-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UJVx4NUPHpvorSQgJMZYcxNXQQWmv6DhmGL9xT9TvT3BpwNq75nIeY36QeBjMO0e AgKFSXN3imWBSootbTuKtQ== 0000313716-98-000004.txt : 19981116 0000313716-98-000004.hdr.sgml : 19981116 ACCESSION NUMBER: 0000313716-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARDINGE INC CENTRAL INDEX KEY: 0000313716 STANDARD INDUSTRIAL CLASSIFICATION: MACHINE TOOLS, METAL CUTTING TYPES [3541] IRS NUMBER: 160470200 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15760 FILM NUMBER: 98747069 BUSINESS ADDRESS: STREET 1: ONE HARDING DRIVE CITY: ELMIRA STATE: NY ZIP: 14902 BUSINESS PHONE: 6077342281 MAIL ADDRESS: STREET 1: ONE HARDINGE DRIVE STREET 2: ONE HARDINGE DRIVE CITY: ELMIRA STATE: NY ZIP: 14902 FORMER COMPANY: FORMER CONFORMED NAME: HARDINGE BROTHERS INC DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 OR |_| 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 (I.R.S. Employer incorporation or organization) Identification No.) Hardinge Inc. One Hardinge Drive Elmira, NY 14902 (Address of principal executive offices) (Zip code) (607) 734-2281 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ As of September 30, 1998 there were 9,824,746 shares of Common Sock of the Registrant outstanding. HARDINGE INC. AND SUBSIDIARIES INDEX Part I Financial Information Page Item 1. Financial Statements Consolidated Balance Sheets at September 30, 1998 and December 31, 1997. 3 Consolidated Statements of Income and Retained Earnings for the three months ended September 30, 1998 and 1997 and the nine months ended September 30, 1998 and 1997. 5 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1998 and 1997. 6 Notes to Consolidated Financial Statements. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 10 Item 3. Quantitative and Qualitative Disclosures About Market Risks. 14 Part II Other Information Item 1. Legal Proceedings 15 Item 2. Changes in Securities 15 Item 3. Default upon Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16 PART I, ITEM 1 HARDINGE INC. AND SUBSIDIARIES Consolidated Balance Sheets (In Thousands) Sept. 30, Dec. 31, 1998 1997 ------------------------------- (Unaudited) Assets Current assets: Cash $ 3,170 $ 1,565 Accounts receivable 55,069 56,210 Notes receivable 6,472 5,886 Inventories 94,979 91,969 Deferred income taxes 2,961 2,961 Prepaid expenses 1,635 1,790 ------------------------------- Total current assets 164,286 160,381 Property, plant and equipment: Property, plant and equipment 144,807 128,640 Less accumulated depreciation 69,156 63,453 ------------------------------- 75,651 65,187 Other assets: Notes receivable 11,927 11,951 Deferred income taxes 837 837 Goodwill 3,974 4,082 Other 1,808 2,846 ------------------------------- 18,546 19,716 ------------------------------- Total assets $258,483 $245,284 =============================== See accompanying notes. HARDINGE INC. AND SUBSIDIARIES Consolidated Balance Sheets--Continued (Dollars In Thousands) Sept. 30, Dec. 31, 1998 1997 ------------------------------ (Unaudited) Liabilities and shareholders' equity: Current liabilities: Accounts payable $ 12,466 $ 18,323 Notes payable to bank 4,251 7,282 Accrued expenses 13,565 9,756 Accrued income taxes 2,980 1,614 Deferred income taxes 2,012 1,553 Current portion long-term debt 3,629 3,468 ------------------------------- Total current liabilities 38,903 41,996 Other liabilities: Long-term debt 34,362 31,012 Accrued pension plan expense 2,311 2,311 Deferred income taxes 1,646 1,575 Accrued postretirement benefits 5,316 5,206 ------------------------------- 43,635 40,104 Shareholders' equity: Preferred stock, Series A, par value $.01: Authorized - 2,000,000; issued - none Common stock, $.01 par value: Authorized shares - 20,000,000 Issued shares - 9,843,992 at Sept. 30, 1998 and 6,511,703 at December 31, 1997 98 65 Additional paid-in capital 60,012 58,065 Retained earnings 123,868 112,625 Treasury shares (444) (552) Accumulated other comprehensive income - Foreign currency translation adjustments (2,253) (2,763) Deferred employee benefits (5,336) (4,256) ------------------------------- Total shareholders' equity 175,945 163,184 ------------------------------- Total liabilities and shareholders' equity $258,483 $245,284 =============================== See accompanying notes. HARDINGE INC AND SUBSIDIARIES Consolidated Statements of Income and Retained Earnings (Unaudited) (In Thousands, Except Per Share Data)
Three months ended Nine months ended September 30, September 30, 1998 1997 1998 1997 ----------------------------- ----------------------------- Net Sales $62,041 $56,772 $192,891 $180,496 Cost of sales 39,435 37,579 123,832 119,791 ----------------------------------------------------------------------------------------- ----------------------------- Gross profit 22,606 19,193 69,059 60,705 Selling, general and administrative expenses 14,886 12,393 43,089 37,172 Unusual expense 1,960 ----------------------------------------------------------------------------------------- ----------------------------- Income from operations 7,720 6,800 25,970 21,573 Interest expense 572 531 1,743 1,896 Interest (income) (120) (176) (379) (530) ----------------------------------------------------------------------------------------- ----------------------------- Income before income taxes 7,268 6,445 24,606 20,207 Income taxes 2,737 2,460 9,212 7,875 ----------------------------------------------------------------------------------------- ----------------------------- Net income 4,531 3,985 15,394 12,332 Retained earnings at beginning of period 120,714 105,498 112,625 99,622 Less dividends declared 1,377 1,234 4,118 3,705 Less stock split effected in the form of a dividend 33 ========================================================================================= ============================= Retained earnings at end of period $123,868 $ 108,249 $123,868 $ 108,249 ========================================================================================= ============================= Per share data: Basic earnings per share $ .48 $ .42 $ 1.63 $ 1.32 ========================================================================================= ============================= Weighted average number of common shares outstanding 9,426 9,380 9,419 9,339 ============================= ============================= Diluted earnings per share $ .48 $ .42 $ 1.63 $ 1.31 ========================================================================================= ============================= Weighted average number of common shares outstanding 9,468 9,413 9,452 9,419 ============================= ============================= Cash dividends declared $ .14 $ .13 $ .42 $ .39 ============================= =============================
