10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2014

or

o 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: 000-15760

Hardinge Inc.

(Exact name of registrant as specified in its charter)

New York	16-0470200
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Hardinge Drive Elmira, NY	14902
(Address of principal executive offices)	(Zip Code)

(607) 734-2281

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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.                                      ýYes  oNo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).                      ýYes  oNo

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

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o  (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     oYes  ýNo

As of October 31, 2014 there were 12,821,768 shares of Common Stock of the registrant outstanding.

HARDINGE INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		PAGE
	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited).
	Consolidated Balance Sheets at September 30, 2014 and December 31, 2013	3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2013	4
	Consolidated Statements of Comprehensive (Loss) Income for the three and nine months ended September 30, 2014 and 2013	5
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2014	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	33
Item 4.	Controls and Procedures.	33
	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings.	34
Item 1A.	Risk Factors.	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	34
Item 3.	Defaults Upon Senior Securities.	34
Item 4.	Mine Safety Disclosures.	34
Item 5.	Other Information.	34
Item 6.	Exhibits.	35
SIGNATURES		36
Certifications

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

HARDINGE INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	September 30, 2014			December 31, 2013
	(Unaudited)
Assets
Cash and cash equivalents	$	15,005		$	34,722
Restricted cash	3,567			4,124
Accounts receivable, net	53,645			57,137
Inventories, net	123,226			114,064
Other current assets	12,067			11,563
Total current assets	207,510			221,610
Property, plant and equipment, net	68,207			74,656
Goodwill	6,727			10,002
Other intangible assets, net	31,030			32,063
Other non-current assets	6,466			5,852
Total non-current assets	112,430			122,573
Total assets	$	319,940		$	344,183
Liabilities and shareholders’ equity
Accounts payable	$	26,608		$	24,418
Accrued expenses	24,055			26,346
Customer deposits	15,033			15,166
Accrued income taxes	1,315			830
Deferred income taxes	2,551			2,569
Contingent consideration	—			7,500
Current portion of long-term debt	3,705			7,850
Total current liabilities	73,267			84,679
Long-term debt	13,835			18,785
Pension and postretirement liabilities	27,261			28,188
Deferred income taxes	4,582			4,968
Other liabilities	3,745			3,775
Total non-current liabilities	49,423			55,716
Commitments and contingencies (see Note 10)
Common stock ($0.01 par value, 20,000,000 authorized; 12,825,468 issued and 12,821,768 outstanding as of September 30, 2014, and 12,472,992 issued and outstanding as of December 31, 2013)	128			125
Additional paid-in capital	120,339			114,951
Retained earnings	83,491			90,937
Treasury shares (at cost, 3,700 as of September 30, 2014, and 75,125 as of December 31, 2013)	(46		)	(806		)
Accumulated other comprehensive loss	(6,662		)	(1,419		)
Total shareholders’ equity	197,250			203,788
Total liabilities and shareholders’ equity	$	319,940		$	344,183

See accompanying notes to the unaudited consolidated financial statements.

3

HARDINGE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2014			2013			2014			2013
	(Unaudited)						(Unaudited)
Sales	$	68,924		$	79,784		$	218,625		$	226,358
Cost of sales	50,247			57,743			158,767			162,577
Gross profit	18,677			22,041			59,858			63,781
Selling, general and administrative expenses	20,123			19,572			59,376			57,780
Impairment charge	5,766			—			5,766			—
Other (income) expense, net	(334		)	(99		)	249			316
(Loss) income from operations	(6,878		)	2,568			(5,533		)	5,685
Interest expense	171			325			569			841
Interest income	(15		)	(14		)	(47		)	(43		)
(Loss) income from continuing operations before income taxes	(7,034		)	2,257			(6,055		)	4,887
Income taxes	544			1,084			845			1,618
Net (loss) income from continuing operations	(7,578		)	1,173			(6,900		)	3,269
Gain from disposal of discontinued operation and income from discontinued operations, net of tax	—			306			218			515
Net (loss) income	$	(7,578	)	$	1,479		$	(6,682	)	$	3,784
Per share data:
Basic (loss) earnings per share:
Continuing operations	$	(0.60	)	$	0.10		$	(0.55	)	$	0.28
Discontinued operations	—			0.03			0.02			0.04
Basic (loss) earnings per share	$	(0.60	)	$	0.13		$	(0.53	)	$	0.32
Diluted (loss) earnings per share:
Continuing operations	$	(0.60	)	$	0.10		$	(0.55	)	$	0.28
Discontinued operations	—			0.03			0.02			0.04
Diluted (loss) earnings per share	$	(0.60	)	$	0.13		$	(0.53	)	$	0.32
Cash dividends declared per share:	$	0.02		$	0.02		$	0.06		$	0.06

See accompanying notes to the unaudited consolidated financial statements.

4

HARDINGE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2014			2013			2014			2013
	(Unaudited)						(Unaudited)
Net (loss) income	$	(7,578	)	$	1,479		$	(6,682	)	$	3,784
Other comprehensive (loss) income:
Foreign currency translation adjustments	(6,368		)	6,969			(5,985		)	2,319
Retirement plans related adjustments	1,336			(500		)	1,570			1,428
Unrealized gain (loss) on cash flow hedges	13			344			(78		)	246
Other comprehensive (loss) income before tax	(5,019		)	6,813			(4,493		)	3,993
Income tax expense (benefit)	927			(196		)	750			138
Other comprehensive (loss) income, net of tax	(5,946		)	7,009			(5,243		)	3,855
Total comprehensive (loss) income	$	(13,524	)	$	8,488		$	(11,925	)	$	7,639

See accompanying notes to the unaudited consolidated financial statements.

5

HARDINGE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended   September 30,
	2014			2013
	(Unaudited)
Operating activities
Net (loss) income	$	(6,682	)	$	3,784
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Impairment charge	5,766			—
Depreciation and amortization	7,317			6,849
Debt issuance costs amortization	33			48
Benefit from deferred income taxes	(346		)	(108		)
Gain on sale of assets	(101		)	(9		)
Gain on sale of business	(218		)	—
Gain on purchase of business	(462		)	—
Unrealized intercompany foreign currency transaction loss (gain)	907			(92		)
Changes in operating assets and liabilities, net of businesses acquired:
Accounts receivable	2,670			5,223
Inventories	(10,054		)	1,409
Other assets	225			378
Accounts payable	2,743			(2,355		)
Customer deposits	259			953
Accrued expenses	(2,859		)	(7,348		)
Accrued pension and postretirement liabilities	(35		)	(298		)
Net cash (used in) provided by operating activities	(837		)	8,434
Investing activities
Acquisition of businesses, net of cash acquired	(5,683		)	(34,250		)
Capital expenditures	(1,830		)	(2,192		)
Proceeds from disposal of business	218			—
Proceeds on sales of assets	131			113
Net cash used in investing activities	(7,164		)	(36,329		)
Financing activities
Payment of contingent consideration	(7,500		)	(299		)
Proceeds from short-term notes payable to bank	13,827			43,041
Repayments of short-term notes payable to bank	(13,827		)	(45,729		)
Proceeds from long-term debt	—			23,000
Repayments of long-term debt	(8,373		)	(2,934		)
Debt issuance costs	—			(682		)
Dividends paid	(757		)	(701		)
Net proceeds from sales of common stock	5,678			1,632
Net cash (used in) provided by financing activities	(10,952		)	17,328
Effect of exchange rate changes on cash	(764		)	(510		)
Net decrease in cash	(19,717		)	(11,077		)
Cash and cash equivalents at beginning of period	34,722			26,855
Cash and cash equivalents at end of period	$	15,005		$	15,778

See accompanying notes to the unaudited consolidated financial statements.

6

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

NOTE 1.  BASIS OF PRESENTATION

In these notes, the terms “Hardinge,” or “the Company,” mean Hardinge Inc. and its predecessors together with its subsidiaries.

The Company operates through two reportable segments, Metalcutting Machine Solutions (“MMS”) and Aftermarket Tooling and Accessories (“ATA”). The MMS segment includes high precision computer controlled metalcutting turning machines, vertical machining centers, horizontal machining centers, grinding machines, and repair parts related to those machines. The ATA segment includes products, primarily collets and chucks that are purchased by manufacturers throughout the lives of their Hardinge or other branded machines.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and, therefore, should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the timing and amount of assets, liabilities, equity, revenue, and expenses reported and disclosed. Actual amounts could differ from these estimates. All adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for the interim periods have been presented and recorded. Due to differing business conditions and some seasonality, operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected in subsequent quarters or for the full year ended December 31, 2014.

Certain amounts in the 2013 consolidated financial statements have been reclassified to conform to the current presentation.

During the quarter ended June 30, 2014, the Company voluntarily changed the date of the annual goodwill and indefinite-lived intangible assets impairment testing from the last day of the fiscal year to the first day of the fourth quarter. This voluntary change is preferable under the circumstances as it provides the Company with additional time to complete the annual goodwill and indefinite-lived intangible asset impairment testing in advance of year-end reporting. The voluntary change in accounting principle related to the annual testing date will not delay, accelerate or avoid an impairment charge. This change was not applied retrospectively, as doing so would require the use of significant estimates and assumptions that include hindsight. Accordingly, the change will be applied prospectively.

7

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

NOTE 2.  ACQUISITIONS

Acquisition of Forkardt

On May 9, 2013, Forkardt, Inc. (“Forkardt”, formerly Cherry Acquisition Corporation) and Hardinge Holdings GmbH, direct wholly owned subsidiaries of the Company, and Hardinge GmbH, an indirect wholly-owned subsidiary of the Company, acquired the Forkardt operations from Illinois Tool Works for $34.3 million, net of cash acquired. The acquisition of Forkardt strengthens and expands the Company’s leadership position in specialty workholding solutions around the world. The acquisition, which was funded through $24.3 million in bank debt and $10.0 million in cash, has been included in the ATA business segment. Forkardt is a leading global provider of high-precision, specialty workholding devices with headquarters in Traverse City, Michigan. Forkardt has operations in the U.S., France, Germany, and India. The results of operations of Forkardt have been included in the consolidated financial statements from the date of acquisition.

All purchase accounting adjustments were finalized in May 2014. The final allocation of purchase price to the assets acquired and liabilities assumed is as follows (in thousands):

	May 9, 2013
Assets Acquired
Accounts receivable	$	5,521
Inventories	5,357
Other current assets	1,257
Property, plant and equipment	6,271
Other non-current assets	105
Trade name, customer list, and other intangible assets	14,614
Total assets acquired	33,125
Liabilities Assumed
Accounts payable and other current liabilities	3,413
Other non-current liabilities	1,278
Net assets acquired	28,434
Total purchase price	34,250
Goodwill	$	5,816

On April 2, 2014, the Company acquired the Forkardt India operations, which had an immaterial impact to the consolidated financial statements.

Disposal of Forkardt, Switzerland operations

On December 31, 2013, the Company divested its Forkardt operations in Switzerland for CHF 5.6 million, net of cash sold ($6.3 million equivalent). The sale was subject to working capital adjustments. The Forkardt Swiss business had net assets of $1.2 million as of the sale date. In March 2014, the Company recognized $0.2 million of additional consideration as a result of final working capital adjustments, which is included in the "Gain from disposal of discontinued operation and income from discontinued operation, net of tax" line in the Statement of Operations for the nine months ended September 30, 2014.

8

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

Acquisition of Voumard

On September 22, 2014, Hardinge Inc., along with its indirect wholly-owned subsidiaries Hardinge GmbH and L. Kellenberger & Co., AG acquired certain assets and assumed certain liabilities associated with a product line of grinding machine systems and applications marketed and sold under the Voumard brand from Peter Wolters GmbH. The purchase price was EUR 1.7 million (approximately $2.2 million), before taking into account customary purchase price adjustments. The acquisition of Voumard expands the Company's product offerings to include internal diameter ("ID") cylindrical grinding solutions, which are a complement to the existing grinding product lines offered by the Company. The acquisition was funded with cash and has been included in the MMS business segment. Voumard is a global leader in the ID grinding market with an installed base of over 9,000 machine solutions serving more than 2,500 customers around the world. The results of operations of Voumard have been included in the consolidated financial statements from the date of acquisition.

In accordance with the acquisition method of accounting, the acquired net assets were recorded at preliminary fair value at the date of acquisition. The identifiable intangible assets acquired, which primarily consists of drawings of $0.1 million, were valued using a cost approach. At September 30, 2014 the purchase price allocation is preliminary pending the finalization of the fair values of the net assets acquired due to the timing of the acquisition. These values will be finalized no later than one year from the date of the transaction. The preliminary fair values of the acquired assets and liabilities exceeded the purchase price of Voumard, resulting in a gain on the purchase of $0.5 million, which is included in the "Other (income) expense, net" line in the Statements of Operations for the three and nine months ended September 30, 2014.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed in the Voumard acquisition at the date of acquisition (in thousands):

	September 22, 2014
Assets Acquired
Inventories	$	2,984
Property, plant and equipment	259
Drawings, customer lists, and other intangible assets	131
Total assets acquired	3,374
Liabilities Assumed
Warranties	600
Deferred tax liability	162
Net assets acquired	2,612
Total purchase price	2,150
Bargain purchase gain	$	(462	)

9

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

Supplemental Pro Forma Information

The following table illustrates the unaudited pro forma effect on the Company’s consolidated operating results for the three and nine months ended September 30, 2014 and 2013, as if the Forkardt acquisition and related financing occurred on January 1, 2012 and the Voumard acquisition had occurred on January1, 2013 (in thousands):

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2014			2013		2014			2013
Sales	$	70,442		$	83,097	$	223,776		$	250,600
Net (loss) income from continuing operations(1)	(8,164		)	1,603		(13,200		)	4,017
Diluted (loss) earnings per share from continuing operations	$	(0.64	)	$	0.14	$	(1.04	)	$	0.34

____________________

⁽¹⁾ The pro forma results above include abbreviated financial results for Voumard, consisting of revenues and direct expenses for that product line. During the nine months ended September 30, 2014, the Voumard business incurred $4.8 million in restructuring charges, which included inventory write-offs, headcount reductions and other related costs. These amounts are included in the pro forma information presented above.

The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what the results of operations would have been had the acquisition been completed on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition.

NOTE 3.  INVENTORIES

Net inventories are stated at the lower of cost (computed in accordance with the first-in, first-out method) or market. Elements of the cost include materials, labor and overhead.

Net inventories consist of the following (in thousands):

	September 30, 2014		December 31, 2013
Raw materials and purchased components	$	32,835	$	32,046
Work-in-process	33,772		28,591
Finished products	56,619		53,427
Inventories, net	$	123,226	$	114,064

10

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

NOTE 4.  FAIR VALUE AND DERIVATIVE INSTRUMENTS

Fair Value

The inputs to the valuation techniques used to measure fair value are classified into the following categories:

Level 1 — Quoted prices in active markets for identical assets and liabilities.

Level 2 — Observable inputs other than quoted prices in active markets for similar assets and liabilities.

Level 3 — Inputs for which significant valuation assumptions are unobservable in a market and therefore value is based on the best available data, some of which is internally developed and considers risk premiums that a market participant would require.

The following table presents the carrying amount, fair values, and classification level within the fair value hierarchy of financial instruments measured or disclosed at fair value on a recurring basis (in thousands):

	September 30, 2014				December 31, 2013				Level of Fair Value Hierarchy
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	15,005	$	15,005	$	34,722	$	34,722	Level 1
Restricted cash	3,567		3,567		4,124		4,124		Level 1
Foreign currency forward contracts	384		384		285		285		Level 2
Liabilities:
Variable interest rate debt	17,540		17,540		26,635		26,635		Level 2
Contingent consideration	—		—		7,500		7,500		Level 3
Foreign currency forward contracts	578		578		872		872		Level 2

The fair value of cash and cash equivalents and restricted cash are based on the fair values of identical assets in active markets. Due to the short period to maturity or the nature of the underlying liability, the fair value of notes payable to bank and variable interest rate debt approximates their respective carrying amounts. The contingent consideration represents the contingent liabilities associated with the earn-out provisions from the 2012 acquisition of Usach. The fair value of the contingent consideration is based on the present value of the estimated aggregated payment amount. The fair value of foreign currency forward contracts is measured using internal models based on observable market inputs such as spot and forward rates. Based on the Company’s continued ability to enter into forward contracts, the markets for the fair value instruments are considered to be active. As of September 30, 2014 and December 31, 2013, there were no significant transfers in and/or out of Level 1 and Level 2.

The following table presents a reconciliation of the changes during the period ended September 30, 2014 for items categorized within Level 3 of the fair value hierarchy (in thousands):

	Contingent Consideration
Balance at December 31, 2013	$	7,500
Current period settlements (payments)	(7,500		)
Balance at September 30, 2014	$	—

11

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

Derivative Instruments

Foreign currency forward contracts are utilized to mitigate the impact of currency fluctuations on assets and liabilities denominated in foreign currencies as well as on forecasted transactions denominated in foreign currencies. These contracts are considered derivative instruments and are recognized as either assets or liabilities and measured at fair value. For contracts that are designated and qualify as cash flow hedges, the gain or loss on the contracts is reported as a component of other comprehensive income (“OCI”) and reclassified from accumulated other comprehensive income (“AOCI”) into the “Sales” or “Cost of sales” line item on the Consolidated Statements of Operations when the underlying hedged transaction affects earnings, or “Other (income) expense, net” when the hedging relationship is deemed to be no longer effective. As of September 30, 2014 and December 31, 2013, the notional amounts of the derivative financial instruments designated to qualify for cash flow hedges were $26.2 million and $37.0 million, respectively. The Company expects less than $0.1 million of net losses, net of income tax effect, to be reclassified from AOCI to earnings within the next 12 months. 

As of September 30, 2014 and December 31, 2013, the notional amounts of the derivative financial instruments not qualifying or otherwise designated as hedges were $34.5 million and $45.5 million, respectively. For the three months ended September 30, 2014 and 2013, gains of $0.4 million and losses of $0.3 million, respectively, were recorded related to this type of derivative financial instruments. For the nine months ended September 30, 2014 and 2013, losses of $0.1 million and $1.7 million, respectively, were recorded related to this type of derivative financial instruments. For contracts that are not designated as hedges, the gain or loss on the contract is recognized in current earnings in the “Other (income) expense, net” line item on the Consolidated Statements of Operations.

The following table presents the fair value on the Consolidated Balance Sheets of the foreign currency forward contracts (in thousands):

	September 30, 2014			December 31, 2013
Foreign currency forwards designated as hedges:
Other current assets	$	202		$	144
Accrued expenses	(209		)	(249		)
Foreign currency forwards not designated as hedges:
Other current assets	182			141
Accrued expenses	(369		)	(623		)
Foreign currency forwards, net	$	(194	)	$	(587	)

NOTE 5.  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following⁽¹⁾ (in thousands): 

	September 30, 2014			December 31, 2013
Land, buildings and improvements	$	85,175		$	88,295
Machinery, equipment and fixtures	78,829			80,584
Office furniture, equipment and vehicles	22,402			23,421
Construction in progress	83			217
	186,489			192,517
Accumulated depreciation	(118,282		)	(117,861		)
Property, plant and equipment, net	$	68,207		$	74,656

____________________

⁽¹⁾ During the nine months ended September 30, 2014, the Company reclassified balances related to cost and accumulated depreciation. The net property, plant and equipment balance was not impacted by this adjustment. The December 31, 2013 balances have been reclassified to reflect the proper presentation.

