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Altra Holdings Announces Financial Results for Fourth Quarter and Year End 2008

March 04, 2009

Mar 4, 2009 (GlobeNewswire via COMTEX News Network) --

  Reports Record Fourth Quarter Recurring EPS of $0.34* and Full Year
                        Recurring EPS of $1.45*

 Recorded $31.8 Million Non-Cash Asset Impairment Charge in the Fourth

          Cash Position Increases 14% to $52 Million in 2008

 * Fourth quarter and full year adjustments to earnings include a
   goodwill impairment charge, restructuring costs, loss on disposal
   of fixed assets, OPEB settlement/curtailment gain, and other one
   time costs which totaled, net of tax, $29.5 million and
   $31.1 million, respectively.

BRAINTREE, Mass., March 4, 2009 (GLOBE NEWSWIRE) -- Altra Holdings, Inc. (Nasdaq:AIMC), a leading global supplier of clutch brakes, couplings, gearing, belted drives and power transmission components, today announced unaudited financial results for the fourth quarter and full year ended December 31, 2008.

Comments on the Fourth Quarter

"Altra delivered record recurring earnings in the fourth quarter, reporting a 54% increase in recurring EPS to $0.34 from the same period in 2007," said Carl Christenson, President and CEO. "The record fourth quarter results demonstrate our ability to quickly adapt to a changing market environment. We were pleased to have achieved this level of profitability despite weakening worldwide end markets and unfavorable foreign exchange rates," continued Christenson.

Financial Results

Net sales for the fourth quarter of 2008 decreased 4% to $144.8 million from $150.9 million in the fourth quarter of 2007. Net sales for the full year ended December 31, 2008 increased 8.7% to $635.3 million from $584.4 million in 2007. Excluding acquisitions, net sales grew by 3.6% year-over-year.

For the fourth quarter of 2008, the Company reported a net loss of $20.7 million, or $0.81 per diluted share, which included a non-cash impairment charge for goodwill (see "Asset Impairment Charge" described below), restructuring charges, fixed asset disposal charges, and an OPEB settlement gain. Excluding these items, fourth-quarter non-GAAP recurring diluted earnings per share were $0.34, an increase of 54% when compared to the prior year (see reconciliation table).

The Company reported net income of $6.5 million, or $0.25 per diluted share, for 2008 compared with net income of $11.5 million, or $0.47 per diluted share, for 2007. Net income for 2008 included the one time items mentioned in the proceeding paragraph. Excluding these items, full-year non-GAAP recurring earnings per share were $1.45 compared with $1.04 in the prior year, an increase of 39%.

Income from operations for the fourth quarter of 2008 decreased to a loss of $15.6 million, from $11.0 million in the fourth quarter of 2007. Excluding the $31.8 million goodwill impairment charge, $1.2 million in restructuring charges, $1.4 million in loss on disposal of assets and a $0.6 million OPEB settlement gain, non-GAAP recurring income from operations was $18.2 million, or 12.6% of sales, for the fourth quarter of 2008. Income from operations for the full year decreased 25.2% to $45.5 million from $60.8 million in 2007. Excluding the $31.8 million goodwill impairment charge, $2.3 million in restructuring charges, $1.6 million in loss on disposal of assets and $0.9 million OPEB settlement/curtailment gain, non-GAAP recurring income from operations for 2008 was $80.3 million, or 12.6% of sales, an increase of 21.9%.

Other income was $3.4 million and $6.2 million for the fourth quarter and the full year, respectively. The increase compared to the prior year was driven mainly by favorable foreign currency translation and transaction gains.

Cash and cash equivalents increased 13.7% to $52.1 million at December 31, 2008 from $45.8 million at December 31, 2007.

Asset Impairment Charge

The Company performed its annual impairment test on goodwill and indefinite life intangible assets during the fourth quarter as required under U.S. GAAP. The tests were performed at the business unit reporting level to evaluate the unit's carrying value compared with an estimate of its fair market value. As a result of significant declines in macroeconomic market conditions, there has been a substantial decline in global equity valuations and the Company's market capitalization. Based on the results of our current valuation, the Company recorded a $31.8 million non-cash goodwill impairment charge in the fourth quarter of 2008, largely relating to the TB Wood's reporting unit which was acquired by the Company in 2007. This goodwill impairment charge is a non-cash item and does not impact the Company's existing debt covenants or its borrowing capacity under current credit agreements.