1997 per share data restated for stock split - see Note D. See accompanying notes. HARDINGE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In Thousands) Nine Months Ended September 30, 1998 1997 ---------------------------------- Net cash provided by operating activities $20,659 $ 32,042 Investing activities: Capital expenditures (15,263) (6,211) Proceeds frpm sale of assets 17 Investment in subsidiary (4,588) ---------------------------------- Net cash (used in) investing activities (15,263) (10,782) Financing activities: (Decrease) in short-term notes payable to bank (3,158) (8,124) Increase (decrease) in long-term debt 3,835 (7,977) (Purchase) sale of treasury stock (430) 84 Dividends paid (4,118) (3,705) --------------------------------- Net cash (used in) financing activities (3,871) (19,722) Effect of exchange rate changes on cash 80 (57) --------------------------------- Net increase in cash $ 1,605 $1,481 ================================= See accompanying notes NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) September 30, 1998 NOTE A--BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1998, are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report for the year ended December 31, 1997. The Company has adopted Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information." The Company operates in only one business segment - industrial machine tools. NOTE B--INVENTORIES Inventories are summarized as follows (dollars in thousands): September 30, December 31, 1998 1997 ---------------------------------- Finished products $ 39,885 $ 32,290 Work-in-process 27,921 32,328 Raw materials and purchased components 27,173 27,351 =========== =========== $ 94,979 $ 91,969 =========== =========== NOTE C--UNUSUAL EXPENSE 1997's first quarter included a one-time charge of $1,960,000 (approximately $1,200,000 after tax, or $.13 per share). This non-recurring charge involves outside costs incurred in connection with a major acquisition that the Company carried into the final stages of the due diligence process but decided not to complete. NOTE D--CHANGES IN SHAREHOLDERS' EQUITY On April 28, 1998, the Board of Directors approved a three-for-two stock split of the Company's common shares to be paid in the form of a 50 percent stock dividend. As a result of the split, 3,281,351 additional shares were issued on May 29, 1998 to shareholders of record on May 8, 1998 and retained earnings were reduced by $32,813. Any fractional shares resulting from the split were paid in cash. All references in the accompanying consolidated financial statements to common shares outstanding and earnings per share have been restated to reflect this stock split. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) September 30, 1998 NOTE E--EARNINGS PER SHARE AND WEIGHTED AVERAGE SHARES OUTSTANDING Earnings per share are computed using the weighted average number of shares of common stock outstanding during the period. For diluted earnings per share, the weighted average number of shares includes common stock equivalents related primarily to restricted stock. In 1997, Statement of Financial Accounting Standards No. 128 "Earnings per Share" was issued. Statement 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. All earnings per share amounts have been restated to conform to the requirements of Statement 128. All earnings per share amounts and shares outstanding have been restated to reflect the stock split mentioned above. The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations required by Statement No. 128. The table sets forth the computation of basic and diluted earnings per share:
Three months ended Nine months ended September 30, September 30, -------------------------------------------------------- 1998 1997 1998 1997 -------------------------------------------------------- (in thousands) Numerator: Net income $ 4,531 $ 3,985 $ 15,394 $12,332 Numerator for basic earnings per share 4,531 3,985 15,394 12,332 Numerator for diluted earnings per share 4,531 3,985 15,394 12,332 Denominator: Denominator for basic earnings per share -weighted average shares 9,426 9,380 9,419 9,339 Effect of diluted securities: Restricted stock and stock options 42 33 33 80 Denominator for diluted earnings per share -adjusted weighted average shares 9,468 9,413 9,452 9,419 Basic earnings per share $ .48 $ .42 $ 1.63 $ 1.32 ========================= ========================== Diluted earnings per share $ .48 $ .42 $ 1.63 $ 1.31 ========================= ==========================
NOTE F--DIVIDENDS DECLARED Dividends declared per share have been restated to reflect the additional shares issued in the stock split mentioned above. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) September 30, 1998 NOTE G--REPORTING COMPREHENSIVE INCOME As of January 1, 1998 the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." Statement 130 establishes new rules for the reporting and display of comprehensive income and its components. However, the adoption of this Statement had no impact on the Company's net income or shareholders' equity. Statement 130 requires that foreign currency translation adjustments, which prior to adoption were reported separately in shareholders' equity, be included in shareholders' equity as other comprehensive income. Prior year financial statements were reclassified to conform to the requirements of Statement 130. During the three months and nine months ended September 30, 1998 and 1997, the components of total comprehensive income consisted of the following (dollars in thousands): Three months ended Nine months ended September 30, September 30, 1998 1997 1998 1997 --------- --------- --------- ---------- Net Income $ 4,531 $ 3,985 $ 15,394 $ 12,332 Foreign currency translation adjustments 814 (96) 510 (1,880) --------- --------- --------- ---------- Comprehensive Income $ 5,345 $ 3,889 $ 15,904 10,452 ========= ========= ========= ========== PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following are management's comments relating to significant changes in the results of operations for the three month and nine month periods ended September 30, 1998 and 1997 and in the Company's financial condition during the nine month period ended September 30, 1998. Results of Operations Net Sales. Net sales for the quarter ended September 30, 1998 totaled $62,041,000 compared to $56,772,000 during the same 1997 quarter, an in- crease of 9.3%. Year to date sales of $192,891,000 for the first nine months of 1998 represent an increase of 6.9% over 1997's nine month total of $180,496,000. Sales of machines accounted for $42,112,000 of net sales for the third quarter of 1998, while sales of non-machine products and services contributed the remaining $19,929,000. Compared to the prior year's third quarter, machine sales increased by 14.8% while other products experienced a slight decline of 0.9%. This difference in rates of change was due in part to shipment of a particularly large machine order to an automotive customer during this year's third quarter. For the nine months ended September 30, 1998 machine revenues were $133,679,000 or 69.3% of total volume with the remaining $59,212,000 or 30.7% coming from other products. This compares to the first nine months of 1997 where machine revenues totaled $121,789,000 or 67.5%, and other revenues totaled $58,707,000 or 32.5%. The increase in the relative percentage of machine sales throughout these periods reflects the Company's continued aggressive introduction of new machine products and strategic acquisitions. Sales to customers in the United States for the quarter ended September 30, 1998 increased by $1,687,000 or 4.1% over the same 1997 quarter. Sales to European customers increased by $876,000 or 7.6%, while sales to all other parts of the world increased by $2,706,000, an increase of 68.4%. For the nine months ended September 30, the 1998 sales apportionment among the US, Europe, and all other areas was 69.6%, 21.2%, and 9.2%, respectively, compared to 72.0%, 18.7%, and 9.3% during 1997. Gross Profit. As in both previous quarters this year, the Company's gross margin continued to increase during the third quarter. Gross margin, as a percentage of sales, was 36.4% in the third quarter