Altra Industrial Motion Corp. (Form: 10-Q, Received: 07/24/2020 17:12:28)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2020

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

For the transition period from to

Commission File Number: 001-33209

ALTRA INDUSTRIAL MOTION CORP.

(Exact name of registrant as specified in its charter)

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

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

(781) 917-0600

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

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

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

As of July 21, 2020, there were 64,655,978 outstanding shares of the registrant’s common stock, $0.001 par value per share.

TABLE OF CONTENTS

		Page #
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statement of Operations	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Statements of Cash Flows	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Notes to Unaudited Condensed Consolidated Interim Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	37
Item 6.	Exhibits	37

SIGNATURES		38

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ALTRA INDUSTRIAL MOTION CORP.

Condensed Consolidated Balance Sheets

Amounts in millions, except share amounts

	June 30, 2020			December 31, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	220.1		$	167.3
Trade receivables, less allowance for credit losses of $5.7 and $5.1 million at June 30, 2020 and December 31, 2019, respectively		230.6			243.2
Inventories		223.1			222.5
Income tax receivable		6.4			5.2
Prepaid expenses and other current assets		35.8			29.1
Total current assets		716.0			667.3
Property, plant and equipment, net		339.7			354.4
Goodwill		1,543.0			1,694.9
Intangible assets, net		1,450.4			1,502.4
Deferred income taxes		1.0			3.0
Other non-current assets		9.2			25.1
Operating lease right of use assets		41.4			36.6
Total assets	$	4,100.7		$	4,283.7
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	140.1		$	154.7
Accrued payroll		57.3			58.3
Accruals and other current liabilities		75.7			82.0
Income tax payable		11.9			13.2
Current portion of long-term debt		17.0			18.0
Operating lease liabilities		13.0			13.5
Total current liabilities		315.0			339.7
Long-term debt - less current portion		1,535.6			1,563.8
Deferred income taxes		368.2			369.1
Pension liabilities		30.5			30.8
Long-term taxes payable		2.7			4.5
Other long-term liabilities		9.8			28.8
Operating lease liabilities, net of current portion		30.4			24.7
Commitments and Contingencies (Note 16)
Stockholders’ equity:
Common stock ($0.001 par value per share, 120,000,000 shares authorized, 64,575,115 and 64,222,603 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively)		0.1			0.1
Additional paid-in capital		1,701.8			1,696.7
Retained earnings		206.7			315.4
Accumulated other comprehensive loss		(100.1	)		(89.9	)
Total stockholders’ equity		1,808.5			1,922.3
Total liabilities and stockholders’ equity	$	4,100.7		$	4,283.7

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

ALTRA INDUSTRIAL MOTION CORP.

Condensed Consolidated Statements of Operations

Amounts in millions, except per share data

	Quarter Ended				Year to Date Ended
	June 30, 2020		June 30, 2019		June 30, 2020			June 30, 2019
	(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)
Net sales	$	400.8	$	466.5	$	835.0		$	949.3
Cost of sales		257.4		299.5		538.6			607.4
Gross profit		143.4		167.0		296.4			341.9
Operating expenses:
Selling, general and administrative expenses		75.8		92.0		162.9			182.9
Impairment of goodwill and intangible asset		—		—		147.5			—
Research and development expenses		14.0		14.7		28.8			30.0
Restructuring costs		1.5		3.2		3.1			5.5
		91.3		109.9		342.3			218.4
(Loss)/Income from operations		52.1		57.1		(45.9	)		123.5
Other non-operating income and expense:
Interest expense, net		18.8		18.6		36.2			38.4
Other non-operating expense, net		2.5		0.4		1.1			1.5
		21.3		19.0		37.3			39.9
(Loss)/Income before income taxes		30.8		38.1		(83.2	)		83.6
Provision for income taxes		9.1		9.1		11.8			19.4
Net (loss)/income	$	21.7	$	29.0	$	(95.0	)	$	64.2
Weighted average shares, basic		64.6		64.3		64.5			64.3
Weighted average shares, diluted		64.7		64.5		64.5			64.5
Net (loss)/income per share:
Basic	$	0.34	$	0.45	$	(1.47	)	$	1.00
Diluted	$	0.34	$	0.45	$	(1.47	)	$	1.00
Cash dividend declared per share	$	0.04	$	0.17	$	0.21		$	0.34

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

ALTRA INDUSTRIAL MOTION CORP.

Condensed Consolidated Statements of Comprehensive Income

(Amounts in millions)

	Quarter Ended						Year to Date Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net Income/(loss)	$	21.7		$	29.0		$	(95.0	)	$	64.2
Other Comprehensive income:
Foreign currency translation adjustment		27.2			4.9			(31.1	)		(7.6	)
Change in pension liability adjustment		—			—			(0.1	)		(0.3	)
Non-cash amortization of interest rate swap expense, net of tax		1.7			—			1.7			—
Change in fair value of derivative financial instruments, net of tax		(0.2	)		(14.0	)		19.3			(2.5	)
Total other comprehensive income/(loss):		28.7			(9.1	)		(10.2	)		(10.4	)
Comprehensive income/(loss)	$	50.4		$	19.9		$	(105.2	)	$	53.8

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

ALTRA INDUSTRIAL MOTION CORP.

Condensed Consolidated Statements of Cash Flows

(Amounts in millions)

	Year to Date Ended
	June 30, 2020			June 30, 2019
	(Unaudited)			(Unaudited)
Cash flows from operating activities
Net (loss)/income	$	(95.0	)	$	64.2
Adjustments to reconcile net income to net operating cash flows:
Depreciation		29.3			28.9
Amortization of intangible assets		34.8			35.4
Amortization of deferred financing costs		2.3			2.3
Accretion of debt discount		0.2			—
Non-cash amortization of interest rate swap expense		2.2			—
Impairment of goodwill and intangible asset		147.5			—
Payment for interest rate swap settlement		(34.7	)		—
(Gain)/Loss on foreign currency, net		(0.1	)		0.8
Loss on disposal and other		—			0.2
Stock-based compensation		7.1			7.0
Changes in assets and liabilities:
Trade receivables		10.9			(10.2	)
Inventories		(3.6	)		(6.3	)
Accounts payable, accrued payroll, accruals and current liabilities		(10.8	)		(20.2	)
Other current assets and liabilities		(14.6	)		(4.5	)
Other operating assets and liabilities		(1.8	)		(1.5	)
Net cash provided by operating activities		73.7			96.1
Cash flows from investing activities
Purchase of property, plant and equipment		(17.3	)		(24.1	)
A&S acquisition purchase price adjustment		—			(13.5	)
Proceeds from cross currency interest rate swap settlement		56.2			0.3
Net cash provided by (used in) investing activities		38.9			(37.3	)
Cash flows from financing activities
Borrowing under Revolving Credit Facility		100.0			—
Payments on Revolving Credit Facility		(100.0	)		—
Payments on Term Loan Facility		(30.0	)		(50.0	)
Dividend payments		(22.3	)		(22.0	)
Net payments on financing leases, mortgages, and other obligations		(0.2	)		(0.5	)
Net proceeds/(payments) from China debt		(0.6	)		2.4
Shares surrendered for tax withholding		(2.0	)		(2.3	)
Net cash used in financing activities		(55.1	)		(72.4	)
Effect of exchange rate changes on cash and cash equivalents		(4.7	)		(1.8	)
Net change in cash and cash equivalents		52.8			(15.4	)
Cash and cash equivalents at beginning of period		167.3			169.0
Cash and cash equivalents at end of period	$	220.1		$	153.6
Cash paid during the period for:
Interest paid on borrowings	$	31.7		$	35.3
Income taxes paid	$	22.8		$	24.4

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

ALTRA INDUSTRIAL MOTION CORP.

Condensed Consolidated Statements of Stockholders’ Equity

Amounts in millions

(Unaudited)

	Common Stock		Shares		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at January 1, 2020	$	0.1		64.2	$	1,696.7	$	315.4		$	(89.9	)	$	1,922.3
Stock-based compensation and vesting of restricted stock, net of withholdings		—		0.4		5.1		—			—			5.1
Net loss		—		—		—		(95.0	)		—			(95.0	)
Dividends declared, $0.21 per share		—		—		—		(13.7	)		—			(13.7	)
Change in fair value of derivative financial instruments, net of tax		—		—		—		—			19.3			19.3
Non-cash amortization of interest rate swap expense, net of tax											1.7			1.7
Minimum pension adjustment, net of tax		—		—		—		—			(0.1	)		(0.1	)
Cumulative foreign currency translation adjustment		—		—		—		—			(31.1	)		(31.1	)
Balance at June 30, 2020	$	0.1		64.6	$	1,701.8	$	206.7		$	(100.1	)	$	1,808.5
Balance at March 31, 2020	$	0.1		64.6	$	1,698.1	$	187.7		$	(128.8	)	$	1,757.1
Stock-based compensation and vesting of restricted stock, net of withholdings		—		—		3.7		—			—			3.7
Net income		—		—		—		21.7			—			21.7
Dividends declared, $0.04 per share		—		—		—		(2.7	)		—			(2.7	)
Change in fair value of derivative financial instruments, net of tax		—		—		—		—			(0.2	)		(0.2	)
Non-cash amortization of interest rate swap expense, net of tax											1.7			1.7
Minimum pension adjustment, net of tax		—		—		—		—			—			—
Cumulative foreign currency translation adjustment		—		—		—		—			27.2			27.2
Balance at June 30, 2020	$	0.1		64.6	$	1,701.8	$	206.7		$	(100.1	)	$	1,808.5

	Common Stock		Shares		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at January 1, 2019	$	0.1		64.2	$	1,687.1	$	232.6		$	(71.6	)	$	1,848.2
Stock-based compensation and vesting of restricted stock, net of withholdings		—		0.1		4.7		—			—			4.7
Net income		—		—		—		64.2			—			64.2
Dividends declared, $0.34 per share		—		—		—		(22.3	)		—			(22.3	)
Change in fair value of derivative financial instruments, net of tax		—		—		—		—			(2.5	)		(2.5	)
Minimum pension adjustment, net of tax		—		—		—		—			(0.3	)		(0.3	)
Cumulative foreign currency translation adjustment		—		—		—		—			(7.6	)		(7.6	)
Balance at June 30, 2019	$	0.1		64.3	$	1,691.8	$	274.5		$	(82.0	)	$	1,884.4
Balance at March 31, 2019	$	0.1		64.3	$	1,688.5	$	256.7		$	(72.9	)	$	1,872.4
Stock-based compensation and vesting of restricted stock, net of withholdings		—		—		3.3		—			—			3.3
Net income		—		—		—		29.0			—			29.0
Dividends declared, $0.17 per share		—		—		—		(11.2	)		—			(11.2	)
Change in fair value of derivative financial instruments, net of tax		—		—		—		—			(14.0	)		(14.0	)
Minimum pension adjustment, net of tax		—		—		—		—			—			—
Cumulative foreign currency translation adjustment		—		—		—		—			4.9			4.9
Balance at June 30, 2019	$	0.1		64.3	$	1,691.8	$	274.5		$	(82.0	)	$	1,884.4

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

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

1. Organization and Nature of Operations

Headquartered in Braintree, Massachusetts, Altra Industrial Motion Corp. (the “Company,” “Altra,” “we,” or “our”) is a leading global designer, producer and marketer of a wide range of electro-mechanical power transmission and motion control products. The Company brings together strong brands with production facilities in seventeen countries. Altra’s leading brands include Ameridrives Couplings, Bauer Gear Motor, Bibby Turboflex, Boston Gear, Delroyd Worm Gear, Formsprag Clutch, Guardian Couplings, Huco, Industrial Clutch, Inertia Dynamics, Jacobs Vehicle Systems, Kilian Manufacturing, Kollmorgen, Lamiflex Couplings, Marland Clutch, Matrix, Nuttall Gear, Portescap, Stieber Clutch, Stromag, Svendborg Brakes, TB Wood’s, Thomson, Twiflex, Warner Electric, Warner Linear, and Wichita Clutch.

2. Basis of Presentation

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the United States, or GAAP. These statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 27, 2020 (the “2019 Annual Report on Form 10-K”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company’s financial position and cash flows for the interim periods presented. The results are not necessarily indicative of future results. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure.

3. Recent Accounting Standards

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the use of the current expected credit loss impairment model to estimate credit losses on certain types of financial instruments, including trade receivables. The model requires an estimate of expected credit losses, measured over the contractual life of an asset, that considers information about past events, current conditions and a forecast of future economic conditions. The Company adopted the standard on January 1, 2020. The adoption of the standard did not have a material impact on our consolidated financial statements.

As a result of the adoption of ASU 2016-13, the Company has updated its significant accounting policy related to trade account receivables and allowances for credit losses as of March 31, 2020 from what was previously disclosed in our audited financial statements for the year ended December 31, 2019 as follows:

All trade account receivables are reported net of allowances for credit losses. The allowances for credit losses represent management’s best estimate of the credit losses expected from our trade account receivables over the life of the underlying assets. Assets with similar risk characteristics are pooled together for determination of their current expected credit losses. We regularly perform detailed reviews of our pooled assets to evaluate the collectability of receivables based on a combination of past, current, and future financial and qualitative factors that may affect customers’ ability to pay. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements. The Company adopted the standard on January 1, 2020. The adoption of the standard did not have a material impact on our consolidated financial statements.

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). This ASU provides relief from certain accounting consequences that could result from the global markets’ anticipated transition away from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The relief provided by this ASU is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The optional amendments are effective as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the effect of the adoption of this standard to the Company.

4. Revenue Recognition

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

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

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

	Quarter Ended						Year to Date Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Net Sales:
Power Transmission Technologies	$	196.3		$	234.9		$	413.0		$	469.8
Automation & Specialty		205.8			233.3			424.4			482.4
Inter-segment eliminations		(1.3	)		(1.7	)		(2.4	)		(2.9	)
Net sales	$	400.8		$	466.5		$	835.0		$	949.3

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

	Net Sales
	Quarter Ended				Year to Date Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
North America (primarily U.S.)	$	205.8	$	269.8	$	451.1	$	542.8
Europe excluding Germany		71.3		79.9		146.1		161.7
Germany		44.1		56.8		96.6		119.0
Asia and other		79.6		60.0		141.2		125.8
Total	$	400.8	$	466.5	$	835.0	$	949.3

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

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

A contract asset is created when the Company satisfies a performance obligation by transferring a promised good to the customer. Contract assets may represent conditional or unconditional rights to consideration. A right is conditional, and recorded as a contract asset, if, for example, the Company must first satisfy another performance obligation in the contract before it is entitled to payment from the customer. Contract assets are transferred to accounts receivable once the right becomes unconditional. A right is unconditional if nothing other than the passage of time is required before payment of that consideration is due. If the Company receives a customer payment prior to satisfying a performance obligation or in excess of estimates of what the Company expects to be entitled to, the payment is recorded as a contract liability. Contracts with payment in arrears are recognized as receivables.

The opening and closing balances of the Company’s contract liability and accounts receivable as of the year to date period ended June 30, 2020 are as follows:

	Deferred Revenue (Current)		Accounts Receivable
Beginning - January 1, 2020	$	8.4	$	243.2
Closing - June 30, 2020		12.5		230.6
Increase/(Decrease)	$	4.1	$	(12.6	)

	Deferred Revenue (Current)		Accounts Receivable
Beginning - January 1, 2019	$	7.4	$	259.8
Closing - June 30, 2019		8.1		269.6
Increase/(Decrease)	$	0.7	$	9.8

In the six-month period ended June 30, 2020, substantially all outstanding revenue has been recognized related to contract liabilities outstanding at January 1, 2020.

5. Fair Value of Financial Instruments

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

•

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

•

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

•

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

The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents and are classified as Level 1.

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

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

The carrying values of financial instruments, including cash equivalents, accounts payable, and other accrued liabilities are carried at cost, which approximates fair value. Debt under the Altra Credit Agreement (as defined herein) is comprised of the Altra Term Loan Facility and the Altra Revolving Credit Facility (both as defined herein). The carrying amount of the Altra Term Loan Facility was $1,160.0 million and the estimated fair value of the Altra Term Loan Facility was $1,113.6 million at June 30, 2020. There is currently no debt under the Altra Revolving Credit Facility. Further, the Altra Credit Agreement was negotiated in October 2018 and there have not been any significant changes in our credit rating. The carrying amount of the Notes (as defined herein) was $400 million and the estimated fair value of the Notes was $416.0 million at June 30, 2020.

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

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

	Gains and (Losses) on Cash Flow Hedges			Non-cash amortization of interest rate swap expense		Defined Benefit Pension Plans			Cumulative Foreign Currency Translation Adjustment			Total
Accumulated Other Comprehensive (Loss) by Component, January 1, 2020	$	(3.0	)		—	$	(1.5	)	$	(85.4	)	$	(89.9	)
Net current-period Other Comprehensive Income (Loss)		19.3			1.7		(0.1	)		(31.1	)		(10.2	)
Accumulated Other Comprehensive Income (Loss) by component, June 30, 2020	$	16.3		$	1.7	$	(1.6	)	$	(116.5	)	$	(100.1	)

	Gains and (Losses) on Cash Flow Hedges			Defined Benefit Pension Plans			Cumulative Foreign Currency Translation Adjustment			Total
Accumulated Other Comprehensive (Loss) by Component, January 1, 2019	$	(12.9	)	$	(0.2	)	$	(58.5	)	$	(71.6	)
Net current-period Other Comprehensive Income (Loss)		(2.5	)		(0.3	)		(7.6	)		(10.4	)
Accumulated Other Comprehensive (Loss) by Component, June 30, 2019	$	(15.4	)	$	(0.5	)	$	(66.1	)	$	(82.0	)

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

7. Net Income per Share

Basic earnings per share is based on the weighted average number of shares of common stock outstanding, and diluted earnings per share is based on the weighted average number of shares of common stock outstanding and all potentially dilutive common stock equivalents outstanding. Common stock equivalents are included in the per share calculations when the effect of their inclusion is dilutive.

