þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 61-1478870 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
300 Granite Street, Suite 201, Braintree, MA | 02184 | |
(Address of principal executive offices) | (Zip Code) |
Large Accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company.) |
Item 1. | Financial Statements |
October 1, | December 31, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 90,261 | $ | 72,723 | ||||
Trade receivables, less allowance for doubtful accounts of $2,068 and $1,111 at
October 1, 2011 and December 31, 2010, respectively |
103,718 | 67,403 | ||||||
Inventories |
123,539 | 88,217 | ||||||
Deferred income taxes |
4,434 | 4,414 | ||||||
Income tax receivable |
5,871 | 4,126 | ||||||
Assets held for sale |
| 1,484 | ||||||
Prepaid expenses and other current assets |
5,091 | 4,168 | ||||||
Total current assets |
332,914 | 242,535 | ||||||
Property, plant and equipment, net |
122,650 | 105,298 | ||||||
Intangible assets, net |
79,560 | 69,250 | ||||||
Goodwill |
84,862 | 76,897 | ||||||
Deferred income taxes |
89 | 82 | ||||||
Other non-current assets, net |
15,248 | 14,040 | ||||||
Total assets |
$ | 635,323 | $ | 508,102 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 50,636 | $ | 40,812 | ||||
Accrued payroll |
21,741 | 18,486 | ||||||
Accruals and other current liabilities |
34,632 | 24,142 | ||||||
Deferred income taxes |
61 | 59 | ||||||
Current portion of long-term debt |
824 | 3,393 | ||||||
Total current liabilities |
107,894 | 86,892 | ||||||
Commitments and contingencies (Note 15) |
||||||||
Long-term debt less current portion and net of unaccreted discount |
266,417 | 213,109 | ||||||
Deferred income taxes |
31,287 | 20,558 | ||||||
Pension liablities |
11,754 | 11,031 | ||||||
Long-term taxes payable |
6,749 | 10,892 | ||||||
Other long-term liabilities |
984 | 868 | ||||||
Stockholders equity: |
||||||||
Common stock ($0.001 par value, 90,000,000 shares authorized, 26,596,145
and 26,466,216 issued and outstanding at October 1, 2011 and December
31, 2010, respectively) |
26 | 26 | ||||||
Additional paid-in capital |
149,007 | 133,861 | ||||||
Retained earnings |
77,315 | 45,536 | ||||||
Accumulated other comprehensive income |
(16,110 | ) | (14,671 | ) | ||||
Total stockholders equity |
210,238 | 164,752 | ||||||
Total liabilities and stockholders equity |
$ | 635,323 | $ | 508,102 | ||||
2
Quarter Ended | Year to Date Ended | |||||||||||||||
October 1, | October 2, | October 1, | October 2, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Net sales |
$ | 177,853 | $ | 128,930 | $ | 503,095 | $ | 389,624 | ||||||||
Cost of sales |
124,824 | 90,289 | 353,821 | 273,453 | ||||||||||||
Gross profit |
53,029 | 38,641 | 149,274 | 116,171 | ||||||||||||
Operating expenses: |
||||||||||||||||
Selling, general and administrative expenses |
31,577 | 22,804 | 84,005 | 65,991 | ||||||||||||
Research and development expenses |
2,801 | 1,746 | 7,544 | 5,156 | ||||||||||||
Restructuring expense |
| 510 | | 2,198 | ||||||||||||
34,378 | 25,060 | 91,549 | 73,345 | |||||||||||||
Income from operations |
18,651 | 13,581 | 57,725 | 42,826 | ||||||||||||
Other non-operating (income) expense: |
||||||||||||||||
Interest expense, net |
6,698 | 4,838 | 18,014 | 14,734 | ||||||||||||
Other non-operating (income) expense, net |
216 | (272 | ) | (668 | ) | 750 | ||||||||||
6,914 | 4,566 | 17,346 | 15,484 | |||||||||||||
Income before income taxes |
11,737 | 9,015 | 40,379 | 27,342 | ||||||||||||
(Benefit from) Provision for income taxes |
(403 | ) | 2,441 | 8,600 | 8,190 | |||||||||||
Net income |
$ | 12,140 | $ | 6,574 | $ | 31,779 | $ | 19,152 | ||||||||
Consolidated Statement of Comprehensive (loss)
income |
||||||||||||||||
Minimum pension liability adjustment |
$ | | $ | (185 | ) | $ | | $ | (515 | ) | ||||||
Foreign currency translation adjustment |
(7,008 | ) | 12,066 | (1,439 | ) | 3,223 | ||||||||||
Comprehensive income |
$ | 5,132 | $ | 18,455 | $ | 30,340 | $ | 21,860 | ||||||||
Weighted average shares, basic |
26,546 | 26,414 | 26,508 | 26,364 | ||||||||||||
Weighted average shares, diluted |
26,655 | 26,495 | 26,712 | 26,477 | ||||||||||||
Net income per share: |
||||||||||||||||
Basic |
$ | 0.46 | $ | 0.25 | $ | 1.20 | $ | 0.73 | ||||||||
Diluted |
$ | 0.46 | $ | 0.25 | $ | 1.19 | $ | 0.72 |
3
Year to Date Ended | ||||||||
October 1, 2011 | October 2, 2010 | |||||||
(Unaudited) | ||||||||
Cash flows from operating activities |
||||||||
Net income |
$ | 31,779 | $ | 19,152 | ||||
Adjustments to reconcile net income to net cash flows: |
||||||||
Depreciation |
13,258 | 12,315 | ||||||
Amortization of intangible assets |
4,568 | 3,713 | ||||||
Amortization and write-offs of deferred financing costs |
1,372 | 536 | ||||||
(Gain) loss on foreign currency, net |
(324 | ) | 270 | |||||
Accretion of debt discount, net |
1,887 | 225 | ||||||
Fixed asset impairment/disposal |
| 441 | ||||||
Stock-based compensation |
1,933 | 1,670 | ||||||
Changes in assets and liabilities: |
||||||||
Trade receivables |
(17,671 | ) | (18,798 | ) | ||||
Inventories |
(13,873 | ) | (8,687 | ) | ||||
Accounts payable and accrued liabilities |
9,552 | 27,429 | ||||||
Other current assets and liabilities |
880 | (752 | ) | |||||
Other operating assets and liabilities |
(4,254 | ) | (186 | ) | ||||
Net cash provided by operating activities |
29,107 | 37,328 | ||||||
Cash flows from investing activities |
||||||||
Purchase of property, plant and equipment |
(13,840 | ) | (12,725 | ) | ||||
Additional purchase price paid for acquisition |
| (1,177 | ) | |||||
Proceeds from sale of Chattanooga Facility |
1,484 | | ||||||
Acquisition of Bauer, net of $41 cash received |
(69,460 | ) | | |||||
Net cash used in investing activities |
(81,816 | ) | (13,902 | ) | ||||
Cash flows from financing activities |
||||||||
Payment of issuance costs for Convertible Notes |
(3,414 | ) | | |||||
Payment of issuance costs for 8 1/8 Senior Secured Notes |
| (265 | ) | |||||
Purchase of 8 1/8 Senior Secured Notes |
(8,230 | ) | | |||||
Proceeds from issuance of Convertible Notes |
85,000 | | ||||||
Shares surrendered for tax withholdings |
(914 | ) | (854 | ) | ||||
Redemption of variable rate demand revenue bonds related to Chattanooga
facility |
(2,290 | ) | | |||||
Payment on mortgages |
(516 | ) | (481 | ) | ||||
Net payments on capital leases |
(627 | ) | (563 | ) | ||||
Net cash provided by (used in) financing activities |
69,009 | (2,163 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents |
1,238 | (599 | ) | |||||
Net change in cash and cash equivalents |
17,538 | 20,664 | ||||||
Cash and cash equivalents at beginning of year |
72,723 | 51,497 | ||||||
Cash and cash equivalents at end of period |
$ | 90,261 | $ | 72,161 | ||||
Cash paid during the period for: |
||||||||
Interest |
$ | 10,462 | $ | 9,676 | ||||
Income taxes |
$ | 9,685 | $ | 1,210 |
4
5
Quarter Ended | Year to Date Ended | |||||||||||||||
October 1, | October 2, | October 1, | October 2, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income |
$ | 12,140 | $ | 6,574 | $ | 31,779 | $ | 19,152 | ||||||||
Shares used in net income per common share basic |
26,546 | 26,414 | 26,508 | 26,364 | ||||||||||||
Incremental shares of unvested restricted common
stock |
109 | 81 | 204 | 113 | ||||||||||||
Shares used in net income per common share
diluted |
26,655 | 26,495 | 26,712 | 26,477 | ||||||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ | 0.46 | $ | 0.25 | $ | 1.20 | $ | 0.73 | ||||||||
Diluted |
$ | 0.46 | $ | 0.25 | $ | 1.19 | $ | 0.72 |
6
Total purchase price, excluding acquisition costs of approximately $3.5 million |
$ | 69,501 | ||
Cash and cash equivalents |
41 | |||
Trade receivables, net of $0.7 million for allowance for doubtful accounts |
18,394 | |||
Inventories |
21,397 | |||
Prepaid expenses and other |
2,331 | |||
Property, plant and equipment |
18,045 | |||
Intangible assets |
15,458 | |||
Total assets acquired |
$ | 75,666 | ||
Accounts payable |
3,946 | |||
Accrued expenses and other current liabilities |
7,589 | |||
Other liabilities |
2,910 | |||
Total liabilities assumed |
$ | 14,445 | ||
Net assets acquired |
61,221 | |||
Excess purchase price over fair value of net assets acquired |
$ | 8,280 | ||
Customer relationships, subject to amortization |
$ | 12,063 | ||
Trade names and trademarks, not subject to amortization |
3,395 | |||
Total intangible assets |
$ | 15,458 | ||
7
Pro Forma (unaudited) | Pro Forma (unaudited) | |||||||||||||||
Quarter to Date Period Ended | Year to Date Period Ended | |||||||||||||||
October 1, 2011 | October 2, 2010 | October 1, 2011 | October 2, 2010 | |||||||||||||
Total revenues |
$ | 177,853 | $ | 154,641 | $ | 553,026 | $ | 460,488 | ||||||||
Net income |
$ | 12,140 | $ | 6,159 | $ | 35,020 | $ | 14,275 | ||||||||
Basic earnings per share: |
||||||||||||||||
Net income |
$ | 0.46 | $ | 0.23 | $ | 1.32 | $ | 0.54 | ||||||||
Diluted earnings per share: |
||||||||||||||||
Net income |
$ | 0.46 | $ | 0.23 | $ | 1.32 | $ | 0.54 |
October 1, | December 31, | |||||||
2011 | 2010 | |||||||
Raw materials |
$ | 46,000 | $ | 32,826 | ||||
Work in process |
25,976 | 16,223 | ||||||
Finished goods |
51,563 | 39,168 | ||||||
Inventories |
$ | 123,539 | $ | 88,217 | ||||
8
2011 | ||||
Gross goodwill balance as of January 1 |
$ | 108,707 | ||
Additional goodwill from Bauer acquisition |
8,280 | |||
Impact of changes in foreign currency |
(315 | ) | ||
Gross goodwill balance as of October 1 |
116,672 | |||
