10-Q

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

JUNE 30, 2016

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 June 30, 2016

or

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

For the transition period from                  to                 

Commission File Number: 000-15760

Hardinge Inc.

(Exact name of registrant as specified in its charter)

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

(607) 734-2281

(Registrant’s telephone number, including area code)

Not Applicable

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                      ýYes  oNo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                      ýYes  oNo

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

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

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

As of July 29, 2016 there were 12,884,677 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 June 30, 2016 and December 31, 2015 (Audited)	4
	Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015	5
	Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2016 and 2015	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015	7
	Notes to Consolidated Financial Statements	8
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

3

Item 1. Financial Statements.

HARDINGE INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	June 30, 2016			December 31, 2015
	(Unaudited)
Assets
Cash and cash equivalents	$	23,368		$	32,774
Restricted cash	2,459			2,192
Accounts receivable, net	45,030			56,945
Inventories, net	118,146			110,232
Other current assets	11,081			9,314
Total current assets	200,084			211,457
Property, plant and equipment, net	60,424			62,025
Goodwill	6,590			6,620
Other intangible assets, net	27,484			28,018
Other non-current assets	3,642			3,015
Total non-current assets	98,140			99,678
Total assets	$	298,224		$	311,135
Liabilities and shareholders’ equity
Notes payable to bank	$	228		$	—
Accounts payable	22,534			24,696
Accrued expenses	23,869			27,964
Customer deposits	15,873			19,845
Accrued income taxes	1,688			1,919
Deferred income taxes	2,450			2,164
Current portion of long-term debt	4,930			5,621
Total current liabilities	71,572			82,209
Long-term debt	4,563			5,985
Pension and postretirement liabilities	55,352			57,322
Deferred income taxes	1,277			1,121
Other liabilities	3,318			3,393
Total non-current liabilities	64,510			67,821
Commitments and contingencies (see Note 10)
Common stock ($0.01 par value, 20,000,000 authorized; 12,869,771 issued and outstanding as of June 30, 2016, and 12,856,716 issued and 12,838,227 outstanding as of December 31, 2015)	129			128
Additional paid-in capital	120,746			120,524
Retained earnings	87,752			89,368
Treasury shares (at cost, none as of June 30, 2016, and 18,489 as of December 31, 2015)	—			(202		)
Accumulated other comprehensive loss	(46,485		)	(48,713		)
Total shareholders’ equity	162,142			161,105
Total liabilities and shareholders’ equity	$	298,224		$	311,135

See accompanying notes to the unaudited consolidated financial statements.

4

HARDINGE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
	(Unaudited)						(Unaudited)
Sales	$	70,186		$	82,356		$	138,007		$	151,484
Cost of sales	46,633			55,394			91,711			102,667
Gross profit	23,553			26,962			46,296			48,817
Selling, general and administrative expenses	19,637			21,071			40,230			40,671
Research & development	3,369			3,498			6,656			7,105
Restructuring	226			—			426			—
Other expense (income), net	20			10			(72		)	75
Income (loss) from operations	301			2,383			(944		)	966
Interest expense	132			154			285			311
Interest income	(69		)	(23		)	(136		)	(40		)
Income (loss) before income taxes	238			2,252			(1,093		)	695
Income tax expense	93			666			8			517
Net Income (loss)	$	145		$	1,586		$	(1,101	)	$	178
Per share data:
Basic earnings (loss) per share:	$	0.01		$	0.12		$	(0.09	)	$	0.01
Diluted earnings (loss) per share:	$	0.01		$	0.12		$	(0.09	)	$	0.01
Cash dividends declared per share:	$	0.02		$	0.02		$	0.04		$	0.04

See accompanying notes to the unaudited consolidated financial statements.

5

HARDINGE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
	(Unaudited)						(Unaudited)
Net income (loss)	$	145		$	1,586		$	(1,101	)	$	178
Other comprehensive (loss) income:
Foreign currency translation adjustments	(2,840		)	4,196			899			5,528
Retirement plans related adjustments	1,575			(522		)	1,302			(11		)
Unrealized gain on cash flow hedges	(33		)	(57		)	132			318
Other comprehensive (loss) income before tax	(1,298		)	3,617			2,333			5,835
Income tax expense (benefit)	282			(333		)	105			831
Other comprehensive (loss) income, net of tax	(1,580		)	3,950			2,228			5,004
Total comprehensive (loss) income	$	(1,435	)	$	5,536		$	1,127		$	5,182

See accompanying notes to the unaudited consolidated financial statements.

6

HARDINGE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended   June 30,
	2016			2015
	(Unaudited)
Operating activities
Net (loss) income	$	(1,101	)	$	178
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	4,098			4,567
Debt issuance costs amortization	66			67
Deferred income taxes	(119		)	(260		)
(Gain) on sale of assets	(4		)	(2		)
Unrealized foreign currency transaction (gain) loss	(116		)	1,185
Changes in operating assets and liabilities:
Accounts receivable	11,826			6,683
Inventories	(7,720		)	(8,467		)
Other assets	(1,661		)	(1,065		)
Accounts payable	(2,170		)	5,097
Customer deposits	(3,886		)	3,420
Accrued expenses	(5,211		)	(799		)
Accrued pension and postretirement liabilities	(41		)	(57		)
Net cash (used in) provided by operating activities	(6,039		)	10,547
Investing activities
Capital expenditures	(992		)	(1,993		)
Proceeds from sales of assets	37			11
Net cash used in investing activities	(955		)	(1,982		)
Financing activities
Proceeds from short-term notes payable to bank	28,871			13,706
Repayments of short-term notes payable to bank	(28,643		)	(13,706		)
Repayments of long-term debt	(2,271		)	(2,364		)
Dividends paid	(536		)	(525		)
Purchases of treasury stock	—			(201		)
Net cash used in financing activities	(2,579		)	(3,090		)
Effect of exchange rate changes on cash	167			1,010
Net (decrease) increase in cash	(9,406		)	6,485
Cash and cash equivalents at beginning of period	32,774			16,293
Cash and cash equivalents at end of period	$	23,368		$	22,778

See accompanying notes to the unaudited consolidated financial statements.

7

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2016

NOTE 1.  BASIS OF PRESENTATION

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

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

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and, therefore, should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as amended. 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 six months ended June 30, 2016 are not necessarily indicative of the results that may be expected in subsequent quarters or for the full year ended December 31, 2016.

In the first quarter of 2015, the Company recorded an out of period adjustment to correct finished goods inventory in the amount of $0.7 million that is related to periods beginning in 2013. This adjustment, which was in the Aftermarket Tooling and Accessories Segment, was to correct for costs that were not properly released from inventory as the product was sold. The Company assessed the impact of this adjustment and concluded that it is not material to previously reported financial statements. The Company also determined that the adjustment was not expected to be material to the full year in 2015, but was material to the first quarter. 

Certain amounts in the 2015 consolidated financial statements have been reclassified to conform to the current presentation. In order to provide greater clarity on investments in research and development, these expenses have been reclassified from Cost of Sales to Operating Expenses where the costs are identified as Research and development, a separate line item.

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.

8

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

JUNE 30, 2016

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):

	June 30, 2016				December 31, 2015				Level of Fair Value Hierarchy
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	23,368	$	23,368	$	32,774	$	32,774	Level 1
Restricted cash	2,459		2,459		2,192		2,192		Level 1
Foreign currency forward contracts	835		835		163		163		Level 2
Liabilities:
Notes payable to bank	228		228		—		—		Level 2
Variable interest rate debt	9,493		9,493		11,606		11,606		Level 2
Foreign currency forward contracts	364		364		418		418		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 June 30, 2016 and December 31, 2015, 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 market. Elements of the cost include materials, labor and overhead.

Net inventories consist of the following (in thousands):

	June 30, 2016		December 31, 2015
Raw materials and purchased components	$	34,517	$	34,438
Work-in-process	36,616		33,682
Finished products	47,013		42,112
Inventories, net	$	118,146	$	110,232

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 (income), net” when the hedging relationship is deemed to be ineffective. As of June 30, 2016 and December 31, 2015, the notional amounts of the derivative financial instruments designated to qualify for cash flow hedges were $51.3 million and $27.4 million, respectively. The Company expects that approximately $0.1 million of expense, net of income tax effect, to be reclassified from AOCI to earnings within the next 12 months. 

As of June 30, 2016 and December 31, 2015, the notional amounts of the derivative financial instruments not qualifying or otherwise designated as hedges were $29.9 million and $38.5 million, respectively. For the three months ended June 30, 2016 and 2015, gains of $0.4 million and $0.2 million, respectively, were recorded related to this type of derivative financial instrument. For the six months ended June 30, 2016 and 2015, losses of $0.02 million and gains of $1.6 million, respectively,

9

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

JUNE 30, 2016

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 (income), 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):

	June 30, 2016			December 31, 2015
Foreign currency forwards designated as hedges:
Other current assets	$	329		$	49
Accrued expenses	(229		)	(222		)
Foreign currency forwards not designated as hedges:
Other current assets	506			114
Accrued expenses	(135		)	(196		)
Foreign currency forwards, net	$	471		$	(255	)

NOTE 5.  PROPERTY, PLANT AND EQUIPMENT

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

	June 30, 2016			December 31, 2015
Land, buildings and improvements	$	83,340		$	82,201
Machinery, equipment and fixtures	78,604			79,176
Office furniture, equipment and vehicles	22,631			22,689
Construction in progress	176			238
	184,751			184,304
Accumulated depreciation	(124,327		)	(122,279		)
Property, plant and equipment, net	$	60,424		$	62,025

NOTE 6.  GOODWILL AND INTANGIBLE ASSETS

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

	MMS			ATA			Total
Goodwill	$	32,434		$	6,620		$	39,054
Accumulated impairment losses	(32,434		)	—			(32,434		)
Balance at December 31, 2015	—			6,620			6,620
Goodwill	32,434			6,620			39,054
Currency translation adjustments	—			(30		)	(30		)
Accumulated impairment losses	(32,434		)	—			(32,434		)
Balance at June 30, 2016	$	—		$	6,590		$	6,590

10

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

JUNE 30, 2016

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

	June 30, 2016			December 31, 2015
Gross amortizable intangible assets:
Technical know-how	$	12,949		$	12,956
Customer lists	8,991			9,011
Land rights	2,610			2,672
Patents, trade names, drawings, and other	4,339			4,393
Total gross amortizable intangible assets	28,889			29,032
Accumulated amortization:
Technical know-how	(7,137		)	(6,833		)
Customer lists	(1,528		)	(1,315		)
Land rights	(291		)	(271		)
Patents, trade names, drawings, and other	(3,418		)	(3,406		)
Total accumulated amortization	(12,374		)	(11,825		)
Amortizable intangible assets, net	16,515			17,207
Indefinite lived intangible assets:
Trade names	10,969			10,811
Intangible assets other than goodwill, net	$	27,484		$	28,018

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

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2015		2016		2015
Amortization expense	$	320	$	451	$	640	$	902

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   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Balance at the beginning of period	$	3,521		$	3,864		$	3,802		$	3,891
Warranties issued	709			430			1,081			1,399
Warranty settlement costs	(557		)	(446		)	(1,147		)	(1,448		)
Changes in accruals for pre-existing warranties	62			88			64			75
Currency translation adjustments	89			101			24			120
Balance at the end of period	$	3,824		$	4,037		$	3,824		$	4,037

11

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

JUNE 30, 2016

NOTE 8.  RESTRUCTURING CHARGES

On August 4, 2015, the Company's Board of Directors approved a strategic restructuring program (the "Program")with the goals of streamlining the Company's cost structure, increasing operational efficiencies and improving shareholder returns. This Program consists of the consolidation of certain facilities and restructuring of certain business units and is expected to incur one-time costs of $4.3 million. The restructuring Program is now substantially complete, with the exception of $0.3 million of certain costs in our German subsidiary associated with the remaining four months of a facility lease, recruiting expenses and other professional fees. The Program is expected to provide annualized savings of approximately $4.5 million.

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 six months ended June 30, 2016 and the cumulative costs recognized to date by the Program (in thousands):

	Total Costs Expected to be Incurred		Cost Recognized for Three Months Ended June 30, 2016		Cost Recognized for Six Months Ended June 30, 2016		Cumulative Costs Recognized to Date
MMS Segment:
Employee termination costs	$	260	$	—	$	—	$	255
Other related costs	—		—		—		—
Total MMS Segment	260		—		—		255
ATA Segment:
Employee termination costs	3,323		69		269		3,314
Facility exit costs	203		—		—		—
Other related costs	539		157		157		415
Total ATA Segment	4,065		226		426		3,729
Total:
Employee termination costs	3,583		69		269		3,569
Facility exit costs	203		—		—		—
Other related costs	539		157		157		415
Total Company	$	4,325	$	226	$	426	$	3,984

There were no costs recognized under the Program for the three and six months ended June 30, 2015. The amounts accrued associated with the Program are included in "Accrued expenses" and "Pension and postretirement liabilities" in the Consolidated Balance Sheets. A rollforward of the accrued restructuring costs is presented below (in thousands):

	Segment						Total
	MMS			ATA
Balance at December 31, 2015	$	167		$	1,242		$	1,409
Restructuring charges:
Employee termination costs	—			269			269
Other related costs	—			157			157
Total restructuring charges for the period	—			426			426
Cash expenditures	(10		)	(1,173		)	(1,183		)
Foreign currency translation adjustment	—			41			41
Balance at June 30, 2016	$	157		$	536		$	693

12

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

JUNE 30, 2016

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 39.1% and (0.7)% for the three and six months ended June 30, 2016.

The tax years 2010 through 2015 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 2008 and 2015 generally remain open to routine examination by foreign taxing authorities, depending on the jurisdiction.

At June 30, 2016, a liability of $2.1 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 June 30, 2016 would be recorded as a benefit to income tax expense on the Consolidated Statements of Operations. It is reasonably possible that some of the uncertain tax positions pertaining to foreign operations may change within the next 12 months due to audit settlements and statute of limitations expirations. The change in uncertain tax positions for these items is estimated to be up to $1.3 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.

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.,

13

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

JUNE 30, 2016

(collectively, the "PRPs"), 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 PRPs 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 PRPs submitted a Remedial Investigation (RI) to respond to EPA issues raised in the initial draft RI. In January 2016, the PRPs submitted a draft Feasibility Study (FS), also to respond to issues raised by the EPA about previous drafts of the FS. The final FS was submitted on July 18, 2016.

The EPA has been preparing a Proposed Remedial Action Plan based upon the final FS, Alternative 3 (Capping), which cost is currently estimated at $1.92 million, of which the Company under current circumstances would be responsible for an estimated $0.3 million which has been reserved and reported as an Accrued expense on the Consolidated Balance Sheets.

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

NOTE 11.  PENSION AND POSTRETIREMENT PLANS

A summary of the components of net periodic pension and postretirement benefit costs for the three and six months ended June 30, 2016 and 2015 is presented below (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended   June 30,						Three Months Ended   June 30,
	2016			2015			2016			2015
Service cost	$	569		$	498		$	3		$	3
Interest cost	1,676			1,678			19			18
Expected return on plan assets	(2,328		)	(2,413		)	—			—
Amortization of prior service credit	(64		)	(82		)	—			—
Amortization of transition asset	(79		)	(21		)	—			—
Amortization of actuarial loss (gain)	957			784			(14		)	(12		)
Net periodic cost	$	731		$	444		$	8		$	9
	Pension Benefits						Postretirement Benefits
	Six Months Ended   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Service cost	$	1,128		$	991		$	6		$	6
Interest cost	3,348			3,351			38			37
Expected return on plan assets	(4,637		)	(4,813		)	—			—
Amortization of prior service credit	(127		)	(162		)	—			—
Amortization of transition asset	(156		)	(42		)	—			—
Amortization of actuarial loss (gain)	1,900			1,562			(28		)	(25		)
Net periodic cost	$	1,456		$	887		$	16		$	18

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

JUNE 30, 2016

NOTE 12.  STOCK BASED COMPENSATION

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

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

	Three Months Ended   June 30,					Six Months Ended   June 30,
	2016		2015			2016		2015
Restricted stock/unit awards (“RSA”)	$	58	$	90		$	123	$	201
Performance share incentives (“PSI”)	—		(62		)	—		(62		)
Total stock based compensation	$	58	$	28		$	123	$	139

There were no RSAs granted during the six months ended June 30, 2016, and 2015, respectively. The deferred compensation is being amortized on a straight-line basis over the specified service period. There were no Performance Share Incentives ("PSIs") granted during the six months ended June 30, 2016 and 2015, respectively. The deferred compensation with respect to the PSIs is being recognized into earnings based on the passage of time and achievement of performance targets. All outstanding RSAs and PSIs are unvested.        

