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, 2017

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	14903
(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”, “smaller reporting company”, and "emerging growth 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
	Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 November 3, 2017 there were 12,947,752 shares of Common Stock of the registrant outstanding.

1

HARDINGE INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		PAGE
	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited).
	Consolidated Balance Sheets at September 30, 2017 and December 31, 2016 (Audited)	3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016	4
	Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017 and 2016	5
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	27
Item 4.	Controls and Procedures.	27
	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings.	28
Item 1A.	Risk Factors.	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	28
Item 3.	Defaults Upon Senior Securities.	28
Item 4.	Mine Safety Disclosures.	28
Item 5.	Other Information.	28
Item 6.	Exhibits.	29
SIGNATURES		30
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, 2017			December 31, 2016
	(Unaudited)
Assets
Cash and cash equivalents	$	32,327		$	28,255
Restricted cash	2,115			2,923
Accounts receivable, net	60,750			55,573
Inventories, net	114,420			107,018
Other current assets	10,815			6,926
Assets held for sale	5,682			—
Total current assets	226,109			200,695
Property, plant and equipment, net	50,569			56,961
Goodwill	6,641			6,579
Other intangible assets, net	26,434			26,730
Other non-current assets	6,163			6,585
Total non-current assets	89,807			96,855
Total assets	$	315,916		$	297,550
Liabilities and shareholders’ equity
Notes payable to bank	$	—		$	703
Accounts payable	25,542			24,217
Accrued expenses	32,595			25,629
Customer deposits	26,182			18,215
Accrued income taxes	1,590			1,160
Current portion of long-term debt	—			2,923
Total current liabilities	85,909			72,847
Long-term debt	—			2,970
Pension and postretirement liabilities	56,023			58,840
Deferred income taxes	4,088			3,800
Other liabilities	1,167			3,152
Total non-current liabilities	61,278			68,762
Commitments and contingencies (see Note 10)
Common stock ($0.01 par value, 20,000,000 authorized; shares issued 12,949,525 and 12,903,037)	129			129
Additional paid-in capital	121,925			121,015
Retained earnings	91,709			89,557
Treasury shares (at cost, 6,850 and 9,243)	(71		)	(104		)
Accumulated other comprehensive loss	(44,963		)	(54,656		)
Total shareholders’ equity	168,729			155,941
Total liabilities and shareholders’ equity	$	315,916		$	297,550

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,
	2017			2016			2017			2016
	(Unaudited)						(Unaudited)
Sales	$	84,991		$	67,211		$	227,745		$	205,218
Cost of sales	56,376			44,060			151,114			135,770
Gross profit	28,615			23,151			76,631			69,448
Selling, general and administrative expenses	20,701			19,992			58,804			60,221
Research & development	3,887			3,296			11,222			9,953
Restructuring	789			182			2,767			608
Other expense, net	276			321			468			249
Income (loss) from operations	2,962			(640		)	3,370			(1,583		)
Interest expense	135			142			346			427
Interest income	(37		)	(56		)	(116		)	(192		)
Income (loss) before income taxes	2,864			(726		)	3,140			(1,818		)
Income tax expense	665			657			466			666
Net Income (loss)	$	2,199		$	(1,383	)	$	2,674		$	(2,484	)
Per share data:
Basic earnings (loss) per share:	$	0.17		$	(0.11	)	$	0.21		$	(0.19	)
Diluted earnings (loss) per share:	$	0.17		$	(0.11	)	$	0.21		$	(0.19	)
Cash dividends declared per share:	$	—		$	0.02		$	0.04		$	0.06

See accompanying notes to the unaudited consolidated financial statements.

4

HARDINGE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2017			2016			2017			2016
	(Unaudited)						(Unaudited)
Net income (loss)	$	2,199		$	(1,383	)	$	2,674		$	(2,484	)
Other comprehensive income (loss):
Foreign currency translation adjustments	266			(368		)	9,199			531
Retirement plans related adjustments	1,058			3,031			807			4,333
Unrealized (loss) gain on cash flow hedges	(442		)	78			(510		)	210
Other comprehensive income (loss) before tax	882			2,741			9,496			5,074
Income tax (benefit) expense	(178		)	322			(197		)	427
Other comprehensive income (loss), net of tax	1,060			2,419			9,693			4,647
Total comprehensive income (loss)	$	3,259		$	1,036		$	12,367		$	2,163

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,
	2017			2016
	(Unaudited)
Operating activities
Net income (loss)	$	2,674		$	(2,484	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Impairment	1,401			—
Depreciation and amortization	6,694			6,095
Debt issuance costs amortization	139			98
Deferred income taxes	(229		)	(705		)
(Gain) loss on sale of assets	(36		)	23
Unrealized foreign currency transaction (gain) loss	(489		)	219
Changes in operating assets and liabilities:
Accounts receivable	(2,793		)	9,761
Restricted cash	941			(1,313		)
Inventories	(4,037		)	(9,458		)
Other assets	(2,255		)	(988		)
Accounts payable	172			(586		)
Customer deposits	6,928			(1,604		)
Accrued expenses	1,747			(3,338		)
Accrued pension and postretirement liabilities	131			(65		)
Net cash generated from (used in) operating activities	10,988			(4,345		)
Investing activities
Capital expenditures	(1,737		)	(1,543		)
Deposit on assets held for sale	516			—
Proceeds from sales of assets	57			38
Net cash used in investing activities	(1,164		)	(1,505		)
Financing activities
Proceeds from short-term notes payable to bank	17,960			35,974
Repayments of short-term notes payable to bank	(18,705		)	(35,974		)
Repayments of long-term debt	(6,090		)	(3,186		)
Dividends paid	(516		)	(792		)
Net cash used in financing activities	(7,351		)	(3,978		)
Effect of exchange rate changes on cash	1,599			(3		)
Net increase (decrease) in cash	4,072			(9,831		)
Cash and cash equivalents at beginning of period	28,255			32,774
Cash and cash equivalents at end of period	$	32,327		$	22,943

See accompanying notes to the unaudited consolidated financial statements.

6

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

NOTE 1.  BASIS OF PRESENTATION

In these notes, the terms “Hardinge,” “the Company,” "we," "us," "our," or similar references 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, 2016. 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, 2017 are not necessarily indicative of the results that may be expected in subsequent quarters or for the full year ended December 31, 2017.

Certain amounts in the September 30, 2016 consolidated financial statements have been reclassified to conform to the current presentation.

NOTE 2.  FAIR VALUE OF FINANCIAL INSTRUMENTS

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.

7

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2017

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, 2017				December 31, 2016				Level of Fair Value Hierarchy
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	32,327	$	32,327	$	28,255	$	28,255	Level 1
Restricted cash	2,115		2,115		2,923		2,923		Level 1
Foreign currency forward contracts	404		404		308		308		Level 2
Liabilities:
Notes payable to bank	—		—		703		703		Level 2
Variable interest rate debt	—		—		5,986		5,986		Level 2
Foreign currency forward contracts	1,254		1,254		566		566		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 fair value of foreign currency forward contracts is measured using 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, 2017 and December 31, 2016, there were no significant transfers in and/or out of Level 1 and Level 2.

NOTE 3.  INVENTORIES

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

Net inventories consist of the following (in thousands):

	September 30, 2017		December 31, 2016
Raw materials and purchased components	$	33,286	$	33,822
Work-in-process	34,506		31,799
Finished products	46,628		41,397
Inventories, net	$	114,420	$	107,018

NOTE 4.  DERIVATIVE FINANCIAL 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 expense, net” when the hedging relationship is deemed to be ineffective. As of September 30, 2017 and December 31, 2016, the notional amounts of the derivative financial instruments designated to qualify for cash flow hedges were $33.7 million and $45.5 million, respectively. The Company expects approximately $0.5 million of expense, net of income tax effect, to be reclassified from AOCI to earnings within the next 12 months. 

As of September 30, 2017 and December 31, 2016, the notional amounts of the derivative financial instruments not qualifying or otherwise designated as hedges were $30.6 million and $35.4 million, respectively. For the three months ended September 30, 2017 and 2016, losses of $0.8 million and gains of $0.5 million, respectively, were recorded related to this type of derivative financial instrument. For the nine months ended September 30, 2017 and 2016, losses of $0.4 million and gains of

8

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2017

$0.03 million, respectively, were recorded related to this type of derivative financial instrument. For contracts that are not designated as hedges, the gain or loss on the contract is recognized in current earnings in the “Other 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, 2017			December 31, 2016
Foreign currency forwards designated as hedges:
Other current assets	$	317		$	153
Accrued expenses	(903		)	(264		)
Foreign currency forwards not designated as hedges:
Other current assets	87			155
Accrued expenses	(351		)	(302		)
Foreign currency forwards, net	$	(850	)	$	(258	)

NOTE 5.  PROPERTY, PLANT AND EQUIPMENT

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

	September 30, 2017			December 31, 2016
Land, buildings and improvements	$	71,610		$	81,311
Machinery, equipment and fixtures	77,035			75,177
Office furniture, equipment and vehicles	23,408			22,471
Construction in progress	379			272
	172,432			179,231
Accumulated depreciation	(121,863		)	(122,270		)
Property, plant and equipment, net	$	50,569		$	56,961

NOTE 6.  GOODWILL AND INTANGIBLE ASSETS

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

	MMS			ATA		Total
Goodwill	$	32,434		$	6,579	$	39,013
Accumulated impairment losses	(32,434		)	—		(32,434		)
Balance at December 31, 2016	—			6,579		6,579
Goodwill	32,434			6,579		39,013
Currency translation adjustments	—			62		62
Accumulated impairment losses	(32,434		)	—		(32,434		)
Balance at September 30, 2017	$	—		$	6,641	$	6,641

9

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2017

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

	September 30, 2017			December 31, 2016
Gross amortizable intangible assets:
Technical know-how	$	12,979		$	12,944
Customer lists	9,011			8,981
Land rights	2,608			2,498
Patents, trade names, drawings, and other	4,408			4,356
Total gross amortizable intangible assets	29,006			28,779
Accumulated amortization:
Technical know-how	(7,908		)	(7,438		)
Customer lists	(2,089		)	(1,744		)
Land rights	(356		)	(304		)
Patents, trade names, drawings, and other	(3,630		)	(3,490		)
Total accumulated amortization	(13,983		)	(12,976		)
Amortizable intangible assets, net	15,023			15,803
Indefinite lived intangible assets:
Trade names	11,411			10,927
Intangible assets other than goodwill, net	$	26,434		$	26,730

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

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2017		2016		2017		2016
Amortization expense	$	313	$	321	$	937	$	961

NOTE 7.  WARRANTIES

A reconciliation of the changes in the product warranty accrual, which is included in "Accrued expenses" in the Consolidated Balance Sheets, is as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2017			2016			2017			2016
Balance at the beginning of period	$	3,324		$	3,824		$	3,555		$	3,802
Warranties issued	396			568			1,241			1,649
Warranty settlement costs	58			(533		)	(794		)	(1,680		)
Changes in accruals for pre-existing warranties	(324		)	(141		)	(704		)	(77		)
Currency translation adjustments	1			14			157			38
Balance at the end of period	$	3,455		$	3,732		$	3,455		$	3,732

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HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2017

NOTE 8.  RESTRUCTURING CHARGES

In March 2017, management initiated a strategic restructuring program in our MMS segment with the goals of streamlining the Company's cost structure, increasing operational efficiencies and cash generation, and improving shareholder returns. This program consists of rationalizing certain product lines, consolidating certain European manufacturing operations, and selling certain assets. It is projected to be substantially complete by mid-2018 and is expected to generate annual pre-tax savings ranging from approximately $2.0 million to $2.5 million once fully implemented. We expect to incur costs of approximately $4.7 million, of which $1.4 million is a non-cash inventory impairment charge related to the product line rationalization.

As part of the above mentioned program, in September 2017, the Company agreed to sell a manufacturing facility in Biel, Switzerland for $9.8 million, excluding customary closing costs, for which a deposit of $0.5 million was received. The building and the related deposit are included in "Assets Held for Sale" and "Accrued Expenses" in the Consolidated Balance Sheets. The sale is expected to be finalized in the second quarter of 2018.

During September 2017, the Company initiated a strategic global realignment of our selling organization with a focus on unified regional sales channels to improve customer contact and service, a simplified product offering, and the elimination of redundancies. In addition, we have initiated a program to optimize our purchasing and supply chain management practices through consolidation of these teams into a single organization to leverage our global talent and buying power. This program is expected to provide cost savings of approximately $10.0 million per year beyond the March 2017 initiative, of which approximately $5.0 million will be from SG&A, primarily from headcount reductions, and $5.0 million will be from material cost savings. We expect to incur costs of approximately $2.0 million, primarily related to severance, in conjunction with this initiative. These costs will be incurred over the next several quarters.

The combined March 2017 initiative and the September 2017 global strategic program (the combined "Program") is intended to generate annual pre-tax savings ranging from approximately $12.0 million to $12.5 million once fully implemented in the latter part of 2018. The total costs estimates are included in the table below.

Restructuring charges are included in the "Restructuring" line item in the Consolidated Statements of Operations. The table below presents the total costs expected to be incurred in connection with the Program, the amount of costs that have been recognized during the three and nine months ended September 30, 2017 and the cumulative costs recognized to date by the Program (in thousands):

	Total Costs Expected to be Incurred		Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017 (Cumulative costs recognized to date)
Restructuring:
Employee termination costs	$	3,319	$	615	$	1,008
Inventory Impairment	1,401		—		1,401
Facility related costs	1,373		43		158
Other related costs	561		131		200
Total Restructuring Activity	$	6,654	$	789	$	2,767

11

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2017

The amounts accrued associated with the Program are included in "Accrued expenses" and "Inventory" in the Consolidated Balance Sheets. A rollforward of the accrued restructuring costs is presented below (in thousands):

Balance at December 31, 2016	$	—
Restructuring charges:
Employee termination costs	1,008
Inventory Impairment	1,401
Facility related costs	158
Other related costs	200
Total restructuring charges for the period	2,767
Cash expenditures	(882		)
Other adjustments to accrual	—
Foreign currency translation adjustment	131
Balance at September 30, 2017	$	2,016

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 rate was 23.2% and 14.8% for the three and nine months ended September 30, 2017.