12

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

NOTE 6.  GOODWILL AND INTANGIBLE ASSETS

Detail and activity of goodwill by segment is presented below (in thousands):

	MMS			ATA			Total
Balance at December 31, 2013
Goodwill(1)	$	32,434		$	5,154		$	37,588
Accumulated impairment losses	(27,586		)	—			(27,586		)
	4,848			5,154			10,002
Acquisition of Forkardt India	—			1,626			1,626
Impairment loss	(4,848		)	—			(4,848		)
Currency translation adjustments	—			(53		)	(53		)
	(4,848		)	1,573			(3,275		)
Balance at September 30, 2014
Goodwill	32,434			6,727			39,161
Accumulated impairment losses	(32,434		)	—			(32,434		)
	$	—		$	6,727		$	6,727

____________________

⁽¹⁾  In accordance with business combination guidance, changes to the purchase price allocation are adjusted retrospectively to the consolidated financial results. The values above include measurement period adjustments recorded in the nine months ended September 30, 2014 to primarily revise the fair value of other current assets, accrued expenses and AOCI. The December 31, 2013 balances included in the consolidated balance sheets have been revised to include the effect of the measurement period adjustments.

Goodwill is reviewed for possible impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit's carrying amount is greater than its fair value. Based on lower than expected performance in the Usach reporting unit during the current year, combined with a downward revision in the anticipated future results, the Company determined that there were indicators of an impairment of that reporting unit. Accordingly, an initial calculation of the fair value was performed, which resulted in the carrying amount of the Usach reporting unit exceeding its fair value, which was estimated based on the present value of expected future cash inflows and market data. Accordingly, a goodwill impairment charge of $4.8 million was recognized in that reporting unit during the third quarter of the current year. This amount is an estimate based on preliminary data, and will be finalized in the fourth quarter in connection with the formal annual impairment test.

13

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

The major components of intangible assets other than goodwill are as follows (in thousands):

	September 30, 2014			December 31, 2013
Gross amortizable intangible assets:
Land rights	$	2,827		$	2,865
Patents	3,065			3,030
Technical know-how, customer lists, and other	22,729			21,375
Total gross amortizable intangible assets	28,621			27,270
Accumulated amortization:
Land rights	(217		)	(177		)
Patents	(2,936		)	(2,884		)
Technical know-how, customer lists, and other	(6,463		)	(5,220		)
Total accumulated amortization	(9,616		)	(8,281		)
Amortizable intangible assets, net	19,005			18,989
Indefinite lived intangible assets:
Assets associated with Bridgeport acquisition(1)	7,225			7,354
Usach trade name(2)	630			1,550
Forkardt trade name(3)	4,170			4,170
	12,025			13,074
Intangible assets other than goodwill, net	$	31,030		$	32,063

____________________

⁽¹⁾ Represents the aggregate value of the trade name, trademarks and copyrights associated with the former worldwide operations of Bridgeport. The Bridgeport brand name is used on all of the machining center lines. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life.

⁽²⁾ Represents the value of the trade name associated with Usach, which the Company acquired in 2012. The Usach trade name is used on all of the grinding machines and grinding systems manufactured by Usach. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life. Based on impairment indicators present in the third quarter of the current year as discussed above, the Company performed a review of the valuation of the Usach intangible assets, resulting in an impairment charge to the Usach trade name of $0.9 million. This amount is an estimate based on preliminary data, and will be finalized in the fourth quarter in connection with the formal annual impairment test.

⁽³⁾   Represents the value of the trade name associated with Forkardt, which the Company acquired in 2013. The Forkardt trade name is used on all of the products manufactured by Forkardt. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life.

Amortization expense related to the definite-lived intangible assets are as follows (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2014		2013		2014		2013
Amortization expense	$	448	$	440	$	1,339	$	1,125

14

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

NOTE 7.  WARRANTIES

A reconciliation of the changes in the product warranty accrual, which is included in accrued expenses, is as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2014			2013			2014			2013
Balance at the beginning of period	$	3,409		$	3,249		$	3,601		$	3,432
Warranties issued	538			787			1,750			2,182
Warranty settlement costs	(665		)	(577		)	(1,797		)	(1,905		)
Changes in accruals for pre-existing warranties	67			(248		)	(217		)	(718		)
Other adjustments(1)	589			—			589			332
Currency translation adjustments	(130		)	117			(118		)	5
Balance at the end of period	$	3,808		$	3,328		$	3,808		$	3,328

____________________

⁽¹⁾  Represents the warranty liabilities assumed in connection with the Voumard acquisition in 2014 and the Forkardt acquisition in 2013. Refer to Note 2. "Acquisitions" for details.

NOTE 8.  FINANCING ARRANGEMENTS

See Note 6. “Financing Arrangements” of the 2013 Annual Report on Form 10-K for a description of the financing arrangements in place as of December 31, 2013.

In January 2014, Hardinge Jiaxing amended its secured credit facility with a local bank. The amendment increased the total availability under the facility from Chinese Yuan (“CNY”) 34.2 million (approximately $5.6 million) to CNY 59.0 million (approximately $9.6 million) or its equivalent in other currencies. The facility, which expires on December 20, 2014, is available for working capital and letter of credit purposes. Borrowings for working capital purposes are limited to CNY 39.0 million (approximately $6.4 million). The facility is secured by real property owned by the subsidiary. The interest rate on the credit facility, currently at 6.60%, is based on the basic interest rate as published by the People’s Bank of China, plus a 10% mark-up. There was no principal amount outstanding under this facility at September 30, 2014.

In June 2014, Hardinge Machine Tools B.V., Taiwan Branch, a wholly-owned subsidiary in Taiwan, renewed its unsecured credit facility, which will expire in June 2015 under the renewal. This facility provides up to $12.0 million, or its equivalent in other currencies, for working capital and export business purposes. This credit facility charges interest at 1.5% and is subject to change by the lender based on market conditions and carries no commitment fees on unused funds. There was no principal amount outstanding under this facility at September 30, 2014.

In September 2014, Hardinge Machine (Shanghai) Co., Ltd., an indirectly wholly-owned subsidiary in China, entered into a new credit facility. This facility, which expires in July 2015, provides up to CNY 34.0 million ($5.5 million equivalent) for letters of guarantee. Individual letters of guarantee issued under this facility require a cash deposit at the bank of 30% of the letter’s face value. The total issued letters of guarantee at September 30, 2014 had a face value of CNY 0.1 million (less than $0.1 million equivalent).

15

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

NOTE 9.  INCOME TAXES

A valuation allowance is recorded against all or a portion of the deferred tax assets in the U.S., Canada, U.K., Germany, and the Netherlands.

Each quarter, a full year tax rate is estimated for jurisdictions not subject to valuation allowances based upon the most recent forecast of full year anticipated results and the year-to-date tax expense is adjusted to reflect the full year anticipated tax rate. The rate is an estimate based upon projected results for the year, estimated annual permanent differences, the statutory tax rates in the various jurisdictions in which the Company operates, and the non-recognition of tax benefits for entities with full valuation allowances. The overall effective tax rates were (7.7)% and (14.0)% for the three and nine months ended September 30, 2014, respectively.

The tax years 2011, 2012 and 2013 remain open to examination by the U.S. federal taxing authorities. The tax years 2009 through 2013 remain open to examination by the U.S. state taxing authorities. For other major jurisdictions (Switzerland, U.K., Taiwan, France, Germany, Netherlands and China), the tax years between 2007 and 2013 generally remain open to routine examination by foreign taxing authorities, depending on the jurisdiction.

At September 30, 2014, a liability of $2.8 million is recorded with respect to uncertain income tax positions, which includes related interest and penalties of $0.7 million. If recognized, essentially all of the uncertain tax positions and related interest at September 30, 2014 would be recorded as a benefit to income tax expense on the Consolidated Statements of Operations. It is reasonably possible that some of the uncertain tax positions pertaining to foreign operations may change within the next 12 months due to audit settlements and statute of limitations expirations. The change in uncertain tax positions for these items is estimated to be between $0.1 million and $1.0 million.

NOTE 10.  COMMITMENTS AND CONTINGENCIES

The Company is a defendant in various lawsuits as a result of normal operations and in the ordinary course of business. Management believes the outcome of these lawsuits will not have a material effect on the financial position or results of operations.

The Company’s operations are subject to extensive federal, state, local and foreign laws and regulations relating to environmental matters. Certain environmental laws can impose joint and several liabilities for releases or threatened releases of hazardous substances upon certain statutorily defined parties regardless of fault or the lawfulness of the original activity or disposal. Hazardous substances and adverse environmental effects have been identified with respect to real property owned by the Company, and on adjacent parcels of real property.

In particular, the Elmira, NY manufacturing facility is located within the Kentucky Avenue Wellfield on the National Priorities List of hazardous waste sites designated for cleanup by the United States Environmental Protection Agency (“EPA”) because of groundwater contamination. The Kentucky Avenue Wellfield Site (the “Site”) encompasses an area which includes sections of the Town of Horseheads and the Village of Elmira Heights in Chemung County, NY. In February 2006, the Company received a Special Notice Concerning a Remedial Investigation/Feasibility Study (“RI/FS”) for the Koppers Pond (the “Pond”) portion of the Site. The EPA documented the release and threatened release of hazardous substances into the environment at the Site, including releases into and in the vicinity of the Pond. The hazardous substances, including metals and polychlorinated biphenyls, have been detected in sediments in the Pond.

Until receipt of this Special Notice in February 2006, the Company had never been named as a potentially responsible party (“PRP”) at the Site nor had the Company received any requests for information from the EPA concerning the Site. Environmental sampling on the Company’s property within this Site under supervision of regulatory authorities had identified off-site sources for such groundwater contamination and sediment contamination in the Pond, and found no evidence that the Company’s operations or property have contributed or are contributing to the contamination. All appropriate insurance carriers have been notified, and the Company is actively cooperating with them, but whether coverage will be available has not yet been determined and possible insurance recovery cannot now be estimated with any degree of certainty.

16

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

A substantial portion of the Pond is located on the Company’s property. The Company, along with Beazer East, Inc., the Village of Horseheads, the Town of Horseheads, the County of Chemung, CBS Corporation and Toshiba America, Inc., the PRPs, have agreed to voluntarily participate in the Remedial Investigation and Feasibility Study (“RI/FS”) by signing an Administrative Settlement Agreement and Order of Consent on September 29, 2006. On September 29, 2006, the Director of Emergency and Remedial Response Division of the EPA, Region II, approved and executed the Agreement on behalf of the EPA. The PRPs also signed a PRP Member Agreement, agreeing to share the cost of the RI/FS study on a per capita basis.

The EPA approved the RI/FS Work Plan in May of 2008. On September 7, 2011, the PRPs submitted the draft Remedial Investigation Report to the EPA and on January 10, 2013, the draft Feasibility Study was submitted to the EPA.

The draft Feasibility Study identified alternative remedial actions with estimated life-cycle costs ranging from $0.7 million to $3.4 million. The Company’s portion of the potential costs are estimated to range from $0.1 million to $0.5 million. Based on the current estimated costs of the various remedial alternatives now under consideration by the EPA, a reserve of $0.2 million has been recorded for the Company’s share of remediation expenses at the Pond as of September 30, 2014. This reserve is included in "Accrued expenses" on the Consolidated Balance Sheets.

Based upon information currently available, except as described in the preceding paragraphs, the Company does not have material liabilities for environmental remediation. Though the foregoing reflects the Company’s current assessment as it relates to environmental remediation obligations, it is possible that future remedial requirements or changes in the enforcement of existing laws and regulations, which are subject to extensive regulatory discretion, will result in material liabilities to the Company.

NOTE 11.  STOCK BASED COMPENSATION

All stock based compensation to employees is recorded as "Selling, general and administrative expenses" in the Consolidated Statements of Operations based on the fair value at the grant date of the award. These non-cash compensation costs are included in the depreciation and amortization amounts in the Consolidated Statements of Cash Flows.

A summary of stock based compensation expense is as follows (in thousands):

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2014			2013		2014			2013
Restricted stock/unit awards (“RSA”)	$	109		$	87	$	327		$	277
Performance share incentives (“PSI”)	(170		)	35		(170		)	95
	$	(61	)	$	122	$	157		$	372

There were no RSAs granted during the nine months ended September 30, 2014, and 2013, respectively. The deferred compensation is being amortized on a straight-line basis over the specified service period. There were no PSIs granted during the nine months ended September 30, 2014 and 2013, respectively. The deferred compensation with respect to the PSIs is being recognized into earnings based on the passage of time and achievement of performance targets. All outstanding RSAs and PSIs are unvested.

Unrecognized compensation and the expected weighted-average recognition periods with respect to the outstanding RSAs as of September 30, 2014 and December 31, 2013, are as follows:

	September 30, 2014		December 31, 2013
Unrecognized compensation cost (in thousands)	$	826	$	1,179
Expected weighted-average recognition period for unrecognized compensation cost (in years)	1.9		2.6

17

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

NOTE 12.  STOCK OFFERING

On August 9, 2013, the Company entered into a sales agreement (the “Agreement”) with an independent sales agent (“Agent”), under which the Company may, from time to time, sell shares of its common stock, par value $0.01 per share (the “Shares”), having an aggregate offering price of up to $25.0 million through the Agent. Under the Agreement, the Agent may sell the Shares by methods deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including sales made directly on the NASDAQ Global Select Market, on any other existing trading market for the common stock or to or through a market maker. In addition, with the prior consent of the Company, the Agent may sell the common stock by any other method permitted by law, including in privately negotiated transactions.

The Agreement will terminate upon the earlier of (i) sale of the Shares under the Agreement having an aggregate offering price of $25.0 million and (ii) the termination of the Agreement as permitted therein. The Agreement may be terminated by the Agent or the Company at any time upon 10 days notice to the other party, or by the Agent at any time in certain circumstances, including the occurrence of a material adverse change in the Company. The Company's Board of Directors authorized this program for a period of one year ending August 8, 2014. This authorization has not been renewed as of September 30, 2014.

As of September 30, 2014, 1,014,252 Shares have been sold under the Agreement for aggregated net proceeds of $14.6 million, of which 663,276 of the shares sold were issued from treasury. During the nine months ended September 30, 2014, 403,863 Shares of common stock have been sold under the “at-the-market” stock offering program for aggregate net proceeds of $5.7 million, of which 52,887 of the shares sold were issued from treasury.

NOTE 13.  CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in AOCI by component for the three and nine months ended September 30, 2014 and 2013 are as follows (in thousands):

	Three Months Ended September 30, 2014
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges		Accumulated other comprehensive (loss) income
Beginning balance, net of tax	$	39,216		$	(39,957	)	$	25	$	(716	)
Other comprehensive (loss) income before reclassifications	(6,368		)	1,585			31		(4,752		)
Less income reclassified from AOCI	—			249			18		267
Net other comprehensive (loss) income	(6,368		)	1,336			13		(5,019		)
Income taxes	756			170			1		927
Ending balance, net of tax	$	32,092		$	(38,791	)	$	37	$	(6,662	)

	Three Months Ended September 30, 2013
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	32,040		$	(60,657	)	$	(46	)	$	(28,663	)
Other comprehensive income before reclassifications	6,969			68			371			7,408
Less income reclassified from AOCI	—			568			27			595
Net other comprehensive income (loss)	6,969			(500		)	344			6,813
Income taxes	(93		)	(120		)	17			(196		)
Ending balance, net of tax	$	39,102		$	(61,037	)	$	281		$	(21,654	)

18

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

	Nine Months Ended September 30, 2014
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	38,663		$	(40,213	)	$	131		$	(1,419	)
Other comprehensive (loss) income before reclassifications	(5,985		)	2,316			(82		)	(3,751		)
Less income (loss) reclassified from AOCI	—			746			(4		)	742
Net other comprehensive (loss) income	(5,985		)	1,570			(78		)	(4,493		)
Income taxes	586			148			16			750
Ending balance, net of tax	$	32,092		$	(38,791	)	$	37		$	(6,662	)

	Nine Months Ended September 30, 2013
	Foreign currency translation adjustments		Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges		Accumulated other comprehensive loss
Beginning balance, net of tax	$	36,830	$	(62,375	)	$	36	$	(25,509	)
Other comprehensive (loss) income before reclassifications	2,319		3,128			263		5,710
Less income (loss) reclassified from AOCI	—		1,700			17		1,717
Net other comprehensive (loss) income	2,319		1,428			246		3,993
Income taxes	47		90			1		138
Ending balance, net of tax	$	39,102	$	(61,037	)	$	281	$	(21,654	)

Details about reclassification out of AOCI for the three and nine months ended September 30, 2014 and 2013 are as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,						Affected line item on the Consolidated Statements of Operations
Details of AOCI components	2014			2013			2014			2013
Unrealized gain (loss) on cash flow hedges:
	$	(10	)	$	41		$	71		$	20		Sales
	28			(14		)	(75		)	(3		)	Other (income) expense, net
	18			27			(4		)	17			Total before tax
	3			(5		)	16			(2		)	Tax benefit (expense)
	$	21		$	22		$	12		$	15		Net of tax
Retirement plans related adjustments:
Amortization of prior service credit	$	(99	)	$	(167	)	$	(303	)	$	(499	)	(a)
Amortization of transition asset	(69		)	(68		)	(211		)	(203		)	(a)
Amortization of actuarial loss	417			803			1,260			2,402			(a)
	249			568			746			1,700			Total before tax
	3			(43		)	7			(127		)	Tax benefit (expense)
	$	252		$	525		$	753		$	1,573		Net of tax

____________________

(a)  These AOCI components are included in the computation of net period pension and post retirement costs. See Note 14. "Pension and Postretirement Plans" for details.

19

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

NOTE 14.  PENSION AND POSTRETIREMENT PLANS

A summary of the components of net periodic pension benefit costs for the three and nine months ended September 30, 2014 and 2013 is presented below (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended   September 30,						Three Months Ended   September 30,
	2014			2013			2014			2013
Service cost	$	352		$	348		$	3		$	4
Interest cost	2,107			1,843			22			23
Expected return on plan assets	(2,477		)	(2,366		)	—			—
Amortization of prior service credit	(99		)	(103		)	—			(64		)
Amortization of transition asset	(69		)	(68		)	—			—
Amortization of actuarial loss (gain)	431			804			(14		)	(1		)
Net periodic cost (benefit)	$	245		$	458		$	11		$	(38	)

	Pension Benefits						Postretirement Benefits
	Nine Months Ended   September 30,						Nine Months Ended   September 30,
	2014			2013			2014			2013
Service cost	$	1,078		$	1,038		$	9		$	12
Interest cost	6,351			5,521			66			69
Expected return on plan assets	(7,473		)	(7,083		)	—			—
Amortization of prior service credit	(303		)	(307		)	—			(192		)
Amortization of transition asset	(211		)	(203		)	—			—
Amortization of loss (gain)	1,302			2,405			(42		)	(3		)
Net periodic cost (benefit)	$	744		$	1,371		$	33		$	(114	)

20

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

NOTE 15.  (LOSS) EARNINGS PER SHARE

Basic (loss) earnings per share is computed using the weighted average number of shares of common stock outstanding during the period. For diluted (loss) earnings per share, the weighted average number of shares includes common stock equivalents related to stock options and restricted stock. The following table presents the basis of the (loss) earnings per share computation (in thousands):

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2014			2013		2014			2013
Numerator for basic and diluted (loss) earnings per share:
(Loss) earnings from continuing operations	$	(7,578	)	$	1,173	$	(6,900	)	$	3,269
Gain from disposal of discontinued operation and income from    discontinued operations, net of tax	—			306		218			515
Net (loss) earnings applicable to common shareholders	$	(7,578	)	$	1,479	$	(6,682	)	$	3,784
Denominator:
Denominator for basic (loss) earnings per share — weighted    average shares	12,715			11,721		12,643			11,681
Assumed exercise of stock options	—			29		—			28
Assumed satisfaction of restricted stock conditions	—			63		—			61
Denominator for diluted (loss) earnings per share — adjusted    weighted average shares	12,715			11,813		12,643			11,770

There is no dilutive effect of the restricted stock and stock options for the three and nine months ended September 30, 2014 due to the current period and year to date net loss. There would have been 108,701 and 103,998 shares included in the diluted earnings per share calculation for the three and nine months ended September 30, 2014 had the impact of including these securities not been anti-dilutive. Shares of certain stock-based awards totaling 36,516 and 47,793 were excluded from the calculation of diluted earnings per share for the three months ended September 30, 2014 and 2013, respectively, as they were anti-dilutive. For the nine months ended September 30, 2014 and 2013, there were 44,208 shares and 53,524 shares, respectively, of certain stock-based compensation awards excluded from the calculation of diluted earnings per share, as they were anti-dilutive.