Unrecognized compensation and the expected weighted-average recognition periods with respect to the outstanding RSAs and PSIs as of June 30, 2016 and December 31, 2015, are as follows:

	June 30, 2016				December 31, 2015
	RSAs		PSIs		RSAs		PSIs
Unrecognized compensation cost (in thousands)	$	226	$	564	$	349	$	1,192
Expected weighted-average recognition period for unrecognized compensation    cost (in years)	0.87		1.51		1.20		1.16

NOTE 13.  CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in AOCI by component for the three and six months ended June 30, 2016 and 2015 are as follows (in thousands):

	Three Months ended June 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	$	24,312		$	(69,221	)	$	4		$	(44,905	)
Other comprehensive (loss) income before reclassifications	(2,840		)	775			(96		)	(2,161		)
Less: (loss) income reclassified from AOCI	—			(800		)	(63		)	(863		)
Net other comprehensive (loss) income	(2,840		)	1,575			(33		)	(1,298		)
Income taxes	113			169			—			282
Ending balance, net of tax	$	21,359		$	(67,815	)	$	(29	)	$	(46,485	)

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HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

JUNE 30, 2016

	Three Months Ended June 30, 2015
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	26,090		$	(64,014	)	$	177		$	(37,747	)
Other comprehensive income (loss) before reclassifications	4,196			(1,191		)	4			3,009
Less: (loss) income reclassified from AOCI	—			(669		)	61			(608		)
Net other comprehensive income (loss)	4,196			(522		)	(57		)	3,617
Income taxes	(201		)	(118		)	(14		)	(333		)
Ending balance, net of tax	$	30,487		$	(64,418	)	$	134		$	(33,797	)

	Six Months Ended June 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	899		(287		)	116			728
Less: (loss) income reclassified from AOCI	—		(1,589		)	(16		)	(1,605		)
Net other comprehensive income	899		1,302			132			2,333
Income taxes	69		17			19			105
Ending balance, net of tax	$	21,359	$	(67,815	)	$	(29	)	$	(46,485	)

	Six Months Ended June 30, 2015
	Foreign currency translation adjustments		Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	25,913	$	(64,570	)	$	(144	)	$	(38,801	)
Other comprehensive income (loss) before reclassifications	5,528		(1,344		)	497			4,681
Less: (loss) income reclassified from AOCI	—		(1,333		)	179			(1,154		)
Net other comprehensive income (loss)	5,528		(11		)	318			5,835
Income taxes	954		(163		)	40			831
Ending balance, net of tax	$	30,487	$	(64,418	)	$	134		$	(33,797	)

16

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

JUNE 30, 2016

Details about reclassification out of AOCI for the three and six months ended June 30, 2016 and 2015 are as follows (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,						Affected line item on the Consolidated Statements of Operations
Details of AOCI components	2016			2015			2016			2015
Unrealized (loss) gain on cash flow hedges:
	$	(53	)	$	16		$	23		$	145		Sales
	(10		)	45			(39		)	34			Other expense (income), net
	(63		)	61			(16		)	179			Total before tax
	(10		)	11			(3		)	32			Income taxes
	$	(73	)	$	72		$	(19	)	$	211		Net of tax
Retirement plans related adjustments:
Amortization of prior service credit	$	64		$	82		$	127		$	162		(a)
Amortization of transition asset	79			21			156			42			(a)
Amortization of actuarial loss	(943		)	(772		)	(1,872		)	(1,537		)	(a)
	(800		)	(669		)	(1,589		)	(1,333		)	Total before tax
	85			48			168			96			Income taxes
	$	(715	)	$	(621	)	$	(1,421	)	$	(1,237	)	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   June 30,				Six Months Ended   June 30,
	2016		2015		2016			2015
Numerator for basic and diluted loss per share:
Net earnings (loss) applicable to common shareholders	$	145	$	1,586	$	(1,101	)	$	178
Denominator for basic and diluted loss per share:
Denominator for basic and diluted loss per share — weighted average shares	12,812		12,776		12,804			12,759
Assumed exercise of stock options	22		21		—			22
Assumed satisfaction of restricted stock conditions	67		60		—			81
Denominator for diluted earnings per share — adjusted weighted average shares	12,901		12,857		12,804			12,862

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HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

JUNE 30, 2016

Common stock equivalents of certain stock-based awards totaling 5,384 and 32,342 were excluded from the calculation of diluted earnings per share for the three months ended June 30, 2016 and 2015, respectively, as they were anti-dilutive. There is no dilutive effect of the restricted stock and stock options for six months ended June 30, 2016 due to the net loss in this period. There would have been 94,666 of these shares included in the diluted calculation for the six months ended June 30, 2016 had there been earnings in this period. Common stock equivalents of certain stock-based awards totaling 24,544 were excluded from the calculation of diluted earnings per share for the six months ended June 30, 2015, as they were anti-dilutive.

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 June 30, 2016
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	54,359	$	15,883	$	(56	)	$	70,186
Depreciation and amortization	1,494		526		—			2,020
Segment income	276		1,641					1,917
Capital expenditures	394		163					557

	Three Months Ended June 30, 2015
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	66,210	$	16,672	$	(526	)	$	82,356
Depreciation and amortization	1,614		585		—			2,199
Segment income	1,743		1,857		—			3,600
Capital expenditures	940		354		—			1,294

	Six Months Ended June 30, 2016
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	106,630		$	31,504	$	(127	)	$	138,007
Depreciation and amortization	2,921			1,064					3,985
Segment (loss) income	(880		)	3,495					2,615
Capital expenditures	685			307					992
Segment assets(1)	222,098			48,440					270,538

18

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

JUNE 30, 2016

	Six Months Ended June 30, 2015
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	119,186	$	32,899	$	(601	)	$	151,484
Depreciation and amortization	3,238		1,185					4,423
Segment income	834		3,054					3,888
Capital expenditures	1,246		747					1,993
Segment assets(1)	246,331		50,788					297,119

____________________

⁽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 six months ended June 30, 2016 and 2015 are as follows (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Segment income	$	1,917		$	3,600		$	2,615		$	3,888
Unallocated corporate expense	(1,616		)	(1,068		)	(3,559		)	(2,771		)
Interest expense, net	(63		)	(131		)	(149		)	(271		)
Other unallocated expense	—			(149		)				(151		)
Income (loss) before income taxes	$	238		$	2,252		$	(1,093	)	$	695

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

	June 30, 2016		December 31, 2015
Total segment assets	$	270,538	$	274,334
Unallocated assets	27,686		36,801
Total assets	$	298,224	$	311,135

Unallocated assets include cash of $23.4 million and $32.8 million at June 30, 2016 and December 31, 2015, respectively.

NOTE 16.  NEW ACCOUNTING STANDARDS

In April 2015, the Financial Accounting Standards Board (“FASB”) issued an amended guidance on the balance sheet presentation of debt issuance costs. This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts while the recognition and measurement guidance for debt issuance costs is not affected. In August 2015, FASB subsequently issued an amended guidance to clarify debt issuance costs associated with a line-of-credit arrangement, which allow an entity to defer and present debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The amendments are required to be applied retrospectively to all prior periods.

In January 2016, the Company adopted the guidance. As a result, the Company reclassified $0.07 million and $0.09 million debt issuance cost as of December 31, 2015 into Current portion of long-term debt and Long-term debt respectively to reduce the carrying amount of debt liability, from Other current assets and Other non-current assets on the Consolidated

19

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

JUNE 30, 2016

Balance Sheets. Debt issuance costs associated with line-of-credit arrangements remained in the Other current assets and Other non-current assets on the Consolidated Balance Sheets. Unamortized debt issuance costs of $0.06 million and $0.06 million are recorded as Other current assets and Other non-current assets respectively, and $0.07 million and $0.06 million were recorded as Current portion of long-term debt and Long-term debt respectively to reduce the carrying amount of debt liability, on the balance sheet at June 30, 2016. The Company's debt issuance cost amortization was not affected by the adoption of the new guidance.

In March 2016, the FASB issued an amended guidance on improvements to employee share-based payment accounting. The guidance includes multiple provisions to simplify various aspects of the accounting for share-based payments. These amendments are expected to impact net income, EPS, and the statement of cash flows. In particular, the tax effects of all stock compensation awards will be included in income. The guidance is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted in any interim period, with all adjustments applied as of the beginning of the fiscal year of adoption. The Company is assessing the impact and method of adoption.

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, 2015, as amended.

We supply high precision computer controlled metalcutting turning machines, grinding machines, vertical machining centers, and repair parts related to those machines. The Company also engineers and supplies high precision, standard and specialty workholding devices, and other machine tool accessories. We believe our products are known for accuracy, reliability, durability and value. We are geographically diversified with manufacturing facilities in China, France, Germany, India, Switzerland, Taiwan, the United States (“U.S.”), and the United Kingdom (“U.K.”), with sales to most industrialized countries. Approximately 66% of our 2015 sales were to customers outside of North America, 70% of our 2015 products sold were manufactured outside of North America, and 69% of our employees as of December 31, 2015 were employed outside of North America.

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

Non-machine sales, which include collets, chucks, accessories, repair parts and service revenue, accounted for approximately 34% of overall sales through the second quarter of 2016 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 be significant to reported results for several reasons. Our primary competitors, particularly for the most technologically advanced products, are now largely manufacturers in Japan, Germany, Switzerland, Korea, and Taiwan, which causes the worldwide valuation of their respective currencies to be central to competitive pricing in all of our markets. The major functional currencies of our subsidiaries are the British Pound Sterling (“GBP”), Chinese Renminbi (“CNY”), Euro (“EUR”), New Taiwanese Dollar (“TWD”), and Swiss Franc (“CHF”). Under U.S. generally accepted accounting principles, results of foreign subsidiaries are translated into U.S. Dollars (“USD”) at the average exchange rate during the periods presented. Period-to-period changes in the exchange rate between their local currency and the USD may affect comparative data significantly. We also purchase computer controls and other components from suppliers throughout the world, with purchase costs reflecting currency changes.

For the three and six months ended June 30, 2016, foreign currency fluctuations resulted in unfavorable currency translation impact of approximately $1.6 million and $3.5 million on sales when compared to the same period in 2015.

Results of Operations

Presented below is summarized selected financial data for the three and six months ended June 30, 2016 and 2015 (in thousands): 

	Three Months Ended   June 30,						$ Change				% Change		Six Months Ended   June 30,
	2016			2015									2016			2015			$ Change				% Change
Sales	$	70,186		$	82,356		$	(12,170	)		(15	)%	$	138,007		$	151,484		$	(13,477	)		(9	)%
Gross profit	23,553			26,962			(3,409		)		(13	)%	46,296			48,817			(2,521		)		(5	)%
% of sales	33.6		%	32.7		%	0.9			pts.			33.5		%	32.2		%	1.3			pts.
Selling, general and administrative expenses	19,637			21,071			(1,434		)		(7	)%	40,230			40,671			(441		)		(1	)%
% of sales	28.0		%	25.6		%	2.4			pts.			29.2		%	26.8		%	2.4			pts.
Research & development	3,369			3,498			(129		)		(4	)%	6,656			7,105			(449		)		(6	)%
Restructuring	226			—			226				100	%	426			—			426				100	%
Other expense (income), net	20			10			10				100	%	(72		)	75			(147		)		(196	)%
Income (loss) from operations	301			2,383			(2,082		)		(87	)%	(944		)	966			(1,910		)		(198	)%
% of sales	0.4		%	2.9		%	(2.5		)	pts.			(0.7		)%	0.6		%	(1.3		)	pts.
Interest expense, net	63			131			(68		)		(52	)%	149			271			(122		)		(45	)%
Income (loss) before income taxes	238			2,252			(2,014		)		(89	)%	(1,093		)	695			(1,788		)		(257	)%
Income tax expense	93			666			(573		)		(86	)%	8			517			(509		)		(98	)%
Net income (loss)	$	145		$	1,586		$	(1,441	)		(91	)%	$	(1,101	)	$	178		$	(1,279	)		(719	)%
% of sales	0.2		%	1.9		%	(1.7		)	pts.			(0.8		)%	0.1		%	(0.9		)	pts.

Sales.  The table below summarizes sales by each corresponding geographical region for the three and six months ended June 30, 2016 compared to the same period in 2015 (in thousands): 

	Three Months Ended   June 30,								Six Months Ended   June 30,
	2016		2015		$ Change			% Change	2016		2015		$ Change			% Change
Sales to customers in:
North America	$	20,694	$	29,073	$	(8,379	)	(29)%	$	38,144	$	55,378	$	(17,234	)	(31)%
Europe	22,242		22,055		187			1%	46,084		44,984		1,100			2%
Asia and other	27,250		31,228		(3,978		)	(13)%	53,779		51,122		2,657			5%
Total	$	70,186	$	82,356	$	(12,170	)	(15)%	$	138,007	$	151,484	$	(13,477	)	(9)%

Sales for the three months ended June 30, 2016 were $70.2 million, a decrease of $12.2 million, or 14.8%, compared to the same period in 2015. The decrease in sales was driven by lower demand in the industrial markets in North America and Asia, in addition to unfavorable foreign currency translation of $1.6 million. Excluding the translation impact, the decline in sales would have been 12.9%.

22

Sales for the six months ended June 30, 2016 were $138.0 million, a decrease of $13.5 million, or 8.9%, compared to the same period in 2015. The decrease in sales was driven by continued lower demand in the industrial markets in North America, partially offset by modest growth in Europe and Asia. Foreign currency translation was unfavorable by $3.5 million. Excluding the translation impact, the decline in sales would have been 6.6%

North America sales were $20.7 million and $38.1 million during the three and six months ended June 30, 2016, respectively, a decrease of $8.4 million, or 29%, and $17.2 million, or 31%, when compared to the same periods in 2015. The decreases in sales were mainly the result of lower sales from the Metalcutting Machine Solutions segment as compared to the prior year due to lower demand for capital goods in that market, as also exhibited in industry published data.

Europe sales were $22.2 million and $46.1 million during the three and six months ended June 30, 2016, respectively, an increase of $0.2 million, or 0.8%, and $1.1 million, or 2.4%, when compared to the same periods in 2015. Foreign currency translation adjustments for the three and six months ended June 30, 2016 resulted in an unfavorable impact of approximately of $0.3 million and $1.1 million to sales. Excluding the impact of translation, sales growth was $0.4 million, or 2.2%, and $2.2 million, or 4.9%, for the three and six months ended June 30, 2016, respectively, compared to the same prior periods. Virtually all of the increase was in the Metalcutting Machine Solutions segment.

Asia and other sales were $27.3 million and $53.8 million during the three and six months ended June 30, 2016, respectively, a decrease of $4.0 million, or 12.7%, and an increase of $2.7 million, or 5.2%, when compared to the same periods in 2015. Foreign currency translation adjustments for the three and six months ended June 30, 2016 resulted in an unfavorable impact of approximately $1.3 million and $2.4 million. Excluding the impact of translation, the sales decline was $2.6 million, or 8.6% for the the three months ended June 30, 2016 compared to the same prior year period, while sales increased $5.1 million, or 10.0% for the six months ended June 30, 2016 compared to the prior period. Demand from customers in China is the key driver of the performance of the machine tool industry, and while recent machine tool industry data from China has continued to be subdued, Hardinge has been able to perform better in the market based upon targeting customer segments that provide better opportunities for growth.

Sales of machines accounted for approximately 66% of the consolidated sales for the three and six months ended June 30, 2016 and 2015, while sales of non-machine products and services, primarily consisting of collets, chucks, accessories, repair parts, and service revenue, accounted for approximately 34% of the consolidated sales for the three and six months ended June 30, 2016 and 2015.

Gross Profit.  Gross profit was $23.6 million, or 33.6% of sales for the three months ended June 30, 2016, compared to $27.0 million, or 32.7% of sales for the same period in 2015. The primary factor to reduced gross profit was the impact of lower sales volume, partially offset by $0.3 million in savings from the Company’s 2015 restructuring actions. The improvement in gross margin percent was due to improved product mix and the restructuring savings, partially offset by the impact of lower volume over fixed manufacturing costs.

Gross profit was $46.3 million or 33.5% of sales for the six months ended June 30, 2016, compared to $48.8 million or 32.2% of sales for the same period in 2015. Gross profit and margin for the six months ended June 30, 2016 was impacted by lower volume, partially offset by $0.6 millionin savings from the Company’s restructuring program, as well as the non-recurrence of an out of period inventory adjustment of $0.7 million recorded in the first quarter of 2015 at one of our European subsidiaries to correct for costs that were not properly released from inventory as the product was sold.

Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses were $19.6 million, or 28.0% of sales for the three months ended June 30, 2016, a decrease of $1.4 million, or 7%, compared to $21.1 million, or 25.6% of sales for the three months ended June 30, 2015. The decrease of $1.4 million in SG&A expenses for the three months ended June 30, 2016 was driven by reduced commission expense of $0.6 million, a favorable impact from currency translation of $0.5 million and savings from the Company’s restructuring program of $0.4 million. These savings were offset by $0.4 million in costs associated with the Company’s strategic review process and $0.2 million in costs related to the restructuring program.

SG&A expenses were $40.2 million, or 29.2% of sales for the six months ended June 30, 2016, down $0.5 million, or 1% compared to $40.7 million, or 25.6% of sales for the six months ended June 30, 2015. The decrease in SG&A expenses of $0.5 million for the six months ended June 30, 2016 was driven by the favorable impact $1.2 million in foreign currency translation, a $0.8 million savings from the Company’s restructuring program, and $0.4 million in savings based on timing of trade shows. These savings were offset by $1.1 million in costs associated with the Company’s strategic review process and $0.4 million in cost related to the restructuring program, and an increase in commission expense of $0.6 million.

Research and Development Expenses.  Research and Development ("R&D") expenses were $3.4 million, or 4.8% of sales for the three months ended June 30, 2016, relatively flat compared to $3.5 million, or 4.2% of sales for the three months ended June 30, 2015. For the quarter, $0.2 million of savings resulted from the restructuring program.

23

R&D expenses were $6.7 million, or 4.8% of sales for the six months ended June 30, 2016, a decrease of $0.4 million, or 6.3% compared to $7.1 million, or 4.7% of sales for the six months ended June 30, 2015. For the year, $0.4 million of savings resulted from the restructuring program.

Other (Income)Expense, Net. Net other expense increased by $0.01 million for the three months ended June 30, 2016 compared to the same period in 2015 while net other income for the six months ended June 30, 2016 increased $0.1 million when compared to the same period in 2015. Variances are primarily a result of fluctuations in foreign currency exchange rates during the periods as compared to the same periods in 2015.

Income (Loss) Before Income Taxes.  As a result of the foregoing, income before income taxes was $0.2 million for the three months ended June 30, 2016, compared to income before income taxes of $2.3 million for the same period in 2015. For the six months ended June 30, 2016, loss before income taxes was $1.1 million compared to income before income taxes of $0.7 million for the same period in 2015.

Income Taxes.  The income tax provision was $0.1 million and $0.01 million for the three and six months ended June 30, 2016, compared to an income tax provision of $0.7 million and $0.5 million for the same periods in 2015. The effective tax rate was 39.1% and (0.7)% for the three and six months ended June 30, 2016, compared to 29.6% and 74.4% for the same periods in 2015, which 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 the Netherlands net deferred tax assets and we expect to continue to record a full valuation allowance on future tax benefits until an appropriate level of profitability is sustained in the respective jurisdiction.

Net Income (Loss).  As a result of the foregoing, net income for the three months ended June 30, 2016 was $0.1 million, or 0.2% of sales, compared to $1.6 million, or 1.9% of sales, for the same period in 2015. Net loss for the six months ended June 30, 2016 was $1.1 million, or 0.8% of sales, compared to net income of $0.2 million, or 0.1% of sales, for the same period in 2015. Both basic and diluted income (loss) per share for the three and six months ended June 30, 2016 were $0.01 and $(0.09), compared to $0.12 and $0.01 for the same periods in 2015.

Business Segment Information — Comparison of the three and six months ended June 30, 2016 and 2015

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

	Three Months Ended   June 30,									Six Months Ended   June 30,
	2016		2015		$ Change			% Change		2016			2015		$ Change			% Change
Sales	$	54,359	$	66,210	$	(11,851	)	(18	)%	$	106,630		$	119,186	$	(12,556	)	(11	)%
Segment income (loss)	276		1,743		(1,467		)	(84	)%	(880		)	834		(1,714		)	(206	)%

MMS sales were $54.4 million for the three months ended June 30, 2016, a decrease of $11.9 million, or 18% when compared to the corresponding period in 2015. After considering the $1.6 million of unfavorable impact of foreign currency translation adjustments, sales would have decreased by $10.3 million or 16%. Declines were exhibited in all machine product lines, primarily due to the uncertainty in the global industrial markets for capital goods. For the six months ended June 30, 2016, MMS sales were $106.6 million, a decrease of $12.6 million, or 11%, when compared to the same period in 2015 primarily due to the uncertainty in global industrial markets. After considering the $3.4 million of unfavorable impact of foreign currency translation adjustments, sales would have decreased by $9.2 million or 8%.

Segment income for the three months ended June 30, 2016 was $0.3 million, a decrease of $1.5 million, or 84% when compared to the prior year. The key driver was the impact of lower volume, partially offset by lower spending in manufacturing and SG&A and $0.2 million of savings from the restructuring program. For thesix months ended June 30, 2016, segment loss was $0.9 million, a decrease of $1.7 million, or 206%, when compared to segment income of $0.8 million in the same period 2015. The primary driver was the impact of reduced volume, partially offset by reductions in manufacturing and SG&A costs and $0.4 million of savings from the restructuring program.

24

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

	Three Months Ended   June 30,									Six Months Ended   June 30,
	2016		2015		$ Change			% Change		2016		2015		$ Change			% Change
Sales	$	15,883	$	16,672	$	(789	)	(5	)%	$	31,504	$	32,899	$	(1,395	)	(4	)%
Segment income	1,641		1,857		(216		)	(12	)%	3,495		3,054		441			14	%

ATA sales for the three months ended June 30, 2016 were $15.9 million, a decrease of $0.8 million, or 5%, when compared to the corresponding period in 2015. The primary driver of the decline in sales was lower sales in Europe offset by growth in North America and Asia. For the six months ended June 30, 2016, ATA sales were $31.5 million, a decrease of $1.4 million, or 4%, when compared to the same period in 2015. The decline in sales for the same and year to date, was primarily due to 22% and 16% respectively of lower sales in Europe, while sales to Asia increased by 8% and 12% respectively.

Segment income for the three months ended June 30, 2016 was $1.6 million, a $0.2 million, or 12% decrease from the prior year. The ATA segment experienced decreased profitability as a result of the decline is sales volume, partially offset by $0.7 million in savings from the restructuring program, reduced by $0.2 million of cost to implement. For the six months ended June 30, 2016, segment income was $3.5 million, an increase of $0.4 million or 14%, when compared to segment income of $3.1 million in the same period 2015. The primary driver of this increase is $1.4 million in savings from the restructuring program, reduced by $0.4 million of cost to implement, in addition to the non-recurrence of an out of period inventory adjustment of $0.7 million at one of our European subsidiaries to correct for costs that were not properly released from inventory as the product was sold in 2015. This was partially offset by the impact of lower sales volume.

Segment Summary For the Three and Six Months Ended June 30, 2016 and 2015 (in thousands):

	Three Months ended June 30, 2016										Three Months Ended June 30, 2015
	MMS		ATA		Inter-Segment Eliminations			Total			MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	54,359	$	15,883	$	(56	)	$	70,186		$	66,210	$	16,672	$	(526	)	$	82,356
Segment income	276		1,641					1,917			1,743		1,857					3,600
Unallocated corporate    expense								(1,616		)								(1,068		)
Interest expense, net								(63		)								(131		)
Other unallocated    expense								—										(149		)
Income before    income taxes								$	238									$	2,252

	Six Months Ended June 30, 2016											Six Months Ended June 30, 2015
	MMS			ATA		Inter-Segment Eliminations			Total			MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	106,630		$	31,504	$	(127	)	$	138,007		$	119,186	$	32,899	$	(601	)	$	151,484
Segment (loss) income	(880		)	3,495					2,615			834		3,054		—			3,888
Unallocated corporate    expense									(3,559		)								(2,771		)
Interest expense, net									(149		)								(271		)
Other unallocated    expense																			(151		)
(Loss) income before    income taxes									$	(1,093	)								$	695

25

Summary of Cash Flows for the Six Months EndedJune 30, 2016 and 2015:

	Six Months Ended   June 30,
	2016			2015
Net cash (used in) provided by operating activities	$	(6,039	)	$	10,547
Net cash used in investing activities	$	(955	)	$	(1,982	)
Net cash used in financing activities	$	(2,579	)	$	(3,090	)

During the six months ended June 30, 2016, we used $6.0 million net cash from operating activities. The net cash used was driven by a net loss (as adjusted for depreciation and amortization expense as well as the impact of unrealized foreign currency transaction loss), an increase in inventory based on orders and associated production levels, and decreases in accounts payable due to timing of purchases and payment activity, customer deposits due to timing of shipments and new orders received, and accrued expenses, primarily as a result of payment of annual incentive compensation, severance pay related to restructuring, sales commission payable, as well as the payment of the annual Company contribution to the 401(k) Plan. These uses of cash were partially offset by cash generated from a reduction in customer accounts receivable due to the timing of sales and collection activity.

During the six months ended June 30, 2015, we generated $10.5 million net cash from operating activities. The net cash generated was driven by net income (as adjusted for depreciation and amortization expense as well as the impact of unrealized foreign currency transaction loss), a decrease in customer receivables due to the timing of sales and collection activity, an increase in customer deposits due to timing of shipments and new orders received, and an increase in accounts payable due to timing of purchases and payment activity. These cash inflows were partially offset by an increase in inventories based on orders and associated production levels, a decrease in accrued expenses, primarily as a result of payment of annual bonuses as well as the payment of the annual Company contribution to the 401(k) Plan, and an increase in other assets related to advanced vendor payments for inventory.

Net cash used in investing activities was $1.0 million for the six months ended June 30, 2016. The primary use of cash was for capital expenditures during the period, which were made primarily for maintenance capital purchases.

Net cash used in investing activities was $2.0 million for the six months ended June 30, 2015. The primary use of cash was for capital expenditures, which were made primarily for maintenance capital purchases.

Net cash flow used in financing activities was $2.6 million for the six months ended June 30, 2016. Cash used was primarily attributable to $2.3 million of payments on long-term debt due to normal scheduled payment activity and year-to-date dividends paid of $0.5 million, offset by $0.2 millionof short-term borrowings during the period.

Net cash flow used by financing activities was $3.1 million for the six months ended June 30, 2015. Cash used by financing activities was primarily driven by $2.4 million of payments on long-term debt due to normal scheduled payment activity and year-to-date dividends paid of $0.5 million.

Liquidity and Capital Resources

We maintain financing arrangements with several financial institutions. These financing arrangements are in the form of long term loans, credit facilities, and lines of credit. The credit facilities allow us to borrow up to $77.6 million at June 30, 2016 and $77.2 million at December 31, 2015, of which $54.3 million and $54.1 million, respectively, can be borrowed for working capital needs. As of June 30, 2016 and December 31, 2015, $69.2 million and $69.8 million was available for borrowing under these respective arrangements, of which $51.6 million and $53.2 million, respectively, was available for working capital needs. Total consolidated borrowings outstanding were $9.7 million and $11.6 million at June 30, 2016 and December 31, 2015, respectively.

Our financing arrangements contain certain debt covenant requirements, including financial covenants, representations, affirmative and negative covenants, prepayment provisions and events of default. As of June 30, 2016, we were in compliance with all of our debt covenants.

26

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 six months ended June 30, 2016, cash flows from operating activities and available cash were sufficient to fund our normal investment activities, primarily capital expenditures for property, plant and equipment and other productive assets.

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

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 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 six months of 2016. For a discussion of our exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risks, contained in our 2015 Annual Report on Form 10-K, as amended.

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 June 30, 2016, 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 June 30, 2016 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.

None.

Item 1A.Risk Factors.

There is no change to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as amended.

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.

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Item 6.	Exhibits.
3.1	Restated Certificate of Incorporation of Hardinge Inc. (incorporated by reference to Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 8, 2015 (File No. 001-34639))
3.2	Certificate of Amendment of the Restated Certificate of Incorporation of Hardinge Inc. (incorporated by reference to Exhibit 3.2 to Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 8, 2015 (File No. 001-34639)).
3.3	By-Laws of Hardinge Inc.
4.1	Specimen of certificate for shares of Common Stock, par value $.01 per share, of Hardinge Inc. (incorporated by reference to Exhibit 3 to Registrant’s Registration Statement on Form 8-A, filed with the Securities and Exchange Commission on May 19, 1995 (File No. 000-15760)).
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
August 5, 2016	By:	/s/ Richard L. Simons
Date		Richard L. Simons
		President and Chief Executive Officer
		(Principal Executive Officer)
August 5, 2016	By:	/s/ Douglas J. Malone
Date		Douglas J. Malone
		Vice President and Chief Financial Officer
		(Principal Financial Officer)

30

EX-3.3

- 1 -

As Adopted 9/28/04

Last Amended 7/7/16

BY - LAWS

-of-

HARDINGE INC.

ARTICLE I Offices.

SECTION 1.
Principal Office.

The principal office of the corporation shall be located in the County of Chemung and State of New York.

SECTION 2.
Other Offices.

The corporation may also have such other offices, either within or without the State of New York, as the Board of Directors may from time to time determine or the business of the corporation may require.

ARTICLE II
Shareholders.

SECTION 1.
Place of Meetings of Shareholders.

Meetings of shareholders may be held at such place, within or without the State of New York, as may be fixed by the Board of Directors.

SECTION 2.
Annual Meeting of Shareholders.

- 2 -

A meeting of shareholders shall be held annually on such date and at such place and time as may be fixed by the Board of Directors for the election of directors and the transaction of other business.

SECTION 3.
Special Meetings of Shareholders.

Special meetings of the shareholders may be called by the Board of Directors or by the Chairman of the Board, or by the President. Such call shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting shall be confined to the purpose or purposes for which the meeting is called.

SECTION 4.
Fixing Record Date.

The Board of Directors may fix, in advance, a date as the record date for purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action. Such date shall be not more than sixty (60) nor less than ten (10) days before the date of such meeting nor more than sixty (60) days before any other action. If no record date is fixed, the record date for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given and for all other purposes shall be at the close of business on the day on which the resolution of the Board of Directors relating thereto is adopted.

SECTION 5.
Notice of Meetings of Shareholders.

Written notice of every meeting of shareholders shall state the place, date and hour of the meeting and, unless it is the annual meeting, indicate that it is being issued by or at the direction of the person or persons calling the meeting. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called. If, at any meeting, action is proposed to be taken which would, if taken, entitle shareholders fulfilling the statutory requirements to receive payment for their shares, the notice of such meeting shall include a statement of that purpose and to that effect. A copy of the notice of any meeting shall be given, personally or by mail, not less than ten (10) nor more than sixty (60) days before the date of the meeting, to each shareholder entitled to vote at such meeting. If mailed, such notice shall be deemed given when deposited in the United States mail, with postage thereon prepaid, directed to the shareholder at his address as it appears on the record of shareholders, or, if he shall have filed with the secretary of the corporation a written request that notices to him be mailed to some other address, then directed to him at such other address.

- 3 -

SECTION 6.
Adjourned meetings.

When a determination of shareholders entitled to notice of or to vote at any meeting of shareholders has been made, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date for the adjourned meeting. When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting the corporation may transact any business that might have been transacted on the original date of the meeting. However, if after the adjournment the Board of Directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record on the new record date entitled to notice.

SECTION 7.
List of Shareholders at Meeting.

A list of shareholders as of the record date, certified by the secretary or by the transfer agent, shall be produced at any meeting of shareholders upon the request there at or prior thereto of any shareholder. If the right to vote at any meeting is challenged, the inspectors of election, or person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meetings, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting.

SECTION 8.
Quorum of Shareholders.

The holders of a majority of the shares entitled to vote thereat shall constitute a quorum at a meeting of shareholders for the transaction of any business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders. Despite the absence of a quorum, the shareholders present may adjourn the meeting.

SECTION 9.
Proxies.

Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting may authorize another person or persons to act for him by proxy. Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except in those cases where an irrevocable proxy is provided by law.

- 4 -

SECTION 10.
Inspectors at Shareholders’ Meetings.

The Board of Directors, in advance of any shareholders’ meeting, may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed or the persons so appointed by the Board of Directors are unable to act at the shareholders’ meeting, then the person presiding at the meeting shall appoint inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting or any shareholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, question or matter determined by them and execute a certificate of any fact found by them. A report or certificate made by them shall be prima facie evidence of the facts stated and of the vote as certified by them.