The tax years 2014 through 2016 remain open to examination by the U.S. federal taxing authorities. The tax years 2011 through 2016 remain open to examination by the U.S. state taxing authorities. For other major jurisdictions (Switzerland, U.K., Taiwan, France, Germany, Netherlands, China and India), the tax years between 2009 and 2016 generally remain open to routine examination by foreign taxing authorities, depending on the jurisdiction.

At September 30, 2017, a liability of $1.4 million is recorded with respect to uncertain income tax positions, which includes related interest of $0.1 million. If recognized, essentially all of the uncertain tax positions and related interest at September 30, 2017 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 potential settlements is estimated to be up to $1.2 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 liability 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.

12

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2017

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 be estimated with any degree of certainty at this time.

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., (collectively, the "PRP's"), agreed to voluntarily participate in the 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 PRP's also signed a PRP Member Agreement, agreeing to share the costs associated with the RI/FS study on a per capita basis.

The EPA approved the RI/FS Work Plan in May of 2008. In July of 2012 the PRP's submitted a Remedial Investigation (RI) to respond to EPA issues raised in the initial draft RI. In January 2016, the PRP's submitted a draft Feasibility Study (FS), also to respond to issues raised by the EPA about previous drafts of the FS. In July 2016, the EPA announced its proposed remediation plan based on an alternative put forth in a July 2016 Woodruff & Curran FS with an estimated total clean-up phase cost of $1.9 million. The preferred remedy consists of the placement of a continuous six-inch thick soil and sand cap, including a geotextile membrane to act as a demarcation layer, over the Pond. The preferred remedy includes long-term monitoring and institutional controls. After a public comment period, on December 13, 2016, the EPA issued a Certificate of Completion confirming that the RI/FS was complete, confirming that all PRP obligations related to the RI/FS had been performed in accordance with the provisions of the Administrative Settlement Agreement and Order on Consent, and approving the remedy selected in the FS as the final response action for the Pond.

In June 2017, the EPA issued a Special Notice letter to the original PRP’s and two new additional parties (Eaton Corporation and Elmira Water Board) requesting these PRPs to fund, undertake, and complete the remedy for the Pond. Shortly after, the EPA provided a proposed Statement of Work for completion of the remedy (“SOW”) and the EPA agreed to waive the past response costs as defined in the RI/FS Order of Consent in full if the parties could reach a settlement with the EPA by September 30, 2017.

    In September 2017 the nine participating PRPs privately negotiated and finalized an allocation of costs amongst themselves, with 10.75% of the costs being allocated to the Company. Based on the estimated cost of the present remedy of $1.9 million, and with credit for costs previously paid by the Company for the RI/FS, the remaining costs that have been allocated to the Company will not exceed $0.2 million. The Company has the entire amount reserved as of September 30, 2017. This reserve is reported in "Accrued expenses" in 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.

13

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2017

NOTE 11.  PENSION AND POSTRETIREMENT PLANS

A summary of the components of net periodic pension and postretirement benefit costs for the three and nine months ended September 30, 2017 and 2016 is presented below (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended   September 30,						Three Months Ended   September 30,
	2017			2016			2017			2016
Service cost	$	493		$	566		$	3		$	3
Interest cost	1,510			1,662			18			19
Expected return on plan assets	(2,143		)	(2,305		)	—			—
Amortization of prior service credit	(79		)	(64		)	—			—
Amortization of transition asset	—			(78		)	—			—
Amortization of actuarial loss (gain)	943			951			(11		)	(14		)
Settlement loss (gain)	45			765			—			—
Net periodic cost	$	769		$	1,497		$	10		$	8
	Pension Benefits						Postretirement Benefits
	Nine Months Ended   September 30,						Nine Months Ended   September 30,
	2017			2016			2017			2016
Service cost	$	1,467		$	1,695		$	9		$	9
Interest cost	4,511			5,010			54			57
Expected return on plan assets	(6,379		)	(6,942		)	—			—
Amortization of prior service credit	(233		)	(191		)	—			—
Amortization of transition asset	—			(234		)	—			—
Amortization of actuarial loss (gain)	2,810			2,850			(33		)	(42		)
Settlement loss (gain)	75			765			—			—
Net periodic cost	$	2,251		$	2,953		$	30		$	24

NOTE 12.  STOCK BASED COMPENSATION

The Company's 2011 Incentive Stock Plan (the "Plan"), as amended on May 6, 2014, permits the grant of several types of incentives, including share options, non-qualified stock options, stock appreciation rights, restricted stock awards/ units (“RSAs”) and performance share incentives (“PSIs”).

Stock Options

There were 255,000 non-qualified stock options granted in the nine months ended September 30, 2017. There are no other vested or unvested stock options outstanding. The fair market value of stock options is estimated using the Black-Scholes valuation model using the following assumptions:

14

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2017

	Nine Months Ended September 30, 2017
Expected volatility	37.0% - 38.5%
Expected dividend yield	0.0% - 0.66%
Risk free rate	1.32% - 1.97%
Expected term (in years)	6.0 - 6.5
Weighted average grant date fair value	$4.52
Weighted average exercise price	$12.05

Stock options vest over a two or three-year period based on either a service period or a combination of service period and performance measures. Deferred compensation for stock options is amortized on a straight-line basis for stock options which vest over a specified service period, and is recognized ratably for stock options, which also have a performance requirement to the extent that it is probable that the performance target will be met. All stock options granted have a ten-year contractual term.

The aggregate intrinsic value of stock options at September 30, 2017 was $0.8 million, which is calculated as the difference between the stock price as of September 30, 2017 and the exercise price of the option.

Restricted Stock/ Unit Awards ("RSAs")

There were 42,350 RSAs granted during the nine months ended September 30, 2017, and no awards in the same period of 2016. There were 6,850 RSAs forfeited during the nine months ended September 30, 2017. The deferred compensation for RSAs is amortized on a straight-line basis over the specified service period, which ranges from three to four years.

Performance Share Incentives ("PSIs")

There were 42,350 PSIs granted during the nine months ended September 30, 2017, and no awards in the same period of 2016. There were 8,161 PSIs forfeited during the nine months ended September 30, 2017. The deferred compensation with respect to the PSIs is being recognized into earnings based on the passage of time and achievement of performance targets.     

Compensation Costs

Stock based compensation costs are based on estimated fair values. The fair value of service and performance based stock awards are based on the market value on the date of the grant. The fair value of stock options are estimated using a Black-Scholes valuation model. All stock based compensation to employees is recorded as "Selling, general and administrative expenses" in the Consolidated Statements of Operations. 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,
	2017		2016		2017		2016
Stock Options	$	103	$	—	$	135	$	—
Restricted stock/unit awards (“RSA”)	57		67		164		190
Performance share incentives (“PSI”)	28		—		67		—
Total stock based compensation	$	188	$	67	$	366	$	190

15

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2017

Unrecognized compensation and the expected weighted-average recognition periods with respect to the outstanding RSAs and PSIs as of September 30, 2017 and December 31, 2016, are as follows:

	September 30, 2017						December 31, 2016
	Stock Options		RSAs		PSIs		Stock Options		RSAs		PSIs
Unrecognized compensation cost (in thousands)	$	1,019	$	335	$	818	$	—	$	113	$	520
Expected weighted-average recognition period for unrecognized compensation cost (in years)	2.44		1.30		1.20		N/A		0.92		0.97

NOTE 13.  CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in AOCI by component for the three and nine months ended September 30, 2017 and 2016 are as follows (in thousands):

	Three Months ended September 30, 2017
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	24,228		$	(70,188	)	$	(63	)	$	(46,023	)
Other comprehensive income (loss) before reclassifications	266			160			(84		)	342
Less: (Loss) income reclassified from AOCI	—			(898		)	358			(540		)
Net other comprehensive income (loss)	266			1,058			(442		)	882
Income taxes	(259		)	147			(66		)	(178		)
Ending balance, net of tax	$	24,753		$	(69,277	)	$	(439	)	$	(44,963	)

	Three Months Ended September 30, 2016
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	21,359		$	(67,815	)	$	(29	)	$	(46,485	)
Other comprehensive (loss) income before reclassifications	(368		)	1,471			204			1,307
Less: (loss) income reclassified from AOCI	—			(1,560		)	126			(1,434		)
Net other comprehensive (loss) income	(368		)	3,031			78			2,741
Income taxes	256			53			13			322
Ending balance, net of tax	$	20,735		$	(64,837	)	$	36		$	(44,066	)

16

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2017

	Nine Months Ended September 30, 2017
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	15,483		$	(70,102	)	$	(37	)	$	(54,656	)
Other comprehensive income (loss) before reclassifications	9,199			(1,812		)	(263		)	7,124
Less: (loss) income reclassified from AOCI	—			(2,619		)	247			(2,372		)
Net other comprehensive income (loss)	9,199			807			(510		)	9,496
Income taxes	(71		)	(18		)	(108		)	(197		)
Ending balance, net of tax	$	24,753		$	(69,277	)	$	(439	)	$	(44,963	)

	Nine Months Ended September 30, 2016
	Foreign currency translation adjustments		Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	20,529	$	(69,100	)	$	(142	)	$	(48,713	)
Other comprehensive income (loss) before reclassifications	531		1,185			320			2,036
Less: (loss) income reclassified from AOCI	—		(3,148		)	110			(3,038		)
Net other comprehensive income (loss)	531		4,333			210			5,074
Income taxes	325		70			32			427
Ending balance, net of tax	$	20,735	$	(64,837	)	$	36		$	(44,066	)

17

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2017

Details about reclassification out of AOCI for the three and nine months ended September 30, 2017 and 2016 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	2017			2016			2017			2016
Unrealized gain (loss) on cash flow hedges:
	$	342		$	39		$	222		$	62		Sales
	16			87			25			48			Other expense, net
	358			126			247			110			Total before tax
	69			21			60			18			Income taxes
	$	427		$	147		$	307		$	128		Net of tax
Retirement plans related adjustments:
Amortization of prior service credit	$	79		$	64		$	233		$	191		(a)
Amortization of transition asset	—			78			—			234			(a)
Amortization of actuarial loss	(932		)	(937		)	(2,777		)	(2,808		)	(a)
Settlement loss	(45		)	(765		)	(75		)	(765		)	(a)
	(898		)	(1,560		)	(2,619		)	(3,148		)	Total before tax
	100			228			284			396			Income taxes
	$	(798	)	$	(1,332	)	$	(2,335	)	$	(2,752	)	Net of tax

(a)  These AOCI components are included in the computation of net periodic pension and post retirement costs. See Note 11. "Pension and Postretirement Plans" for details.

NOTE 14.  EARNINGS (LOSS) PER SHARE

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

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2017		2016			2017		2016
Numerator for basic and diluted loss per share:
Net earnings (loss) applicable to common shareholders	$	2,199	$	(1,383	)	$	2,674	$	(2,484	)
Denominator for basic and diluted loss per share:
Denominator for basic and diluted loss per share — weighted average shares	12,907		12,835			12,894		12,815
Assumed exercise of stock options	21		—			7		—
Assumed satisfaction of restricted stock conditions	56		—			43		—
Denominator for diluted earnings per share — adjusted weighted average shares	12,984		12,835			12,944		12,815

Common stock equivalents of certain stock-based awards totaling 221,076 and 99,384 were excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2017, respectively, as they were anti-dilutive. There is no dilutive effect of the restricted stock and stock options for the three and nine months ended

18

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2017

September 30, 2016 due to the net loss in these periods. There would have been 90,405 and 93,245 of these shares included in the diluted calculation for the three and nine months ended September 30, 2016, respectively, had there been earnings in this period.

NOTE 15. SEGMENT INFORMATION

Segment income (loss) 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, 2017
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	67,994	$	17,142	$	(145	)	$	84,991
Depreciation and amortization	1,438		478					1,916
Segment income	1,546		3,406					4,952
Capital expenditures	657		112					769

	Three Months Ended September 30, 2016
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	52,089		$	15,270	$	(148	)	$	67,211
Depreciation and amortization	1,433			498					1,931
Segment income	(984		)	1,847					863
Capital expenditures	433			118					551

	Nine Months Ended September 30, 2017
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	178,842	$	49,303	$	(400	)	$	227,745
Depreciation and amortization	4,267		1,481		0			5,748
Segment (loss) income	805		8,437					9,242
Capital expenditures	1,425		312					1,737
Segment assets(1)	232,767		46,527					279,294

	Nine Months Ended September 30, 2016
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	158,718		$	46,773	$	(273	)	$	205,218
Depreciation and amortization	4,353			1,562					5,915
Segment (loss) income	(1,864		)	5,342					3,478
Capital expenditures	1,119			424					1,543
Segment assets(1)	226,618			48,341					274,959

____________________

⁽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.

19

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2017

A reconciliation of segment income to consolidated income (loss) before income taxes for the three and nine months ended September 30, 2017 and 2016 are as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2017			2016			2017			2016
Segment income	$	4,952		$	863		$	9,242		$	3,478
Unallocated corporate expense	(1,990		)	(1,503		)	(5,872		)	(5,061		)
Interest expense, net	(98		)	(86		)	(230		)	(235		)
Income (loss) before income taxes	$	2,864		$	(726	)	$	3,140		$	(1,818	)

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

	September 30, 2017		December 31, 2016
Total segment assets	$	279,294	$	265,279
Unallocated assets	36,622		32,271
Total assets	$	315,916	$	297,550

Unallocated assets include cash of $32.3 million and $28.3 million at September 30, 2017 and December 31, 2016, respectively.