21

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

NOTE 16. SEGMENT INFORMATION

Segment (loss) income is measured for internal reporting purposes by excluding corporate expenses, impairment charges, interest income, interest expense, and income taxes. Corporate expenses consist primarily of executive employment costs, certain professional fees, and costs associated with the Company’s global headquarters. Financial results for each reportable segment are as follows (in thousands):

	Three Months Ended September 30, 2014
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	52,353		$	16,681	$	(110	)	$	68,924
Depreciation and amortization	1,722			630					2,352
Segment (loss) income	(2,094		)	1,338					(756		)
Capital expenditures	457			249					706

	Three Months Ended September 30, 2013
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	64,382	$	15,462	$	(60	)	$	79,784
Depreciation and amortization	1,742		612					2,354
Segment income	2,149		1,564					3,713
Capital expenditures	540		25					565

	Nine Months Ended September 30, 2014
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	167,977		$	50,909	$	(261	)	$	218,625
Depreciation and amortization	5,255			1,916					7,171
Segment (loss) income	(2,107		)	5,072					2,965
Capital expenditures	1,136			694					1,830
Segment assets(1)	246,429			53,874					300,303

	Nine Months Ended September 30, 2013
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	191,272	$	35,448	$	(362	)	$	226,358
Depreciation and amortization	5,102		1,335					6,437
Segment income	6,224		4,464					10,688
Capital expenditures	1,676		516					2,192
Segment assets(1)	268,802		55,675					324,477

____________________

⁽¹⁾  Segment assets primarily consist of restricted cash, accounts receivable, inventories, prepaid and other assets, property, plant and equipment, and intangible assets. Unallocated assets primarily include, cash and cash equivalents, corporate property, plant and equipment, deferred income taxes, and other non-current assets.

22

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

A reconciliation of segment (loss) income to consolidated (loss) income from operations before income taxes for the three and nine months ended September 30, 2014 and 2013 are as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2014			2013			2014			2013
Segment (loss) income	$	(756	)	$	3,713		$	2,965		$	10,688
Unallocated corporate expense	(859		)	(415		)	(3,151		)	(1,931		)
Interest expense, net	(156		)	(311		)	(522		)	(798		)
Other unallocated income (expense)	(5,263		)	(730		)	(5,347		)	(3,072		)
(Loss) income from continuing operations before income taxes	$	(7,034	)	$	2,257		$	(6,055	)	$	4,887

A reconciliation of segment assets to consolidated total assets follows (in thousands):

	September 30, 2014		December 31, 2013
Total segment assets	$	300,303	$	303,423
Unallocated assets	19,637		40,760
Total assets	$	319,940	$	344,183

Unallocated assets include cash of $15.0 million and $34.7 million at September 30, 2014 and December 31, 2013, respectively.

NOTE 17.  NEW ACCOUNTING STANDARDS

In August 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance on management's evaluation and disclosure of uncertainties about the entity's ability to continue as a going concern. In connection with the preparation of the interim and annual financial statements, management will be required to perform an assessment of whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. If conditions or events are identified that raise substantial doubt that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued, additional disclosures are required. This guidance is effective for the annual period ending after December 15, 2016, and for interim and annual periods thereafter. Early application is permitted. Management does not believe that the adoption of this accounting guidance will have a material impact on the financial statements or related disclosures.     

In June 2014, FASB issued authoritative guidance on accounting for share-based payments when the terms of the award provide that a performance target could be achieved after the requisite service period. This guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition, and as such, should not be reflected in estimating the grant-date fair value of the award. This guidance is effective for interim and annual periods beginning after December 15, 2015, with early adoption permitted. The Company is currently evaluating the new guidance and has not determined the impact this standard may have on the financial statements.

23

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEPTEMBER 30, 2014

In May 2014, FASB issued authoritative guidance on accounting for revenue recognition. The objective of this guidance is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the new guidance, an entity will (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the contract’s performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. This guidance applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. The new guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2016 for public companies. Early adoption is not permitted. Entities have the option of using either a full retrospective or modified approach to adopt this guidance. The Company is currently evaluating the new guidance and has not determined the impact this standard may have on the financial statements, nor decided upon the method of adoption.

In April 2014, FASB issued authoritative guidance on the presentation and disclosure of discontinued operations. This guidance is effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been previously reported in financial statements. Management does not believe that the adoption of this accounting guidance will have a material impact on the financial statements.

24

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

Overview.  The following Management’s Discussion and Analysis (“MD&A”) contains information that the Company believes is necessary to attain an understanding of the Company’s financial condition and associated matters, including the Company’s liquidity, capital resources and results of operations. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited financial statements, the accompanying notes to the financial statements (“Notes”) appearing elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2013.

We supply high precision computer controlled metalcutting turning machines, grinding machines, vertical machining centers, and repair parts related to those machines. The Company also engineers and supplies high precision, standard and specialty workholding devices, and other machine tool accessories. We believe our products are known for accuracy, reliability, durability and value. We are geographically diversified with manufacturing facilities in China, France, Germany, Switzerland, Taiwan, the United States (“U.S.”), the United Kingdom (“U.K.”), and India, with sales to most industrialized countries. Approximately 67% of our 2013 sales were to customers outside of North America, 68% of our 2013 products sold were manufactured outside of North America, and 66% of our employees in 2013 were employed outside of North America.

Metrics on machine tool market activity monitored by our management include world machine tool shipments, as reported annually by Gardner Publications in the Metalworking Insiders Report, and metal-cutting machine orders, as reported by the Association of Manufacturing Technology, the primary industry group for U.S. machine tool manufacturers. Other closely followed U.S. market indicators are tracked to determine activity levels in U.S. manufacturing plants that are prospective customers for our products. One such measurement is the Purchasing Managers Index, as reported by the Institute for Supply Management. Another measurement is capacity utilization of U.S. manufacturing plants, as reported by the Federal Reserve Board. Similar information regarding machine tool shipments and economic indicators in foreign countries is published by trade associations, government agencies, and economic services in those countries.

Non-machine sales, which include collets, chucks, accessories, repair parts and service revenue, accounted for approximately 36% of overall sales through the third quarter of 2014 and are an important part of our business due to an installed base of thousands of machines, and the growing needs demanded by specialty workholding applications. In the past, sales of these products and services have not fluctuated on a year-to-year basis as significantly as the sales of our machines have from time to time, but demand for these products and services typically track the direction of the related machine metrics.

Other key performance indicators are geographic distribution of net sales (“sales”) and net orders (“orders”), gross profit as a percent of sales, income from operations, working capital changes, and debt level trends. In an industry where constant product technology development has led to an average model life of three to five years, effectiveness of technological innovation and development of new products are also key performance indicators.

We are exposed to financial market risk resulting from changes in interest and foreign currency rates. Global economic conditions and related disruptions within the financial markets have also increased our exposure to the possible liquidity and credit risks of our counterparties. We believe we have sufficient liquidity to fund our foreseeable business needs, including cash and cash equivalents, cash flows from operations, our bank financing arrangements, and equity financing arrangements.

We monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety of principal. Our cash and cash equivalents are diversified among counterparties to minimize exposure to any one of these entities.

We are subject to credit risks relating to the ability of counterparties of hedging transactions to meet their contractual payment obligations. The risks related to creditworthiness and non-performance has been considered in the fair value measurements of our foreign currency forward exchange contracts.

We expect that some of our customers and vendors may experience difficulty in maintaining the liquidity required to buy inventory or raw materials. We continue to monitor our customers’ financial condition in order to mitigate the risk associated with our ability to collect on our accounts receivable.

25

Foreign currency exchange rate changes can be significant to reported results for several reasons. Our primary competitors, particularly for the most technologically advanced products, are now largely manufacturers in Japan, Germany, Switzerland, Korea, and Taiwan, which causes the worldwide valuation of their respective currencies to be central to competitive pricing in all of our markets. The major functional currencies of our subsidiaries are the British Pound Sterling (“GBP”), Chinese Renminbi (“CNY”), Euro (“EUR”), New Taiwanese Dollar (“TWD”), and Swiss Franc (“CHF”). Under U.S. generally accepted accounting principles, results of foreign subsidiaries are translated into U.S. Dollars (“USD”) at the average exchange rate during the periods presented. Period-to-period changes in the exchange rate between their local currency and the USD may affect comparative data significantly. We also purchase computer controls and other components from suppliers throughout the world, with purchase costs reflecting currency changes.

The fluctuations of the foreign currency exchange rates during the three months ended September 30, 2014 did not have a measurable impact on sales as compared to the same period in 2013. For the nine months ended September 30, 2014, foreign currency fluctuations resulted in favorable currency translation impact of approximately $1.1 million on sales when compared to the same period in 2013.

26

Results of Operations

Presented below is summarized selected financial data for the three and nine months ended September 30, 2014 and 2013 (in thousands): 

	Three Months Ended   September 30,												Nine Months Ended   September 30,
	2014			2013			$ Change				% Change		2014			2013			$ Change				% Change
Sales	$	68,924		$	79,784		$	(10,860	)		(14	)%	$	218,625		$	226,358		$	(7,733	)		(3	)%
Gross profit	18,677			22,041			(3,364		)		(15	)%	59,858			63,781			(3,923		)		(6	)%
% of sales	27.1		%	27.6		%	(0.5		)	pts.			27.4		%	28.2		%	(0.8		)	pts.
Selling, general and    administrative    expenses	20,123			19,572			551				3	%	59,376			57,780			1,596				3	%
% of sales	29.2		%	24.5		%	4.7			pts.			27.2		%	25.5		%	1.7			pts.
Impairment charge	5,766			—			5,766				NM		5,766			—			5,766				NM
Other (income)    expense, net	(334		)	(99		)	(235		)		237	%	249			316			(67		)		(21	)%
(Loss) income from    operations	(6,878		)	2,568			(9,446		)		(368	)%	(5,533		)	5,685			(11,218		)		(197	)%
% of sales	(10.0		)%	3.2		%	(13.2		)	pts.			(2.5		)%	2.5		%	(5.0		)	pts.
Interest expense, net	156			311			(155		)		(50	)%	522			798			(276		)		(35	)%
(Loss) income from    continuing    operations before    income taxes	(7,034		)	2,257			(9,291		)		(412	)%	(6,055		)	4,887			(10,942		)		(224	)%
Income taxes	544			1,084			(540		)		(50	)%	845			1,618			(773		)		(48	)%
Net (loss) income    from continuing    operations	(7,578		)	1,173			(8,751		)		(746	)%	(6,900		)	3,269			(10,169		)		(311	)%
Gain from disposal   of discontinued   operation and income from   discontinued   operation, net of   tax	—			306			(306		)		(100	)%	218			515			(297		)		(58	)%
Net (loss) income	$	(7,578	)	$	1,479		$	(9,057	)		(612	)%	$	(6,682	)	$	3,784		$	(10,466	)		(277	)%
% of sales	(11.0		)%	1.9		%	(12.9		)	pts.			(3.1		)%	1.7		%	(4.8		)	pts.

____________________

NM - Not Meaningful

Sales.  The table below summarizes sales by each corresponding geographical region for the three and nine months ended September 30, 2014 compared to the same periods in 2013 (in thousands):

	Three Months Ended   September 30,									Nine Months Ended   September 30,
	2014		2013		$ Change			% Change		2014		2013		$ Change			% Change
Sales to customers in:
North America	$	24,026	$	22,021	$	2,005		9	%	$	72,258	$	72,985	$	(727	)	(1	)%
Europe	21,286		26,980		(5,694		)	(21	)%	71,961		71,260		701			1	%
Asia	23,612		30,783		(7,171		)	(23	)%	74,406		82,113		(7,707		)	(9	)%
Total	$	68,924	$	79,784	$	(10,860	)	(14	)%	$	218,625	$	226,358	$	(7,733	)	(3	)%

27

Sales for the three months ended September 30, 2014 were $68.9 million, a decrease of $10.9 million, or 14% when compared to the same period in 2013. Sales for the nine months ended September 30, 2014 were $218.6 million, a decrease of $7.7 million, or 3% when compared to the same period in 2013. For the three months ended September 30, 2014, the primary drivers of the decline in sales were economic uncertainty in Europe, which has weakened order activity and reduced sales levels of machines in Asia. For the nine months ended September 30, 2014, the decrease in machine sales throughout the world, mainly driven by the company's high-end grinding solutions, was the leading cause of the overall decline in sales. This decrease was offset in part by the acquisition of Forkardt, which contributed $13.4 million in incremental sales during the nine months ended September 30, 2014, and favorable currency exchange rates fluctuations of approximately $1.1 million when compared to the same period in 2013. 

North America sales were $24.0 million and $72.3 million, respectively, during the three and nine months ended September 30, 2014. North America sales increased by $2.0 million, or 9%, and decreased by $0.7 million, or 1%, for the respective three and nine months ended September 30, 2014 when compared to the same periods in 2013. The increase in sales for the three months ended September 30, 2014 was mainly the result of higher machine sales as compared to the prior year due to higher demand in the market. For the nine months ended September 30, 2014, reduced sales levels of the company’s machines were mostly offset by the acquisition of Forkardt, which contributed $5.4 million in incremental sales during the nine months ended September 30, 2014.

Europe sales were $21.3 million and $72.0 million, respectively, during the three and nine months ended September 30, 2014. Europe sales decreased by $5.7 million, or 21%, and increased by $0.7 million, or 1%, for the respective three and nine months ended September 30, 2014 when compared to the same periods in 2013. For the three months ended September 30, 2014, the decrease in sales was primarily driven by lower machine sales as compared to the prior year comparable period, as a result of softer demand due to the economic uncertainty in the region. For the nine months ended September 30, 2014, the acquisition of Forkardt contributed $6.4 million in incremental sales combined with the favorable impact of currency exchange rate fluctuations of $1.8 million. These increases to sales were primarily offset by lower machine sales in the period.

Asia sales were $23.6 million and $74.4 million during the three and nine months ended September 30, 2014, respectively. Asia sales decreased by $7.2 million, or 23%, and $7.7 million, or 9%, for the respective three and nine months ended September 30, 2014 when compared to the same periods in 2013. For the three months ended September 30, 2014, reduced demand for our machines were responsible for the overall decrease is sales. For the nine months ended September 30, 2014, the decrease in machine sales, combined with the unfavorable impact from currency exchange rate fluctuations of $0.7 million was offset in part by the acquisition of Forkardt, which contributed $1.6 million in incremental sales. Demand from customers in China is the key driver of the performance of the machine tool industry, and while recent machine tool industry data from China has been subdued, Hardinge has been able to maintain sales volume levels in the customer segments that it serves.

Sales of machines accounted for approximately 62% and 64% of the consolidated sales for the three and nine months ended September 30, 2014, respectively, compared to 69% and 71% for the same periods in 2013. Sales of non-machine products and services, primarily consisting of collets, chucks, accessories, repair parts, and service revenue, accounted for 38% and 36% of the consolidated sales for the respective three and nine months ended September 30, 2014, compared to 31% and 29% for the same periods in 2013. The increase in the portion of non-machine sales over total sales during the three and nine months ended September 30, 2014 when compared to the corresponding periods in 2013 was primarily driven by sales activity from the acquired Forkardt business.

Gross Profit.  Gross profit was $18.7 million, or 27.1% of sales for the three months ended September 30, 2014, compared to $22.0 million, or 27.6% of sales for the same period in 2013. Gross profit was $59.9 million, or 27.4% of sales for the nine months ended September 30, 2014, compared to $63.8 million, or 28.2% of sales for the same period in 2013. The decrease in gross margins for the three months ended September 30, 2014 was mainly attributable to product mix as compared to the same period in the prior year. The year to date decline in gross margin was primarily a result of lower production levels in the Company’s grinding facilities, which resulted in lower factory absorption.

Selling, General and Administrative Expenses.  Selling, general and administrative (“SG&A”) expenses were $20.1 million, or 29.2% of net sales for the three months ended September 30, 2014, an increase of $0.6 million or 3%, compared to $19.6 million, or 24.5% of net sales for the three months ended September 30, 2013. SG&A expenses were $59.4 million, or 27.2% of net sales for the nine months ended September 30, 2014, an increase of $1.6 million or 3%, compared to $57.8 million, or 25.5% of net sales for the nine months ended September 30, 2013. SG&A expenses for the three months ended September 30, 2014 were driven by increased trade show and advertising costs. SG&A for the nine months ended September 30, 2014 included $2.2 million of incremental SG&A expense from our Forkardt acquisition, and $0.8 million of

28

unfavorable impact from changes in currency exchange rates. Excluding the impact of the Forkardt acquisition and foreign currency rate fluctuations, SG&A decreased by $1.4 million compared to the same period in 2013, primarily as a result of charges recorded in the prior year related to the change in our sales distribution in the United Kingdom, for which there are no correlated charges in the current year.

Impairment Charge.  As a result of indicators of impairment being present in our Usach reporting unit in the third quarter of the current year, a valuation was performed, resulting in an impairment charge to goodwill of $4.8 million and the Usach trade name of $0.9 million.

(Loss) Income from Continuing Operations Before Income Taxes.  As a result of the foregoing, net loss from continuing operations was $7.0 million and $6.1 million for the three and nine months ended September 30, 2014, respectively, compared to net income from continuing operations of $2.3 million and $4.9 million for the same periods in 2013.

Income Taxes.  The provision for income taxes was $0.5 million and $0.8 million for the three and nine months ended September 30, 2014, respectively, compared to $1.1 million and $1.6 million for the same periods in 2013. The effective tax rates were (7.7)% and (14.0)% for the three and nine months ended September 30, 2014, respectively, compared to 48.0% and 33.1% for the same periods in 2013, which differ from the U.S. statutory rate primarily due to the mix of earnings by country and by the non-recognition of tax benefits for certain entities in a loss position for which a full valuation allowance has been recorded.

Each quarter, an estimate of the full year tax rate is developed based upon anticipated annual results and an adjustment is made, if required, to the year-to-date income tax expense to reflect the full year anticipated effective tax rate.

We continue to maintain a valuation allowance on all or a portion of the tax benefits of our U.S., Canada, U.K., Germany, and the Netherlands net deferred tax assets and we expect to continue to record a full valuation allowance on future tax benefits until an appropriate level of profitability is sustained in the respective jurisdiction.

Net (Loss) Income. As a result of the foregoing, net loss for the three months ended September 30, 2014 was $7.6 million, or 11.0% of net sales, compared to net income of $1.5 million, or 1.9% of net sales, for the same period in 2013. Net loss for the nine months ended September 30, 2014 was $6.7 million, or 3.1% of net sales, compared to net income of $3.8 million, or 1.7% of net sales, for the same period in 2013. Both basic and diluted (loss) earnings per share for the three and nine months ended September 30, 2014 were $(0.60) and $(0.53), respectively, compared to $0.13 and $0.32, respectively for the same periods in 2013.

Business Segment Information — Comparison of the three and nine months ended September 30, 2014 and 2013

In 2013, the Company changed its reportable business segment from one reportable segment to two reportable segments, Metalcutting Machine Solutions (“MMS”) and Aftermarket Tooling and Accessories (“ATA”). The Company has recast its disclosures for all periods presented to conform to this segment presentation.

Metalcutting Machine Solutions Segment (in thousands):

	Three Months Ended   September 30,										Nine Months Ended   September 30,
	2014			2013		$ Change			% Change		2014			2013		$ Change			% Change
Sales	$	52,353		$	64,382	$	(12,029	)	(19	)%	$	167,977		$	191,272	$	(23,295	)	(12	)%
Segment (loss) income	(2,094		)	2,149		(4,243		)	(197	)%	(2,107		)	6,224		(8,331		)	(134	)%

MMS sales declined by $12.0 million, or 19% in the three months ended September 30, 2014 when compared with the same period in 2013. MMS sales declined by $23.3 million, or 12% in the nine months ended September 30, 2014 when compared with the same period in 2013. The primary driver was lower levels of machine sales throughout the world due to economic uncertainty, which impacted levels of capital investment made in our major markets.