Accumulated impairment as of January 1 |
(31,810 | ) | ||
Impairment charge during the period |
| |||
Accumulated impairment as of October 1 |
(31,810 | ) | ||
Net goodwill balance October 1, 2011 |
$ | 84,862 | ||
October 1, 2011 | December 31, 2010 | |||||||||||||||
Accumulated | Accumulated | |||||||||||||||
Cost | Amortization | Cost | Amortization | |||||||||||||
Other intangible assets |
||||||||||||||||
Intangible assets not subject to amortization: |
||||||||||||||||
Tradenames and trademarks |
$ | 34,125 | $ | | $ | 30,730 | $ | | ||||||||
Intangible assets subject to amortization: |
||||||||||||||||
Customer relationships |
74,101 | 27,607 | 62,038 | 23,821 | ||||||||||||
Product technology and patents |
5,632 | 5,701 | 5,435 | 4,919 | ||||||||||||
Impact of changes in foreign currency |
(990 | ) | | (213 | ) | | ||||||||||
Total intangible assets |
$ | 112,868 | $ | 33,308 | $ | 97,990 | $ | 28,740 | ||||||||
9
October 1, | October 2, | |||||||
2011 | 2010 | |||||||
Balance at beginning of period |
$ | 3,583 | $ | 4,047 | ||||
Additional warranty related to Bauer |
1,720 | | ||||||
Accrued current period warranty expense |
1,618 | 1,041 | ||||||
Payments |
(1,645 | ) | (1,186 | ) | ||||
Balance at end of period |
$ | 5,276 | $ | 3,902 | ||||
10
Quarter Ended | ||||||||||||||||
Pension Benefits | Other Benefits | |||||||||||||||
October 1, | October 2, | October 1, | October 2, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Service cost |
$ | 25 | $ | 50 | $ | 1 | $ | 1 | ||||||||
Interest cost |
291 | 334 | 4 | 4 | ||||||||||||
Expected return on plan assets |
(266 | ) | (309 | ) | | | ||||||||||
Amortization of prior service income |
| | | (172 | ) | |||||||||||
Amortization of net gain |
7 | | (13 | ) | (40 | ) | ||||||||||
Net periodic benefit cost (income) |
$ | 57 | $ | 75 | $ | (8 | ) | $ | (207 | ) | ||||||
Year to Date Ended | ||||||||||||||||
Pension Benefits | Other Benefits | |||||||||||||||
October 1, | October 2, | October 1, | October 2, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Service cost |
$ | 75 | $ | 50 | $ | 2 | $ | 2 | ||||||||
Interest cost |
863 | 962 | 12 | 17 | ||||||||||||
Expected return on plan assets |
(778 | ) | (919 | ) | | | ||||||||||
Amortization of prior service income |
| | (1 | ) | (515 | ) | ||||||||||
Amortization of net gain |
32 | | (39 | ) | (121 | ) | ||||||||||
Net periodic benefit cost (income) |
$ | 192 | $ | 93 | $ | (26 | ) | $ | (617 | ) | ||||||
11
October 1, | December | |||||||
2011 | 31, 2010 | |||||||
Debt: |
||||||||
Revolving Credit Agreement |
$ | | $ | | ||||
Convertible Notes |
85,000 | | ||||||
Senior Secured Notes |
201,770 | 210,000 | ||||||
Variable rate demand revenue bonds |
3,000 | 5,300 | ||||||
Mortgages |
1,918 | 2,372 | ||||||
Capital leases |
605 | 1,257 | ||||||
Total debt |
292,293 | 218,929 | ||||||
Less: debt discount, net of accretion |
(25,052 | ) | (2,427 | ) | ||||
Total long-term debt, net of unaccreted discount |
$ | 267,241 | $ | 216,502 | ||||
Less current portion of long-term debt |
824 | 3,393 | ||||||
Total long-term debt |
$ | 266,417 | $ | 213,109 | ||||
12
October 1, | ||||
2011 | ||||
Principal amount of debt |
$ | 85,000 | ||
Unamortized discount |
22,931 | |||
Carrying value of debt |
$ | 62,069 | ||
October 1, | ||||
2011 | ||||
Contractual coupon rate of interest |
$ | 1,364 | ||
Accretion of convertible notes discount and amortization of
deferred financing costs |
1,761 | |||
Interest expense for the Convertible Notes |
$ | 3,125 | ||
13
14
15
Weighted-average | ||||||||
Shares | grant date fair value | |||||||
Restricted shares unvested January 1, 2011 |
287,586 | $ | 9.66 | |||||
Shares granted |
114,273 | 21.94 | ||||||
Shares for which restrictions lapsed |
(185,121 | ) | 12.66 | |||||
Restricted shares unvested October 1, 2011 |
216,738 | $ | 13.57 | |||||
16
Net Sales | Net Sales | |||||||||||||||
Quarter Ended | Year to Date Ended | |||||||||||||||
October 1, | October 2, | October 1, | October 2, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
North America (primarily U.S.) |
$ | 107,000 | $ | 94,335 | $ | 36,141 | $ | 286,716 | ||||||||
Europe |
59,565 | 26,629 | 137,104 | 81,204 | ||||||||||||
Asia and other |
11,288 | 7,966 | 29,850 | 21,704 | ||||||||||||
Total |
$ | 177,853 | $ | 128,930 | $ | 503,095 | $ | 389,624 | ||||||||
17
Year to Date Ended | ||||
October 2, 2010 | ||||
2009 Altra | ||||
Plan | ||||
Expenses |
||||
Severance |
$ | 1,159 | ||
Moving and relocation |
413 | |||
Other cash expenses |
395 | |||
Total cash expenses |
1,967 | |||
Non-cash asset impairment and loss on
sale of fixed asset |
231 | |||
Total restructuring expenses |
$ | 2,198 | ||
2009 Altra Plan | ||||
Balance at December 31, 2010 |
$ | 159 | ||
Cash restructuring expense incurred |
| |||
Cash payments |
(50 | ) | ||
Balance at October 1, 2011 |
$ | 109 | ||
18
Guarantor | Non Guarantor | |||||||||||||||||||
Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
ASSETS |
||||||||||||||||||||
Current assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 54,063 | $ | 36,198 | $ | | $ | 90,261 | ||||||||||
Trade receivables, less allowance for doubtful accounts |
| 54,008 | 49,710 | | 103,718 | |||||||||||||||
Loans receivable from related parties |
267,605 | | | (267,605 | ) | | ||||||||||||||
Inventories |
| 72,933 | 50,606 | | 123,539 | |||||||||||||||
Deferred income taxes |
| 3,814 | 620 | | 4,434 | |||||||||||||||
Income tax receivable |
| 5,871 | | | 5,871 | |||||||||||||||
Prepaid expenses and other current assets |
| 2,957 | 2,134 | | 5,091 | |||||||||||||||
Total current assets |
267,605 | 193,646 | 139,268 | (267,605 | ) | 332,914 | ||||||||||||||
Property, plant and equipment, net |
| 75,847 | 46,803 | | 122,650 | |||||||||||||||
Intangible assets, net |
| 51,295 | 28,265 | | 79,560 | |||||||||||||||
Goodwill |
| 56,446 | 28,416 | | 84,862 | |||||||||||||||
Deferred income taxes |
| | 89 | | 89 | |||||||||||||||
Investment in subsidiaries |
202,650 | | | (202,650 | ) | | ||||||||||||||
Other non-current assets |
7,382 | 7,733 | 133 | | 15,248 | |||||||||||||||
Total assets |
$ | 477,637 | $ | 384,967 | $ | 242,974 | $ | (470,255 | ) | $ | 635,323 | |||||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Accounts payable |
$ | | $ | 27,594 | $ | 23,042 | $ | | $ | 50,636 | ||||||||||
Accrued payroll |
| 10,037 | 11,704 | | 21,741 | |||||||||||||||
Accruals and other current liabilities |
5,733 | 15,634 | 13,265 | | 34,632 | |||||||||||||||
Deferred income taxes |
| | 61 | | 61 | |||||||||||||||
Current portion of long-term debt |
| 454 | 370 | | 824 | |||||||||||||||
Loans payable to related parties |
| 195,086 | 72,519 | (267,605 | ) | | ||||||||||||||
Total current liabilities |
5,733 | 248,805 | 120,961 | (267,605 | ) | 107,894 | ||||||||||||||
Long-term debt less current portion and net of unacreted
discount |
261,666 | 3,110 | 1,641 | | 266,417 | |||||||||||||||
Deferred income taxes |
| 22,434 | 8,853 | | 31,287 | |||||||||||||||
Pension liablities |
| 5,763 | 5,991 | | 11,754 | |||||||||||||||
Long-term taxes payable |
| 6,749 | | | 6,749 | |||||||||||||||
Other long-term liabilities |
| 778 | 206 | | 984 | |||||||||||||||
Total stockholders equity |
210,238 | 97,328 | 105,322 | (202,650 | ) | 210,238 | ||||||||||||||
Total liabilities and stockholders equity |
$ | 477,637 | $ | 384,967 | $ | 242,974 | $ | (470,255 | ) | $ | 635,323 | |||||||||
19
Guarantor | Non Guarantor | |||||||||||||||||||
Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
ASSETS |
||||||||||||||||||||
Current assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 37,125 | $ | 35,598 | $ | | $ | 72,723 | ||||||||||
Trade receivables, less allowance for doubtful accounts |
| 44,020 | 23,383 | | 67,403 | |||||||||||||||
Loans receivable from related parties |
204,667 | | | (204,667 | ) | | ||||||||||||||
Inventories |
| 63,226 | 24,991 | | 88,217 | |||||||||||||||
Deferred income taxes |
| 3,813 | 601 | | 4,414 | |||||||||||||||
Assets held for sale |
| 1,484 | | | 1,484 | |||||||||||||||
Income tax receivable |
| 4,126 | | | 4,126 | |||||||||||||||
Prepaid expenses and other current assets |
| 2,282 | 1,886 | | 4,168 | |||||||||||||||
Total current assets |
204,667 | 156,076 | 86,459 | (204,667 | ) | 242,535 | ||||||||||||||
Property, plant and equipment, net |
| 74,956 | 30,342 | | 105,298 | |||||||||||||||
Intangible assets, net |
| 54,321 | 14,929 | | 69,250 | |||||||||||||||
Goodwill |
| 56,446 | 20,451 | | 76,897 | |||||||||||||||
Deferred income taxes |
| | 82 | | 82 | |||||||||||||||
Investment in subsidiaries |
163,069 | | | (163,069 | ) | | ||||||||||||||
Other non-current assets |
6,020 | 7,905 | 115 | | 14,040 | |||||||||||||||
Total assets |
$ | 373,756 | $ | 349,704 | $ | 152,378 | $ | (367,736 | ) | $ | 508,102 | |||||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Accounts payable |
$ | | $ | 26,497 | $ | 14,315 | $ | | $ | 40,812 | ||||||||||
Accrued payroll |
| 12,364 | 6,122 | | 18,486 | |||||||||||||||
Accruals and other current liabilities |
1,422 | 15,458 | 7,262 | | 24,142 | |||||||||||||||
Deferred income taxes |
| | 59 | | 59 | |||||||||||||||
Current portion of long-term debt |
| 3,028 | 365 | | 3,393 | |||||||||||||||
Loans payable to related parties |
| 185,768 | 18,899 | (204,667 | ) | | ||||||||||||||
Total current liabilities |
1,422 | 243,115 | 47,022 | (204,667 | ) | 86,892 | ||||||||||||||
Long-term debt less current portion and net of unaccreted discount |
207,582 | 3,338 | 2,189 | | 213,109 | |||||||||||||||