of 1998 compared to 33.8% for the same 1997 quarter. Gross margin percentages for the nine month periods ended September 30, 1998 and 1997 were 35.8% and 33.6%, respectively. The improved margins reported throughout the year are the result of a more profitable mix of machine sales and better factory utilization. Selling, General,and Administrative Expenses. Selling, general and administrative ("SG&A") expenses as a percentage of sales for the quarter ended September 30 were 24.0% in 1998 compared to 21.8% during 1997. The same upward trend is true for the nine month periods ended September 30, 1998 and 1997, at 22.3% and 20.6%, respectively. The additional expense during the first nine months of 1998 is a result of several factors. The implementation of the Company's strategy to provide better service to our growing marketplace has resulted in the addition of both sales and service personnel, and the opening of new regional technical centers in Ohio and Texas. The Company has just completed participation in the International Manufacturing Technology Show in Chicago. The show, held every two years, is the premier showcase for Hardinge products. The Company's presence at this year's show was broadly expanded to accommodate its growing product lines. Finally, 1997's year-to-date SG&A expenses include only two quarters of Hansvedt Industries costs as a result of the Hansvedt acquisition having taken place in April, 1997. Income from Operations. Operating income for the quarter ended September 30, 1998 was $7,720,000 (12.4% of sales) compared to $6,800,000 (12.0%) during the same quarter last year. Income from operations for the nine months ended September 30, 1998 was $25,970,000, or 13.5% of sales, compared to 1997's $23,533,000, or 13.0%, as calculated prior to the non-recurring charge related to acquisition efforts which was reported during 1997's first quarter. With this non-recurring charge taken into consideration, operating income for the nine months ended September 30, 1997 was $21,573,000, or 12.0% of sales. The increases in sales volume and gross margin rates described earlier have more than offset the additional SG&A costs during 1998, resulting in these improvements. Interest Expense. Interest expense for the quarter ended September 30, 1998 was $572,000, compared to $531,000 a year earlier, resulting from slightly higher average borrowing at slightly lower rates. For the nine month periods ended September 30, 1998 and 1997, interest expense totaled $1,743,000 and $1,896,000, respectively. Interest Income. Interest income is derived mainly from financing of customer purchases. A program of reduced interest rates as a sales incentive during 1998 is responsible for the reduced interest income of $120,000 and $379,000 for the quarter and nine months ended September 30, 1998 compared to $176,000 and $530,000 for the same periods a year earlier. Income Taxes. The provision for income taxes as a percentage of pre-tax income was 37.7% and 37.4%, for the third quarter and first nine months of 1998, respectively, compared to 38.2% and 39.0% for the same 1997 periods. The rate reductions are a reflection of higher utilization of US income tax credits. Net Income. Net income for the third quarter of 1998 was $4,531,000, or $.48 per share, an increase of $546,000 or 13.7% from 1997's income of $3,985,000 or $.42 per share which was restated for the Company's May 1998 3-for-2 stock split. Year to date 1998 net income was $15,394,000, or $1.63 per share, compared to $12,332,000, or $1.31 per share for the same 1997 period after restatement. As previously reported, 1997's net income has been reduced by $1,200,000, or $.13 per share (after restatement), resulting from a non-recurring charge related to first quarter 1997 acquisition efforts. Excluding that charge, net income for the first nine months of 1997 was $13,532,000, or $1.44 per share as restated. The net income gain is attributable to the accumulation of factors already discussed. Earnings Per Share. All earnings per share and weighted average share amounts are presented, and where appropriate, restated as diluted to conform with Financial Accounting Standards Board Statement No. 128, Earnings Per Share. Additionally, to provide comparability between periods, prior periods' data have also been restated to give effect to the Company's 3-for-2 stock split which took place in May, 1998. Quarterly Information The following table sets forth certain quarterly financial data for each of the periods indicated. Three Months Ended Mar. 31, June 30, Sept. 30, Dec. 31, 1997 1997 1997 1997 --------------------------------------------------- (in thousands, except per share data) --------------------------------------------------- Net Sales $ 60,056 $ 63,668 $ 56,772 $66,083 Gross Profit 20,178 21,334 19,193 21,713 Income from operations 6,414 8,359 6,800 8,926 Net income 3,514 4,833 3,985 5,608 Diluted earnings per share .38 .52 .42 .59 Weighted average shares outstanding 9,328 9,356 9,413 9,443 Three Months Ended Mar. 31, June 30, Sept. 30, 1998 1998 1998 --------------------------------------------------- (in thousands, except per share data) --------------------------------------------------- Net Sales $ 65,779 $ 65,071 $ 62,041 Gross Profit 22,853 23,600 22,606 Income from operations 9,182 9,068 7,720 Net income 5,454 5,409 4,531 Diluted earnings per share .58 .57 .48 Weighted average shares outstanding 9,441 9,468 9,468 Liquidity and Capital Resources Hardinge's operating activities for the nine months ended September 30, 1998 provided funds totaling $20,659,000 compared to $ 32,042,000 for the same period a year earlier. The 1998 and 1997 nine month periods generated $22,509,000 and $18,813,000, respectively, from net income plus depreciation and amortization. However, funds were used to increase inventory by $2,031,000 during the nine months ended September 30, 1998. During the nine months ended September 30, 1997, funds were generated by an inventory reduction of $11,804,000 as inventory levels, which had been increased during 1996 for new product introductions and large auto business orders, were reduced. These significant changes in inventory levels were largely responsible for the overall difference in funds provided by operations between the two nine month periods. Throughout the nine months ended September 30, 1998, total debt remained nearly level. However, during the same 1997 period the Company repaid short and long-term borrowings totaling $16,101,000. Capital expenditures and acquisition activities required $15,263,000 and $10,782,000 in funds for the nine month periods ended September 30, 1998 and 1997, respectively. 