NOTE 16.  NEW ACCOUNTING STANDARDS

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, establishing a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This update provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. We have the option of using either a full retrospective or modified approach to adopt this guidance. Between August 2015 and May 2016, the FASB issued four additional updates to 1) ASU No. 2015-14, Deferral of the Effective Date, 2) ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), 3)ASU No. 2016-10, Identifying Performance Obligations and Licensing, and 4) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients to provide further guidance and clarification in accounting for revenue arising from contracts with customers. The new guidance is effective for annual reporting periods beginning after December 15, 2017, and all annual and interim periods thereafter. In the first quarter 2017 the Company developed a project plan and timeline to complete a diagnostic assessment to begin developing solutions. This assessment has progressed and has included an initial training of key personnel, sampling of contracts, and revenue stream evaluation. The Company expects to implement and test any changes in policy, processes, systems and internal controls and compute required transition adjustments and disclosures. The Company expects to adopt the standard on a modified retrospective basis in 2018. We do not expect the adoption of this standard to have a material impact on our financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which establishes a comprehensive new lease accounting model. This update clarifies the definition of a lease, requires a dual approach to lease classification similar to current lease classifications, and requires lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within the fiscal year, and requires modified retrospective application. Early adoption is permitted. The Company is evaluating the impact that this guidance will have on the financial statements.

20

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, 2016.

We supply high precision computer controlled metalcutting turning machines, grinding machines, vertical and horizontal 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, India, Switzerland, Taiwan, the United States (“U.S.”), and the United Kingdom (“U.K.”), with sales to most industrialized countries. Approximately 68% of our 2016 sales were to customers outside of North America, 71% of our 2016 products sold were manufactured outside of North America, and 68% of our employees as of December 31, 2016 were employed outside of North America. In the nine months of 2017, approximately 69% of our sales were to customers outside of North America, 72% of our products sold were manufactured outside of North America, and, as of September 30, 2017, 68% of our employees were 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 33% of overall sales through the third quarter of 2017 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.

21

Foreign currency exchange rate changes can significantly affect 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 Yuan (“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.

For the three and nine months ended September 30, 2017, foreign currency fluctuations resulted in favorable currency translation impact of approximately $0.8 million and unfavorable $2.3 million, respectively, on sales when compared to the same periods in 2016.

Results of Operations

Presented below is summarized selected financial data for the three and nine months ended September 30, 2017 and 2016 (in thousands): 

	Three Months Ended   September 30,						$ Change				% Change		Nine Months Ended   September 30,						$ Change				% Change
	2017			2016									2017			2016
Sales	$	84,991		$	67,211		$	17,780			26	%	$	227,745		$	205,218		$	22,527			11	%
Gross profit	28,615			23,151			5,464				24	%	76,631			69,448			7,183				10	%
% of sales	33.7		%	34.4		%	(0.7		)	pts.			33.6		%	33.8		%	(0.2		)	pts.
Selling, general and administrative expenses	20,701			19,992			709				4	%	58,804			60,221			(1,417		)		(2	)%
% of sales	24.4		%	29.7		%	(5.3		)	pts.			25.8		%	29.3		%	(3.5		)	pts.
Research & development	3,887			3,296			591				18	%	11,222			9,953			1,269				13	%
Restructuring	789			182			607				334	%	2,767			608			2,159				355	%
Other expense, net	276			321			(45		)		(14	)%	468			249			219				88	%
Income (loss) from operations	2,962			(640		)	3,602				563	%	3,370			(1,583		)	4,953				313	%
% of sales	3.5		%	(1.0		)%	4.5			pts.			1.5		%	(0.8		)%	2.3			pts.
Interest expense, net	98			86			12				14	%	230			235			(5		)		(2	)%
Income (loss) before income taxes	2,864			(726		)	3,590				494	%	3,140			(1,818		)	4,958				273	%
Income tax expense	665			657			8				1	%	466			666			(200		)		(30	)%
Net income (loss)	$	2,199		$	(1,383	)	$	3,582			259	%	$	2,674		$	(2,484	)	$	5,158			208	%
% of sales	2.6		%	(2.1		)%	4.7			pts.			1.2		%	(1.2		)%	2.4			pts.

Sales.  The table below summarizes sales by each corresponding geographical region for the three and nine months ended September 30, 2017 compared to the same period in 2016 (in thousands): 

	Three Months Ended   September 30,				$		%	Nine Months Ended   September 30,				$			%
	2017		2016		Change		Change	2017		2016		Change			Change
Sales to customers in:
North America	$	27,465	$	24,780	$	2,685	11%	$	71,268	$	62,924	$	8,344		13%
Europe	22,437		18,271		4,166		23%	62,379		64,355		(1,976		)	(3)%
Asia and other	35,089		24,160		10,929		45%	94,098		77,939		16,159			21%
Total	$	84,991	$	67,211	$	17,780	26%	$	227,745	$	205,218	$	22,527		11%

Sales for the three months ended September 30, 2017 were $85.0 million, an increase of $17.8 million, or 26%, compared to the same period in 2016. The increase in sales was driven by higher demand in all regions. Sales for the three months ended September 30,

22

2017 also included favorable foreign currency translation of $0.8 million. Excluding the translation impact, the increase in sales would have been 25%.

Sales for the nine months ended September 30, 2017 were $227.7 million, an increase of $22.5 million, or 11%, compared to the same period in 2016. The increase in sales was driven by increases in Asia and North America machine sales, partially offset by decreases in machine sales in Europe and an unfavorable foreign currency translation of approximately $2.3 million. Excluding the translation impact, the increase in sales would have been 12%.

North America sales were $27.5 million and $71.3 million during the three and nine months ended September 30, 2017, respectively, an increase of $2.7 million, or 11%, and $8.3 million, or 13%, when compared to the same periods in 2016.

Europe sales were $22.4 million and $62.4 million during the three and nine months ended September 30, 2017, respectively. Sales for the three months ended September 30, 2017 increased $4.2 million, or 23%, compared to the prior year period. Sales for the nine month period ended September 30, 2017 decreased by $2.0 million, or 3%, due to first quarter weakness in the European industrial markets. Sales for the three and nine months ended September 30, 2017 had favorable foreign currency translation of approximately $0.5 million and unfavorable of $0.6 million, respectively.

Asia and other sales were $35.1 million and $94.1 million during the three and nine months ended September 30, 2017, respectively, an increase of $10.9 million, or 45%, and $16.2 million, or 21%, when compared to the same periods in 2016. The sales increases over prior year in both three and nine month comparative periods were due to a significant increase in machine sales in China and other parts of Asia, which was partially offset in the nine month period by unfavorable foreign currency translation of approximately $1.6 million. Foreign currency translation did not have a material incremental effect on sales in Asia during the three months ended September 30, 2017.

Sales of machines accounted for approximately 69% and 67% of the consolidated sales for the three and nine months ended September 30, 2017 and 65% for the both the three and nine months ended September 30, 2016. Sales of non-machine products and services, primarily consisting of collets, chucks, accessories, repair parts, and service revenue, accounted for approximately 31% and 33% of the consolidated sales for the three and nine months ended September 30, 2017 and 35% for both the three and nine months ended September 30, 2016.

Gross Profit.  Gross profit was $28.6 million, or 34% of sales, for the three months ended September 30, 2017, compared to $23.2 million, or 34% of sales for the same period in 2016 as unfavorable mix and lower absorption on machines were offset by strong workholding margins. The increase in gross profit was attributable to higher sales volume for the three months ended September 30, 2017 as compared to the same period in 2016.

Gross profit was $76.6 million, or 34% of sales, for the nine months ended September 30, 2017, compared to $69.4 million, or 34% of sales, for the same period in 2016 as unfavorable mix and lower absorption on machines were offset by strong workholding margins, including a $0.6 million improvement due to incremental savings generated by the restructuring program initiated in late 2015. The increase in gross profit was attributable to higher sales volume for the nine months ended September 30, 2017 as compared to the same period in 2016.

Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses were $20.7 million, or 24% of sales, for the three months ended September 30, 2017, an increase of $0.7 million, or 4%, compared to $20.0 million, or 30% of sales, for the three months ended September 30, 2016. We incurred $1.1 million of unusual charges in the prior-year quarter related to severance and a pension obligation settlement. Without the impact of these unusual costs, SG&A would have increased by $1.7 million in the current quarter compared to the prior-year quarter. The increase was due to higher commissions of $0.8 million related to increased volume and higher incentive based compensation of $0.9 million from stronger financial results.

SG&A expenses were $58.8 million, or 26% of sales, for the nine months ended September 30, 2017, compared to $60.2 million, or 29% of sales, for the nine months ended September 30, 2016. We incurred $1.4 million of unusual charges in the current period related to strategic initiatives, executive search and severance charges, and $2.3 million of unusual charges in the prior-year period primarily associated with strategic review, severance charges and a pension obligation settlement. Without the impact of these unusual costs, SG&A would have decreased by $0.6 million in the current period compared to the prior-year period. The decrease was due to lower sales and marketing expenses of $1.9 million, partially offset by increased incentive based compensation of $1.0 million.

Restructuring. Restructuring expenses were $0.8 million and $2.8 million for the three and nine months ended September 30, 2017, respectively. In March 2017, management initiated a strategic restructuring program in our MMS segment. We expect to realize approximately $2.0 to $2.5 million of annual cost savings related to this program. In addition, we have recently expanded our restructuring efforts in order to improve earnings by optimizing our footprint and improving operational efficiencies to reduce our cost structure and

23

reduce annual costs by an additional $10 million. Both of these initiatives are expected to be substantially completed in 2018. For further information regarding restructuring activities, refer to Note 8. "Restructuring Charges" to the unaudited Consolidated Financial Statements in the quarterly report.

Restructuring expense in 2016 were related to the 2015 restructuring program and were $0.2 million and $0.6 million for the three and nine months ended September 30, 2016, respectively.

Research and Development Expenses.  Research and Development ("R&D") expenses were $3.9 million, or 5% of sales, for the three months ended September 30, 2017, compared to $3.3 million, or 5% of sales, for the three months ended September 30, 2016. R&D expenses were $11.2 million, or 5% of sales, for the nine months ended September 30, 2017, compared to $10.0 million, or 5% of sales, for the nine months ended September 30, 2016.

Income (Loss) Before Income Taxes.  As a result of the foregoing, income before income taxes was $2.9 million for the three months ended September 30, 2017, compared to loss before income taxes of $0.7 million for the same period in 2016. For the nine months ended September 30, 2017, income before income taxes was $3.1 million compared to loss before income taxes of $1.8 million for the same period in 2016.

Income Taxes.  The income tax provision was an expense of $0.7 million and $0.5 million for the three and nine months ended September 30, 2017, compared to an income tax provision expense of $0.7 million for both the three and nine month periods in 2016. The effective tax rate was 23.2% and 14.8% for the three and nine months ended September 30, 2017, respectively, compared to (90.5)% and (36.6)% for the same periods in 2016. The effective tax rate differs 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 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 Income (Loss).  As a result of the foregoing, net income for the three months ended September 30, 2017 was $2.2 million, or 3% of sales, compared to a net loss of $1.4 million, or 2.1% of sales, for the same period in 2016. Net income for the nine months ended September 30, 2017 was $2.7 million, or 1.2% of sales, compared to net loss of $2.5 million, or 1.2% of sales, for the same period in 2016. Both basic and diluted income (loss) per share for the three and nine months ended September 30, 2017 were $0.17 and $0.21, compared to $(0.11) and $(0.19) for the same periods in 2016.

Business Segment Information — Comparison of the three and nine months ended September 30, 2017 and 2016

Metalcutting Machine Solutions Segment (MMS) (in thousands):

	Three Months Ended   September 30,									Nine Months Ended   September 30,
	2017		2016			$ Change		% Change		2017		2016			$ Change		% Change
Sales	$	67,994	$	52,089		$	15,905	31	%	$	178,842	$	158,718		$	20,124	13	%
Segment income (loss)	1,546		(984		)	2,530		257	%	805		(1,864		)	2,669		143	%

MMS sales were $68.0 million for the three months ended September 30, 2017, an increase of $15.9 million, or 31% when compared to the corresponding period in 2016. The increase was driven by sales in Asia and Europe, with sales in North America up slightly, and a favorable foreign currency translation of approximately $0.6 million. For the nine months ended September 30, 2017, MMS sales were $178.8 million, an increase of $20.1 million, or 13%, when compared to the same period in 2016. The increase was driven by sales in Asia, and to a lesser extent North America, and partially offset by a decrease in sales in Europe, and unfavorable foreign currency translation of approximately $2.3 million.

Segment income for the three months ended September 30, 2017 was $1.5 million, an increase of $2.5 million.The increase is due to increased profit related to increased sales volume, and partially offset by restructuring charges of $0.8 million.

24

For thenine months ended September 30, 2017, segment income was $0.8 million, an improvement of $2.7 million, or 143%, when compared to the segment loss of $1.9 million in the same period of 2016. The volume related increases in gross profit and lower agent commissions due to changes in channel mix were partially offset by increased restructuring charges of $2.8 million.

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

	Three Months Ended   September 30,								Nine Months Ended   September 30,
	2017		2016		$ Change		% Change		2017		2016		$ Change		% Change
Sales	$	17,142	$	15,270	$	1,872	12	%	$	49,303	$	46,773	$	2,530	5	%
Segment income	3,406		1,847		1,559		84	%	8,437		5,342		3,095		58	%

ATA sales for the three months ended September 30, 2017 were $17.1 million, an increase of $1.9 million, or 12%, when compared to the corresponding period in 2016. An increase in North America was partially offset by a small decrease in Europe. ATA sales for the nine months ended September 30, 2017 were $49.3 million, an increase of $2.5 million, or 5%, when compared to the corresponding period in 2016. The increase was largely driven by North America with a small increase in Europe.