Deferred income taxes |
| 13,043 | 7,515 | | 20,558 | |||||||||||||||
Pension liablities |
| 7,596 | 3,212 | | 10,808 | |||||||||||||||
Other post retirement benefits |
| 223 | | | 223 | |||||||||||||||
Long-term taxes payables |
| 10,892 | | | 10,892 | |||||||||||||||
Other long-term liabilities |
| 762 | 106 | | 868 | |||||||||||||||
Total stockholders equity |
164,752 | 70,735 | 92,334 | (163,069 | ) | 164,752 | ||||||||||||||
Total liabilities and stockholders equity |
$ | 373,756 | $ | 349,704 | $ | 152,378 | $ | (367,736 | ) | $ | 508,102 | |||||||||
20
Year to Date Ended October 1, 2011 | ||||||||||||||||||||
Guarantor | Non-Guarantor | |||||||||||||||||||
Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | | $ | 344,731 | $ | 191,944 | $ | (33,580 | ) | $ | 503,095 | |||||||||
Cost of sales |
| 249,795 | 137,606 | (33,580 | ) | 353,821 | ||||||||||||||
Gross profit |
| 94,936 | 54,338 | | 149,274 | |||||||||||||||
Selling, general and administrative expenses |
| 51,639 | 32,366 | 84,005 | ||||||||||||||||
Research and development expenses |
| 3,962 | 3,582 | 7,544 | ||||||||||||||||
Income from operations |
| 39,335 | 18,390 | | 57,725 | |||||||||||||||
Interest expense, net |
17,265 | 659 | 90 | 18,014 | ||||||||||||||||
Other non-operating income, net |
| (432 | ) | (236 | ) | (668 | ) | |||||||||||||
Equity in earnings of subsidiaries |
39,581 | | | (39,581 | ) | | ||||||||||||||
Income before income taxes |
22,316 | 39,108 | 18,536 | (39,581 | ) | 40,379 | ||||||||||||||
Provision (benefit) for income taxes |
(9,463 | ) | 12,515 | 5,548 | 8,600 | |||||||||||||||
Net income |
$ | 31,779 | $ | 26,593 | $ | 12,988 | $ | (39,581 | ) | $ | 31,779 | |||||||||
Year to Date Ended October 2, 2010 | ||||||||||||||||||||
Guarantor | Non-Guarantor | |||||||||||||||||||
Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | | $ | 293,134 | $ | 125,836 | $ | (29,346 | ) | $ | 389,624 | |||||||||
Cost of sales |
| 215,547 | 87,252 | (29,346 | ) | 273,453 | ||||||||||||||
Gross profit |
| 77,587 | 38,584 | | 116,171 | |||||||||||||||
Selling, general and administrative expenses |
46 | 44,916 | 21,029 | | 65,991 | |||||||||||||||
Research and development expenses |
| 3,091 | 2,065 | | 5,156 | |||||||||||||||
Restructuring costs |
| 1,207 | 991 | | 2,198 | |||||||||||||||
Income (loss) from operations |
(46 | ) | 28,373 | 14,499 | | 42,826 | ||||||||||||||
Interest expense, net |
13,526 | 1,083 | 125 | | 14,734 | |||||||||||||||
Other non-operating expense, net |
| 764 | (14 | ) | | 750 | ||||||||||||||
Equity in earnings of subsidiaries |
26,594 | | | (26,594 | ) | | ||||||||||||||
Income before income taxes |
13,022 | 26,526 | 14,388 | (26,594 | ) | 27,342 | ||||||||||||||
Provision (benefit) for income taxes |
(6,130 | ) | 9,284 | 5,036 | | 8,190 | ||||||||||||||
Net income |
$ | 19,152 | $ | 17,242 | $ | 9,352 | $ | (26,594 | ) | $ | 19,152 | |||||||||
21
Quarter Ended October 1, 2011 | ||||||||||||||||||||
Guarantor | Non-Guarantor | |||||||||||||||||||
Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | | $ | 110,929 | $ | 79,500 | $ | (12,576 | ) | $ | 177,853 | |||||||||
Cost of sales |
| 80,066 | 57,334 | (12,576 | ) | 124,824 | ||||||||||||||
Gross profit |
| 30,863 | 22,166 | | 53,029 | |||||||||||||||
Selling, general and administrative expenses |
| 16,595 | 14,982 | 31,577 | ||||||||||||||||
Research and development expenses |
| 1,306 | 1,495 | 2,801 | ||||||||||||||||
Income from operations |
| 12,962 | 5,689 | | 18,651 | |||||||||||||||
Interest expense, net |
6,395 | 253 | 50 | 6,698 | ||||||||||||||||
Other non-operating income, net |
| 30 | 186 | 216 | ||||||||||||||||
Equity in earnings of subsidiaries |
11,806 | | | (11,806 | ) | | ||||||||||||||
Income before income taxes |
5,411 | 12,679 | 5,453 | (11,806 | ) | 11,737 | ||||||||||||||
Provision (benefit) for income taxes |
(6,729 | ) | 3,264 | 3,062 | (403 | ) | ||||||||||||||
Net income |
$ | 12,140 | $ | 9,415 | $ | 2,391 | $ | (11,806 | ) | $ | 12,140 | |||||||||
Quarter Ended October 2, 2010 | ||||||||||||||||||||
Guarantor | Non-Guarantor | |||||||||||||||||||
Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | | $ | 96,652 | $ | 42,156 | $ | (9,878 | ) | $ | 128,930 | |||||||||
Cost of sales |
| 70,207 | 29,960 | (9,878 | ) | 90,289 | ||||||||||||||
Gross profit |
| 26,445 | 12,196 | | 38,641 | |||||||||||||||
Selling, general and administrative expenses |
| 15,702 | 7,102 | | 22,804 | |||||||||||||||
Research and development expenses |
| 1,043 | 703 | | 1,746 | |||||||||||||||
Restructuring costs |
| 229 | 281 | | 510 | |||||||||||||||
Income from operations |
| 9,471 | 4,110 | | 13,581 | |||||||||||||||
Interest expense, net |
4,465 | 359 | 14 | | 4,838 | |||||||||||||||
Other non-operating (income) expense, net |
| 638 | (910 | ) | | (272 | ) | |||||||||||||
Equity in earnings of subsidiaries |
8,762 | | | (8,762 | ) | | ||||||||||||||
Income before income taxes |
4,297 | 8,474 | 5,006 | (8,762 | ) | 9,015 | ||||||||||||||
Provision (benefit) for income taxes |
(2,277 | ) | 2,966 | 1,752 | | 2,441 | ||||||||||||||
Net income |
$ | 6,574 | $ | 5,508 | $ | 3,254 | $ | (8,762 | ) | $ | 6,574 | |||||||||
22
Year to Date Ended October 1, 2011 | ||||||||||||||||||||
Guarantor | Non-Guarantor | |||||||||||||||||||
Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Cash flows from operating activities |
||||||||||||||||||||
Net income |
$ | 31,779 | $ | 26,593 | $ | 12,988 | $ | (39,581 | ) | $ | 31,779 | |||||||||
Undistributed equity in earnings of subsidiaries |
(39,581 | ) | | | 39,581 | | ||||||||||||||
Adjustments to reconcile net income to net cash flows: |
| |||||||||||||||||||
Depreciation |
| 5,422 | 7,836 | | 13,258 | |||||||||||||||
Amortization of intangible assets |
| 3,089 | 1,479 | | 4,568 | |||||||||||||||
Amortization and write-offs of deferred financing costs |
1,037 | 335 | | | 1,372 | |||||||||||||||
(Gain) loss on foreign currency, net |
| | (324 | ) | | (324 | ) | |||||||||||||
Accretion of debt discount, net |
1,887 | | | | 1,887 | |||||||||||||||
Stock-based compensation |
| 1,933 | | | 1,933 | |||||||||||||||
Changes in assets and liabilities: |
| | ||||||||||||||||||
Trade receivables |
| (9,354 | ) | (8,317 | ) | | (17,671 | ) | ||||||||||||
Inventories |
| (9,008 | ) | (4,865 | ) | | (13,873 | ) | ||||||||||||
Accounts payable and accrued liabilities |
4,311 | (3,329 | ) | 8,570 | | 9,552 | ||||||||||||||
Other current assets and liabilities |
| (675 | ) | 1,555 | | 880 | ||||||||||||||
Other operating assets and liabilities |
| (6,364 | ) | 2,110 | | (4,254 | ) | |||||||||||||
Net cash provided by (used in) operating activities |
(567 | ) | 8,642 | 21,032 | | 29,107 | ||||||||||||||
Cash flows used in investing activities |
||||||||||||||||||||
Purchase of property, plant and equipement |
| (5,966 | ) | (7,874 | ) | | (13,840 | ) | ||||||||||||
Acquisition of Bauer net of cash $41 thousand cash received |
| (1,146 | ) | (68,314 | ) | | (69,460 | ) | ||||||||||||
Proceeds from sale of Chattanooga |
| 1,484 | | | 1,484 | |||||||||||||||
Net cash used in investing activities |
| (5,628 | ) | (76,188 | ) | | (81,816 | ) | ||||||||||||
Cash flows from financing activities |
||||||||||||||||||||
Proceeds from issuance of Convertible Notes |
85,000 | | | | 85,000 | |||||||||||||||
Purchase of 8 1/8 Senior Secured Notes |
(8,230 | ) | | | | (8,230 | ) | |||||||||||||
Payment of issuance costs for Convertible Notes |
(3,414 | ) | | | | (3,414 | ) | |||||||||||||
Shares surrendered for tax withholdings |
(914 | ) | | | | (914 | ) | |||||||||||||
Redemption of variable rate demand revenuebonds related to
the Chattanooga facility |
| (2,290 | ) | | | (2,290 | ) | |||||||||||||
Payments on mortgages |
| | (516 | ) | | (516 | ) | |||||||||||||
Payments on capital leases |
| (228 | ) | (399 | ) | | (627 | ) | ||||||||||||
Change in affiliate debt |
(71,875 | ) | 16,442 | 55,433 | | | ||||||||||||||
Net cash provided by financing activities |
567 | 13,924 | 54,518 | | 69,009 | |||||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
| | 1,238 | | 1,238 | |||||||||||||||
Net change in cash and cash equivalents |
| 16,938 | 600 | | 17,538 | |||||||||||||||
Cash and cash equivalents at beginning of year |
| 37,125 | 35,598 | | 72,723 | |||||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | 54,063 | $ | 36,198 | $ | | $ | 90,261 | ||||||||||
23
Year to Date Ended October 2, 2010 | ||||||||||||||||||||
Guarantor | Non-Guarantor | |||||||||||||||||||
Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Cash flows from operating activities |
||||||||||||||||||||
Net income |
$ | 19,152 | $ | 17,242 | $ | 9,352 | $ | (26,594 | ) | $ | 19,152 | |||||||||
Undistributed equity in earnings of subsidiaries |
(26,594 | ) | | | 26,594 | | ||||||||||||||
Adjustments to reconcile net income to net cash flows: |
||||||||||||||||||||
Depreciation |
| 9,521 | 2,794 | | 12,315 | |||||||||||||||
Amortization of intangible assets |
| 3,046 | 667 | | 3,713 | |||||||||||||||
Amortization and write-offs of deferred financing costs |
536 | | | | 536 | |||||||||||||||
Fixed asset impairment/disposal |
| 92 | 349 | | 441 | |||||||||||||||
Loss on foreign currency, net |
| | 270 | | 270 | |||||||||||||||
Accretion of debt discount |
225 | | | | 225 | |||||||||||||||
Stock based compensation |
| 1,670 | | | 1,670 | |||||||||||||||
Changes in assets and liabilities: |
||||||||||||||||||||
Trade receivables |
| (11,409 | ) | (7,389 | ) | | (18,798 | ) | ||||||||||||