1998's capital expenditures include a number of very large items of manufacturing equipment purchased to machine larger part sizes and to increase productivity of our manufacturing operations in both the U.S. and Switzerland. The net result of all operating, financing, and investing activities was an increase in cash of $1,605,000 for the nine months ended September 30, 1998 compared to $1,481,000 during the same period of the previous year. Hardinge's current ratio at September 30, 1998 was 4.22:1, compared to 3.82:1 at December 31, 1997. Hardinge provides long-term financing for the purchase of its equipment by qualified customers. We periodically sell portfolios of our customer notes to financial institutions in order to reduce debt and finance current operations. Our customer financing program has an impact on our month-to-month borrowings, but it has had little long-term impact on our working capital because of the ability to sell the underlying notes. We sold $30,455,000 of customer notes in the first nine months of 1998, compared to $25,400,000 during the same period of 1997. At September 30, 1998 Hardinge maintained revolving loan agreements with several U.S. banks providing for unsecured borrowing up to $70,000,000 on a revolving basis, $20,000,000 through November 1, 1999 and $50,000,000 through August 1, 2002. Any amounts outstanding on the $20,000,000 line expiring November 1, 1999 convert, at the Company's option, to term loans payable quarterly over four years through 2003. These facilities, along with other short term credit agreements, provide for immediate access of up to $77,000,000. At September 30, 1998, outstanding borrowings under these arrangements totaled $23,684,000. We believe that the currently available funds and credit facilities, along with internally generated funds, will provide sufficient financial resources for ongoing operations. Year 2000 Issue The Year 2000 issue arises from the use of two-digit date fields in certain computer programs which may cause problems as the year changes from 1999 to 2000. If the Company's computer systems do not correctly recognize date information, there could be a material adverse effect on the Company's operations. The Company has identified risk associated with the Year 2000 problem in the following areas: (i) systems used by the Company to operate its business; (ii) systems used by the Company's critical suppliers; and (iii) warranty or other potential claims from the Company's customers. The Company has evaluated its risks in these areas and is in the process of implementing a program to minimize any potential impact on operations arising out of the Year 2000 problem. The Company's efforts have been directed by a Steering Committee consisting of executive officers and other appropriate personnel. Costs associated with the program are not expected to be significant and are being expensed as incurred with funding through operating cash flows. With respect to IT (Information Technology) systems, the Company has reviewed, tested and corrected, where necessary, all internally-generated software for the ability to recognize the year 2000. Where the Company relies on outside software vendors, the Company has received written assurance of, and tested for, such software's ability to properly perform beyond December 31, 1999. Non-information technology ("Non-IT") systems include plant floor machinery and systems with embedded technology such as microprocessors or microcontrollers which operate such facility related items as phone systems, access controls and heating, ventilation and air conditioning systems. The Company has identified, tested where possible and received when available written confirmation that its facility-related Non-IT equipment is Year 2000 compliant and has requested written assurance from its key equipment suppliers that their internal operations and products are and will be Year 2000 compliant. Currently, a majority of suppliers have provided the requested assurance and the Company anticipates concluding this analysis, including equipment testing, in early 1999. The Company believes that its past and current products are Year 2000 compliant and therefore exposure to warranty and other potential claims is not expected to be outside the ordinary course of business. With respect to the computerized control systems in place on the Company's machines sold in prior years, the Company's primary supplier of these controls has provided written assurance that both their previously-supplied and current controls are Year 2000 compliant. As part of its Year 2000 compliance program, the Company has developed a contingency plan to address what it views as the most likely worst-case scenario resulting from one or more of the above-identified risks being realized. At this time, the Company believes that the failure of a third-party's system to perform as represented poses the greatest risk to the Company's operations. The contingency plan identifies alternative suppliers and addresses other potential third-party failures. While the Company believes it has addressed all critical Year 2000 issues, there is no guarantee against internal, external and third-party system failures related to the Year 2000 problem. Such failures could have a material adverse effect on the Company's results of operations, liquidity and financial condition. Euro Conversion The Company conducts operations in several European countries which will begin conversion in 1999 to the new common currency (the Euro) to be used by members of the European Union. The Company does not anticipate any significant risk to its operations as a result of the conversion. This report contains statements, including those relating to the year 2000 issue, of a forward-looking nature relating to the financial performance of Hardinge Inc. Such statements are based upon information known to management at this time. The company cautions that such statements necessarily involve uncertainties and risk and deal with matters beyond the company's ability to control, and in many cases the company cannot predict what factors would cause actual results to differ materially from those indicated. Among the many factors that could cause actual results to differ from those set forth in the forward-looking statements are fluctuations in the machine tool business cycles, changes in general economic conditions in the U.S. or internationally, the mix of products sold and the profit margins thereon, the relative success of the company's entry into new product and geographic markets , the company's ability to manage its operating costs, actions taken by customers such as order cancellations or reduced bookings by customers or distributors, competitors' actions such as price discounting or new product introductions, governmental regulations and environmental matters, changes in the availability and cost of materials and supplies, the implementation of new technologies and currency fluctuations. Any forward-looking statement should be considered in light of these factors. The company undertakes no obligation to revise its forward-looking statements if unanticipated events alter their accuracy. PART I. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable Part II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Default upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K A. Exhibits 10.1 Swap Transaction Agreement effective June 1, 1998 between Hardinge Inc. and The Chase Manhattan Bank. 10.2 Employment Agreement with Richard C. Amadril, dated August August 3, 1998. 27.1 Financial Data Schedule 27.2 Restated Finacial Data Scedule B. Reports on Form 8-K There were no reports filed on Form 8-K during the quarter. 