Business Outlook

"During November and December of 2008 we saw a significant change in economic conditions both in North America and internationally as most of our end markets experienced dramatic downturns," said Christenson. "We are going to utilize this downturn as an opportunity to improve the structure and operations of the Company. In addition, we will continue to invest in new product and new business initiatives to gain market share. We believe we are taking the right steps to effectively manage through this difficult environment in 2009," continued Christenson.

"We are taking swift and aggressive actions to reduce our expenses and maximize near-term profitability. Our cost-reduction initiatives are centered on three areas: overall payroll reductions, plant consolidations and procurement cost reductions. At the same time, we are continuing our strong focus on working capital management and cash generation," added Christenson.

"Through February we have reduced our worldwide staffing levels by 400 positions, or 12%. We also have announced a general hiring freeze, frozen salaries and wages where possible, eliminated selected benefits, reduced work weeks, required salaried furloughs and several other payroll cost reduction initiatives. We expect that the payroll savings from these and other actions will be approximately $30 million in 2009," continued Christenson.

"We are requiring cost reductions from every supplier and service provider and have been successful reducing our procurement costs," added Christenson. "We expect that the savings will begin during the first quarter of 2009 and continue to ramp up throughout the year. From this initiative, we have targeted annual savings of $10 million for the year."

"In addition, as part of our ongoing efforts to improve the utilization of our manufacturing infrastructure, we will be closing up to six manufacturing facilities during the next 18 months," said Christenson. "We expect the cost of consolidating these facilities will total $10 to $12 million and will result in annual savings of $6 to $7 million.

"Therefore, we are expecting total savings of $40 million in 2009 or approximately $50 million on an annualized basis.

"We are not anticipating a general economic recovery this year and are implementing cost changes necessary to operate in an environment similar to what we have been experiencing for the last several months. Our strong cash position and the structure of our debt agreements provide us with significant financial flexibility and liquidity as we weather this downturn," concluded Christenson.

Based on these assumptions, the Company is forecasting 2009 sales in the range of $460 million to $500 million and recurring EPS of $0.25 to $0.45 for the full year. The Company expects capital expenditures in the range of $6 to $8 million, depreciation and amortization in the range of $20 to $22 million, net interest expense of $25 to $26 million, and a tax rate of approximately 35.0%. The Company is also projecting 2009 cash flow from operations (excluding restructuring) to be in the range of $30 to $40 million.

                        Altra Holdings, Inc.

                                ------------------  ------------------
 Consolidated Statements of
  Income (Loss) Data:             Quarter Ended         Year Ended
 In Thousands of Dollars,       Dec. 31,  Dec. 31,  Dec. 31,  Dec. 31,
  except per share amounts        2008      2007      2008      2007
                                --------  --------  --------  --------

 Net sales                      $144,813  $150,864  $635,336  $584,376
 Cost of sales                   102,727   108,443   449,244   419,109
                                --------  --------  --------  --------
  Gross profit                  $ 42,086  $ 42,421  $186,092  $165,267
  Gross profit as a percent of
   net sales                        29.1%     28.1%     29.3%     28.3%
 Selling, general &
  administrative expenses         22,562    25,825    99,185    93,211
 Research and development
  expenses                         1,429     1,612     6,589     6,077
 Goodwill impairment charge       31,810        --    31,810        --
 Loss (gain) on settlement/
  curtailment of benefit plans      (649)    2,745      (925)    2,745
 Loss on sale/disposal of
  assets                           1,391        --     1,584        --
 Restructuring expense             1,161     1,219     2,310     2,399
                                --------  --------  --------  --------
  Income (loss) from operations $(15,618) $ 11,020  $ 45,539  $ 60,835
  Income from operations as a
   percent of net sales            -10.8%      7.3%      7.2%     10.4%
 Interest expense, net             5,883     7,274    28,339    38,554
 Other non-operating (income)
  expense, net                    (3,362)       90    (6,249)      612
                                --------  --------  --------  --------
  Income (loss) from continuing
   operations before income
   taxes                        $(18,139) $  3,656  $ 23,449  $ 21,669
 Provision for income taxes        2,604     1,723    16,731     8,208
                                --------  --------  --------  --------
 Income tax rate                   -14.4%     47.1%     71.4%     37.9%
  Net income (loss) from
   continuing operations         (20,743)    1,933     6,718    13,461
 Net loss from discontinued
  operations, net of taxes of
  $5,507, $43 and $6,109,
  respectively                        --    (3,353)     (224)   (2,001)
                                --------  --------  --------  --------
   Net income (loss)            $(20,743) $ (1,420) $  6,494  $ 11,460
                                ========  ========  ========  ========

