620,089 |
|
|
$ |
3.24 |
|
|
|
|
|
|
|
|
|
|
Shares for which restrictions lapsed |
|
|
(430,209 |
) |
|
$ |
4.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares unvested June 30, 2007 |
|
|
1,189,880 |
|
|
$ |
2.69 |
|
|
|
|
|
|
|
|
Total remaining unrecognized compensation cost is approximately $2.8 million as of June 30,
2007 and will be recognized over a weighted average remaining period of three years.
Subsequent to the initial public offering restricted shares granted are valued based on the
fair market value of the stock on the date of grant.
In July 2007, the Compensation Committee of the Board of Directors approved a grant to two of
the Companys non-employee directors of 3,326 shares each of restricted common stock of Altra
Holdings. The fair market value of the restricted shares was calculated using the total number of
shares granted multiplied by the average stock price on the date of grant, of $18.04, for a total compensation charge of approximately
$0.1 million. The shares will fully vest on March 14, 2008. The expense will be recognized on a straight-line basis over
the service period.
12. Related-Party Transactions
Joy Global Sales
One of the Companys directors, is an Executive of Joy Global, Inc. The Company sold
approximately $2.6 million and $1.7 million in goods to divisions of Joy Global, Inc. during the
year to date periods ended June 30, 2007 and 2006, respectively. Sales to division of Joy Global
were $1.2 million and $0.8 million for the quarters ended June 30, 2007 and 2006, respectively.
Other than his
11
ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
position as an Executive of Joy Global, Inc., the Companys director has no interest
in sales transactions between the Company and Joy Global, Inc.
Management Agreement
The Company entered into an advisory services agreement with Genstar Capital, L.P.
(Genstar), whereby Genstar agreed to provide certain management, business strategy, consulting,
financial advisory and acquisition related services to the Company. Pursuant to the agreement, the
Company was required to pay to Genstar an annual consulting fee of $1.0 million (payable quarterly,
in arrears at the end of each calendar quarter), reimbursement of out-of-pocket expenses incurred
in connection with the advisory services and an advisory fee of 2.0% of the aggregate consideration
relating to any acquisition or dispositions completed by the Company. The Company recorded $0.3
million in management fees, included in selling, general and administrative expenses for the
quarter ended June 30, 2006 and $0.5 million for the year to date period ended June 30, 2006.
Genstar also received a one-time transaction fee of $1.0 million for the Hay Hall acquisition and
it is reflected in selling, general and administrative expenses for the year to date period ended
and quarter ended June 30, 2006. In December 2006, the Genstar management agreement was terminated.
There are no amounts in accruals or other liabilities payable to Genstar as of June 30, 2007.
13. Concentrations of Credit, Business Risks and Workforce
Financial instruments, which are potentially subject to concentrations of credit risk, consist
primarily of trade accounts receivable. The Company manages this risk by conducting credit
evaluations of customers prior to delivery or commencement of services. When the Company enters
into a sales contract, collateral is normally not required from the customer. Payments are
typically due within thirty days of billing. An allowance for potential credit losses is
maintained, and losses have historically been within managements expectations.
Credit related losses may occur in the event of non-performance by counterparties to financial
instruments. Counterparties typically represent international or well established financial
institutions.
No one customer represented 10% or more of the Companys sales for the quarters ended or year
to date periods ended June 30, 2007 and 2006.
Approximately 22.8% of the Companys labor force (14.0% and 59.7% in the United States and
Europe, respectively) is represented by collective bargaining agreements.
14 Geographic Information
The Company operates in a single business segment for the development, manufacturing and sales
of mechanical power transmission products. The Companys chief operating decision maker reviews
consolidated operating results to make decisions about allocating resources and assessing
performance for the entire Company. Net sales to third parties and property, plant and equipment by
geographic region are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
Net Sales |
|
|
Property, Plant and Equipment |
|
|
|
Quarter Ended |
|
|
Year to Date Period Ended |
|
|
|
|
|
|
|
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
North America (primarily U.S.) |
|
$ |
117,997 |
|
|
$ |
80,756 |
|
|
$ |
211,176 |
|
|
$ |
163,994 |
|
|
$ |
84,930 |
|
|
$ |
50,673 |
|
Europe |
|
|
39,276 |
|
|
|
35,018 |
|
|
|
74,256 |
|
|
|
62,624 |
|
|
|
29,675 |
|
|
|
29,865 |
|
Asia and other |
|
|
5,869 |
|
|
|
4,000 |
|
|
|
10,416 |
|
|
|
7,940 |
|
|
|
1,775 |
|
|
|
1,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
163,142 |
|
|
$ |
119,774 |
|
|
$ |
295,848 |
|
|
$ |
234,558 |
|
|
$ |
116,380 |
|
|
$ |
82,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to third parties are attributed to the geographic regions based on the country
in which the shipment originates. Amounts attributed to the geographic regions for long-lived
assets are based on the location of the entity, which holds such assets.