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. November 12, 1998 By:_/s/ Robert E. Agan____________________ Date Robert E. Agan Chairman of the Board, President /CEO November 12, 1998 By:_/s/ J. Patrick Ervin__________________ Date J. Patrick Ervin Executive Vice President November 12, 1998 By:_/s/ Malcolm L Gibson__________________ Date Malcolm L. Gibson Executive Vice President and Chief Financial Officer (Principal Financial Officer) November 12, 1998 By:_/s/ Richard L. Simons_________________ Date Richard L. Simons Vice President - Finance (Principal Accounting Officer) EX-10.1 2 SWAP TRANSACTION AGREEMENT EXHIBIT 10.1 CONFIRMATION -------------- SWAP TRANSACTION JUNE 05 1998 HARDINGE INC. ELMIRA ATTN: TOM CONNELLY PHONE: 607-734-2281 FAX: 607-734-5517 RE: SWAP TRANSACTION (OUR REF. NO. 0000050820 / 47154018) DEAR SIRS: THE PURPOSE OF THIS LETTER AGREEMENT IS TO SET FORTH THE TERMS AND CONDITIONS OF THE SWAP TRANSACTION ENTERED INTO BETWEEN US ON THE TRADE DATE SPECIFIED BELOW (THE "SWAP TRANSACTION"). THIS LETTER AGREEMENT CONSTITUTES A "CONFIRMATION" AS REFERRED TO IN THE AGREEMENT SPECIFIED BELOW. THE DEFINITIONS AND PROVISIONS CONTAINED IN THE 1991 ISDA DEFINITIONS (THE "DEFINITIONS") (AS PUBLISHED BY THE INTERNTIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC.) ARE INCORPORATED INTO THIS CONFIRMATION. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THOSE DEFINITIONS AND PROVISIONS AND THIS CONFIRMATION, THIS CONFIRMATION WILL GOVERN. 1. THIS CONFIRMATION SUPPLEMENTS, FORMS PART OF, AND IS SUBJECT TO THE ISDA MASTER AGREEMENT, DATED FEBRUARY 15, 1996, AS AMENDED AND SUPPLEMENTED FROM TIME TO TIME (THE "AGREEMENT") BETWEEN THE CHASE MANHATTAN BANK ("CHASE") AND HARDINGE INC. (THE "COUNTERPARTY"). ALL PROVISIONS CONTAINED IN THE AGREEMENT SHALL GOVERN THIS CONFIRMATION EXCEPT AS EXPRESSLY MODIFIED BELOW. 2. THE TERMS OF THE PARTICULAR SWAP TRANSACTION TO WHICH THIS CONFIRMATION RELATES ARE AS FOLLOWS: NOTIONAL AMOUNT: USD 15,000,000.00 TRADE DATE: MAY 28, 1998 EFFECTIVE DATE: JUNE 01 1998 TERMINATION DATE: JUNE 02 2003, SUBJECT TO ADJUSTMENT IN ACCORDANCE WITH THE MODIFIED FOLLOWING BUSINESS DAY CONVENTION FIXED AMOUNTS FIXED RATE PAYER: THE COUNTERPARTY CONFIRMATION -------------- SWAP TRANSACTION JUNE 05 1998 HARDINGE INC. ELMIRA ATTN: TOM CONNELLY PHONE: 607-734-2281 FAX: 607-734-5517 RE: SWAP TRANSACTION (OUR REF. NO. 0000050820 / 471540018) CONTINUATION - (1) FIXED RATE PAYER PAYMENT DATES, SUBJECT TO ADJUSTMENT IN ACCORDANCE WITH THE MODIFIED FOLLOWING BUSINESS DAY CONVENTION: SEPTEMBER 01, DECEMBER 01, MARCH 01, JUNE 01 OF EACH YEAR PRIOR TO AND INCLUDING THE TERMINATION DATE, COMMENCING WITH SEPTEMBER 01 1998. FIXED RATE AND FIXED RATE DAY COUNT FRACTION: 6.01%; ACTUAL/ 360 FLOATING AMOUNTS FLOATING RATE PAYER: CHASE FLOATING RATE PAYER PAYMENT DATES, SUBJECT TO ADJUSTMENT IN ACCORDANCE WITH THE MODIFIED FOLLOWING BUSINESS DAY CONVENTION: SEPTEMBER 01, DECEMBER 01, MARCH 01, JUNE 01 OF EACH YEAR PRIOR TO AND INCLUDING THE TERMINATION DATE COMMENCING WITH SEPTEMBER 01 1998. FLOATING RATE FOR INITIAL CALCULATION PERIOD: 5.6875 PER CENT FLOATING RATE OPTION: USD-LIBOR-BBA DESIGNATED MATURITY: 3 MONTHS FLOATING RATE DAY COUNT FRACTION: ACTUAL/360 SPREAD: PLUS 0.0% RESET DATES: THE FIRST DAY OF EACH CALCULATION PERIOD BUSINESS DAYS FOR PAYMENTS BY BOTH PARTIES: LONDON, NEW YORK, CALCULATION AGENT: CHASE, OR AS STATED IN THE AGREEMENT 3. ACCOUNT DETAILS CONFIRMATION -------------- SWAP TRANSACTION JUNE 05 1998 HARDINGE INC. ELMIRA ATTN: TOM CONNELLY PHONE: 607-734-2281 FAX: 607-734-5517 RE: SWAP TRANSACTION (OUR REF. NO. 0000050820 / 47154018) CONTINUATION - (2) PAYMENTS TO CHASE ACCOUNT FOR PAYMENTS IN USD: CHASE MANHATTAN BANK NEW YROK FED ABA 021-000-021 A/C# 900-9-001364 PAYMENTS TO COUNTERPARTY ACCOUNT FOR PAYMENTS IN USD: TO BE ADVISED 4. OFFICE AND ADDRESS FOR NOTICES IN CONNECTION WITH THIS SWAP TRANSACTION: (A) CHASE: ITS HEAD OFFICE IN NEW YORK AT 4 CHASE METROTECH CENTER, 17TH FLOOR, BROOKLYN, NY 11245, ATTN: GLOBAL DERIVATIVE OPERATIONS. (B) COUNTERPARTY: ITS OFFICE IN ELMIRA, ATTN: TOM CONNELLY, PHONE: (607) 734-2281, FAX: (607) 734-5517. 5. DOCUMENTS TO BE DELIVERED: EACH PARTY SHALL DELIVER TO THE OTHER, AT THE TIME OF ITS EXECUTION OF THIS CONFIRMATION, EVIDENCE OF THE SPECIMEN SIGNATURE AND INCUMBENCY OF EACH PERSON WHO IS EXECUTING THE CONFIRMATION ON THE PARTY'S BEHALF, UNLESS SUCH EVIDENCE HAS PREVIOUSLY BEEN SUPPLIED IN CONNECTION WITH THE AGREEMENT AND REMAINS TRUE AND IN EFFECT . 6. EACH PARTY WILL BE DEEMED TO REPRESENT TO THE OTHER PARTY ON THE DATE ON WHICH IT ENTERS INTO A SWAP TRANSACTION THAT (ABSENT A WRITTEN AGREEMENT BETWEEM THE PARTIES THAT EXPRESSLY IMPOSES AFFIRMATIVE OBLIGATIONS TO THE CONTRARY FOR THAT SWAP TRANSACTION): CONFIRMATION -------------- SWAP TRANSACTION JUNE 05 1998 HARDINGE INC. ELMIRA ATTN: TOM CONNELLY PHONE: (607) 734-2281 FAX: (607) 734-5517 RE: SWAP TRANSACTION (OUR REF. NO. 0000050820 / 47154018) CONTINUATION - (3) (A) NON RELIANCE. IT IS ACTING FOR ITS OWN ACCOUNT, AND IT HAS MADE ITS OWN INDEPENDENT DECISIONS TO ENTER INTO THAT SWAP TRANSACTION AND AS TO WHETHER THAT SWAP TRANSACTION IS APPROPRIATE OR PROPER FOR IT BASED UPON ITS OWN JUDGEMENT AND UPON ADVICE FROM SUCH ADVISERS AS IT HAS DEEMED NECESSARY. IT IS NOT RELYING ON ANY COMMUNICATION (WRITTEN OR ORAL) OF THE OTHER PARTY AS INVESTMENT ADVICE OR AS A RECOMMENDATION TO ENTER INTO THAT SWAP TRANSACTION: IT BEING UNDERSTOOD THAT INFORMATION AND EXPLANATIONS RELATED TO THE TERMS AND CONDITIONS OF A SWAP TRANSACTION SHALL NOT BE CONSIDERED INVESTMENT ADVICE OR A RECOMMENDATION TO ENTER INTO THAT SWAP TRANSACTION. NO COMMUNICATION (WRITTEN OR ORAL) RECEIVED FROM THE OTHER PARTY SHALL BE DEEMED TO BE AN ASSURANCE OR GUARANTEE AS TO THE EXPECTED RESULTS OF THAT SWAP TRANSACTION. (B) ASSESSMENT AND UNDERSTANDING. IT IS CAPABLE OF ASSESSING THE MERITS OF AND UNDERSTANDING (ON ITS OWN BEHALF OR THROUGH INDEPENDENT PROFESSIONAL ADVICE), AND UNDERSTANDS AND ACCEPTS, THE TERMS, CONDITIONS AND RISKS OF THAT SWAP TRANSACTION.IT ALSO IS CAPABLE OF ASSUMING, AND ASSUMES, THE RISKS OF THAT SWAP TRANSACTION. (C) STATUS OF PARTIES. THE OTHER PARTY IS NOT ACTING AS A FIDUCIARY FOR OR AN ADVISER TO IT IN RESPECT OF THAT SWAP TRANSACTION. 7. NEGATIVE INTEREST RATES. (A) CHASE AND COUNTERPARTY AGREE THAT, IF WITH RESPECT TO A CALCULATION PERIOD, EITHER PARTY IS OBLIGATED TO PAY A FLOATING AMOUNT THAT IS A NEGATIVE NUMBER (EITHER DUE TO A QUOTED NEGATIVE FLOATING RATE OR BY OPERATION OF A SPREAD THAT IS SUBTRACTED FROM THE FLOATING RATE), THE FLOATING AMOUNT WITH RESPECT TO THAT PARTY FOR THAT CALCULATION PERIOD WILL BE DEEMED TO BE ZERO, AND THE OTHER PARTY WILL PAY TO THAT PARTY THE ABSOLUTE VALUE OF THE NEGATIVE FLOATING AMOUNT AS CALCULATED, IN ADDITION TO ANY AMOUNTS OTHERWISE OWED BY THE OTHER PARTY FOR THAT CALCULATION PERIOD, ON THE PAYMENT DATE THAT THE FLOATING AMOUNT WOULD HAVE BEEN DUE IF IT HAD BEEN A POSITIVE NUMBER. PLEASE CONFIRM THAT THE FOREGOING CORRECTLY SETS FOR THE TERMS OF CONFIRMATION -------------- SWAP TRANSACTION JUNE 05 1998 HARDINGE INC. ELMIRA ATTN: TOM CONNELLY PHONE: (607) 734-2281 FAX: (607) 734-5517 RE: SWAP TRANSACTION (OUR REF. NO. 0000050820 / 47154018) CONTINUATION - (4) OUR AGREEMENT BY EXECUTING THE COPIES OF THIS CONFIRMATION ENCLOSED FOR THAT PURPOSE AND RETURNING THEM TO US. FOR INQUIRIES REGARDING THIS CONFIRMATION PLEASE CALL: CUSTOMER SERVICE AT (718) 242-3155, OR FAX (718) 242-9262/4809/4811 YOURS SINCERELY, THE CHASE MANHATTAN BANK BY: /s/ SHEILA Y. HILTON AUTHORIZED SIGNATURE SHELIA Y. HILTON ASSISTANT VICE PRESIDENT CONFIRMED AS OF THE DATE FIRST ABOVE WRITTEN: HARDINGE INC. BY: /s/ THOMAS T. CONNELLY NAME: THOMAS T. CONELLY TITLE: TREASURER EX-10.2 3 EMPLOYMENT AGREEMENT EXHIBIT 10.2 EMPLOYMENT AGREEMENT dated as of August 3, 1998 (the "Agreement"), between HARDINGE INC., a New York corporation (the "Company") and RICHARD C. AMADRIL (the "Executive"). WHEREAS, the Executive is currently employed by the Company; and WHEREAS, the Company desires to engage the Executive to provide services pursuant to the terms of this Agreement; NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, the parties hereto agree as follows: 1. EFFECTIVENESS OF AGREEMENT AND EFFECTIVE DATE This Agreement shall become effective as of the date hereof. For purposes of this Agreement, the term "Effective Date" shall mean January 1, 1998. 