Inventories |
| (5,148 | ) | (3,539 | ) | | (8,687 | ) | ||||||||||||
Accounts payable and accrued liabilities |
5,145 | 15,287 | 6,997 | | 27,429 | |||||||||||||||
Other current assets and liabilities |
| (352 | ) | (400 | ) | | (752 | ) | ||||||||||||
Other operating assets and liabilities |
| (86 | ) | (100 | ) | | (186 | ) | ||||||||||||
Net cash provided by (used in) operating activities |
(1,536 | ) | 29,863 | 9,001 | | 37,328 | ||||||||||||||
Cash flows from investing activities |
||||||||||||||||||||
Purchase of fixed assets |
| (10,570 | ) | (2,155 | ) | | (12,725 | ) | ||||||||||||
Additional purchase price paid for acquisition |
| (645 | ) | (532 | ) | | (1,177 | ) | ||||||||||||
Net cash used in investing activities |
| (11,215 | ) | (2,687 | ) | | (13,902 | ) | ||||||||||||
Cash flows from financing activities |
||||||||||||||||||||
Payment of debt issuance costs |
(265 | ) | | | | (265 | ) | |||||||||||||
Shares surrendered for tax withholdings |
(854 | ) | | | | (854 | ) | |||||||||||||
Payments on mortgages |
| | (481 | ) | | (481 | ) | |||||||||||||
Change in affiliate debt |
2,654 | 1,361 | (4,015 | ) | | | ||||||||||||||
Payment on capital leases |
| (470 | ) | (93 | ) | | (563 | ) | ||||||||||||
Net cash (used in) provided by financing activities |
1,535 | 891 | (4,589 | ) | | (2,163 | ) | |||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
| | (599 | ) | | (599 | ) | |||||||||||||
Net change in cash and cash equivalents |
(1 | ) | 19,539 | 1,126 | | 20,664 | ||||||||||||||
Cash and cash equivalents at beginning of year |
1 | 19,744 | 31,752 | | 51,497 | |||||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | 39,283 | $ | 32,878 | $ | | $ | 72,161 | ||||||||||
24
25
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
| the Companys access to capital, credit ratings, indebtedness, and ability to raise additional capital and operate under the terms of the Companys debt obligations; |
| the risks associated with our debt; |
| the effects of intense competition in the markets in which we operate; |
| the Companys ability to successfully execute, manage and integrate key acquisitions and mergers, including the Bauer Acquisition; |
| the Companys ability to obtain or protect intellectual property rights; |
| the Companys ability to retain existing customers and our ability to attract new customers for growth of our business; |
| the effects of the loss or bankruptcy of or default by any significant customer, suppliers, or other entity relevant to the Companys operations; |
| the Companys ability to successfully pursue the Companys development activities and successfully integrate new operations and systems, including the realization of revenues, economies of scale, cost savings, and productivity gains associated with such operations; |
| the Companys ability to complete cost reduction actions and risks associated with such actions; |
| the Companys ability to control costs; |
| failure of the Companys operating equipment or information technology infrastructure; |
| the Companys ability to achieve its business plans, including with respect to an uncertain economic environment; |
| the effects of unanticipated deficiencies, if any, in the disclosure controls and internal controls of Bauer; |
| changes in employment, environmental, tax and other laws and changes in the enforcement of laws; |
| the accuracy of estimated forecasts of OEM customers and the impact of the current global economic environment on our customers; |
| fluctuations in the costs of raw materials used in our products; |
| the Companys ability to attract and retain key executives and other personnel; |
| work stoppages and other labor issues; |
| changes in the Companys pension and retirement liabilities; |
| the Companys risk of loss not covered by insurance; |
| the outcome of litigation to which the Company is a party from time to time, including product liability claims; |
| changes in accounting rules and standards, audits, compliance with the Sarbanes-Oxley Act, and regulatory investigations; |
| changes in market conditions that would result in the impairment of goodwill or other assets of the Company; |
| changes in market conditions in which we operate that would influence the value of the Companys stock; |
26
| the effects of changes to critical accounting estimates; changes in volatility of the Companys stock price and the risk of litigation following a decline in the price of the Companys stock; |
| the cyclical nature of the markets in which we operate; |
| the risks associated with the global recession and volatility and disruption in the global financial markets; |
| political and economic conditions nationally, regionally, and in the markets in which we operate; |
| natural disasters, war, civil unrest, terrorism, fire, floods, tornadoes, earthquakes, hurricanes, or other matters beyond the Companys control; |
| the risks associated with international operations, including currency risks; |
| the risks associated with the Companys planned investment in a new manufacturing facility in China; and |
| other factors, risks, and uncertainties referenced in the Companys filings with the Securities and Exchange Commission, including the Risk Factors set forth in the Companys Annual Report on Form 10-K for the year ended December 31, 2010. |
27
28
Products | Principal Brands | Principal Markets | Sample Applications | |||
Clutches and Brakes
|
Warner Electric, Wichita Clutch, Formsprag Clutch, Stieber Clutch, Matrix, Inertia Dynamics, Twiflex, Industrial Clutch, Marland Clutch |
Aerospace, energy, material handling, metals, turf and garden, mining | Elevators, forklifts, lawn mowers, oil well draw works, punch presses, conveyors | |||
Gearing
|
Boston Gear, Nuttall Gear, Delroyd, Bauer Gear Motor | Food processing, material handling, metals, transportation | Conveyors, ethanol mixers, packaging machinery, metal processing equipment | |||
Engineered Couplings
|
Ameridrives, Bibby Transmissions, TB Woods | Energy, metals, plastics, chemical | Extruders, turbines, steel strip mills, pumps | |||
Engineered Bearing Assemblies
|
Kilian | Aerospace, material handling, transportation | Cargo rollers, seat storage systems, conveyors | |||
Power
Transmission
Components
|
Warner Electric, Boston Gear, Huco Dynatork, Warner Linear, Matrix, TB Woods | Material handling, metals, turf and garden | Conveyors, lawn mowers, machine tools | |||
Engineered Belted
Drives
|
TB Woods | Aggregate, HVAC, material handling | Pumps, sand and gravel conveyors, industrial fans |
29
30
Quarter Ended | Year to Date Ended | |||||||||||||||
October 1, | October 2, | October 1, | October 2, | |||||||||||||
(In thousands) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Net sales |
$ | 177,853 | $ | 128,930 | $ | 503,095 | $ | 389,624 | ||||||||
Cost of sales |
124,824 | 90,289 | 353,821 | 273,453 | ||||||||||||
Gross profit |
53,029 | 38,641 | 149,274 | 116,171 | ||||||||||||
Gross profit percentage |
29.82 | % | 29.97 | % | 29.67 | % | 29.82 | % | ||||||||
Selling, general and administrative expenses |
31,577 | 22,804 | 84,005 | 65,991 | ||||||||||||
Research and development expenses |
2,801 | 1,746 | 7,544 | 5,156 | ||||||||||||
Restructuring costs |
| 510 | | 2,198 | ||||||||||||
Income from operations |
18,651 | 13,581 | 57,725 | 42,826 | ||||||||||||
Interest expense, net |
6,698 | 4,838 | 18,014 | 14,734 | ||||||||||||
Other non-operating (income) expense, net |
216 | (272 | ) | (668 | ) | 750 | ||||||||||
Income before income taxes |
11,737 | 9,015 | 40,379 | 27,342 | ||||||||||||
Provision for income taxes |
(403 | ) | 2,441 | 8,600 | 8,190 | |||||||||||
Net income |
$ | 12,140 | $ | 6,574 | $ | 31,779 | $ | 19,152 | ||||||||
Quarter Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Net sales |
$ | 177,853 | $ | 128,930 | $ | 48,923 | 37.9 | % |
31
Quarter Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Gross Profit |
$ | 53,029 | $ | 38,641 | $ | 14,388 | 37.2 | % | ||||||||
Gross Profit as a percent of sales |
29.8 | % | 30.0 | % |
Quarter Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Selling, general and
administrative expense
(SG&A) |
$ | 31,577 | $ | 22,804 | $ | 8,773 | 38.5 | % | ||||||||
SG&A as a percent of sales |
17.8 | % | 17.7 | % |
Quarter Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Restructuring Expense |
$ | | $ | 510 | $ | (510 | ) | -100.0 | % |
Quarter Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Interest Expense, net |
$ | 6,698 | $ | 4,838 | $ | 1,860 | 38.4 | % |
32
Quarter Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Other non-operating (income) expense, net |
$ | 216 | $ | (272 | ) | $ | 488 | -179.4 | % |
Quarter Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Provision for income taxes |
$ | (403 | ) | $ | 2,441 | $ | (2,844 | ) | -116.5 | % | ||||||
Provision for income
taxes as a % of income
before income taxes |
-3.4 | % | 27.1 | % |
33
Year to Date Period Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Net sales |
$ | 503,095 | $ | 389,624 | $ | 113,471 | 29.1 | % |
Year to Date Period Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Gross Profit |
$ | 149,274 | $ | 116,171 | $ | 33,103 | 28.5 | % | ||||||||
Gross Profit as a percent of sales |
29.7 | % | 29.8 | % |
Year to Date Period Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Selling, general and
administrative expense
(SG&A) |
$ | 84,005 | $ | 65,991 | $ | 18,014 | 27.3 | % | ||||||||
SG&A as a percent of sales |