Segment income for the three months ended September 30, 2017 was $3.4 million, a $1.6 million, or 84% increase from the prior year due to reduced manufacturing costs and operating expenses. Segment income for the nine months ended September 30, 2017 was $8.4 million, a $3.1 million, or 58%, increase from the prior year. ATA experienced higher volumes, reduced manufacturing costs, lower restructuring charges of $0.6 million and incremental restructuring savings of $0.5 million compared to the prior-year period.

Segment Summary For the Three and Nine Months Ended September 30, 2017 and 2016 (in thousands):

	Three Months ended September 30, 2017										Three Months Ended September 30, 2016
	MMS		ATA		Inter-Segment Eliminations			Total			MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	67,994	$	17,142	$	(145	)	$	84,991		$	52,089		$	15,270	$	(148	)	$	67,211
Segment income	1,546		3,406					4,952			(984		)	1,847					863
Unallocated corporate    expense								(1,990		)									(1,503		)
Interest expense, net								(98		)									(86		)
Other unallocated    expense								—											—
Income before    income taxes								$	2,864										$	(726	)

	Nine Months Ended September 30, 2017										Nine Months Ended September 30, 2016
	MMS		ATA		Inter-Segment Eliminations			Total			MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	178,842	$	49,303	$	(400	)	$	227,745		$	158,718		$	46,773	$	(273	)	$	205,218
Segment (loss) income	805		8,437					9,242			(1,864		)	5,342					3,478
Unallocated corporate    expense								(5,872		)									(5,061		)
Interest expense, net								(230		)									(235		)
Other unallocated    expense								—											—
(Loss) income before    income taxes								$	3,140										$	(1,818	)

25

Summary of Cash Flows for the Nine Months EndedSeptember 30, 2017 and 2016 (in thousands):

	Nine Months Ended   September 30,
	2017			2016
Net cash provided by (used in) operating activities	$	10,988		$	(4,345	)
Net cash used in investing activities	$	(1,164	)	$	(1,505	)
Net cash used in financing activities	$	(7,351	)	$	(3,978	)

During the nine months ended September 30, 2017, we generated $11.0 million net cash from operating activities. The net cash generated was the result of positive operating results and improvements in net working capital. In the first nine months of 2017, cash was provided by net income of $2.7 million, non-cash adjustments of $6.7 million for depreciation and amortization and $1.4 million for inventory impairment, and total changes in operating assets and liabilities of $0.8 million. The prior year cash used in operating activities of $4.3 million was the result of a net loss of $2.5 million and total changes in operating assets and liabilities using cash of $7.6 million, partially offset by sources from non-cash adjustments of $6.1 million for depreciation and amortization.

Net cash used in investing activities was $1.2 million and $1.5 million for the nine months ended September 30, 2017 and 2016, respectively. The primary use of cash was for capital expenditures during these periods, which were made mainly for maintenance capital purchases. In the nine months ended September 30, 2017 cash used was partially offset by the receipt of $0.5 million in deposit proceeds for a building which we have agreed to sell, which is expected to close in the second quarter of 2018.

Net cash flow used in financing activities was $7.4 million for the nine months ended September 30, 2017. Cash used was primarily attributable to $6.1 million of payments on long-term debt which we paid off early, $0.7 million of net payments on short term borrowings and year-to-date dividends paid of $0.5 million.

Net cash flow used in financing activities was $4.0 million for the nine months ended September 30, 2016. Cash used for financing activities was primarily driven by $3.2 million of payments on long-term debt due to normal scheduled payment activity and year-to-date dividends paid of $0.8 million.

Liquidity and Capital Resources

We maintain financing arrangements with several financial institutions. These financing arrangements are in the form of credit facilities and lines of credit. The credit facilities allow us to borrow up to $74.8 million at September 30, 2017 and $74.7 million at December 31, 2016, of which $54.3 million and $53.0 million, respectively, can be borrowed for working capital needs. As of September 30, 2017 and December 31, 2016, $67.3 million and $67.1 million was available for borrowing under these respective arrangements, of which $53.9 million and $51.9 million, respectively, was available for working capital needs. In the third quarter of 2017 we paid the remaining balance of our long term debt and at September 30, 2017 we had no outstanding borrowings under any of our revolving credit facilities. At December 31, 2016 we had total consolidated borrowings outstanding of $6.0 million and we had borrowings under revolving credit facilities of $0.7 million.

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, 2017, we were in compliance with all of our debt covenants.

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 non-cash charges and change in working capital needs. During the nine months ended September 30, 2017, 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.

26

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.

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 16. "New Accounting Standards" of the Consolidated 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, our expectations and estimates relating to restructuring charges and operational savings from the Company's strategic restructuring program 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.

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 2017. For a discussion of our exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risks, contained in our 2016 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, 2017, 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.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2017 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 Securities Exchange Act of 1934.

27

PART II — OTHER INFORMATION

Item 1.Legal Proceedings.

Information regarding certain legal proceedings in which we are involved is incorporated by reference from Note 10. "Commitments and Contingencies" to the unaudited Consolidated Financial Statements included in this quarterly report.

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, 2016.

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.

28

Item 6.	Exhibits.
10.1	Non-qualified Option Agreement dated as of July 31, 2017, between Hardinge Inc. and Douglas J. Malone (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed with the Commission on August 3, 2017).
10.2	Non-qualified Option Agreement dated as of July 31, 2017, between Hardinge Inc. and Douglas J. Malone (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K, filed with the Commission on August 3, 2017).
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

29

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 9, 2017	By:	/s/ Charles P. Dougherty
Date		Charles P. Dougherty
		President and Chief Executive Officer
		(Principal Executive Officer)
November 9, 2017	By:	/s/ Douglas J. Malone
Date		Douglas J. Malone
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

30

EX-31.1

EXHIBIT 31.1

HARDINGE INC.

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

I, Charles P. Dougherty, 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 9, 2017	/s/ Charles P. Dougherty
		Charles P. Dougherty
		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 9, 2017	/s/ Douglas J. Malone
		Douglas J. Malone
		Senior Vice President and Chief Financial Officer
		(Principal Financial 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, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Charles P. Dougherty, President and Chief Executive Officer of the Company and I, Douglas J. Malone, Senior 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/ Charles P. Dougherty

Charles P. Dougherty

President and Chief Executive Officer

November 9, 2017

/s/ Douglas J. Malone

Douglas J. Malone

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

November 9, 2017

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.

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 03, 2017
Document and Entity Information
Entity Registrant Name	HARDINGE INC.
Entity Central Index Key	0000313716
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		12,947,752
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3

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Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Assets
Cash and cash equivalents	$ 32,327	$ 28,255
Restricted cash	2,115	2,923
Accounts receivable, net	60,750	55,573
Inventories, net	114,420	107,018
Other current assets	10,815	6,926
Assets held for sale	5,682	0
Total current assets	226,109	200,695
Property, plant and equipment, net	50,569	56,961
Goodwill	6,641	6,579
Other intangible assets, net	26,434	26,730
Other non-current assets	6,163	6,585
Total non-current assets	89,807	96,855
Total assets	315,916	297,550
Liabilities and shareholders’ equity
Notes payable to bank	0	703
Accounts payable	25,542	24,217
Accrued expenses	32,595	25,629
Customer deposits	26,182	18,215
Accrued income taxes	1,590	1,160
Current portion of long-term debt	0	2,923
Total current liabilities	85,909	72,847
Long-term debt	0	2,970
Pension and postretirement liabilities	56,023	58,840
Deferred income taxes	4,088	3,800
Other liabilities	1,167	3,152
Total non-current liabilities	61,278	68,762
Commitments and contingencies (see Note 10)
Common stock ($0.01 par value, 20,000,000 authorized; shares issued 12,949,525 and 12,903,037)	129	129
Additional paid-in capital	121,925	121,015
Retained earnings	91,709	89,557
Treasury shares (at cost, 6,850 and 9,243)	(71)	(104)
Accumulated other comprehensive loss	(44,963)	(54,656)
Total shareholders’ equity	168,729	155,941
Total liabilities and shareholders’ equity	$ 315,916	$ 297,550

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
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)	12,949,525	12,903,037
Treasury shares (in shares)	6,850	9,243

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Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
Sales	$ 84,991	$ 67,211	$ 227,745	$ 205,218
Cost of sales	56,376	44,060	151,114	135,770
Gross profit	28,615	23,151	76,631	69,448
Selling, general and administrative expenses	20,701	19,992	58,804	60,221
Research & development	3,887	3,296	11,222	9,953
Restructuring	789	182	2,767	608
Other expense, net	276	321	468	249
Income (loss) from operations	2,962	(640)	3,370	(1,583)
Interest expense	135	142	346	427
Interest income	(37)	(56)	(116)	(192)
Income (loss) before income taxes	2,864	(726)	3,140	(1,818)
Income tax expense	665	657	466	666
Net Income (loss)	$ 2,199	$ (1,383)	$ 2,674	$ (2,484)
Per share data:
Basic earnings (loss) per share (in dollars per share)	$ 0.17	$ (0.11)	$ 0.21	$ (0.19)
Diluted earnings (loss) per share (in dollars per share)	0.17	(0.11)	0.21	(0.19)
Cash dividends declared per share (in dollars per share)	$ 0	$ 0.02	$ 0.04	$ 0.06

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Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 2,199	$ (1,383)	$ 2,674	$ (2,484)
Other comprehensive income (loss):
Foreign currency translation adjustments	266	(368)	9,199	531
Retirement plans related adjustments	1,058	3,031	807	4,333
Unrealized (loss) gain on cash flow hedges	(442)	78	(510)	210
Other comprehensive income (loss) before tax	882	2,741	9,496	5,074
Income tax (benefit) expense	(178)	322	(197)	427
Other comprehensive income (loss), net of tax	1,060	2,419	9,693	4,647
Total comprehensive income (loss)	$ 3,259	$ 1,036	$ 12,367	$ 2,163

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Operating activities
Net income (loss)	$ 2,674	$ (2,484)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Impairment	1,401	0
Depreciation and amortization	6,694	6,095
Debt issuance costs amortization	139	98
Deferred income taxes	(229)	(705)
(Gain) loss on sale of assets	(36)	23
Unrealized foreign currency transaction (gain) loss	(489)	219
Changes in operating assets and liabilities:
Accounts receivable	(2,793)	9,761
Restricted cash	941	(1,313)
Inventories	(4,037)	(9,458)
Other assets	(2,255)	(988)
Accounts payable	172	(586)
Customer deposits	6,928	(1,604)
Accrued expenses	1,747	(3,338)
Accrued pension and postretirement liabilities	131	(65)
Net cash generated from (used in) operating activities	10,988	(4,345)
Investing activities
Capital expenditures	(1,737)	(1,543)
Deposit on assets held for sale	516	0
Proceeds from sales of assets	57	38
Net cash used in investing activities	(1,164)	(1,505)
Financing activities
Proceeds from short-term notes payable to bank	17,960	35,974
Repayments of short-term notes payable to bank	(18,705)	(35,974)
Repayments of long-term debt	(6,090)	(3,186)
Dividends paid	(516)	(792)
Net cash used in financing activities	(7,351)	(3,978)
Effect of exchange rate changes on cash	1,599	(3)
Net increase (decrease) in cash	4,072	(9,831)
Cash and cash equivalents at beginning of period	28,255	32,774
Cash and cash equivalents at end of period	$ 32,327	$ 22,943

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BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

In these notes, the terms “Hardinge,” “the Company,” "we," "us," "our," or similar references 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, 2016. 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, 2017 are not necessarily indicative of the results that may be expected in subsequent quarters or for the full year ended December 31, 2017.

Certain amounts in the September 30, 2016 consolidated financial statements have been reclassified to conform to the current presentation.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2017

FAIR VALUE AND DERIVATIVE INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

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, 2017				December 31, 2016				Level of Fair Value Hierarchy
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	32,327	$	32,327	$	28,255	$	28,255	Level 1
Restricted cash	2,115		2,115		2,923		2,923		Level 1
Foreign currency forward contracts	404		404		308		308		Level 2
Liabilities:
Notes payable to bank	—		—		703		703		Level 2
Variable interest rate debt	—		—		5,986		5,986		Level 2
Foreign currency forward contracts	1,254		1,254		566		566		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 fair value of foreign currency forward contracts is measured using 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, 2017 and December 31, 2016, there were no significant transfers in and/or out of Level 1 and Level 2.

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INVENTORIES

9 Months Ended

Sep. 30, 2017

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 net realizable value. Elements of the cost include materials, labor and overhead.

Net inventories consist of the following (in thousands):

	September 30, 2017		December 31, 2016
Raw materials and purchased components	$	33,286	$	33,822
Work-in-process	34,506		31,799
Finished products	46,628		41,397
Inventories, net	$	114,420	$	107,018

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DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE FINANCIAL 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 expense, net” when the hedging relationship is deemed to be ineffective. As of September 30, 2017 and December 31, 2016, the notional amounts of the derivative financial instruments designated to qualify for cash flow hedges were $33.7 million and $45.5 million, respectively. The Company expects approximately $0.5 million of expense, net of income tax effect, to be reclassified from AOCI to earnings within the next 12 months. 