2. EMPLOYMENT AND DUTIES 2.1 General. The Company hereby employs the Executive, and the Executive agrees to serve, upon the terms and conditions herein contained. The Executive shall perform such duties and services for the Company as may be designated from time to time by the Board of Directors of the Company (the "Board") or the Chief Executive Officer of the Company. The Executive agrees to serve the Company faithfully and to the best of his ability under the direction of the Board and the Chief Executive Officer of the Company. 2.2 Exclusive Services. Except as may otherwise be approved in advance by the Board or the Chief Executive Officer of the Company, and except during vacation periods and reasonable periods of absence due to sickness, personal injury or other disability, the Executive shall devote his full working time throughout the Employment Term (as defined in Section 2.3) to the services required of him hereunder. The Executive shall render his services exclusively to the Company during the Employment Term, and shall use his best efforts, judgment and energy to improve and advance the business and interests of the Company in a manner consistent with the duties of his position. 2.3 Term of Employment. The Executive's employment under this Agreement shall commence as of the date hereof and shall terminate on the earlier of (i) the second anniversary of the Effective Date or (ii) termination of the Executive's employment pursuant to this Agreement; provided, however, that the term of the Executive's employment shall be automatically extended without further action of either party for additional one year periods unless written notice of either party's intention not to extend has been given to the other party hereto at least 60 days prior to the expiration of the then effective term. The period commencing as of the Effective Date and ending on the second anniversary of the Effective Date or such later date to which the term of the Executive's employment shall have been extended is hereinafter referred to as the "Employment Term". Notwithstanding the foregoing, in the event of a Change in Control (as defined in Section 5.5) occurring during the Employment Term, the Employment Term shall be extended so that it terminates on the second anniversary of the date of the Change in Control. 2.4 Reimbursement of Expenses. The Company shall reimburse the Executive for reasonable travel and other business expenses incurred by him in the fulfillment of his duties hereunder upon presentation by the Executive of an itemized account of such expenditures, in accordance with Company practices consistently applied. 3. ANNUAL COMPENSATION 3.1 Base Salary. From August 1, 1998, the Executive shall be entitled to receive a base salary ("Base Salary") at a rate of $120,000 per annum, payable in accordance with the Company's payroll practices, with such changes as may be provided in accordance with the terms hereof. Once changed, such amount shall constitute the Executive's annual Base Salary. 3.2 Annual Review. The Executive's Base Salary shall be reviewed by the Board, based upon the Executive's performance, not less often than annually. 3.3 Bonus. After the Effective Date, the Executive shall be entitled to such bonus, if any, as may be awarded to the Executive from time to time by the Board. 4. EMPLOYEE BENEFITS The Executive shall, during his employment under this Agreement, be included to the extent eligible thereunder in all employee benefit plans, programs or arrangements (including, without limitation, any plans, programs or arrangements providing for retirement benefits, incentive compensation, profit sharing, bonuses, disability benefits, health and life insurance, or vacation and paid holidays) which shall be established by the Company for, or made available to, its executives generally. 5. TERMINATION OF EMPLOYMENT 5.1 Termination Without Cause; Resignation for Good Reason. 5.1.1 Prior to a Change in Control. If, prior to the expiration of the Employment Term, the Executive's employment is terminated by the Company without Cause (as defined in Section 5.3), or the Executive resigns from his employment hereunder for Good Reason (as defined in Section 5.4.1), at any time prior to a Change in Control, the Company shall continue to pay the Executive the Base Salary (at the rate in effect immediately prior to such termination) for the greater of (i) 6 months or (ii) the remainder of the Employment Term (such period being referred to hereinafter as the "Severance Period"), at such intervals as the same would have been paid had the Executive remained in the active service of the Company. In addition, the Executive shall be entitled to continue to participate during the Severance Period in all employee welfare benefit plans that the Company provides and continues to provide generally to its employees, provided that the Executive is entitled to continue to participate in such plans under the terms thereof. The Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment except as determined in accordance with the terms of the employee benefit plans or programs of the Company. In the event of the Executive's death during the Severance Period, Base Salary continuation payments under this Section 5.1.1 shall continue to be made during the remainder of the Severance Period to the beneficiary designated in writing for this purpose by the Executive or, if no such beneficiary is specifically designated, to the Executive's estate. If, during the Severance Period, the Executive materially breaches his obligations under Section 8 of this Agreement, the Company may, upon written notice to the Executive, terminate the Severance Period and cease to make any further payments or provide any benefits described in this Section 5.1.1. 5.1.2 Following a Change in Control. If, prior to the expiration of the Employment Term, (a) the Executive's employment is terminated by the Company without Cause (as defined in Section 5.3), or the Executive terminates his employment hereunder for Good Reason (as defined in Section 5.4.2), at any time following a Change in Control or (b) the Executive resigns from his employment hereunder for any reason at any time later than six months following a Change in Control, the Company shall pay to the Executive a lump sum cash payment equal to 1.5 times the sum of (i) his Base Salary (at the rate in effect immediately prior to such termination or, if higher, as in effect immediately prior to the Change in Control) and (ii) his average annual bonus earned during the three fiscal years immediately preceding the Change in Control. In addition, the Executive shall be entitled to continue to participate for a period of three years following such termination in all employee benefit welfare plans that the Company provides and continues to provide generally to its executive employees (or, if the Executive is not entitled to participate in any such plan under the terms thereof, in a comparable substitute arrangement provided by the Company). The Company shall reimburse the Executive for any premiums or other expenses incurred by the Executive with respect to his participation and that of any of his dependents in any such employee benefit welfare plan. 5.2 Termination for Cause; Resignation Without Good Reason. If, prior to the expiration of the Employment Term, the Executive's employment is terminated by the Company for Cause, or the Executive resigns from his employment hereunder other than for Good Reason, the Executive shall (subject to Section 5.1.2) be entitled only to payment of his Base Salary as then in effect through and including the date of termination or resignation. Subject to Section 5.1.2, the Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment, except as determined in accordance with the terms of the employee benefit plans or programs of the Company. 