16.7 | % | 16.9 | % |
34
Year to Date Period Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Restructuring expenses |
$ | | $ | 2,198 | $ | (2,198 | ) | -100.0 | % |
Year to Date Period Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Interest Expense, net |
$ | 18,014 | $ | 14,734 | $ | 3,280 | 22.3 | % |
Year to Date Period Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Other non-operating (income) expense, net |
$ | (668 | ) | $ | 750 | $ | (1,418 | ) | -189.1 | % |
Year to Date Period Ended | ||||||||||||||||
October 1, | October 2, | |||||||||||||||
2011 | 2010 | Change | % | |||||||||||||
Provision for income taxes |
$ | 8,600 | $ | 8,190 | $ | 410 | 5.0 | % | ||||||||
Provision for income
taxes as a % of income
before income taxes |
21.3 | % | 30.0 | % |
35
Amounts in millions | ||||||||
October 1, | December 31, | |||||||
2011 | 2010 | |||||||
Debt: |
||||||||
Revolving Credit Agreement |
$ | | $ | | ||||
Convertible Notes |
85.0 | | ||||||
Senior Secured Notes |
201.8 | 210.0 | ||||||
Variable rate demand revenue bonds |
3.0 | 5.3 | ||||||
Mortgages |
1.9 | 2.4 | ||||||
Capital leases |
0.6 | 1.3 | ||||||
Total Debt |
$ | 292.3 | $ | 219.0 | ||||
36
37
Year to Date Period Ended | ||||||||||||||||
October 1, | December 31, | |||||||||||||||
(in thousands) | 2011 | 2010 | Change | % | ||||||||||||
Cash and cash equivalents |
$ | 90,261 | $ | 72,723 | $ | 17,538 | 24.1 | % |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
38
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Total Number of | Dollar Value of | |||||||||||||||
Total Number | Average | Shares Purchased as | Shares That May Yet be | |||||||||||||
of Shares | Price Paid per | Part of Publicly | Purchased Under | |||||||||||||
Approximate Period | Purchased (1) | Share | Announced Plans or Programs | The Plans or Programs | ||||||||||||
July 3, 2011 to July 30, 2011 |
| $ | | | $ | | ||||||||||
July 31, 2011 to August 27, 2011 |
41,118 | $ | 17.64 | | $ | | ||||||||||
August 28, 2011 to October 1,
2011 |
10,682 | $ | 15.52 | | $ | |
(1) | We repurchased these shares of common stock in connection with the vesting of certain stock awards to cover minimum statutory withholding taxes. |
39
Item 3. | Defaults Upon Senior Securities |
Item 4. | (Removed and Reserved) |
Item 5. | Other Information |
40
Item 6. | Exhibits |
Exhibit | ||||
Number | Description | |||
3.1 | (1) | Second Amended and Restated Certificate of Incorporation of the Registrant. |
||
3.2 | (2) | Second Amended and Restated Bylaws of the Registrant. |
||
31.1 | * | Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
||
31.2 | * | Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
||
32.1 | ** | Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
||
32.2 | ** | Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
||
101 | *** | The following materials from the Companys Quarterly Report on Form 10-Q for
the quarter ended October 1, 2011, formatted in XBRL (Extensible Business
Reporting Language): (i) the Unaudited Condensed Consolidated Statement of
Earnings, (ii) the Unaudited Condensed Consolidated Balance Sheet, (iii) the
Unaudited Condensed Consolidated Statement of Cash Flows, and (iv) Notes to
Unaudited Condensed Consolidated Financial Statements, tagged as blocks of
text. |
* | Filed herewith. | |
** | Furnished herewith. | |
*** | As provided in Rule 406T of Regulation S-T, this information is furnished herewith and not filed for purposes of sections 11 and 12 of the Securities Act of 1933, as amended, or section 18 of the Securities Exchange Act of 1934, as amended. | |
(1) | Incorporated by reference to Altra Holdings, Inc.s Registration Statement on Form S-1/A, as amended, filed with the Securities and Exchange Commission on December 4, 2006. | |
(2) | Incorporated by reference to Altra Holdings, Inc.s Current Report on form 8-K filed with the Securities and Exchange Commission on October 27, 2008. |
41
ALTRA HOLDINGS, INC. |
||||
November 3, 2011 | By: | /s/ Carl R. Christenson | ||
Name: | Carl R. Christenson | |||
Title President and Chief Executive Officer | ||||
November 3, 2011 | By: | /s/ Christian Storch | ||
Name: | Christian Storch | |||
Title: | Vice President and Chief Financial Officer | |||
November 3, 2011 | By: | /s/ Todd B. Patriacca | ||
Name: | Todd B. Patriacca | |||
Title: | Vice President of Finance, Corporate Controller and Treasurer |
42
Exhibit | ||||
Number | Description | |||
31.1 | Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|||
31.2 | Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|||
32.1 | Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. |
|||
32.2 | Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. |
|||
101 | *** | The following materials from the Companys Quarterly Report
on Form 10-Q for the quarter ended October 1, 2011, formatted
in XBRL (Extensible Business Reporting Language): (i) the
Unaudited Condensed Consolidated Statement of Earnings,
(ii) the Unaudited Condensed Consolidated Balance Sheet,
(iii) the Unaudited Condensed Consolidated Statement of
Cash Flows, and (iv) Notes to Unaudited Condensed
Consolidated Financial Statements, tagged as blocks of
text. |
* | Filed herewith. | |
** | Furnished herewith. | |
*** | As provided in Rule 406T of Regulation S-T, this information is furnished herewith and not filed for purposes of sections 11 and 12 of the Securities Act of 1933, as amended, or section 18 of the Securities Exchange Act of 1934, as amended. |
43
Date: November 3, 2011 | By: | /s/ Carl R. Christenson | ||
Name: | Carl R. Christenson | |||
Title: | President and Chief Executive Officer |
Date: November 3, 2011 | By: | /s/ Christian Storch | ||
Name: | Christian Storch | |||
Title: | Vice President and Chief Financial Officer |
Date: November 3, 2011 | By: | /s Carl R. Christenson | ||
Name: | Carl R. Christenson | |||
Title: | President and Chief Executive Officer |
Date: November 3, 2011 | By: | /s/ Christian Storch | ||
Name: | Christian Storch | |||
Title: | Vice President and Chief Financial Officer | |||
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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data | Oct. 01, 2011 | Dec. 31, 2010 |
---|---|---|
Current assets: | ||
Allowance for doubtful accounts | $ 2,068 | $ 1,111 |
Stockholders' equity: | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 90,000,000 | 90,000,000 |
Common stock, shares issued | 26,596,145 | 26,466,216 |
Common stock, shares outstanding | 26,596,145 | 26,466,216 |
Guarantor Subsidiaries | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 01, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor Subsidiaries [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor Subsidiaries |
17. Guarantor Subsidiaries
All of the Company’s direct and indirect 100% owned U.S. domestic subsidiaries are guarantors
of the Company’s Senior Secured Notes. The following condensed consolidating financial statements
present separately the financial position, results of operations, and cash flows for (a) the
Company, as parent, (b) the guarantor subsidiaries of the Company consisting of all of the,
directly or indirectly, 100% owned U.S. subsidiaries of the Company, (c) the non-guarantor
subsidiaries of the Company consisting of all non-domestic subsidiaries of the Company, and (d)
eliminations necessary to arrive at the Company’s information on a consolidated basis. These
statements are presented in accordance with the disclosure requirements under the Securities and
Exchange Commission’s Regulation S-X, Rule 3-10. Separate financial statements of the Guarantor
Subsidiaries are not presented because their guarantees are full and unconditional and joint and
several.
Unaudited Condensed Consolidating Balance Sheet
October 1, 2011
Condensed Consolidating Balance Sheet
December 31, 2010
Unaudited Condensed Consolidating Statement of Income
Unaudited Condensed Consolidating Statement of Income
Unaudited Condensed Consolidating Statement of Income
Unaudited Condensed Consolidating Statement of Income
Unaudited Condensed Consolidating Statement of Cash Flows
Unaudited Condensed Consolidating Statement of Cash Flows
|
Document and Entity Information (USD $) In Millions, except Share data | 9 Months Ended | ||
---|---|---|---|
Oct. 01, 2011 | Oct. 25, 2011 | Jul. 03, 2010 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | Altra Holdings, Inc. | ||
Entity Central Index Key | 0001374535 | ||
Document Type | 10-Q | ||
Document Period End Date | Oct. 01, 2011 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2011 | ||
Document Fiscal Period Focus | Q3 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 320.3 | ||
Entity Common Stock, Shares Outstanding | 26,812,883 |
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Acquisitions | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 01, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions |
6. Acquisitions
In May 2011, the Company consummated an agreement to acquire substantially all of the assets
and liabilities of Danfoss Bauer GmbH relating to its gear motor business (“Bauer”) for cash
consideration of €43.1 million ($62.3 million). We refer to this transaction as
the Bauer Acquisition. Following closing, the Company made additional
payments in the amount of €4.8 million ($7.0 million) to reflect an adjustment for working capital
and $0.2 million to reflect an adjustment for pension liability.
The total purchase price paid for the Bauer Acquisition was
€48.0 million ($69.50 million).