 Weighted Average common shares
  Basic                           25,549    25,110    25,496    23,579
  Diluted                         25,549    26,105    26,095    24,630

 Earnings per share - Basic
  Net income (loss) from
   continuing operations        $  (0.81) $   0.08  $   0.26  $   0.57
  Net loss from discontinued
   operations                         --     (0.14)    (0.01)    (0.08)
                                --------  --------  --------  --------
   Net income (loss)            $  (0.81) $  (0.06) $   0.25  $   0.49

 Earnings per share - Diluted
  Net income (loss) from
   continuing operations        $  (0.81) $   0.07  $   0.26  $   0.55
  Net loss from discontinued
   operations                         --     (0.12)    (0.01)    (0.08)
                                --------  --------  --------  --------
   Net income (loss)            $  (0.81) $  (0.05) $   0.25  $   0.47

 Other Financial Data:
  Depreciation & amortization      4,313     5,562    21,068    21,939
  Capital expenditures             7,055     4,830    19,289    11,633

 Reconciliation of Recurring
  Net Income:

  Net income (loss) from
   continuing operations        $(20,743) $  1,933  $  6,718  $ 13,461

  Restructuring charges, net of
   tax                               753       792     1,503     1,559
  Non-cash goodwill impairment
   charge, net of tax             28,379        --    28,379        --
  Premium & deferred financing
   expense eliminated on
   redeemed 11.25% bonds, net
   of tax                             --        --        77     6,607
  Former executive separation
   costs, net of tax                  --       969        --       969
  Loss on sale/disposal of
   assets, net of tax                829        --       829        --
  Premium, deferred financing
   expense and original issue
   discount eliminated on
   redeemed 9% bonds, net of
   tax                                --        --       945        --
  Loss (gain) on curtailment/
   settlement of benefit plans      (421)    1,784      (604)    1,784
  Gain on the sale of
   securities, net of tax             --        --      (141)       --
  Amortization of inventory fair
   value adjustment, net of tax       --       205        --       641
  Accelerated vesting of stock
   compensation (for ex
   director), net of tax              --        --        --       178
  Bridge financing fee on TB
   Woods acquisition, net of tax      --        --        --       305
  Deferred financing expense
   eliminated on pay down of TB
   Wood's revolving credit
   facility, net of tax               --        --       100        --
                                --------  --------  --------  --------
   Recurring net income         $  8,797  $  5,683  $ 37,806  $ 25,504
                                ========  ========  ========  ========

 Recurring diluted earnings per
  share                         $   0.34  $   0.22  $   1.45  $   1.04
                                ========  ========  ========  ========

 Consolidated Balance Sheets                December 31,  December 31,
 In Thousands of Dollars                        2008          2007

  Current Assets
   Cash and cash equivalents                      52,073        45,807
   Trade Receivables, net                         68,803        73,248
   Inventories, net                               98,410       101,835
   Deferred income taxes                           8,032         8,286
   Receivable from sale of Electronics
    Division                                          --        17,100
   Prepaid expenses and other                      6,514         5,578
   Assets held for sale                            4,676         4,728
                                            ------------  ------------
 Total current assets                            238,508       253,015
   Property, plant and equipment, net            110,220       113,043
   Intangible assets, net                         79,339        88,943
   Goodwill                                       77,497       114,979
   Deferred income taxes                             495           231
   Other assets                                    7,525         6,747
                                            ------------  ------------
 Total assets                               $    513,584  $    580,525
                                            ============  ============

 Liabilities and stockholders' equity
  Current liabilities
   Accounts payable                               33,890        41,668
   Accrued payroll                                16,775        16,988
   Accruals and other liabilities                 18,755        22,001
   Deferred income taxes                           6,906         8,060
   Current portion of long-term debt               3,391         2,667
                                            ------------  ------------
  Total current liabilities                       79,717        91,384
   Long-term debt, less current portion and
    net of unaccreted discount and premium       258,132       291,399
   Deferred income taxes                          23,336        24,490
   Pension liabilities                            11,854        13,431
   Other post retirement benefits                  2,270         3,170
   Long-term taxes payable                         7,976         5,911
   Other long-term liabilities                     1,434         4,308
                                            ------------  ------------
 Total stockholders' equity                      128,865       146,432
                                            ------------  ------------
 Total liabilities and stockholders' equity $    513,584  $    580,525
                                            ============  ============