Segment loss for the three months ended September 30, 2014 was $2.1 million, or $4.2 million below 2013 performance. Segment loss was $2.1 million for the nine months ended September 30, 2014, or $8.3 million below 2013 performance. The primary factor in reduced profitability in the quarter was impacted by lower sales levels and product mix. For the year-to-date period, lower production levels due to lower machine demand resulted in under absorption of factory costs due to lower utilization of our factories caused the decline in segment profitability.

29

Aftermarket Tooling and Accessories Segment (ATA)(in thousands):

	Three Months Ended   September 30,									Nine Months Ended   September 30,
	2014		2013		$ Change			% Change		2014		2013		$ Change		% Change
Sales	$	16,681	$	15,462	$	1,219		8	%	$	50,909	$	35,448	$	15,461	44	%
Segment income	1,338		1,564		(226		)	(14	)%	5,072		4,464		608		14	%

ATA sales for the three months ended September 30, 2014 were $16.7 million, an increase of $1.2 million when compared to the corresponding period in 2013. ATA sales for the nine months ended September 30, 2014 were $50.9 million, an increase of $15.5 million when compared to the same period in 2013. Virtually all of the additional sales were generated from the newly acquired Forkardt business in May of 2013.

Segment income for the three months ended September 30, 2014 was $1.3 million, a 14% decrease from the prior year. Segment income for the nine months ended September 30, 2014 was $5.1 million, a 14% increase over prior year. The additional income was driven by the incremental Forkardt sales volume, offset in part by lower productivity in the U.S. and Germany, which resulted in lower profitability.

Segment Summary For the Three and Nine Months Ended September 30, 2014 (in thousands):

	Three Months Ended September 30, 2014											Three Months Ended September 30, 2013
	MMS			ATA		Inter-Segment Eliminations			Total			MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	52,353		$	16,681	$	(110	)	$	68,924		$	64,382	$	15,462	$	(60	)	$	79,784
Segment (loss) income	(2,094		)	1,338					(756		)	2,149		1,564					3,713
Unallocated corporate    expense									(859		)								(415		)
Interest expense, net									(156		)								(311		)
Other unallocated    income (expense)									(5,263		)								(730		)
(Loss) income from    continuing    operations, before    income taxes									$	(7,034	)								$	2,257

	Nine Months Ended September 30, 2014											Nine Months Ended September 30, 2013
	MMS			ATA		Inter-Segment Eliminations			Total			MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	167,977		$	50,909	$	(261	)	$	218,625		$	191,272	$	35,448	$	(362	)	$	226,358
Segment (loss) income	(2,107		)	5,072					2,965			6,224		4,464					10,688
Unallocated corporate    expense									(3,151		)								(1,931		)
Interest expense, net									(522		)								(798		)
Other unallocated income (expense)									(5,347		)								(3,072		)
(Loss) income from    continuing    operations, before    income taxes									$	(6,055	)								$	4,887

30

Summary of Cash Flows for the Nine Months EndedSeptember 30, 2014 and 2013:

During the nine months ended September 30, 2014, we used $0.8 million net cash for operating activities. The net cash used was driven by a net loss (as adjusted for depreciation and amortization expense and impairment loss), an increase in inventories based on orders and associated production levels, and a decrease in accrued expenses, primarily as a result of payment of the annual bonus as well as the payment of the annual Company contribution to the 401(k) Plan. These cash inflows were offset in part by an increase in accounts payable due to timing of purchases and payment activity, a decrease in customer receivables due to the timing of sales and collection activity, an increase in customer deposits due to timing of shipments and new orders received, and decreases in other assets.

During the nine months ended September 30, 2013, we generated $8.4 million net cash in operating activities. The generation of net cash was primarily driven by a decrease in customer receivables due to the timing of sales and collection activity, decreases in inventory levels, as well as an increase in customer deposits as a result of improving order activity in North America and Asia. The cash inflow was offset in part by a decrease in accrued expenses, primarily as a result of payment of the annual bonus as well as the payment of the annual Company contribution to the 401(k) Plan, and a decrease in accounts payable due to timing of purchases and payment activity.

Net cash used in investing activities was $7.2 million for the nine months ended September 30, 2014. The primary uses of cash was for the acquisitions of Forkardt India and Voumard, combined with capital expenditures during the period, which were made primarily for maintenance capital purchases. These cash outflows were offset in part by additional consideration received during the current year as a result of the final working capital adjustments on the sale of the Forkardt Switzerland operations, and proceeds from the sale of fixed assets made during the ordinary course of business.

Net cash used in investing activities was $36.3 million for the nine months ended September 30, 2013. In May of 2013, we used $34.3 million net cash to acquire Forkardt. In addition, we used $2.2 million in cash for capital expenditures, which were made primarily for maintenance capital purchases.

Net cash flow used by financing activities was $11.0 million for the nine months ended September 30, 2014. Cash used was primarily attributable to $8.4 million of payments on long-term debt due to the mandatory principal payments in connection with the at-the-market stock offering program, pay down of debt with a portion of the proceeds from the sale of the Forkardt Switzerland operations, and normal scheduled payment activity, combined with a $7.5 million payment of contingent consideration in connection with a prior acquisition, and year-to-date dividends paid of $0.8 million. These cash outflows were offset in part by $5.7 million of proceeds from sale of common stock in connection with the at-the-market stock offering sales agreement entered into on August 9, 2013.

During the nine months ended September 30, 2013, net cash provided by financing activities was $17.3 million. Cash provided by financing activities was primarily due to $23.0 million in term loan proceeds used to partially fund the acquisition of Forkardt, as well as additional borrowings under our existing credit facilities to align financing activities to current working capital needs.

Liquidity and Capital Resources

We maintain financing arrangements with several financial institutions. These financing arrangements are in the form of long term loans, credit facilities, and lines of credit. The credit facilities allow us to borrow up to $81.3 million at September 30, 2014 and $76.6 million at December 31, 2013, of which $57.9 million and $58.0 million, respectively, can be borrowed for working capital needs. As of September 30, 2014 and December 31, 2013, $74.5 million and $70.0 million was available for borrowing under these respective arrangements, of which $57.1 million and $56.8 million, respectively, was available for working capital needs. Total consolidated borrowings outstanding were $17.5 million and $26.6 million at September 30, 2014 and December 31, 2013, respectively.

Our financing arrangements contain certain debt covenant requirements, including financial covenants, representations, affirmative and negative covenants, prepayment provisions and events of default. As of September 30, 2014, we were in compliance with all of our debt covenants.

31

Our liquidity requirements primarily include funding for operations, including working capital requirements, and funding for capital investments and acquisitions. We expect to meet these requirements in the long term through cash provided by operating activities and availability under various credit facilities and other financing arrangements. Cash flows from operating activities are primarily driven by earnings before noncash charges and change in working capital needs. During the nine months ended September 30, 2014, cash flows from operating activities and available cash were sufficient to fund our normal investment activities, primarily capital expenditures for property, plant and equipment and other productive assets.

We assess on an ongoing basis our portfolio of operations, as well as our financial and capital structures, to ensure we have sufficient capital and liquidity to meet our strategic objectives. As part of this process, from time to time we evaluate and pursue acquisition opportunities that we believe will enhance our strategic position.

On August 9, 2013, the Company entered into a sales agreement with an independent sales agent, under which we may sell shares of our common stock with an aggregate price of up to $25.0 million in sales deemed to be “at-the-market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended. As of October 31, 2014 we have sold 1,014,252 shares of our common stock for aggregate net proceeds of $14.6 million. The Board authorized this sales program for a period of one year ending August 8, 2014. This authorization has not been renewed as of September 30, 2014.

Change in Accounting Policy

During the quarter ended June 30, 2014, we voluntarily changed the date of the annual goodwill and indefinite-lived intangible assets impairment testing from the last day of the fiscal year to the first day of the fourth quarter. This voluntary change is preferable under the circumstances as it provides additional time to complete the annual goodwill and indefinite-lived intangible asset impairment testing in advance of year-end reporting. The voluntary change in accounting principle related to the annual testing date will not delay, accelerate or avoid an impairment charge. This change was not applied retrospectively, as doing so would require the use of significant estimates and assumptions that include hindsight. Accordingly, the change will be applied prospectively.

Accounting Guidance Not Yet Adopted

We are currently assessing the financial impact to our consolidated financial statements of accounting guidance not yet adopted. For further information on accounting guidance not yet adopted, refer to Note 17 of the Financial Statements.

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Accordingly, there can be no assurance that our expectations will be realized. Such statements are based upon information known to management at this time. The Company cautions that such statements necessarily involve uncertainties and risk and deal with matters beyond the Company’s ability to control, and in many cases the Company cannot predict what factors would cause actual results to differ materially from those indicated. Among the many factors that could cause actual results to differ from those set forth in the forward-looking statements are fluctuations in the machine tool business cycles, changes in general economic conditions in the U.S. or internationally, the mix of products sold and the profit margins thereon, the relative success of the Company’s entry into new product and geographic markets, the Company’s ability to manage its operating costs, actions taken by customers such as order cancellations or reduced bookings by customers or distributors, competitors’ actions such as price discounting or new product introductions, governmental regulations and environmental matters, changes in the availability and cost of materials and supplies, the implementation of new technologies and currency fluctuations. Any forward-looking statement should be considered in light of these factors. The Company undertakes no obligation to revise its forward-looking statements if unanticipated events alter their accuracy.

32

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes to our market risk exposures during the first nine months of 2014. For a discussion of our exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risks, contained in our 2013 Annual Report on Form 10-K.

Item 4.  Controls and Procedures.

Management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2014, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, and determined that these controls and procedures were effective.

As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2013, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2013, due to a material weakness in the Company’s internal control over financial reporting related to the computation of the Company’s gain from the sale of the Forkardt Swiss operations in December 2013. Specifically, management review over complex, non-routine transactions that could have a significant impact on financial reporting was not operating effectively as of December 31, 2013. The Company has implemented new controls and procedures in the current year to address the material weakness identified as of December 31, 2013, including engaging third-party specialists to provide additional review when significant non-routine transactions of a complex nature occur. As of September 30, 2014, the Company has entered into a significant complex non-routine transaction; however, due to the proximity of the transaction to the reporting date, testing of the newly implemented controls and procedures has not been completed. Accordingly, we are unable to conclude that the material weakness has been remediated as of September 30, 2014.

Except as discussed above, there have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2014 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act.

33

PART II — OTHER INFORMATION

Item 1.Legal Proceedings.

None.

Item 1A.Risk Factors.

There is no change to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

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

None.

Item 3.Defaults Upon Senior Securities.

None.

Item 4.Mine Safety Disclosures.

Not Applicable.

Item 5.Other Information.

None.

34

Item 6.	Exhibits.
2.1	Asset Purchase Agreement, dated as of September 5, 2014, by and among Peter Wolters GmbH, Lam Research Corporation, Hardinge GmbH, L. Kellenberger & Co., AG and Hardinge Inc. (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 26, 2014).
3.1	Restated Certificate of Incorporation of Hardinge Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission on March 15, 2010 (File No. 001-34639)).
3.2	Certificate of Amendment of the Restated Certificate of Incorporation of Hardinge Inc. (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 23, 2010 (File No. 000-15760)).
3.3	By-Laws of Hardinge Inc. (incorporated by reference to Exhibit 3.3 to Registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 8, 2014).
4.1	Specimen of certificate for shares of Common Stock, par value $.01 per share, of Hardinge Inc. (incorporated by reference to Exhibit 3 to Registrant’s Registration Statement on Form 8-A, filed with the Securities and Exchange Commission on May 19, 1995 (File No. 000-15760)).
10.1	Amended and Restated Employment Agreement dated as of August 8, 2014, between Hardinge Inc. and Edward J. Gaio (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 11, 2014).
31.1	Chief Executive Officer Certification pursuant to Rule 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Chief Financial Officer Certification pursuant to Rule 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

35

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.

		HARDINGE INC.
		Registrant
November 6, 2014	By:	/s/ Richard L. Simons
Date		Richard L. Simons
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)
November 6, 2014	By:	/s/ Douglas J. Malone
Date		Douglas J. Malone
		Vice President and Chief Financial Officer
		(Principal Financial Officer)
November 6, 2014	By:	/s/ Edward J. Gaio
Date		Edward J. Gaio
		Corporate Controller
		(Principal Accounting Officer)

36

EX-31.1

EXHIBIT 31.1

HARDINGE INC.

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard L. Simons, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Hardinge Inc.;

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 controls 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:	November 6, 2014	/s/ Richard L. Simons
		Richard L. Simons
		Chairman, President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

HARDINGE INC.

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Douglas J. Malone, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Hardinge Inc.;

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:	November 6, 2014	/s/ Douglas J. Malone
		Douglas J. Malone
		Vice President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

EX-32

EXHIBIT 32

HARDINGE INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hardinge Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard L. Simons, Chairman, President and Chief Executive Officer of the Company and I, Douglas J. Malone, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(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.

/s/ Richard L. Simons

Richard L. Simons

Chairman, President and Chief Executive Officer

November 6, 2014

/s/ Douglas J. Malone

Douglas J. Malone

Vice President and Chief Financial Officer

(Principal Financial Officer)

November 6, 2014

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to Hardinge Inc. and will be retained by Hardinge Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

FAIR VALUE AND DERIVATIVE INSTRUMENTS (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2013	Dec. 31, 2012
Financial instruments
Cash and cash equivalents	$ 15,005	$ 34,722	$ 15,778	$ 26,855
Restricted cash	3,567	4,124
Contingent consideration	0	7,500
Recurring | Level 1
Financial instruments
Cash and cash equivalents	15,005	34,722
Cash and cash equivalents, fair value	15,005	34,722
Restricted cash	3,567	4,124
Restricted cash, fair value	3,567	4,124
Recurring | Level 2
Financial instruments
Foreign currency forward contracts	384	285
Variable interest rate debt	17,540	26,635
Variable interest rate debt, fair value	17,540	26,635
Foreign currency forward contracts	578	872
Recurring | Level 3
Financial instruments
Contingent consideration	0	7,500
Contingent Consideration, At Fair Value	$ 0	$ 7,500

XML

PENSION AND POSTRETIREMENT PLANS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Pension Benefits
Components of net periodic benefit cost (credit)
Service cost	$ 352	$ 348	$ 1,078	$ 1,038
Interest cost	2,107	1,843	6,351	5,521
Expected return on plan assets	(2,477)	(2,366)	(7,473)	(7,083)
Amortization of prior service credit	(99)	(103)	(303)	(307)
Amortization of transition asset	(69)	(68)	(211)	(203)
Amortization of loss (gain)	431	804	1,302	2,405
Net periodic cost (benefit)	245	458	744	1,371
Postretirement Benefits
Components of net periodic benefit cost (credit)
Service cost	3	4	9	12
Interest cost	22	23	66	69
Expected return on plan assets	0	0	0	0
Amortization of prior service credit	0	(64)	0	(192)
Amortization of transition asset	0	0	0	0
Amortization of loss (gain)	(14)	(1)	(42)	(3)
Net periodic cost (benefit)	$ 11	$ (38)	$ 33	$ (114)

XML

INCOME TAXES (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2014
Income Tax Disclosure [Abstract]
Effective tax rate (as a percent)	(7.70%)	(14.00%)
Uncertain income tax position	$ 2.8	$ 2.8
Interest and penalties included in uncertain income tax position	0.7	0.7
Minimum estimated change in uncertain tax positions	0.1	0.1
Maximum estimated change in uncertain tax positions	$ 1.0	$ 1.0

XML

(LOSS) EARNINGS PER SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Numerator for basic and diluted (loss) earnings per share:
(Loss) earnings from continuing operations	$ (7,578)	$ 1,173	$ (6,900)	$ 3,269
Gain from disposal of discontinued operation and income from discontinued operations, net of tax	0	306	218	515
Net (loss) earnings applicable to common shareholders	$ (7,578)	$ 1,479	$ (6,682)	$ 3,784
Denominator:
Denominator for basic (loss) earnings per share - weighted average shares (in shares)	12,715,000	11,721,000	12,643,000	11,681,000
Denominator for diluted (loss) earnings per share - adjusted weighted average shares (in shares)	12,715,000	11,813,000	12,643,000	11,770,000
Shares that would have been included in diluted earnings per share calculations	108,701		103,998
Anti-dilutive stock-based awards excluded from calculation of diluted earnings per share (in shares)	36,516	47,793	44,208	53,524
Stock options
Denominator:
Incremental shares attributable to assumed conversion of share based payment awards (in shares)	0	29,000	0	28,000
Restricted stock
Denominator:
Incremental shares attributable to assumed conversion of share based payment awards (in shares)	0	63,000	0	61,000

XML

WARRANTIES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Changes in product warranty accrual
Balance at the beginning of period	$ 3,409		$ 3,249		$ 3,601		$ 3,432
Warranties issued	538		787		1,750		2,182
Warranty settlement costs	(665)		(577)		(1,797)		(1,905)
Changes in accruals for pre-existing warranties	67		(248)		(217)		(718)
Other adjustments	589	[1]	0	[1]	589	[1]	332	[1]
Currency translation adjustments	(130)		117		(118)		5
Balance at the end of period	$ 3,808		$ 3,328		$ 3,808		$ 3,328

[1] Represents the warranty liabilities assumed in connection with the Voumard acquisition in 2014 and the Forkardt acquisition in 2013. Refer to Note 2. "Acquisitions" for details.

XML

PENSION AND POSTRETIREMENT PLANS (Tables)

9 Months Ended

Sep. 30, 2014

Pension and Other Postretirement Benefit Expense [Abstract]

Summary of the components of net periodic pension benefit costs

A summary of the components of net periodic pension benefit costs for the three and nine months ended September 30, 2014 and 2013 is presented below (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended   September 30,						Three Months Ended   September 30,
	2014			2013			2014			2013
Service cost	$	352		$	348		$	3		$	4
Interest cost	2,107			1,843			22			23
Expected return on plan assets	(2,477		)	(2,366		)	—			—
Amortization of prior service credit	(99		)	(103		)	—			(64		)
Amortization of transition asset	(69		)	(68		)	—			—
Amortization of actuarial loss (gain)	431			804			(14		)	(1		)
Net periodic cost (benefit)	$	245		$	458		$	11		$	(38	)

	Pension Benefits						Postretirement Benefits
	Nine Months Ended   September 30,						Nine Months Ended   September 30,
	2014			2013			2014			2013
Service cost	$	1,078		$	1,038		$	9		$	12
Interest cost	6,351			5,521			66			69
Expected return on plan assets	(7,473		)	(7,083		)	—			—
Amortization of prior service credit	(303		)	(307		)	—			(192		)
Amortization of transition asset	(211		)	(203		)	—			—
Amortization of loss (gain)	1,302			2,405			(42		)	(3		)
Net periodic cost (benefit)	$	744		$	1,371		$	33		$	(114	)

XML

ACQUISITIONS (Tables)

9 Months Ended

Sep. 30, 2014

ACQUISITIONS

Schedule of unaudited pro forma effect on consolidated operating results

The following table illustrates the unaudited pro forma effect on the Company’s consolidated operating results for the three and nine months ended September 30, 2014 and 2013, as if the Forkardt acquisition and related financing occurred on January 1, 2012 and the Voumard acquisition had occurred on January1, 2013 (in thousands):

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2014			2013		2014			2013
Sales	$	70,442		$	83,097	$	223,776		$	250,600
Net (loss) income from continuing operations(1)	(8,164		)	1,603		(13,200		)	4,017
Diluted (loss) earnings per share from continuing operations	$	(0.64	)	$	0.14	$	(1.04	)	$	0.34

____________________

⁽¹⁾ The pro forma results above include abbreviated financial results for Voumard, consisting of revenues and direct expenses for that product line. During the nine months ended September 30, 2014, the Voumard business incurred $4.8 million in restructuring charges, which included inventory write-offs, headcount reductions and other related costs. These amounts are included in the pro forma information presented above.