The
Company’s payment to reflect the working capital adjustment for
Bauer was paid in July 2011. The Company originally included the
working capital adjustment as part of the other liabilities in the
purchase price allocation instead of included as part of
the purchase price of the acquisition. In the quarter ended
October 1, 2011, the Company adjusted the table below to reflect
the $7.0 million working capital payment as a reduction to other
liabilities and an increase in the total purchase price, excluding
acquisition costs. This adjustment has no effect on the amount of
goodwill acquired as part of the Bauer Acquisition.
In
the quarter ended October 1, 2011, the amount of acquired
goodwill the Company received from the Bauer acquisition changed by
$1.4 million due to changes in the Company’s valuation of
fixed assets as well as adjustments to certain reserves.
Through
the Bauer Acquisition, the Company acquired a European manufacturer of high-quality gear motors, offering engineered solutions to
a variety of industries, including material handling, metals, food
processing and energy. With the Bauer Acquisition, in
addition to a presence in Germany, the Company acquired Bauer’s well-established sales network in 15 additional
countries in Western and Eastern Europe, China, and the United States.
The closing date of the Bauer Acquisition was May 29, 2011, and as a result, the Company’s
consolidated financial statements reflect Bauer’s results of operations from the beginning of
business on May 30, 2011 forward. Revenue and net income for the
Bauer activity included in the quarter ended October 1, 2011 were
$30.7 million and $1.0 million, respectively. Revenue and net income for the year to date period
ended October 1, 2011 were $39.5 million and $0.1 million, respectively.
The Company is in the process of completing its final purchase price allocation. The value of
the acquired assets, assumed liabilities and identified intangibles from the acquisition of Bauer,
as presented below, are based upon the Company’s preliminary estimate of the fair value as of the
date of the acquisition. The purchase price allocation as of the acquisition date is as follows:
The excess of the purchase price over the fair value of the net assets acquired was recorded as
goodwill. The Company is currently in the process of analyzing tax deductible goodwill for Bauer.
The Company expects to develop synergies, such as lower cost country sourcing, global procurement,
ability to cross-sell product, as well as penetrating certain geographic areas, as a result of the
acquisition of Bauer.
The estimated amounts recorded as intangible assets consist of the following:
Customer relationships are subject to amortization, and will be recognized on a straight-line
basis over the estimated useful life of 9 years, which represents the anticipated period over which
the Company estimates it will benefit from the acquired assets.
The following table sets forth the unaudited pro forma results of operations of the Company
for the year and quarter to date periods ended October 1, 2011 and October 2, 2010 as if the
Company had acquired Bauer at the beginning of the respective periods. The pro forma information
contains the actual operating results of the Company and Bauer, adjusted to include the pro forma
impact of (i) additional depreciation expense as a result of estimated depreciation based on the
fair value of fixed assets; (ii) additional expense as a result of the estimated amortization of
identifiable intangible assets; (iii) additional interest expense associated with the Convertible
Notes issued on March 7, 2011 in connection with the Bauer Acquisition; (iv) elimination of certain
acquisition related costs; and (v) the elimination of additional expense as a result of a fair
value adjustment to inventory recorded in connection with the acquisition. 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.
|
Pension and Other Employee Benefits | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 01, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension and Other Employee Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension and Other Employee Benefits |
11. Pension and Other Employee Benefits
Defined Benefit (Pension) and Post-retirement Benefit Plans
The Company sponsors various defined benefit (pension) and post-retirement (medical, dental
and life insurance coverage) plans for certain, primarily unionized, active employees.
The following table represents the components of the net periodic benefit cost associated with
the respective plans for the quarter and year to date periods ended October 1, 2011 and October 2,
2010:
The Company made $2.4 million of payments to the pension plan in the year to date period ended
October 1, 2011 of which $0.8 million were required payments.
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Basis of Presentation | 9 Months Ended |
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Oct. 01, 2011 | |
Organization and Nature of Operations/Basis of Presentation [Abstract] | |
Basis of Presentation |
2. Basis of Presentation
The Company was formed on November 30, 2004 following acquisitions of The Kilian Company
(“Kilian”) and certain subsidiaries of Colfax Corporation (“Colfax”). During 2006, the Company
acquired Hay Hall Holdings Limited (“Hay Hall”) and Bear Linear (“Warner Linear”). On April 5,
2007, the Company acquired TB Wood’s Corporation (“TB Wood’s”), and on October 5, 2007, the Company
acquired substantially all of the assets of All Power Transmission Manufacturing, Inc. (“All
Power”). On May 29, 2011, the Company acquired substantially all of the assets of Danfoss Bauer
GmbH relating to its gear motor business (“Bauer”).
The Company’s unaudited condensed consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the information and note
disclosures required by accounting principles generally accepted in the United States of America.
These statements should be read in conjunction with the financial statements and notes thereto
included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. In the
opinion of management, the accompanying unaudited condensed consolidated financial statements
include all adjustments, consisting only of normal recurring adjustments, necessary to present
fairly the Company’s financial position as of October 1, 2011 and December 31, 2010, results of
operations for the quarter and year to date periods ended October 1, 2011 and October 2, 2010, and
cash flows for the year to date periods ended October 1, 2011 and October 2, 2010.
The December 31, 2010 consolidated balance sheet data presented for 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.
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Goodwill and Intangible Assets | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 01, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets |
8. Goodwill and Intangible Assets
Changes to goodwill from December 31, 2010 through October 1, 2011 were as follows:
Other intangible assets as of October 1, 2011 and December 31, 2010 consisted of the
following:
Related
to the Bauer Acquisition, the Company recorded an additional $15.5 million of
intangible assets of which $12.1 million related to customer
relationships, which will be amortized
on a straight line basis over 9 years, and $3.4 million related to tradenames and trademarks which
represents indefinite-lived intangible assets.
The Company recorded $1.7 million and $1.4 million of amortization expense in the quarters
ended October 1, 2011 and October 2, 2010, respectively, and recorded $4.6 million and $3.7 million
of amortization expense in the year to date periods ended October 1, 2011 and October 2, 2010,
respectively.
The estimated amortization expense for intangible assets is approximately $1.7 million for the
remainder of 2011, $6.8 million in 2012, and $6.3 million in each of the next three years and then
$18.0 million thereafter.
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Stockholders' Equity | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 01, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity |
13. Stockholders’ Equity
Stock-Based Compensation
The Company’s Board of Directors established the 2004 Equity Incentive Plan (the “Plan”) that
provides for various forms of stock-based compensation to independent directors, officers and
senior-level employees of the Company. The restricted shares of common stock issued pursuant to
the Plan generally vest ratably over a period ranging from immediately to 5 years, provided that
the vesting of the restricted shares may accelerate upon the occurrence of certain liquidity
events, if approved by the Board of Directors in connection with the transactions. Common stock
awarded under the Plan is generally subject to restrictions on transfer, repurchase rights, and
other limitations and rights as set forth in the applicable award agreements. The shares are
valued based on the share price on the date of grant.
The Plan permits the Company to grant restricted stock, among other things, 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 Personnel and Compensation Committee of the Board of Directors.
Compensation expense recorded during the year to date periods ended October 1, 2011 and October 2,
2010 was $1.9 million and $1.7 million, respectively. Compensation expense recorded during the
quarter to date periods ended October 1, 2011 and October 2, 2010 was $0.6 million and $0.5
million, respectively. Stock-based compensation has been recorded as an adjustment to selling,
general and administrative expenses in the accompanying condensed consolidated statements of
income. Stock-based compensation expense is recognized on a straight-line basis over the vesting
period.
The following table sets forth the activity of the Company’s unvested restricted stock grants
in the year to date period ended October 1, 2011:
Total remaining unrecognized compensation cost was $2.8 million as of October 1, 2011, which
will be recognized over a weighted average remaining period of three years. The fair market value
of the shares in which the restrictions have lapsed during the year to date period ended October 1,
2011 was $3.2 million. Restricted shares granted are valued based on the fair market value of the
stock on the date of grant.
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Warranty Costs | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 01, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warranty Costs/Commitments and Contingencies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warranty Costs |
9. Warranty Costs
The contractual warranty period generally ranges from three months to two years with a few
extending up to thirty-six months based on product and application of the product. Changes in the
carrying amount of accrued product warranty costs for each of the year to date periods ended
October 1, 2011 and October 2, 2010 are as follows:
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Inventories | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 01, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
7. Inventories
Inventories located at certain subsidiaries are stated at the lower of 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 October 1, 2011 and December 31, 2010 consisted of the
following:
Approximately 11% of total inventories were valued using the LIFO method as of October 1, 2011 and
approximately 12% of total inventories were valued using the LIFO method as of December 31, 2010.
The Company recorded a $0.1 million provision as a component of cost of sales to value the
inventory on a LIFO basis for each of the quarters ended October 1, 2011 and October 2, 2010. The
Company recorded a $0.4 million adjustment and $0.2 million adjustment as a component of cost of
sales to value the inventory on a LIFO basis for the year to date periods ended October 1, 2011 and
October 2, 2010, respectively.
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Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) (USD $) In Thousands | 9 Months Ended |
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Oct. 01, 2011 | |
Cash flows from investing activities | |
Cash Acquired from Acquisition | $ 41 |
Fair Value of Financial Instruments | 9 Months Ended |
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Oct. 01, 2011 | |
Fair Value of Financial Instruments [Abstract] | |
Fair Value of Financial Instruments |
3. Fair Value of Financial Instruments
The carrying values of financial instruments, including accounts receivable, cash equivalents,
accounts payable and other accrued liabilities, approximate their fair values due to their
short-term maturities. The carrying amount of the 8 1/8% Senior Secured Notes
(the “Senior Secured Notes”) was $201.8 million and $210.0 million at October 1, 2011 and December 31, 2010, respectively. The
estimated fair value of the Senior Secured Notes at October 1, 2011
and December 31, 2010 was $205.8 million and $221.0 million, respectively, based on quoted market
prices for such notes (level 1).
The
carrying amount of the 2.75% Convertible Notes (the “Convertible
Notes”) was $85.0 million at October 1, 2011. The
estimated fair value of the Convertible Notes (the
at October 1, 2011, was $67.3 million, based on
quoted market prices for such notes (level 1).
Included in cash and cash equivalents as of October 1, 2011 and December 31, 2010 are money
market fund investments of $52.7 million and $34.0 million, respectively, which are reported at
fair value based on quoted market prices for such investments (level 1).