As of September 30, 2017 and December 31, 2016, the notional amounts of the derivative financial instruments not qualifying or otherwise designated as hedges were $30.6 million and $35.4 million, respectively. For the three months ended September 30, 2017 and 2016, losses of $0.8 million and gains of $0.5 million, respectively, were recorded related to this type of derivative financial instrument. For the nine months ended September 30, 2017 and 2016, losses of $0.4 million and gains of $0.03 million, respectively, were recorded related to this type of derivative financial instrument. For contracts that are not designated as hedges, the gain or loss on the contract is recognized in current earnings in the “Other 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, 2017			December 31, 2016
Foreign currency forwards designated as hedges:
Other current assets	$	317		$	153
Accrued expenses	(903		)	(264		)
Foreign currency forwards not designated as hedges:
Other current assets	87			155
Accrued expenses	(351		)	(302		)
Foreign currency forwards, net	$	(850	)	$	(258	)

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PROPERTY, PLANT AND EQUIPMENT

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

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

	September 30, 2017			December 31, 2016
Land, buildings and improvements	$	71,610		$	81,311
Machinery, equipment and fixtures	77,035			75,177
Office furniture, equipment and vehicles	23,408			22,471
Construction in progress	379			272
	172,432			179,231
Accumulated depreciation	(121,863		)	(122,270		)
Property, plant and equipment, net	$	50,569		$	56,961

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GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2017

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
Goodwill	$	32,434		$	6,579	$	39,013
Accumulated impairment losses	(32,434		)	—		(32,434		)
Balance at December 31, 2016	—			6,579		6,579
Goodwill	32,434			6,579		39,013
Currency translation adjustments	—			62		62
Accumulated impairment losses	(32,434		)	—		(32,434		)
Balance at September 30, 2017	$	—		$	6,641	$	6,641

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

	September 30, 2017			December 31, 2016
Gross amortizable intangible assets:
Technical know-how	$	12,979		$	12,944
Customer lists	9,011			8,981
Land rights	2,608			2,498
Patents, trade names, drawings, and other	4,408			4,356
Total gross amortizable intangible assets	29,006			28,779
Accumulated amortization:
Technical know-how	(7,908		)	(7,438		)
Customer lists	(2,089		)	(1,744		)
Land rights	(356		)	(304		)
Patents, trade names, drawings, and other	(3,630		)	(3,490		)
Total accumulated amortization	(13,983		)	(12,976		)
Amortizable intangible assets, net	15,023			15,803
Indefinite lived intangible assets:
Trade names	11,411			10,927
Intangible assets other than goodwill, net	$	26,434		$	26,730

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

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2017		2016		2017		2016
Amortization expense	$	313	$	321	$	937	$	961

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WARRANTIES

9 Months Ended

Sep. 30, 2017

Product Warranties Disclosures [Abstract]

WARRANTIES

WARRANTIES

A reconciliation of the changes in the product warranty accrual, which is included in "Accrued expenses" in the Consolidated Balance Sheets, is as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2017			2016			2017			2016
Balance at the beginning of period	$	3,324		$	3,824		$	3,555		$	3,802
Warranties issued	396			568			1,241			1,649
Warranty settlement costs	58			(533		)	(794		)	(1,680		)
Changes in accruals for pre-existing warranties	(324		)	(141		)	(704		)	(77		)
Currency translation adjustments	1			14			157			38
Balance at the end of period	$	3,455		$	3,732		$	3,455		$	3,732

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RESTRUCTURING CHARGES

9 Months Ended

Sep. 30, 2017

Restructuring and Related Activities [Abstract]

Restructuring Charges

RESTRUCTURING CHARGES

In March 2017, management initiated a strategic restructuring program in our MMS segment with the goals of streamlining the Company's cost structure, increasing operational efficiencies and cash generation, and improving shareholder returns. This program consists of rationalizing certain product lines, consolidating certain European manufacturing operations, and selling certain assets. It is projected to be substantially complete by mid-2018 and is expected to generate annual pre-tax savings ranging from approximately $2.0 million to $2.5 million once fully implemented. We expect to incur costs of approximately $4.7 million, of which $1.4 million is a non-cash inventory impairment charge related to the product line rationalization.

As part of the above mentioned program, in September 2017, the Company agreed to sell a manufacturing facility in Biel, Switzerland for $9.8 million, excluding customary closing costs, for which a deposit of $0.5 million was received. The building and the related deposit are included in "Assets Held for Sale" and "Accrued Expenses" in the Consolidated Balance Sheets. The sale is expected to be finalized in the second quarter of 2018.

During September 2017, the Company initiated a strategic global realignment of our selling organization with a focus on unified regional sales channels to improve customer contact and service, a simplified product offering, and the elimination of redundancies. In addition, we have initiated a program to optimize our purchasing and supply chain management practices through consolidation of these teams into a single organization to leverage our global talent and buying power. This program is expected to provide cost savings of approximately $10.0 million per year beyond the March 2017 initiative, of which approximately $5.0 million will be from SG&A, primarily from headcount reductions, and $5.0 million will be from material cost savings. We expect to incur costs of approximately $2.0 million, primarily related to severance, in conjunction with this initiative. These costs will be incurred over the next several quarters.

The combined March 2017 initiative and the September 2017 global strategic program (the combined "Program") is intended to generate annual pre-tax savings ranging from approximately $12.0 million to $12.5 million once fully implemented in the latter part of 2018. The total costs estimates are included in the table below.

Restructuring charges are included in the "Restructuring" line item in the Consolidated Statements of Operations. The table below presents the total costs expected to be incurred in connection with the Program, the amount of costs that have been recognized during the three and nine months ended September 30, 2017 and the cumulative costs recognized to date by the Program (in thousands):

	Total Costs Expected to be Incurred		Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017 (Cumulative costs recognized to date)
Restructuring:
Employee termination costs	$	3,319	$	615	$	1,008
Inventory Impairment	1,401		—		1,401
Facility related costs	1,373		43		158
Other related costs	561		131		200
Total Restructuring Activity	$	6,654	$	789	$	2,767

The amounts accrued associated with the Program are included in "Accrued expenses" and "Inventory" in the Consolidated Balance Sheets. A rollforward of the accrued restructuring costs is presented below (in thousands):

Balance at December 31, 2016	$	—
Restructuring charges:
Employee termination costs	1,008
Inventory Impairment	1,401
Facility related costs	158
Other related costs	200
Total restructuring charges for the period	2,767
Cash expenditures	(882		)
Other adjustments to accrual	—
Foreign currency translation adjustment	131
Balance at September 30, 2017	$	2,016

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INCOME TAXES

9 Months Ended

Sep. 30, 2017

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 rate was 23.2% and 14.8% for the three and nine months ended September 30, 2017.

The tax years 2014 through 2016 remain open to examination by the U.S. federal taxing authorities. The tax years 2011 through 2016 remain open to examination by the U.S. state taxing authorities. For other major jurisdictions (Switzerland, U.K., Taiwan, France, Germany, Netherlands, China and India), the tax years between 2009 and 2016 generally remain open to routine examination by foreign taxing authorities, depending on the jurisdiction.

At September 30, 2017, a liability of $1.4 million is recorded with respect to uncertain income tax positions, which includes related interest of $0.1 million. If recognized, essentially all of the uncertain tax positions and related interest at September 30, 2017 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 potential settlements is estimated to be up to $1.2 million.

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2017

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 liability 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 be estimated with any degree of certainty at this time.

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., (collectively, the "PRP's"), agreed to voluntarily participate in the 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 PRP's also signed a PRP Member Agreement, agreeing to share the costs associated with the RI/FS study on a per capita basis.

The EPA approved the RI/FS Work Plan in May of 2008. In July of 2012 the PRP's submitted a Remedial Investigation (RI) to respond to EPA issues raised in the initial draft RI. In January 2016, the PRP's submitted a draft Feasibility Study (FS), also to respond to issues raised by the EPA about previous drafts of the FS. In July 2016, the EPA announced its proposed remediation plan based on an alternative put forth in a July 2016 Woodruff & Curran FS with an estimated total clean-up phase cost of $1.9 million. The preferred remedy consists of the placement of a continuous six-inch thick soil and sand cap, including a geotextile membrane to act as a demarcation layer, over the Pond. The preferred remedy includes long-term monitoring and institutional controls. After a public comment period, on December 13, 2016, the EPA issued a Certificate of Completion confirming that the RI/FS was complete, confirming that all PRP obligations related to the RI/FS had been performed in accordance with the provisions of the Administrative Settlement Agreement and Order on Consent, and approving the remedy selected in the FS as the final response action for the Pond.

In June 2017, the EPA issued a Special Notice letter to the original PRP’s and two new additional parties (Eaton Corporation and Elmira Water Board) requesting these PRPs to fund, undertake, and complete the remedy for the Pond. Shortly after, the EPA provided a proposed Statement of Work for completion of the remedy (“SOW”) and the EPA agreed to waive the past response costs as defined in the RI/FS Order of Consent in full if the parties could reach a settlement with the EPA by September 30, 2017.

    In September 2017 the nine participating PRPs privately negotiated and finalized an allocation of costs amongst themselves, with 10.75% of the costs being allocated to the Company. Based on the estimated cost of the present remedy of $1.9 million, and with credit for costs previously paid by the Company for the RI/FS, the remaining costs that have been allocated to the Company will not exceed $0.2 million. The Company has the entire amount reserved as of September 30, 2017. This reserve is reported in "Accrued expenses" in 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.

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PENSION AND POSTRETIREMENT PLANS

9 Months Ended

Sep. 30, 2017

Pension and Other Postretirement Benefits Cost (Reversal of Cost) [Abstract]

PENSION AND POSTRETIREMENT PLANS

PENSION AND POSTRETIREMENT PLANS

A summary of the components of net periodic pension and postretirement benefit costs for the three and nine months ended September 30, 2017 and 2016 is presented below (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended   September 30,						Three Months Ended   September 30,
	2017			2016			2017			2016
Service cost	$	493		$	566		$	3		$	3
Interest cost	1,510			1,662			18			19
Expected return on plan assets	(2,143		)	(2,305		)	—			—
Amortization of prior service credit	(79		)	(64		)	—			—
Amortization of transition asset	—			(78		)	—			—
Amortization of actuarial loss (gain)	943			951			(11		)	(14		)
Settlement loss (gain)	45			765			—			—
Net periodic cost	$	769		$	1,497		$	10		$	8
	Pension Benefits						Postretirement Benefits
	Nine Months Ended   September 30,						Nine Months Ended   September 30,
	2017			2016			2017			2016
Service cost	$	1,467		$	1,695		$	9		$	9
Interest cost	4,511			5,010			54			57
Expected return on plan assets	(6,379		)	(6,942		)	—			—
Amortization of prior service credit	(233		)	(191		)	—			—
Amortization of transition asset	—			(234		)	—			—
Amortization of actuarial loss (gain)	2,810			2,850			(33		)	(42		)
Settlement loss (gain)	75			765			—			—
Net periodic cost	$	2,251		$	2,953		$	30		$	24

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STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 2017

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

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

The Company's 2011 Incentive Stock Plan (the "Plan"), as amended on May 6, 2014, permits the grant of several types of incentives, including share options, non-qualified stock options, stock appreciation rights, restricted stock awards/ units (“RSAs”) and performance share incentives (“PSIs”).

Stock Options

There were 255,000 non-qualified stock options granted in the nine months ended September 30, 2017. There are no other vested or unvested stock options outstanding. The fair market value of stock options is estimated using the Black-Scholes valuation model using the following assumptions:

	Nine Months Ended September 30, 2017
Expected volatility	37.0% - 38.5%
Expected dividend yield	0.0% - 0.66%
Risk free rate	1.32% - 1.97%
Expected term (in years)	6.0 - 6.5
Weighted average grant date fair value	$4.52
Weighted average exercise price	$12.05

Stock options vest over a two or three-year period based on either a service period or a combination of service period and performance measures. Deferred compensation for stock options is amortized on a straight-line basis for stock options which vest over a specified service period, and is recognized ratably for stock options, which also have a performance requirement to the extent that it is probable that the performance target will be met. All stock options granted have a ten-year contractual term.

The aggregate intrinsic value of stock options at September 30, 2017 was $0.8 million, which is calculated as the difference between the stock price as of September 30, 2017 and the exercise price of the option.

Restricted Stock/ Unit Awards ("RSAs")

There were 42,350 RSAs granted during the nine months ended September 30, 2017, and no awards in the same period of 2016. There were 6,850 RSAs forfeited during the nine months ended September 30, 2017. The deferred compensation for RSAs is amortized on a straight-line basis over the specified service period, which ranges from three to four years.

Performance Share Incentives ("PSIs")

There were 42,350 PSIs granted during the nine months ended September 30, 2017, and no awards in the same period of 2016. There were 8,161 PSIs forfeited during the nine months ended September 30, 2017. The deferred compensation with respect to the PSIs is being recognized into earnings based on the passage of time and achievement of performance targets.     