5.3 Cause. Termination for "Cause" shall mean termination of the Executive's employment because of: (i) any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement; (ii) the continued failure or refusal of the Executive to substantially perform the duties reasonably required of him as an employee of the Company; (iii) any willful and material violation by the Executive of any Federal or state law or regulation applicable to the business of the Company or any of its subsidiaries, or the Executive's conviction of a felony, or any willful perpetration by the Executive of a common law fraud; or (iv) any other willful misconduct by the Executive which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or any of its subsidiaries or affiliates. 5.4 Good Reason. 5.4.1 Prior to a Change in Control. For purposes of this Agreement, "Good Reason" shall mean a material breach by the Company of any term or provision of this Agreement (without the Executive's prior written consent). 5.4.2 Following a Change in Control. Following a Change in Control, for purposes of this Agreement, "Good Reason" shall also mean (in addition to the event or condition described in Section 5.4.1), any of the following (without the Executive's prior written consent): (i) decrease in the Executive's base rate of compensation or a failure by the Company to pay material compensation due and payable to the Executive in connection with his employment; (ii) a material diminution of the responsibilities or title of the Executive with the Company; or (iii) a failure to continue in effect any medical, dental, accident, disability or other material employee welfare benefit plan in which the Executive is entitled to participate immediately prior to the Change in Control or any material decrease in the benefits provided under any such plan (except that employee contributions may be raised to the extent of any cost increases imposed by third parties); (iv) the Company's requiring the Executive to relocate to an office or location more than 50 miles from his principal employment location immediately prior to the Change in Control; or (v) a failure or refusal of any successor company to assume the Company's obligations under this Agreement. 5.5 Change in Control. For purposes of this Agreement, the term "Change in Control" shall mean and shall be deemed to occur if and when: (i) an offeror (other than the Company) purchases shares of Common Stock of the Company pursuant to a tender or exchange offer for such shares; (ii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), other than any employee benefit plan of the Company or any person or entity appointed or established pursuant to any such plan, who is not now but who shall hereafter become the beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, excluding any such securities held by such person as trustee or other fiduciary of an employee benefit plan of the Company; (iii) the membership of the Board changes as the result of a contested election or elections, so that a majority of the individuals who are directors at any particular time were proposed by persons other than (a) directors who were members of the Board immediately prior to a first such contested election ("Continuing Directors") or (b) directors proposed by the Continuing Directors and were initially elected to the Board as a result of such a contested election or elections occurring within the previous two years; or (iv) the shareholders of the Company approve a merger, consolidation, sale or disposition of all or substantially all of the Company's assets, or a plan of partial or complete liquidation. 6. DEATH, DISABILITY OR RETIREMENT. In the event of termination of employment by reason of death, Permanent Disability (as hereinafter defined) or retirement, the Executive (or his estate, as applicable) shall be entitled to Base Salary and benefits determined under Sections 3 and 4 through the date of termination. Other benefits shall be determined in accordance with the benefit plans maintained by the Company, and the Company shall have no further obligation hereunder. For purposes of this Agreement, "Permanent Disability" means a physical or mental disability or infirmity of the Executive that prevents the normal performance of substantially all his duties as an employee of the Company, which disability or infirmity shall exist for any continuous period of 180 days. 7. MITIGATION OF DAMAGES The Executive shall be required to mitigate the amount of any payment provided for in Section 5.1.1 by seeking other employment, and any such payment will be reduced by any amounts which the Executive receives or is entitled to receive from another employer with respect to the Severance Period. The Executive shall promptly notify the Company in writing in the event that other employment is obtained during the Severance Period. 8. NONSOLICITATION; CONFIDENTIALITY; NONCOMPETITION 8.1 Nonsolicitation. For so long as the Executive is employed by the Company, and continuing for two years thereafter if termination of employment occurs prior to a Change in Control, the Executive shall not, without the prior written consent of the Company, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor, officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity other than the Company: (x) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or, during the then most recent 12-month period, was employed by, or had served as an agent or key consultant of the Company or any of its subsidiaries; or (y) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or was within the then most recent 12-month period, a customer or client (or reasonably anticipated to the general knowledge of the Executive or the public to become a customer or client) of the Company or any of its subsidiaries. 8.2 Confidentiality. The Executive covenants and agrees with the Company that he will not at any time, except in performance of his obligations to the Company hereunder or with the prior written consent of the Company, directly or indirectly, disclose any secret or confidential information that he may learn or has learned by reason of his association with the Company or any of its subsidiaries and affiliates. The term "confidential information" includes information not previously disclosed to the public or to the trade by the Company's management, or otherwise in the public domain, with respect to the Company's or any of its subsidiaries' or affiliates' products, facilities, applications and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, customer lists, technical information, financial information (including the revenues, costs or profits associated with any of the Company's products), business plans, prospects or opportunities, but shall exclude any information which (i) is or becomes available to the public or is generally known in the industry or industries in which the Company operates other than as a result of disclosure by the Executive in violation of his agreements under this Section 8.2 or (ii) the Executive is required to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law. 8.3 No Competing Employment. For so long as the Executive is employed by the Company, and continuing for one year thereafter if termination of employment occurs prior to a Change in Control, the Executive shall not, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor (other than a stockholder or investor owning not more than a 1% interest), officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity other than the Company, render any service to or in any way be affiliated with a competitor (or any person or entity that is reasonably anticipated to the general knowledge of the Executive or the public to become a competitor) of the Company or any of its subsidiaries. 