Forkardt

ACQUISITIONS

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

The final allocation of purchase price to the assets acquired and liabilities assumed is as follows (in thousands):

	May 9, 2013
Assets Acquired
Accounts receivable	$	5,521
Inventories	5,357
Other current assets	1,257
Property, plant and equipment	6,271
Other non-current assets	105
Trade name, customer list, and other intangible assets	14,614
Total assets acquired	33,125
Liabilities Assumed
Accounts payable and other current liabilities	3,413
Other non-current liabilities	1,278
Net assets acquired	28,434
Total purchase price	34,250
Goodwill	$	5,816

Voumard

ACQUISITIONS

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed in the Voumard acquisition at the date of acquisition (in thousands):

	September 22, 2014
Assets Acquired
Inventories	$	2,984
Property, plant and equipment	259
Drawings, customer lists, and other intangible assets	131
Total assets acquired	3,374
Liabilities Assumed
Warranties	600
Deferred tax liability	162
Net assets acquired	2,612
Total purchase price	2,150
Bargain purchase gain	$	(462	)

XML

STOCK BASED COMPENSATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Stock-based compensation
Stock based compensation expenses	$ (61)	$ 122	$ 157	$ 372
Restricted stock/units awards
Stock-based compensation
Stock based compensation expenses	109	87	327	277
Unrecognized compensation and expected weighted-average recognition period
Unrecognized compensation cost	826		826		1,179
Expected weighted-average recognition period for unrecognized compensation cost (in years)			1 year 10 months 20 days	2 years 7 months 6 days
Performance share incentives
Stock-based compensation
Stock based compensation expenses	$ (170)	$ 35	$ (170)	$ 95

XML

PROPERTY, PLANT AND EQUIPMENT (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Property, plant and equipment
Property, plant and equipment, gross	$ 186,489	$ 192,517
Accumulated depreciation	(118,282)	(117,861)
Property, plant and equipment, net	68,207	74,656
Land, buildings and improvements
Property, plant and equipment
Property, plant and equipment, gross	85,175	88,295
Machinery, equipment and fixtures
Property, plant and equipment
Property, plant and equipment, gross	78,829	80,584
Office furniture, equipment and vehicles
Property, plant and equipment
Property, plant and equipment, gross	22,402	23,421
Construction in progress
Property, plant and equipment
Property, plant and equipment, gross	$ 83	$ 217

XML

ACQUISITIONS (Details)	3 Months Ended		9 Months Ended			0 Months Ended		9 Months Ended	0 Months Ended			1 Months Ended
	Sep. 30, 2014 USD ($)	Sep. 30, 2013 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2013 USD ($)	Dec. 31, 2013 USD ($)	Sep. 22, 2014 Voumard USD ($) customer machine_solution	Sep. 22, 2014 Voumard EUR (€)	Sep. 30, 2014 Voumard USD ($)	May 09, 2013 Forkardt USD ($)	Dec. 31, 2013 Forkardt Swiss business USD ($)	Dec. 31, 2013 Forkardt Swiss business CHF	Mar. 31, 2014 Forkardt Swiss business USD ($)	Dec. 31, 2013 Forkardt Swiss business USD ($)	Sep. 22, 2014 Technical Know How USD ($)
ACQUISITIONS
Purchase price less cash acquired			$ 5,683,000	$ 34,250,000					$ 34,250,000
Bank debt used in funding of acquisition									24,300,000
Cash used in funding of acquisition						2,150,000	1,700,000		10,000,000	6,300,000	5,600,000
Assets Acquired
Accounts receivable									5,521,000
Inventories						2,984,000			5,357,000
Other current assets									1,257,000
Property, plant and equipment						259,000			6,271,000
Other non-current assets									105,000
Trade name, customer list, and other intangible assets									14,614,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles						131,000								100,000
Total assets acquired						3,374,000			33,125,000
Liabilities assumed
Accounts payable and other current liabilities						600,000			3,413,000
Other non-current liabilities									1,278,000
Deferred tax liability						162,000
Net assets						2,612,000			28,434,000				1,200,000
Goodwill	6,727,000		6,727,000		10,002,000				5,816,000
Gain from disposal of discontinued operation and income from discontinued operation, net of tax			218,000	0								200,000
Installed Machine Base (machine solutions)						9,000	9,000
Customer Base (customers)						2,500	2,500
Gain on purchase of business			(462,000)	0		(462,000)		(500,000)
Supplemental Pro Forma Information
Sales	70,442,000	83,097,000	223,776,000	250,600,000
Net (loss) income from continuing operations(1)	(8,164,000)	1,603,000	(13,200,000)	4,017,000
Diluted (loss) earnings per share from continuing operations (in dollars per share)	$ (0.64)	$ 0.14	$ (1.04)	$ 0.34
Restructuring Charges								$ 4,800,000

XML

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Changes in AOCI by component
Beginning balance, net of tax	$ (716)	$ (28,663)	$ (1,419)	$ (25,509)
Other comprehensive (loss) income before reclassifications	(4,752)	7,408	(3,751)	5,710
Less income reclassified from AOCI	267	595	742	1,717
Net other comprehensive (loss) income	(5,019)	6,813	(4,493)	3,993
Income taxes	(927)	196	(750)	(138)
Ending balance, net of tax	(6,662)	(21,654)	(6,662)	(21,654)
Foreign currency translation adjustment
Changes in AOCI by component
Beginning balance, net of tax	39,216	32,040	38,663	36,830
Other comprehensive (loss) income before reclassifications	(6,368)	6,969	(5,985)	2,319
Net other comprehensive (loss) income	(6,368)	6,969	(5,985)	2,319
Income taxes	756	(93)	586	47
Ending balance, net of tax	32,092	39,102	32,092	39,102
Retirement plans related adjustments
Changes in AOCI by component
Beginning balance, net of tax	(39,957)	(60,657)	(40,213)	(62,375)
Other comprehensive (loss) income before reclassifications	1,585	68	2,316	3,128
Less income reclassified from AOCI	249	568	746	1,700
Net other comprehensive (loss) income	1,336	(500)	1,570	1,428
Income taxes	170	(120)	148	90
Ending balance, net of tax	(38,791)	(61,037)	(38,791)	(61,037)
Unrealized gain (loss) on cash flow hedges
Changes in AOCI by component
Beginning balance, net of tax	25	(46)	131	36
Other comprehensive (loss) income before reclassifications	31	371	(82)	263
Less income reclassified from AOCI	18	27	(4)	17
Net other comprehensive (loss) income	13	344	(78)	246
Income taxes	1	17	16	1
Ending balance, net of tax	$ 37	$ 281	$ 37	$ 281

XML

FINANCING ARRANGEMENTS (Details)	9 Months Ended						9 Months Ended
	Sep. 30, 2014 Jiaxing line of credit facility USD ($)	Sep. 30, 2014 Jiaxing line of credit facility CNY	Jan. 07, 2014 Jiaxing line of credit facility USD ($)	Jan. 07, 2014 Jiaxing line of credit facility CNY	Jan. 06, 2014 Jiaxing line of credit facility USD ($)	Jan. 06, 2014 Jiaxing line of credit facility CNY	Sep. 30, 2014 Taiwan Unsecured Credit Facility USD ($)	Sep. 30, 2014 HSL Credit Facility [Member] USD ($)	Sep. 30, 2014 HSL Credit Facility [Member] CNY
Financing arrangements
Borrowing capacity available for working capital and letter of credit purposes			$ 9,600,000	59,000,000.0	$ 5,600,000	34,200,000.0	$ 12,000,000	$ 5,500,000	34,000,000
Borrowing capacity available for working capital need	6,400,000	39,000,000.0
Interest rate (as a percent)	6.60%	6.60%					1.50%
Basis spread added to base rate (as a percent)	10.00%	10.00%
Line of credit facility, amount outstanding	0						0
Collateral cash deposit requirement, percent								30.00%	30.00%
Letters of Guarantee Outstanding, CNY (less than $0.1m USD)								$ 100,000	100,000.0

XML

INVENTORIES

9 Months Ended

Sep. 30, 2014

Inventory Disclosure [Abstract]

INVENTORIES

INVENTORIES

Net inventories are stated at the lower of cost (computed in accordance with the first-in, first-out method) or market. Elements of the cost include materials, labor and overhead.

Net inventories consist of the following (in thousands):

	September 30, 2014		December 31, 2013
Raw materials and purchased components	$	32,835	$	32,046
Work-in-process	33,772		28,591
Finished products	56,619		53,427
Inventories, net	$	123,226	$	114,064

XML

GOODWILL AND INTANGIBLE ASSETS (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Summary of goodwill amount
Balance at the beginning of the period	$ 10,002
Acquisition of Forkardt India	1,626
Impairment Loss	(4,848)
Currency translation adjustments	(53)
Balance at the end of the period	6,727
Goodwill, Period Increase (Decrease)	(3,275)
Gross carrying value of goodwill	39,161	37,588
Accumulated impairment losses	(32,434)	(27,586)
MMS
Summary of goodwill amount
Balance at the beginning of the period	4,848
Acquisition of Forkardt India	0
Impairment Loss	(4,848)
Currency translation adjustments	0
Balance at the end of the period	0
Goodwill, Period Increase (Decrease)	(4,848)
Gross carrying value of goodwill	32,434	32,434
Accumulated impairment losses	(32,434)	(27,586)
ATA
Summary of goodwill amount
Balance at the beginning of the period	5,154
Acquisition of Forkardt India	1,626
Impairment Loss	0
Currency translation adjustments	(53)
Balance at the end of the period	6,727
Goodwill, Period Increase (Decrease)	1,573
Gross carrying value of goodwill	6,727	5,154
Accumulated impairment losses	$ 0	$ 0

XML

GOODWILL AND INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Finite-lived Intangible Assets Amortization Expense [Table Text Block]

Amortization expense related to the definite-lived intangible assets are as follows (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2014		2013		2014		2013
Amortization expense	$	448	$	440	$	1,339	$	1,125

Summary of detail and activity of goodwill by segment

Detail and activity of goodwill by segment is presented below (in thousands):

	MMS			ATA			Total
Balance at December 31, 2013
Goodwill(1)	$	32,434		$	5,154		$	37,588
Accumulated impairment losses	(27,586		)	—			(27,586		)
	4,848			5,154			10,002
Acquisition of Forkardt India	—			1,626			1,626
Impairment loss	(4,848		)	—			(4,848		)
Currency translation adjustments	—			(53		)	(53		)
	(4,848		)	1,573			(3,275		)
Balance at September 30, 2014
Goodwill	32,434			6,727			39,161
Accumulated impairment losses	(32,434		)	—			(32,434		)
	$	—		$	6,727		$	6,727

____________________

⁽¹⁾  In accordance with business combination guidance, changes to the purchase price allocation are adjusted retrospectively to the consolidated financial results. The values above include measurement period adjustments recorded in the nine months ended September 30, 2014 to primarily revise the fair value of other current assets, accrued expenses and AOCI. The December 31, 2013 balances included in the consolidated balance sheets have been revised to include the effect of the measurement period adjustments.

Summary of the major components of intangible assets other than goodwill

The major components of intangible assets other than goodwill are as follows (in thousands):

	September 30, 2014			December 31, 2013
Gross amortizable intangible assets:
Land rights	$	2,827		$	2,865
Patents	3,065			3,030
Technical know-how, customer lists, and other	22,729			21,375
Total gross amortizable intangible assets	28,621			27,270
Accumulated amortization:
Land rights	(217		)	(177		)
Patents	(2,936		)	(2,884		)
Technical know-how, customer lists, and other	(6,463		)	(5,220		)
Total accumulated amortization	(9,616		)	(8,281		)
Amortizable intangible assets, net	19,005			18,989
Indefinite lived intangible assets:
Assets associated with Bridgeport acquisition(1)	7,225			7,354
Usach trade name(2)	630			1,550
Forkardt trade name(3)	4,170			4,170
	12,025			13,074
Intangible assets other than goodwill, net	$	31,030		$	32,063

____________________

⁽¹⁾ Represents the aggregate value of the trade name, trademarks and copyrights associated with the former worldwide operations of Bridgeport. The Bridgeport brand name is used on all of the machining center lines. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life.

⁽²⁾ Represents the value of the trade name associated with Usach, which the Company acquired in 2012. The Usach trade name is used on all of the grinding machines and grinding systems manufactured by Usach. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life. Based on impairment indicators present in the third quarter of the current year as discussed above, the Company performed a review of the valuation of the Usach intangible assets, resulting in an impairment charge to the Usach trade name of $0.9 million. This amount is an estimate based on preliminary data, and will be finalized in the fourth quarter in connection with the formal annual impairment test.

⁽³⁾   Represents the value of the trade name associated with Forkardt, which the Company acquired in 2013. The Forkardt trade name is used on all of the products manufactured by Forkardt. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life.

XML

PROPERTY, PLANT AND EQUIPMENT (Tables)

9 Months Ended

Sep. 30, 2014

Property, Plant and Equipment [Abstract]

Schedule of components of property, plant and equipment, net

Property, plant and equipment consists of the following⁽¹⁾ (in thousands): 

	September 30, 2014			December 31, 2013
Land, buildings and improvements	$	85,175		$	88,295
Machinery, equipment and fixtures	78,829			80,584
Office furniture, equipment and vehicles	22,402			23,421
Construction in progress	83			217
	186,489			192,517
Accumulated depreciation	(118,282		)	(117,861		)
Property, plant and equipment, net	$	68,207		$	74,656

____________________

⁽¹⁾ During the nine months ended September 30, 2014, the Company reclassified balances related to cost and accumulated depreciation. The net property, plant and equipment balance was not impacted by this adjustment. The December 31, 2013 balances have been reclassified to reflect the proper presentation.

XML

SEGMENT INFORMATION (Details) (USD $)	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013		Dec. 31, 2013
Financial results of reportable segments
Sales	$ 68,924,000		$ 79,784,000		$ 218,625,000		$ 226,358,000
Depreciation and amortization					7,317,000		6,849,000
Segment (loss) income	(6,878,000)		2,568,000		(5,533,000)		5,685,000
Capital expenditures					1,830,000		2,192,000
Segment assets	319,940,000				319,940,000				344,183,000
Reconciliation of segment income to consolidated income before income taxes
(Loss) income from continuing operations before income taxes	(7,034,000)		2,257,000		(6,055,000)		4,887,000
Operating segment
Financial results of reportable segments
Sales	68,924,000		79,784,000		218,625,000		226,358,000
Depreciation and amortization	2,352,000		2,354,000		7,171,000		6,437,000
Segment (loss) income	(756,000)		3,713,000		2,965,000		10,688,000
Capital expenditures	706,000		565,000		1,830,000		2,192,000
Segment assets	300,303,000	[1]	324,477,000	[1]	300,303,000	[1]	324,477,000	[1]	303,423,000
Reconciliation of segment income to consolidated income before income taxes
Unallocated corporate expense	(859,000)		(415,000)		(3,151,000)		(1,931,000)
Interest expense, net	156,000		311,000		522,000		798,000
Other unallocated income (expense)	(5,263,000)		(730,000)		(5,347,000)		(3,072,000)
(Loss) income from continuing operations before income taxes	(7,034,000)		2,257,000		(6,055,000)		4,887,000
Operating segment | MMS
Financial results of reportable segments
Sales	52,353,000		64,382,000		167,977,000		191,272,000
Depreciation and amortization	1,722,000		1,742,000		5,255,000		5,102,000
Segment (loss) income	(2,094,000)		2,149,000		(2,107,000)		6,224,000
Capital expenditures	457,000		540,000		1,136,000		1,676,000
Segment assets	246,429,000	[1]	268,802,000	[1]	246,429,000	[1]	268,802,000	[1]
Operating segment | ATA
Financial results of reportable segments
Sales	16,681,000		15,462,000		50,909,000		35,448,000
Depreciation and amortization	630,000		612,000		1,916,000		1,335,000
Segment (loss) income	1,338,000		1,564,000		5,072,000		4,464,000
Capital expenditures	249,000		25,000		694,000		516,000
Segment assets	53,874,000	[1]	55,675,000	[1]	53,874,000	[1]	55,675,000	[1]
Inter-Segment Eliminations
Financial results of reportable segments
Sales	(110,000)		(60,000)		(261,000)		(362,000)
Unallocated assets
Financial results of reportable segments
Segment assets	19,637,000				19,637,000				40,760,000
Reconciliation of segment income to consolidated income before income taxes
Cash	$ 15,000,000				$ 15,000,000				$ 34,700,000

[1] Segment assets primarily consist of restricted cash, accounts receivable, inventories, prepaid and other assets, property, plant and equipment, and intangible assets. Unallocated assets primarily include, cash and cash equivalents, corporate property, plant and equipment, deferred income taxes, and other non-current assets.

XML

GOODWILL AND INTANGIBLE ASSETS (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended			9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013	Sep. 30, 2014		Sep. 30, 2013	Dec. 31, 2013
Amortizable intangible assets
Gross amortizable intangible assets	$ 28,621			$ 28,621			$ 27,270
Accumulated amortization	(9,616)			(9,616)			(8,281)
Amortizable intangible assets, net	19,005			19,005			18,989
Indefinite lived intangible assets	12,025			12,025			13,074
Intangible assets other than goodwill, net	31,030			31,030			32,063
Amortization expense related to amortizable intangible assets	448		440	1,339		1,125
Assets associated with Bridgeport acquisition | Assets
Amortizable intangible assets
Indefinite lived intangible assets	7,225	[1]		7,225	[1]		7,354	[1]
Usach | Trade names
Amortizable intangible assets
Indefinite lived intangible assets	630	[2]		630	[2]		1,550	[2]
Forkardt | Trade names
Amortizable intangible assets
Indefinite lived intangible assets	4,170	[3]		4,170	[3]		4,170	[3]
Land rights
Amortizable intangible assets
Gross amortizable intangible assets	2,827			2,827			2,865
Accumulated amortization	(217)			(217)			(177)
Patents
Amortizable intangible assets
Gross amortizable intangible assets	3,065			3,065			3,030
Accumulated amortization	(2,936)			(2,936)			(2,884)
Technical know-how, customer list, and other
Amortizable intangible assets
Gross amortizable intangible assets	22,729			22,729			21,375
Accumulated amortization	$ (6,463)			$ (6,463)			$ (5,220)

[1] Represents the aggregate value of the trade name, trademarks and copyrights associated with the former worldwide operations of Bridgeport. The Bridgeport brand name is used on all of the machining center lines. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life.

[2] Represents the value of the trade name associated with Usach, which the Company acquired in 2012. The Usach trade name is used on all of the grinding machines and grinding systems manufactured by Usach. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life.

[3] Represents the value of the trade name associated with Forkardt, which the Company acquired in 2013. The Forkardt trade name is used on all of the products manufactured by Forkardt. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life.

XML

WARRANTIES (Tables)

9 Months Ended

Sep. 30, 2014

Product Warranties Disclosures [Abstract]

Schedule of reconciliation of changes in product warranty accrual included in accrued expenses

A reconciliation of the changes in the product warranty accrual, which is included in accrued expenses, is as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2014			2013			2014			2013
Balance at the beginning of period	$	3,409		$	3,249		$	3,601		$	3,432
Warranties issued	538			787			1,750			2,182
Warranty settlement costs	(665		)	(577		)	(1,797		)	(1,905		)
Changes in accruals for pre-existing warranties	67			(248		)	(217		)	(718		)
Other adjustments(1)	589			—			589			332
Currency translation adjustments	(130		)	117			(118		)	5
Balance at the end of period	$	3,808		$	3,328		$	3,808		$	3,328

____________________

⁽¹⁾  Represents the warranty liabilities assumed in connection with the Voumard acquisition in 2014 and the Forkardt acquisition in 2013. Refer to Note 2. "Acquisitions" for details.