SECTION 11.
Qualifications of Voters.

Every shareholder of record shall be entitled at every meeting of shareholders to one vote for every share standing in his name on the record of shareholders.

Neither treasury shares nor shares held by another domestic or foreign corporation of any type or kind, if a majority of the shares entitled to vote in the election of directors of such other corporation is held by the corporation, shall be voted at any meeting or counted in determining the total number of outstanding shares.

Shares held by an administrator, executor, guardian, conservator, committee, or other fiduciary, except a trustee, may be voted by him, either in person or by proxy, without transfer of such shares into his name. Shares held by a trustee may be voted by him, either in person or by proxy, only after the shares have been transferred into his name as trustee or into the name of his nominee.

Shares held by or under the control of a receiver may be voted by him without the transfer thereof into his name if authority so to do is contained in an order of the court by which such receiver was appointed.

A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee.

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Shares standing in the name of another domestic or foreign corporation of any type or kind may be voted by such officer, agent or proxy as the By-Laws of such corporation may provide, or, in the absence of such provision, as the Board of Directors of such corporation may determine.

SECTION 12.
Vote of Shareholders.

At each meeting of shareholders, every shareholder entitled to vote shall have the right to vote in person or by proxy duly appointed by an appropriate instrument, such as a writing, a telegram, a cablegram or other means of electronic transmission, in each case subscribed by or on behalf of such shareholder. The vote for directors shall be by ballot. In a vote by ballot each ballot shall state the number of shares voted and the name of the shareholder or proxy voting. Directors shall, except as otherwise required by law, be elected by a plurality of the votes cast at a meeting of shareholders by the holders of shares entitled to vote in the election. Any other corporate action by vote of the shareholders shall, except as otherwise required by law, these By-Laws or the certificate of incorporation, be authorized by a majority of the votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon.

SECTION 13.
Conduct of Shareholders’ Meetings.

The person presiding over the shareholders’ meeting may establish such rules and regulations for the conduct of the meeting as the presiding person may deem to be reasonably necessary or desirable for the orderly and expeditious conduct of the meeting.

SECTION 14.
Shareholder Proposals.

No shareholder shall be entitled to submit a proposal to a meeting of shareholders unless at the time of submitting the proposal, the shareholder shall be a record or beneficial owner of at least 1% or $1,000 in market value of shares entitled to be voted at the meeting, and shall have held such shares for at least one year and shall continue to own such shares through the date on which the meeting is held. A shareholder meeting the above requirements shall deliver to the secretary of the corporation not later than 120 days prior to the first anniversary of the date on which the corporation’s proxy statement was mailed to shareholders in connection with the previous year’s annual meeting, the text of any proposal which he intends to propose at an annual meeting of shareholders and a notice of the intention of the shareholder to present such proposal at the meeting. A proposal to be presented at any meeting of shareholders other than an annual meeting shall be delivered to the Secretary a reasonable time before the mailing of the corporation’s proxy material.

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ARTICLE III
Directors.

SECTION 1.
Board of Directors.

The business of the corporation shall be managed under the direction of its Board of Directors.

SECTION 2.
Qualifications of Directors.

Each director shall be at least 18 years of age.

SECTION 3.
Number of Directors.

The number of directors constituting the entire Board of Directors shall be nine (9). This number may be increased or decreased from time to time by amendment of these By-Laws, provided, however, that the number may not be decreased to less than three (3). No decrease in the number of directors shall shorten the term of any incumbent director.

SECTION 4.
Election and Term of Directors.

The directors shall be classified, with respect to the period for which they shall severally hold office, into three classes as nearly equal in the number as possible, each holding office for a period expiring at the third annual meeting of shareholders following the first annual meeting of shareholders of the Corporation at which directors of such class have been elected.

SECTION 5.
Nominations for Directors.

Nominations of candidates for election as directors of the corporation at any meeting of shareholders called for the election of directors may be made by the Board of Directors or by any shareholder entitled to vote at such meeting. Nominations made by the Board of Directors shall be made in accordance with the recommendations of the nominating and governance committee of the Board of Directors at a meeting of the Board of Directors, or by written consent of directors in lieu of a meeting, not later than sixty days prior to the date of any meeting of shareholders called for the election of directors. The Secretary of the corporation shall request that each such proposed nominee provide the corporation with such information

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concerning himself as is required, under the rules of the Securities and Exchange Commission, to be included in the corporation’s proxy statement soliciting proxies for his election as a director. Any shareholder who intends to make a nomination at any annual meeting of shareholders shall deliver to the Secretary of the corporation not later than 120 days prior to the first anniversary of the date on which the corporation’s proxy statement was mailed to shareholders in connection with the previous year’s annual meeting, or if such nomination is to be made at a meeting of shareholders other than an annual meeting, a reasonable time before the mailing of the corporation’s proxy material, a notice setting forth (i) the name, age, business address and residence of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares of capital stock of the corporation which are owned of record and beneficially by each such nominee and (iv) such other information concerning each such nominee as would be required, under the rules of the Securities and Exchange Commission, in a proxy statement soliciting proxies for the election of such nominees. Such notice shall include a signed consent of such nominee to serve as a director of the corporation, if elected. In the event that a person is validly designated as a nominee in accordance with the provisions of this section and shall thereafter become unable or unwilling to stand for election to the Board of Directors, the Board of Directors or the shareholder who proposed such nominee, as the case may be, may designate a substitute nominee. If the Secretary of the meeting of shareholders called for the election of directors determines that a nomination was not made in accordance with the foregoing procedures, such nomination shall be void.

SECTION 6.
Newly Created Directorships and Vacancies.

Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board of Directors for any reason may be filled by vote of a majority of the directors then in office, although less than a quorum exists. A director elected to fill a newly created directorship or a vacancy shall be elected to hold office until the next meeting of shareholders at which the election of directors is in the regular order of business, and until his successor has been elected and qualified. Any newly created directorships or any decrease in the number of directors shall be apportioned among the classes of directors as to make all classes as nearly equal in number as possible. When the number of directors is increased by the Board of Directors and any newly created directorships are filled by the Board of Directors, there shall be no classification of the additional directors until the next Annual Meeting of Shareholders.

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SECTION 7.
Removal of Directors.

Any director, an entire class of directors or the entire board of directors may be removed from office, only for cause, and only by the affirmative vote of the holders of at least 75% of the outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.

SECTION 8.
Quorum of Directors.

One-third (1/3) of the entire Board of Directors shall constitute a quorum for the transaction of business or of any specified item of business.

SECTION 9.
Action by the Board of Directors.

The vote of the majority of the directors present at a meeting of the Board of Directors at the time of the vote, if a quorum is present at such time, shall, except as otherwise provided by law, these By-Laws or the certificate of incorporation, be the act of the Board of Directors.

SECTION 10.
Written Consent of Directors Without a Meeting.

Any action required or permitted to be taken by the Board of Directors or a committee thereof may be taken without a meeting if all members of the Board or the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the Board or committee shall be filed with the minutes of the proceedings of the Board or committee.

SECTION 11.
Place and Time of Meetings of Board of Directors.

Meetings of the Board of Directors, regular or special, may be held at any place, within or without the State of New York and at any time, fixed by the Board of Directors or by the person or persons calling the meeting. Such meetings may be held by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time.

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SECTION 12.
Notice of Meetings of the Board of Directors.

Regular meetings of the Board of Directors may be held without notice if the time and place of such meetings are fixed by the Board of Directors. Special meetings of the Board of Directors shall be held upon notice to the directors and may be called by the Chairman of the Board or the President, or any two directors. The notice shall be given personally including by telephone or mail, telegram, cable or other public instrumentality. If given personally or by telephone, such notice shall be given not less than 48 hours before the meeting to each director. If given by mail, cable telegram or other public instrumentality, such notice shall be given not less than five (5) days before the date of the meeting, to each director. Such notice shall be deemed given, if mailed, when deposited in the United States mail, with postage thereon prepaid, or, if telegraphed, cabled or sent by other public instrumentality, when given to the telegraph company, cable company, or other public instrumentality, directed to the director at his business address, or, if he shall have filed with the secretary of the corporation a written request that notices to him be mailed or telegraphed, cabled or sent to some other address, then directed to him at such other address. The notice need not specify the purpose of any regular or special meeting of the Board of Directors.

SECTION 13.
Reimbursement and Compensation of Directors.

The directors may be paid their expenses of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of the executive committee or other committees may be allowed similar reimbursement and compensation for their services as such.

SECTION 14.
Executive Committee and Other Committees.

The Board of Directors by resolution adopted by a majority of the entire board, shall designate from among its members an executive committee, an audit committee, a compensation committee, a nominating and governance committee and other committees, each consisting of two or more directors or such greater number of directors as may be required by the charter for such committee, applicable law or the Nasdaq Marketplace Rules (or other applicable stock exchange rules or listing standards). Except as to matters listed below and except as otherwise provided by the Board of Directors, the executive committee, during the interim between meetings of the board of directors, shall possess and may exercise all of the powers of the Board of Directors in the management and direction of the business and conduct of the affairs of the corporation, and shall have power to authorize the seal of the corporation to be affixed to all papers which may be required. Each other committee shall have and may exercise such

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powers as shall be conferred or authorized by the resolution appointing it. No such committee shall have authority as to the following matters:

(1)
The submission to shareholders of any action that needs shareholders’ approval;

(2)
The filling of vacancies in the Board of Directors or in any committee;

(3)
The fixing of compensation of the directors for serving on the Board of Directors or on any committee;

(4)
The amendment or repeal of the by-laws or the adoption of new by-laws;

(5)
The amendment or repeal of any resolution of the Board of Directors.

Each such committee shall serve at the pleasure of the board. The Board of Directors shall have the power at any time to fill vacancies in, to change the size or membership of, and to discharge any such committee.

A majority of any such committee may determine its action and may fix the time and place of its meetings, unless provided otherwise by the Board of Directors. Each such committee shall keep a written record of its acts and proceedings and shall submit such record to the Board of Directors at each regular meeting thereof and at such other times as requested by the Board of Directors. Failure to submit such record, or failure of the Board to approve any action indicated therein will not, however, invalidate such action to the extent it has been carried out by the Corporation prior to the time the record of such action was, or should have been, submitted to the Board of Directors as herein provided.

SECTION 15.
Chairman of the Board.

The Board of Directors, by resolution, may designate from among its members a Chairman of the Board. The Chairman of the Board position shall not be an officer position. Any member of the Board of Directors, whether or not such member is an officer of the Corporation, shall be eligible to serve as Chairman of the Board. The Chairman of the Board shall preside at all meetings of the shareholders and will perform such other duties as may be prescribed from time to time by the Board of Directors or these By-laws.

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ARTICLE IV
Officers.

SECTION 1.
Officers.

The Board of Directors shall elect a President, one or more Executive Vice Presidents, one or more Senior Vice Presidents and Vice Presidents, a Secretary, a Treasurer and a Controller. The Board of Directors may also at any time elect one or more Assistant Secretaries and/or Assistant Treasurers. Any two or more offices may be combined and conferred upon one person except the offices of President and Secretary.

The Board of Directors shall appoint either the Chairman of the Board, if any, or the President, the Chief Executive Officer of the Corporation (“the CEO”), who, subject to the control of the Board of Directors, shall direct and control all the business and affairs of the Corporation. The Board of Directors may appoint an Executive Vice President or a Senior Vice President as the Chief Operating Officer of the Corporation (“the COO”) who shall be subject to the control of, and perform such duties as may be assigned by, the Chairman of the Board, the President or the Board of Directors. The Board of Directors may appoint an Executive Vice President or a Senior Vice President as the Chief Financial Officer of the Corporation (“the CFO”) who shall be responsible for all the fiscal affairs of the Corporation and who shall be subject to the control of, and perform such duties as may be assigned by, the Chairman of the Board, the President or the Board of Directors.

SECTION 2.
Election and Term of Office.

The officers of the Corporation shall be elected by a majority vote of the entire Board of Directors at its first meeting held after the annual meeting of the shareholders. In the event of the failure of the Board to elect such officers at such meeting or in the event of a vacancy then such election may be made at any subsequent regular or special meeting of the Board. All officers shall serve under the direction of and at the pleasure of the Board of Directors. Any vacancy occurring in any office may be filled by the Board of Directors.

SECTION 3.
Powers and Duties of Officers.

(a)
President. The President shall perform the duties of the Chairman of the Board of Directors in his absence or during his inability to act. Any action taken by the President

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in the performance of the duties of the Chairman of the Board of Directors shall be conclusive evidence of the absence or inability to act of the Chairman of the Board of Directors at the time such action was taken. He shall also have such other and further powers and shall perform such other and further duties as may be assigned to him by the Board of Directors.

(b)
Executive Vice Presidents, Senior Vice Presidents and Vice Presidents. Executive Vice Presidents, Senior Vice Presidents and Vice Presidents shall perform such duties as may be assigned to them by the Chairman of the Board of Directors or by the President or by the Board of Directors. The Board of Directors may designate any one or more of said Executive Vice Presidents or Senior Vice Presidents as the Chief Operating Officer or the Chief Financial Officer.

(c)
Treasurer. The Treasurer shall have the care and custody of the corporate funds and securities. He shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation in the manner ordered by the Board. He shall upon request render an account of all his transactions as Treasurer to the Board of Directors. He shall, at all reasonable hours, exhibit his books and accounts to any director upon application. He or an Assistant Treasurer or such other officers, directors or agents as may be designated by the Board of Directors shall endorse checks, notes or drafts payable to the order of the corporation and sign and countersign checks, drafts, and orders for the payment or withdrawal of moneys or securities on deposit in the corporate accounts in such manner as the Board may direct. He shall perform such other duties as shall be assigned to him by the Board of Directors or by the Chairman of the Board of Directors or by the President.

(d)
Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors, and the shareholders, unless another person be appointed for that purpose by the shareholders, and also, unless another person be appointed for that purpose by the Executive Committee, the minutes of the Executive Committee, in books provided for that purpose. He shall give or cause to be given all notices required by these by-laws or by resolution of the Board of Directors. He shall have charge of the stock certificate books, stock transfer books and stock ledgers, all of which shall at all reasonable hours be open to the examination of any director; he shall have custody of the seal of the Corporation; and he shall in general perform all the duties usually incident to the office of Secretary, subject to the control of the Board of Directors. The Secretary or an Assistant Secretary shall also certify all resolutions and proceedings of the shareholders, directors and Executive Committee.

(e)
Controller. The Controller shall be responsible for and have active control of all matters pertaining to the accounts of the corporation. He shall audit all payrolls and vouchers

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and shall direct the manner of certifying the same; shall supervise the manner of keeping all vouchers for payments and all other documents relating to such payments; shall receive and audit all operating and financial statements of the corporation and its subsidiaries; shall have the care, custody and supervision of the books of account of the corporation, their arrangement and classification and shall supervise the accounting and auditing practices of the corporation. He shall, at all reasonable hours, exhibit his books and accounts to any director upon application. He shall, upon request, render an account of the financial condition of the corporation to the Board of Directors. He shall perform such other duties as shall be assigned to him by the Board of Directors or by the Chairman of the Board of Directors or the President.

(f)
Assistant Officers. The Assistant Secretary or Secretaries and the Assistant Treasurer or Treasurers shall perform the duties of the Secretary and of the Treasurer, respectively, in the absence of those officers and shall have such further powers and perform such other duties as may be assigned to them respectively by the Board of Directors.

(g)
Removal. Regardless of whether such officer is also a director, any officer may be removed as an officer, either with or without cause, by a vote of a majority of the whole Board of Directors at a special meeting of the Board called for that purpose, or by any committee of the Board upon whom such power of removal may be conferred by the Board of Directors.

(h)
Bond. Any officer of the Corporation shall give a bond for the faithful discharge of his duties, in such sum, when and as shall be required by the Board of Directors.

(i)
Compensation. The compensation of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such compensation by reason of the fact that he is also a director of the corporation.

SECTION 4.

The Chairman of the Board, President, Secretary, or any other officer designated by the Board of Directors, is hereby empowered to endorse or execute and deliver any instrument of transfer of any certificate for shares of stock, or bond, or other security owned by or standing in the name of the Corporation.

SECTION 5.
Non-Officer Appointments.