8.4 Exclusive Property. The Executive confirms that all confidential information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company shall be and remain the property of the Company, except for such papers customarily deemed to be the personal copies of the Executive. 8.5 Injunctive Relief. Without intending to limit the remedies available to the Company, the Executive acknowledges that a breach of any of the covenants contained in this Section 8 may result in material and irreparable injury to the Company or its affiliates or subsidiaries for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to seek a temporary restraining order and/or a preliminary or permanent injunction restraining the Executive from engaging in activities prohibited by this Section 8 or such other relief as may be required specifically to enforce any of the covenants in this Section 8. If for any reason, it is held that the restrictions under this Section 8 are not reasonable or that consideration therefor is inadequate, such restrictions shall be interpreted or modified to include as much of the duration and scope identified in this Section 8 as will render such restrictions valid and enforceable. 9. ARBITRATION Any dispute or controversy arising under or in connection with this Agreement that cannot be mutually resolved by the parties hereto shall be settled exclusively by arbitration in New York, New York, before one arbitrator of exemplary qualifications and stature, who shall be selected jointly by the Company and the Executive, or, if the Company and the Executive cannot agree on the selection of the arbitrator, shall be selected by the American Arbitration Association. Judgment may be entered on the arbitrator's award in any court having jurisdiction. The parties hereby agree that the arbitrator shall be empowered to enter an equitable decree mandating specific enforcement of the terms of this Agreement. 10. CERTAIN PAYMENTS Notwithstanding anything in this Agreement to the contrary, if any amounts due to the Executive under this Agreement and any other plan or program of the Company constitute a "parachute payment" (as defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")), then the aggregate of the amounts constituting the parachute payment shall be reduced to an amount that will equal three times his "base amount" (as defined in Section 280G(b)(3) of the Code) less $1.00. The determination to be made with respect to this Section 10 shall be made by an accounting firm jointly selected by the Company and the Executive and paid by the Company, and which may be the Company's independent auditors. 11. MISCELLANEOUS 11.1 Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: Hardinge Inc. One Hardinge Drive Elmira, New York 14902-1507 Telecopier No. (607) 734-2353 Attention: Mr. Robert E. Agan To the Executive: Richard C. Amadril 611 Decker Avenue Elmira, New York 14904 All such notices shall be conclusively deemed to be received and shall be effective, (i) if sent by hand delivery, upon receipt, (ii) if sent by telecopy or facsimile transmission, upon confirmation of receipt by the sender of such transmission, or (iii) if sent by registered or certified mail, on the fifth day after the day on which such notice is mailed. 11.2 Severability. Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 11.3 Assignment. The rights and obligations of this Agreement shall bind and inure to the benefit of any successor of the Company by reorganization, merger or consolidation, or any assignee of all or substantially all of the Company's business and properties. Neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation by the Executive. 11.4 Entire Agreement. This Agreement represents the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between the Company and the Executive relating to the subject matter hereof. This Agreement may be amended at any time by mutual written agreement of the parties hereto. 11.5 Withholding. The payment of any amount pursuant to this Agreement shall be subject to applicable withholding and payroll taxes, and such other deductions as may be required under the Company's employee benefit plans, if any. 11.6 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed entirely within that state. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and the Executive has hereunto set his hand, as of the day and year first above written. HARDINGE INC. By /s/ Robert E. Agan Name: Robert E, Agan Title: Chairman of the Board, President and Chief Executive Officer /s/ Richard C. Amadril Richard C. Amadril. For purposes of this Agreement, I hereby designate Carol C. Amadril as my beneficiary hereunder. Date: August 3, 1998 /s/ Richard C. Amadril --------------- ---------------------- Richard C. Amadril State of New York ) : ss. County of Chemung ) On the 3rd day of August , 1998, before me, personally came Robert E. Agan, to me known, who being by me duly sworn, did depose and say that he resides in the Town of Elmira, Chemung County, New York; that he is the Chairman of the Board, President and Chief Executive Officer of HARDINGE INC., the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that it was so affixed by order of the Board of Directors of said corporation and that he signed his name thereto by like order. /s/ Malcolm L. Gibson Malcolm L. Gibson Notary Public State of New York ) : ss. County of Chemung ) On this 3rd day of August , 1998, before me, the subscriber, personally appeared RICHARD C. AMADRIL, to me personally known and known to me to be the same person described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed the same. /s/ Malcolm L. Gibson Malcolm L. Gibson Notary Public EX-27.1 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS INFORMATION EXTRACTED FROM THE COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1998 SEP-30-1998 3,170 0 73,468 0 94,979 164,286 144,807 69,156 258,483 38,903 0 0 0 98 175,847 258,483 192,891 192,891 123,832 43,089 0 0 1,743 24,606 9,212 15,394 0 0 0 15,394 1.63 1.63
EX-27.2 5 RESTATED FINANCIAL DATA SCHEDULE
5 THIS RESTATED SCHEDULE CONTAINS INFORMATION EXTRACTED FROM THE COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EARNINGS PER SHARE AMOUNTS HAVE BEEN RESTATED TO REFLECT A THREE FOR TWO STOCK SPLIT IN MAY, 1998 1,000 9-MOS DEC-31-1997 SEP-30-1997 4,117 0 60,263 0 90,367 146,790 126,651 61,896 227,994 31,537 0 0 0 65 155,477 227,994 180,496 180,496 119,791 31,172 1,960 0 1,896 20,207 7,875 12,332 0 0 0 12,332 1.32 1.31
-----END PRIVACY-ENHANCED MESSAGE-----