XML

STOCK BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of stock based compensation expense

A summary of stock based compensation expense is as follows (in thousands):

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2014			2013		2014			2013
Restricted stock/unit awards (“RSA”)	$	109		$	87	$	327		$	277
Performance share incentives (“PSI”)	(170		)	35		(170		)	95
	$	(61	)	$	122	$	157		$	372

Schedule of unrecognized compensation and the expected weighted-average recognition periods with respect to the outstanding RSAs

Unrecognized compensation and the expected weighted-average recognition periods with respect to the outstanding RSAs as of September 30, 2014 and December 31, 2013, are as follows:

	September 30, 2014		December 31, 2013
Unrecognized compensation cost (in thousands)	$	826	$	1,179
Expected weighted-average recognition period for unrecognized compensation cost (in years)	1.9		2.6

XML

ACQUISITIONS

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

ACQUISITIONS

ACQUISITIONS

Acquisition of Forkardt

On May 9, 2013, Forkardt, Inc. (“Forkardt”, formerly Cherry Acquisition Corporation) and Hardinge Holdings GmbH, direct wholly owned subsidiaries of the Company, and Hardinge GmbH, an indirect wholly-owned subsidiary of the Company, acquired the Forkardt operations from Illinois Tool Works for $34.3 million, net of cash acquired. The acquisition of Forkardt strengthens and expands the Company’s leadership position in specialty workholding solutions around the world. The acquisition, which was funded through $24.3 million in bank debt and $10.0 million in cash, has been included in the ATA business segment. Forkardt is a leading global provider of high-precision, specialty workholding devices with headquarters in Traverse City, Michigan. Forkardt has operations in the U.S., France, Germany, and India. The results of operations of Forkardt have been included in the consolidated financial statements from the date of acquisition.

All purchase accounting adjustments were finalized in May 2014. The final allocation of purchase price to the assets acquired and liabilities assumed is as follows (in thousands):

	May 9, 2013
Assets Acquired
Accounts receivable	$	5,521
Inventories	5,357
Other current assets	1,257
Property, plant and equipment	6,271
Other non-current assets	105
Trade name, customer list, and other intangible assets	14,614
Total assets acquired	33,125
Liabilities Assumed
Accounts payable and other current liabilities	3,413
Other non-current liabilities	1,278
Net assets acquired	28,434
Total purchase price	34,250
Goodwill	$	5,816

On April 2, 2014, the Company acquired the Forkardt India operations, which had an immaterial impact to the consolidated financial statements.

Disposal of Forkardt, Switzerland operations

On December 31, 2013, the Company divested its Forkardt operations in Switzerland for CHF 5.6 million, net of cash sold ($6.3 million equivalent). The sale was subject to working capital adjustments. The Forkardt Swiss business had net assets of $1.2 million as of the sale date. In March 2014, the Company recognized $0.2 million of additional consideration as a result of final working capital adjustments, which is included in the "Gain from disposal of discontinued operation and income from discontinued operation, net of tax" line in the Statement of Operations for the nine months ended September 30, 2014.

Acquisition of Voumard

On September 22, 2014, Hardinge Inc., along with its indirect wholly-owned subsidiaries Hardinge GmbH and L. Kellenberger & Co., AG acquired certain assets and assumed certain liabilities associated with a product line of grinding machine systems and applications marketed and sold under the Voumard brand from Peter Wolters GmbH. The purchase price was EUR 1.7 million (approximately $2.2 million), before taking into account customary purchase price adjustments. The acquisition of Voumard expands the Company's product offerings to include internal diameter ("ID") cylindrical grinding solutions, which are a complement to the existing grinding product lines offered by the Company. The acquisition was funded with cash and has been included in the MMS business segment. Voumard is a global leader in the ID grinding market with an installed base of over 9,000 machine solutions serving more than 2,500 customers around the world. The results of operations of Voumard have been included in the consolidated financial statements from the date of acquisition.

In accordance with the acquisition method of accounting, the acquired net assets were recorded at preliminary fair value at the date of acquisition. The identifiable intangible assets acquired, which primarily consists of drawings of $0.1 million, were valued using a cost approach. At September 30, 2014 the purchase price allocation is preliminary pending the finalization of the fair values of the net assets acquired due to the timing of the acquisition. These values will be finalized no later than one year from the date of the transaction. The preliminary fair values of the acquired assets and liabilities exceeded the purchase price of Voumard, resulting in a gain on the purchase of $0.5 million, which is included in the "Other (income) expense, net" line in the Statements of Operations for the three and nine months ended September 30, 2014.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed in the Voumard acquisition at the date of acquisition (in thousands):

	September 22, 2014
Assets Acquired
Inventories	$	2,984
Property, plant and equipment	259
Drawings, customer lists, and other intangible assets	131
Total assets acquired	3,374
Liabilities Assumed
Warranties	600
Deferred tax liability	162
Net assets acquired	2,612
Total purchase price	2,150
Bargain purchase gain	$	(462	)

Supplemental Pro Forma Information

The following table illustrates the unaudited pro forma effect on the Company’s consolidated operating results for the three and nine months ended September 30, 2014 and 2013, as if the Forkardt acquisition and related financing occurred on January 1, 2012 and the Voumard acquisition had occurred on January1, 2013 (in thousands):

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2014			2013		2014			2013
Sales	$	70,442		$	83,097	$	223,776		$	250,600
Net (loss) income from continuing operations(1)	(8,164		)	1,603		(13,200		)	4,017
Diluted (loss) earnings per share from continuing operations	$	(0.64	)	$	0.14	$	(1.04	)	$	0.34

____________________

⁽¹⁾ The pro forma results above include abbreviated financial results for Voumard, consisting of revenues and direct expenses for that product line. During the nine months ended September 30, 2014, the Voumard business incurred $4.8 million in restructuring charges, which included inventory write-offs, headcount reductions and other related costs. These amounts are included in the pro forma information presented above.

The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what the results of operations would have been had the acquisition been completed on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition.

XML

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

9 Months Ended

Sep. 30, 2014

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of changes in accumulated other comprehensive income (loss) (AOCI) by component

Changes in AOCI by component for the three and nine months ended September 30, 2014 and 2013 are as follows (in thousands):

	Three Months Ended September 30, 2014
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges		Accumulated other comprehensive (loss) income
Beginning balance, net of tax	$	39,216		$	(39,957	)	$	25	$	(716	)
Other comprehensive (loss) income before reclassifications	(6,368		)	1,585			31		(4,752		)
Less income reclassified from AOCI	—			249			18		267
Net other comprehensive (loss) income	(6,368		)	1,336			13		(5,019		)
Income taxes	756			170			1		927
Ending balance, net of tax	$	32,092		$	(38,791	)	$	37	$	(6,662	)

	Three Months Ended September 30, 2013
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	32,040		$	(60,657	)	$	(46	)	$	(28,663	)
Other comprehensive income before reclassifications	6,969			68			371			7,408
Less income reclassified from AOCI	—			568			27			595
Net other comprehensive income (loss)	6,969			(500		)	344			6,813
Income taxes	(93		)	(120		)	17			(196		)
Ending balance, net of tax	$	39,102		$	(61,037	)	$	281		$	(21,654	)

	Nine Months Ended September 30, 2014
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	38,663		$	(40,213	)	$	131		$	(1,419	)
Other comprehensive (loss) income before reclassifications	(5,985		)	2,316			(82		)	(3,751		)
Less income (loss) reclassified from AOCI	—			746			(4		)	742
Net other comprehensive (loss) income	(5,985		)	1,570			(78		)	(4,493		)
Income taxes	586			148			16			750
Ending balance, net of tax	$	32,092		$	(38,791	)	$	37		$	(6,662	)

	Nine Months Ended September 30, 2013
	Foreign currency translation adjustments		Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges		Accumulated other comprehensive loss
Beginning balance, net of tax	$	36,830	$	(62,375	)	$	36	$	(25,509	)
Other comprehensive (loss) income before reclassifications	2,319		3,128			263		5,710
Less income (loss) reclassified from AOCI	—		1,700			17		1,717
Net other comprehensive (loss) income	2,319		1,428			246		3,993
Income taxes	47		90			1		138
Ending balance, net of tax	$	39,102	$	(61,037	)	$	281	$	(21,654	)

Schedule of reclassification out of AOCI

Details about reclassification out of AOCI for the three and nine months ended September 30, 2014 and 2013 are as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,						Affected line item on the Consolidated Statements of Operations
Details of AOCI components	2014			2013			2014			2013
Unrealized gain (loss) on cash flow hedges:
	$	(10	)	$	41		$	71		$	20		Sales
	28			(14		)	(75		)	(3		)	Other (income) expense, net
	18			27			(4		)	17			Total before tax
	3			(5		)	16			(2		)	Tax benefit (expense)
	$	21		$	22		$	12		$	15		Net of tax
Retirement plans related adjustments:
Amortization of prior service credit	$	(99	)	$	(167	)	$	(303	)	$	(499	)	(a)
Amortization of transition asset	(69		)	(68		)	(211		)	(203		)	(a)
Amortization of actuarial loss	417			803			1,260			2,402			(a)
	249			568			746			1,700			Total before tax
	3			(43		)	7			(127		)	Tax benefit (expense)
	$	252		$	525		$	753		$	1,573		Net of tax

____________________

(a)  These AOCI components are included in the computation of net period pension and post retirement costs. See Note 14. "Pension and Postretirement Plans" for details.

XML

FAIR VALUE AND DERIVATIVE INSTRUMENTS (Details 2) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Foreign currency derivative financial instruments qualifying and designated as hedges
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	$ 400,000	$ (300,000)	$ (100,000)	$ (1,700,000)
Fair value of the foreign currency forward contracts
Foreign currency forwards designated as hedges - Other current assets	202,000		202,000		144,000
Foreign currency forwards designated as hedges - Accrued expenses	(209,000)		(209,000)		(249,000)
Foreign currency forwards not designated as hedges - Other current assets	182,000		182,000		141,000
Foreign currency forwards not designated as hedges - Accrued expenses	(369,000)		(369,000)		(623,000)
Derivative, Fair Value, Net	(194,000)		(194,000)		(587,000)
Foreign currency forwards | Not designated as hedges
Derivative financial instruments
Notional Amount	34,500,000		34,500,000		45,500,000
Foreign currency forwards | Cash flow hedges
Derivative financial instruments
Notional Amount	26,200,000		26,200,000		37,000,000
Maximum | Foreign currency forwards | Cash flow hedges
Foreign currency derivative financial instruments qualifying and designated as hedges
Expected losses, net of income tax effect, expected to be reclassified from AOCI within the next 12 months, less than	$ (100,000)		$ (100,000)

XML

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Reclassification out of AOCI
Sales	$ 68,924		$ 79,784		$ 218,625		$ 226,358
Other expense, net	334		99		(249)		(316)
Income from continuing operations before income taxes	(7,034)		2,257		(6,055)		4,887
Income taxes	(544)		(1,084)		(845)		(1,618)
Net income (loss)	(7,578)		1,479		(6,682)		3,784
Unrealized gain (loss) on cash flow hedges | Amount reclassified from AOCI
Reclassification out of AOCI
Sales	(10)		41		71		20
Other expense, net	28		(14)		(75)		(3)
Income from continuing operations before income taxes	18		27		(4)		17
Income taxes	3		(5)		16		(2)
Net income (loss)	21		22		12		15
Retirement plans related adjustments | Amount reclassified from AOCI
Reclassification out of AOCI
Amortization of prior service credit	(99)	[1]	(167)	[1]	(303)	[1]	(499)	[1]
Amortization of transition asset	(69)	[1]	(68)	[1]	(211)	[1]	(203)	[1]
Amortization of actuarial loss	417	[1]	803	[1]	1,260	[1]	2,402	[1]
Income from continuing operations before income taxes	249		568		746		1,700
Income taxes	3		(43)		7		(127)
Net income (loss)	$ 252		$ 525		$ 753		$ 1,573

[1] These AOCI components are included in the computation of net period pension and post retirement costs. See Note 14. "Pension and Postretirement Plans" for details.

XML

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Assets
Cash and cash equivalents	$ 15,005	$ 34,722
Restricted cash	3,567	4,124
Accounts receivable, net	53,645	57,137
Inventories, net	123,226	114,064
Other current assets	12,067	11,563
Total current assets	207,510	221,610
Property, plant and equipment, net	68,207	74,656
Goodwill	6,727	10,002
Other intangible assets, net	31,030	32,063
Other non-current assets	6,466	5,852
Total non-current assets	112,430	122,573
Total assets	319,940	344,183
Liabilities and shareholders’ equity
Accounts payable	26,608	24,418
Accrued expenses	24,055	26,346
Customer deposits	15,033	15,166
Accrued income taxes	1,315	830
Deferred income taxes	2,551	2,569
Contingent consideration	0	7,500
Current portion of long-term debt	3,705	7,850
Total current liabilities	73,267	84,679
Long-term debt	13,835	18,785
Pension and postretirement liabilities	27,261	28,188
Deferred income taxes	4,582	4,968
Other liabilities	3,745	3,775
Total non-current liabilities	49,423	55,716
Commitments and contingencies (see Note 10)
Common stock ($0.01 par value, 20,000,000 authorized; 12,825,468 issued and 12,821,768 outstanding as of September 30, 2014, and 12,472,992 issued and outstanding as of December 31, 2013)	128	125
Additional paid-in capital	120,339	114,951
Retained earnings	83,491	90,937
Treasury shares (at cost, 3,700 as of September 30, 2014, and 75,125 as of December 31, 2013)	(46)	(806)
Accumulated other comprehensive loss	(6,662)	(1,419)
Total shareholders’ equity	197,250	203,788
Total liabilities and shareholders’ equity	$ 319,940	$ 344,183

XML

GOODWILL AND INTANGIBLE ASSETS Impairment of Intangible Assets other than Goodwill (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
Impairment of Intangible Assets (Excluding Goodwill)	$ 0.9

XML

Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Operating activities
Net (loss) income	$ (6,682)	$ 3,784
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Impairment charge	5,766	0
Depreciation and amortization	7,317	6,849
Debt issuance costs amortization	33	48
Benefit from deferred income taxes	(346)	(108)
Gain on sale of assets	(101)	(9)
Gain on sale of business	(218)	0
Gain on purchase of business	(462)	0
Unrealized intercompany foreign currency transaction loss (gain)	907	(92)
Changes in operating assets and liabilities, net of businesses acquired:
Accounts receivable	2,670	5,223
Inventories	(10,054)	1,409
Other assets	225	378
Accounts payable	2,743	(2,355)
Customer deposits	259	953
Accrued expenses	(2,859)	(7,348)
Accrued pension and postretirement liabilities	(35)	(298)
Net cash (used in) provided by operating activities	(837)	8,434
Investing activities
Acquisition of businesses, net of cash acquired	(5,683)	(34,250)
Capital expenditures	(1,830)	(2,192)
Proceeds from disposal of business	218	0
Proceeds on sales of assets	131	113
Net cash used in investing activities	(7,164)	(36,329)
Financing activities
Payment of contingent consideration	(7,500)	(299)
Proceeds from short-term notes payable to bank	13,827	43,041
Repayments of short-term notes payable to bank	(13,827)	(45,729)
Proceeds from long-term debt	0	23,000
Repayments of long-term debt	(8,373)	(2,934)
Debt issuance costs	0	(682)
Dividends paid	(757)	(701)
Net proceeds from sales of common stock	5,678	1,632
Net cash (used in) provided by financing activities	(10,952)	17,328
Effect of exchange rate changes on cash	(764)	(510)
Net decrease in cash	(19,717)	(11,077)
Cash and cash equivalents at beginning of period	34,722	26,855
Cash and cash equivalents at end of period	$ 15,005	$ 15,778

XML

SEGMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Schedule of financial results of reportable segments

Financial results for each reportable segment are as follows (in thousands):

	Three Months Ended September 30, 2014
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	52,353		$	16,681	$	(110	)	$	68,924
Depreciation and amortization	1,722			630					2,352
Segment (loss) income	(2,094		)	1,338					(756		)
Capital expenditures	457			249					706

	Three Months Ended September 30, 2013
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	64,382	$	15,462	$	(60	)	$	79,784
Depreciation and amortization	1,742		612					2,354
Segment income	2,149		1,564					3,713
Capital expenditures	540		25					565

	Nine Months Ended September 30, 2014
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	167,977		$	50,909	$	(261	)	$	218,625
Depreciation and amortization	5,255			1,916					7,171
Segment (loss) income	(2,107		)	5,072					2,965
Capital expenditures	1,136			694					1,830
Segment assets(1)	246,429			53,874					300,303

	Nine Months Ended September 30, 2013
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	191,272	$	35,448	$	(362	)	$	226,358
Depreciation and amortization	5,102		1,335					6,437
Segment income	6,224		4,464					10,688
Capital expenditures	1,676		516					2,192
Segment assets(1)	268,802		55,675					324,477

____________________

⁽¹⁾  Segment assets primarily consist of restricted cash, accounts receivable, inventories, prepaid and other assets, property, plant and equipment, and intangible assets. Unallocated assets primarily include, cash and cash equivalents, corporate property, plant and equipment, deferred income taxes, and other non-current assets.

Schedule of reconciliation of segment income to consolidated income from operations before income taxes

A reconciliation of segment (loss) income to consolidated (loss) income from operations before income taxes for the three and nine months ended September 30, 2014 and 2013 are as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2014			2013			2014			2013
Segment (loss) income	$	(756	)	$	3,713		$	2,965		$	10,688
Unallocated corporate expense	(859		)	(415		)	(3,151		)	(1,931		)
Interest expense, net	(156		)	(311		)	(522		)	(798		)
Other unallocated income (expense)	(5,263		)	(730		)	(5,347		)	(3,072		)
(Loss) income from continuing operations before income taxes	$	(7,034	)	$	2,257		$	(6,055	)	$	4,887

Schedule of reconciliation of segment assets to consolidated total assets

A reconciliation of segment assets to consolidated total assets follows (in thousands):

	September 30, 2014		December 31, 2013
Total segment assets	$	300,303	$	303,423
Unallocated assets	19,637		40,760
Total assets	$	319,940	$	344,183

XML

SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

Segment (loss) income is measured for internal reporting purposes by excluding corporate expenses, impairment charges, interest income, interest expense, and income taxes. Corporate expenses consist primarily of executive employment costs, certain professional fees, and costs associated with the Company’s global headquarters. Financial results for each reportable segment are as follows (in thousands):

	Three Months Ended September 30, 2014
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	52,353		$	16,681	$	(110	)	$	68,924
Depreciation and amortization	1,722			630					2,352
Segment (loss) income	(2,094		)	1,338					(756		)
Capital expenditures	457			249					706

	Three Months Ended September 30, 2013
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	64,382	$	15,462	$	(60	)	$	79,784
Depreciation and amortization	1,742		612					2,354
Segment income	2,149		1,564					3,713
Capital expenditures	540		25					565

	Nine Months Ended September 30, 2014
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	167,977		$	50,909	$	(261	)	$	218,625
Depreciation and amortization	5,255			1,916					7,171
Segment (loss) income	(2,107		)	5,072					2,965
Capital expenditures	1,136			694					1,830
Segment assets(1)	246,429			53,874					300,303

	Nine Months Ended September 30, 2013
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	191,272	$	35,448	$	(362	)	$	226,358
Depreciation and amortization	5,102		1,335					6,437
Segment income	6,224		4,464					10,688
Capital expenditures	1,676		516					2,192
Segment assets(1)	268,802		55,675					324,477

____________________

⁽¹⁾  Segment assets primarily consist of restricted cash, accounts receivable, inventories, prepaid and other assets, property, plant and equipment, and intangible assets. Unallocated assets primarily include, cash and cash equivalents, corporate property, plant and equipment, deferred income taxes, and other non-current assets.