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Recent Accounting Pronouncements | 9 Months Ended |
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Oct. 01, 2011 | |
Recent Accounting Pronouncements [Abstract] | |
Recent Accounting Pronouncements |
4. Recent Accounting Pronouncements
In September 2011, the Financial Accounting Standards Board (FASB) issued guidance to allow
entities to use a qualitative approach to determine whether it is more likely than not that the
fair value of a reporting unit is less than its carrying value. If after performing the
qualitative assessment an entity determines it is not more likely than not that the fair value of a
reporting unit is less than its carrying amount, then performing the two-step impairment test is
unnecessary. However if an entity concludes otherwise, then it is required to perform the first
step of the two-step goodwill impairment test. The amendments are effective for annual and interim
goodwill impairment tests performed for fiscal years beginning after December 15, 2011 with early
adoption permitted. The
Company is currently evaluating the impact of its pending adoption on the consolidated
financial statements.
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Debt [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt |
12. Debt
Outstanding debt obligations at October 1, 2011 and December 31, 2010 were as follows:
Convertible Senior Notes
On March 7, 2011, the Company issued $85.0 million of Convertible Notes
due on March 1, 2031. Interest on the Convertible Notes is payable
semiannually in arrears, on March 1 and September 1 of each year, commencing on September 1, 2011
at an annual rate of 2.75%. Proceeds from the offering were $81.6 million, net of fees and
expenses that were capitalized. The proceeds from the offering were used in part to fund the
Bauer Acquisition and also to bolster the Company’s cash position.
The Convertible Notes will mature on March 1, 2031, unless earlier redeemed, repurchased by
the Company or converted, and are convertible into cash or shares, or a combination thereof, at the
Company’s election. The Convertible Notes are convertible into shares of the Company’s common
stock based on an initial conversion rate, subject to adjustment, of 36.0985 shares per $1,000
principal amount of notes (which represents an initial conversion price of approximately $27.70 per
share of our common stock), in certain circumstances. Prior to March 1, 2030, the Convertible
Notes are convertible only in the following circumstances: (1) during any fiscal quarter commencing
after June 30, 2011 if the last reported sale price of the Company’s common stock is greater than
or equal to 130% of the applicable conversion price for at least 20 trading days in the period of
30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; (2)
during the five business day period after any 10 consecutive trading day period (the “measurement
period”) in which the trading price per $1,000 principal amount of notes for each trading day in
the measurement period was less than 97% of the product of the last reported sale price of the
Company’s common stock and the conversion rate on such trading day; (3) if the Convertible Notes
have been called for redemption; or (4) upon the occurrence of specified corporate transactions.
On or after March 1, 2030, and ending at the close of business on the second business day
immediately preceding the maturity date, holders may convert their Convertible Notes at any time,
regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as
the case may be, cash, shares of common stock, or a combination thereof, at the Company’s election.
The Company intends to settle the principal amount in cash and any additional amounts in shares of
stock.
If a fundamental change occurs, the Convertible Notes are redeemable at a price equal to 100%
of the principal amount of the notes to be repurchased, plus accrued and unpaid interest (including
contingent interest and additional interest, if any) to, but excluding, the repurchase date. The
Convertible Notes are also redeemable on each of March 1, 2018, March 1, 2021, and March 1, 2026
for cash at a price equal to 100% of the principal amount of the notes to be repurchased, plus
accrued and unpaid interest (including contingent interest and additional interest, if any) to, but
excluding, the option repurchase date.
On or after March 1, 2015, the Company may call all or part of the Convertible Notes at a
redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed,
plus accrued and unpaid interest to, but excluding, the redemption date, plus a “make-whole
premium” payment in cash, shares of the Company’s common stock, or combination thereof, at the
Company’s option, equal to the sum of the present values of the remaining scheduled payments of
interest on the Convertible Notes to be redeemed through March 1, 2018 to, but excluding, the
redemption date, if the last reported sale price of the Company’s common stock for 20 or more
trading days in a period of 30 consecutive trading days ending on the trading day prior to the date
the Company provides notice of redemption exceeds 130% of the conversion price in effect on each
such trading day. On or after March 1, 2018, the Company may redeem for cash all or a portion of
the notes at a redemption price of 100% of the principle amount of the Convertible Notes to be
redeemed, plus accrued and unpaid interest (including contingent and additional interest, if any)
to, but not including, the redemption date.
The Company separately accounted for the debt and equity components of the Convertible Notes
to reflect the issuer’s non-convertible debt borrowing rate, which interests costs are to be
recognized in subsequent periods. The note payable principal balance at the date of issuance of
$85.0 million was bifurcated into a debt component of $60.5 million and an equity component of
$24.5 million. The difference between the note payable principal balance and the value of the debt
component is being accreted to interest expense over the term of the notes. The debt component was
recognized at the present value of associated cash flows discounted using a 8.25% discount rate,
the borrowing rate at the date of issuance for a similar debt instrument without a conversion
feature. The Company paid approximately $3.4 million of issuance costs associated with the
Convertible Notes. The Company recorded $1.0 million of debt issuance costs as an offset to
additional paid-in capital. The balance of $2.4 million of debt issuance costs is classified as
other non-current assets and will be amortized over the term of the notes using the effective
interest method.
The carrying amount of the equity component and the principal amount of the liability
component, the unamortized discount, and the net carrying amount are as follows as of October 1,
2011:
Interest expense associated with the Convertible Notes consisted of the following for the year
to date period ended October 1, 2011:
The effective interest yield of the Convertible Notes due in 2031 is 8.5% at October 1, 2011
and the cash coupon interest rate is 2.75%.
Senior Secured Notes
In November 2009, the Company issued 8 1/8% Senior Secured Notes (the
“Senior Secured Notes”) with a face value of $210 million. Interest on the Senior Secured Notes is
payable semi-annually in arrears, on June 1 and December 1 of each year, commencing on June 1, 2010
at an annual rate of 8 1/8%. The effective interest rate of the Senior
Secured Notes was approximately 8.75% after consideration of the $6.7 million of deferred financing
costs (included in other non-current assets) which are being amortized over the term using the
effective interest method. The principal balance of the Senior Secured Notes matures on December
1, 2016.
During
the quarter and year to date period ended October 1, 2011, the Company repurchased
$8.2 million of Senior Secured Notes. The Company repurchased the Senior Secured Notes at a
premium of $0.2 million, which was recorded as part of interest expense in the quarter ended
October 1, 2011. Due to the repurchase of the Senior Secured Notes, the Company also wrote-off a
proportional amount of the deferred financing fees and original issue discount associated with the
Senior Secured Notes totaling $0.3 million which was also recorded as part of interest expense in
the quarter ended October 1, 2011.
The Senior Secured Notes are guaranteed by the Company’s U.S. domestic subsidiaries and are
secured by a second priority lien, subject to first priority liens securing the Revolving Credit
Agreement, on substantially all of the Company’s assets and those of its domestic subsidiaries.
The indenture governing the Senior Secured Notes contains covenants which restrict the Company and
its subsidiaries. These restrictions limit or prohibit, among other things, the Company’s ability
to incur additional indebtedness; repay subordinated indebtedness prior to stated maturities; pay
cash dividends on or redeem or repurchase stock or make other distributions; make investments or
acquisitions; sell certain assets or merge with or into other companies; sell stock in our
subsidiaries; and create liens on their assets. There are no financial covenants associated with
the Senior Secured Notes.
Revolving Credit Agreement
Concurrently with the closing of the offering of the Senior Secured Notes, Altra Industrial
entered into a new senior secured credit facility (the “Revolving Credit Agreement”), that provides
for borrowing capacity in an initial amount of up to $50.0 million (subject to adjustment pursuant
to a borrowing base and subject to increase from time to time in accordance with the terms of the
credit facility). The Revolving Credit Agreement replaced Altra Industrial’s then existing senior
secured credit facility (the “Old Revolving Credit Agreement”), and TB Wood’s existing credit
facility (the “Old TB Wood’s Revolving Credit Agreement”). The Company can borrow up to $37.5
million under the Revolving Credit Agreement without being required to comply with any financial
covenants under the agreement. The Company may use up to $30.0 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 25, 2012.
There were no borrowings under the Revolving Credit Agreement at October 1, 2011 and December
31, 2010, however, the lender had issued $6.6 million and $10.1 million of outstanding letters of
credit on behalf of the Company as of October 1, 2011 and December 31, 2010, respectively.
Altra
Industrial and all of its domestic subsidiaries are borrowers (collectively, “Borrowers”) under the Revolving Credit Agreement. Certain of our existing and subsequently
acquired or organized domestic subsidiaries that are not Borrowers do and will guarantee (on a
senior secured basis) the Revolving Credit Agreement. Obligations of the other Borrowers under the
Revolving Credit Agreement and the guarantees are secured by substantially all of Borrowers’ assets
and the assets of each of our existing and subsequently acquired or organized domestic subsidiaries
that is a guarantor of our obligations under the Revolving Credit Agreement (with such subsidiaries
being referred to as the “U.S. subsidiary guarantors”), including but not limited to: (a) a
first-priority pledge of all the capital stock of subsidiaries held by Borrowers or any U.S.
subsidiary guarantor (which pledge, in the case of any foreign subsidiary, will be limited to 100%
of any non-voting stock and 65% of the voting stock of such foreign subsidiary) and (b) perfected
first-priority security interests in and mortgages on substantially all tangible and intangible
assets of each Borrower and U.S. subsidiary guarantor, including accounts receivable, inventory,
equipment, general intangibles, investment property, intellectual property, certain real property,
and cash and proceeds of the foregoing (in each case subject to materiality thresholds and other
exceptions).
An event of default under the Revolving Credit Agreement would occur in connection with a
change of control, among other things, if: (i) Altra Industrial ceases to own or control 100% of
each of its borrower subsidiaries, or (ii) a change of control occurs under the Senior Secured
Notes, or any other subordinated indebtedness.
An event of default under the Revolving Credit Agreement would also occur if an event of
default occurs under the indentures governing the Senior Secured Notes or if there is a default
under any other indebtedness of any borrower involving an aggregate amount of $10 million or more
and such default: (i) occurs at final maturity of such debt, (ii) allows the lender there under to
accelerate such debt or (iii) causes such debt to be required to be repaid prior to its stated
maturity. An event of default would also occur under the Revolving Credit Agreement if any of the
indebtedness under the Revolving Credit Agreement ceases, with limited exception, to be secured by
a full lien on the assets of Borrowers and guarantors.
Variable Rate Demand Revenue Bonds
In connection with the acquisition of TB Wood’s, the Company assumed obligations for certain
Variable Rate Demand Revenue Bonds outstanding as of the acquisition date. TB Wood’s had assumed
obligations for approximately $3.0 million and $2.3 million of Variable Rate Demand Revenue Bonds
issued under the authority of the industrial development corporations of the City of San Marcos,
Texas and City of Chattanooga, Tennessee, respectively. The Company sold the Chattanooga facility
on April 14, 2011 and redeemed the bonds associated with the facility at the time. The bonds
associated with the San Marcos facility bear a variable interest rate (less than 1% as of October
1, 2011) and mature in April 2024. The bonds were issued to finance a production facility for TB
Wood’s manufacturing operations in the city of San Marcos and are secured by a letter of credit
issued under the terms of the Revolving Credit Agreement.