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

	Quarter Ended				Year to Date Ended
	June 30, 2020		June 30, 2019		June 30, 2020			June 30, 2019
Net income/(loss)	$	21.7	$	29.0	$	(95.0	)	$	64.2
Shares used in net income per common share - basic		64.6		64.3		64.5			64.3
Incremental shares of unvested restricted common stock		0.1		0.2		—			0.2
Shares used in net income per common share - diluted		64.7		64.5		64.5			64.5
Shares excluded as their inclusion would be anti-dilutive		—		—		0.1			—
Earnings/(Loss) per share:
Basic net income	$	0.34	$	0.45	$	(1.47	)	$	1.00
Diluted net income	$	0.34	$	0.45	$	(1.47	)	$	1.00

8. Inventories

Inventories at June 30, 2020 and December 31, 2019 consisted of the following:

	June 30, 2020		December 31, 2019
Raw materials	$	105.3	$	104.2
Work in process		22.7		22.4
Finished goods		95.1		95.9
	$	223.1	$	222.5

9. Goodwill and Intangible Assets

The Company conducts an annual impairment review of goodwill and indefinite-lived intangible assets in October of each year, unless events occur which trigger the need for an interim impairment review. The 2019 annual goodwill impairment review indicated that the JVS reporting unit’s fair value exceeded its carrying value by less than 10%. All other reporting units had fair values that exceeded their carrying value by 10% or more.

During the first quarter of 2020, the Company considered the economic impact of the COVID-19 pandemic to be a triggering event for the JVS business unit and, as a result, the Company performed an interim impairment review. As a result of both the COVID-19 related economic downturn and its impact on JVS’s anticipated financial results, the Company concluded that it was more likely than not that the JVS reporting unit’s carrying value exceeded its fair value and performed an interim impairment review for both JVS’s goodwill and tradename intangible asset. As a result of the interim impairment testing performed on March 31, 2020, the Company recorded non-cash impairment charges of $8.4 million and $139.1 million for indefinite-lived intangible assets and goodwill, respectively.

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

The Company estimated the fair value of the JVS reporting unit using both the discounted cash flow model and the market approach. The Company estimated the value of JVS’s indefinite-lived tradename intangible asset using a discounted cash flow model. The determination of the fair value using the discounted cash flow model requires management to make significant estimates and assumptions related to forecasts of future revenues, profit margins, and discount rates. The determination of the fair value using the market approach requires management to make significant assumptions related to earnings before interest, taxes, depreciation, and amortization (“EBITDA”) multiples. The Company estimates future cash flows based upon historical results and current market projections, discounted at a market comparable rate.

Key assumptions developed by management and used in the interim quantitative analysis included the following:

•

Near-term revenue declines in 2020;

•

Adjusted profit margins over the projection period, due to revenue adjustments and maintained investment in the business; and

•

Market-based discount rates.

•

Reduced EBITDA multiple, due to current market conditions.

During the second quarter of 2020, the Company again considered the economic impact of the COVID-19 pandemic on the reporting units and determined there was no triggering event to further evaluate for potential impairment. For all reporting units, the Company concluded that it was more likely than not that their fair value continued to exceed their carrying value as of June 30, 2020. However, depending on its duration and the severity of its economic impact, the COVID-19 pandemic may trigger additional interim impairment reviews in future periods.

Changes in goodwill from January 1, 2020 through June 30, 2020 were as follows:

	Power Transmission Technologies			Automation & Specialty			Total
Net goodwill balance January 1, 2020	$	410.1		$	1,284.8		$	1,694.9
Goodwill impairment charge		—			(139.1	)		(139.1	)
Impact of changes in foreign currency		(1.0	)		(11.8	)		(12.8	)
Net goodwill balance June 30, 2020	$	409.1		$	1,133.9		$	1,543.0

Other intangible assets as of June 30, 2020 and December 31, 2019 consisted of the following:

	June 30, 2020						December 31, 2019
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Other intangible assets
Intangible assets not subject to amortization:
Tradenames and trademarks (1)	$	249.8	$	—	$	249.8	$	260.0	$	—	$	260.0
In-process research and development		16.0		—		16.0		16.0		—		16.0
Intangible assets subject to amortization:
Customer relationships		1,179.8		161.2		1,018.6		1,187.7		137.8		1,049.9
Product technology and patents		210.1		44.1		166.0		210.0		33.5		176.5
Total intangible assets	$	1,655.7	$	205.3	$	1,450.4	$	1,673.7	$	171.3	$	1,502.4

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

(1)	The change in Cost of Tradenames and trademarks is a result of the $8.4 million impairment charge in the quarter-end March 31, 2020 related to the JVS reporting unit.

The Company recorded $17.3 million and $17.6 million of amortization expense in the quarters ended June 30, 2020 and 2019, respectively; and, recorded $34.8 million and $35.4 million of amortization expense in the year to date periods ended June 30, 2020 and 2019, respectively.

The estimated amortization expense for intangible assets is approximately $35.9 million for the remainder of 2020, $70.7 million in each of the next four years and then $865.9 million thereafter.

10. Warranty Costs

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

Changes in the carrying amount of accrued product warranty costs for each of the quarters ended June 30, 2020 and 2019 are as follows:

	June 30, 2020			June 30, 2019
Balance at beginning of period	$	10.0		$	9.4
Accrued current period warranty expense		2.0			2.0
Payments and adjustments		(2.8	)		(1.2	)
Balance at end of period	$	9.2		$	10.2

11. Debt

Outstanding debt obligations at June 30, 2020 and December 31, 2019 were as follows.

	June 30, 2020			December 31, 2019
Debt:
Term loan	$	1,160.0		$	1,190.0
Revolving Credit Facility		—			—
Notes		400.0			400.0
Mortgages and other		12.6			13.5
Finance leases		0.3			0.5
Total gross debt		1,572.9			1,604.0
Less: debt discount and deferred financing costs		(20.3	)		(22.2	)
Total debt, net of debt discount and deferred financing costs		1,552.6			1,581.8
Less: current portion of long-term debt		(17.0	)		(18.0	)
Total long-term debt, net of unaccreted discount	$	1,535.6		$	1,563.8

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

2018 Credit Agreement and Notes

On October 1, 2018 (the “A&S Closing Date”), upon the closing of the combination (the “Fortive Transaction”) of Altra with four operating companies from Fortive Corporation’s (“Fortive”) Automation & Specialty platform (the “A&S Business”), the Company assumed $400 million aggregate principal amount of 6.125% senior notes due 2026 (the “Notes”). The Notes will mature on October 1, 2026. Interest on the Notes accrues from October 1, 2018, and the first interest payment date on the Notes was on April 1, 2019. The Notes may be redeemed at the option of the issuer on or after October 1, 2023. The Notes are guaranteed on a senior unsecured basis by the Company and certain of its domestic subsidiaries.

On the A&S Closing Date, the Company entered into a new Credit Agreement (the “Altra Credit Agreement”). The Altra Credit Agreement provides for a seven-year senior secured term loan in an aggregate principal amount of $1,340.0 million (the “Altra Term Loan Facility”) and a five-year senior secured revolving credit facility in an aggregate committed principal amount of $300.0 million (the “Altra Revolving Credit Facility” and together with the Altra Term Loan Facility, the “Altra Credit Facilities”). The proceeds of the Altra Term Loan Facility were used to (i) consummate Fortive’s transfer of certain non-U.S assets, liabilities and entities constituting a portion of the A&S Business to certain subsidiaries of Altra, and the Altra subsidiaries’ assumption of substantially all of the liabilities associated with the transferred assets (the “Direct Sales”), (ii) repay in full and extinguish all outstanding indebtedness for borrowed money under the 2015 Credit Agreement (as defined herein) and (iii) pay certain fees, costs, and expenses in connection with the consummation of the Fortive Transaction. The proceeds of the Altra Revolving Credit Facility will be used for working capital and general corporate purposes.

The Altra Credit Facilities are guaranteed on a senior secured basis by the Company and certain of its domestic subsidiaries, subject to certain customary exceptions.

Borrowings under the Altra Term Loan Facility will bear interest at a per annum rate equal to a “Eurocurrency Rate” plus 2.00%, in the case of Eurocurrency Rate borrowings, or equal to a “Base Rate” plus 1.00%, in the case of Base Rate borrowings. Borrowings under the Altra Revolving Credit Facility will initially bear interest at a per annum rate equal to a Eurocurrency Rate plus 2.00%, in the case of Eurocurrency Rate borrowings, or equal to a Base Rate plus 1.00%, in the case of Base Rate borrowings, and thereafter will bear interest at a per annum rate equal to a Eurocurrency Rate or Base Rate, as applicable, plus an interest rate spread determined by reference to a pricing grid based on the Company’s senior secured net leverage ratio. In addition, the Company will be required to pay fees that will fluctuate between 0.250% per annum to 0.375% per annum on the unused amount of the Altra Revolving Credit Facility, based upon the Company’s senior secured net leverage ratio. The interest rate on the Term Loan Facility was 2.174% at June 30, 2020.

The Altra Credit Agreement contains usual and customary representations and warranties, and usual and customary affirmative and negative covenants, including limitations on liens, investments, restricted payments, additional indebtedness and asset sales and mergers. In addition, the Altra Credit Agreement requires that Altra maintain a specified maximum senior secured leverage ratio and a specified minimum interest coverage ratio. The obligations of the borrowers of the Altra Credit Facilities under the Altra Credit Agreement may be accelerated upon customary events of default, including non-payment of principal, interest, fees and other amounts, inaccuracy of representation and warranties, violation of covenants, cross default and cross acceleration, voluntary and involuntary bankruptcy or insolvency proceedings, inability to pay debts as they become due, material judgments, ERISA events, actual or asserted invalidity of security documents or guarantees and change in control.

The Company incurred $29.9 million in issuance costs, which are amortized over the term of the debt as an adjustment to the effective interest rate on the outstanding borrowings.

The Company provided notice to the administrative agent of the Altra Credit Agreement on March 9, 2020 and March 16, 2020 to draw down $50 million and $50 million, respectively, under the Altra Revolving Credit Facility. At that time, the Company had increased its borrowings under the Altra Revolving Credit Facility as a precautionary action in order to increase its cash position and enhance its financial flexibility during this period of uncertainty in the global markets resulting from COVID-19. On April 14, 2020, the Company provided notice to the administrative agent of the Altra Credit Agreement to repay $50 million outstanding under the Altra Revolving Credit Facility. On April 27 2020 and May, 27, 2020 the Company provided notice to the administrative agent to repay $15 million and $35 million, respectively, which were outstanding under the Altra Revolving Credit Facility. As of the period ended June 30, 2020, all outstanding borrowings under the Altra Revolving Credit Facility have been repaid.

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

As of June 30, 2020, the Company had $1,160.0 million outstanding on the Altra Credit Agreement. As of June 30, 2020 and December 31, 2019, the Company had $5.2 million and $4.4 million in letters of credit outstanding, respectively. The Company had $294.8 million available to borrow under the Altra Credit Facilities at June 30, 2020.

Mortgages and Other Agreements

The Company’s subsidiaries in Europe have entered into certain long-term fixed rate term loans that are generally secured by local property, plant and equipment. The debt has interest rates that range from 1.79% to 2.5%, with various quarterly and monthly installments through 2028.

Financing Leases

The Company leases certain equipment under finance lease arrangements, whose obligations are included in both short-term and long-term debt. Finance lease obligations amounted to approximately $0.3 million and $0.5 million at June 30, 2020 and December 31, 2019, respectively. Finance lease right of use assets are included in property, plant and equipment with the related amortization recorded as depreciation expense.

12. Stockholders’ Equity

Common Stock

Effective October 1, 2018, the Company amended its Articles of Incorporation to increase the number of authorized shares of Altra common stock from 90.0 million shares to 120.0 million shares. As of June 30, 2020 and December 31, 2019, there were 64,575,115 and 64,222,603 shares of common stock issued and outstanding, respectively.

Preferred Stock

On December 20, 2006, the Company amended and restated its certificate of incorporation authorizing 10.0 million shares of undesignated Preferred Stock (“Preferred Stock”). The Preferred Stock may be issued from time to time in one or more classes or series, the shares of each class or series to have such designations and powers, preferences, rights, qualifications, limitations and restrictions as determined by the Company’s Board of Directors. There was no Preferred Stock issued or outstanding at June 30, 2020 or December 31, 2019.

Restricted Common Stock

The 2014 Omnibus Incentive Plan (the “2014 Plan”) was approved by the Company’s stockholders at the Company’s 2014 Annual Meeting of Stockholders. The 2014 Plan provides for various forms of stock-based compensation to our directors, executive personnel and other key employees and consultants. Under the 2014 Plan, the remaining total number of shares of common stock available for delivery pursuant to the grant of awards (“Awards”) was 4.5 million as of June 30, 2020.

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

The 2014 Plan permits the Company to grant, among other things, restricted stock, restricted stock units, stock options and performance share awards to key employees. Certain awards include vesting based upon achievement of specified performance criteria. Compensation expense recorded (in selling, general and administrative expense) during the quarters ended June 30, 2020 and 2019 was $3.8 million and $3.5 million, respectively. Compensation expense recorded (in selling, general and administrative expense) during the year to date period ended June 30, 2020 and 2019 was $7.1 million and $7.0 million, respectively. The Company recognizes stock-based compensation expense on a straight-line basis for the shares vesting ratably under the plan and uses the graded-vesting method of recognizing stock-based compensation expense for the performance share awards based on the probability of the specific performance metrics being achieved over the requisite service period.

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

The following tables set forth the activity of the Company’s restricted stock grants and stock options to date:

	Shares			Weighted- average fair value
Shares unvested January 1, 2020		786.3		$	35.69
Shares granted		325.6			34.58
Shares for which restrictions lapsed		(175.1	)		38.06
Shares unvested June 30, 2020		936.8		$	34.93

	Shares		Weighted- average fair value
Options unvested January 1, 2020		271.7	$	30.65
Options granted		214.5		34.78
Options exercised		—		—
Options outstanding June 30, 2020		486.2	$	32.47
Quantity ending exercisable balance		66.4	$	30.65

Total remaining unrecognized compensation cost is approximately $25.6 million as of June 30, 2020, and will be recognized over a weighted average remaining period of three years. The intrinsic value of these awards, as of June 30, 2020, was $27.6 million. Grant date fair value is based on the quoted price of the stock on the date of grant.

13. Restructuring, Asset Impairment, and Transition Expenses

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

During 2017, the Company commenced a restructuring plan (“2017 Altra Plan”) as a result of the Company’s purchase of Stromag and to rationalize its global renewable energy business. The actions taken pursuant to the 2017 Altra Plan included reducing headcount, facility consolidations and the elimination of certain costs. The expenses for the quarter and year to date period ended June 30, 2020 were approximately $0.3 million, and $0.5 million, respectively, and were composed of severance and other restructuring costs. The Company does not expect to incur any additional material costs as a result of the 2017 Altra Plan.

During 2019, the Company commenced a restructuring plan (“2019 Altra Plan”) to drive efficiencies, reduce the number of facilities and optimize its operating margin. The Company expects to incur approximately $10 - $15 million in restructuring expenses under the 2019 Altra Plan over the next three years, primarily related headcount reductions and plant consolidations. The expenses for the quarter and year to date period ended June 30, 2020 were $1.2 million and $2.6 million, respectively, and were composed of severance and consolidation costs.

The following is a reconciliation of the accrued restructuring costs between January 1, 2020 and June 30, 2020.

	2017 Altra Plan			2019 Altra Plan			Total All Plans
Balance at January 1, 2020	$	1.5		$	2.6		$	4.1
Restructuring expense incurred		0.2			1.4			1.6
Cash payments		(0.4	)		(1.4	)		(1.8	)
Balance at March 31, 2020		1.3			2.6			3.9
Restructuring expense incurred		0.3			1.2			1.5
Cash payments		(0.6	)		(1.1	)		(1.7	)
Balance at June 30, 2020		1.0			2.7			3.7

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

The following is a reconcilation of the accrued restructuring costs between January 1, 2019 and June 30, 2019.

	2017 Altra Plan			2019 Altra Plan			Total All Plans
Balance at January 1, 2019	$	2.0		$	—		$	2.0
Restructuring expense incurred		1.0			1.3			2.3
Cash payments		(1.5	)		(0.5	)		(2.0	)
Balance at March 31, 2019		1.5			0.8			2.3
Restructuring expense incurred		1.8			1.4			3.2
Cash payments		(2.0	)		(0.7	)		(2.7	)
Balance at June 30, 2019		1.3			1.5			2.8

The following is a reconciliation of restructuring expense by segment for the year to date period ended June 30, 2020.

	2017 Altra Plan		2019 Altra Plan		Total All Plans
Power Transmission Technologies	$	0.5	$	0.6	$	1.1
Automation & Specialty		—		2.0		2.0
Total restructuring expense at June 30, 2020	$	0.5	$	2.6	$	3.1

The following is a reconciliation of restructuring expense by segment for the year to date period ended June 30, 2019

	2017 Altra Plan		2019 Altra Plan		Total All Plans
Power Transmission Technologies	$	2.8	$	0.1	$	2.9
Automation & Specialty		—		2.6		2.6
Total restructuring expense at June 30, 2019	$	2.8	$	2.7	$	5.5

The total accrued restructuring reserve as of June 30, 2020, and as of June 30, 2019 relate primarily to severance and consolidation costs under the 2017 Altra Plan and the 2019 Altra Plan and are recorded in accruals and other liabilities on the accompanying unaudited condensed consolidated balance sheet.

14. Segments, Concentrations and Geographic Information

Segments

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

•

Power Transmission Technologies - PTT. This segment includes the following key product offerings:

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

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

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

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

•

Automation & Specialty – A&S. This segment includes the following key brands:

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

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

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

Jacobs Vehicle Systems (JVS): Provides heavy-duty diesel engine brake systems and valve actuation mechanisms for the commercial vehicle market, including compression release, bleeder and exhaust brakes, including the “Jake Brake” engine braking system. These products are primarily used in heavy duty Class 8 truck applications.

