ACQUISITIONS

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. For the year ended December 31, 2014, $0.2 million in sales and $0.5 million of net loss related to the Voumard business have been included in the Consolidated Statements of Operations. Acquisition related costs of $0.1 million were incurred related to the acquisition of the Voumard business for the year ended December 31, 2014 and reported in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

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. The weighted average life of the acquired identifiable intangible assets subject to amortization was estimated at 5 years at the time of acquisition. At December 31, 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 expense, net" line in the Consolidated Statements of Operations for the year ended December 31, 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	)

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. For the year ended December 31, 2013, $27.8 million in sales and net income of $0.6 million was recognized in the Consolidated Statements of Operations related to Forkardt, which includes $1.0 million of inventory step up charges associated with acquisition purchase accounting. These amounts include sales of $6.1 million and net income of $0.6 million associated with the Forkardt Swiss business that was divested on December 31, 2013. Results associated with the Forkardt Swiss business have been reported as discontinued operations in the Consolidated Statements of Operations. Acquisition related costs of $2.2 million for the year ended December 31, 2013 were incurred and reported in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

The purchase price was allocated to the assets acquired and liabilities assumed based on their fair values. The identifiable intangible assets acquired, which primarily consist of customer relationships of $4.3 million, trade name of $5.3 million and technical know-how of $5.0 million were valued using an income approach. The weighted average life of the acquired identifiable intangible assets subject to amortization was estimated at 17.3 years at the time of acquisition. The excess purchase price over the fair value of the assets acquired and the liabilities assumed was recorded as goodwill, of which $2.4 million is deductible for tax purposes.

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

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, net of tax" line in the Statement of Operations for the year ended December 31, 2014.

Acquisition of Forkardt India

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

Supplemental Pro Forma Information

The following table illustrates the unaudited pro forma effect on the Company’s consolidated operating results for the years ended December 31, 2014 and 2013, as if the Forkardt acquisition and related financing occurred on January 1, 2012 and the Voumard acquisition had occurred on January 1, 2013 (in thousands, except per share data):



	Year Ended December 31,
	2014			2013
Sales	$	318,061		$	359,973
Net (loss) income from continuing operations⁽¹⁾	(7,402		)	5,406
Diluted (loss) earnings per share from continuing operations	$	(0.58	)	$	0.45

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⁽¹⁾

The pro forma results above include abbreviated financial results for Voumard, consisting of revenues and direct expenses for that product line. During the year ended December 31, 2014, but prior to its acquisition by the Company, the Voumard business incurred $4.9 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.

Acquisition of Usach Technologies, Inc.

On December 20, 2012, the Company acquired 100% of the issued and outstanding capital stock of Usach Technologies, Inc. ("Usach"), an Illinois based manufacturer of high precision grinding machines and systems, for $18.8 million. The acquisition of Usach is included in the Company's MMS business segment. The purchase price was comprised of $11.3 million in cash and an earn-out provision valued at $7.5 million. The earn-out was based on the future economic performance of Usach as measured against certain minimum thresholds of earnings from operations before interest, taxes, depreciation and amortization through 2015. The maximum contractual earn-out was $7.5 million. The results of operations of Usach have been included in the consolidated financial statements from the date of acquisition. Acquisition related costs of $0.3 million in 2012 were recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

The purchase price has been assigned to the assets acquired and the liabilities assumed based on their fair values. The identifiable intangible assets acquired, which primarily consist of customer relationships, trade name and technical know-how, were valued using an income approach. The weighted average life of the identifiable intangible assets acquired was estimated at 16.4 years at the time of acquisition. The excess purchase price over the fair value of the assets acquired and the liabilities assumed was recorded as goodwill, none of which was deductible for tax purposes.

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



	December 20, 2012
Assets Acquired
Cash and cash equivalents	$	2,482
Accounts receivable	2,514
Inventories	5,167
Other current assets	788
Property, plant and equipment	62
Trade name, customer list, and other intangible assets	9,400
Total assets acquired	20,413
Liabilities Assumed
Accounts payable and other current liabilities	6,807
Other non-current liabilities	3,513
Net assets acquired	10,093
Total purchase price	18,750
Goodwill	$	8,657