The net assets of foreign subsidiaries at June 30, 2007 and December 31, 2006 were $65.8
million and $46.8 million, respectively.
12
ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
The Company has not provided specific product line sales as our general purpose financial
statements do not allow us to readily determine groups of similar product sales.
15. Commitments and Contingencies
General Litigation
The Company is involved in various pending legal proceedings arising out of the ordinary
course of business. None of these legal proceedings is expected to have a material adverse effect
on the financial condition of the Company. With respect to these proceedings, management believes
that it will prevail, has adequate insurance coverage or has established appropriate reserves to
cover potential liabilities. Any costs that management estimates may be paid related to these
proceedings or claims are accrued when the liability is considered probable and the amount can be
reasonably estimated. There can be no assurance, however, as to the ultimate outcome of any of
these matters, and if all or substantially all of these legal proceedings were to be determined
adversely to the Company, there could be a material adverse effect on the financial condition of
the Company.
We have been indemnified for certain pre-existing legal and environmental matters for matters
prior to acquisition.
16. Restructuring, Asset Impairment and Transition Expenses
Beginning in the first quarter of 2007, the Company adopted a restructuring program intended
to improve operational efficiency by reducing headcount, consolidating its operating facilities and
relocating manufacturing to lower cost areas. The restructuring charges for the quarter and year to
date periods ended June 30, 2007 were approximately $0.2 million and $1.0 million, respectively.
The Companys asset impairment and losses on sales of assets for the manufacturing
consolidation program for the year to date period ended June 30, 2007 were $0.1 million. The
Company does not expect any additional asset impairment and losses on sale of assets through the
completion of this program.
The Companys total transition expense for the manufacturing consolidation program for the
year to date period ended and quarter ended June 30, 2007 was approximately $0.9 million and $0.2
million, respectively. The Company expects to incur during 2007 an additional $0.1 million of
transition costs in connection with the completion of this program.
The Companys total restructuring expense, excluding
non-cash loss on disposal of fixed assets, by major component for the year to date period ended
June 30, 2007 and costs that are expected to be incurred through the completion of the program,
were as follows:
|
|
|
|
|
|
|
|
|
|
|
Costs incurred |
|
|
|
|
|
|
year to date |
|
|
Expected costs |
|
|
|
period ended |
|
|
through program |
|
|
|
June 30, 2007 |
|
|
completion |
|
Moving and relocation costs |
|
$ |
521 |
|
|
$ |
|
|
Severance |
|
|
224 |
|
|
|
30 |
|
Other |
|
|
129 |
|
|
|
|
|
|
|
|
|
|
|
|
Total expenditures |
|
$ |
874 |
|
|
$ |
30 |
|
|
|
|
|
|
|
|
The following is a reconciliation of the accrued restructuring costs between December 31, 2006
and June 30, 2007:
|
|
|
|
|
Balance at December 31, 2006 |
|
$ |
|
|
Restructuring expenses incurred |
|
|
991 |
|
Cash payments |
|
|
(755 |
) |
Non-cash loss on disposal of fixed assets |
|
|
(117 |
) |
|
|
|
|
Balance at June 30, 2007 |
|
$ |
119 |
|
|
|
|
|
13
ALTRA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Interim Financial Statements
Dollars in thousands, unless otherwise noted
In connection with the Companys acquisition of TB Woods, the Company adopted a restructuring
program intended to consolidate operating facilities and reduce duplicate staffing. The estimated
costs of this restructuring program were recorded as a part of purchase accounting and increased
goodwill.
The following is a summary of accruals related to such restructuring activities:
|
|
|
|
|
Balance at December 31, 2006 |
|
$ |
|
|
Restructuring accruals established as part of purchase
accounting related to severance |
|
|
952 |
|
Cash payments |
|
|
(852 |
) |
|
|
|
|
Balance at June 30, 2007 |
|
$ |
100 |
|
|
|
|
|
This is a preliminary estimate of costs associated with this restructuring program.
17. Subsequent Event
On August 8, 2007, Altra Industrial redeemed £12.0 million aggregate principal amount of the
outstanding Senior Notes at a redemption price of 113.5% of the principal amount of the Senior
Notes, plus accrued and unpaid interest. In connection with the redemption Altra Industrial
incurred $3.3 million of pre-payment premium. Subsequent to the redemption, £3.9 million, or $7.9
million of Senior Notes remain outstanding
14
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of the financial condition and results of operations of Altra Holdings,
Inc. should be read together with the audited financial statements of Altra Holdings, Inc. and its
Predecessor and related notes included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2006. The following discussion includes forward-looking statements. For a
discussion of important factors that could cause actual results to differ materially from the
results referred to in the forward-looking statements, see Forward-Looking Statements. in the
Companys Annual Report on Form 10-K for the year ended December 31, 2006.