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

	Quarters Ended						Year to Date Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Net Sales:
Power Transmission Technologies	$	196.3		$	234.9		$	413.0		$	469.8
Automation & Specialty		205.8			233.3			424.4			482.4
Inter-segment eliminations		(1.3	)		(1.7	)		(2.4	)		(2.9	)
Net sales	$	400.8		$	466.5		$	835.0		$	949.3
Income/(loss) from operations:
Segment earnings:
Power Transmission Technologies	$	23.9		$	31.9		$	49.5		$	60.8
Automation & Specialty		26.0			31.8			(92.6	)		72.4
Corporate expenses (1)		3.7			(3.4	)		0.3			(4.2	)
Restructuring costs		(1.5	)		(3.2	)		(3.1	)		(5.5	)
Income/(loss) from operations	$	52.1		$	57.1		$	(45.9	)	$	123.5
Other non-operating expense:
Net interest expense		18.8			18.6			36.2			38.4
Other non-operating expense, net		2.5			0.4			1.1			1.5
Total non-operating expense	$	21.3		$	19.0		$	37.3		$	39.9
Income/(loss) before income taxes		30.8			38.1			(83.2	)		83.6
Provision for income taxes		9.1			9.1			11.8			19.4
Net income/(loss)	$	21.7		$	29.0		$	(95.0	)	$	64.2

(1)

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

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

Selected information by segment (continued)

	Quarter Ended				Year to Date Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Depreciation and amortization:
Power Transmission Technologies	$	8.2	$	8.3	$	16.4	$	16.7
Automation & Specialty		22.9		23.2		46.2		46.2
Corporate		0.9		0.7		1.5		1.4
Total depreciation and amortization	$	32.0	$	32.2	$	64.1	$	64.3

					June 30, 2020		June 30, 2019
Total assets:
Power Transmission Technologies					$	1,045.7	$	1,089.2
Automation & Specialty						2,920.1		3,170.3
Corporate(2)						134.9		98.3
Total assets					$	4,100.7	$	4,357.8

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

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

	Net Sales
	Quarter Ended				Year to Date Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
North America (primarily U.S.)	$	205.8	$	269.8	$	451.1	$	542.8
Europe excluding Germany		71.3		79.9		146.1		161.7
Germany		44.1		56.8		96.6		119.0
Asia and other		79.6		60.0		141.2		125.8
Total	$	400.8	$	466.5	$	835.0	$	949.3

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

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

15. Derivative Financial Instruments

The Company may manage changes in market conditions related to interest on debt obligations and foreign currency exposures by entering into derivative instruments, including interest rate and foreign currency swap agreements. All derivative instruments are recognized as either assets or liabilities on the balance sheet at fair value at the end of each period. The Company determines the fair value of financial instruments using quoted market prices whenever available. When quoted market prices are not available for various types of financial instruments (such as forwards, options and swaps), the Company uses standard models with market-based inputs, which take into account the present value of estimated future cash flows and the ability of Altra or the financial counterparty to perform. For interest rate swaps, the significant inputs to these models are interest rate curves for discounting future cash flows that are adjusted for credit risk. For forward foreign currency contracts, the significant inputs are interest rate curves for discounting future cash flows, and exchange rate curves of the foreign currency for translating future cash flows. For designated hedging relationships, the Company formally documents the hedging relationship consistent with the requirements of ASC 815, Derivatives.

Cross Currency Interest Rate Swaps

In December 2018, the Company entered into cross-currency swap agreements to hedge its net investment in Euro-denominated assets against future volatility in the exchange rate between the U.S. dollar and the Euro. By doing so, the Company synthetically converted a portion of its U.S. dollar-based long-term debt into Euro-denominated long-term debt. The agreements originally had a five-year maturity at notional amounts declining from $600.0 million to $360.0 million over the contract period. The terms of the swap agreements provided for the Company to receive net interest payments at a fixed rate of 4.8255% and pay Euros at rates ranging from 2.19% to 2.315%. At inception, the cross-currency swaps were designated as net investment hedges.

For net investment hedges, changes in the fair value of the effective portion of the derivatives’ gains or losses are reported as foreign currency translation gains or losses in accumulated other comprehensive income (loss) (“AOCIL”). The gains or losses on the net investment hedges reported in AOCIL are reclassified to earnings in the period in which earnings are affected by the underlying item, such as a disposal or substantial liquidations of the entities being hedged.

During the first quarter of 2020, the global economy declined substantially due to the impact of COVID-19. This decline resulted in a significant increase in the value of the U.S. dollar. The appreciation of the U.S. dollar resulted in the Company’s cross currency interest rate swaps being substantially in-the-money. Given the increased cash value of the hedges and the Company’s overall desire to strengthen its cash position, the Company terminated the cross-currency interest rate swaps during the first quarter of 2020. The Company received the cash value of the cross-currency interest rate swaps of approximately $56.2 million upon termination. In addition, the Company paid the interest owed and received the interest due, resulting in the recognition of approximately $3.3 million in net interest income and paid termination fees of approximately $0.9 million. Through the date of the termination of the cross-currency interest rate swaps, the Company recorded a gain in AOCIL of approximately $31.3 million, net of $9.9 million of tax, compared to $19.8 million, net of $3.6 million of tax, during the year to date period ended June 30, 2020, and year to date period ended December 31, 2019, respectively.


	June 30, 2020		December 31, 2019
Description (in millions)	Gain/(Loss) Recognized in AOCI
Cross currency swap agreements, net of tax	$	31.3	$	19.8

Interest Rate Swaps

In January 2017, the Company entered into an interest rate swap agreement to fix the variable interest rate payable on a portion of its outstanding borrowings. This interest rate swap matured on January 31, 2020.

In December 2018, the Company entered into an interest rate swap agreement to manage the cash flow risk caused by interest rate changes on the forecasted interest payments expected to occur related to a portion of its outstanding borrowings under the Altra Credit Agreement for a notional value of $600 million at 4.8255%.

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

The interest rate swap agreement was designed to manage exposure to interest rates on the Company’s variable rate indebtedness and was recognized on the balance sheet at fair value. The Company designated this interest rate swap agreement as a cash flow hedge and changes in the fair value of the swap were recognized in other comprehensive income until the hedged items were recognized in earnings.

During the second quarter of 2020, the Company terminated the interest rate swap agreement. The Company paid the cash value of the interest rate swaps of approximately $34.7 million upon termination. In addition, the Company paid the interest owed and received the interest due, resulting in the recognition of approximately $0.1 million in net interest expense and paid termination fees of approximately $0.1 million. Through the date of the termination of the interest rate swap, the Company recorded a loss in AOCIL of approximately $11.9 million, net of $3.8 million of tax benefit, compared to $9.8 million, net of $1.7 million of tax benefit, during the year to date period ended June 30, 2020, and year to date period ended December 31, 2019, respectively. The loss on the interest rate swap reported in AOCIL will be reclassified to earnings in future periods when the hedged transaction affects earnings or if it is determined that it is probable that the hedged transaction will not occur. The Company reclassified approximately $3.2 million and $0.5 million of AOCIL into interest expense for the quarters ended June 30, 2020 and June 30, 2019, respectively. The Company reclassified $4.8 million and $1.0 million of AOCIL into interest expense for the year to date periods ended June 30, 2020 and June 30, 2019, respectively. Approximately $2.2 million of the AOCIL reclassified to interest expense for the quarter and year to date period ended June 30, 2020 represents non-cash amortization due to the termination of the interest rate swap.

The following table summarizes the location and fair value, using Level 2 inputs (see Note 6 for a description of the fair value levels), of the Company's derivatives designated and not designated as hedging instruments in the unaudited condensed consolidated balance sheets (in millions).


	Balance Sheet Location	June 30, 2020		December 31, 2019
Designated as hedging instruments:
Cross currency swap agreements	Other long-term (assets)	$	—	$	(15.0	)
Interest rate swap agreement	Other long-term (assets)		—		(0.0	)
Interest rate swap agreement	Other long-term liabilities		—		19.0
		$	—	$	4.0

16. 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. 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. We have established loss provisions for matters in which losses are probable and can be reasonably estimated. For matters where a reserve has not been established and for which we believe a loss is reasonably possible, as well as for matters where a reserve has been recorded but for which an exposure to loss in excess of the amount accrued is reasonably possible, we believe that such losses, individually and in the aggregate, will not have a material effect on our unaudited condensed consolidated financial statements.

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

ALTRA INDUSTRIAL MOTION CORP.

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Amounts in millions, unless otherwise noted

There were no material amounts accrued in the accompanying unaudited condensed consolidated balance sheets for potential litigation as of June 30, 2020 or December 31, 2019.

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.

Environmental

There is contamination at some of the Company’s current facilities, primarily related to historical operations at those sites, for which the Company could be liable for the investigation and remediation under certain environmental laws. The potential for contamination also exists at other of the Company’s current or former sites, based on historical uses of those sites. The Company currently is not undertaking any material remediation or investigations and the costs or liability in connection with potential contamination conditions at these facilities cannot be predicted at this time because the potential existence of contamination has not been investigated or not enough is known about the environmental conditions or likely remedial requirements. Currently, other parties with contractual liability are addressing or have plans or obligations to address those contamination conditions that may pose a material risk to human health, safety or the environment. In addition, while the Company attempts to evaluate the risk of liability associated with these facilities at the time the Company acquired them, there may be environmental conditions currently unknown to the Company relating to prior, existing or future sites or operations or those of predecessor companies whose liabilities the Company may have assumed or acquired which could have a material adverse effect on the Company’s business.

The Company is being indemnified, or expects to be indemnified, by third parties subject to certain caps or limitations on the indemnification, for certain environmental costs and liabilities associated with certain owned or operated sites. Accordingly, based on the indemnification and the experience with similar sites of the environmental consultants who the Company has hired, the Company does not expect such costs and liabilities to have a material adverse effect on its business, operations or earnings. The Company cannot assure you, however, that those third parties will in fact satisfy their indemnification obligations. If those third parties become unable to, or otherwise do not, comply with their respective indemnity obligations, or if certain contamination or other liability for which the Company is obligated is not subject to these indemnities, the Company could become subject to significant liabilities.

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

17. Subsequent Events

On July 22, 2020 the Company declared a dividend of $0.04 per share for the quarter ended September 30, 2020, payable on October 2, 2020 to stockholders of record as of September 18, 2020.

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

Cautionary Statement Regarding Forward-Looking Statements

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

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

•

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

•

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

•

the cyclical nature of the markets in which we operate;

•

the loss of independent distributors on which we rely;

•

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

•

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

•

the risks associated with international operations, including currency risks;

•

the risks associated with and potential impacts of new trade policies, legislations, treaties, and tariffs both in and outside of the United States;

•

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

•

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

•

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

•

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

•

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

•

the accuracy of estimated forecasts of original equipment manufacturer (“OEM”) customers and the impact of the current global and European economic environment on our customers;

•

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

•

disruption of our supply chain;

•

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

•

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

•

work stoppages and other labor issues;

•

changes in employment, environmental, tax and other laws, including enactment of the 2017 Tax Act, and changes in the enforcement of laws;

•

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

•

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

•

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

•

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

•

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

•

the effects of changes to critical accounting estimates;

•

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

•

failure of the Company’s operating equipment or information technology infrastructure, including cyber-attacks or other security breaches, and failure to comply with data privacy laws or regulations;

•

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

•

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

•

the risks associated with the Company’s debt;

•

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

•

the risks associated with interest rate swap contracts;

•

the risks associated with transitioning from LIBOR to a replacement alternative reference rate;

•

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

•

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

•

the risks related to regulations regarding conflict minerals;

•

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

•

the Company’s ability to successfully execute, manage and integrate key acquisitions and mergers, including Altra’s purchase of Stromag (the “Stromag Acquisition”), and the business combination (the “Fortive Transaction”) of the Company with four operating companies from Fortive Corporation’s (“Fortive”) Automation & Specialty platform (the “A&S Business”);

•

other risks associated with the Fortive Transaction, including:

lost sales and customers as a result of customers of Altra or the A&S Business deciding not do so business with us;

risks associated with managing a larger and more complex business;

integrating personnel of Altra and the A&S Business while maintaining focus on providing consistent, high-quality products and service to customers;

the loss of key employees;

unanticipated issues in integrating manufacturing, logistics, information, communications and other systems;

possible inconsistencies in standards, controls, procedures, policies and compensation structures;

the impact on our internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002; and

potential unknown liabilities and unforeseen expenses associated with the Fortive Transaction;

•

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

•

the risk associated with the United Kingdom’s vote to leave the European Union; and

•

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

ALL FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS REPORT. EXCEPT AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR RELEASE ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT ANY EVENTS OR CIRCUMSTANCES AFTER THE DATE OF THIS REPORT OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO US OR ANY PERSON ACTING ON THE COMPANY’S BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS CONTAINED OR REFERRED TO IN THIS SECTION AND IN OUR RISK FACTORS SET FORTH (1) IN THE SECTION TITLED “RISK FACTORS,” SET FORTH IN PART II, ITEM 1A OF THIS QUARTERLY REPORT ON FORM 10-Q; (2) IN PART I, ITEM 1A OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2019, FILED WITH THE SEC ON FEBRUARY 27, 2020; AND (3) IN THE COMPANY’S OTHER SEC FILINGS.

The following discussion of the financial condition and results of operations of Altra Industrial Motion Corp. and its subsidiaries should be read together with (1) the unaudited condensed consolidated financial statements of Altra Industrial Motion Corp. and its subsidiaries and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and (2) the audited consolidated financial statements of Altra Industrial Motion Corp. and its subsidiaries and the related notes and management’s discussion and analysis of financial conditions and results of operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The following discussion includes forward-looking statements. For a discussion of important factors that could cause actual results to differ materially from the results referred to in the forward-looking statements, see “Forward-Looking Statements” and “Risk Factors” in this Quarterly Report on Form 10-Q and “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Unless the context requires otherwise, the terms “Altra,” “Altra Industrial Motion Corp.,” “the Company,” “we,” “us,” and “our” refer to Altra Industrial Motion Corp. and its subsidiaries.

General

We are a leading global designer, producer and marketer of a wide range of electromechanical power transmission motion control products. Our technologies are used in various motion related applications and across a wide variety of high-volume manufacturing and non-manufacturing processes in which reliability and precision are critical to avoid costly down time and enhance the overall efficiency of operations.

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

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

Business Outlook

Our future financial performance depends, in large part, on conditions in the markets that we serve and on conditions in the U.S., European, and global economies in general. During the quarter ended June 30, 2020, the impact of the COVID-19 pandemic continued to affect our results of operations as we experienced temporary facility shutdowns, lower factory utilization rates, and some secondary impacts on customer demand. In the second quarter, the Company’s Pandemic Response Team continued to identify and

assess risks and develop countermeasures following guidance from national, state and local governmental and health authorities. In addition, the Company’s Business Continuity Task Force continued to work to ensure continuity of supply for its customers and to facilitate reopening manufacturing facilities impacted by the pandemic. During the second quarter, Altra experienced minimal supply chain disruption and the vast majority of our material manufacturing facilities continued to be operational at levels required to meet customer demand. In addition, during the second quarter we also took several proactive measures to protect the Company’s balance sheet and strengthen its liquidity position, including:

•

Accelerating cost reductions through furloughs, merit increase suspensions, executive wage rollbacks, discretionary spending reductions, corporate travel suspension, and service provider and other expense reductions.

•

Leveraging government work programs and tax deferrals and extensions to the extent they do not incur interest rate fees or penalties.

The COVID-19 pandemic and its effects on the economic environment remain extremely fluid and it is difficult to predict with certainty what unforeseen circumstances may develop as we progress through the remainder of the year. As a result, we will continue to proceed cautiously by managing our cost structure and cash flows and prioritizing debt reduction. In addition, we are implementing strategic plans to best position Altra to adapt to these changing conditions and to continue to serve our customers and community.

Critical Accounting Policies

The preparation of our unaudited condensed consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make judgments, assumptions and estimates that affect our reported amounts of assets, revenues and expenses, as well as related disclosures of contingent assets and liabilities. We base our estimates on past experiences and other assumptions we believe to be appropriate, and we evaluate these estimates on an on-going basis. See the discussion of critical accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2019. Except as otherwise noted below, there have been no changes in the identification or application of the Company’s critical accounting policies during the quarter ended June 30, 2020.

Impairment of Goodwill and Indefinite-Lived Intangible Assets

During the first quarter of 2020 the Company considered the economic impact of the COVID-19 pandemic to be a triggering event for the JVS business unit and, as a result, the Company performed an interim impairment review. As a result of both the COVID-19 related economic downturn and its impact on JVS’s anticipated financial results, the Company concluded that it was more likely than not that the JVS reporting unit’s carrying value exceeds its fair value and performed an interim impairment review for both JVS’s goodwill and tradename intangible asset. As a result, on March 31, 2020, the Company recorded non-cash impairment charges of $8.4 million and $139.1 million for goodwill and indefinite-lived intangible assets, respectively.

Key assumptions developed by management and used in the interim quantitative analysis included the following:

•

Near-term revenue declines in 2020;

•

Adjusted profit margins over the projection period, due to revenue adjustments and maintained investment in the business; and

•

Market-based discount rates.

•

Reduced EBITDA multiple, due to current market conditions.

During the second quarter of 2020, the Company again considered the economic impact of the COVID-19 pandemic on the reporting units and determined there was no triggering event. For all reporting units, the Company concluded that it was more likely than not that their fair value continued to exceed their carrying value as of June 30, 2020. However, depending on its duration and the severity of its economic impact, the COVID-19 pandemic may trigger additional interim impairment reviews in future periods.

Income Taxes

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law in the U.S. to provide certain relief as a result of the COVID-19 pandemic. In addition, governments around the world have enacted or implemented various forms of tax relief measures in response to the economic conditions in the wake of COVID-19. Altra has determined that neither the CARES Act nor changes to income tax laws or regulations in other jurisdictions had a significant impact on the Company’s unaudited condensed consolidated financial statements for the period ended June 30, 2020.

Trade Account Receivables

As a result of the adoption of ASU 2016-13, the Company has updated its significant accounting policy related to trade account receivables and allowances for credit losses from what was previously disclosed in our audited financial statements for the year ended December 31, 2019 as follows:

Recent Accounting Standards

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

Results of Operations

(Amounts in millions, unless otherwise noted)

	Quarter Ended						Year to Date Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Net sales	$	400.8		$	466.5		$	835.0		$	949.3
Cost of sales		257.4			299.5			538.6			607.4
Gross profit		143.4			167.0			296.4			341.9
Gross profit percentage		35.8	%		35.8	%		35.5	%		36.0	%
Selling, general and administrative expenses		75.8			92.0			162.9			182.9
Impairment of Goodwill and Intangible Asset		—			—			147.5			—
Research and development expenses		14.0			14.7			28.8			30.0
Restructuring costs		1.5			3.2			3.1			5.5
Income/(loss) from operations		52.1			57.1			(45.9	)		123.5
Interest expense, net		18.8			18.6			36.2			38.4
Other non-operating expense, net		2.5			0.4			1.1			1.5
Income/(loss) before income taxes		30.8			38.1			(83.2	)		83.6
Provision for income taxes		9.1			9.1			11.8			19.4
Net income/(loss)	$	21.7		$	29.0		$	(95.0	)	$	64.2

Quarter Ended June 30, 2020 compared with Quarter Ended June 30, 2019

(Amounts in millions, unless otherwise noted)

Amounts in millions, except percentage data	Quarter Ended
	June 30, 2020		June 30, 2019		Change			%
Net sales	$	400.8	$	466.5	$	(65.7	)		(14.1	)%

Net SalesThe decrease in net sales during the quarter ended June 30, 2020 is primarily due to the overall economic decline due to the effects of the COVID-19 pandemic, and a decline in sales in our oil and gas end market, as a result of the reduction in oil prices globally. Changes in foreign exchange had an unfavorable impact on net sales of $7.1 million, primarily driven by the Euro and Chinese Renminbi. This was partially offset by price which had a favorable impact of $3.2 million for the quarter ended June 30, 2020.