Compensation Costs

Stock based compensation costs are based on estimated fair values. The fair value of service and performance based stock awards are based on the market value on the date of the grant. The fair value of stock options are estimated using a Black-Scholes valuation model. All stock based compensation to employees is recorded as "Selling, general and administrative expenses" in the Consolidated Statements of Operations. 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,
	2017		2016		2017		2016
Stock Options	$	103	$	—	$	135	$	—
Restricted stock/unit awards (“RSA”)	57		67		164		190
Performance share incentives (“PSI”)	28		—		67		—
Total stock based compensation	$	188	$	67	$	366	$	190

Unrecognized compensation and the expected weighted-average recognition periods with respect to the outstanding RSAs and PSIs as of September 30, 2017 and December 31, 2016, are as follows:

	September 30, 2017						December 31, 2016
	Stock Options		RSAs		PSIs		Stock Options		RSAs		PSIs
Unrecognized compensation cost (in thousands)	$	1,019	$	335	$	818	$	—	$	113	$	520
Expected weighted-average recognition period for unrecognized compensation cost (in years)	2.44		1.30		1.20		N/A		0.92		0.97

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

9 Months Ended

Sep. 30, 2017

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, 2017 and 2016 are as follows (in thousands):

	Three Months ended September 30, 2017
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	24,228		$	(70,188	)	$	(63	)	$	(46,023	)
Other comprehensive income (loss) before reclassifications	266			160			(84		)	342
Less: (Loss) income reclassified from AOCI	—			(898		)	358			(540		)
Net other comprehensive income (loss)	266			1,058			(442		)	882
Income taxes	(259		)	147			(66		)	(178		)
Ending balance, net of tax	$	24,753		$	(69,277	)	$	(439	)	$	(44,963	)

	Three Months Ended September 30, 2016
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	21,359		$	(67,815	)	$	(29	)	$	(46,485	)
Other comprehensive (loss) income before reclassifications	(368		)	1,471			204			1,307
Less: (loss) income reclassified from AOCI	—			(1,560		)	126			(1,434		)
Net other comprehensive (loss) income	(368		)	3,031			78			2,741
Income taxes	256			53			13			322
Ending balance, net of tax	$	20,735		$	(64,837	)	$	36		$	(44,066	)

	Nine Months Ended September 30, 2017
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	15,483		$	(70,102	)	$	(37	)	$	(54,656	)
Other comprehensive income (loss) before reclassifications	9,199			(1,812		)	(263		)	7,124
Less: (loss) income reclassified from AOCI	—			(2,619		)	247			(2,372		)
Net other comprehensive income (loss)	9,199			807			(510		)	9,496
Income taxes	(71		)	(18		)	(108		)	(197		)
Ending balance, net of tax	$	24,753		$	(69,277	)	$	(439	)	$	(44,963	)

	Nine Months Ended September 30, 2016
	Foreign currency translation adjustments		Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	20,529	$	(69,100	)	$	(142	)	$	(48,713	)
Other comprehensive income (loss) before reclassifications	531		1,185			320			2,036
Less: (loss) income reclassified from AOCI	—		(3,148		)	110			(3,038		)
Net other comprehensive income (loss)	531		4,333			210			5,074
Income taxes	325		70			32			427
Ending balance, net of tax	$	20,735	$	(64,837	)	$	36		$	(44,066	)

Details about reclassification out of AOCI for the three and nine months ended September 30, 2017 and 2016 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	2017			2016			2017			2016
Unrealized gain (loss) on cash flow hedges:
	$	342		$	39		$	222		$	62		Sales
	16			87			25			48			Other expense, net
	358			126			247			110			Total before tax
	69			21			60			18			Income taxes
	$	427		$	147		$	307		$	128		Net of tax
Retirement plans related adjustments:
Amortization of prior service credit	$	79		$	64		$	233		$	191		(a)
Amortization of transition asset	—			78			—			234			(a)
Amortization of actuarial loss	(932		)	(937		)	(2,777		)	(2,808		)	(a)
Settlement loss	(45		)	(765		)	(75		)	(765		)	(a)
	(898		)	(1,560		)	(2,619		)	(3,148		)	Total before tax
	100			228			284			396			Income taxes
	$	(798	)	$	(1,332	)	$	(2,335	)	$	(2,752	)	Net of tax

(a)  These AOCI components are included in the computation of net periodic pension and post retirement costs. See Note 11. "Pension and Postretirement Plans" for details.

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EARNINGS (LOSS) PER SHARE

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

EARNINGS (LOSS) PER SHARE

ARNINGS (LOSS) PER SHARE

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

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2017		2016			2017		2016
Numerator for basic and diluted loss per share:
Net earnings (loss) applicable to common shareholders	$	2,199	$	(1,383	)	$	2,674	$	(2,484	)
Denominator for basic and diluted loss per share:
Denominator for basic and diluted loss per share — weighted average shares	12,907		12,835			12,894		12,815
Assumed exercise of stock options	21		—			7		—
Assumed satisfaction of restricted stock conditions	56		—			43		—
Denominator for diluted earnings per share — adjusted weighted average shares	12,984		12,835			12,944		12,815

Common stock equivalents of certain stock-based awards totaling 221,076 and 99,384 were excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2017, respectively, as they were anti-dilutive. There is no dilutive effect of the restricted stock and stock options for the three and nine months ended September 30, 2016 due to the net loss in these periods. There would have been 90,405 and 93,245 of these shares included in the diluted calculation for the three and nine months ended September 30, 2016, respectively, had there been earnings in this period.

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SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

Segment income (loss) 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, 2017
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	67,994	$	17,142	$	(145	)	$	84,991
Depreciation and amortization	1,438		478					1,916
Segment income	1,546		3,406					4,952
Capital expenditures	657		112					769

	Three Months Ended September 30, 2016
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	52,089		$	15,270	$	(148	)	$	67,211
Depreciation and amortization	1,433			498					1,931
Segment income	(984		)	1,847					863
Capital expenditures	433			118					551

	Nine Months Ended September 30, 2017
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	178,842	$	49,303	$	(400	)	$	227,745
Depreciation and amortization	4,267		1,481		0			5,748
Segment (loss) income	805		8,437					9,242
Capital expenditures	1,425		312					1,737
Segment assets(1)	232,767		46,527					279,294

	Nine Months Ended September 30, 2016
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	158,718		$	46,773	$	(273	)	$	205,218
Depreciation and amortization	4,353			1,562					5,915
Segment (loss) income	(1,864		)	5,342					3,478
Capital expenditures	1,119			424					1,543
Segment assets(1)	226,618			48,341					274,959

____________________

⁽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 income to consolidated income (loss) before income taxes for the three and nine months ended September 30, 2017 and 2016 are as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2017			2016			2017			2016
Segment income	$	4,952		$	863		$	9,242		$	3,478
Unallocated corporate expense	(1,990		)	(1,503		)	(5,872		)	(5,061		)
Interest expense, net	(98		)	(86		)	(230		)	(235		)
Income (loss) before income taxes	$	2,864		$	(726	)	$	3,140		$	(1,818	)

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

	September 30, 2017		December 31, 2016
Total segment assets	$	279,294	$	265,279
Unallocated assets	36,622		32,271
Total assets	$	315,916	$	297,550

Unallocated assets include cash of $32.3 million and $28.3 million at September 30, 2017 and December 31, 2016, respectively.

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NEW ACCOUNTING STANDARDS

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

NEW ACCOUNTING STANDARDS

NEW ACCOUNTING STANDARDS

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, establishing a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This update provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. We have the option of using either a full retrospective or modified approach to adopt this guidance. Between August 2015 and May 2016, the FASB issued four additional updates to 1) ASU No. 2015-14, Deferral of the Effective Date, 2) ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), 3)ASU No. 2016-10, Identifying Performance Obligations and Licensing, and 4) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients to provide further guidance and clarification in accounting for revenue arising from contracts with customers. The new guidance is effective for annual reporting periods beginning after December 15, 2017, and all annual and interim periods thereafter. In the first quarter 2017 the Company developed a project plan and timeline to complete a diagnostic assessment to begin developing solutions. This assessment has progressed and has included an initial training of key personnel, sampling of contracts, and revenue stream evaluation. The Company expects to implement and test any changes in policy, processes, systems and internal controls and compute required transition adjustments and disclosures. The Company expects to adopt the standard on a modified retrospective basis in 2018. We do not expect the adoption of this standard to have a material impact on our financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which establishes a comprehensive new lease accounting model. This update clarifies the definition of a lease, requires a dual approach to lease classification similar to current lease classifications, and requires lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within the fiscal year, and requires modified retrospective application. Early adoption is permitted. The Company is evaluating the impact that this guidance will have on the financial statements.

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NEW ACCOUNTING STANDARDS NEW ACCOUNTINGS STANDARDS (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

New Accounting Standards

NEW ACCOUNTING STANDARDS

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, establishing a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This update provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. We have the option of using either a full retrospective or modified approach to adopt this guidance. Between August 2015 and May 2016, the FASB issued four additional updates to 1) ASU No. 2015-14, Deferral of the Effective Date, 2) ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), 3)ASU No. 2016-10, Identifying Performance Obligations and Licensing, and 4) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients to provide further guidance and clarification in accounting for revenue arising from contracts with customers. The new guidance is effective for annual reporting periods beginning after December 15, 2017, and all annual and interim periods thereafter. In the first quarter 2017 the Company developed a project plan and timeline to complete a diagnostic assessment to begin developing solutions. This assessment has progressed and has included an initial training of key personnel, sampling of contracts, and revenue stream evaluation. The Company expects to implement and test any changes in policy, processes, systems and internal controls and compute required transition adjustments and disclosures. The Company expects to adopt the standard on a modified retrospective basis in 2018. We do not expect the adoption of this standard to have a material impact on our financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which establishes a comprehensive new lease accounting model. This update clarifies the definition of a lease, requires a dual approach to lease classification similar to current lease classifications, and requires lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within the fiscal year, and requires modified retrospective application. Early adoption is permitted. The Company is evaluating the impact that this guidance will have on the financial statements.

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2017

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, 2017				December 31, 2016				Level of Fair Value Hierarchy
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	32,327	$	32,327	$	28,255	$	28,255	Level 1
Restricted cash	2,115		2,115		2,923		2,923		Level 1
Foreign currency forward contracts	404		404		308		308		Level 2
Liabilities:
Notes payable to bank	—		—		703		703		Level 2
Variable interest rate debt	—		—		5,986		5,986		Level 2
Foreign currency forward contracts	1,254		1,254		566		566		Level 2

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INVENTORIES (Tables)

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Schedule of net inventories

Net inventories consist of the following (in thousands):

	September 30, 2017		December 31, 2016
Raw materials and purchased components	$	33,286	$	33,822
Work-in-process	34,506		31,799
Finished products	46,628		41,397
Inventories, net	$	114,420	$	107,018

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DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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, 2017			December 31, 2016
Foreign currency forwards designated as hedges:
Other current assets	$	317		$	153
Accrued expenses	(903		)	(264		)
Foreign currency forwards not designated as hedges:
Other current assets	87			155
Accrued expenses	(351		)	(302		)
Foreign currency forwards, net	$	(850	)	$	(258	)

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PROPERTY, PLANT AND EQUIPMENT (Tables)

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Schedule of components of property, plant and equipment, net

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

	September 30, 2017			December 31, 2016
Land, buildings and improvements	$	71,610		$	81,311
Machinery, equipment and fixtures	77,035			75,177
Office furniture, equipment and vehicles	23,408			22,471
Construction in progress	379			272
	172,432			179,231
Accumulated depreciation	(121,863		)	(122,270		)
Property, plant and equipment, net	$	50,569		$	56,961

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GOODWILL AND INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of detail and activity of goodwill by segment

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

	MMS			ATA		Total
Goodwill	$	32,434		$	6,579	$	39,013
Accumulated impairment losses	(32,434		)	—		(32,434		)
Balance at December 31, 2016	—			6,579		6,579
Goodwill	32,434			6,579		39,013
Currency translation adjustments	—			62		62
Accumulated impairment losses	(32,434		)	—		(32,434		)
Balance at September 30, 2017	$	—		$	6,641	$	6,641

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, 2017			December 31, 2016
Gross amortizable intangible assets:
Technical know-how	$	12,979		$	12,944
Customer lists	9,011			8,981
Land rights	2,608			2,498
Patents, trade names, drawings, and other	4,408			4,356
Total gross amortizable intangible assets	29,006			28,779
Accumulated amortization:
Technical know-how	(7,908		)	(7,438		)
Customer lists	(2,089		)	(1,744		)
Land rights	(356		)	(304		)
Patents, trade names, drawings, and other	(3,630		)	(3,490		)
Total accumulated amortization	(13,983		)	(12,976		)
Amortizable intangible assets, net	15,023			15,803
Indefinite lived intangible assets:
Trade names	11,411			10,927
Intangible assets other than goodwill, net	$	26,434		$	26,730

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,
	2017		2016		2017		2016
Amortization expense	$	313	$	321	$	937	$	961

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WARRANTIES (Tables)

9 Months Ended

Sep. 30, 2017

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" in the Consolidated Balance Sheets, is as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2017			2016			2017			2016
Balance at the beginning of period	$	3,324		$	3,824		$	3,555		$	3,802
Warranties issued	396			568			1,241			1,649
Warranty settlement costs	58			(533		)	(794		)	(1,680		)
Changes in accruals for pre-existing warranties	(324		)	(141		)	(704		)	(77		)
Currency translation adjustments	1			14			157			38
Balance at the end of period	$	3,455		$	3,732		$	3,455		$	3,732

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RESTRUCTURING CHARGES (Tables)

9 Months Ended

Sep. 30, 2017

Restructuring and Related Activities [Abstract]

Summary of Cost Incurred and Expected to be Incurred and the Restructuring Reserve

The table below presents the total costs expected to be incurred in connection with the Program, the amount of costs that have been recognized during the three and nine months ended September 30, 2017 and the cumulative costs recognized to date by the Program (in thousands):

	Total Costs Expected to be Incurred		Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017 (Cumulative costs recognized to date)
Restructuring:
Employee termination costs	$	3,319	$	615	$	1,008
Inventory Impairment	1,401		—		1,401
Facility related costs	1,373		43		158
Other related costs	561		131		200
Total Restructuring Activity	$	6,654	$	789	$	2,767

The amounts accrued associated with the Program are included in "Accrued expenses" and "Inventory" in the Consolidated Balance Sheets. A rollforward of the accrued restructuring costs is presented below (in thousands):

Balance at December 31, 2016	$	—
Restructuring charges:
Employee termination costs	1,008
Inventory Impairment	1,401
Facility related costs	158
Other related costs	200
Total restructuring charges for the period	2,767
Cash expenditures	(882		)
Other adjustments to accrual	—
Foreign currency translation adjustment	131
Balance at September 30, 2017	$	2,016

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PENSION AND POSTRETIREMENT PLANS (Tables)

9 Months Ended

Sep. 30, 2017

Pension and Other Postretirement Benefits Cost (Reversal of Cost) [Abstract]