A reconciliation of segment (loss) income to consolidated (loss) income from operations before income taxes for the three and nine months ended September 30, 2014 and 2013 are as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2014			2013			2014			2013
Segment (loss) income	$	(756	)	$	3,713		$	2,965		$	10,688
Unallocated corporate expense	(859		)	(415		)	(3,151		)	(1,931		)
Interest expense, net	(156		)	(311		)	(522		)	(798		)
Other unallocated income (expense)	(5,263		)	(730		)	(5,347		)	(3,072		)
(Loss) income from continuing operations before income taxes	$	(7,034	)	$	2,257		$	(6,055	)	$	4,887

A reconciliation of segment assets to consolidated total assets follows (in thousands):

	September 30, 2014		December 31, 2013
Total segment assets	$	300,303	$	303,423
Unallocated assets	19,637		40,760
Total assets	$	319,940	$	344,183

Unallocated assets include cash of $15.0 million and $34.7 million at September 30, 2014 and December 31, 2013, respectively.

XML

BASIS OF PRESENTATION (Details)	9 Months Ended
	Sep. 30, 2014 reportable_segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable business segments	2

XML

BASIS OF PRESENTATION Goodwill and Intangible Assets (Policies)

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Policy [Policy Text Block]

During the quarter ended June 30, 2014, the Company voluntarily changed the date of the annual goodwill and indefinite-lived intangible assets impairment testing from the last day of the fiscal year to the first day of the fourth quarter. This voluntary change is preferable under the circumstances as it provides the Company with additional time to complete the annual goodwill and indefinite-lived intangible asset impairment testing in advance of year-end reporting. The voluntary change in accounting principle related to the annual testing date will not delay, accelerate or avoid an impairment charge. This change was not applied retrospectively, as doing so would require the use of significant estimates and assumptions that include hindsight. Accordingly, the change will be applied prospectively.

New Accounting Standards

In August 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance on management's evaluation and disclosure of uncertainties about the entity's ability to continue as a going concern. In connection with the preparation of the interim and annual financial statements, management will be required to perform an assessment of whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. If conditions or events are identified that raise substantial doubt that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued, additional disclosures are required. This guidance is effective for the annual period ending after December 15, 2016, and for interim and annual periods thereafter. Early application is permitted. Management does not believe that the adoption of this accounting guidance will have a material impact on the financial statements or related disclosures.     

In June 2014, FASB issued authoritative guidance on accounting for share-based payments when the terms of the award provide that a performance target could be achieved after the requisite service period. This guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition, and as such, should not be reflected in estimating the grant-date fair value of the award. This guidance is effective for interim and annual periods beginning after December 15, 2015, with early adoption permitted. The Company is currently evaluating the new guidance and has not determined the impact this standard may have on the financial statements.

In May 2014, FASB issued authoritative guidance on accounting for revenue recognition. The objective of this guidance is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the new guidance, an entity will (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the contract’s performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. This guidance applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. The new guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2016 for public companies. Early adoption is not permitted. Entities have the option of using either a full retrospective or modified approach to adopt this guidance. The Company is currently evaluating the new guidance and has not determined the impact this standard may have on the financial statements, nor decided upon the method of adoption.

In April 2014, FASB issued authoritative guidance on the presentation and disclosure of discontinued operations. This guidance is effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been previously reported in financial statements. Management does not believe that the adoption of this accounting guidance will have a material impact on the financial statements.

XML

BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

In these notes, the terms “Hardinge,” or “the Company,” mean Hardinge Inc. and its predecessors together with its subsidiaries.

The Company operates through two reportable segments, Metalcutting Machine Solutions (“MMS”) and Aftermarket Tooling and Accessories (“ATA”). The MMS segment includes high precision computer controlled metalcutting turning machines, vertical machining centers, horizontal machining centers, grinding machines, and repair parts related to those machines. The ATA segment includes products, primarily collets and chucks that are purchased by manufacturers throughout the lives of their Hardinge or other branded machines.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and, therefore, should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the timing and amount of assets, liabilities, equity, revenue, and expenses reported and disclosed. Actual amounts could differ from these estimates. All adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for the interim periods have been presented and recorded. Due to differing business conditions and some seasonality, operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected in subsequent quarters or for the full year ended December 31, 2014.

Certain amounts in the 2013 consolidated financial statements have been reclassified to conform to the current presentation.

During the quarter ended June 30, 2014, the Company voluntarily changed the date of the annual goodwill and indefinite-lived intangible assets impairment testing from the last day of the fiscal year to the first day of the fourth quarter. This voluntary change is preferable under the circumstances as it provides the Company with additional time to complete the annual goodwill and indefinite-lived intangible asset impairment testing in advance of year-end reporting. The voluntary change in accounting principle related to the annual testing date will not delay, accelerate or avoid an impairment charge. This change was not applied retrospectively, as doing so would require the use of significant estimates and assumptions that include hindsight. Accordingly, the change will be applied prospectively.

XML

Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	20,000,000	20,000,000
Common stock, issued (in shares)	12,825,468	12,472,992
Common stock, outstanding (in shares)	12,821,768	12,472,992
Treasury shares (in shares)	3,700	75,125

XML

STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

All stock based compensation to employees is recorded as "Selling, general and administrative expenses" in the Consolidated Statements of Operations based on the fair value at the grant date of the award. These non-cash compensation costs are included in the depreciation and amortization amounts in the Consolidated Statements of Cash Flows.

A summary of stock based compensation expense is as follows (in thousands):

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2014			2013		2014			2013
Restricted stock/unit awards (“RSA”)	$	109		$	87	$	327		$	277
Performance share incentives (“PSI”)	(170		)	35		(170		)	95
	$	(61	)	$	122	$	157		$	372

There were no RSAs granted during the nine months ended September 30, 2014, and 2013, respectively. The deferred compensation is being amortized on a straight-line basis over the specified service period. There were no PSIs granted during the nine months ended September 30, 2014 and 2013, respectively. The deferred compensation with respect to the PSIs is being recognized into earnings based on the passage of time and achievement of performance targets. All outstanding RSAs and PSIs are unvested.

Unrecognized compensation and the expected weighted-average recognition periods with respect to the outstanding RSAs as of September 30, 2014 and December 31, 2013, are as follows:

	September 30, 2014		December 31, 2013
Unrecognized compensation cost (in thousands)	$	826	$	1,179
Expected weighted-average recognition period for unrecognized compensation cost (in years)	1.9		2.6

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Oct. 31, 2014
Document and Entity Information
Entity Registrant Name	HARDINGE INC.
Entity Central Index Key	0000313716
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		12,821,768
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3

XML

STOCK OFFERING

9 Months Ended

Sep. 30, 2014

STOCK OFFERING

STOCK OFFERING

STOCK OFFERING

On August 9, 2013, the Company entered into a sales agreement (the “Agreement”) with an independent sales agent (“Agent”), under which the Company may, from time to time, sell shares of its common stock, par value $0.01 per share (the “Shares”), having an aggregate offering price of up to $25.0 million through the Agent. Under the Agreement, the Agent may sell the Shares by methods deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including sales made directly on the NASDAQ Global Select Market, on any other existing trading market for the common stock or to or through a market maker. In addition, with the prior consent of the Company, the Agent may sell the common stock by any other method permitted by law, including in privately negotiated transactions.

The Agreement will terminate upon the earlier of (i) sale of the Shares under the Agreement having an aggregate offering price of $25.0 million and (ii) the termination of the Agreement as permitted therein. The Agreement may be terminated by the Agent or the Company at any time upon 10 days notice to the other party, or by the Agent at any time in certain circumstances, including the occurrence of a material adverse change in the Company. The Company's Board of Directors authorized this program for a period of one year ending August 8, 2014. This authorization has not been renewed as of September 30, 2014.

As of September 30, 2014, 1,014,252 Shares have been sold under the Agreement for aggregated net proceeds of $14.6 million, of which 663,276 of the shares sold were issued from treasury. During the nine months ended September 30, 2014, 403,863 Shares of common stock have been sold under the “at-the-market” stock offering program for aggregate net proceeds of $5.7 million, of which 52,887 of the shares sold were issued from treasury.

XML

Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Income Statement [Abstract]
Sales	$ 68,924	$ 79,784	$ 218,625	$ 226,358
Cost of sales	50,247	57,743	158,767	162,577
Gross profit	18,677	22,041	59,858	63,781
Selling, general and administrative expenses	20,123	19,572	59,376	57,780
Impairment charge	5,766	0	5,766	0
Other (income) expense, net	(334)	(99)	249	316
(Loss) income from operations	(6,878)	2,568	(5,533)	5,685
Interest expense	171	325	569	841
Interest income	(15)	(14)	(47)	(43)
(Loss) income from continuing operations before income taxes	(7,034)	2,257	(6,055)	4,887
Income taxes	544	1,084	845	1,618
Net (loss) income from continuing operations	(7,578)	1,173	(6,900)	3,269
Gain from disposal of discontinued operation and income from discontinued operations, net of tax	0	306	218	515
Net (loss) income	$ (7,578)	$ 1,479	$ (6,682)	$ 3,784
Basic (loss) earnings per share:
Continuing operations (in dollars per share)	$ (0.60)	$ 0.10	$ (0.55)	$ 0.28
Discontinued operations (in dollars per share)	$ 0.00	$ 0.03	$ 0.02	$ 0.04
Basic (loss) earnings per share (in dollars per share)	$ (0.60)	$ 0.13	$ (0.53)	$ 0.32
Diluted (loss) earnings per share:
Continuing operations (in dollars per share)	$ (0.60)	$ 0.10	$ (0.55)	$ 0.28
Discontinued operations (in dollars per share)	$ 0.00	$ 0.03	$ 0.02	$ 0.04
Diluted (loss) earnings per share (in dollars per share)	$ (0.60)	$ 0.13	$ (0.53)	$ 0.32
Cash dividends declared per share: (in dollars per share)	$ 0.02	$ 0.02	$ 0.06	$ 0.06

XML

GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

Detail and activity of goodwill by segment is presented below (in thousands):

	MMS			ATA			Total
Balance at December 31, 2013
Goodwill(1)	$	32,434		$	5,154		$	37,588
Accumulated impairment losses	(27,586		)	—			(27,586		)
	4,848			5,154			10,002
Acquisition of Forkardt India	—			1,626			1,626
Impairment loss	(4,848		)	—			(4,848		)
Currency translation adjustments	—			(53		)	(53		)
	(4,848		)	1,573			(3,275		)
Balance at September 30, 2014
Goodwill	32,434			6,727			39,161
Accumulated impairment losses	(32,434		)	—			(32,434		)
	$	—		$	6,727		$	6,727

____________________

⁽¹⁾  In accordance with business combination guidance, changes to the purchase price allocation are adjusted retrospectively to the consolidated financial results. The values above include measurement period adjustments recorded in the nine months ended September 30, 2014 to primarily revise the fair value of other current assets, accrued expenses and AOCI. The December 31, 2013 balances included in the consolidated balance sheets have been revised to include the effect of the measurement period adjustments.

Goodwill is reviewed for possible impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit's carrying amount is greater than its fair value. Based on lower than expected performance in the Usach reporting unit during the current year, combined with a downward revision in the anticipated future results, the Company determined that there were indicators of an impairment of that reporting unit. Accordingly, an initial calculation of the fair value was performed, which resulted in the carrying amount of the Usach reporting unit exceeding its fair value, which was estimated based on the present value of expected future cash inflows and market data. Accordingly, a goodwill impairment charge of $4.8 million was recognized in that reporting unit during the third quarter of the current year. This amount is an estimate based on preliminary data, and will be finalized in the fourth quarter in connection with the formal annual impairment test.

The major components of intangible assets other than goodwill are as follows (in thousands):

	September 30, 2014			December 31, 2013
Gross amortizable intangible assets:
Land rights	$	2,827		$	2,865
Patents	3,065			3,030
Technical know-how, customer lists, and other	22,729			21,375
Total gross amortizable intangible assets	28,621			27,270
Accumulated amortization:
Land rights	(217		)	(177		)
Patents	(2,936		)	(2,884		)
Technical know-how, customer lists, and other	(6,463		)	(5,220		)
Total accumulated amortization	(9,616		)	(8,281		)
Amortizable intangible assets, net	19,005			18,989
Indefinite lived intangible assets:
Assets associated with Bridgeport acquisition(1)	7,225			7,354
Usach trade name(2)	630			1,550
Forkardt trade name(3)	4,170			4,170
	12,025			13,074
Intangible assets other than goodwill, net	$	31,030		$	32,063

____________________

⁽¹⁾ Represents the aggregate value of the trade name, trademarks and copyrights associated with the former worldwide operations of Bridgeport. The Bridgeport brand name is used on all of the machining center lines. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life.

⁽²⁾ Represents the value of the trade name associated with Usach, which the Company acquired in 2012. The Usach trade name is used on all of the grinding machines and grinding systems manufactured by Usach. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life. Based on impairment indicators present in the third quarter of the current year as discussed above, the Company performed a review of the valuation of the Usach intangible assets, resulting in an impairment charge to the Usach trade name of $0.9 million. This amount is an estimate based on preliminary data, and will be finalized in the fourth quarter in connection with the formal annual impairment test.

⁽³⁾   Represents the value of the trade name associated with Forkardt, which the Company acquired in 2013. The Forkardt trade name is used on all of the products manufactured by Forkardt. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life.

Amortization expense related to the definite-lived intangible assets are as follows (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2014		2013		2014		2013
Amortization expense	$	448	$	440	$	1,339	$	1,125

XML

PROPERTY, PLANT AND EQUIPMENT

9 Months Ended

Sep. 30, 2014

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following⁽¹⁾ (in thousands): 

	September 30, 2014			December 31, 2013
Land, buildings and improvements	$	85,175		$	88,295
Machinery, equipment and fixtures	78,829			80,584
Office furniture, equipment and vehicles	22,402			23,421
Construction in progress	83			217
	186,489			192,517
Accumulated depreciation	(118,282		)	(117,861		)
Property, plant and equipment, net	$	68,207		$	74,656

____________________

⁽¹⁾ During the nine months ended September 30, 2014, the Company reclassified balances related to cost and accumulated depreciation. The net property, plant and equipment balance was not impacted by this adjustment. The December 31, 2013 balances have been reclassified to reflect the proper presentation.

XML

NEW ACCOUNTING STANDARDS

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

NEW ACCOUNTING STANDARDS

NEW ACCOUNTING STANDARDS

In August 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance on management's evaluation and disclosure of uncertainties about the entity's ability to continue as a going concern. In connection with the preparation of the interim and annual financial statements, management will be required to perform an assessment of whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. If conditions or events are identified that raise substantial doubt that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued, additional disclosures are required. This guidance is effective for the annual period ending after December 15, 2016, and for interim and annual periods thereafter. Early application is permitted. Management does not believe that the adoption of this accounting guidance will have a material impact on the financial statements or related disclosures.     

In June 2014, FASB issued authoritative guidance on accounting for share-based payments when the terms of the award provide that a performance target could be achieved after the requisite service period. This guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition, and as such, should not be reflected in estimating the grant-date fair value of the award. This guidance is effective for interim and annual periods beginning after December 15, 2015, with early adoption permitted. The Company is currently evaluating the new guidance and has not determined the impact this standard may have on the financial statements.

In May 2014, FASB issued authoritative guidance on accounting for revenue recognition. The objective of this guidance is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the new guidance, an entity will (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the contract’s performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. This guidance applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. The new guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2016 for public companies. Early adoption is not permitted. Entities have the option of using either a full retrospective or modified approach to adopt this guidance. The Company is currently evaluating the new guidance and has not determined the impact this standard may have on the financial statements, nor decided upon the method of adoption.

In April 2014, FASB issued authoritative guidance on the presentation and disclosure of discontinued operations. This guidance is effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been previously reported in financial statements. Management does not believe that the adoption of this accounting guidance will have a material impact on the financial statements.

XML

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

9 Months Ended

Sep. 30, 2014

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in AOCI by component for the three and nine months ended September 30, 2014 and 2013 are as follows (in thousands):

	Three Months Ended September 30, 2014
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges		Accumulated other comprehensive (loss) income
Beginning balance, net of tax	$	39,216		$	(39,957	)	$	25	$	(716	)
Other comprehensive (loss) income before reclassifications	(6,368		)	1,585			31		(4,752		)
Less income reclassified from AOCI	—			249			18		267
Net other comprehensive (loss) income	(6,368		)	1,336			13		(5,019		)
Income taxes	756			170			1		927
Ending balance, net of tax	$	32,092		$	(38,791	)	$	37	$	(6,662	)

	Three Months Ended September 30, 2013
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	32,040		$	(60,657	)	$	(46	)	$	(28,663	)
Other comprehensive income before reclassifications	6,969			68			371			7,408
Less income reclassified from AOCI	—			568			27			595
Net other comprehensive income (loss)	6,969			(500		)	344			6,813
Income taxes	(93		)	(120		)	17			(196		)
Ending balance, net of tax	$	39,102		$	(61,037	)	$	281		$	(21,654	)

	Nine Months Ended September 30, 2014
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	38,663		$	(40,213	)	$	131		$	(1,419	)
Other comprehensive (loss) income before reclassifications	(5,985		)	2,316			(82		)	(3,751		)
Less income (loss) reclassified from AOCI	—			746			(4		)	742
Net other comprehensive (loss) income	(5,985		)	1,570			(78		)	(4,493		)
Income taxes	586			148			16			750
Ending balance, net of tax	$	32,092		$	(38,791	)	$	37		$	(6,662	)

	Nine Months Ended September 30, 2013
	Foreign currency translation adjustments		Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges		Accumulated other comprehensive loss
Beginning balance, net of tax	$	36,830	$	(62,375	)	$	36	$	(25,509	)
Other comprehensive (loss) income before reclassifications	2,319		3,128			263		5,710
Less income (loss) reclassified from AOCI	—		1,700			17		1,717
Net other comprehensive (loss) income	2,319		1,428			246		3,993
Income taxes	47		90			1		138
Ending balance, net of tax	$	39,102	$	(61,037	)	$	281	$	(21,654	)

Details about reclassification out of AOCI for the three and nine months ended September 30, 2014 and 2013 are as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,						Affected line item on the Consolidated Statements of Operations
Details of AOCI components	2014			2013			2014			2013
Unrealized gain (loss) on cash flow hedges:
	$	(10	)	$	41		$	71		$	20		Sales
	28			(14		)	(75		)	(3		)	Other (income) expense, net
	18			27			(4		)	17			Total before tax
	3			(5		)	16			(2		)	Tax benefit (expense)
	$	21		$	22		$	12		$	15		Net of tax
Retirement plans related adjustments:
Amortization of prior service credit	$	(99	)	$	(167	)	$	(303	)	$	(499	)	(a)
Amortization of transition asset	(69		)	(68		)	(211		)	(203		)	(a)
Amortization of actuarial loss	417			803			1,260			2,402			(a)
	249			568			746			1,700			Total before tax
	3			(43		)	7			(127		)	Tax benefit (expense)
	$	252		$	525		$	753		$	1,573		Net of tax

____________________

(a)  These AOCI components are included in the computation of net period pension and post retirement costs. See Note 14. "Pension and Postretirement Plans" for details.

XML

INCOME TAXES

9 Months Ended

Sep. 30, 2014

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

A valuation allowance is recorded against all or a portion of the deferred tax assets in the U.S., Canada, U.K., Germany, and the Netherlands.

Each quarter, a full year tax rate is estimated for jurisdictions not subject to valuation allowances based upon the most recent forecast of full year anticipated results and the year-to-date tax expense is adjusted to reflect the full year anticipated tax rate. The rate is an estimate based upon projected results for the year, estimated annual permanent differences, the statutory tax rates in the various jurisdictions in which the Company operates, and the non-recognition of tax benefits for entities with full valuation allowances. The overall effective tax rates were (7.7)% and (14.0)% for the three and nine months ended September 30, 2014, respectively.

The tax years 2011, 2012 and 2013 remain open to examination by the U.S. federal taxing authorities. The tax years 2009 through 2013 remain open to examination by the U.S. state taxing authorities. For other major jurisdictions (Switzerland, U.K., Taiwan, France, Germany, Netherlands and China), the tax years between 2007 and 2013 generally remain open to routine examination by foreign taxing authorities, depending on the jurisdiction.