Amounts in millions, except percentage data	Quarter Ended
	June 30, 2020			June 30, 2019			Change			%
Gross profit	$	143.4		$	167.0		$	(23.6	)		(14.1	)%
Gross profit as a percent of sales		35.8	%		35.8	%

Gross Profit Gross profit decreased during the quarter ended June 30, 2020, primarily due to the economic impact of the COVID-19 pandemic including a decrease in sales levels, costs associated with temporary shutdowns of our manufacturing facilities and shutdowns of operations of our customers and suppliers. Changes in foreign exchange had an unfavorable impact on gross profit of $2.8 million, primarily driven by the Euro and Chinese Renminbi. We have taken actions to reduce our expenses and maximize near-term profitability; however, we expect our 2020 gross profit as a percentage of sales to decrease when compared to 2019.

Amounts in millions, except percentage data	Quarter Ended
	June 30, 2020			June 30, 2019			Change			%
Selling, general and administrative expense (“SG&A”)	$	75.8		$	92.0		$	(16.2	)		(17.6	)%
SG&A as a percent of sales		18.9	%		19.7	%

Selling, general and administrative expenses The decrease in SG&A during the quarter ended June 30, 2020 was primarily due to cost reduction actions which began during the quarter ended March 31, 2020 and continued during the current quarter. Our cost reduction efforts were focused on compensation reductions, and the elimination of non-critical expenses, including travel, which decreased our overall SG&A costs. During the remainder of 2020 we expect our SG&A costs to increase as certain temporary cost reductions terminate.

Amounts in millions, except percentage data	Quarter Ended
	June 30, 2020		June 30, 2019		Change			%
Research and development expenses (“R&D”)	$	14.0	$	14.7	$	(0.7	)		(4.8	)%

Research and development expense Research and development expenses decreased for the quarter ended June 30, 2020 when compared to the quarter ended June 30, 2019 primarily due to cost reduction actions which began during the quarter. The decrease is partially offset by the unfavorable impact of foreign exchange of $0.1 million, primarily driven by the Euro. We expect R&D costs to be approximately 2.5% - 3.5% of sales in future periods.

Amounts in millions, except percentage data	Quarter Ended
	June 30, 2020		June 30, 2019		Change			%
Restructuring costs	$	1.5	$	3.2	$	(1.7	)		(53.1	)%

Restructuring costs. During the quarter ended September 30, 2017, we commenced a restructuring plan (“2017 Altra Plan”) as a result of the Stromag Acquisition and to rationalize our global renewable energy business. The actions taken pursuant to the 2017 Altra Plan included reducing headcount, facility consolidations and the elimination of certain costs. The total 2017 Altra Plan savings are in line with our expectations. We do not expect to incur any additional material costs as a result of the 2017 Altra Plan.

During 2019, we commenced a restructuring plan (“2019 Altra Plan”) to drive efficiencies, reduce the number of facilities and optimize our operating margin. We expect to incur $10 - $15 million in restructuring expenses under the 2019 Plan over the next three years, primarily related to headcount reductions and plant consolidations. We achieved savings of $0.3 million during the quarter ended June 30, 2020 under the 2019 Altra Plan and estimate additional future savings during 2020 to be approximately $3.2 million. The cost savings for the quarter ended June 30, 2020 were recognized as reductions in SG&A expense of approximately $0.3 million.

Amounts in millions, except percentage data	Quarter Ended
	June 30, 2020		June 30, 2019		Change		%
Interest expense, net	$	18.8	$	18.6	$	0.2		1.1	%

Interest expenseInterest expense increased for the quarter ended June 30, 2020 compared to the prior year period primarily due to the impact of the termination of our interest rate and cross currency interest rate swap agreements. As of June 30, 2020, the Company recorded approximately $2.2 million of non-cash interest expense related to the termination of the interest rate swap. This was partially offset by the impact of debt paydowns of approximately $110.0 million since the second quarter of 2019, and lower average interest rates.

Amounts in millions, except percentage data	Quarter Ended
	June 30, 2020			June 30, 2019			Change		%
Provision for income taxes	$	9.1		$	9.1		$	—		0.0	%
Provision for income taxes as a percent of income before income taxes		29.5	%		23.9	%

Provision for Income Taxes The provision for income tax as a percentage of income before income taxes increased for the quarter ended June 30, 2020 as compared to the quarter ended June 30, 2019. The increase in the 2020 provision for income tax as a percent of income before income taxes is due to the impact of a $2.0 million of withholding tax paid as a result of a dividend from one of our foreign subsidiaries. We expect our provision for income taxes before discrete items to be approximately 21% to 23% for the full year 2020.

Year to Date Ended June 30, 2020 compared with Year to Date Ended June 30, 2019

(Amounts in millions, unless otherwise noted)

Amounts in millions, except percentage data	Year to Date Ended
	June 30, 2020		June 30, 2019		Change			%
Net sales	$	835.0	$	949.3	$	(114.3	)		(12.0	)%

Net SalesThe decrease in net sales during the year to date period ended June 30, 2020 is primarily due to a decline in sales in our oil and gas end market, as a result of the decline in oil prices globally, and the overall economic decline due to the effects of the COVID-19 pandemic. Changes in foreign exchange had an unfavorable impact on net sales of $14.2 million, primarily driven by the Euro and Chinese Renminbi. This was partially offset by price which had a favorable impact of $6.3 million for the year to date period ended June 30, 2020.

Amounts in millions, except percentage data	Year to Date Ended
	June 30, 2020			June 30, 2019			Change			%
Gross profit	$	296.4		$	341.9		$	(45.5	)		(13.3	)%
Gross profit as a percent of sales		35.5	%		36.0	%

Gross Profit Gross profit as a percentage of net sales decreased during the year to date period ended June 30, 2020, primarily due to the economic impact of the COVID-19 pandemic including a decrease in sales levels, costs associated with temporary shutdowns of our manufacturing facilities and shutdowns of operations of our customers and suppliers. Changes in foreign exchange had an unfavorable impact on gross profit of $5.5 million, primarily driven by the Euro and Chinese Renminbi. We have taken actions to reduce our expenses and maximize near-term profitability; however, we expect our 2020 gross profit as a percentage of sales to decrease when compared to 2019.

Amounts in millions, except percentage data	Year to Date Ended
	June 30, 2020			June 30, 2019			Change			%
Selling, general and administrative expense (“SG&A”)	$	162.9		$	182.9		$	(20.0	)		(10.9	)%
SG&A as a percent of sales		19.5	%		19.3	%

Selling, general and administrative expenses The decrease in SG&A during the year to date period ended June 30, 2020 was primarily due to cost reduction actions which began during the quarter ended March 31, 2020 and continued during the current period. Our cost reduction efforts were focused on compensation reductions, and the elimination of non-critical expenses, including travel, which decreased our SG&A costs. However, due to the decrease in sales, SG&A as a percent of sales increased despite our cost reductions. During the remainder of 2020 we expect our SG&A costs to increase as certain temporary cost reductions terminate.

Amounts in millions, except percentage data	Year to Date Ended
	June 30, 2020		June 30, 2019		Change			%
Research and development expenses (“R&D”)	$	28.8	$	30.0	$	(1.2	)		(4.0	)%

Research and development expense Research and development expenses decreased for the year to date period ended June 30, 2020 when compared to the year to date period ended June 30, 2019. The decrease is mainly due to cost reduction actions which began during the year as a response to the COVID-19 pandemic partially offset by the unfavorable impact of foreign exchange of $0.3 million, primarily driven by the Euro. We expect R&D costs to be approximately 2.5% - 3.5% of sales in future periods.

Amounts in millions, except percentage data	Year to Date Ended
	June 30, 2020		June 30, 2019		Change			%
Restructuring costs	$	3.1	$	5.5	$	(2.4	)		(43.6	)%

During 2019, we commenced a restructuring plan (“2019 Altra Plan”) to drive efficiencies, reduce the number of facilities and optimize our operating margin. We expect expenses related to workforce reductions, lease termination costs and other facility rationalization costs. We expect to incur $10 - $15 million in restructuring expenses under the 2019 Plan over the next 3 years, primarily related to plant consolidation and headcount reductions. We achieved savings of $0.6 million during the year to date period June 30, 2020 under the 2019 Altra Plan and estimate additional future savings during 2020 to be approximately $3.2 million. The cost savings for the year to date period ended June 30, 2020 were recognized as improvements in SG&A and Cost of Sales of approximately $0.4 million and $0.1 million, respectively.

Amounts in millions, except percentage data	Year to Date Ended
	June 30, 2020		June 30, 2019		Change			%
Interest expense, net	$	36.2	$	38.4	$	(2.2	)		(5.7	)%

Interest expenseInterest expense decreased for the year to date period ended June 30, 2020 compared to the prior year period primarily due to debt paydowns of approximately $160.0 million since the fourth quarter of 2018. We expect our interest expense in 2020 to decrease as a result of additional principal payments, resulting in lower average outstanding borrowings, as well as lower average interest rates. This will be partially offset by non-cash interest expense as a result of the termination of the interest rate

swap. As of June 30, 2020, the Company recorded approximately $2.2 million of non-cash interest expense related to the termination of the interest rate swap.

Amounts in millions, except percentage data	Year to Date Ended
	June 30, 2020			June 30, 2019			Change			%
Provision for income taxes	$	11.8		$	19.4		$	(7.6	)		(39.2	)%
Provision for income taxes as a percent of income before income taxes		(14.2	)%		23.2	%

Provision for Income Taxes The provision for income tax as a percentage of income before income taxes decreased for the year to date period ended June 30, 2020 as compared to the year to date period ended June 30, 2019. The decrease in the 2020 provision for income tax as a percent of income before income taxes is due to the impact of the $139.1 million non-cash impairment charge recorded at the JVS reporting unit in the United States and China. This was partially offset by the impact of a $2.8 million discrete item related to changes in tax rates for the JVS reporting unit in China, and the impact of $2.0 million of withholding tax paid as a result of a dividend from a foreign subsidiary. We expect our provision for income taxes before discrete items to be approximately 21% to 23% for the full year 2020.

Segment Performance.

(Amounts in millions unless otherwise noted)

	Quarter Ended						Year to Date Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Net Sales:
Power Transmission Technologies	$	196.3		$	234.9		$	413.0		$	469.8
Automation & Specialty		205.8			233.3			424.4			482.4
Inter-segment eliminations		(1.3	)		(1.7	)		(2.4	)		(2.9	)
Net sales	$	400.8		$	466.5		$	835.0		$	949.3
(Loss)/Income from operations:
Segment earnings:
Power Transmission Technologies	$	23.9		$	31.9		$	49.5		$	60.8
Automation & Specialty		26.0			31.8			(92.6	)		72.4
Corporate expenses (1)		3.7			(3.4	)		0.3			(4.2	)
Restructuring costs		(1.5	)		(3.2	)		(3.1	)		(5.5	)
(Loss)/Income from operations	$	52.1		$	57.1		$	(45.9	)	$	123.5

(1)

Power Transmission Technologies

Net sales in the Power Transmission Technologies segment were $196.3 million and $413.0 million in the quarter and year to date periods ended June 30, 2020, respectively. The decrease of approximately $38.6 million or 16%, and $56.8 million or 12% from the quarter and year to date periods ended June 30, 2019, respectively, is primarily due to the overall economic decline as a result of the COVID-19 pandemic and its impact on our turf and garden, agricultural, and oil and gas end markets. In addition, changes in foreign exchange had an unfavorable impact on net sales of $3.6 million and $7.1 million, for the quarter and year to date periods ended June 30, 2020, respectively, primarily driven by the Euro and Chinese Renminbi. Income from operations for the quarter and year to date periods ended June 30, 2020 was $23.9 million, a decrease of 25%, and $49.5 million, a decrease of 18.5%, respectively, which is primarily driven by the decline in sales.

Automation & Specialty

Net sales in the Automation and Specialty segment were $205.8 million and $424.4 million in the quarter and year to date periods ended June 30, 2020, respectively. The decrease of approximately $27.5 million, or 11.7%, and $58.0 million, or 12% from the quarter and year to date periods ended June 30, 2019 is primarily due to the overall economic decline as a result of the COVID-19 pandemic, partially offset by modest growth in the class 8 heavy duty trucking end market, factory automation and the aerospace and defense end markets. In addition, changes in foreign exchange had an unfavorable impact on net sales of $3.5 million and $7.1 million, for the quarter and year to date periods ended June 30, 2020, respectively, primarily driven by the Euro and Chinese Renminbi. The Automation & Specialty segment had income from operations for the quarter ended June 30, 2020 of $26.0 million, a decrease of 18%, primarily driven by the sales decline. The Automation and Specialty segment had a loss from operations for the year to date period ended June 30, 2020, due to the non-cash impairment charge recorded at the JVS reporting unit during the quarter ended March 31, 2020. As a result of both the COVID-19 related economic downturn and its impact on the JVS reporting units anticipated financial results, the Company concluded that it was more likely than not that the JVS reporting unit’s carrying value exceeded its fair value and performed an interim impairment review for both JVS’s goodwill and tradename intangible assets, during the quarter ended March 30, 2020. As a result, the Company recorded non-cash impairment charges of $8.4 million and $139.1 million for goodwill and indefinite-lived intangible assets, respectively, in the quarter ended March 31, 2020.

Liquidity and Capital Resources

Overview

We finance our capital and working capital requirements through a combination of cash flows from operating activities and borrowings under the Altra Revolving Credit Facility. At June 30, 2020, we had the ability under the Altra Revolving Credit Facility (as defined herein) to borrow an additional $294.8 million subject to satisfying customary conditions. We expect that our primary ongoing requirements for cash will be for working capital, debt service, capital expenditures, acquisitions, pensions, dividends and share repurchases.

On October 1, 2018 (the “A&S Closing Date”), we consummated the Fortive Transaction. The aggregate purchase price for the A&S Business was approximately $2,855.7 million, subject to certain post-closing adjustments, and consisted of (i) $1,400.0 million of cash transferred to Fortive and (ii) shares of Altra common stock received by Fortive shareholders valued at approximately $1,455.7 million. The value of the common stock was based on the closing stock price on the A&S Closing Date of $41.59. We financed the cash portion of the Fortive Transaction with the Altra Credit Facilities (as defined herein).

We believe, based on current and projected levels of cash flows from operating activities, together with our ability to borrow under the Altra Revolving Credit Facility (as defined herein), we have sufficient liquidity to make required payments of interest on our debt, to make amortization payments under the Altra Credit Facilities (as defined herein), to fund our operating needs, to fund working capital and capital expenditure requirements and to comply with the financial ratios in our debt agreements. However, it is difficult to predict the severity and duration of the economic decline due to the impact of the COVID-19 pandemic but we have taken several proactive measures to protect our balance sheet and strengthen our liquidity position, as discussed above under “Business Outlook.”

In the event additional funds are needed for operations, we could attempt to obtain new debt and/or refinance existing debt, or attempt to raise capital in the equity markets. There can be no assurance however that additional debt or equity financing will be available on commercially acceptable terms, if at all.

Notes

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

The unaffiliated selling securityholder received the Selling Securityholder Notes from Fortive prior to the closing of the Private Placement in exchange for certain outstanding Fortive debt held or acquired by the unaffiliated selling securityholder. Stevens Holding used the net proceeds of the Primary Notes to fund a dividend payment to Fortive prior to the consummation of the Merger, and Stevens Holding did not receive any proceeds from the sale of the Selling Securityholder Notes.

Altra Credit Agreement

On the A&S Closing Date, Altra entered into the Altra Credit Agreement with certain subsidiaries of Altra, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and a syndicate of lenders. The Altra Credit Agreement provides for a seven-year senior secured term loan to Altra in an aggregate principal amount of $1,340.0 million (the “Altra Term Loan Facility”) and a five-year senior secured revolving credit facility provided to Altra and certain of its subsidiaries in an aggregate committed principal amount of $300.0 million (the “Altra Revolving Credit Facility” and together with the Altra Term Loan Facility, the “Altra Credit Facilities”). The proceeds of the Altra Term Loan Facility were used to (i) consummate the Direct Sales, (ii) repay in full and extinguish all outstanding indebtedness for borrowed money under the 2015 Credit Agreement and (iii) pay certain fees, costs, and expenses in connection with the consummation of the Fortive Transaction. Any proceeds of the Altra Term Loan Facility not so used may be used for general corporate purposes. The proceeds of the Altra Revolving Credit Facility will be used for working capital and general corporate purposes.

The Altra Credit Facilities are guaranteed on a senior secured basis by Altra and by each direct or indirect wholly owned domestic subsidiary of Altra, subject to certain customary exceptions.

Borrowings under the Altra Term Loan Facility will bear interest at a per annum rate equal to a “Eurocurrency Rate” plus 2.00%, in the case of Eurocurrency Rate borrowings, or equal to a “Base Rate” plus 1.00%, in the case of Base Rate borrowings. Borrowings under the Altra Revolving Credit Facility will initially bear interest at a per annum rate equal to a Eurocurrency Rate plus 2.00%, in the case of Eurocurrency Rate borrowings, or equal to a Base Rate plus 1.00%, in the case of Base Rate borrowings, and thereafter will bear interest at a per annum rate equal to a Eurocurrency Rate or Base Rate, as applicable, plus an interest rate spread determined by reference to a pricing grid based on Altra’s senior secured net leverage ratio. In addition, Altra will be required to pay fees that will fluctuate between 0.250% per annum to 0.375% per annum on the unused amount of the Altra Revolving Credit Facility, based upon Altra’s senior secured net leverage ratio. The interest rate on the Altra Term Loan Facility was 2.174% at June 30, 2020.