General
We are a leading multinational designer, producer and marketer of a wide range of mechanical
power transmission products. Our product portfolio includes industrial clutches and brakes,
enclosed gear drives, open gearing, couplings, machined-race bearings, belted drives and other
related products which are sold across a wide variety of industries. Our products serve a wide
variety of end markets including general industrial, material handling, mining, power generation,
transportation, automotive and turf and garden. We primarily sell our products to OEMs such as John
Deere, Carrier and General Electric and through long-standing relationships with industrial
distributors such as Motion Industries, Applied Industrial Technologies, Kaman Industrial
Technologies, Bearing Distributions, Inc. and W.W. Grainger.
Recent Acquisition
On April 5, 2007, the Company completed its acquisition of TB Woods Corporation (TB Woods)
pursuant to a cash tender offer for all of the outstanding shares of TB Woods common stock for
$24.80 per share. This was followed by a short form merger (the Merger) of Forest Acquisition
Corporation, the Companys indirect wholly-owned subsidiary, with and into TB Woods. This resulted
in TB Woods becoming a wholly-owned indirect subsidiary of the Company. In connection with the
merger, all remaining outstanding shares of TB Woods common stock (other than those held by
shareholders who properly perfect dissenters rights under Delaware law), were converted into the
right to receive the same $24.80 cash price per share paid in the tender offer (net of the holder
without interest and less any required withholding taxes).
Critical Accounting Policies
The preparation of our condensed consolidated financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of America requires
management to make judgments, assumptions and estimates that affect our reported amounts of assets,
revenues and expenses, as well as related disclosure of contingent assets and liabilities.
Management believes there have been no significant changes in our critical accounting policies
since December 31, 2006. See the discussion of critical accounting policies in our Annual Report on
Form 10-K for the year ended December 31, 2006.
Recent Accounting Pronouncements
In June 2006, the FASB issued FASB Interpretation No. (FIN) 48, Accounting for Uncertainty
in Income Taxes An Interpretation of FASB Statement No. 109, which prescribes a recognition
threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. The Company adopted FIN 48 on January
1, 2007. See Note 8 to the condensed consolidated financial statements for the impact of adoption
of this pronouncement.
Non-GAAP Financial Measures
The discussion of EBITDA (earnings before interest, income taxes, depreciation and
amortization) included in the discussion of Results of Operations below is being provided because
management considers EBITDA to be an important measure of financial performance. Among other
things, management believes that EBITDA provides useful information for our investors because it is
useful for trending, analyzing and benchmarking the performance and value of our business.
Management also believes that EBITDA is useful in assessing current performance compared with our
historical performance because significant line items within our statements of operations such as
depreciation, amortization and interest expense are significantly impacted by acquisitions.
Internally, EBITDA is used as a financial measure to assess the operating performance and is an
important measure in our incentive compensation plans.
15
EBITDA has important limitations, and should not be considered in isolation or as a substitute
for analysis of our results as reported under generally accepted accounting principles in the
United States (GAAP). For example, EBITDA does not reflect:
|
|
|
cash expenditures, or future requirements, for capital expenditures or contractual commitments; |
|
|
|
|
changes in, or cash requirements for, working capital needs; |
|
|
|
|
the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debts; |
|
|
|
|
tax distributions that would represent a reduction in cash available to us; and |
|
|
|
|
any cash requirements for assets being depreciated and amortized that may have to be replaced in the future. |
EBITDA is not a recognized measurement under GAAP, and when analyzing our operating
performance, investors should use EBITDA in addition to, and not as an alternative for, operating
income and net income (each as determined in accordance with GAAP). Because not all companies use
identical calculations, our presentation of EBITDA may not be comparable to similarly titled
measures of other companies. The amounts shown for EBITDA also differ from the amounts calculated
under similarly titled definitions in our debt instruments, which are further adjusted to reflect
certain other cash and non-cash charges and are used to determine compliance with financial
covenants and our ability to engage in certain activities, such as incurring additional debt and
making certain restricted payments.
To compensate for the limitations of EBITDA we utilize several GAAP measures to review our
performance. These GAAP measures include, but are not limited to, net income, operating income,
cash provided by (used in) operations, cash provided by (used in) investing activities and cash
provided by (used in) financing activities. These important GAAP measures allow our management to,
among other things, review and understand our uses of cash period to period, compare our operations
with competitors on a consistent basis and understand the revenues and expenses matched to each
other for the applicable reporting period. We believe that the use of these GAAP measures,
supplemented by the use of EBITDA, allows us to have a greater understanding of our performance and
allows us to adapt to changing trends and business opportunities.