Summary of the components of net periodic pension benefit costs

A summary of the components of net periodic pension and postretirement benefit costs for the three and nine months ended September 30, 2017 and 2016 is presented below (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended   September 30,						Three Months Ended   September 30,
	2017			2016			2017			2016
Service cost	$	493		$	566		$	3		$	3
Interest cost	1,510			1,662			18			19
Expected return on plan assets	(2,143		)	(2,305		)	—			—
Amortization of prior service credit	(79		)	(64		)	—			—
Amortization of transition asset	—			(78		)	—			—
Amortization of actuarial loss (gain)	943			951			(11		)	(14		)
Settlement loss (gain)	45			765			—			—
Net periodic cost	$	769		$	1,497		$	10		$	8
	Pension Benefits						Postretirement Benefits
	Nine Months Ended   September 30,						Nine Months Ended   September 30,
	2017			2016			2017			2016
Service cost	$	1,467		$	1,695		$	9		$	9
Interest cost	4,511			5,010			54			57
Expected return on plan assets	(6,379		)	(6,942		)	—			—
Amortization of prior service credit	(233		)	(191		)	—			—
Amortization of transition asset	—			(234		)	—			—
Amortization of actuarial loss (gain)	2,810			2,850			(33		)	(42		)
Settlement loss (gain)	75			765			—			—
Net periodic cost	$	2,251		$	2,953		$	30		$	24

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STOCK BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2017

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

Assumptions used in Valuation of stock options

The fair market value of stock options is estimated using the Black-Scholes valuation model using the following assumptions:

	Nine Months Ended September 30, 2017
Expected volatility	37.0% - 38.5%
Expected dividend yield	0.0% - 0.66%
Risk free rate	1.32% - 1.97%
Expected term (in years)	6.0 - 6.5
Weighted average grant date fair value	$4.52
Weighted average exercise price	$12.05

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,
	2017		2016		2017		2016
Stock Options	$	103	$	—	$	135	$	—
Restricted stock/unit awards (“RSA”)	57		67		164		190
Performance share incentives (“PSI”)	28		—		67		—
Total stock based compensation	$	188	$	67	$	366	$	190

Schedule of unrecognized compensation and the expected weighted-average recognition periods

Unrecognized compensation and the expected weighted-average recognition periods with respect to the outstanding RSAs and PSIs as of September 30, 2017 and December 31, 2016, are as follows:

	September 30, 2017						December 31, 2016
	Stock Options		RSAs		PSIs		Stock Options		RSAs		PSIs
Unrecognized compensation cost (in thousands)	$	1,019	$	335	$	818	$	—	$	113	$	520
Expected weighted-average recognition period for unrecognized compensation cost (in years)	2.44		1.30		1.20		N/A		0.92		0.97

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

9 Months Ended

Sep. 30, 2017

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, 2017 and 2016 are as follows (in thousands):

	Three Months ended September 30, 2017
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	24,228		$	(70,188	)	$	(63	)	$	(46,023	)
Other comprehensive income (loss) before reclassifications	266			160			(84		)	342
Less: (Loss) income reclassified from AOCI	—			(898		)	358			(540		)
Net other comprehensive income (loss)	266			1,058			(442		)	882
Income taxes	(259		)	147			(66		)	(178		)
Ending balance, net of tax	$	24,753		$	(69,277	)	$	(439	)	$	(44,963	)

	Three Months Ended September 30, 2016
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	21,359		$	(67,815	)	$	(29	)	$	(46,485	)
Other comprehensive (loss) income before reclassifications	(368		)	1,471			204			1,307
Less: (loss) income reclassified from AOCI	—			(1,560		)	126			(1,434		)
Net other comprehensive (loss) income	(368		)	3,031			78			2,741
Income taxes	256			53			13			322
Ending balance, net of tax	$	20,735		$	(64,837	)	$	36		$	(44,066	)

Schedule of reclassification out of AOCI

Details about reclassification out of AOCI for the three and nine months ended September 30, 2017 and 2016 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	2017			2016			2017			2016
Unrealized gain (loss) on cash flow hedges:
	$	342		$	39		$	222		$	62		Sales
	16			87			25			48			Other expense, net
	358			126			247			110			Total before tax
	69			21			60			18			Income taxes
	$	427		$	147		$	307		$	128		Net of tax
Retirement plans related adjustments:
Amortization of prior service credit	$	79		$	64		$	233		$	191		(a)
Amortization of transition asset	—			78			—			234			(a)
Amortization of actuarial loss	(932		)	(937		)	(2,777		)	(2,808		)	(a)
Settlement loss	(45		)	(765		)	(75		)	(765		)	(a)
	(898		)	(1,560		)	(2,619		)	(3,148		)	Total before tax
	100			228			284			396			Income taxes
	$	(798	)	$	(1,332	)	$	(2,335	)	$	(2,752	)	Net of tax

(a)  These AOCI components are included in the computation of net periodic pension and post retirement costs. See Note 11. "Pension and Postretirement Plans" for details.

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EARNINGS (LOSS) PER SHARE (Tables)

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Schedule of the basis of the earnings per share computation

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

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2017		2016			2017		2016
Numerator for basic and diluted loss per share:
Net earnings (loss) applicable to common shareholders	$	2,199	$	(1,383	)	$	2,674	$	(2,484	)
Denominator for basic and diluted loss per share:
Denominator for basic and diluted loss per share — weighted average shares	12,907		12,835			12,894		12,815
Assumed exercise of stock options	21		—			7		—
Assumed satisfaction of restricted stock conditions	56		—			43		—
Denominator for diluted earnings per share — adjusted weighted average shares	12,984		12,835			12,944		12,815

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SEGMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2017

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, 2017
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	67,994	$	17,142	$	(145	)	$	84,991
Depreciation and amortization	1,438		478					1,916
Segment income	1,546		3,406					4,952
Capital expenditures	657		112					769

	Three Months Ended September 30, 2016
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	52,089		$	15,270	$	(148	)	$	67,211
Depreciation and amortization	1,433			498					1,931
Segment income	(984		)	1,847					863
Capital expenditures	433			118					551

	Nine Months Ended September 30, 2017
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	178,842	$	49,303	$	(400	)	$	227,745
Depreciation and amortization	4,267		1,481		0			5,748
Segment (loss) income	805		8,437					9,242
Capital expenditures	1,425		312					1,737
Segment assets(1)	232,767		46,527					279,294

	Nine Months Ended September 30, 2016
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	158,718		$	46,773	$	(273	)	$	205,218
Depreciation and amortization	4,353			1,562					5,915
Segment (loss) income	(1,864		)	5,342					3,478
Capital expenditures	1,119			424					1,543
Segment assets(1)	226,618			48,341					274,959

____________________

⁽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 income to consolidated income (loss) before income taxes for the three and nine months ended September 30, 2017 and 2016 are as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2017			2016			2017			2016
Segment income	$	4,952		$	863		$	9,242		$	3,478
Unallocated corporate expense	(1,990		)	(1,503		)	(5,872		)	(5,061		)
Interest expense, net	(98		)	(86		)	(230		)	(235		)
Income (loss) before income taxes	$	2,864		$	(726	)	$	3,140		$	(1,818	)

Schedule of reconciliation of segment assets to consolidated total assets

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

	September 30, 2017		December 31, 2016
Total segment assets	$	279,294	$	265,279
Unallocated assets	36,622		32,271
Total assets	$	315,916	$	297,550

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BASIS OF PRESENTATION (Details)	9 Months Ended
	Sep. 30, 2017 reportable_segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable business segments	2

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016	Dec. 31, 2015
Financial instruments
Cash and cash equivalents	$ 32,327	$ 28,255	$ 22,943	$ 32,774
Restricted cash	2,115	2,923
Notes payable	0	703
Notes payable, fair value	0	703
Foreign currency forward contracts, liabilities	850	258
Recurring | Level 1
Financial instruments
Cash and cash equivalents	32,327	28,255
Cash and cash equivalents, fair value	32,327	28,255
Restricted cash	2,115	2,923
Restricted cash, fair value	2,115	2,923
Recurring | Level 2
Financial instruments
Foreign currency forward contracts, assets	404	308
Variable interest rate debt	0	5,986
Variable interest rate debt, fair value	0	5,986
Foreign currency forward contracts, liabilities	$ 1,254	$ 566

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INVENTORIES (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Inventory Disclosure [Abstract]
Raw materials and purchased components	$ 33,286	$ 33,822
Work-in-process	34,506	31,799
Finished products	46,628	41,397
Inventories, net	$ 114,420	$ 107,018

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DERIVATIVE FINANCIAL INSTRUMENTS (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Derivative [Line Items]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	$ 800	$ 500	$ 400	$ 30
Foreign Exchange Contract [Member] | Cash flow hedges
Derivative [Line Items]
Price Risk Cash Flow Hedge Unrealized Gain (Loss) to be Reclassified During Next 12 Months	(500)		(500)
Notional Amount	33,700		33,700		$ 45,500
Not Designated as Hedging Instrument [Member] | Foreign Exchange Contract [Member]
Derivative [Line Items]
Notional Amount	$ 30,600		$ 30,600		$ 35,400

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DERIVATIVE FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	$ 800	$ 500	$ 400	$ 30
Foreign currency forwards designated as hedges - Other current assets	317		317		$ 153
Foreign currency forwards designated as hedges - Accrued expenses	(903)		(903)		(264)
Foreign currency forwards not designated as hedges - Other current assets	87		87		155
Foreign currency forwards not designated as hedges - Accrued expenses	(351)		(351)		(302)
Foreign currency forward contracts, liabilities	$ (850)		$ (850)		$ (258)

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PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Property, plant and equipment
Property, plant and equipment, gross	$ 172,432	$ 179,231
Accumulated depreciation	(121,863)	(122,270)
Property, plant and equipment, net	50,569	56,961
Land, buildings and improvements
Property, plant and equipment
Property, plant and equipment, gross	71,610	81,311
Machinery, equipment and fixtures
Property, plant and equipment
Property, plant and equipment, gross	77,035	75,177
Office furniture, equipment and vehicles
Property, plant and equipment
Property, plant and equipment, gross	23,408	22,471
Construction in progress
Property, plant and equipment
Property, plant and equipment, gross	$ 379	$ 272

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GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Summary of goodwill amount
Goodwill	$ 39,013	$ 39,013
Accumulated impairment losses	(32,434)	(32,434)
Balance at December 31, 2016	6,579
Accumulated impairment losses	62
Balance at September 30, 2017	6,641
MMS
Summary of goodwill amount
Goodwill	32,434	32,434
Accumulated impairment losses	(32,434)	(32,434)
Balance at December 31, 2016	0
Accumulated impairment losses	0
Balance at September 30, 2017	0
ATA
Summary of goodwill amount
Goodwill	6,579	6,579
Accumulated impairment losses	0	$ 0
Balance at December 31, 2016	6,579
Accumulated impairment losses	62
Balance at September 30, 2017	$ 6,641

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GOODWILL AND INTANGIBLE ASSETS (Details 2) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	$ 29,006	$ 28,779
Finite-Lived Intangible Assets, Accumulated Amortization	(13,983)	(12,976)
Finite-Lived Intangible Assets, Net	15,023	15,803
Other intangible assets, net	26,434	26,730
Technical Know How [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	12,979	12,944
Finite-Lived Intangible Assets, Accumulated Amortization	(7,908)	(7,438)
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	9,011	8,981
Finite-Lived Intangible Assets, Accumulated Amortization	(2,089)	(1,744)
Land Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	2,608	2,498
Finite-Lived Intangible Assets, Accumulated Amortization	(356)	(304)
Patents, trade names, drawings, and other [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	4,408	4,356
Finite-Lived Intangible Assets, Accumulated Amortization	(3,630)	(3,490)
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Indefinite-Lived Intangible Assets (Excluding Goodwill)	$ 11,411	$ 10,927

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GOODWILL AND INTANGIBLE ASSETS (Details 3) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of Intangible Assets	$ 313	$ 321	$ 937	$ 961

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WARRANTIES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Changes in product warranty accrual
Balance at the beginning of period	$ 3,324	$ 3,824	$ 3,555	$ 3,802
Warranties issued	396	568	1,241	1,649
Warranty settlement costs	58	(533)	(794)	(1,680)
Changes in accruals for pre-existing warranties	(324)	(141)	(704)	(77)
Currency translation adjustments	1	14	157	38
Balance at the end of period	$ 3,455	$ 3,732	$ 3,455	$ 3,732

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RESTRUCTURING CHARGES (Details Textual) - USD ($) $ in Thousands	1 Months Ended	9 Months Ended
	Mar. 31, 2017	Sep. 30, 2017
Restructuring Cost and Reserve [Line Items]
Expected restructuring costs		$ 6,654
Facility related costs
Restructuring Cost and Reserve [Line Items]
Expected restructuring costs		1,373
Employee termination costs
Restructuring Cost and Reserve [Line Items]
Expected restructuring costs		3,319
Other related costs
Restructuring Cost and Reserve [Line Items]
Expected restructuring costs		561
Disposal Group, Disposed of by Sale, Not Discontinued Operations | MMS
Restructuring Cost and Reserve [Line Items]
Consideration for sale of facility		9,800
Strategic Restructuring Program | Facility related costs | MMS
Restructuring Cost and Reserve [Line Items]
Expected restructuring costs		4,700
Non-cash inventory impairment charge		1,400
Strategic Restructuring Program | Facility related costs | MMS | Minimum
Restructuring Cost and Reserve [Line Items]
Annual pre-tax savings, generated from restructuring	$ 2,000
Strategic Restructuring Program | Facility related costs | MMS | Maximum
Restructuring Cost and Reserve [Line Items]
Annual pre-tax savings, generated from restructuring	$ 2,500
Strategic Restructuring Program | Disposal Group, Disposed of by Sale, Not Discontinued Operations | Facility related costs | MMS
Restructuring Cost and Reserve [Line Items]
Deposit for sale of manufacturing facility		500
Strategic Global Realignment
Restructuring Cost and Reserve [Line Items]
Annual pre-tax savings, generated from restructuring		10,000
Strategic Global Realignment | Employee termination costs
Restructuring Cost and Reserve [Line Items]
Annual pre-tax savings, generated from restructuring		2,000
Strategic Global Realignment | Other related costs
Restructuring Cost and Reserve [Line Items]
Annual pre-tax savings, generated from restructuring		5,000
Strategic Global Realignment | Selling, General and Administrative Expenses | Employee termination costs
Restructuring Cost and Reserve [Line Items]
Annual pre-tax savings, generated from restructuring		5,000
Strategic Restructuring Program and Strategic Global Realignment | Minimum
Restructuring Cost and Reserve [Line Items]
Annual pre-tax savings, generated from restructuring		12,000
Strategic Restructuring Program and Strategic Global Realignment | Maximum
Restructuring Cost and Reserve [Line Items]
Annual pre-tax savings, generated from restructuring		$ 12,500