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

Borrowings

The following is a summary of our borrowings as of June 30, 2020 and June 30, 2019, respectively:

	Amounts in millions
	June 30, 2020		June 30, 2019
Debt:
Term loan	$	1,160.0	$	1,270.0
Revolving Credit Facility		—		—
Notes		400.0		400.0
Mortgages and other		12.6		15.2
Finance leases		0.3		0.5
Total debt	$	1,572.9	$	1,685.7

Cash and Cash Equivalents

The following is a summary of our cash balances and cash flows (in millions) as of and for the year to date periods ended June 30, 2020 and June 30, 2019, respectively:

	June 30, 2020			June 30, 2019			Change
Cash and cash equivalents at the beginning of the period	$	167.3		$	169.0		$	(1.7	)
Cash flows provided by operating activities		73.7			96.1			(22.4	)
Cash flows provided by (used in) investing activities		38.9			(37.3	)		76.2
Cash flows provided used in financing activities		(55.1	)		(72.4	)		17.3
Effect of exchange rate changes on cash and cash equivalents		(4.7	)		(1.8	)		(2.9	)
Cash and cash equivalents at the end of the period	$	220.1		$	153.6		$	66.5

Cash Flows for 2020

Net cash provided by operating activities was approximately $73.7 million for the year to date period ended June 30, 2020. This was generated by a net loss of $95.0 million offset by the net impact of the add-back of certain items including non-cash depreciation, amortization of intangible assets, stock-based compensation, amortization of deferred financing costs, non-cash loss on foreign currency, the payment from interest rate swap hedge settlement of approximately $34.7 million and the non-cash impairment charge to goodwill and intangible assets which totaled approximately $188.6 million. This was partially offset by a use of cash from a net increase in assets and liabilities of approximately $19.9 million.

Net cash provided by investing activities for the year to date period ended June 30, 2020 increased approximately $76.2 million compared to the period ended June 30, 2019, primarily due to the cross currency interest rate swap settlement proceeds of approximately $56.2 million received during the second quarter of 2020.

Net cash used in financing activities for the year to date period ended June 30, 2020 as compared to the period ended June 30, 2019 decreased by $17.3 million, primarily as a result of the decrease in payments on the Term Loan Facility compared to the prior year.

We intend to use our remaining cash and cash equivalents and cash flow from operations to provide for our working capital needs, to service our debt, including principal payments, for capital expenditures, for pension funding, and to pay dividends to our stockholders. As of June 30, 2020 we have approximately $117.1 million of cash and cash equivalents held by foreign subsidiaries. We believe, based on current and projected levels of cash flows from operating activities, together with our ability to borrow under the Altra Revolving Credit Facility, we have sufficient liquidity to make required payments of interest on our debt, to make amortization payments under the Altra Credit Facilities, to fund our operating needs, to fund working capital and capital expenditure requirements and to comply with the financial ratios in our debt agreements. However, it is difficult to predict the severity and duration of the economic decline due to the impact of the COVID-19 pandemic and any potential resulting impact to our cash flows.

Contractual Obligations

There were no material changes in our contractual obligations during the period ended June 30, 2020.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risk factors such as fluctuating interest rates, changes in foreign currency rates, and changes in commodity prices. Since the beginning of the fiscal year, we have terminated our interest rate swap agreements and cross-currency interest rate swap agreements. However, there is no material change to our sensitivity analyses and other quantitative and qualitative disclosures regarding our market risk set forth in our Annual Report on Form 10-K for the year ended December 31, 2019.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of June 30, 2020, our management, under the supervision and with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act, such as this Quarterly Report on Form 10-Q, is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that, as of June 30, 2020, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our fiscal quarter ended June 30, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are, from time to time, party to various legal proceedings arising out of our business. During the reporting period, there have been no material changes to the description of legal proceedings set forth in our Annual Report on Form 10-K for the year ended December 31, 2019.

Item 1A. Risk Factors

The reader should carefully consider the Risk Factors described in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission. Those risk factors described elsewhere in this report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2019 are not the only ones we face, but are considered to be the most material. These risk factors could cause our actual results to differ materially from those stated in forward looking statements contained in this Form 10-Q and elsewhere. All risk factors stated in our Annual Report on Form 10-K for the year ended December 31, 2019 are incorporated herein by reference.

During the reporting period, except as noted below, there were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, as updated by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

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

(a) Recent Sales of Unregistered Equity Securities

None.

(b) Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are filed as part of this report:

Exhibit Number		Description

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

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

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

10.1(4)		Altra Industrial Motion Corp. Omnibus Incentive Plan, as amended and restated †

10.2*		Form of Altra Industrial Motion Corp.’ Performance Share Award Agreement under Altra Industrial Motion Corp.’s 2014 Omnibus Incentive Plan, as amended and restated †

10.3*		Form of Altra Industrial Motion Corp.’s Restricted Stock Unit Award Agreement under Altra Industrial Motion Corp.’s 2014 Omnibus Incentive Plan as amended and restated †

10.4*		Form of Altra Industrial Motion Corp.’s Restricted Stock Award Agreement under Altra Industrial Motion Corp.’s 2014 Omnibus Incentive Plan as amended and restated †

10.5*		Form of Altra Industrial Motion Corp.’s Nonqualified Stock Option Award Agreement under Altra Industrial Motion Corp.’s 2014 Omnibus Incentive Plan as amended and restated †

31.1*		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Unaudited Condensed Consolidated Statement of Operations, (ii) the Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss), (iii) the Unaudited Condensed Consolidated Balance Sheet, (iv) the Unaudited Condensed Consolidated Statement of Cash Flows, (v) the Unaudited Consolidated Statement of Stockholders’ Equity and (vi) Notes to Unaudited Condensed Consolidated Interim Financial Statements.

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in iXBRL and contained in Exhibit 101.

*	Filed herewith.

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

†	Management contract or compensatory plan or arrangement

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

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

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

(4)	Incorporated by reference to Annex A filed with Altra Industrial Motion Corp.’s Proxy Statement, filed with the Securities and Exchange Commission on March 26, 2020.

SIGNATURES

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

		ALTRA INDUSTRIAL MOTION CORP.

July 24, 2020	By:	/s/ Carl R. Christenson
	Name:	Carl R. Christenson
	Title	Chairman and Chief Executive Officer
		(Principal Executive Officer)
July 24, 2020	By:	/s/ Christian Storch
	Name:	Christian Storch
	Title:	Vice President and Chief Financial Officer
		(Principal Financial Officer)
July 24, 2020	By:	/s/ Todd B. Patriacca
	Name:	Todd B. Patriacca
	Title:	Vice President of Finance, Corporate Controller and Treasurer
		(Principal Accounting Officer)

Exhibit 10.2

ALTRA INDUSTRIAL MOTION CORP.

Altra Industrial Motion Corp. 2014 Omnibus Incentive Plan

Performance Share Award Agreement

This Performance Share Award Agreement (this “Agreement”), granted under the Altra Industrial Motion Corp. 2014 Omnibus Incentive Plan, as amended (the “Plan”), is effective as of «Date_of_Grant», and is made between Altra Industrial Motion Corp., a Delaware corporation (the “Company”), and «First_Name» «Last_Name» (the “Participant”). This Agreement is subject to all of the terms and conditions as set forth herein and in the Plan.

Preliminary Statements

WHEREAS, the Company has determined that it is desirable and in its best interests to grant to the Participant a performance share award (this “Award”) that is subject to performance conditions and payable in unrestricted shares of the Company’s stock (the “Unrestricted Stock”) and, in certain cases, restricted shares of the Company’s stock (the “Restricted Stock”), in accordance with the terms of the Plan and the Company’s 2019 Performance Share Incentive Plan (“PSIP”), in order to provide the Participant with a significant interest in the Company’s growth and to give the Participant a greater incentive to perform at the highest level and further the interests of the Company and the shareholders of the Company; and

WHEREAS, any capitalized term not herein defined shall have the meaning as set forth in the Plan.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein:

Article 1
Performance Share Award

Section 1.1Grant of Performance Shares. On the terms and conditions of this Agreement, the Plan and the PSIP, the Committee grants to the Participant this Award, which will become earned based on the achievement of relative total shareholder return goals as described in Section 1.2 below (the shares that may be delivered pursuant to this Award, the “Performance Shares”). The target number of Performance Shares to be issued pursuant to this Award is «PSA_Number_of_Shares» (the “Target Shares”), and the maximum number of Performance Shares that may be issued pursuant to this Award is 150% of the number of Target Shares. The extent to which this Award shall be earned shall be determined in accordance with the provisions of Section 1.2 below. The date of grant of this Award is «Date_of_Grant» (the “Grant Date”). The Performance Shares shall be paid in Unrestricted Stock or, in certain cases, Restricted Stock.

Section 1.2Earning the Performance Shares. Except as provided in Section 1.3 below, the Participant shall earn this Award in accordance with the following provisions:

(a)Performance Criteria. The extent to which this Award shall become earned at the end of the applicable performance period shall be based upon the change in the value of the common stock of the Company (taking dividends into account in accordance with the terms provided in Exhibit 1 of the PSIP) over the three-year Performance Period (as defined in Section 1.2(b) below), calculated in accordance with Exhibit 1 of the PSIP (the “Performance Criteria”).

(b)Performance Period. The performance period for the Performance Criteria shall commence on January 1, 2019 and shall end on December 31, 2021 (the “Performance Period”).

(c)Percentage of Performance Shares Earned. Except as provided herein, the Participant shall earn 100% of the Performance Shares if the Company’s Total Shareholder Return (“TSR”) (as such term is defined in the PSIP) is in the 50^th percentile compared to the TSR of the Company’s Peer Group (as provided in Exhibit 1 of the PSIP) over the Performance Period. If the Company’s TSR over the Performance Period is negative, the performance multiplier will be limited to 100% of the target award. Generally, the percentage of Performance Shares earned at the end of the Performance Period based on the Performance Criteria shall be determined according to the following chart; however, the actual number of Performance Shares will be interpolated linearly between the percentages set forth in the following chart based on actual results:

Company TSR Ranking	Vesting Percentage (percentage of Performance Shares)	Payout if Company TSR is Negative
75^th Percentile	150%	100%
50^th Percentile	100%	100%
25^th Percentile	50%	50%
Below 25^th Percentile	0%	0%

(d)Committee Certification. Promptly after the end of the Performance Period, and in no event later than February 15, 2022, the Committee must determine (in accordance with Exhibit 1 of the PSIP) and certify whether, and to what extent, the Performance Criteria have been achieved. If the minimum Performance Criteria of percentile rank has not been achieved during the Performance Period, no Performance Shares shall be earned, no corresponding Unrestricted Stock shall be delivered, and this Agreement will be of no force or effect; provided that Section 3.2 of this Agreement shall survive.

(e)Vesting. Unless otherwise provided in Section 1.3 below, the Participant shall become fully vested in the earned portion of the Performance Shares, if any, immediately on the date that the Committee makes its certification, in accordance with Section 1.2(d) (the “Vesting Date”); provided that the Participant remains in the continuous employment of the Company through the Vesting Date.

Section 1.3Termination of Employment; Change in Control. Except as otherwise provided in this Section 1.3, if the Participant ceases to be an employee of the Company or any Subsidiary for any reason, any unvested portion of the Performance Shares shall thereupon be forfeited immediately and without any further action by the Company. If any employment or similar agreement entered into between the Participant, on the one hand, and the Company or a Subsidiary, on the other, provides for treatment of this Award that is more favorable to the Participant than the treatment set forth in this Section 1.3, the more favorable treatment set forth in such employment or similar agreement shall govern.

(a)Notwithstanding anything contrary in this Agreement, upon the occurrence of a Change in Control prior to the end of the Performance Period, this Award shall be treated as follows:

(i)

If the continuing entity assumes this Award, this Award will be settled in a number of shares of Restricted Stock that cliff-vest at the end of the Performance Period. Such number of shares will be determined based on the achievement of the Performance Criteria as of the Change in Control date, taking into account Section 1.6 herein. Upon the occurrence of any of the following termination events after this Award is settled in shares of Restricted Stock, but prior to the end of the Performance Period, this Award will be treated as follows:

Death, termination of employment due to Disability, or termination without Cause within 24 months following a Change in Control or resignation for Good Reason within 24 months following a Change in Control: Vesting of such shares of Restricted Stock will accelerate (subject, in each case except in the case of the Participant’s death, to the Release Condition and the Participant’s compliance with the restrictive covenants provided in Section 3.2 herein).

Authorized Retirement: Subject to the Release Condition, upon the Participant’s Authorized Retirement, such shares of Restricted Stock shall remain outstanding and eligible to cliff-vest at the end of the Performance Period, subject to the Participant’s compliance with the restrictive covenants provided in Section 3.2 herein; provided, that in the event that at any time from or after the Participant’s Authorized Retirement, the Company determines that the Restricted Stock has become subject to any applicable U.S. federal, state, local or other tax withholding obligations, (x) the Company shall withhold a number of shares of Restricted Stock with a Fair Market Value equal to such withholding liability (as determined in accordance with Section 2.6(b)(i) hereof), and (y) the number of shares of Restricted Stock that are not used to satisfy such withholding liability (the “Net Restricted Shares”) shall remain subject to the transfer restrictions set forth in Section 1.9 herein and subject to the Participant’s compliance with the restrictive covenants provided in Section 3.2 herein, in each case, until the end of the Performance Period.

(ii)

If the continuing entity fails to assume this Award, this Award shall become fully vested as of the Change in Control date, subject to the Participant’s continued employment through such date, and the Participant shall be entitled to receive a number of shares of Unrestricted Stock on the Change in Control date (or an equivalent amount in cash or other unrestricted property, as determined by the Committee), determined based on the achievement of the Performance Criteria as of the Change in Control date, taking into account Section 1.6 herein. Any portion that becomes vested pursuant to this Section 1.3(a)(ii) shall become payable within ten (10) days following the Change in Control date.

(b)Notwithstanding anything contrary in this Agreement and except as provided in Section 1.3(a), upon the occurrence of any of the following termination events, this Award will be treated as follows (subject, in each case except in the case of the Participant’s death, to the Release Condition and the Participant’s compliance with restrictive covenants provided in Section 3.2 herein):

(i)

Death or termination of employment due to Disability: Prorated payout based on time elapsed and actual performance with respect to the Performance Criteria at the end of the Performance Period. Any portion that becomes vested pursuant to this Section 1.3(b)(i) shall become payable on the regular payment date pursuant to Section 1.5(a) herein.

(ii)

Authorized Retirement: Prorated payout based on time elapsed and actual performance with respect to the Performance Criteria at the end of the Performance Period. Any portion that becomes vested pursuant to this Section 1.3(b)(ii) shall become payable on the regular payment date pursuant to Section 1.5(a) herein.

(iii)

Termination without Cause (not within 24 months following a Change in Control): In the discretion of the Committee, a prorated portion of this Award may be paid based on time elapsed and actual performance at the end of the Performance Period. Any portion that becomes vested pursuant to this Section 1.3(b)(iii) shall become payable on the regular payment date pursuant to Section 1.5(a) herein.

Section 1.4Release Condition. Except as otherwise determined by the Committee, if any vesting or settlement of the Performance Shares or vesting of shares of Restricted Stock is subject to a “Release Condition”, the Participant must sign and deliver to the Company a release of claims, in the form provided by the Company (which, following a Change in Control, shall be based on the Company’s form prior to the Change in Control), as consideration for such vesting or settlement, within thirty (30) days following the applicable event and shall not revoke it within the period specified therein.

Section 1.5Payment of Awards.

(a)Payment of earned Performance Shares shall be made on a date as soon as administratively practicable following the completion of the Performance Period, but in no event later than March 15, 2022 (the “Payment Date”), except as set forth in Section 1.3(a) hereof.

(b)On the Payment Date, the Participant shall receive one share of Unrestricted Stock for each Performance Share earned and certified pursuant to Section 1.2(d), plus any shares of Unrestricted Stock to which the Participant is entitled under Section 1.6 below.

(c)On the date on which any shares of Unrestricted Stock are received by the Participant in accordance with this Agreement (including as a result of any shares of Restricted Stock becoming vested), the Participant shall be entered as the stockholder of record for the number of shares that have been so received.

Section 1.6Dividend Equivalent Rights. If the applicable Performance Criteria are satisfied or deemed satisfied pursuant to Section 1.2 or 1.3 herein with respect to any Performance Shares granted to the Participant under this Agreement, and the Participant receives Restricted Stock or Unrestricted Stock, as appropriate, pursuant thereunder, then the Participant shall also be entitled to receive, on the applicable payment date pursuant to Section 1.3 or 1.5 herein, a number of shares of either Restricted Stock or Unrestricted Stock, as appropriate, equal to (A) (i) the number of Performance Shares earned or deemed earned by the Participant under Section 1.2 and/or Section 1.3, as applicable, multiplied by (ii) the cumulative amount of cash dividends paid by the Company that the Participant would have received had the Participant owned such earned Performance Shares on each dividend record date through such payment date, divided by (B) the closing price of the Company’s Common Stock on the last business day immediately prior to such payment date; provided, however, that cash will be paid in lieu of any fractional shares the Participant would be entitled to receive under this Section 1.6.

Section 1.7Effect of Changes in Capitalization. This Award shall be subject to adjustment in accordance with Section 10(c) of the Plan.

Section 1.8General Restrictions. The Company shall not be required to sell or issue any Restricted Stock or Unrestricted Stock under this Award if the sale or issuance of such Restricted Stock or Unrestricted Stock would constitute a violation by the Participant or by the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any Restricted Stock or Unrestricted Stock subject to this Award upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares, this Award may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of this Award. Specifically, in connection with the Securities Act of 1933 (as now in effect or as hereafter amended), unless a registration statement under such Act is in effect with respect to the Restricted Stock covered by this Award, the Company shall not be required to sell or issue such shares unless the Company has received evidence satisfactory to it that the holder of this Award may acquire such shares pursuant to an exemption from registration under such Act. Any determination in this connection by the Company shall be final, binding and conclusive. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act of 1933 (as now in effect or as hereafter amended). The Company shall not be obligated to take any affirmative action in order to cause the issuance of shares pursuant to this Award to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that the Restricted Stock portion of this Award shall not be delivered unless and until the shares of Restricted Stock covered by this Award are registered or are subject to an available exemption from registration, the delivery of the Restricted Stock portion of this Award (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption.

Section 1.9Restrictions on Transfer. Other than by will or under the laws of descent and distribution, the Participant shall not have the right to make or permit to occur any Transfer of all or any portion of this Award, whether vested or unvested, whether outright or as security, with or without consideration, voluntary or involuntary. Any such Transfer not made in accordance with this Agreement shall be deemed null and void.

Article 2
Restricted Stock

Section 2.1Terms of Restricted Stock.