The Chief Executive Officer may, from time to time for the convenience of the Corporation and in furtherance of its business interests, confer the title of Vice President or any

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variation thereof on an employee of the Corporation without the Board of Directors electing such employee an officer of the Corporation(a ‘Non-Officer Vice President”). A Non-Officer Vice President shall not be an officer of the Corporation for any purpose including, but not limited to, for the purposes of these By-Laws, the New York Business Corporation Law and any employee benefit plan sponsored or offered by the Corporation. Each appointment of a Non-Officer Vice President is revocable at the discretion of the Chief Executive Officer.

ARTICLE V
Contracts, Checks And Deposits.

SECTION 1.
Contracts.

The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation and such authority may be general or confined to specific instances.

SECTION 2.
Checks, Drafts, etc.

All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors.

SECTION 3.
Deposits.

All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors may select.

ARTICLE VI
Certificates Representing Shares, Record
Of Shareholders, Transfers Of Shares.

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SECTION 1.
Issuance of Shares.

No shares of any class of the corporation or any obligations or other securities convertible into or carrying options to purchase any such shares of the corporation, or any options or rights to purchase any such shares or securities of the corporation, shall be issued or sold unless such issuance or sale is approved by the affirmative vote of at least a majority of the entire Board of Directors.

SECTION 2.
Certificates Representing Shares.

The shares of the corporation shall be represented by certificates which shall be in such form as shall be determined by the Board of Directors. All such certificates shall be consecutively numbered or otherwise identified. Such certificates shall be signed by the Chairman of the Board or the President or a Vice-President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and may, but need not, be sealed with the seal of the corporation or a facsimile thereof. The signature of such persons upon the certificate may be facsimiles if the certificate is countersigned by a transfer agent or an assistant transfer agent, or registered by a registrar other than the corporation itself or its employee. In case any person who has signed or whose facsimile signature has been placed upon a certificate in his capacity as Chairman of the Board or an officer shall have ceased to serve in such capacity before such certificate is issued, it may be issued by the corporation with the same effect as if he were serving in such capacity at the date of issue. Each certificate shall state upon the face thereof; (1) that the corporation is formed under the laws of New York; (2) the name of the person or persons to whom issued; (3) the number and class of shares and the par value of each share represented by such certificate.

SECTION 3.
Lost, Destroyed or Wrongfully Taken Certificates.

The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation, alleged to have been lost, apparently destroyed or wrongfully taken upon the making of an affidavit of that fact by the person claiming the certificate to be lost, apparently destroyed or wrongfully taken. When authorizing such issue of a new certificate or certificates, the Board of Directors, may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, apparently destroyed or wrongfully taken certificate or certificates, or his legal representative to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum and with such surety or sureties as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, apparently destroyed or wrongfully taken.

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SECTION 4.
Record of Shareholders.

The corporation shall keep at its principal office, or at the office of its transfer agent in the State of New York, a record containing the names and addresses of all shareholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof. The corporation shall be protected in treating the persons in whose names shares stand on the record of shareholders as the owners thereof for all purposes.

SECTION 5.
Transfer of Shares.

Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, and cancel the old certificate. Every such transfer of shares shall be entered on the record of shareholders of the corporation.

ARTICLE VII
Fiscal Year.

The fiscal year of the corporation shall be the calendar year.

ARTICLE VIII
Dividends.

The Board of Directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its certificate of incorporation.

ARTICLE IX
Seal.

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The seal of the corporation shall be circular in form and contain the name of the corporation, the year when it was formed, and the words “New York”. The corporation may use the seal causing it or a facsimile to be affixed or impressed or reproduced in any other manner.

ARTICLE X
Waiver Of Notice.

SECTION 1.
Waiver of Notice to Shareholders.

Notice of meeting need not be given to any shareholder who signed a waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him.

SECTION 2.
Waiver of Notice to Director.

Notice of meeting need not be given to any director who signs a waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him. A waiver of notice need not specify the purpose of any regular or special meeting of the Board of Directors.

SECTION 3.
Notice Dispensed with When Delivery Prohibited.

Whenever communication to any shareholder or any director is unlawful under any statute of the State of New York or of the United States or any regulation, proclamation or order issued under said statutes, the giving of any notice to such shareholder or such director shall not be required and there shall be no duty to apply for license or other permission to so do.

ARTICLE XI
Indemnification.

SECTION 1.
Indemnification.

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The corporation shall, to the fullest extent permitted by applicable law, as amended from time to time, indemnify each person made, or threatened to be made, a party to any action or proceeding, whether civil, criminal, administrative or investigative (“Proceeding”) by reason of the fact that such person, such person’s testator or intestate, is or was a director or officer of the corporation, or, while a director or officer, serves or served, at the request of the corporation, any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, penalties, amounts paid in settlement and reasonable expenses (including attorneys’ fees, costs and charges) incurred in connection with such threatened or pending Proceeding, or any appeal therein; provided that no such indemnification shall be made if a judgment or other final adjudication adverse to such person establishes that (i) his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled, and provided further that no such indemnification shall be required with respect to any settlement or other nonadjudicated disposition of any threatened or pending Proceeding unless the corporation has given its prior consent to such settlement or other disposition.

The corporation shall, from time to time, advance or promptly reimburse upon request any director or officer seeking indemnification hereunder the funds necessary for payment of expenses (including attorneys’ fees, costs and charges) reasonably incurred in connection with any threatened or pending Proceeding in advance of the final disposition thereof upon receipt of a written undertaking by or on behalf of such person to repay such amount if such person is ultimately found not to be entitled to indemnification or, where indemnification is granted, to the extent the expenses so advanced or reimbursed exceed the amount to which such person is entitled.

Nothing herein shall limit or affect any right of any person otherwise than hereunder to indemnification or to advancement of expenses (including attorneys’ fees, costs and charges) under any statute, rule, regulation, certificate of incorporation, by-law, resolution of directors or shareholders, insurance policy, contract or otherwise.

The corporation is authorized to enter into agreements with any of its directors or officers to reflect or confirm the rights and benefits contained in this Article and to extend other additional rights to indemnification and to advancement of expenses to any such person to the fullest extent permitted by applicable law, and to set forth procedures for any such person to obtain advancement of expenses and indemnification, but the existence of any such agreement or the failure to enter into any such agreement shall not adversely affect or limit the rights of any such person pursuant to this Article or otherwise.

For the purposes of this Article, the corporation shall be deemed to have requested a person to serve an employee benefit plan where the performance by such person of his duties to the corporation also imposes duties on, or otherwise involves services by, such person to the plan

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or participants or beneficiaries of the plan, and excise taxes assessed on a person with respect to an employee benefit plan pursuant to applicable law shall be considered indemnifiable expenses.

If a request to be indemnified or for the advancement of expenses pursuant to this Article is not paid in full by the corporation within 30 days after a written claim has been received by the corporation, the person seeking indemnification or advancement of expenses may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the person seeking indemnification or advancement of expenses shall be entitled also to be paid the expenses of prosecuting such claim. In any such judicial proceeding, the corporation shall have the burden of proving by the preponderance of the evidence that the person seeking indemnification or advancement of expenses is not entitled to indemnification or advances hereunder. Neither the failure of the corporation (including its board of directors, independent legal counsel or shareholders) to have made a determination that the person seeking indemnification or advancement of expenses is entitled to indemnification or advancement of expenses in the circumstances nor an actual determination by the corporation (including its board of directors, independent legal counsel or shareholders) that the person seeking indemnification or advancement of expenses is not so entitled shall be a defense to an action or create a presumption that the person seeking indemnification or advancement of expenses is not so entitled.

Nothing in this Article shall restrict the power and the authority of the corporation to indemnify or advance expenses to, make indemnification agreements and arrangements with, or maintain insurance on behalf of, any employee or agent of the corporation or any person (whether or not a director, officer, employee or agent of the corporation) who serves at the request of the corporation in any capacity with any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

If this Article or any part hereof shall be held unenforceable in any respect by a court of competent jurisdiction, it shall be deemed modified to the minimum extent necessary to make it enforceable, and the remainder of this Article shall remain fully enforceable.

This Article shall be given retroactive effect and the full benefits hereof shall be available in respect of any alleged or actual occurrences, acts or failures to act prior to the date of the adoption of this Article. The right to indemnification or advancement of expenses under this Article shall be a contract right.

ARTICLE XII
Employee Benefits.

The Board may from time to time make such provision for the establishment, funding, and carrying out of pension, profit sharing, share bonus, share purchase, share option,

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savings, thrift and other retirement, incentive and benefit plans, trusts and provisions for any or all of its employees and officers, as in its discretion the Board may deem advisable and the Board may from time to time adopt and carry out any such plan or plans of providing such benefits or modify, discontinue or terminate any such plan as may then be in force. If any such benefit plan entitles members of the Board to participate as employees of the corporation, every member of the Board shall be entitled to vote upon any matter relating to the adoption, administration, carrying out, modification, discontinuance or termination of any such plan. The Board shall have power to appropriate funds including cash, stock, and other property of the corporation to defray, in whole or in part, the cost of providing any such benefits which may be based upon services rendered by employees prior to the date of establishment or modification of such plan and upon services to be rendered thereafter prior to the retirement or other payment date provided therein and may obligate the corporation to make payments toward defraying any such expenses over a period of years, subject always to the power of the Board in its discretion to modify, discontinue and terminate any such benefit plan to the extent then permitted in existing tax or other laws. The Board shall have full power in its discretion to provide for the administration of any such benefit plan and the investment and reinvestment of funds therein by an insurance company, trustees (who may be directors, officers or employees of the corporation), or other agency under such terms and conditions as the Board may deem advisable or to provide for the administration of such plan and the investment and reinvestment of the funds therein by the company. The Board shall have full power in its discretion to delegate to such committees, individuals (who may be directors, officers or employees of the corporation) or independent consultants such part of the carrying out of any such plan as in its discretion it may deem advisable.

ARTICLE XIII
Amendment And Repeal.

SECTION 1.
Amendment and Repeal by the Shareholders.

These By-Laws may be amended or repealed by the affirmative vote of holders of at least 75% of the outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, provided that the notice of meeting states such purpose.

SECTION 2.
Amendment and Repeal by the Board of Directors.

These By-Laws may also be amended or repealed by the affirmative vote of at least 75% of the entire Board of Directors.

- 21 -

EX-31.1

EXHIBIT 31.1

HARDINGE INC.

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

I, Richard L. Simons, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	August 5, 2016	/s/ Richard L. Simons
		Richard L. Simons
		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:	August 5, 2016	/s/ Douglas J. Malone
		Douglas J. Malone
		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 June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard L. Simons, Chairman, President and Chief Executive Officer of the Company and I, Douglas J. Malone, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

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

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

/s/ Richard L. Simons

Richard L. Simons

President and Chief Executive Officer

August 5, 2016

/s/ Douglas J. Malone

Douglas J. Malone

Vice President and Chief Financial Officer

(Principal Financial Officer)

August 5, 2016

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

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 29, 2016
Document and Entity Information
Entity Registrant Name	HARDINGE INC.
Entity Central Index Key	0000313716
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		12,884,677
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Assets
Cash and cash equivalents	$ 23,368	$ 32,774
Restricted cash	2,459	2,192
Accounts receivable, net	45,030	56,945
Inventories, net	118,146	110,232
Other current assets	11,081	9,314
Total current assets	200,084	211,457
Property, plant and equipment, net	60,424	62,025
Goodwill	6,590	6,620
Other intangible assets, net	27,484	28,018
Other non-current assets	3,642	3,015
Total non-current assets	98,140	99,678
Total assets	298,224	311,135
Liabilities and shareholders’ equity
Notes payable to bank	228	0
Accounts payable	22,534	24,696
Accrued expenses	23,869	27,964
Customer deposits	15,873	19,845
Accrued income taxes	1,688	1,919
Deferred income taxes	2,450	2,164
Current portion of long-term debt	4,930	5,621
Total current liabilities	71,572	82,209
Long-term debt	4,563	5,985
Pension and postretirement liabilities	55,352	57,322
Deferred income taxes	1,277	1,121
Other liabilities	3,318	3,393
Total non-current liabilities	64,510	67,821
Commitments and contingencies (see Note 10)
Common stock ($0.01 par value, 20,000,000 authorized; 12,869,771 issued and outstanding as of June 30, 2016, and 12,856,716 issued and 12,838,227 outstanding as of December 31, 2015)	129	128
Additional paid-in capital	120,746	120,524
Retained earnings	87,752	89,368
Treasury shares (at cost, none as of June 30, 2016, and 18,489 as of December 31, 2015)	0	(202)
Accumulated other comprehensive loss	(46,485)	(48,713)
Total shareholders’ equity	162,142	161,105
Total liabilities and shareholders’ equity	$ 298,224	$ 311,135

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
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)	12,869,771	12,856,716
Common stock, outstanding (in shares)	12,869,771	12,838,227
Treasury shares (in shares)	0	18,489

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Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Statement [Abstract]
Sales	$ 70,186	$ 82,356	$ 138,007	$ 151,484
Cost of sales	46,633	55,394	91,711	102,667
Gross profit	23,553	26,962	46,296	48,817
Selling, general and administrative expenses	19,637	21,071	40,230	40,671
Research & development	3,369	3,498	6,656	7,105
Restructuring	226	0	426	0
Other expense (income), net	20	10	(72)	75
Income (loss) from operations	301	2,383	(944)	966
Interest expense	132	154	285	311
Interest income	(69)	(23)	(136)	(40)
Income (loss) before income taxes	238	2,252	(1,093)	695
Income tax expense	93	666	8	517
Net Income (loss)	$ 145	$ 1,586	$ (1,101)	$ 178
Per share data:
Basic earnings (loss) per share:	$ 0.01	$ 0.12	$ (0.09)	$ 0.01
Diluted earnings (loss) per share:	0.01	0.12	(0.09)	0.01
Cash dividends declared per share:	$ 0.02	$ 0.02	$ 0.04	$ 0.04

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Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 145	$ 1,586	$ (1,101)	$ 178
Other comprehensive (loss) income:
Foreign currency translation adjustments	(2,840)	4,196	899	5,528
Retirement plans related adjustments	1,575	(522)	1,302	(11)
Unrealized gain on cash flow hedges	(33)	(57)	132	318
Other comprehensive (loss) income before tax	(1,298)	3,617	2,333	5,835
Income tax expense (benefit)	282	(333)	105	831
Other comprehensive (loss) income, net of tax	(1,580)	3,950	2,228	5,004
Total comprehensive (loss) income	$ (1,435)	$ 5,536	$ 1,127	$ 5,182

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Operating activities
Net income (loss)	$ (1,101)	$ 178
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	4,098	4,567
Debt issuance costs amortization	66	67
Deferred income taxes	(119)	(260)
(Gain) on sale of assets	(4)	(2)
Unrealized foreign currency transaction (gain) loss	(116)	1,185
Changes in operating assets and liabilities:
Accounts receivable	11,826	6,683
Inventories	(7,720)	(8,467)
Other assets	(1,661)	(1,065)
Accounts payable	(2,170)	5,097
Customer deposits	(3,886)	3,420
Accrued expenses	(5,211)	(799)
Accrued pension and postretirement liabilities	(41)	(57)
Net cash (used in) provided by operating activities	(6,039)	10,547
Investing activities
Capital expenditures	(992)	(1,993)
Proceeds from sales of assets	37	11
Net cash used in investing activities	(955)	(1,982)
Financing activities
Proceeds from short-term notes payable to bank	28,871	13,706
Repayments of short-term notes payable to bank	(28,643)	(13,706)
Repayments of long-term debt	(2,271)	(2,364)
Dividends paid	(536)	(525)
Purchases of treasury stock	0	(201)
Net cash used in financing activities	(2,579)	(3,090)
Effect of exchange rate changes on cash	167	1,010
Net (decrease) increase in cash	(9,406)	6,485
Cash and cash equivalents at beginning of period	32,774	16,293
Cash and cash equivalents at end of period	$ 23,368	$ 22,778

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BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

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

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

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and, therefore, should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as amended. 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 six months ended June 30, 2016 are not necessarily indicative of the results that may be expected in subsequent quarters or for the full year ended December 31, 2016.

In the first quarter of 2015, the Company recorded an out of period adjustment to correct finished goods inventory in the amount of $0.7 million that is related to periods beginning in 2013. This adjustment, which was in the Aftermarket Tooling and Accessories Segment, was to correct for costs that were not properly released from inventory as the product was sold. The Company assessed the impact of this adjustment and concluded that it is not material to previously reported financial statements. The Company also determined that the adjustment was not expected to be material to the full year in 2015, but was material to the first quarter. 