At September 30, 2014, a liability of $2.8 million is recorded with respect to uncertain income tax positions, which includes related interest and penalties of $0.7 million. If recognized, essentially all of the uncertain tax positions and related interest at September 30, 2014 would be recorded as a benefit to income tax expense on the Consolidated Statements of Operations. It is reasonably possible that some of the uncertain tax positions pertaining to foreign operations may change within the next 12 months due to audit settlements and statute of limitations expirations. The change in uncertain tax positions for these items is estimated to be between $0.1 million and $1.0 million.

XML

WARRANTIES

9 Months Ended

Sep. 30, 2014

Product Warranties Disclosures [Abstract]

WARRANTIES

WARRANTIES

A reconciliation of the changes in the product warranty accrual, which is included in accrued expenses, is as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2014			2013			2014			2013
Balance at the beginning of period	$	3,409		$	3,249		$	3,601		$	3,432
Warranties issued	538			787			1,750			2,182
Warranty settlement costs	(665		)	(577		)	(1,797		)	(1,905		)
Changes in accruals for pre-existing warranties	67			(248		)	(217		)	(718		)
Other adjustments(1)	589			—			589			332
Currency translation adjustments	(130		)	117			(118		)	5
Balance at the end of period	$	3,808		$	3,328		$	3,808		$	3,328

____________________

⁽¹⁾  Represents the warranty liabilities assumed in connection with the Voumard acquisition in 2014 and the Forkardt acquisition in 2013. Refer to Note 2. "Acquisitions" for details.

XML

FINANCING ARRANGEMENTS

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

FINANCING ARRANGEMENTS

FINANCING ARRANGEMENTS

See Note 6. “Financing Arrangements” of the 2013 Annual Report on Form 10-K for a description of the financing arrangements in place as of December 31, 2013.

In January 2014, Hardinge Jiaxing amended its secured credit facility with a local bank. The amendment increased the total availability under the facility from Chinese Yuan (“CNY”) 34.2 million (approximately $5.6 million) to CNY 59.0 million (approximately $9.6 million) or its equivalent in other currencies. The facility, which expires on December 20, 2014, is available for working capital and letter of credit purposes. Borrowings for working capital purposes are limited to CNY 39.0 million (approximately $6.4 million). The facility is secured by real property owned by the subsidiary. The interest rate on the credit facility, currently at 6.60%, is based on the basic interest rate as published by the People’s Bank of China, plus a 10% mark-up. There was no principal amount outstanding under this facility at September 30, 2014.

In June 2014, Hardinge Machine Tools B.V., Taiwan Branch, a wholly-owned subsidiary in Taiwan, renewed its unsecured credit facility, which will expire in June 2015 under the renewal. This facility provides up to $12.0 million, or its equivalent in other currencies, for working capital and export business purposes. This credit facility charges interest at 1.5% and is subject to change by the lender based on market conditions and carries no commitment fees on unused funds. There was no principal amount outstanding under this facility at September 30, 2014.

In September 2014, Hardinge Machine (Shanghai) Co., Ltd., an indirectly wholly-owned subsidiary in China, entered into a new credit facility. This facility, which expires in July 2015, provides up to CNY 34.0 million ($5.5 million equivalent) for letters of guarantee. Individual letters of guarantee issued under this facility require a cash deposit at the bank of 30% of the letter’s face value. The total issued letters of guarantee at September 30, 2014 had a face value of CNY 0.1 million (less than $0.1 million equivalent).

XML

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

The Company is a defendant in various lawsuits as a result of normal operations and in the ordinary course of business. Management believes the outcome of these lawsuits will not have a material effect on the financial position or results of operations.

The Company’s operations are subject to extensive federal, state, local and foreign laws and regulations relating to environmental matters. Certain environmental laws can impose joint and several liabilities for releases or threatened releases of hazardous substances upon certain statutorily defined parties regardless of fault or the lawfulness of the original activity or disposal. Hazardous substances and adverse environmental effects have been identified with respect to real property owned by the Company, and on adjacent parcels of real property.

In particular, the Elmira, NY manufacturing facility is located within the Kentucky Avenue Wellfield on the National Priorities List of hazardous waste sites designated for cleanup by the United States Environmental Protection Agency (“EPA”) because of groundwater contamination. The Kentucky Avenue Wellfield Site (the “Site”) encompasses an area which includes sections of the Town of Horseheads and the Village of Elmira Heights in Chemung County, NY. In February 2006, the Company received a Special Notice Concerning a Remedial Investigation/Feasibility Study (“RI/FS”) for the Koppers Pond (the “Pond”) portion of the Site. The EPA documented the release and threatened release of hazardous substances into the environment at the Site, including releases into and in the vicinity of the Pond. The hazardous substances, including metals and polychlorinated biphenyls, have been detected in sediments in the Pond.

Until receipt of this Special Notice in February 2006, the Company had never been named as a potentially responsible party (“PRP”) at the Site nor had the Company received any requests for information from the EPA concerning the Site. Environmental sampling on the Company’s property within this Site under supervision of regulatory authorities had identified off-site sources for such groundwater contamination and sediment contamination in the Pond, and found no evidence that the Company’s operations or property have contributed or are contributing to the contamination. All appropriate insurance carriers have been notified, and the Company is actively cooperating with them, but whether coverage will be available has not yet been determined and possible insurance recovery cannot now be estimated with any degree of certainty.

A substantial portion of the Pond is located on the Company’s property. The Company, along with Beazer East, Inc., the Village of Horseheads, the Town of Horseheads, the County of Chemung, CBS Corporation and Toshiba America, Inc., the PRPs, have agreed to voluntarily participate in the Remedial Investigation and Feasibility Study (“RI/FS”) by signing an Administrative Settlement Agreement and Order of Consent on September 29, 2006. On September 29, 2006, the Director of Emergency and Remedial Response Division of the EPA, Region II, approved and executed the Agreement on behalf of the EPA. The PRPs also signed a PRP Member Agreement, agreeing to share the cost of the RI/FS study on a per capita basis.

The EPA approved the RI/FS Work Plan in May of 2008. On September 7, 2011, the PRPs submitted the draft Remedial Investigation Report to the EPA and on January 10, 2013, the draft Feasibility Study was submitted to the EPA.

The draft Feasibility Study identified alternative remedial actions with estimated life-cycle costs ranging from $0.7 million to $3.4 million. The Company’s portion of the potential costs are estimated to range from $0.1 million to $0.5 million. Based on the current estimated costs of the various remedial alternatives now under consideration by the EPA, a reserve of $0.2 million has been recorded for the Company’s share of remediation expenses at the Pond as of September 30, 2014. This reserve is included in "Accrued expenses" on the Consolidated Balance Sheets.

Based upon information currently available, except as described in the preceding paragraphs, the Company does not have material liabilities for environmental remediation. Though the foregoing reflects the Company’s current assessment as it relates to environmental remediation obligations, it is possible that future remedial requirements or changes in the enforcement of existing laws and regulations, which are subject to extensive regulatory discretion, will result in material liabilities to the Company.

XML

(LOSS) EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

Schedule of the basis of the earnings per share computation

The following table presents the basis of the (loss) earnings per share computation (in thousands):

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2014			2013		2014			2013
Numerator for basic and diluted (loss) earnings per share:
(Loss) earnings from continuing operations	$	(7,578	)	$	1,173	$	(6,900	)	$	3,269
Gain from disposal of discontinued operation and income from    discontinued operations, net of tax	—			306		218			515
Net (loss) earnings applicable to common shareholders	$	(7,578	)	$	1,479	$	(6,682	)	$	3,784
Denominator:
Denominator for basic (loss) earnings per share — weighted    average shares	12,715			11,721		12,643			11,681
Assumed exercise of stock options	—			29		—			28
Assumed satisfaction of restricted stock conditions	—			63		—			61
Denominator for diluted (loss) earnings per share — adjusted    weighted average shares	12,715			11,813		12,643			11,770

XML

STOCK OFFERING (Details) (USD $)	0 Months Ended	9 Months Ended	14 Months Ended
	Aug. 09, 2013	Sep. 30, 2014	Sep. 30, 2014	Dec. 31, 2013
STOCK OFFERING
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01	$ 0.01
Aggregate offering price authorized under the agreement	$ 25,000,000.0
Threshold aggregate offering price for termination of agreement	25,000,000.0
Period of notice to be served for termination of the agreement	10 days
Term of program	1 year
Stock Issued During Period, Shares, Other		403,863	1,014,252
Proceeds from sale of common stock		$ 5,700,000	$ 14,600,000
Stock Issued During Period, Shares, Treasury Stock Reissued		52,887	663,276

XML

(LOSS) EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

Basic (loss) earnings per share is computed using the weighted average number of shares of common stock outstanding during the period. For diluted (loss) earnings per share, the weighted average number of shares includes common stock equivalents related to stock options and restricted stock. The following table presents the basis of the (loss) earnings per share computation (in thousands):

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2014			2013		2014			2013
Numerator for basic and diluted (loss) earnings per share:
(Loss) earnings from continuing operations	$	(7,578	)	$	1,173	$	(6,900	)	$	3,269
Gain from disposal of discontinued operation and income from    discontinued operations, net of tax	—			306		218			515
Net (loss) earnings applicable to common shareholders	$	(7,578	)	$	1,479	$	(6,682	)	$	3,784
Denominator:
Denominator for basic (loss) earnings per share — weighted    average shares	12,715			11,721		12,643			11,681
Assumed exercise of stock options	—			29		—			28
Assumed satisfaction of restricted stock conditions	—			63		—			61
Denominator for diluted (loss) earnings per share — adjusted    weighted average shares	12,715			11,813		12,643			11,770

There is no dilutive effect of the restricted stock and stock options for the three and nine months ended September 30, 2014 due to the current period and year to date net loss. There would have been 108,701 and 103,998 shares included in the diluted earnings per share calculation for the three and nine months ended September 30, 2014 had the impact of including these securities not been anti-dilutive. Shares of certain stock-based awards totaling 36,516 and 47,793 were excluded from the calculation of diluted earnings per share for the three months ended September 30, 2014 and 2013, respectively, as they were anti-dilutive. For the nine months ended September 30, 2014 and 2013, there were 44,208 shares and 53,524 shares, respectively, of certain stock-based compensation awards excluded from the calculation of diluted earnings per share, as they were anti-dilutive.

XML

INVENTORIES (Tables)

9 Months Ended

Sep. 30, 2014

Inventory Disclosure [Abstract]

Schedule of net inventories

Net inventories consist of the following (in thousands):

	September 30, 2014		December 31, 2013
Raw materials and purchased components	$	32,835	$	32,046
Work-in-process	33,772		28,591
Finished products	56,619		53,427
Inventories, net	$	123,226	$	114,064

XML

COMMITMENTS AND CONTINGENCIES (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Jan. 10, 2013
Commitments and Contingencies
Estimated life-cycle costs, minimum		$ 0.7
Estimated life-cycle costs, maximum		3.4
Reserve for estimated life-cycle costs	0.2
Minimum
Commitments and Contingencies
Loss contingency, entity portion of potential cost	0.1
Maximum
Commitments and Contingencies
Loss contingency, entity portion of potential cost	$ 0.5

XML

FAIR VALUE AND DERIVATIVE INSTRUMENTS (Details 3) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Current period settlements (payments)	$ 7,500	$ 299
Fair Value, Measurements, Recurring [Member] | Level 3
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at December 31, 2013	7,500
Current period settlements (payments)	(7,500)
Balance at September 30, 2014	$ 0

XML

Consolidated Statements of Comprehensive (Loss) Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ (7,578)	$ 1,479	$ (6,682)	$ 3,784
Other comprehensive (loss) income:
Foreign currency translation adjustments	(6,368)	6,969	(5,985)	2,319
Retirement plans related adjustments	1,336	(500)	1,570	1,428
Unrealized gain (loss) on cash flow hedges	13	344	(78)	246
Other comprehensive (loss) income before tax	(5,019)	6,813	(4,493)	3,993
Income tax expense (benefit)	927	(196)	750	138
Other comprehensive (loss) income, net of tax	(5,946)	7,009	(5,243)	3,855
Total comprehensive (loss) income	$ (13,524)	$ 8,488	$ (11,925)	$ 7,639

XML

FAIR VALUE AND DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 30, 2014

FAIR VALUE AND DERIVATIVE INSTRUMENTS

FAIR VALUE AND DERIVATIVE INSTRUMENTS

FAIR VALUE AND DERIVATIVE INSTRUMENTS

Fair Value

The inputs to the valuation techniques used to measure fair value are classified into the following categories:

Level 1 — Quoted prices in active markets for identical assets and liabilities.

Level 2 — Observable inputs other than quoted prices in active markets for similar assets and liabilities.

Level 3 — Inputs for which significant valuation assumptions are unobservable in a market and therefore value is based on the best available data, some of which is internally developed and considers risk premiums that a market participant would require.

The following table presents the carrying amount, fair values, and classification level within the fair value hierarchy of financial instruments measured or disclosed at fair value on a recurring basis (in thousands):

	September 30, 2014				December 31, 2013				Level of Fair Value Hierarchy
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	15,005	$	15,005	$	34,722	$	34,722	Level 1
Restricted cash	3,567		3,567		4,124		4,124		Level 1
Foreign currency forward contracts	384		384		285		285		Level 2
Liabilities:
Variable interest rate debt	17,540		17,540		26,635		26,635		Level 2
Contingent consideration	—		—		7,500		7,500		Level 3
Foreign currency forward contracts	578		578		872		872		Level 2

The fair value of cash and cash equivalents and restricted cash are based on the fair values of identical assets in active markets. Due to the short period to maturity or the nature of the underlying liability, the fair value of notes payable to bank and variable interest rate debt approximates their respective carrying amounts. The contingent consideration represents the contingent liabilities associated with the earn-out provisions from the 2012 acquisition of Usach. The fair value of the contingent consideration is based on the present value of the estimated aggregated payment amount. The fair value of foreign currency forward contracts is measured using internal models based on observable market inputs such as spot and forward rates. Based on the Company’s continued ability to enter into forward contracts, the markets for the fair value instruments are considered to be active. As of September 30, 2014 and December 31, 2013, there were no significant transfers in and/or out of Level 1 and Level 2.

The following table presents a reconciliation of the changes during the period ended September 30, 2014 for items categorized within Level 3 of the fair value hierarchy (in thousands):

	Contingent Consideration
Balance at December 31, 2013	$	7,500
Current period settlements (payments)	(7,500		)
Balance at September 30, 2014	$	—

Derivative Instruments

Foreign currency forward contracts are utilized to mitigate the impact of currency fluctuations on assets and liabilities denominated in foreign currencies as well as on forecasted transactions denominated in foreign currencies. These contracts are considered derivative instruments and are recognized as either assets or liabilities and measured at fair value. For contracts that are designated and qualify as cash flow hedges, the gain or loss on the contracts is reported as a component of other comprehensive income (“OCI”) and reclassified from accumulated other comprehensive income (“AOCI”) into the “Sales” or “Cost of sales” line item on the Consolidated Statements of Operations when the underlying hedged transaction affects earnings, or “Other (income) expense, net” when the hedging relationship is deemed to be no longer effective. As of September 30, 2014 and December 31, 2013, the notional amounts of the derivative financial instruments designated to qualify for cash flow hedges were $26.2 million and $37.0 million, respectively. The Company expects less than $0.1 million of net losses, net of income tax effect, to be reclassified from AOCI to earnings within the next 12 months. 

As of September 30, 2014 and December 31, 2013, the notional amounts of the derivative financial instruments not qualifying or otherwise designated as hedges were $34.5 million and $45.5 million, respectively. For the three months ended September 30, 2014 and 2013, gains of $0.4 million and losses of $0.3 million, respectively, were recorded related to this type of derivative financial instruments. For the nine months ended September 30, 2014 and 2013, losses of $0.1 million and $1.7 million, respectively, were recorded related to this type of derivative financial instruments. For contracts that are not designated as hedges, the gain or loss on the contract is recognized in current earnings in the “Other (income) expense, net” line item on the Consolidated Statements of Operations.

The following table presents the fair value on the Consolidated Balance Sheets of the foreign currency forward contracts (in thousands):

	September 30, 2014			December 31, 2013
Foreign currency forwards designated as hedges:
Other current assets	$	202		$	144
Accrued expenses	(209		)	(249		)
Foreign currency forwards not designated as hedges:
Other current assets	182			141
Accrued expenses	(369		)	(623		)
Foreign currency forwards, net	$	(194	)	$	(587	)

XML

FAIR VALUE AND DERIVATIVE INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2014

FAIR VALUE AND DERIVATIVE INSTRUMENTS

Schedule of carrying amount, fair values and classification of financial instruments measured or disclosed at fair value on a recurring basis

The following table presents the carrying amount, fair values, and classification level within the fair value hierarchy of financial instruments measured or disclosed at fair value on a recurring basis (in thousands):

	September 30, 2014				December 31, 2013				Level of Fair Value Hierarchy
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	15,005	$	15,005	$	34,722	$	34,722	Level 1
Restricted cash	3,567		3,567		4,124		4,124		Level 1
Foreign currency forward contracts	384		384		285		285		Level 2
Liabilities:
Variable interest rate debt	17,540		17,540		26,635		26,635		Level 2
Contingent consideration	—		—		7,500		7,500		Level 3
Foreign currency forward contracts	578		578		872		872		Level 2

Schedule of fair value hierarchy activity during the year

The following table presents a reconciliation of the changes during the period ended September 30, 2014 for items categorized within Level 3 of the fair value hierarchy (in thousands):

	Contingent Consideration
Balance at December 31, 2013	$	7,500
Current period settlements (payments)	(7,500		)
Balance at September 30, 2014	$	—

Schedule of fair value on the Consolidated Balance Sheets of the foreign currency forward contracts

The following table presents the fair value on the Consolidated Balance Sheets of the foreign currency forward contracts (in thousands):

	September 30, 2014			December 31, 2013
Foreign currency forwards designated as hedges:
Other current assets	$	202		$	144
Accrued expenses	(209		)	(249		)
Foreign currency forwards not designated as hedges:
Other current assets	182			141
Accrued expenses	(369		)	(623		)
Foreign currency forwards, net	$	(194	)	$	(587	)

XML

INVENTORIES (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Inventory Disclosure [Abstract]
Raw materials and purchased components	$ 32,835	$ 32,046
Work-in-process	33,772	28,591
Finished products	56,619	53,427
Inventories, net	$ 123,226	$ 114,064

XML

PENSION AND POSTRETIREMENT PLANS

9 Months Ended

Sep. 30, 2014

Pension and Other Postretirement Benefit Expense [Abstract]

PENSION AND POSTRETIREMENT PLANS

PENSION AND POSTRETIREMENT PLANS

A summary of the components of net periodic pension benefit costs for the three and nine months ended September 30, 2014 and 2013 is presented below (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended   September 30,						Three Months Ended   September 30,
	2014			2013			2014			2013
Service cost	$	352		$	348		$	3		$	4
Interest cost	2,107			1,843			22			23
Expected return on plan assets	(2,477		)	(2,366		)	—			—
Amortization of prior service credit	(99		)	(103		)	—			(64		)
Amortization of transition asset	(69		)	(68		)	—			—
Amortization of actuarial loss (gain)	431			804			(14		)	(1		)
Net periodic cost (benefit)	$	245		$	458		$	11		$	(38	)

	Pension Benefits						Postretirement Benefits
	Nine Months Ended   September 30,						Nine Months Ended   September 30,
	2014			2013			2014			2013
Service cost	$	1,078		$	1,038		$	9		$	12
Interest cost	6,351			5,521			66			69
Expected return on plan assets	(7,473		)	(7,083		)	—			—
Amortization of prior service credit	(303		)	(307		)	—			(192		)
Amortization of transition asset	(211		)	(203		)	—			—
Amortization of loss (gain)	1,302			2,405			(42		)	(3		)
Net periodic cost (benefit)	$	744		$	1,371		$	33		$	(114	)