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RESTRUCTURING CHARGES (Cost Incurred and Expected to be Incurred) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	$ 6,654		$ 6,654
Cost Recognized	789	$ 182	2,767	$ 608
Cost Recognized (Cumulative costs recognized to date)	2,767		2,767
Employee termination costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	3,319		3,319
Cost Recognized	615		1,008
Cost Recognized (Cumulative costs recognized to date)	1,008		1,008
Inventory Impairment
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	1,401		1,401
Cost Recognized	0		1,401
Cost Recognized (Cumulative costs recognized to date)	1,401		1,401
Facility related costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	1,373		1,373
Cost Recognized	43		158
Cost Recognized (Cumulative costs recognized to date)	158		158
Other related costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	561		561
Cost Recognized	131		200
Cost Recognized (Cumulative costs recognized to date)	$ 200		$ 200

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RESTRUCTURING CHARGES (Restructuring Reserve) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Restructuring Reserve [Roll Forward]
Balance at December 31, 2016			$ 0
Restructuring	$ 789	$ 182	2,767	$ 608
Cash expenditures			(882)
Other adjustments to accrual			0
Foreign currency translation adjustment			131
Balance at September 30, 2017	2,016		2,016
Employee termination costs
Restructuring Reserve [Roll Forward]
Restructuring	615		1,008
Inventory Impairment
Restructuring Reserve [Roll Forward]
Restructuring	0		1,401
Facility related costs
Restructuring Reserve [Roll Forward]
Restructuring	43		158
Other related costs
Restructuring Reserve [Roll Forward]
Restructuring	$ 131		$ 200

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INCOME TAXES (Details) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2017 USD ($)
Income Tax Disclosure [Abstract]
Effective tax rate (as a percent)	23.20%	14.80%
Uncertain income tax position	$ 1.4	$ 1.4
Interest and penalties included in uncertain income tax position	0.1	0.1
Potential decrease in uncertain tax positions	$ 1.2	$ 1.2

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COMMITMENTS AND CONTINGENCIES (Details) - Koppers Pond $ in Millions	1 Months Ended
	Sep. 30, 2017 USD ($) party	Jun. 30, 2017 party	Jul. 31, 2016 USD ($)
Site Contingency [Line Items]
Clean-up phase cost | $			$ 1.9
Number of parties added to cost sharing agreement (party) | party		2
Number of potentially responsible parties (party) | party	9
Percentage of costs allocated to company	10.75%
Accrual for environmental loss contingencies | $	$ 0.2

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PENSION AND POSTRETIREMENT PLANS (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Pension Benefits
Components of net periodic benefit cost (credit)
Service cost	$ 493	$ 566	$ 1,467	$ 1,695
Interest cost	1,510	1,662	4,511	5,010
Expected return on plan assets	(2,143)	(2,305)	(6,379)	(6,942)
Amortization of prior service credit	(79)	(64)	(233)	(191)
Amortization of transition asset	0	(78)	0	(234)
Amortization of loss (gain)	943	951	2,810	2,850
Settlement loss (gain)	45	765	75	765
Net periodic cost	769	1,497	2,251	2,953
Postretirement Benefits
Components of net periodic benefit cost (credit)
Service cost	3	3	9	9
Interest cost	18	19	54	57
Expected return on plan assets	0	0	0	0
Amortization of prior service credit	0	0	0	0
Amortization of transition asset	0	0	0	0
Amortization of loss (gain)	(11)	(14)	(33)	(42)
Settlement loss (gain)	0	0	0	0
Net periodic cost	$ 10	$ 8	$ 30	$ 24

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STOCK BASED COMPENSATION (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2017	Sep. 30, 2016
Non-qualified stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options granted (in shares)	255,000
Employee stock option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested stock options outstanding (in shares)	0	0
Unvested stock options outstanding (in shares)	0	0
Contractual term of awards		P10Y
Intrinsic value of stock options	$ 0.8	$ 0.8
Employee stock option | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards vesting period		2 years
Employee stock option | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards vesting period		3 years
Restricted stock/units awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted in period (in shares)		42,350	0
Shares forfeited in period (in shares)		6,850
Restricted stock/units awards | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards vesting period		3 years
Restricted stock/units awards | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards vesting period		4 years
Performance share incentives
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted in period (in shares)		42,350	0
Shares forfeited in period (in shares)		8,161

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STOCK BASED COMPENSATION (Assumptions Used in Valuation of Stock Options) (Details 1) - Employee stock option	3 Months Ended
	Sep. 30, 2017 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free rate, minimum	1.32%
Risk free rate, maximum	1.97%
Weighted average grant date fair value (in dollars per share)	$ 4.52
Weighted average exercise price (in dollars per share)	$ 12.05
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	37.00%
Expected dividend yield	0.00%
Expected term (in years)	6 years
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	38.50%
Expected dividend yield	0.66%
Expected term (in years)	6 years 6 months

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STOCK BASED COMPENSATION (Summary of Stock Based Compensation Expense) (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock based compensation	$ 188	$ 67	$ 366	$ 190
Employee stock option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock based compensation	103	0	135	0
Restricted stock/units awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock based compensation	57	67	164	190
Performance share incentives
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock based compensation	$ 28	$ 0	$ 67	$ 0

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STOCK BASED COMPENSATION (Unrecognized Compensation and the Expected Weighted-average Recognition Periods) (Details 3) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Employee stock option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost (in thousands)	$ 1,019	$ 0
Expected weighted-average recognition period for unrecognized compensation cost (in years)	2 years 5 months 9 days
Restricted stock/units awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost (in thousands)	$ 335	$ 113
Expected weighted-average recognition period for unrecognized compensation cost (in years)	1 year 3 months 18 days	11 months 1 day
Performance share incentives
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost (in thousands)	$ 818	$ 520
Expected weighted-average recognition period for unrecognized compensation cost (in years)	1 year 2 months 12 days	11 months 19 days

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Changes in AOCI by component
Beginning balance, net of tax	$ (46,023)	$ (46,485)	$ (54,656)	$ (48,713)
Other comprehensive (loss) income before reclassifications	342	1,307	7,124	2,036
Total before tax	(540)	(1,434)	(2,372)	(3,038)
Net other comprehensive (loss) income	882	2,741	9,496	5,074
Income tax (benefit) expense	(178)	322	(197)	427
Ending balance, net of tax	(44,963)	(44,066)	(44,963)	(44,066)
Foreign currency translation adjustments
Changes in AOCI by component
Beginning balance, net of tax	24,228	21,359	15,483	20,529
Other comprehensive (loss) income before reclassifications	266	(368)	9,199	531
Total before tax	0	0	0	0
Net other comprehensive (loss) income	266	(368)	9,199	531
Income tax (benefit) expense	(259)	256	(71)	325
Ending balance, net of tax	24,753	20,735	24,753	20,735
Retirement plans related adjustments
Changes in AOCI by component
Beginning balance, net of tax	(70,188)	(67,815)	(70,102)	(69,100)
Other comprehensive (loss) income before reclassifications	160	1,471	(1,812)	1,185
Total before tax	(898)	(1,560)	(2,619)	(3,148)
Net other comprehensive (loss) income	1,058	3,031	807	4,333
Income tax (benefit) expense	147	53	(18)	70
Ending balance, net of tax	(69,277)	(64,837)	(69,277)	(64,837)
Unrealized gain (loss) on cash flow hedges
Changes in AOCI by component
Beginning balance, net of tax	(63)	(29)	(37)	(142)
Other comprehensive (loss) income before reclassifications	(84)	204	(263)	320
Total before tax	358	126	247	110
Net other comprehensive (loss) income	(442)	78	(510)	210
Income tax (benefit) expense	(66)	13	(108)	32
Ending balance, net of tax	$ (439)	$ 36	$ (439)	$ 36

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details 2) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Reclassification out of AOCI
Sales		$ 84,991	$ 67,211	$ 227,745	$ 205,218
Other expense, net		(276)	(321)	(468)	(249)
Income from continuing operations before income taxes		2,864	(726)	3,140	(1,818)
Income taxes		(665)	(657)	(466)	(666)
Net earnings (loss) applicable to common shareholders		2,199	(1,383)	2,674	(2,484)
Total before tax		(540)	(1,434)	(2,372)	(3,038)
Unrealized gain (loss) on cash flow hedges
Reclassification out of AOCI
Total before tax		358	126	247	110
Amortization of prior service credit
Reclassification out of AOCI
Total before tax	[1]	79	64	233	191
Amortization of transition asset
Reclassification out of AOCI
Total before tax	[1]	0	78	0	234
Amortization of actuarial loss
Reclassification out of AOCI
Total before tax	[1]	(932)	(937)	(2,777)	(2,808)
Settlement loss
Reclassification out of AOCI
Total before tax		(45)	(765)	(75)	(765)
Retirement plans related adjustments
Reclassification out of AOCI
Total before tax		(898)	(1,560)	(2,619)	(3,148)
Income taxes		100	228	284	396
Net of tax		(798)	(1,332)	(2,335)	(2,752)
Amount reclassified from AOCI | Unrealized gain (loss) on cash flow hedges
Reclassification out of AOCI
Sales		342	39	222	62
Other expense, net		16	87	25	48
Income from continuing operations before income taxes		358	126	247	110
Income taxes		69	21	60	18
Net earnings (loss) applicable to common shareholders		$ 427	$ 147	$ 307	$ 128

[1] These AOCI components are included in the computation of net periodic pension and post retirement costs. See Note 11. "Pension and Postretirement Plans" for details.

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EARNINGS (LOSS) PER SHARE (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Earnings per share
Net earnings (loss) applicable to common shareholders	$ 2,199	$ (1,383)	$ 2,674	$ (2,484)
Denominator for basic and diluted loss per share:
Denominator for basic (loss) earnings per share - weighted average shares (in shares)	12,907,000	12,835,000	12,894,000	12,815,000
Denominator for diluted earnings per share — adjusted weighted average shares (in shares)	12,984,000	12,835,000	12,944,000	12,815,000
Stock Compensation Plan
Denominator for basic and diluted loss per share:
Anti-dilutive stock-based awards excluded from calculation of diluted earnings per share (in shares)	221,076	90,405	99,384	93,245
Employee stock option
Denominator for basic and diluted loss per share:
Assumed exercise of stock options and satisfaction of restricted stock conditions (in shares)	21,000	0	7,000	0
Restricted Stock
Denominator for basic and diluted loss per share:
Assumed exercise of stock options and satisfaction of restricted stock conditions (in shares)	56,000	0	43,000	0

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SEGMENT INFORMATION (Details) - USD ($) $ in Thousands		3 Months Ended				9 Months Ended
		Sep. 30, 2017		Sep. 30, 2016		Sep. 30, 2017		Sep. 30, 2016		Dec. 31, 2016
Financial results of reportable segments
Sales		$ 84,991		$ 67,211		$ 227,745		$ 205,218
Depreciation and amortization						6,694		6,095
Segment (loss) income		2,962		(640)		3,370		(1,583)
Capital expenditures						1,737		1,543
Segment assets		315,916				315,916				$ 297,550
Reconciliation of segment income to consolidated income before income taxes
Income (loss) before income taxes		2,864		(726)		3,140		(1,818)
Operating segment
Financial results of reportable segments
Sales		84,991		67,211		227,745		205,218
Depreciation and amortization		1,916		1,931		5,748		5,915
Segment (loss) income		4,952		863		9,242		3,478
Capital expenditures		769		551		1,737		1,543
Segment assets		279,294	[1]	274,959	[1]	279,294	[1]	274,959	[1]	265,279
Reconciliation of segment income to consolidated income before income taxes
Unallocated corporate expense		(1,990)		(1,503)		(5,872)		(5,061)
Interest expense, net		(98)		(86)		(230)		(235)
Income (loss) before income taxes		2,864		(726)		3,140		(1,818)
Operating segment | MMS
Financial results of reportable segments
Sales		67,994		52,089		178,842		158,718
Depreciation and amortization		1,438		1,433		4,267		4,353
Segment (loss) income		1,546		(984)		805		(1,864)
Capital expenditures		657		433		1,425		1,119
Segment assets	[1]	232,767		226,618		232,767		226,618
Operating segment | ATA
Financial results of reportable segments
Sales		17,142		15,270		49,303		46,773
Depreciation and amortization		478		498		1,481		1,562
Segment (loss) income		3,406		1,847		8,437		5,342
Capital expenditures		112		118		312		424
Segment assets	[1]	46,527		48,341		46,527		48,341
Inter-Segment Eliminations
Financial results of reportable segments
Sales		(145)		$ (148)		(400)		$ (273)
Unallocated assets
Financial results of reportable segments
Segment assets		36,622				36,622				32,271
Reconciliation of segment income to consolidated income before income taxes
Cash		$ 32,300				$ 32,300				$ 28,300

[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.