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
|
|
June 30, 2007 |
|
|
June 30, 2006 |
|
|
June 30, 2007 |
|
|
June 30, 2006 |
|
Net sales |
|
$ |
163,142 |
|
|
$ |
119,774 |
|
|
$ |
295,848 |
|
|
$ |
234,558 |
|
Cost of sales |
|
|
117,238 |
|
|
|
87,501 |
|
|
|
211,896 |
|
|
|
170,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
45,904 |
|
|
|
32,273 |
|
|
|
83,952 |
|
|
|
64,127 |
|
Gross profit percentage |
|
|
28.1 |
% |
|
|
26.9 |
% |
|
|
28.4 |
% |
|
|
27.3 |
% |
Selling, general and administrative expenses |
|
|
25,063 |
|
|
|
19,094 |
|
|
|
45,890 |
|
|
|
37,821 |
|
Research and development expenses |
|
|
2,204 |
|
|
|
1,288 |
|
|
|
3,498 |
|
|
|
2,492 |
|
Restructuring charges |
|
|
198 |
|
|
|
|
|
|
|
991 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
18,439 |
|
|
|
11,891 |
|
|
|
33,573 |
|
|
|
23,814 |
|
Interest expense, net |
|
|
10,692 |
|
|
|
6,374 |
|
|
|
19,840 |
|
|
|
12,815 |
|
Other non-operating income, net |
|
|
123 |
|
|
|
72 |
|
|
|
76 |
|
|
|
(87 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
7,624 |
|
|
|
5,445 |
|
|
|
13,657 |
|
|
|
11,086 |
|
Provision for income taxes |
|
|
2,803 |
|
|
|
1,749 |
|
|
|
5,068 |
|
|
|
4,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
4,821 |
|
|
$ |
3,696 |
|
|
$ |
8,589 |
|
|
$ |
6,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, 2007 Compared with Quarter Ended June 30 , 2006
Net sales. Net sales increased by $43.4 million, or 36.2%, from $119.8 million for the quarter
ended June 30, 2006 to $163.1 million for the quarter ended June 30, 2007. The increase in sales
was primarily due to the inclusion of TB Woods which contributed $29.8 million. Without including
the impact of Hay Hall, acquired February 10, 2006, Warner Linear, acquired May 18, 2006 and TB
Woods acquired April 5, 2007, sales increased 10.6%. The remaining increase was driven by price
increases, new product initiatives, continued strength in key late cycle markets, defense
applications and global clutch brake sales.
16
Gross profit. Gross profit increased by $13.6 million, or 42.2%, from $32.3 million (26.9% of
net sales), for the quarter ended June 30, 2006 to $45.9 million (28.1% of net sales) for the same
period of 2007. The increase is primarily due to the inclusion of TB Woods during the second
quarter 2007, additional low cost country material sourcing and implementation of productivity
improvements at recently acquired businesses.
Selling, general and administrative expenses. Selling, general and administrative expenses
increased by $6.0 million, or 31.2%, from $19.1 million for the quarter ended June 30, 2006 to
$25.1 million for the quarter ended June 30, 2007. The increase in selling, general and
administrative expenses is primarily due to the inclusion of TB Woods and Warner Linear for the
full quarter ended June 30, 2007, additional amortization of intangible assets associated with the
TB Woods acquisition and increased costs associated with being a public company, partially offset
by the termination of the management advisory fee agreement.
Research and development expenses. Research and development expenses increased $0.9 million or
71.1% from $1.3 million to $2.2 million. The increase in research and development expense is due
to the inclusion of TB Woods in the quarter ended June 30, 2007.
Restructuring During the first quarter of 2007, we initiated a restructuring program intended
to improve operational efficiency by reducing headcount, consolidating our operating facilities and
relocating manufacturing to lower cost areas. We recorded approximately $0.2 million of
restructuring expense in the second quarter of 2007.
EBITDA. To reconcile net income to EBITDA for the quarter ended June 30, 2007, we added back
to net income $2.8 million provision of income taxes, $10.7 million of interest expense and $6.1
million of depreciation and amortization expenses. To reconcile net income to EBITDA for the
quarter ended June 30, 2006, we added back to net income $1.7 million provision of income taxes,
$6.4 million of interest expense and $3.8 million of depreciation and amortization expenses. Taking
into account the foregoing adjustments, our resulting EBITDA was $24.4 million for the quarter
ended June 30, 2007 and $15.6 million for the quarter ended June 30, 2006. The increase is due to
the acquisition of TB Woods and Warner Linear, price increases, volume, and cost savings measures.
Interest expense. We recorded interest expense of $10.7 million during the quarter ended June
30, 2007, which was an increase of $4.3 million, from the quarter ended June 30, 2006. The increase
was due to $2.4 million of interest associated with the Senior Secured Notes that were issued in
the second quarter of 2007, the $1.6 million pre-payment premium and the $0.3 million amortization
of deferred financing costs associated with the pay-down of the Senior Notes. For a description of
the Senior Notes please see Note 10 to our Condensed Consolidated Financial Statements in Item I of
this Form 10-Q.
Provision for income taxes. The provision for income taxes was $2.8 million, or 36.8%, of
income before taxes, for the quarter ended June 30, 2007, versus a provision of $1.7 million, or
32.1%, of income before taxes, for the quarter ended June 30, 2006. The 2007 provision as a
percentage of income before taxes was higher than that of 2006, primarily due to a greater
proportion of taxable income in jurisdictions having higher statutory tax rates. Additionally, the
Companys overall estimated effective tax rate for all of 2006 was lower than the rate recorded in
the first quarter of 2006 and therefore the second quarter rate was driven down to get the year to
date effective rate at the estimated full year rate.