(a)This Article 2 sets out the terms applicable to any shares of Restricted Stock that may be delivered pursuant to Article 1 hereof. Subject to the terms and conditions of this Agreement, the Plan and the PSIP, the Restricted Stock payable to the Participant pursuant to Section 1.3, Section 1.5 or Section 1.6 shall be issued for good and valuable consideration, which the Company has determined to exceed the par value of the Company’s common stock.

(b)The Restricted Stock shall be evidenced in such manner as the Company may deem appropriate, including book-entry registration or issuance of one or more stock certificates. Any certificate or book-entry credit issued or entered in respect of the Restricted Stock shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to the Restricted Stock substantially in the following form:

“The transferability of this certificate (if certificated) and the shares of stock represented hereby is subject to the terms and conditions (including forfeiture) of the Altra Industrial Motion Corp. 2014 Omnibus Incentive Plan and an Award Agreement between the Altra Industrial Motion Corp. and the stockholder, as well as the terms and conditions of applicable law. Copies of such Plan and Agreement are on file at the offices of Altra Industrial Motion Corp.”

Section 2.2Forfeiture Restriction.

(a)Subject to Section 1.3, Section 2.2(b) and Section 2.2(d), if the Participant ceases to be an employee of the Company or any Subsidiary for any reason, all of the unvested shares of Restricted Stock shall thereupon, without any further action by the Company, be forfeited immediately and released from the Forfeiture Restriction. Upon the occurrence of such forfeiture, the Company shall become the legal and beneficial owner of such forfeited shares and all rights and interests therein or relating thereto and the Company shall have the right to retain and transfer such shares to its own name.

(b)One-hundred percent of the shares of Restricted Stock shall be released from the Forfeiture Restriction on the final day of the Performance Period; provided that the Participant continues to be an employee of the Company or a Subsidiary through such date. In addition, if the vesting of any shares of Restricted Stock issued to the Participant accelerates pursuant to Section 1.3, such shares shall be fully released from the Forfeiture Restriction.

(c)Notwithstanding anything to the contrary in this Agreement, no shares of Restricted Stock or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment, or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect.

Section 2.3Cash Dividend Entitlement. Notwithstanding anything in the Plan to the contrary, with respect to all Restricted Stock, the Participant shall be entitled to receive payment on the applicable payment date of all cash dividends declared by the Company.

Section 2.4Restrictions on Transfer. The Participant may not Transfer any shares of Restricted Stock granted hereunder.

Section 2.5Effect of Changes in Capitalization. The shares of Restricted Stock shall be subject to adjustment in accordance with Section 10(c) of the Plan.

Section 2.6Tax Matters.

(a)The Participant may make the election under Section 83(b) of the Code with respect to the delivery of the shares of Restricted Stock. Section 83 of the Code provides that generally the Participant is not subject to federal income tax until shares are released from the Forfeiture Restrictions. If the Participant makes a Section 83(b) election, the Participant would recognize income as of the date of the delivery of Restricted Stock to the Participant in the amount of the Fair Market Value of the Restricted Stock (determined as of the date of the delivery of the Restricted Stock) without regard to the vesting restrictions. A Section 83(b) election must be filed with the Internal Revenue Service within thirty (30) days after the date the Performance Shares are settled in shares of Restricted Stock. The form for making a Section 83(b) election is attached as Exhibit A. The Participant acknowledges that it is the Participant’s sole responsibility to timely file the Section 83(b) election and that failure to file a Section 83(b) election within the applicable thirty (30) day period will cause the Participant to be taxed when the shares are released from the Forfeiture Restriction. The Participant shall (i) provide the Company with a copy of any Section 83(b) election within five (5) business days of filing such election and (ii) deliver to the Company within ten (10) business days of filing such election a check payable to the Company in the amount of all withholding tax obligations (whether federal, state, local or foreign income or social insurance tax), imposed on the Participant as a result of filing such Section 83(b) election.

(b)If the Performance Shares are settled in shares of Restricted Stock, then upon (x) the date of such settlement, if the Participant files a Section 83(b) election, or (y) at such time as the shares of Restricted Stock are released from the Forfeiture Restriction, if the Participant does not file a Section 83(b) election, the Participant (or his or her personal representative) shall deliver to the Company, within ten (10) days after such occurrence (or in the event of death, within ten (10) days of the appointment of the personal representative), either a check payable to the Company in the amount of all withholding tax obligations (whether federal, state, local or foreign income or social insurance tax), imposed on the Participant and the Company by reason of the release of the Forfeiture Restriction, or a withholding election form to be provided by the Company upon request by the Participant (or personal representative).

(i)

In the event the Participant or his or her personal representative elects to satisfy the withholding obligation by executing the withholding election form, the Participant’s actual number of vested shares of Restricted Stock shall be reduced by the number of whole shares that, when multiplied by the Fair Market Value of a share on the date that the Forfeiture Restriction is released, the Company determines is sufficient to satisfy the Participant’s tax obligations by reason of the Participant being recorded as the stockholder of record of such shares. The Participant may, instead, choose to deliver to the Company a check payable to the Company in the amount of all withholding tax obligations (whether federal, state, local or foreign income or social insurance tax). In the event that the Participant fails to tender either the required certified check or withholding election, the Participant shall be deemed to have elected and executed the withholding election form; provided that, if, at the time that a tax withholding obligation arises in respect of the shares, the Participant has been designated as an “officer” within the meaning of Section 16 of the Exchange Act, then unless otherwise elected in writing by the Participant, the Company shall withhold the maximum amount necessary to satisfy the amount of such withholding tax obligations.

(c)Notwithstanding the foregoing, the summary of tax consequences to the Participant described in this Section 2.6 is provided only as general information and not as tax advice. It does not address all of the tax considerations that may be relevant to the Participant. The Participant acknowledges that he or she should consult with, and rely on, his or her own tax advisors regarding all of the possible tax consequences, based on the Participant’s individual situation, in connection with this Award.

(d)It is intended that the Award shall be exempt from Section 409A of the Code pursuant to the “short-term deferral” rule applicable to such section, as set forth in the regulations or other guidance published by the Internal Revenue Service thereunder.

Section 2.7Acknowledgment. THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE LAPSING OF THE FORFEITURE RESTRICTION PURSUANT TO Section 2.2 HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT WITH THE COMPANY (OR A SUBSIDIARY) AS AN “AT WILL” EMPLOYEE OF THE COMPANY (OR A SUBSIDIARY) AND NOT THROUGH THE ACT OF BEING HIRED OR ACQUIRING SHARES HEREUNDER. THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE FORFEITURE RESTRICTION SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR SUCH PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY’S RIGHT TO TERMINATE THE PARTICIPANT’S EMPLOYMENT WITH THE COMPANY (OR A SUBSIDIARY) AT ANY TIME, WITH OR WITHOUT CAUSE.

Article 3
Miscellaneous

Section 3.1Definitions.

(a)“Authorized Retirement” means the Participant’s voluntary resignation from employment with the Company and its Subsidiaries under circumstances which the Committee, in its sole discretion, determines to constitute “Retirement”. For the avoidance of doubt, the Committee’s determination of whether “Retirement” has occurred shall be made on an individual Award basis, and “Retirement” treatment for any one Award shall not require that all Awards held by the Participant will receive “Retirement” treatment.

(b)“Forfeiture Restriction” means a “substantial risk of forfeiture” within the meaning of Section 83(b) of the Code and the regulations promulgated thereunder.

(c)“Transfer” means any direct or indirect, voluntary or involuntary, offer to sell, transfer, sale, assignment, pledge, hypothecation, short sales, loan, grant of an option to purchase or other disposition, or the entering of any contract or agreement to do any of the foregoing.

Section 3.2Non-Compete; Non-Solicitation.

(a) In consideration of this Award, the Participant agrees and covenants not to:

(i)Contribute his or her knowledge, directly or indirectly, in whole or in part, as an employee, officer, owner, manager, advisor, consultant, agent, partner, director, shareholder, volunteer, intern or in any other similar capacity to an entity engaged in the same or similar business as the Company and its Related Entities, as such business may be expanded from time to time, for a period of two years following the Participant’s termination of employment; provided that nothing in this Section 3.2 shall prohibit the ownership of less than five percent (5%) of the stock of a publicly-held corporation whose stock is traded on a national securities exchange or listed with the Nasdaq Stock Market;

(ii) Directly or indirectly, solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of the Company or its Related Entities for two years following the Participant’s termination of employment; or

(iii) Directly or indirectly, solicit, contact (including, but not limited to, email, regular mail, express mail, telephone, fax and instant message), attempt to contact or meet with the current, former or prospective customers of the Company or any of its Related Entities for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company or any of its Related Entities for a period of two years following the Participant’s termination of employment.

(b) If the Participant breaches any of the covenants set forth in Section 3.2(a):

(i) All unvested portions of this Award (including any unvested shares of Restricted Stock and any Net Restricted Shares) shall be immediately forfeited; and

(ii)the Participant hereby consents and agrees that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages or other available forms of relief.

(c)If the Participant has agreed to a non-compete and/or a non-solicitation provision in any other contract or agreement with the Company, then the Company may choose to enforce any other non-compete and/or non-solicitation provision to which the Participant is bound to the extent such provision provides greater restrictions than those provided in Sections 3.2(a) and 3.2(b) herein.

Section 3.3Effectiveness of Agreement. This Agreement shall not be effective unless Participant executes and delivers this Agreement within ten (10) business days of the date of this Agreement.

Section 3.4Interpretation of this Agreement. By his or her signature below, the Participant agrees to be bound by the terms and conditions of the Plan. The Participant has reviewed the Plan in its entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement and the Plan. All decisions and interpretations made by the Committee or the Board with regard to any question arising under this Agreement and the Plan shall be final, binding and conclusive on the Company and the Participant and any other person entitled to receive the benefits of this Award and the shares of Restricted Stock as provided for herein.

Section 3.5Tax Withholding. The Company is entitled to withhold from any payments of Awards under this Agreement, Plan or the PSIP any and all amounts required to be withheld for federal, state and local withholding taxes.

Section 3.6General Provisions.

(a)This Agreement shall be governed by the laws of the State of Delaware, without giving effect to principles of conflicts of laws.

(b)This Agreement, the Plan and the PSIP constitute the entire agreement between the Company and the Participant concerning the subject matter hereof. There is no representation or statement made by any party on which another party has relied which is not included in this Agreement. Any previous agreement between the Company and the Participant concerning the subject matter hereof is hereby terminated and superseded by this Agreement, the Plan and the PSIP. This Agreement may not be assigned by the Participant except as required in connection with a permitted transfer thereunder. Subject to the foregoing, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, permitted assigns, heirs, executors and administrators of the parties hereto. Any attempted transfer of this Agreement not in compliance with the terms hereof shall be null and void.

(c)Neither this Agreement nor any term hereof may be amended, modified, waived, discharged, or terminated except by a written instrument signed by the Company and the Participant; provided, however, that the Company unilaterally may waive any provision hereof in writing to the extent that such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

(d)Either party’s failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, nor prevent that party thereafter from enforcing each and every other provision of this Agreement. The rights granted both parties herein are cumulative and shall not constitute a waiver of either party’s right to assert all other legal remedies available to it under the circumstances.

(e)THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE PERFORMANCE SHARES SUBJECT TO THIS AWARD ARE EARNED BY CONTINUING EMPLOYMENT WITH THE COMPANY (OR A SUBSIDIARY) THROUGH THE APPLICABLE VESTING DATES AND ACHIEVEMENT OF THE PERFORMANCE CRITERIA SET FORTH HEREIN, AS AN “AT WILL” EMPLOYEE OF THE COMPANY (OR A SUBSIDIARY) AND NOT THROUGH THE ACT OF BEING HIRED OR ACQUIRING SHARES HEREUNDER. THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR SUCH PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY’S RIGHT TO TERMINATE THE PARTICIPANT’S EMPLOYMENT WITH THE COMPANY (OR A SUBSIDIARY) AT ANY TIME, WITH OR WITHOUT CAUSE.

(f)Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally or sent by facsimile transmission, overnight air courier, or first class certified or registered mail, postage prepaid, and addressed to the parties at the addresses of the parties set forth at the end of this Agreement or such other address as a party may designate by five (5) days’ advance written notice to the other parties hereto. All notices and communications shall be deemed to have been received unless otherwise set forth herein: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of facsimile transmission, on the date on which the sender receives electronic confirmation that such notice was received by the addressee; (iii) in the case of overnight air courier, on the second business day following the day sent, with receipt confirmed by the courier; and (iv) in the case of mailing by first class certified or registered mail, postage prepaid, return receipt requested, on the fifth business day following such mailing.

(g)If any term or provision of this Agreement or the application thereof to any person, property or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons, property or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

(h)This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile or other electronic signatures (including PDFs) shall be deemed an original.

(i)The headings of the sections of this Agreement are for convenience and shall not by themselves determine the interpretation of this Agreement. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rule of strict construction will be applied against any party.

(j)This Agreement will not confer any rights or remedies upon any person other than the parties hereto and their respective successors and permitted assigns.

(k)By his or her signature below, the Participant agrees to be bound by the terms and conditions of the Plan and the PSIP. The Participant has reviewed the Plan and the PSIP in its entirely, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement and the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Plan, the PSIP and this Agreement by the Committee.

(Signature Page Follows)

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first set forth above.

ALTRA INDUSTRIAL MOTION CORP.:	PARTICIPANT:


By:
Name: Carl R. Christenson Title: Chief Executive Officer	«First_Name» «Last_Name»

Address:	Address:

Altra Industrial Motion Corp. 300 Granite Street, Suite 201 Braintree, MA 02184 Attention: Carl R. Christenson Fax No.: (781) 843-0615	«Street_Address» «City», «State» «Zip»

EXHIBIT A

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal Tax Code, to include in taxpayer’s gross income for the current taxable year, the amount of any compensation taxable to taxpayer in connection with his receipt of the property described below:

The name, address, taxpayer identification number and taxable year of the undersigned are as follows:

NAME:	«First_Name» «Last_Name»		SPOUSE:

ADDRESS:		«Street_Address», «City», «State» «Zip»

IDENTIFICATION NO.:

SPOUSE:

TAXABLE YEAR:

The property with respect to which the election is made is described as follows: _____________________ shares (the “Shares”) of the common stock of Altra Industrial Motion Corp. (the “Company”).

The date on which the property was transferred is:

The property is subject to the following restrictions:

The Shares may be forfeited to the Company, or its assignee, on certain events, including certain terminations of employment. This right lapses with regard to a portion of the Shares over time.

The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is approximately: $[ ].

The amount (if any) paid for such property is: $0.00 per share.

The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.

Dated:
			«First_Name» «Last_Name»

Exhibit 10.3

ALTRA INDUSTRIAL MOTION CORP.

2014 OMNIBUS INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”) is made as of «Date_of_Grant» (the “Date of Grant”), by and between Altra Industrial Motion Corp., a Delaware corporation (the “Company”), and «First_Name» «Last_Name» (the “Participant”). This Agreement is subject to all of the terms and conditions as set forth herein and in the Company’s 2014 Omnibus Incentive Plan, as amended (the “Plan”), which is incorporated herein by reference.

The parties agree as follows:

1.Definitions. Each of the following terms used herein shall have the following meanings:

“Authorized Retirement” means the Participant’s voluntary resignation from employment with the Company and its Subsidiaries under circumstances which the Committee, in its sole discretion, determines to constitute “Retirement”. For the avoidance of doubt, the Committee’s determination of whether “Retirement” has occurred shall be made on an individual Award basis, and “Retirement” treatment for any one Award shall not require that all Awards held by the Participant will receive “Retirement” treatment.

“Transfer” means any direct or indirect, voluntary or involuntary, offer to sell, transfer, sale, assignment, pledge, hypothecation, short sales, loan, grant of an option to purchase or other disposition, or the entering of any contract or agreement to do any of the foregoing.

Any capitalized term not herein defined shall have the meaning as set forth in the Plan.

2.Grant of Restricted Stock Units. Subject to the terms and conditions of this Agreement and the Plan, the Company hereby grants the Participant a total of [●] Restricted Stock Units (“RSUs”) (such grant, the “Award”). Each RSU represents an unfunded, unsecured right to receive, subject to satisfaction of the conditions set forth herein, one share of the Company’s common stock par value $0.001 (a “Share”). RSUs are considered Other Stock-Based Awards for purposes of the Plan.

3.Vesting; Termination of Employment; Change in Control; Settlement; Forfeiture.

(a)Vesting. The RSUs shall vest in accordance with the schedule set forth on [Appendix [●]]; provided that the Participant continues to be an employee of the Company or a Subsidiary from the Date of Grant through the applicable vesting dates set forth therein (each, a “Vesting Date”).

(b)Termination of Employment; Change in Control. Notwithstanding anything contrary in this Agreement, upon the occurrence of any of the following events, the Participant’s RSUs shall become fully vested (subject, in each case except in the case of the Participant’s

«Last_Name» Restricted Stock Unit Award Agreement [●], 2019

death, to the Release Condition (as defined below) and the Participant’s compliance with the restrictive covenants provided in Section 8 hereof); provided that if any employment or similar agreement entered into between the Participant, on the one hand, and the Company or a Subsidiary, on the other, provides for treatment of the RSUs that is more favorable to the Participant than the treatment set forth in this Section 3(b), the more favorable treatment set forth in such employment or similar agreement shall govern:

(i)the Participant’s death or termination of employment due to Disability;

(ii)in the discretion of the Committee, the termination of the Participant’s employment with the Company without Cause (not within 24 months following a Change in Control); or

(iii)following a Change in Control, if:

(1)the continuing entity fails to assume the RSUs; or

(2)the Participant is terminated (either by the Company or its successor) without Cause or the Participant voluntarily terminates for Good Reason, in each case, within the 24-month period following the Change in Control.

(c)Authorized Retirement. Notwithstanding anything contrary in this Agreement, if, on or prior to the applicable Vesting Date, the Participant’s employment is terminated due to an Authorized Retirement, subject to the Release Condition, each unvested RSU will be settled by the Company within 60 days following the Participant’s Authorized Retirement through the issuance of a restricted share of the Company’s common stock (the “Restricted Stock”), which shall remain forfeitable until the applicable Vesting Date. Notwithstanding the foregoing, in the event that at any time from or after the Participant’s Authorized Retirement, the Company determines that the Restricted Stock has become subject to any applicable U.S. federal, state, local or other tax withholding obligations, (1) the Company shall withhold a number of shares of Restricted Stock with a Fair Market Value equal to such withholding liability (as determined in accordance with Section 7 hereof), and (2) the number of shares of Restricted Stock that are not used to satisfy such withholding liability (the “Net Restricted Shares”) shall remain subject to the transfer restrictions set forth in Section 4 hereof and the Participant’s compliance with the restrictive covenants provided in Section 8 hereof, in each case, until the applicable Vesting Date. Notwithstanding anything in the Plan to the contrary, with respect to all Restricted Stock, the Participant shall be entitled to receive payment on the applicable payment date of all cash dividends declared by the Company.