The Company will conduct an investor conference call on March 5, 2009 at 11:00 AM EST to discuss its unaudited 2008 fourth quarter and full year financial results. The public is invited to listen to the conference call by dialing 800-862-9098 domestically or 785-424-1051 for international access, and asking to participate in Conference ID# ALTRA. Also, the Company has posted slides on its web site at http://www.altramotion.com in the Investor Relations Section in the Events & Presentations tab to help the participants better follow the discussion. A replay of the recorded conference call will be available until midnight on March 12, 2009. To listen to the replay, dial 800-388-9074 domestically or 402-220-1117 for international access.

Altra Holdings, Inc., through its wholly-owned subsidiary Altra Industrial Motion, Inc., is a leading multinational designer, producer and marketer of a wide range of mechanical power transmission products. The Company brings together strong brands covering over 40 product lines with production facilities in eight countries and sales coverage in over 70 countries. Our leading brands include Boston Gear, Warner Electric, TB Wood's, Formsprag Clutch, Ameridrives Couplings, Industrial Clutch, Kilian Manufacturing, Marland Clutch, Nuttall Gear, Stieber Clutch, Wichita Clutch, Twiflex Limited, Bibby Transmissions, Matrix International, Inertia Dynamics, Huco Dynatork and Warner Linear.

Discussion of Non-GAAP Measures

As used in this news release and the accompanying slides posted on the Company's website, non-GAAP recurring diluted earnings per share, non-GAAP recurring income from operations and non-GAAP recurring net income are each calculated using net income from continuing operations that excludes premiums and interest expense associated with the extinguishment of debt, OPEB and pension settlement gains and losses, restructuring charges and goodwill impairment that management does not consider to be directly related to the Company's core operating performance. Non-GAAP recurring diluted earnings per share is calculated by dividing non-GAAP recurring net income by GAAP weighted average shares outstanding (diluted).

Altra believes that the presentation of non-GAAP recurring net income, non-GAAP recurring income from operations and non-GAAP recurring diluted earnings per share provides important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations.

Forward Looking Statements

All statements, other than statements of historical fact included in this release are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are based on financial data, market assumptions and business plans available only as of the time the statements are made, which may become out of date or incomplete. Forward-looking statements are inherently uncertain, and investors must recognize that events could differ significantly from our expectations.

In addition to the risks and uncertainties noted in this release, there are certain factors that could cause actual results to differ materially from those anticipated by some of the statements made. These include: (1) competitive pressures, (2) changes in economic conditions in the U.S. and abroad and the cyclical nature of our markets, (3) loss of distributors, (4) the ability to develop new products and respond to customer needs, (5) risks associated with international operations, including currency risks, (6) accuracy of estimated forecasts of OEM customers and the impact of the current global economic environment on our customers, (7) fluctuations in the costs of raw materials used in our products, (8) product liability claims, (9) work stoppages and other labor issues, (10) changes in employment, environmental, tax and other laws and changes in the enforcement of laws, (11) loss of key management and other personnel, (12) changes in pension and retirement liabilities, (13) the ability to achieve business plans, including with respect to an uncertain economic environment, (14) the ability to successfully execute, manage and integrate key acquisitions and mergers,(15) failure to obtain or protect intellectual property rights, (16) risks associated with impairment of goodwill or intangibles assets, (17) failure of operating equipment or information technology infrastructure, (18) risks associated with our debt leverage and operating covenants under our debt instruments, (19) risks associated with the global recession and volatility and disruption in the global financial markets, (20) our ability to complete cost reduction actions and risks associated with such actions, and (21) other risks, uncertainties and other factors described in the Company's quarterly reports on Form 10-Q and annual reports on Form 10-K and in the Company's other filings with the U.S. Securities and Exchange Commission (SEC) or in materials incorporated therein by reference. Altra Holdings, Inc. is under no obligation to, and expressly disclaims any obligation to, update or alter its forward looking statements, whether as a result of new information, future events or otherwise. AIMC-E

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Altra Holdings, Inc.

Altra Holdings, Inc.
          Christian Storch, Chief Financial Officer

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