Mortgage
In June 2006, the Company entered into a mortgage on its building in Heidelberg, Germany with
a local bank. In 2009, the Company refinanced the Heidelberg mortgage and increased the amount
borrowed by an additional €1.0 million. The new mortgage has an interest rate of 2.9% and is
payable in monthly installments over the next six years. As of October 1, 2011 and December 31,
2010, the mortgage had a remaining principal of €1.4 million or $1.9 million, and of €1.8 million
or $2.4 million, respectively.
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
$0.6 million and $1.3 million at October 1, 2011 and December 31, 2010, respectively. Assets
subject to capital leases are included in property, plant and equipment with the related
amortization recorded as depreciation expense.
Overdraft Agreements
Certain of our foreign subsidiaries maintain overdraft agreements with financial institutions.
There were no borrowings as of October 1, 2011 and December 31, 2010 under any of the overdraft
agreements.
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Net Income per Share | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Net Income per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income per Share |
5. Net Income per Share
Basic earnings per share is based on the weighted average number of shares of common stock
outstanding, and diluted earnings per share is based on the weighted average number of shares of
common stock outstanding and all potentially dilutive common stock equivalents outstanding. Common
stock equivalents are included in the per share calculations when the effect of their inclusion
would be dilutive.
The following is a reconciliation of basic to diluted net income per share:
The Company excluded 784,890 shares related to the Convertible Notes (See Note 12) from the above
earnings per share calculation as these shares were anti-dilutive.
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Commitments and Contingencies | 9 Months Ended |
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Oct. 01, 2011 | |
Warranty Costs/Commitments and Contingencies [Abstract] | |
Commitments and Contingencies |
15. Commitments and Contingencies
General Litigation
The Company is involved in various pending legal proceedings arising out of the ordinary
course of business. These proceedings primarily involve commercial claims, product liability
claims, personal injury claims, and workers’ compensation claims. None of these legal proceedings
are expected to have a material adverse effect on the results of operations, cash flows, or
financial condition of the Company. With respect to these proceedings, management believes that the
Company will prevail, has adequate insurance coverage or has established appropriate reserves to
cover potential liabilities. Any costs that management estimates may be paid related to these
proceedings or claims are accrued when the liability is considered probable and the amount can be
reasonably estimated. There can be no assurance, however, as to the ultimate outcome of any of
these matters, and if all or substantially all of these legal proceedings were to be determined
adversely to the Company, there could be a material adverse effect on the results of operations,
cash flows, or financial condition of the Company. As of October 1, 2011 and December 31, 2010,
the Company cannot estimate the likelihood or potential amount of the liability related to these
proceedings. As a result, no amounts were accrued in the accompanying condensed consolidated
balance sheets for potential litigation losses at those dates.
The Company also risks exposure to product liability claims in connection with products it has
sold and those sold by businesses that the Company acquired. Although in some cases third parties
have retained responsibility for product liability claims relating to products manufactured or sold
prior to the acquisition of the relevant business and in other cases the persons from whom the
Company has acquired a business may be required to indemnify the Company for certain product
liability claims subject to certain caps or limitations on indemnification, the Company cannot
assure that those third parties will in fact satisfy their obligations with respect to liabilities
retained by them or their indemnification obligations. If those third parties become unable to or
otherwise do not comply with their respective obligations including indemnity obligations, or if
certain product liability claims for which the Company is obligated were not retained by third
parties or are not subject to these indemnities, the Company could become subject to significant
liabilities or other adverse consequences. Moreover, even in cases where third parties retain
responsibility for product liability claims or are required to indemnify the Company, significant
claims arising from products that have been acquired could have a material adverse effect on the
Company’s ability to realize the benefits from an acquisition, could result in the reduction of the
value of goodwill that the Company recorded in connection with an acquisition, or could otherwise
have a material adverse effect on the
Company’s business, financial condition, or operations.
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Restructuring, Asset Impairment and Transition Expenses | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Restructuring, Asset Impairment and Transition Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring, Asset Impairment and Transition Expenses |
16. Restructuring, Asset Impairment and Transition Expenses
In March 2009, the Company adopted a restructuring plan (“2009 Altra Plan”) to improve the
utilization of the manufacturing infrastructure and to realign the business with the current
economic conditions. The 2009 Altra Plan was intended to improve operational efficiency by
reducing headcount and consolidating facilities. The Company’s total restructuring expense was
$2.2 million for the year to date period ended October 2, 2010. The Company substantially completed
the 2009 Altra Plan in the fourth quarter of 2010.
The Company’s restructuring expense, by major component for the year to date period ended
October 2, 2010, was as follows:
The following is a reconciliation of the accrued restructuring costs between December 31,
2010 and October 1, 2011:
The total restructuring reserve as of October 1, 2011 relates to severance costs to be paid to
employees and is recorded in accruals and other current liabilities on the condensed consolidated
balance sheet. As of October 1, 2011, the Company has incurred $10.0 million of cumulative expense
related to the 2009 Altra Plan. The Company does not expect to incur any additional expenses
associated with the consolidation of facilities under the 2009 Altra Plan for the remainder of
2011.
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Subsequent Events | 9 Months Ended |
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Oct. 01, 2011 | |
Subsequent Events [Abstract] | |
Subsequent Events |
18. Subsequent Events
In October 2011,
the Company repurchased an additional $3.7 million of Senior
Secured Notes at a premium of $0.1 million.
The Company considers events or transactions that occur after the balance sheet date but
before the financial statements are issued to provide additional evidence relative to certain
estimates or to identify matters that require additional disclosure. The Company has evaluated
subsequent events through the date the financial statements were issued and determined that with
the exception of the above repurchase of Senior Secured Notes, no material subsequent events have
occurred that would effect the information presented in these condensed consolidated financial
statements or require additional disclosure.
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Organization and Nature of Operations | 9 Months Ended |
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Oct. 01, 2011 | |
Organization and Nature of Operations/Basis of Presentation [Abstract] | |
Organization and Nature of Operations |
1. Organization and Nature of Operations
Headquartered in Braintree, Massachusetts, Altra Holdings, Inc. (the “Company”), through its
wholly-owned subsidiary Altra Industrial Motion, Inc. (“Altra Industrial”), is a leading
multi-national designer, producer and marketer of a wide range of mechanical power transmission
products. The Company brings together strong brands covering over 50 product lines with production
facilities in nine countries and sales coverage in over 70 countries. The Company’s leading brands
include Boston Gear, Warner Electric, TB Wood’s, Formsprag Clutch, Ameridrives Couplings,
Industrial Clutch, Kilian Manufacturing, Marland Clutch, Nuttall Gear, Stieber Clutch, Wichita
Clutch, Twiflex Limited, Bibby Transmissions, Matrix International, Inertia Dynamics, Huco
Dynatork, Warner Linear, and Bauer Gear Motor.
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Income Taxes | 9 Months Ended |
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Oct. 01, 2011 | |
Income Taxes [Abstract] | |
Income Taxes |
10. Income Taxes
The estimated effective income tax rates recorded for the quarters ended October 1, 2011 and
October 2, 2010, were based upon management’s best estimate of the effective tax rate for the
entire year.
The Company and its subsidiaries file a consolidated federal income tax return in the United
States as well as consolidated and separate income tax returns 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 the tax years prior to 2007.
Additionally, the Company has indemnification agreements with the sellers of the Colfax, Kilian and
Hay Hall entities, which provide for reimbursement to the Company for payments made in satisfaction
of tax liabilities relating to pre-acquisition periods.
During the quarter ended October 1, 2011, the Company recognized a tax benefit for the
reduction of the Company’s reserve for uncertain tax positions
due to a favorable New Jersey Supreme Court ruling in a case that did
not involve the Company. The reserve consisted of approximately $2.3 million of tax, $1.8 million
accrued interest and $0.5 million of penalties. In addition, the Company reversed $1.4 million of
deferred tax assets related to the federal benefit of the accrued state reserve . The net benefit
to the Company is approximately $3.2 million. In addition, the Company released $0.7 million of a
valuation allowance against state income tax attributes. This amount was fully recognized in the
Company’s effective rate for the quarter ended October 1, 2011.
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Concentrations of Credit, Segment Data and Workforce |
14. Concentrations of Credit, Segment Data and Workforce
Financial instruments, which are potentially subject to counter party performance and
concentrations of credit risk, consist primarily of trade accounts receivable. The Company manages
these risks by conducting credit evaluations of customers prior to delivery or commencement of
services. When the Company enters into a sales contract, collateral is normally not required from
the customer. Payments are typically due within thirty days of billing. An allowance for potential
credit losses is maintained, and losses have historically been within management’s expectations.
No customer represented greater than 10% of total sales for each of the quarters ended October 1,
2011 and October 2, 2010.
The Company is also subject to counter party performance risk of loss in the event of
non-performance by counterparties to financial instruments, such as cash and investments. Cash and
investments are held by international or well established financial institutions.
With the acquisition of Bauer, the Company has six operating segments that are regularly
reviewed by our chief operating decision maker. Each of these operating segments represents a unit
that produces mechanical power transmission products. The Company aggregates all of the operating
segments into one reportable segment. The six operating segments have similar long-term average
gross profit margins. All of our products are sold by one global sales force and we have one
global marketing function with the exception of the newly acquired Bauer gear motor business, for
which the Company is developing a plan to integrate sales and marketing activities. Strategic
markets and industries are determined for the entire company and then targeted by the brands. All
of our operating segments have common manufacturing and production processes. Each segment
includes machine shops which use similar equipment and manufacturing techniques. Each of our
segments uses common raw materials, such as aluminum, steel and copper. The Company is in the
process of converging the purchasing process so that these materials are purchased and procurement
contracts are negotiated by one global purchasing function.
We serve the general industrial market by selling to original equipment manufacturers (“OEM”)
and distributors. Our OEM and distributor customers serve the general industrial market. Resource
allocation decisions such as capital expenditure requirements and headcount requirements are made
at a consolidated level and allocated to the individual operating segments.
Discrete financial information is not available by product line at the level necessary for
management to assess performance or make resource allocation decisions.
Net sales to third parties by geographic region are as follows:
Net sales to third parties are attributed to the geographic regions based on the country in
which the shipment originates.
The net assets of our foreign subsidiaries at October 1, 2011 and December 31, 2010 were
$105.3 million and $92.3 million, respectively.
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