Year to Date Ended June 30, 2007 Compared with Year to Date Ended June 30, 2006
Net sales. Net sales increased by $61.3 million, or 26.1%, from $234.6 million for the year to
date period ended June 30, 2006 to $295.8 million for the year to date period ended June 30, 2007.
Without including the impact of Hay Hall, acquired February 10, 2006 Warner Linear, acquired May
18, 2006, and TB Woods acquired April 5, 2007, sales increased 9.4%. The increase is due to price
increases, new product initiatives, continued strength in key late cycle markets, defense
applications and global clutch brake sales.
Gross profit. Gross profit increased by $19.8 million, or 30.9%, from $64.1 million (27.3% of
net sales), for the year to date period ended June 30, 2006 to $84.0 million (28.4% of net sales)
for the same period of 2007. The increase is primarily due to the inclusion of Hay Hall, TB Woods
and Warner Linear for the full year to date period ended June 30, 2007, additional low cost country material
sourcing and implementation of productivity improvements at recently acquired businesses.
Selling, general and administrative expenses. Selling, general and administrative expenses
increased by $8.1 million, or 21.3%, from $37.8 million for the year to date period ended June 30,
2006 to $45.9 million for the year to date period ended June 30, 2007. The increase in selling,
general and administrative expenses is primarily due to the inclusion of TB Woods, Hay Hall and
Warner
17
Linear for the full year to date period ended June 30, 2007, additional amortization of intangible assets
associated with the TB Woods acquisition and increased costs associated with being a public
company, partially offset by the termination of the management advisory fee agreement.
Research and development expenses. Research and development expenses increased $1.0 million,
or 40.4%, from $2.5 million to $3.5 million. The increase is mainly due to the inclusion of TB
Woods in the year to date period ended June 30, 2007.
Restructuring During the first quarter of 2007, we adopted a restructuring program intended
to improve operational efficiency by reducing headcount, consolidating our operating facilities and
relocating manufacturing to lower cost areas. We incurred approximately $1.0 million of
restructuring expense in the year to date period ended June 30, 2007.
EBITDA. To reconcile net income to EBITDA for the year to date period ended June 30, 2007, we
added back to net income $5.1 million provision of income taxes, $19.8 million of interest expense
and $10.6 million of depreciation and amortization expenses. To reconcile net income to EBITDA for
the year to date period ended June 30, 2006, we added back to net income $4.2 million provision of
income taxes, $12.8 million of interest expense and $6.7 million of depreciation and amortization
expenses. Taking into account the foregoing adjustments, our resulting EBITDA was $44.1 million for
the year to date period ended June 30, 2007 and $30.6 million for the year to date period ended
June 30, 2006. The increase is due to the acquisitions of TB Woods, Hay Hall and Warner Linear,
price increases, volume, cost savings measures and the termination of the management advisory
services agreement.
Interest expense. We recorded interest expense of $19.8 million during the year to date period
ended June 30, 2007, which was an increase of $7.0 million, from the year to date period ended June
30, 2006. The increase was due to the interest associated with the Senior Notes being outstanding
for an additional six weeks during the first quarter of 2007, the $1.6 million pre-payment premium
and $0.3 million of amortization of deferred financing costs associated with the pay-down of the
Senior Notes issued during the second quarter of 2007. The increase was partially offset by a
decrease in interest on the Senior Notes after the February redemption. For a description of the
Senior Notes and Senior Secured Notes, please see Note 10 to our Condensed Consolidated Financial
Statements in Item I of this Form 10-Q.
Provision for income taxes. The provision for income taxes was $5.1 million, or 37.1%, of
income before taxes, for the year to date period ended June 30, 2007, versus a provision of $4.2
million, or 37.8%, of income before taxes, for the year to date period ended June 30, 2006.
Liquidity and Capital Resources
Net Cash
Cash and cash equivalents totaled $34.4 million at June 30, 2007 compared to $42.5 million at
December 31, 2006. Net cash used in operating activities for the year to date period ended June 30,
2007 resulted mainly from cash provided by net income of $8.6 million and the add-back of non-cash
depreciation, amortization, stock based compensation, amortization of inventory fair value
adjustment, disposal of fixed assets, loss on foreign currency, accretion of debt discount and
deferred financing costs of $14.6 million offset by a net increase in operating assets of $11.1
million and a net decrease in operating liabilities of $16.1 million.
Net cash used in investing activities of $121.7 million for the year to date period ended June
30, 2007 resulted from $117.5 million used in the purchase of TB Woods and $4.2 million used in
the purchases of property, plant and equipment primarily for investment in manufacturing equipment.
Net cash provided by financing activities of $116.8 million for the year to date period ended
June 30, 2007 consisted primarily of proceeds from the issuance of Senior Secured Notes for $106.1
million, the proceeds from the secondary public offering for $49.6 million and borrowings from the
revolving line of credit of $8.3 million. This was offset by the payment of debt issuance costs of
$3.4 million, payments on the revolving line of credit for $9.1 million, the payment of $34.0
million on the Senior Notes and payment of costs associated with the secondary public offering and
initial public offering of $0.4 million and payments of capital
lease obligations of $0.4 million.