Certain amounts in the 2015 consolidated financial statements have been reclassified to conform to the current presentation. In order to provide greater clarity on investments in research and development, these expenses have been reclassified from Cost of Sales to Operating Expenses where the costs are identified as Research and development, a separate line item.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2016

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):

	June 30, 2016				December 31, 2015				Level of Fair Value Hierarchy
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	23,368	$	23,368	$	32,774	$	32,774	Level 1
Restricted cash	2,459		2,459		2,192		2,192		Level 1
Foreign currency forward contracts	835		835		163		163		Level 2
Liabilities:
Notes payable to bank	228		228		—		—		Level 2
Variable interest rate debt	9,493		9,493		11,606		11,606		Level 2
Foreign currency forward contracts	364		364		418		418		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 June 30, 2016 and December 31, 2015, there were no significant transfers in and/or out of Level 1 and Level 2.

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INVENTORIES

6 Months Ended

Jun. 30, 2016

Inventory Disclosure [Abstract]

INVENTORIES

INVENTORIES

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

Net inventories consist of the following (in thousands):

	June 30, 2016		December 31, 2015
Raw materials and purchased components	$	34,517	$	34,438
Work-in-process	36,616		33,682
Finished products	47,013		42,112
Inventories, net	$	118,146	$	110,232

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DERIVATIVE FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2016

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 (income), net” when the hedging relationship is deemed to be ineffective. As of June 30, 2016 and December 31, 2015, the notional amounts of the derivative financial instruments designated to qualify for cash flow hedges were $51.3 million and $27.4 million, respectively. The Company expects that approximately $0.1 million of expense, net of income tax effect, to be reclassified from AOCI to earnings within the next 12 months. 

As of June 30, 2016 and December 31, 2015, the notional amounts of the derivative financial instruments not qualifying or otherwise designated as hedges were $29.9 million and $38.5 million, respectively. For the three months ended June 30, 2016 and 2015, gains of $0.4 million and $0.2 million, respectively, were recorded related to this type of derivative financial instrument. For the six months ended June 30, 2016 and 2015, losses of $0.02 million and gains of $1.6 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 (income), 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):

	June 30, 2016			December 31, 2015
Foreign currency forwards designated as hedges:
Other current assets	$	329		$	49
Accrued expenses	(229		)	(222		)
Foreign currency forwards not designated as hedges:
Other current assets	506			114
Accrued expenses	(135		)	(196		)
Foreign currency forwards, net	$	471		$	(255	)

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PROPERTY, PLANT AND EQUIPMENT

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

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

	June 30, 2016			December 31, 2015
Land, buildings and improvements	$	83,340		$	82,201
Machinery, equipment and fixtures	78,604			79,176
Office furniture, equipment and vehicles	22,631			22,689
Construction in progress	176			238
	184,751			184,304
Accumulated depreciation	(124,327		)	(122,279		)
Property, plant and equipment, net	$	60,424		$	62,025

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GOODWILL AND INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2016

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		$	6,620		$	39,054
Accumulated impairment losses	(32,434		)	—			(32,434		)
Balance at December 31, 2015	—			6,620			6,620
Goodwill	32,434			6,620			39,054
Currency translation adjustments	—			(30		)	(30		)
Accumulated impairment losses	(32,434		)	—			(32,434		)
Balance at June 30, 2016	$	—		$	6,590		$	6,590

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

	June 30, 2016			December 31, 2015
Gross amortizable intangible assets:
Technical know-how	$	12,949		$	12,956
Customer lists	8,991			9,011
Land rights	2,610			2,672
Patents, trade names, drawings, and other	4,339			4,393
Total gross amortizable intangible assets	28,889			29,032
Accumulated amortization:
Technical know-how	(7,137		)	(6,833		)
Customer lists	(1,528		)	(1,315		)
Land rights	(291		)	(271		)
Patents, trade names, drawings, and other	(3,418		)	(3,406		)
Total accumulated amortization	(12,374		)	(11,825		)
Amortizable intangible assets, net	16,515			17,207
Indefinite lived intangible assets:
Trade names	10,969			10,811
Intangible assets other than goodwill, net	$	27,484		$	28,018

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

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2015		2016		2015
Amortization expense	$	320	$	451	$	640	$	902

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WARRANTIES

6 Months Ended

Jun. 30, 2016

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   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Balance at the beginning of period	$	3,521		$	3,864		$	3,802		$	3,891
Warranties issued	709			430			1,081			1,399
Warranty settlement costs	(557		)	(446		)	(1,147		)	(1,448		)
Changes in accruals for pre-existing warranties	62			88			64			75
Currency translation adjustments	89			101			24			120
Balance at the end of period	$	3,824		$	4,037		$	3,824		$	4,037

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RESTRUCTURING CHARGES

6 Months Ended

Jun. 30, 2016

Restructuring and Related Activities [Abstract]

Restructuring Charges

RESTRUCTURING CHARGES

On August 4, 2015, the Company's Board of Directors approved a strategic restructuring program (the "Program")with the goals of streamlining the Company's cost structure, increasing operational efficiencies and improving shareholder returns. This Program consists of the consolidation of certain facilities and restructuring of certain business units and is expected to incur one-time costs of $4.3 million. The restructuring Program is now substantially complete, with the exception of $0.3 million of certain costs in our German subsidiary associated with the remaining four months of a facility lease, recruiting expenses and other professional fees. The Program is expected to provide annualized savings of approximately $4.5 million.

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 six months ended June 30, 2016 and the cumulative costs recognized to date by the Program (in thousands):

	Total Costs Expected to be Incurred		Cost Recognized for Three Months Ended June 30, 2016		Cost Recognized for Six Months Ended June 30, 2016		Cumulative Costs Recognized to Date
MMS Segment:
Employee termination costs	$	260	$	—	$	—	$	255
Other related costs	—		—		—		—
Total MMS Segment	260		—		—		255
ATA Segment:
Employee termination costs	3,323		69		269		3,314
Facility exit costs	203		—		—		—
Other related costs	539		157		157		415
Total ATA Segment	4,065		226		426		3,729
Total:
Employee termination costs	3,583		69		269		3,569
Facility exit costs	203		—		—		—
Other related costs	539		157		157		415
Total Company	$	4,325	$	226	$	426	$	3,984

There were no costs recognized under the Program for the three and six months ended June 30, 2015. The amounts accrued associated with the Program are included in "Accrued expenses" and "Pension and postretirement liabilities" in the Consolidated Balance Sheets. A rollforward of the accrued restructuring costs is presented below (in thousands):

	Segment						Total
	MMS			ATA
Balance at December 31, 2015	$	167		$	1,242		$	1,409
Restructuring charges:
Employee termination costs	—			269			269
Other related costs	—			157			157
Total restructuring charges for the period	—			426			426
Cash expenditures	(10		)	(1,173		)	(1,183		)
Foreign currency translation adjustment	—			41			41
Balance at June 30, 2016	$	157		$	536		$	693

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INCOME TAXES

6 Months Ended

Jun. 30, 2016

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 39.1% and (0.7)% for the three and six months ended June 30, 2016.

The tax years 2010 through 2015 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 2008 and 2015 generally remain open to routine examination by foreign taxing authorities, depending on the jurisdiction.

At June 30, 2016, a liability of $2.1 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 June 30, 2016 would be recorded as a benefit to income tax expense on the Consolidated Statements of Operations. It is reasonably possible that some of the uncertain tax positions pertaining to foreign operations may change within the next 12 months due to audit settlements and statute of limitations expirations. The change in uncertain tax positions for these items is estimated to be up to $1.3 million.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2016

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 "PRPs"), 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 PRPs 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 PRPs submitted a Remedial Investigation (RI) to respond to EPA issues raised in the initial draft RI. In January 2016, the PRPs submitted a draft Feasibility Study (FS), also to respond to issues raised by the EPA about previous drafts of the FS. The final FS was submitted on July 18, 2016.

The EPA has been preparing a Proposed Remedial Action Plan based upon the final FS, Alternative 3 (Capping), which cost is currently estimated at $1.92 million, of which the Company under current circumstances would be responsible for an estimated $0.3 million which has been reserved and reported as an Accrued expense on the Consolidated Balance Sheets.

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

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PENSION AND POSTRETIREMENT PLANS

6 Months Ended

Jun. 30, 2016

Pension and Other Postretirement Benefit Expense [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 six months ended June 30, 2016 and 2015 is presented below (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended   June 30,						Three Months Ended   June 30,
	2016			2015			2016			2015
Service cost	$	569		$	498		$	3		$	3
Interest cost	1,676			1,678			19			18
Expected return on plan assets	(2,328		)	(2,413		)	—			—
Amortization of prior service credit	(64		)	(82		)	—			—
Amortization of transition asset	(79		)	(21		)	—			—
Amortization of actuarial loss (gain)	957			784			(14		)	(12		)
Net periodic cost	$	731		$	444		$	8		$	9
	Pension Benefits						Postretirement Benefits
	Six Months Ended   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Service cost	$	1,128		$	991		$	6		$	6
Interest cost	3,348			3,351			38			37
Expected return on plan assets	(4,637		)	(4,813		)	—			—
Amortization of prior service credit	(127		)	(162		)	—			—
Amortization of transition asset	(156		)	(42		)	—			—
Amortization of actuarial loss (gain)	1,900			1,562			(28		)	(25		)
Net periodic cost	$	1,456		$	887		$	16		$	18

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STOCK BASED COMPENSATION

6 Months Ended

Jun. 30, 2016

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

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

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

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

	Three Months Ended   June 30,					Six Months Ended   June 30,
	2016		2015			2016		2015
Restricted stock/unit awards (“RSA”)	$	58	$	90		$	123	$	201
Performance share incentives (“PSI”)	—		(62		)	—		(62		)
Total stock based compensation	$	58	$	28		$	123	$	139

There were no RSAs granted during the six months ended June 30, 2016, and 2015, respectively. The deferred compensation is being amortized on a straight-line basis over the specified service period. There were no Performance Share Incentives ("PSIs") granted during the six months ended June 30, 2016 and 2015, respectively. The deferred compensation with respect to the PSIs is being recognized into earnings based on the passage of time and achievement of performance targets. All outstanding RSAs and PSIs are unvested.        

Unrecognized compensation and the expected weighted-average recognition periods with respect to the outstanding RSAs and PSIs as of June 30, 2016 and December 31, 2015, are as follows:

	June 30, 2016				December 31, 2015
	RSAs		PSIs		RSAs		PSIs
Unrecognized compensation cost (in thousands)	$	226	$	564	$	349	$	1,192
Expected weighted-average recognition period for unrecognized compensation    cost (in years)	0.87		1.51		1.20		1.16

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

6 Months Ended

Jun. 30, 2016

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 six months ended June 30, 2016 and 2015 are as follows (in thousands):

	Three Months ended June 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	$	24,312		$	(69,221	)	$	4		$	(44,905	)
Other comprehensive (loss) income before reclassifications	(2,840		)	775			(96		)	(2,161		)
Less: (loss) income reclassified from AOCI	—			(800		)	(63		)	(863		)
Net other comprehensive (loss) income	(2,840		)	1,575			(33		)	(1,298		)
Income taxes	113			169			—			282
Ending balance, net of tax	$	21,359		$	(67,815	)	$	(29	)	$	(46,485	)

	Three Months Ended June 30, 2015
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	26,090		$	(64,014	)	$	177		$	(37,747	)
Other comprehensive income (loss) before reclassifications	4,196			(1,191		)	4			3,009
Less: (loss) income reclassified from AOCI	—			(669		)	61			(608		)
Net other comprehensive income (loss)	4,196			(522		)	(57		)	3,617
Income taxes	(201		)	(118		)	(14		)	(333		)
Ending balance, net of tax	$	30,487		$	(64,418	)	$	134		$	(33,797	)

	Six Months Ended June 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	899		(287		)	116			728
Less: (loss) income reclassified from AOCI	—		(1,589		)	(16		)	(1,605		)
Net other comprehensive income	899		1,302			132			2,333
Income taxes	69		17			19			105
Ending balance, net of tax	$	21,359	$	(67,815	)	$	(29	)	$	(46,485	)

	Six Months Ended June 30, 2015
	Foreign currency translation adjustments		Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	25,913	$	(64,570	)	$	(144	)	$	(38,801	)
Other comprehensive income (loss) before reclassifications	5,528		(1,344		)	497			4,681
Less: (loss) income reclassified from AOCI	—		(1,333		)	179			(1,154		)
Net other comprehensive income (loss)	5,528		(11		)	318			5,835
Income taxes	954		(163		)	40			831
Ending balance, net of tax	$	30,487	$	(64,418	)	$	134		$	(33,797	)

Details about reclassification out of AOCI for the three and six months ended June 30, 2016 and 2015 are as follows (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,						Affected line item on the Consolidated Statements of Operations
Details of AOCI components	2016			2015			2016			2015
Unrealized (loss) gain on cash flow hedges:
	$	(53	)	$	16		$	23		$	145		Sales
	(10		)	45			(39		)	34			Other expense (income), net
	(63		)	61			(16		)	179			Total before tax
	(10		)	11			(3		)	32			Income taxes
	$	(73	)	$	72		$	(19	)	$	211		Net of tax
Retirement plans related adjustments:
Amortization of prior service credit	$	64		$	82		$	127		$	162		(a)
Amortization of transition asset	79			21			156			42			(a)
Amortization of actuarial loss	(943		)	(772		)	(1,872		)	(1,537		)	(a)
	(800		)	(669		)	(1,589		)	(1,333		)	Total before tax
	85			48			168			96			Income taxes
	$	(715	)	$	(621	)	$	(1,421	)	$	(1,237	)	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

6 Months Ended

Jun. 30, 2016

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   June 30,				Six Months Ended   June 30,
	2016		2015		2016			2015
Numerator for basic and diluted loss per share:
Net earnings (loss) applicable to common shareholders	$	145	$	1,586	$	(1,101	)	$	178
Denominator for basic and diluted loss per share:
Denominator for basic and diluted loss per share — weighted average shares	12,812		12,776		12,804			12,759
Assumed exercise of stock options	22		21		—			22
Assumed satisfaction of restricted stock conditions	67		60		—			81
Denominator for diluted earnings per share — adjusted weighted average shares	12,901		12,857		12,804			12,862

Common stock equivalents of certain stock-based awards totaling 5,384 and 32,342 were excluded from the calculation of diluted earnings per share for the three months ended June 30, 2016 and 2015, respectively, as they were anti-dilutive. There is no dilutive effect of the restricted stock and stock options for six months ended June 30, 2016 due to the net loss in this period. There would have been 94,666 of these shares included in the diluted calculation for the six months ended June 30, 2016 had there been earnings in this period. Common stock equivalents of certain stock-based awards totaling 24,544 were excluded from the calculation of diluted earnings per share for the six months ended June 30, 2015, as they were anti-dilutive.

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SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2016

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 June 30, 2016
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	54,359	$	15,883	$	(56	)	$	70,186
Depreciation and amortization	1,494		526		—			2,020
Segment income	276		1,641					1,917
Capital expenditures	394		163					557

	Three Months Ended June 30, 2015
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	66,210	$	16,672	$	(526	)	$	82,356
Depreciation and amortization	1,614		585		—			2,199
Segment income	1,743		1,857		—			3,600
Capital expenditures	940		354		—			1,294

	Six Months Ended June 30, 2016
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	106,630		$	31,504	$	(127	)	$	138,007
Depreciation and amortization	2,921			1,064					3,985
Segment (loss) income	(880		)	3,495					2,615
Capital expenditures	685			307					992
Segment assets(1)	222,098			48,440					270,538

	Six Months Ended June 30, 2015
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	119,186	$	32,899	$	(601	)	$	151,484
Depreciation and amortization	3,238		1,185					4,423
Segment income	834		3,054					3,888
Capital expenditures	1,246		747					1,993
Segment assets(1)	246,331		50,788					297,119

____________________

⁽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 six months ended June 30, 2016 and 2015 are as follows (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Segment income	$	1,917		$	3,600		$	2,615		$	3,888
Unallocated corporate expense	(1,616		)	(1,068		)	(3,559		)	(2,771		)
Interest expense, net	(63		)	(131		)	(149		)	(271		)
Other unallocated expense	—			(149		)				(151		)
Income (loss) before income taxes	$	238		$	2,252		$	(1,093	)	$	695

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

	June 30, 2016		December 31, 2015
Total segment assets	$	270,538	$	274,334
Unallocated assets	27,686		36,801
Total assets	$	298,224	$	311,135

Unallocated assets include cash of $23.4 million and $32.8 million at June 30, 2016 and December 31, 2015, respectively.