The Restricted Stock shall be evidenced in such manner as the Company may deem appropriate, including book-entry registration or issuance of one or more stock certificates. Any certificate or book-entry credit issued or entered in respect of the Restricted Stock shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to the Restricted Stock substantially in the following form:

«Last_Name» Restricted Stock Unit Award Agreement [●], 2019

(d)Settlement. Except as set forth in Section 3(c), each vested RSU shall be settled within 60 days following the applicable Vesting Date or such earlier date on which the RSU otherwise becomes vested in accordance with this Agreement or the Plan. The RSUs may be settled in Shares, in cash in an amount equal to the number of vested RSUs multiplied by the Fair Market Value of a Share as of the applicable Vesting Date, or in a combination of cash and Shares, as determined by the Committee. In any event, RSUs will be settled no later than 60 days following the date that they are no longer subject to a substantial risk of forfeiture (within the meaning of Treasury Regulation Section 1.409A-1(d)).

(e)Forfeiture. Except as provided in Sections 3(b) and 3(c) hereof, any unvested RSUs outstanding on the date when the Participant ceases to perform services for the Company or a Subsidiary shall automatically be forfeited as of such date.

4.Restrictions on Transfer; Creditors. The Participant shall only Transfer the RSUs or Restricted Stock granted hereunder in accordance with the terms of the Plan. Without limiting the foregoing, no RSUs or Restricted Stock or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by Transfer, whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect.

5.Effect of Changes in Capitalization. The RSUs and Restricted Stock shall be subject to adjustment in accordance with Section 10(c) of the Plan.

6.Release Condition. Except as otherwise determined by the Committee, if any vesting of the RSUs is subject to a “Release Condition”, the Participant must sign and deliver to the Company a release of claims, in the form provided by the Company (which, following a Change in Control, shall be based on the Company’s form prior to the Change in Control), as consideration for such vesting, within 30 days following the applicable event and shall not revoke it within the period specified therein.

7.Tax Withholding. In the event the Participant or his or her personal representative elects to satisfy the withholding obligation by executing the withholding election form, the actual number of Shares delivered to the Participant upon vesting of the Award shall be reduced by a number of whole Shares, which, when multiplied by the Fair Market Value on the last trading day prior to the date that the Award is settled, the Company determines is sufficient to satisfy the Participant’s tax obligations in connection with settlement of the Award. The Participant may, instead, choose to deliver to the Company a check payable to the Company in the amount of all withholding tax obligations (whether federal, state, local or foreign income or social insurance tax). In the event

«Last_Name» Restricted Stock Unit Award Agreement [●], 2019

that the Participant fails to tender either the required certified check or withholding election, the Participant shall be deemed to have elected and executed the withholding election form; provided that, if, at the time that a tax withholding obligation arises in respect of the Award, the Participant has been designated as an “officer” within the meaning of Section 16 of the Exchange Act, unless otherwise elected in writing by the Participant, the Company shall withhold the maximum amount necessary to satisfy the amount of such withholding tax obligations.

8.Non-Compete; Non-Solicitation.

(a)In consideration of the Award, the Participant agrees and covenants not to:

(i)Contribute his or her knowledge, directly or indirectly, in whole or in part, as an employee, officer, owner, manager, advisor, consultant, agent, partner, director, shareholder, volunteer, intern or in any other similar capacity to an entity engaged in the same or similar business as the Company and its Related Entities, as such business may be expanded from time to time, for a period of two years following the Participant's termination of employment; provided that nothing in this Section 8 shall prohibit the ownership of less than five percent (5%) of the stock of a publicly-held corporation whose stock is traded on a national securities exchange or listed with the Nasdaq Stock Market;

(iii) Directly or indirectly, solicit, contact (including, but not limited to, email, regular mail, express mail, telephone, fax and instant message), attempt to contact or meet with the current, former, or prospective customers of the Company or any of its Related Entities for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company or any of its Related Entities for a period of two years following the Participant's termination of employment.

(b) If the Participant breaches any of the covenants set forth in Section 8(a):

(i)All unvested portions of this Award (including any unvested RSUs and any Net Restricted Shares) shall be immediately forfeited; and

«Last_Name» Restricted Stock Unit Award Agreement [●], 2019

9.Section 409A.

(a)It is intended that the provisions of this Award Agreement comply with Section 409A, and all provisions of this Award Agreement shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. It is also intended that the RSUs shall be exempt from Section 409A pursuant to the “short-term deferral” rule applicable to such section, as set forth in the regulations or other guidance published by the Internal Revenue Service thereunder.

(b)Neither the Participant nor any of the Participant’s creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Section 409A) payable under this Award Agreement to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A, any deferred compensation (within the meaning of Section 409A) payable to the Participant or for the Participant’s benefit under this Award Agreement may not be reduced by, or offset against, any amount owing by the Participant to the Company or any of its Affiliates.

(c)Notwithstanding any provision of this Award Agreement to the contrary, no Shares shall be issued or transferred to a Participant before the first date on which a payment could be made without subjecting the Participant to tax under the provisions of Section 409A. If, at the time of the Participant’s “separation from service” (within the meaning of Section 409A), (i) the Participant shall be a “specified employee” (within the meaning of Section 409A and using the identification methodology selected by the Company from time to time) and (ii) the Company shall make a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid taxes or penalties under Section 409A, then the Company shall not pay such amount on the otherwise scheduled payment date but shall instead pay it, without interest, on the first business day after such six-month period.

(d)Notwithstanding any provision of this Award Agreement to the contrary, in light of the uncertainty with respect to the proper application of Section 409A, the Company reserves the right to make amendments to this Award Agreement as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A. In any case, the Participant shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on the Participant or for the Participant’s account in connection with this Award Agreement (including any taxes and penalties under Section 409A), and neither the Company nor any of its Affiliates shall have any obligation to indemnify or otherwise hold the Participant harmless from any or all of such taxes or penalties.

«Last_Name» Restricted Stock Unit Award Agreement [●], 2019

10.General Provisions.

(a)This Agreement shall be governed by the laws of the State of Delaware, without giving effect to principles of conflicts of laws.

(b)This Agreement and the Plan constitute the entire agreement between the Company and the Participant concerning the subject matter hereof. There is no representation or statement made by any party on which another party has relied which is not included in this Agreement. Any previous agreement between the Company and the Participant concerning the subject matter hereof is hereby terminated and superseded by this Agreement and the Plan. This Agreement may not be assigned by the Participant except as required in connection with a permitted transfer thereunder. Subject to the foregoing, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, permitted assigns, heirs, executors and administrators of the parties hereto. Any attempted transfer of this Agreement not in compliance with the terms hereof shall be null and void.

(c)Neither this Agreement nor any term hereof may be amended, modified, waived, discharged or terminated except by a written instrument signed by the Company and the Participant; provided, however, that the Company unilaterally may waive any provision hereof in writing to the extent that such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

(e)THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE RSUs SUBJECT TO THIS AWARD ARE EARNED BY CONTINUING EMPLOYMENT WITH THE COMPANY (OR A SUBSIDIARY) THROUGH THE APPLICABLE VESTING DATES, PURSUANT TO SECTION 3(a) HEREOF, AS AN “AT WILL” EMPLOYEE OF THE COMPANY (OR A SUBSIDIARY) AND NOT THROUGH THE ACT OF BEING HIRED OR ACQUIRING SHARES HEREUNDER. THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR SUCH PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY’S RIGHT TO TERMINATE THE PARTICIPANT’S EMPLOYMENT WITH THE COMPANY (OR A SUBSIDIARY) AT ANY TIME, WITH OR WITHOUT CAUSE.

«Last_Name» Restricted Stock Unit Award Agreement [●], 2019

addresses of the parties set forth at the end of this Agreement or such other address as a party may designate by five (5) days’ advance written notice to the other parties hereto. All notices and communications shall be deemed to have been received unless otherwise set forth herein: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of facsimile transmission, on the date on which the sender receives electronic confirmation that such notice was received by the addressee; (iii) in the case of overnight air courier, on the second business day following the day sent, with receipt confirmed by the courier; and (iv) in the case of mailing by first class certified or registered mail, postage prepaid, return receipt requested, on the fifth business day following such mailing.

(h)The provisions of this Agreement shall apply, to the full extent set forth herein with respect to the Award, to any and awards in respect of capital stock or other securities of the Company or a Subsidiary which may be issued in respect of, in exchange for, or in substitution of the Award, and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof.

(i)This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimiles or other electronic signatures (including PDFs) shall be deemed an original.

(j)The headings of the sections of this Agreement are for convenience and shall not by themselves determine the interpretation of this Agreement. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rule of strict construction will be applied against any party.

(k)This Agreement will not confer any rights or remedies upon any person other than the parties hereto and their respective successors and permitted assigns.

(l)By his or her signature below, the Participant agrees to be bound by the terms and conditions of the Plan. The Participant has reviewed the Plan in its entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement and the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Plan and this Agreement by the Committee.

(m)With respect to all RSUs, including unvested RSUs, the Participant shall be entitled to receive Dividend Equivalents paid in cash on the applicable Dividend payment date to shareholders in respect of all Dividends declared (or for which a record date is set) by the Company prior to settlement of the RSUs as if such RSUs had been outstanding Shares.

«Last_Name» Restricted Stock Unit Award Agreement [●], 2019

(Signature Page Follows)

«Last_Name» Restricted Stock Unit Award Agreement [●], 2019

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first set forth above.


ALTRA INDUSTRIAL MOTION CORP.:	PARTICIPANT:


By:
By:
Name: Carl R. Christenson Title: Chief Executive Officer	«First_Name» «Last_Name»

Address:	Address:
Altra Industrial Motion Corp. 300 Granite Street, Suite 201 Braintree, MA 02184 Attention: Carl R. Christenson Fax No.: (781) 843-0615	«Street_Address» «City», «State» «Zip»

«Last_Name» Restricted Stock Unit Award Agreement [●], 2019

Exhibit 10.4

ALTRA INDUSTRIAL MOTION CORP.

2014 OMNIBUS INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT

THIS RESTRICTED STOCK AWARD AGREEMENT (this “Agreement”) is made as of «Date_of_Grant» (the “Date of Grant”), by and between Altra Industrial Motion Corp., a Delaware corporation (the “Company”), and «First_Name» «Last_Name» (the “Participant”). This Agreement is subject to all of the terms and conditions as set forth herein and in the Company’s 2014 Omnibus Incentive Plan (the “Plan”), as amended, which is incorporated herein by reference.

The parties agree as follows:

1.Definitions. Each of the following terms used herein shall have the following meanings:

“Forfeiture Restriction” means a “substantial risk of forfeiture” within the meaning of Section 83(b) of the Code and the regulations promulgated thereunder.

Any capitalized term not herein defined shall have the meaning as set forth in the Plan.

2.Issuance of Stock. Subject to the terms and conditions of this Agreement and the Plan, the Company hereby agrees to issue to the Participant «RSA_Number_of_Shares_Written» («RSA_Number_of_Shares») Shares of Restricted Stock (the “Restricted Shares”) for good and valuable consideration that the Company has determined to exceed the par value of the Company’s common stock.

3.Vesting; Termination of Employment; Change in Control; Forfeiture.

(a)Vesting. The Restricted Shares shall vest in accordance with the schedule set forth on [Appendix [●]]; provided that the Participant continues to be an employee of the Company or a Subsidiary from the Date of Grant through the applicable vesting dates set forth therein (each, a “Vesting Date”).

«Last_Name» Restricted Stock Award Agreement [●], 2019

(b)Termination of Employment; Change in Control. Notwithstanding anything contrary in this Agreement, upon the occurrence of any of the following events, the Restricted Shares shall become fully vested (subject, in each case except in the case of the Participant’s death, to the Release Condition (as defined below) and the Participant’s compliance with the restrictive covenants provided in Section 9 hereof); provided, that if any employment or similar agreement entered into between the Participant, on the one hand, and the Company or a Subsidiary, on the other, provides for treatment of the Restricted Shares that is more favorable to the Participant than the treatment set forth in this Section 3(b), the more favorable treatment set forth in such employment or similar agreement shall govern:

(i)the Participant’s death or termination of employment due to Disability;

(ii)in the discretion of the Committee, the termination of the Participant’s employment without Cause; or

(iii)following a Change in Control, if:

(1)the continuing entity fails to assume the Restricted Stock Award; or

(2)the Participant’s employment is terminated by the Company or its successor without Cause or by the Participant for Good Reason, in each case, within the 24-month period following the Change in Control.

(c)Authorized Retirement. Subject to the Release Condition, upon the Participant’s Authorized Retirement, the Restricted Shares shall remain outstanding and eligible to vest in accordance with Section 3(a) hereof, subject to the Participant’s compliance with the restrictive covenants provided in Section 9 hereof; provided, that in the event that at any time from or after the Participant’s Authorized Retirement, the Company determines that the Restricted Shares have become subject to any applicable U.S. federal, state, local or other tax withholding obligations, (i) the Company shall withhold a number of Restricted Shares with a Fair Market Value equal to such withholding liability (as determined in accordance with Section 8(c) hereof), and (ii) the number of Restricted Shares that are not used to satisfy such withholding liability (the “Net Restricted Shares”) shall remain subject to the transfer restrictions set forth in Section 5 hereof and the Participant’s compliance with the restrictive covenants provided in Section 9 hereof, in each case, until the applicable Vesting Date. For purposes of clause (ii) of the preceding sentence, the percentage of Net Restricted Shares that shall vest on each Vesting Date following the Participant’s Authorized Retirement shall be determined pro rata.

(d)Forfeiture. Except as provided in Sections 3(b) and 3(c) hereof, any Restricted Shares outstanding on the date when the Participant ceases to be employed by the Company or a Subsidiary shall automatically be forfeited as of such date.

4. Release Condition. Except as otherwise determined by the Committee, if any vesting of the Restricted Shares is subject to a “Release Condition”, the Participant must sign and deliver to the Company a release of claims, in the form provided by the Company (which, following a Change in Control, shall be based on the Company’s form prior to the Change in Control) (“Release”), as consideration for such vesting, within 30 days following the applicable event and shall not revoke it within the period specified therein.

5.Restrictions on Transfer; Creditors. The Participant shall only Transfer the Restricted Shares granted hereunder in accordance with the terms of the Plan. Without limiting the foregoing, no Restricted Shares or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by Transfer, whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect.

6.Registration of Shares. The Restricted Shares shall be evidenced in such manner as the Company may deem appropriate, including book-entry registration or issuance of one or more stock certificates. Any certificate or book-entry credit issued or entered in respect of the Restricted Shares shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to the Restricted Shares substantially in the following form:

7.Effect of Changes in Capitalization. The Restricted Shares shall be subject to adjustment in accordance with Section 10(c) of the Plan.

8.Section 83(b) Election; Withholding.

(a)The Participant may make an election under Section 83(b) of the Code with respect to this award. Section 83 of the Code provides that generally the Participant is not subject to federal income tax until Restricted Shares are released from the Forfeiture Restriction. If the Participant makes a Section 83(b) election, the Participant would recognize income as of the date of the award in the amount of the excess of the Fair Market Value of the award (determined as of the date of the award) over the purchase price of the award. A Section 83(b) election must be filed with the Internal Revenue Service within thirty (30) days after the Date of Grant. The form for making a Section 83(b) election is attached as Exhibit A. The Participant acknowledges that it is the Participant’s sole responsibility to timely file the Section 83(b) election and that failure to file a Section 83(b) election within the applicable thirty (30) day period will cause the Participant to be taxed when the Restricted Shares are released from the Forfeiture Restriction. The Participant shall (A) provide the Company with a copy of any Section 83(b) election within five (5) business days of filing such election and (B) deliver to the Company within ten (10) business days of filing such election a check payable to the Company in the amount of all withholding tax obligations (whether federal, state, local or foreign income or social insurance tax), imposed on the Participant as a result of filing such 83(b) election.

(b)Upon (x) the date of the award, if the Participant files a Section 83(b) election, or (y) at such time as the Restricted Shares of Restricted Stock are released from the Forfeiture Restriction, if the Participant does not file a Section 83(b) election, in each case, after the grant of the Restricted Shares, the Participant (or his/her personal representative) shall deliver to the Company, within ten (10) days after the occurrence of such release (or in the event of death, within ten (10) days of the appointment of the personal representative), either a check payable to the Company in the amount of all withholding tax obligations (whether federal, state, local or foreign income or social insurance tax), imposed on the Participant and the Company by reason of the release of the Forfeiture Restriction, or a withholding election form to be provided by the Company upon request by the Participant (or personal representative).

(c)In the event the Participant or his personal representative elects to satisfy the withholding obligation by executing the withholding election form, the Participant’s actual number of vested Restricted Shares shall be reduced by the number of whole Restricted Shares which, when multiplied by the Fair Market Value of a Share on the date that the Forfeiture Restriction is released, that the Company determines is sufficient to satisfy the Participant’s tax obligations by reason of the Participant being recorded as the stockholder of record of such Shares. The Participant may, instead, choose to deliver to the Company a check payable to the Company in the amount of all withholding tax obligations (whether federal, state, local or foreign income or social insurance tax). In the event that the Participant fails to tender either the required certified check or withholding election, the Participant shall be deemed to have elected and executed the withholding election form; provided that, if, at the time that a tax withholding obligation arises in respect of the Shares, the Participant has been designated as an “officer” within the meaning of Section 16 of the Exchange Act, unless otherwise elected in writing by the Participant, the Company shall withhold the maximum amount necessary to satisfy the amount of such withholding tax obligations.

(d)Notwithstanding the foregoing, the summary of tax consequences to Participants described in this Section 8 is provided only as general information and not as tax advice. It does not address all of the tax considerations that may be relevant to a particular Participant. The Participant acknowledges that Participants should consult with, and rely on, their own tax advisors regarding all of the possible tax consequences, based on their individual situations, in connection with this award.

9.Non-Compete; Non-Solicitation.