Net cash flow used in operating activities, for the year to date period ended June 30, 2006
resulted mainly from cash provided by net income of $6.9 million and the add-back of non-cash
depreciation, amortization, accretion and deferred financing costs of $7.9 million, stock based
compensation of $0.1 million, deferred tax expense of $2.2 million, non-cash amortization of $2.3
million for
18
inventory step-ups recorded as part of the Hay Hall Acquisition and a net increase in
operating liabilities of $3.8 million, offset by cash used from a net increase in operating assets
of $9.5 million.
Net cash used in investing activities of $58.2 million for the quarter ended June 30, 2006
resulted from $50.3 million used in the purchase of Hay Hall, $3.5 million for the purchase of Bear
Linear and $4.1 million used in the purchases of property, plant and equipment primarily for
investment in manufacturing equipment and for the consolidation of our IT infrastructure.
Net cash provided by financing activities of $47.3 million for the year to date period ended
June 30, 2006 resulted primarily from the proceeds of $57.6 million from the issuance of the Senior
Notes in connection with the Hay Hall Acquisition, offset primarily by payment on the subordinated
notes of $9.0 million and payment of debt issuance costs of $1.8 million.
Liquidity
Our primary source of liquidity will be cash flow from operations and borrowings under our
senior revolving credit facility. See footnote 10 to the condensed consolidated financial
statements for explanation of our senior revolving credit facility. We expect that our primary
ongoing requirements for cash will be for working capital, debt service, capital expenditures and
pension plan funding.
We incurred substantial indebtedness in connection with the Colfax Corporation, Hay Hall and
TB Woods Acquisitions. As of June 30, 2007, taking into account these transactions, we had
approximately $322.3 million of total indebtedness outstanding (including capital leases and
mortgages). We expect our interest expense, arising from our existing debt, to be approximately
$31.2 million on an annual basis, through the maturity of the Senior Secured Notes, in 2011.
Our senior revolving credit facility provides for senior secured financing of up to $30.0
million, including $10.0 million available for letters of credit. As of June 30, 2007, there were
no outstanding borrowings and $3.0 million of outstanding letters of credit under our senior
revolving credit facility.
We had $12.2 million outstanding on the TB Woods revolving credit facility as of June 30,
2007. No additional borrowing are allowed under this agreement.
We made capital expenditures of approximately $4.2 million and $4.1 million in the quarters
ended June 30, 2007 and June 30, 2006, respectively. These capital expenditures will support
on-going business needs.
We have cash funding requirements associated with our pension plan which are estimated to be
$1.6 million during the remainder of 2007, $3.8 million in 2008, and $1.9 million thereafter.
Our ability to make scheduled payments of principal and interest, to fund planned capital
expenditures and to meet our pension plan funding obligations will depend on our ability to
generate cash in the future. Based on our current level of operations, we believe that cash flow
from operations and available cash, together with available borrowings under our senior revolving
credit facility will be adequate to meet our future liquidity requirements for at least the next
two years. However, our ability to generate cash is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our control. See the section
entitled Changes in general economic conditions or the cyclical nature of our markets could harm
our operations and financial performance in our Annual Report on Form 10-K for the year ended
December 31, 2006 and Form S-1 filed with the SEC on June 4, 2007 for further discussion.
We cannot assure you that our business will generate sufficient cash flow from operations,
that any revenue growth or operating improvements will be realized or that future borrowings will
be available under our senior secured credit facility in an amount sufficient to enable us to
service our indebtedness, including the notes, or to fund our other liquidity needs. In addition,
we cannot assure you that we will be able to refinance any of our indebtedness, including our
senior revolving credit facility and the notes as they become due. Our ability to access capital in
the long term will depend on the availability of capital markets and pricing on commercially
reasonable terms at the time we are seeking funds. See Our substantial level of indebtedness could
adversely affect our financial condition, harm our ability to react to changes to our business and
prevent us from fulfilling our obligations on the notes. in our Annual Report on Form 10-K for the
year ended December 31, 2006 and Form S-1 filed with the SEC on June 4, 2007 for further
discussion. In addition, our ability to borrow funds under our senior revolving credit facility
will depend on our ability to satisfy the financial and non-financial covenants contained in that
facility.
19
Contractual Obligations
During the year to date period ended June 30, 2007 Altra Industrial redeemed £11.6 million and
£5.5 million aggregate principal amount of their outstanding Senior Notes. As of June 30, 2007,
the remaining principal balance was £15.9 million, or approximately $31.9 million. In August,
2007, Altra Industrial redeemed £12.0 million aggregate principal amount of the outstanding Senior
Notes at a redemption price of 113.5% of the principal amount of the Senior Notes, plus accrued and
unpaid interest. Subsequent to the redemption, £3.9 million, or $7.9 million of Senior Notes
remain outstanding The remaining principal balance is due February 2013.