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NEW ACCOUNTING STANDARDS

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

NEW ACCOUNTING STANDARDS

NEW ACCOUNTING STANDARDS

In April 2015, the Financial Accounting Standards Board (“FASB”) issued an amended guidance on the balance sheet presentation of debt issuance costs. This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts while the recognition and measurement guidance for debt issuance costs is not affected. In August 2015, FASB subsequently issued an amended guidance to clarify debt issuance costs associated with a line-of-credit arrangement, which allow an entity to defer and present debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The amendments are required to be applied retrospectively to all prior periods.

In January 2016, the Company adopted the guidance. As a result, the Company reclassified $0.07 million and $0.09 million debt issuance cost as of December 31, 2015 into Current portion of long-term debt and Long-term debt respectively to reduce the carrying amount of debt liability, from Other current assets and Other non-current assets on the Consolidated Balance Sheets. Debt issuance costs associated with line-of-credit arrangements remained in the Other current assets and Other non-current assets on the Consolidated Balance Sheets. Unamortized debt issuance costs of $0.06 million and $0.06 million are recorded as Other current assets and Other non-current assets respectively, and $0.07 million and $0.06 million were recorded as Current portion of long-term debt and Long-term debt respectively to reduce the carrying amount of debt liability, on the balance sheet at June 30, 2016. The Company's debt issuance cost amortization was not affected by the adoption of the new guidance.

In March 2016, the FASB issued an amended guidance on improvements to employee share-based payment accounting. The guidance includes multiple provisions to simplify various aspects of the accounting for share-based payments. These amendments are expected to impact net income, EPS, and the statement of cash flows. In particular, the tax effects of all stock compensation awards will be included in income. The guidance is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted in any interim period, with all adjustments applied as of the beginning of the fiscal year of adoption. The Company is assessing the impact and method of adoption.

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NEW ACCOUNTING STANDARDS NEW ACCOUNTINGS STANDARDS (Policies)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

In April 2015, the Financial Accounting Standards Board (“FASB”) issued an amended guidance on the balance sheet presentation of debt issuance costs. This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts while the recognition and measurement guidance for debt issuance costs is not affected. In August 2015, FASB subsequently issued an amended guidance to clarify debt issuance costs associated with a line-of-credit arrangement, which allow an entity to defer and present debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The amendments are required to be applied retrospectively to all prior periods.

In January 2016, the Company adopted the guidance. As a result, the Company reclassified $0.07 million and $0.09 million debt issuance cost as of December 31, 2015 into Current portion of long-term debt and Long-term debt respectively to reduce the carrying amount of debt liability, from Other current assets and Other non-current assets on the Consolidated Balance Sheets. Debt issuance costs associated with line-of-credit arrangements remained in the Other current assets and Other non-current assets on the Consolidated Balance Sheets. Unamortized debt issuance costs of $0.06 million and $0.06 million are recorded as Other current assets and Other non-current assets respectively, and $0.07 million and $0.06 million were recorded as Current portion of long-term debt and Long-term debt respectively to reduce the carrying amount of debt liability, on the balance sheet at June 30, 2016. The Company's debt issuance cost amortization was not affected by the adoption of the new guidance.

In March 2016, the FASB issued an amended guidance on improvements to employee share-based payment accounting. The guidance includes multiple provisions to simplify various aspects of the accounting for share-based payments. These amendments are expected to impact net income, EPS, and the statement of cash flows. In particular, the tax effects of all stock compensation awards will be included in income. The guidance is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted in any interim period, with all adjustments applied as of the beginning of the fiscal year of adoption. The Company is assessing the impact and method of adoption.

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2016

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):

	June 30, 2016				December 31, 2015				Level of Fair Value Hierarchy
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	23,368	$	23,368	$	32,774	$	32,774	Level 1
Restricted cash	2,459		2,459		2,192		2,192		Level 1
Foreign currency forward contracts	835		835		163		163		Level 2
Liabilities:
Notes payable to bank	228		228		—		—		Level 2
Variable interest rate debt	9,493		9,493		11,606		11,606		Level 2
Foreign currency forward contracts	364		364		418		418		Level 2

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INVENTORIES (Tables)

6 Months Ended

Jun. 30, 2016

Inventory Disclosure [Abstract]

Schedule of net inventories

Net inventories consist of the following (in thousands):

	June 30, 2016		December 31, 2015
Raw materials and purchased components	$	34,517	$	34,438
Work-in-process	36,616		33,682
Finished products	47,013		42,112
Inventories, net	$	118,146	$	110,232

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DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2016

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):

	June 30, 2016			December 31, 2015
Foreign currency forwards designated as hedges:
Other current assets	$	329		$	49
Accrued expenses	(229		)	(222		)
Foreign currency forwards not designated as hedges:
Other current assets	506			114
Accrued expenses	(135		)	(196		)
Foreign currency forwards, net	$	471		$	(255	)

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PROPERTY, PLANT AND EQUIPMENT (Tables)

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Schedule of components of property, plant and equipment, net

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

	June 30, 2016			December 31, 2015
Land, buildings and improvements	$	83,340		$	82,201
Machinery, equipment and fixtures	78,604			79,176
Office furniture, equipment and vehicles	22,631			22,689
Construction in progress	176			238
	184,751			184,304
Accumulated depreciation	(124,327		)	(122,279		)
Property, plant and equipment, net	$	60,424		$	62,025

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GOODWILL AND INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2016

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		$	6,620		$	39,054
Accumulated impairment losses	(32,434		)	—			(32,434		)
Balance at December 31, 2015	—			6,620			6,620
Goodwill	32,434			6,620			39,054
Currency translation adjustments	—			(30		)	(30		)
Accumulated impairment losses	(32,434		)	—			(32,434		)
Balance at June 30, 2016	$	—		$	6,590		$	6,590

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):

	June 30, 2016			December 31, 2015
Gross amortizable intangible assets:
Technical know-how	$	12,949		$	12,956
Customer lists	8,991			9,011
Land rights	2,610			2,672
Patents, trade names, drawings, and other	4,339			4,393
Total gross amortizable intangible assets	28,889			29,032
Accumulated amortization:
Technical know-how	(7,137		)	(6,833		)
Customer lists	(1,528		)	(1,315		)
Land rights	(291		)	(271		)
Patents, trade names, drawings, and other	(3,418		)	(3,406		)
Total accumulated amortization	(12,374		)	(11,825		)
Amortizable intangible assets, net	16,515			17,207
Indefinite lived intangible assets:
Trade names	10,969			10,811
Intangible assets other than goodwill, net	$	27,484		$	28,018

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   June 30,				Six Months Ended   June 30,
	2016		2015		2016		2015
Amortization expense	$	320	$	451	$	640	$	902

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WARRANTIES (Tables)

6 Months Ended

Jun. 30, 2016

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   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Balance at the beginning of period	$	3,521		$	3,864		$	3,802		$	3,891
Warranties issued	709			430			1,081			1,399
Warranty settlement costs	(557		)	(446		)	(1,147		)	(1,448		)
Changes in accruals for pre-existing warranties	62			88			64			75
Currency translation adjustments	89			101			24			120
Balance at the end of period	$	3,824		$	4,037		$	3,824		$	4,037

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RESTRUCTURING CHARGES (Tables)

6 Months Ended

Jun. 30, 2016

Restructuring and Related Activities [Abstract]

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

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 six months ended June 30, 2016 and the cumulative costs recognized to date by the Program (in thousands):

	Total Costs Expected to be Incurred		Cost Recognized for Three Months Ended June 30, 2016		Cost Recognized for Six Months Ended June 30, 2016		Cumulative Costs Recognized to Date
MMS Segment:
Employee termination costs	$	260	$	—	$	—	$	255
Other related costs	—		—		—		—
Total MMS Segment	260		—		—		255
ATA Segment:
Employee termination costs	3,323		69		269		3,314
Facility exit costs	203		—		—		—
Other related costs	539		157		157		415
Total ATA Segment	4,065		226		426		3,729
Total:
Employee termination costs	3,583		69		269		3,569
Facility exit costs	203		—		—		—
Other related costs	539		157		157		415
Total Company	$	4,325	$	226	$	426	$	3,984

There were no costs recognized under the Program for the three and six months ended June 30, 2015. The amounts accrued associated with the Program are included in "Accrued expenses" and "Pension and postretirement liabilities" in the Consolidated Balance Sheets. A rollforward of the accrued restructuring costs is presented below (in thousands):

	Segment						Total
	MMS			ATA
Balance at December 31, 2015	$	167		$	1,242		$	1,409
Restructuring charges:
Employee termination costs	—			269			269
Other related costs	—			157			157
Total restructuring charges for the period	—			426			426
Cash expenditures	(10		)	(1,173		)	(1,183		)
Foreign currency translation adjustment	—			41			41
Balance at June 30, 2016	$	157		$	536		$	693

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PENSION AND POSTRETIREMENT PLANS (Tables)

6 Months Ended

Jun. 30, 2016

Pension and Other Postretirement Benefit Expense [Abstract]

Summary of the components of net periodic pension benefit costs

A summary of the components of net periodic pension and postretirement benefit costs for the three and six months ended June 30, 2016 and 2015 is presented below (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended   June 30,						Three Months Ended   June 30,
	2016			2015			2016			2015
Service cost	$	569		$	498		$	3		$	3
Interest cost	1,676			1,678			19			18
Expected return on plan assets	(2,328		)	(2,413		)	—			—
Amortization of prior service credit	(64		)	(82		)	—			—
Amortization of transition asset	(79		)	(21		)	—			—
Amortization of actuarial loss (gain)	957			784			(14		)	(12		)
Net periodic cost	$	731		$	444		$	8		$	9
	Pension Benefits						Postretirement Benefits
	Six Months Ended   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Service cost	$	1,128		$	991		$	6		$	6
Interest cost	3,348			3,351			38			37
Expected return on plan assets	(4,637		)	(4,813		)	—			—
Amortization of prior service credit	(127		)	(162		)	—			—
Amortization of transition asset	(156		)	(42		)	—			—
Amortization of actuarial loss (gain)	1,900			1,562			(28		)	(25		)
Net periodic cost	$	1,456		$	887		$	16		$	18

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STOCK BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2016

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

Summary of stock based compensation expense

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

	Three Months Ended   June 30,					Six Months Ended   June 30,
	2016		2015			2016		2015
Restricted stock/unit awards (“RSA”)	$	58	$	90		$	123	$	201
Performance share incentives (“PSI”)	—		(62		)	—		(62		)
Total stock based compensation	$	58	$	28		$	123	$	139

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

Unrecognized compensation and the expected weighted-average recognition periods with respect to the outstanding RSAs and PSIs as of June 30, 2016 and December 31, 2015, are as follows:

	June 30, 2016				December 31, 2015
	RSAs		PSIs		RSAs		PSIs
Unrecognized compensation cost (in thousands)	$	226	$	564	$	349	$	1,192
Expected weighted-average recognition period for unrecognized compensation    cost (in years)	0.87		1.51		1.20		1.16

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

6 Months Ended

Jun. 30, 2016

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 six months ended June 30, 2016 and 2015 are as follows (in thousands):

	Three Months ended June 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	$	24,312		$	(69,221	)	$	4		$	(44,905	)
Other comprehensive (loss) income before reclassifications	(2,840		)	775			(96		)	(2,161		)
Less: (loss) income reclassified from AOCI	—			(800		)	(63		)	(863		)
Net other comprehensive (loss) income	(2,840		)	1,575			(33		)	(1,298		)
Income taxes	113			169			—			282
Ending balance, net of tax	$	21,359		$	(67,815	)	$	(29	)	$	(46,485	)

	Three Months Ended June 30, 2015
	Foreign currency translation adjustments			Retirement plans related adjustments			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
Beginning balance, net of tax	$	26,090		$	(64,014	)	$	177		$	(37,747	)
Other comprehensive income (loss) before reclassifications	4,196			(1,191		)	4			3,009
Less: (loss) income reclassified from AOCI	—			(669		)	61			(608		)
Net other comprehensive income (loss)	4,196			(522		)	(57		)	3,617
Income taxes	(201		)	(118		)	(14		)	(333		)
Ending balance, net of tax	$	30,487		$	(64,418	)	$	134		$	(33,797	)

Schedule of reclassification out of AOCI

Details about reclassification out of AOCI for the three and six months ended June 30, 2016 and 2015 are as follows (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,						Affected line item on the Consolidated Statements of Operations
Details of AOCI components	2016			2015			2016			2015
Unrealized (loss) gain on cash flow hedges:
	$	(53	)	$	16		$	23		$	145		Sales
	(10		)	45			(39		)	34			Other expense (income), net
	(63		)	61			(16		)	179			Total before tax
	(10		)	11			(3		)	32			Income taxes
	$	(73	)	$	72		$	(19	)	$	211		Net of tax
Retirement plans related adjustments:
Amortization of prior service credit	$	64		$	82		$	127		$	162		(a)
Amortization of transition asset	79			21			156			42			(a)
Amortization of actuarial loss	(943		)	(772		)	(1,872		)	(1,537		)	(a)
	(800		)	(669		)	(1,589		)	(1,333		)	Total before tax
	85			48			168			96			Income taxes
	$	(715	)	$	(621	)	$	(1,421	)	$	(1,237	)	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)

6 Months Ended

Jun. 30, 2016

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   June 30,				Six Months Ended   June 30,
	2016		2015		2016			2015
Numerator for basic and diluted loss per share:
Net earnings (loss) applicable to common shareholders	$	145	$	1,586	$	(1,101	)	$	178
Denominator for basic and diluted loss per share:
Denominator for basic and diluted loss per share — weighted average shares	12,812		12,776		12,804			12,759
Assumed exercise of stock options	22		21		—			22
Assumed satisfaction of restricted stock conditions	67		60		—			81
Denominator for diluted earnings per share — adjusted weighted average shares	12,901		12,857		12,804			12,862

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SEGMENT INFORMATION (Tables)

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Schedule of financial results of reportable segments

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

	Three Months ended June 30, 2016
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	54,359	$	15,883	$	(56	)	$	70,186
Depreciation and amortization	1,494		526		—			2,020
Segment income	276		1,641					1,917
Capital expenditures	394		163					557

	Three Months Ended June 30, 2015
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	66,210	$	16,672	$	(526	)	$	82,356
Depreciation and amortization	1,614		585		—			2,199
Segment income	1,743		1,857		—			3,600
Capital expenditures	940		354		—			1,294

	Six Months Ended June 30, 2016
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	106,630		$	31,504	$	(127	)	$	138,007
Depreciation and amortization	2,921			1,064					3,985
Segment (loss) income	(880		)	3,495					2,615
Capital expenditures	685			307					992
Segment assets(1)	222,098			48,440					270,538

	Six Months Ended June 30, 2015
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	119,186	$	32,899	$	(601	)	$	151,484
Depreciation and amortization	3,238		1,185					4,423
Segment income	834		3,054					3,888
Capital expenditures	1,246		747					1,993
Segment assets(1)	246,331		50,788					297,119

____________________

⁽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 six months ended June 30, 2016 and 2015 are as follows (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Segment income	$	1,917		$	3,600		$	2,615		$	3,888
Unallocated corporate expense	(1,616		)	(1,068		)	(3,559		)	(2,771		)
Interest expense, net	(63		)	(131		)	(149		)	(271		)
Other unallocated expense	—			(149		)				(151		)
Income (loss) before income taxes	$	238		$	2,252		$	(1,093	)	$	695

Schedule of reconciliation of segment assets to consolidated total assets

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

	June 30, 2016		December 31, 2015
Total segment assets	$	270,538	$	274,334
Unallocated assets	27,686		36,801
Total assets	$	298,224	$	311,135

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BASIS OF PRESENTATION (Details) $ in Millions	6 Months Ended
	Jun. 30, 2016 reportable_segment	Jun. 30, 2015 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable business segments | reportable_segment	2
Inventory valuation adjustment | $		$ 0.7

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015	Dec. 31, 2014
Financial instruments
Cash and cash equivalents	$ 23,368	$ 32,774	$ 22,778	$ 16,293
Restricted cash	2,459	2,192
Notes payable	228	0
Notes payable, fair value	228	0
Foreign currency forward contracts, liabilities	(471)	255
Recurring | Level 1
Financial instruments
Cash and cash equivalents	23,368	32,774
Cash and cash equivalents, fair value	23,368	32,774
Restricted cash	2,459	2,192
Restricted cash, fair value	2,459	2,192
Recurring | Level 2
Financial instruments
Foreign currency forward contracts, assets	835	163
Variable interest rate debt	9,493	11,606
Variable interest rate debt, fair value	9,493	11,606
Foreign currency forward contracts, liabilities	$ 364	$ 418