(a) In consideration of the Restricted Shares, the Participant agrees and covenants not to:

(i)Contribute his or her knowledge, directly or indirectly, in whole or in part, as an employee, officer, owner, manager, advisor, consultant, agent, partner, director, shareholder, volunteer, intern or in any other similar capacity to an entity engaged in the same or similar business as the Company and its Related Entities, as such business may be expanded from time to time, for a period of two years following the Participant’s termination of employment; provided that nothing in this Section 9 shall prohibit the ownership of less than five percent (5%) of the stock of a publicly-held corporation whose stock is traded on a national securities exchange or listed with the Nasdaq Stock Market;

(ii)Directly or indirectly, solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of the Company or its Related Entities for two years following the Participant’s termination of employment; or

(iii)Directly or indirectly, solicit, contact (including, but not limited to, email, regular mail, express mail, telephone, fax, and instant message), attempt to contact or meet with the current, former, or prospective customers of the Company or any of its Related Entities for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company or any of its Related Entities for a period of two years following the Participant’s termination of employment.

(b) If the Participant breaches any of the covenants set forth in Section 9(a):

(i)All Restricted Shares (including any Net Restricted Shares) shall be immediately forfeited; and

10.General Provisions.

(a)This Agreement shall be governed by the laws of the State of Delaware, without giving effect to principles of conflicts of laws.

(e)THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE RESTRICTED STOCK SUBJECT TO THIS AWARD IS EARNED BY CONTINUING EMPLOYMENT WITH THE COMPANY (OR A SUBSIDIARY) THROUGH THE APPLICABLE VESTING DATES, PURSUANT TO SECTION 3(a) HEREOF, AS AN “AT WILL” EMPLOYEE OF THE COMPANY (OR A SUBSIDIARY) AND NOT THROUGH THE ACT OF BEING HIRED OR ACQUIRING RESTRICTED SHARES HEREUNDER. THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR SUCH PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY’S RIGHT TO TERMINATE THE PARTICIPANT’S EMPLOYMENT WITH THE COMPANY (OR A SUBSIDIARY) AT ANY TIME, WITH OR WITHOUT CAUSE.

(h)The provisions of this Agreement shall apply, to the full extent set forth herein with respect to the Restricted Shares, to any and all shares of capital stock or other securities of the Company or a Subsidiary which may be issued in respect of, in exchange for, or in substitution of the Restricted Shares, and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof.

(k)This Agreement will not confer any rights or remedies upon any person other than the parties hereto and their respective successors and permitted assigns.

(m)With respect to all Restricted Shares, the Participant shall be entitled to receive payment on the applicable payment date to shareholders of all cash dividends declared by the Company.

(Signature Page Follows)

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first set forth above.

ALTRA INDUSTRIAL MOTION CORP.:	PARTICIPANT:


By:
Name: Carl R. Christenson Title: Chief Executive Officer	«First_Name» «Last_Name»

Address:	Address:

Altra Industrial Motion Corp. 300 Granite Street, Suite 201 Braintree, MA 02184 Attention: Carl R. Christenson Fax No.: (781) 843-0615	«Street_Address» «City», «State» «Zip»

EXHIBIT A

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

1.The name, address, taxpayer identification number and taxable year of the undersigned are as follows:

NAME:	«First_Name» «Last_Name»		SPOUSE:

ADDRESS:		«Street_Address», «City», «State» «Zip»

IDENTIFICATION NO.:

SPOUSE:

TAXABLE YEAR:

«Tax_Year»

2.The property with respect to which the election is made is described as follows: «RSA_Number_of_Shares» shares (the “Shares”) of the Common Stock of Altra Industrial Motion Corp. (the “Company”).

3.The date on which the property was transferred is: «Date_of_Grant»

4.The property is subject to the following restrictions:

The Shares may be forfeited to the Company, or its assignee, on certain events. This right lapses with regard to a portion of the Shares over time.

5.The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is approximately: $[ ].

6.The amount (if any) paid for such property is: $0.00 per share.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.

Dated:
			«First_Name» «Last_Name»

Exhibit 10.5

ALTRA INDUSTRIAL MOTION CORP.

2014 OMNIBUS INCENTIVE PLAN

NONQUALIFIED STOCK OPTION AWARD AGREEMENT

THIS NONQUALIFIED STOCK OPTION AWARD AGREEMENT (this “Agreement”) is made as of «Date_of_Grant» (the “Date of Grant”), by and between Altra Industrial Motion Corp., a Delaware corporation (the “Company”), and «First_Name» «Last_Name» (the “Participant”). This Agreement is subject to all of the terms and conditions as set forth herein and in the Company’s 2014 Omnibus Incentive Plan, as amended (the “Plan”), which is incorporated herein by reference. Any capitalized term not herein defined shall have the meaning as set forth in the Plan.

1.Grant of Option.

(a)Grant. The Company hereby grants to the Participant an Option (the “Option”) to purchase a total of [●] Shares (the “Option Shares”), on the terms and conditions set forth in this Agreement and as otherwise provided in the Plan. The Option is not intended to qualify as an incentive stock option under Section 422 of the Code.

(b)Exercise Price. The per share exercise price of the Option shall be $[●] per Option Share (the “Exercise Price”).

2.Vesting. The Option shall become vested and exercisable in accordance with the schedule set forth on [Appendix [●]]; provided that the Participant continues to be an employee of the Company or a Subsidiary from the Date of Grant through the applicable vesting dates set forth therein (each, a “Vesting Date”).

3.Exercise of Option.

(a)Method of Exercise. The Participant may exercise the vested and exercisable portion of the Option, in whole or in part, by notifying the Company in writing of the whole number of Option Shares to be purchased thereunder and delivering with such notice an amount equal to the aggregate Exercise Price for such number of Option Shares to be purchased, in cash (certified check, wire transfer or bank draft) or in whole Shares already owned by the Participant. The Participant may also exercise the Option by means of (i) a “net exercise” procedure effected by withholding the applicable number of Option Shares otherwise deliverable in respect of an Option that are needed to pay for the aggregate Exercise Price for such Option Shares and all applicable required withholding taxes or (ii) a broker-assisted “cashless exercise” pursuant to which the Company is delivered a copy of irrevocable instructions to a stockbroker to sell the Option Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the aggregate Exercise Price for such Option Shares and all applicable required withholding taxes.

«Last_Name» Stock Option Award Agreement [●]

(b)Automatic Exercise Upon Expiration Date. Notwithstanding any other provision of this Agreement, if, as of the close of trading on the last trading day on which all or a portion of the outstanding Option may be exercised (such day, the “Last Trading Date”), the then-Fair Market Value of a Share exceeds the Exercise Price by at least $.01 (such expiring portion of the Option that is so in-the-money, the “Auto-Exercise Eligible Option”), the Participant will be deemed to have automatically exercised such Auto-Exercise Eligible Option (to the extent it has not previously been exercised or forfeited) as of the close of trading on the Last Trading Date in accordance with the provisions of this Section 3(b). In the event of an automatic exercise pursuant to this Section 3(b), the Company will reduce the number of Option Shares issued to the Participant upon such exercise in an amount necessary to satisfy (i) the Participant’s Exercise Price obligation for the Auto-Exercise Eligible Option and (ii) all applicable tax withholding requirements, in each case, based on the Fair Market Value of the Option Shares as of the close of trading on the Last Trading Date. The Participant may notify the record-keeper of the Plan in writing in advance that the Participant does not wish for the Auto-Exercise Eligible Option to be exercised. The Committee may, at any time in its discretion, determine not to automatically exercise the Option.

4.Termination; Change in Control.

(a)General. Except as otherwise provided in this Section 4, if the Participant ceases to be an employee of the Company or any Subsidiary for any reason, the unvested portion of the Option shall thereupon be forfeited immediately and without any further action by the Company. If any employment or similar agreement entered into between the Participant, on the one hand, and the Company or a Subsidiary, on the other, provides for treatment of the Option that is more favorable to the Participant than the treatment set forth in this Section 4, the more favorable treatment set forth in such employment or similar agreement shall govern.

(b)Acceleration Events. Notwithstanding anything contrary in this Agreement, upon the occurrence of any of the following events, the unvested portion of the Option shall become fully vested and exercisable as of the date of such event (subject, in each case except in the case of the Participant’s death, to the Release Condition (as defined below) and the Participant’s compliance with the restrictive covenants provided in Section 9 herein):

(i)the Participant’s death or termination of employment due to Disability;

(ii)in the discretion of the Committee, the termination of the Participant’s employment by the Company without Cause (not within 24 months following a Change in Control); or

(iii)following a Change in Control, if:

(1)the continuing entity fails to assume the Option; or

(2)the Participant’s employment is terminated by the Company (or its successor) without Cause or the Participant resigns for Good Reason, in each case, within the 24-month period following the Change in Control.

(c)Authorized Retirement. Notwithstanding anything contrary in this Agreement, upon the Participant’s Authorized Retirement (as defined herein) (subject to the Release Condition and the Participant’s compliance with the restrictive covenants provided in Section 9 herein), the Option shall continue to vest in accordance with the vesting schedule set forth on [Appendix [●]], as if the Participant had remained continuously employed by the Company or a Subsidiary through the applicable Vesting Date. For purposes of this Agreement, “Authorized Retirement” means the Participant’s voluntary resignation from employment with the Company and its Subsidiaries under circumstances which the Committee, in its sole discretion, determines to constitute “Retirement”. For the avoidance of doubt, the Committee’s determination of whether “Retirement” has occurred shall be made on an individual Award basis, and “Retirement” treatment for any one Award shall not require that all Awards held by the Participant will receive “Retirement” treatment.

5.Expiration. Notwithstanding anything to the contrary in this Agreement, in no event shall any portion of the Option be exercisable after the 10th anniversary of the Date of Grant (the “Option Period”). The Option (including the vested portion thereof) is subject to earlier cancellation, termination or expiration of the Option (i) pursuant to Section 10(c) or 10(m) of the Plan; (ii) pursuant to Section 4(b)(iii)(1), 7 or 9 herein; or (iii) immediately upon a termination of the Participant’s employment by the Company for Cause. In the case of any termination of the Participant’s employment due to the Participant’s voluntary resignation from the Company and its Subsidiaries that does not constitute an Authorized Retirement, or due to an event set forth in Section 4(b)(ii) or 4(b)(iii)(2), the vested portion of the Option shall expire on the earlier of (x) the last day of the Option Period and (y) the 90th day following the date of such termination. In the case of any termination of the Participant’s employment as described in Section 4(b)(i), the vested portion of the Option shall expire on the earlier of (x) the last day of the Option Period and (y) the one-year anniversary of the effective date of such event. In the case of the Participant’s Authorized Retirement, the vested portion of the Option shall expire on the earliest of (x) the last day of the Option Period, (y) the one-year anniversary of the last Vesting Date and (z) the date of any breach of the restrictive covenants provided in Section 9 herein.

6.Restrictions on Transfer. Other than by will or under the laws of descent and distribution, the Participant shall not have the right to make or permit to occur any Transfer of all or any portion of the Option, whether vested or unvested, whether outright or as security, with or without consideration, voluntary or involuntary. Any such Transfer not made in accordance with this Agreement shall be deemed null and void. For purposes of this Agreement, “Transfer” means, with respect to any Shares, any direct or indirect, voluntary or involuntary, offer to sell, transfer, sale, assignment, pledge, hypothecation, short sales, loan, grant of an option to purchase or other disposition of any of the Shares, or the entering of any contract or agreement to do any of the foregoing.

7.Effect of Changes in Capitalization. The Option shall be subject to adjustment in accordance with Section 10(c) of the Plan. In addition, notwithstanding anything in the Plan or this Agreement to the contrary, in connection with any Change in Control, the Committee shall have authority to (i) make provision for a cash payment to the Participant in consideration for the cancellation of all or a portion of the Option, in an amount equal to the excess, if any, of (x) the Fair Market Value of a Share (as of a date specified by the Committee), multiplied by the number of Option Shares subject to the portion of the Option being cancelled, over (y) the aggregate Exercise Price for the Option Shares subject to the portion of the Option being cancelled, or (ii) if the Exercise Price is equal to, or in excess of, the Fair Market Value of a Share (as of a date specified by the Committee), cancel and terminate the Option without any payment or consideration therefor.

8.Tax Withholding. If the Participant or his or her personal representative elects to satisfy the withholding obligation by executing the withholding election form, the actual number of Option Shares delivered to the Participant upon exercise of the Option shall be reduced by a number of whole Shares, which, when multiplied by the Fair Market Value on the last trading day prior to the date that the Option is exercised, the Company determines is sufficient to satisfy the Participant’s tax obligations in connection with such exercise. The Participant may, instead, choose to deliver to the Company a check payable to the Company in the amount of all withholding tax obligations (whether federal, state, local or foreign income or social insurance tax). If the Participant fails to tender either the required certified check or withholding election, the Participant shall be deemed to have elected and executed the withholding election form; provided that, if, at the time that a tax withholding obligation arises in respect of the Option, the Participant has been designated as an “officer” within the meaning of Section 16 of the Exchange Act, unless otherwise elected in writing by the Participant, the Company shall withhold the maximum amount necessary to satisfy the amount of such withholding tax obligations.

9.Non-Compete; Non-Solicitation.

(a)In consideration of the Option granted hereby, the Participant agrees and covenants not to:

(i)Contribute his or her knowledge, directly or indirectly, in whole or in part, as an employee, officer, owner, manager, advisor, consultant, agent, partner, director, shareholder, volunteer, intern or in any other similar capacity to an entity engaged in the same or similar business as the Company and its Related Entities, as such business may be expanded from time to time, for a period of two years following the Participant’s termination of employment; provided that nothing in this Section 9 shall prohibit the ownership of less than five percent (5%) of the stock of a publicly held corporation whose stock is traded on a national securities exchange or listed with the Nasdaq Stock Market;

(ii)Directly or indirectly, solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of the Company or its Related Entities for two years following the Participant’s termination of employment; or

(iii)Directly or indirectly, solicit, contact (including, but not limited to, e-mail, regular mail, express mail, telephone, fax, and instant message), attempt to contact or meet with the current, former, or prospective customers of the Company or any of its Related Entities for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company or any of its Related Entities for a period of two years following the Participant’s termination of employment.

(b)If the Participant breaches any of the covenants set forth in Section 9(a) herein:

(i)All unvested and vested Options shall be immediately forfeited; and

10.Release Condition. Except as otherwise determined by the Committee, if any vesting or exercise of the Option is subject to a “Release Condition”, the Participant must sign and deliver to the Company a release of claims, in the form provided by the Company (which, following a Change in Control, shall be based on the Company’s form prior to the Change in Control) (“Release”), as consideration for such vesting or exercise, within 30 days following the applicable event and shall not revoke it within the period specified therein.

11.Fractional Shares. The Company will not issue fractional Option Shares upon the exercise of an Option. Any fractional Option Shares will be treated in accordance with Section 10(i) of the Plan.

12.General Provisions.

(a)This Agreement shall be governed by the laws of the State of Delaware, without giving effect to principles of conflicts of laws.

(b)This Agreement and the Plan constitute the entire agreement between the Company and the Participant concerning the subject matter hereof. There is no representation or statement made by any party on which another party has relied which is not included in this Agreement or the Plan. Any previous agreement between the Company and the Participant concerning the subject matter hereof is hereby terminated and superseded by this Agreement and the Plan. This Agreement may not be assigned by the Participant except as required in connection with a permitted transfer thereunder. Subject to the foregoing, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, permitted assigns, heirs, executors and administrators of the parties hereto. Any attempted transfer of this Agreement not in compliance with the terms hereof shall be null and void.

(c)Neither this Agreement nor any term hereof may be amended, modified, waived, discharged, or terminated except by a written instrument signed by the Company and the Participant; provided, however, that the Company unilaterally may waive any provision hereof in writing to the extent that such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as, or be construed to be, a subsequent waiver of the same provision or a waiver of any other provision hereof.

(e)The Participant acknowledges and agrees that this Agreement, the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued employment for such period, for any period, or at all, and shall not interfere with the Company’s right to terminate the Participant’s employment with the Company at any time, for any reason. The Participant further acknowledges and agrees that this Agreement does not entitle the Participant to be granted any other Award under the Plan or to be treated uniformly with other Participants and employees of the Company.

(f)Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally or sent by facsimile transmission, overnight air courier, or first-class, certified or registered mail, postage prepaid, and addressed to the parties at the addresses of the parties set forth at the end of this Agreement or such other address as a party may designate by five (5) days’ advance written notice to the other parties hereto. All notices and communications shall be deemed to have been received unless otherwise set forth herein: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of facsimile transmission, on the date on which the sender receives electronic confirmation that such notice was received by the addressee; (iii) in the case of overnight air courier, on the second business day following the day sent, with receipt confirmed by the courier; and (iv) in the case of mailing by first class certified or registered mail, postage prepaid, return receipt requested, on the fifth business day following such mailing.

(h)The provisions of this Agreement shall apply, to the full extent set forth herein with respect to the Shares, to any and all shares of capital stock or other securities of the Company or a Subsidiary which may be issued in respect of, in exchange for, in substitution of the Shares, and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof.

(k)This Agreement will not confer any rights or remedies upon any person other than the parties hereto and their respective successors and permitted assigns.

(Signature Page Follows)

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first set forth above.

ALTRA INDUSTRIAL MOTION CORP.:	PARTICIPANT:


By:
Name: Carl R. Christenson Title: Chief Executive Officer	«First_Name» «Last_Name»

Address:	Address:

Altra Industrial Motion Corp. 300 Granite Street, Suite 201 Braintree, MA 02184 Attention: Carl R. Christenson Fax No.: (781) 843-0615	«Street_Address» «City», «State» «Zip»

[Signature Page for 2014 Omnibus Incentive Plan Nonqualified Stock Option Award Agreement]

EXHIBIT 31.1

Certification of Chief Executive Officer

I, Carl R. Christenson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Altra Industrial Motion Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 24, 2020	By:	/s/ Carl R. Christenson
	Name:	Carl R. Christenson
	Title:	Chairman and Chief Executive Officer

EXHIBIT 31.2

Certification of Chief Financial Officer

I, Christian Storch, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Altra Industrial Motion Corp.;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 24, 2020	By:	/s/ Christian Storch
	Name:	Christian Storch
	Title:	Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Altra Industrial Motion Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carl R. Christenson, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 24, 2020	By:	/s/ Carl R. Christenson
	Name:	Carl R. Christenson
	Title:	Chairman and Chief Executive Officer

Exhibit 32.2

CERTIFICATION PURSUANT TO SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Altra Industrial Motion Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christian Storch, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 24, 2020	By:	/s/ Christian Storch
	Name	Christian Storch
	Title:	Vice President and Chief Financial Officer