In April 2007, Altra Industrial completed a follow-on offering of an aggregate of $105.0
million of the existing Senior Secured Notes. As of June 30, 2007, the remaining principal balance
was $270.0 million. The balance is due in December 2011.
In connection with the TB Woods acquisition, we assumed $5.3 million of variable rate demand
revenue bonds. $3.0 million of these bonds mature in 2024 and $2.3 million mature in 2022. In
addition, we refinanced concurrent with the acquisition $13.0 million of TB Woods revolving credit
agreement. Payments of $0.8 million are due over the remainder of 2007. $1.5 million, $1.5
million, $8.8 million are due in 2008, 2009 and 2010, respectively.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Information concerning market risk is contained in the Managements Discussion and Analysis of
Financial Condition and Results of Operations contained in our Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31, 2006. There were no
material changes in our exposure to market risk from December 31, 2006.
Item 4. Controls and Procedures
Our management, with the participation of the Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange
Act)), as of June 30, 2007.
In designing and evaluating the disclosure controls and procedures, management recognizes that
any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives.
Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are designed at a reasonable assurance level and are
effective to provide reasonable assurance that information we are required to disclose in reports
that we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules and forms, and that
such information is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.
There has been no change in our internal control over financial reporting (as defined in Rules
13(a)-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during our fiscal quarter ended
June 30, 2007, that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
20
PART IIOTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various pending legal proceedings arising out of the ordinary
course of business. None of these legal proceedings is expected to have a material adverse effect
on the financial condition of the Company. With respect to these proceedings, management believes
that it will prevail, has adequate insurance coverage or has established appropriate reserves to
cover potential liabilities. There can be no assurance, however, as to the ultimate outcome of any
of these matters, and if all or substantially all of these legal proceedings were to be determined
adversely to the Company, there could be a material adverse effect on the financial condition of
the Company.
Item 1A. Risk Factors
The reader should carefully consider the Risk Factors listed in our Annual Report on Form 10-K for
the year ended December 31, 2006 and Form S-1 filed with the SEC on June 4, 2007. These factors
could cause our actual results to differ materially from those stated in forward looking statements
contained in this Form 10-Q and elsewhere. Management does not believe there have been any material
changes in our risk factors as stated in our Annual Report on Form 10-K for the year ended December
31, 2006 and Form S-1 filed with the SEC on June 4, 2007.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
Our annual meeting of stockholders was held on May 8, 2007. The following matters were voted upon:
Edmund M. Carpenter, Jean-Pierre L. Conte, Darren J. Gold, Michael L. Hurt, Larry McPherson,
Richard D. Paterson and James H. Woodward, Jr. were elected to serve as Directors of the Company
until the 2008 Annual Meeting of Stockholders and until the successors are duly elected and
qualified.
Mr. Carpenter was elected with 16,323,526 votes FOR and 1,894,361 votes WITHHELD, Mr. Conte was
elected with 16,290,242 votes FOR and 1,927,645 votes WITHHELD, Mr. Gold was elected with
13,908,903 votes FOR and 4,308,984 votes WITHHELD, Mr. Hurt was elected with 13,996,953 votes
FOR and 4,270,934 votes WITHHELD, Mr. McPherson was elected with 17,884,786 votes FOR and
333,101 votes WITHHELD, Mr. Paterson was elected with 17,884,786 votes FOR and 333,101 votes
WITHHELD and Mr. Woodward was elected with 17,884,786 votes FOR and 333,101 votes WITHHELD.
The stockholders approved the ratification of the Audit Committees selection of Ernst & Young, LLP
as the Companys independent registered public accounting firm for the year ending December 31,
2007, with 18,208,343 votes FOR, 6,027 votes AGAINST and 3,516 votes ABSTAINING.
Item 5. Other Information
None.
Item 6. Exhibits
The following exhibits are filed as part of this report:
21
EXHIBIT INDEX
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Exhibit |
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Number |
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Description |
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2.1(1)
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Agreement and Plan of Merger, dated as of February 17, 2007, among Altra
Holdings, Inc., Forest Acquisition Corporation and TB Woods Corporation. |
|
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2.2(2)
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Amendment No. 1 to the Agreement and Plan of Merger, dated as of March 11,
2007, among Altra Holdings, Inc., Forest Acquisition Corporation and TB
Woods Corporation. |
|
|
|
3.1(3)
|
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Second Amended and Restated Certificate of Incorporation of the Registrant |
|
|
|
3.3(3)
|
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Amended and Restated Bylaws of the Registrant |
|
|
|
4.1(4)
|
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Indenture, dated as of November 30, 2004, among Altra Industrial Motion,
Inc., the Guarantors party thereto and The Bank of New York Trust Company,
N.A. as trustee. |
|
|
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4.2(5)
|
|
First Supplemental Indenture, dated as of February 7, 2006, among Altra
Industrial Motion, Inc., the guarantors party thereto, and The Bank of New
York Trust Company, N.A. as trustee. |
|
|
|
4.3(6)
|
|
Second Supplemental Indenture, dated as of February 8, 2006, among Altra
Industrial Motion, Inc., the guarantors party thereto, and The Bank of New
York Trust Company, N.A. as trustee. |
|
|
|
4.4(5)
|
|
Third Supplemental Indenture, dated as of April 24, 2006, among Altra
Industrial Motion, Inc., the guarantors party thereto, and The Bank of New
York Trust Company, N.A. as trustee. |
|
|
|
4.5(7)
|
|
Fourth Supplemental Indenture, dated as of March 21, 2007, among Altra
Industrial Motion, Inc., the guarantors party thereto, and The Bank of New
York Trust Company, N.A. as trustee. |
|
|
|
4.6(8)
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Fifth Supplemental Indenture, dated as of April 5, 2007, among Altra
Industrial Motion, Inc., the guarantors party thereto, and The Bank of New
York Trust Company, N.A. as trustee. |
|
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4.7(4)
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Form of 9% Senior Secured Notes due 2011. |
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4.8(4)
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Registration Rights Agreement, dated as of November 30, 2004, among Altra
Industrial Motion, Inc., Jefferies & Company, Inc., and the subsidiary
guarantors party thereto. |
|
|
|
4.9(9)
|
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Registration Rights Agreement, dated as of April 5, 2007, among Altra
Industrial Motion, Inc., Jefferies & Company, Inc., and the subsidiary
guarantors party thereto. |
|
|
|
4.10(6)
|
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Indenture, dated as of February 8, 2006, among Altra Industrial Motion,
Inc., the guarantors party thereto, The Bank of New York, as trustee and
paying agent and The Bank of New York (Luxembourg) SA, as Luxembourg paying
agent. |
|
|
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4.11(5)
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First Supplemental Indenture, dated as of April 24, 2006, among Altra
Industrial Motion, Inc., the guarantors party thereto, and The Bank of New
York as trustee. |
|
|
|
4.12(7)
|
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Second Supplemental Indenture, dated as of March 26, 2007, among Altra
Industrial Motion, Inc., the guarantors party thereto, and The Bank of New
York, as trustee. |
|
|
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4.13(8)
|
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Third Supplemental Indenture, dated as of April 5, 2007, among Altra
Industrial Motion, Inc., the guarantors party thereto, and The Bank of New
York, as trustee. |
|
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4.14(6)
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Form of 11 1/4% Senior Notes due 2013. |
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4.15(6)
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Registration Rights Agreement, dated as of February 8, 2006, among Altra
Industrial Motion, Inc., the guarantors party thereto, and Jefferies
International Limited, as initial purchasers. |
22
|
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|
Exhibit |
|
|
Number |
|
Description |
10.2(9)
|
|
Fifth Amendment to, and Consent and Waiver under, Credit Agreement and
Joinder to Loan Documents, dated as of April 5, 2007, among Altra
Industrial Motion, Inc., the financial institutions listed therein, as
Lenders, and Wells Fargo Foothill, Inc. |
|
|
|
31.1*
|
|
Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
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31.2*
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Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
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32.1**
|
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Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
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32.2**
|
|
Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
* |
|
Filed herewith. |
|
** |
|
Furnished herewith. |
(1) Incorporated by reference to the Registrants Current Report on Form 8-K filed with the
Securities and Exchange Commission on February 20, 2007.
(2) Incorporated by reference to the Registrants Current Report on Form 8-K filed with the
Securities and Exchange Commission on March 13, 2007.
(3) Incorporated by reference to the Registrants Registration Statement on Form S-1, as amended
(No. 333-137660), filed with the Securities and Exchange Commission on December 4, 2006.
(4) Incorporated by reference to Altra Industrial Motion, Inc. Registration Statement on Form S-4
(File No. 333-124944) filed with the Securities and Exchange Commission on May 16, 2005.
(5) Incorporated by reference to Altra Industrial Motion, Inc.s Annual Report on Form 10-K filed
with the Securities and Exchange Commission on May 15, 2006.
(6) Incorporated by reference to Altra Industrial Motion, Inc.s Current Report on Form 8-K filed
with the Securities and Exchange Commission on February 14, 2006.
(7) Incorporated by reference to Altra Industrial Motion, Inc.s Current Report on Form 8-K filed
with the Securities and Exchange Commission on March 26, 2007.
(8) Incorporated by reference to Altra Indusctial Motion, Inc.s Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 11, 2007.
(9) Incorporated by reference to Altra Industrial Motion, Inc.s Registration Statement on Form S-4
(File No. 333-142692-06) filed with the Securities and Exchange Commission on May 8, 2007.
23
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.
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ALTRA HOLDINGS, INC. |
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August 14, 2007
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By:
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/s/ Michael L. Hurt
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Name: Michael L. Hurt |
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Title: Chairman and Chief Executive Officer |
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August 14, 2007
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By:
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/s/ David Wall |
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Name: David Wall |
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Title: VP Finance and Chief Financial Officer |
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24