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INVENTORIES (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials and purchased components	$ 34,517	$ 34,438
Work-in-process	36,616	33,682
Finished products	47,013	42,112
Inventories, net	$ 118,146	$ 110,232

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DERIVATIVE FINANCIAL INSTRUMENTS (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Derivative [Line Items]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	$ 400	$ 200	$ 20	$ 1,600
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	(100)		(100)
Notional Amount	51,300		51,300		$ 27,400
Not Designated as Hedging Instrument [Member] | Foreign Exchange Contract [Member]
Derivative [Line Items]
Notional Amount	$ 29,900		$ 29,900		$ 38,500

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DERIVATIVE FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	$ 400	$ 200	$ 20	$ 1,600
Foreign currency forwards designated as hedges - Other current assets	329		329		$ 49
Foreign currency forwards designated as hedges - Accrued expenses	(229)		(229)		(222)
Foreign currency forwards not designated as hedges - Other current assets	506		506		114
Foreign currency forwards not designated as hedges - Accrued expenses	(135)		(135)		(196)
Foreign currency forward contracts, liabilities	$ 471		$ 471		$ (255)

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PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Property, plant and equipment
Property, plant and equipment, gross	$ 184,751	$ 184,304
Accumulated depreciation	(124,327)	(122,279)
Property, plant and equipment, net	60,424	62,025
Land, buildings and improvements
Property, plant and equipment
Property, plant and equipment, gross	83,340	82,201
Machinery, equipment and fixtures
Property, plant and equipment
Property, plant and equipment, gross	78,604	79,176
Office furniture, equipment and vehicles
Property, plant and equipment
Property, plant and equipment, gross	22,631	22,689
Construction in progress
Property, plant and equipment
Property, plant and equipment, gross	$ 176	$ 238

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GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Summary of goodwill amount
Goodwill	$ 39,054	$ 39,054
Accumulated impairment losses	(32,434)	(32,434)
Balance at December 31, 2015	6,620
Accumulated impairment losses	(30)
Balance at June 30, 2016	6,590
MMS
Summary of goodwill amount
Goodwill	32,434	32,434
Accumulated impairment losses	(32,434)	(32,434)
Balance at December 31, 2015	0
Accumulated impairment losses	0
Balance at June 30, 2016	0
ATA
Summary of goodwill amount
Goodwill	6,620	6,620
Accumulated impairment losses	0	$ 0
Balance at December 31, 2015	6,620
Accumulated impairment losses	(30)
Balance at June 30, 2016	$ 6,590

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GOODWILL AND INTANGIBLE ASSETS (Details 2) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	$ 28,889	$ 29,032
Finite-Lived Intangible Assets, Accumulated Amortization	(12,374)	(11,825)
Finite-Lived Intangible Assets, Net	16,515	17,207
Other intangible assets, net	27,484	28,018
Technical Know How [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	12,949	12,956
Finite-Lived Intangible Assets, Accumulated Amortization	(7,137)	(6,833)
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	8,991	9,011
Finite-Lived Intangible Assets, Accumulated Amortization	(1,528)	(1,315)
Land Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	2,610	2,672
Finite-Lived Intangible Assets, Accumulated Amortization	(291)	(271)
Patents, trade names, drawings, and other [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	4,339	4,393
Finite-Lived Intangible Assets, Accumulated Amortization	(3,418)	(3,406)
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Indefinite-Lived Intangible Assets (Excluding Goodwill)	$ 10,969	$ 10,811

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GOODWILL AND INTANGIBLE ASSETS (Details 3) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of Intangible Assets	$ 320	$ 451	$ 640	$ 902

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WARRANTIES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Changes in product warranty accrual
Balance at the beginning of period	$ 3,521	$ 3,864	$ 3,802	$ 3,891
Warranties issued	709	430	1,081	1,399
Warranty settlement costs	(557)	(446)	(1,147)	(1,448)
Changes in accruals for pre-existing warranties	62	88	64	75
Currency translation adjustments	89	101	24	120
Balance at the end of period	$ 3,824	$ 4,037	$ 3,824	$ 4,037

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RESTRUCTURING CHARGES (Details)	6 Months Ended
	Jun. 30, 2016 USD ($)
Restructuring and Related Activities [Abstract]
Total Costs Expected to be Incurred	$ 4,325,000
Remaining restructuring costs expected	300,000
Annual pre-tax savings, generated from restructuring	$ 4,500,000.0

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RESTRUCTURING CHARGES (Cost Incurred and Expected to be Incurred) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	$ 4,325		$ 4,325
Restructuring	226	$ 0	426	$ 0
Cumulative Costs Incurred to Date	3,984		3,984
Employee termination costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	3,583		3,583
Restructuring	69		269
Cumulative Costs Incurred to Date	3,569		3,569
Facility exit costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	203		203
Restructuring	0		0
Cumulative Costs Incurred to Date	0		0
Other related costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	539		539
Restructuring	157		157
Cumulative Costs Incurred to Date	415		415
Operating segment | MMS
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	260		260
Restructuring	0		0
Cumulative Costs Incurred to Date	255		255
Operating segment | MMS | Employee termination costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	260		260
Restructuring	0		0
Cumulative Costs Incurred to Date	255		255
Operating segment | MMS | Other related costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	0		0
Restructuring	0		0
Cumulative Costs Incurred to Date	0		0
Operating segment | ATA
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	4,065		4,065
Restructuring	226		426
Cumulative Costs Incurred to Date	3,729		3,729
Operating segment | ATA | Employee termination costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	3,323		3,323
Restructuring	69		269
Cumulative Costs Incurred to Date	3,314		3,314
Operating segment | ATA | Facility exit costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	203		203
Restructuring	0		0
Cumulative Costs Incurred to Date	0		0
Operating segment | ATA | Other related costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	539		539
Restructuring	157		157
Cumulative Costs Incurred to Date	$ 415		$ 415

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RESTRUCTURING CHARGES (Restructuring Reserve) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Restructuring Reserve [Roll Forward]
Balance at December 31, 2015			$ 1,409
Restructuring	$ 226	$ 0	426	$ 0
Cash expenditures			(1,183)
Foreign currency translation adjustment			41
Balance at June 30, 2016	693		693
Employee termination costs
Restructuring Reserve [Roll Forward]
Restructuring	69		269
Other related costs
Restructuring Reserve [Roll Forward]
Restructuring	157		157
Operating segment | MMS
Restructuring Reserve [Roll Forward]
Balance at December 31, 2015			167
Restructuring	0		0
Cash expenditures			(10)
Foreign currency translation adjustment			0
Balance at June 30, 2016	157		157
Operating segment | MMS | Employee termination costs
Restructuring Reserve [Roll Forward]
Restructuring	0		0
Operating segment | MMS | Other related costs
Restructuring Reserve [Roll Forward]
Restructuring	0		0
Operating segment | ATA
Restructuring Reserve [Roll Forward]
Balance at December 31, 2015			1,242
Restructuring	226		426
Cash expenditures			(1,173)
Foreign currency translation adjustment			41
Balance at June 30, 2016	536		536
Operating segment | ATA | Employee termination costs
Restructuring Reserve [Roll Forward]
Restructuring	69		269
Operating segment | ATA | Other related costs
Restructuring Reserve [Roll Forward]
Restructuring	$ 157		$ 157

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INCOME TAXES (Details) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2016 USD ($)	Jun. 30, 2016 USD ($)
Income Tax Disclosure [Abstract]
Effective tax rate (as a percent)	39.10%	(0.70%)
Uncertain income tax position	$ 2.1	$ 2.1
Interest and penalties included in uncertain income tax position	0.1	0.1
Significant (Increase) Decrease in Unrecognized Tax Benefits is Reasonably Possible, Estimated Range of Change, Upper Bound (Deprecated 2015-01-31)	$ 1.3	$ 1.3

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COMMITMENTS AND CONTINGENCIES (Details) - Kentucky Avenue Wellfield Site [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($)
Commitments and Contingencies
Environmental remediation obligations, proposed settlement	$ 1,920
Accounts Payable and Accrued Liabilities [Member]
Commitments and Contingencies
Accrual environmental expenses	$ 300

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PENSION AND POSTRETIREMENT PLANS (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Components of net periodic benefit cost (credit)
Pension Expense	$ 731	$ 444	$ 1,456	$ 887
Other Postretirement Benefit Expense	8	9	16	18
Pension Benefits
Components of net periodic benefit cost (credit)
Service cost	569	498	1,128	991
Interest cost	1,676	1,678	3,348	3,351
Expected return on plan assets	(2,328)	(2,413)	(4,637)	(4,813)
Amortization of prior service credit	(64)	(82)	(127)	(162)
Amortization of transition asset	(79)	(21)	(156)	(42)
Amortization of loss (gain)	957	784	1,900	1,562
Postretirement Benefits
Components of net periodic benefit cost (credit)
Service cost	3	3	6	6
Interest cost	19	18	38	37
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)	$ (14)	$ (12)	$ (28)	$ (25)

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STOCK BASED COMPENSATION (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Stock-based compensation
Stock based compensation expenses	$ 58	$ 28	$ 123	$ 139
Restricted stock/units awards
Stock-based compensation
Stock based compensation expenses	58	90	123	201
Unrecognized compensation and expected weighted-average recognition period
Unrecognized compensation cost	226		$ 226		$ 349
Expected weighted-average recognition period for unrecognized compensation cost (in years)			10 months 13 days		1 year 2 months 13 days
Performance share incentives
Stock-based compensation
Stock based compensation expenses	0	$ (62)	$ 0	$ (62)
Unrecognized compensation and expected weighted-average recognition period
Unrecognized compensation cost	$ 564		$ 564		$ 1,192
Expected weighted-average recognition period for unrecognized compensation cost (in years)			1 year 6 months 4 days		1 year 1 month 28 days

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Changes in AOCI by component
Beginning balance, net of tax	$ (44,905)	$ (37,747)	$ (48,713)	$ (38,801)
Other comprehensive (loss) income before reclassifications	(2,161)	3,009	728	4,681
Less income reclassified from AOCI	(863)	(608)	(1,605)	(1,154)
Net other comprehensive (loss) income	(1,298)	3,617	2,333	5,835
Income taxes	(282)	333	(105)	(831)
Ending balance, net of tax	(46,485)	(33,797)	(46,485)	(33,797)
Foreign currency translation adjustments
Changes in AOCI by component
Beginning balance, net of tax	24,312	26,090	20,529	25,913
Other comprehensive (loss) income before reclassifications	(2,840)	4,196	899	5,528
Less income reclassified from AOCI	0	0	0	0
Net other comprehensive (loss) income	(2,840)	4,196	899	5,528
Income taxes	113	(201)	69	954
Ending balance, net of tax	21,359	30,487	21,359	30,487
Retirement plans related adjustments
Changes in AOCI by component
Beginning balance, net of tax	(69,221)	(64,014)	(69,100)	(64,570)
Other comprehensive (loss) income before reclassifications	775	(1,191)	(287)	(1,344)
Less income reclassified from AOCI	(800)	(669)	(1,589)	(1,333)
Net other comprehensive (loss) income	1,575	(522)	1,302	(11)
Income taxes	169	(118)	17	(163)
Ending balance, net of tax	(67,815)	(64,418)	(67,815)	(64,418)
Unrealized gain (loss) on cash flow hedges
Changes in AOCI by component
Beginning balance, net of tax	4	177	(142)	(144)
Other comprehensive (loss) income before reclassifications	(96)	4	116	497
Less income reclassified from AOCI	(63)	61	(16)	179
Net other comprehensive (loss) income	(33)	(57)	132	318
Income taxes	0	(14)	19	40
Ending balance, net of tax	$ (29)	$ 134	$ (29)	$ 134

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details 2) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Reclassification out of AOCI
Sales		$ 70,186	$ 82,356	$ 138,007	$ 151,484
Other expense, net		(20)	(10)	72	(75)
Income from continuing operations before income taxes		238	2,252	(1,093)	695
Income taxes		(93)	(666)	(8)	(517)
Net earnings (loss) applicable to common shareholders		145	1,586	(1,101)	178
Unrealized gain (loss) on cash flow hedges | Amount reclassified from AOCI
Reclassification out of AOCI
Sales		(53)	16	23	145
Other expense, net		(10)	45	(39)	34
Income from continuing operations before income taxes		(63)	61	(16)	179
Income taxes		(10)	11	(3)	32
Net earnings (loss) applicable to common shareholders		(73)	72	(19)	211
Retirement plans related adjustments | Amount reclassified from AOCI
Reclassification out of AOCI
Amortization of prior service credit	[1]	64	82	127	162
Amortization of transition asset	[1]	79	21	156	42
Amortization of actuarial loss	[1]	(943)	(772)	(1,872)	(1,537)
Income from continuing operations before income taxes		(800)	(669)	(1,589)	(1,333)
Income taxes		85	48	168	96
Net earnings (loss) applicable to common shareholders		$ (715)	$ (621)	$ (1,421)	$ (1,237)

[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 ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings per share
Weighted Average Number of Shares Outstanding, Diluted	12,901,000	12,857,000	12,804,000	12,862,000
Net earnings (loss) applicable to common shareholders	$ 145,000	$ 1,586,000	$ (1,101,000)	$ 178,000
Denominator for basic and diluted loss per share:
Denominator for basic (loss) earnings per share - weighted average shares (in shares)	12,812,000	12,776,000	12,804,000	12,759,000
Stock Options and Restricted Stock
Denominator for basic and diluted loss per share:
Dilutive Securities, Effect on Basic Earnings Per Share, Dilutive Convertible Securities			$ 94,666
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)	5,384	32,342		24,544
Employee Stock Option [Member]
Denominator for basic and diluted loss per share:
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements	22,000	21,000	0	22,000
Restricted Stock [Member]
Denominator for basic and diluted loss per share:
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements	67,000	60,000	0	81,000

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SEGMENT INFORMATION (Details) - USD ($) $ in Thousands		3 Months Ended				6 Months Ended
		Jun. 30, 2016		Jun. 30, 2015		Jun. 30, 2016		Jun. 30, 2015		Dec. 31, 2015
Financial results of reportable segments
Sales		$ 70,186		$ 82,356		$ 138,007		$ 151,484
Depreciation and amortization						4,098		4,567
Segment (loss) income		301		2,383		(944)		966
Capital expenditures						992		1,993
Segment assets		298,224				298,224				$ 311,135
Reconciliation of segment income to consolidated income before income taxes
Income (loss) before income taxes		238		2,252		(1,093)		695
Operating segment
Financial results of reportable segments
Sales		70,186		82,356		138,007		151,484
Depreciation and amortization		2,020		2,199		3,985		4,423
Segment (loss) income		1,917		3,600		2,615		3,888
Capital expenditures		557		1,294		992		1,993
Segment assets		270,538	[1]	297,119	[1]	270,538	[1]	297,119	[1]	274,334
Reconciliation of segment income to consolidated income before income taxes
Unallocated corporate expense		(1,616)		(1,068)		(3,559)		(2,771)
Interest expense, net		63		131		149		271
Other unallocated income (expense)		0		(149)				(151)
Income (loss) before income taxes		238		2,252		(1,093)		695
Operating segment | MMS
Financial results of reportable segments
Sales		54,359		66,210		106,630		119,186
Depreciation and amortization		1,494		1,614		2,921		3,238
Segment (loss) income		276		1,743		(880)		834
Capital expenditures		394		940		685		1,246
Segment assets	[1]	222,098		246,331		222,098		246,331
Operating segment | ATA
Financial results of reportable segments
Sales		15,883		16,672		31,504		32,899
Depreciation and amortization		526		585		1,064		1,185
Segment (loss) income		1,641		1,857		3,495		3,054
Capital expenditures		163		354		307		747
Segment assets	[1]	48,440		50,788		48,440		50,788
Inter-Segment Eliminations
Financial results of reportable segments
Sales		(56)		$ (526)		(127)		$ (601)
Unallocated assets
Financial results of reportable segments
Segment assets		27,686				27,686				36,801
Reconciliation of segment income to consolidated income before income taxes
Cash		$ 23,400				$ 23,400				$ 32,800

[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.

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NEW ACCOUNTING STANDARDS NEW ACCOUNTING STANDARDS (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Long-term Debt, Current Maturities
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred finance costs, net	$ 70
Other Current Assets
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred finance costs, net	$ 60
Accounting Standards Update 2015-03 | Long-term Debt, Current Maturities
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred finance costs, net		$ 70
Accounting Standards Update 2015-03 | Long-term Debt, Excluding Current Maturities
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred finance costs, net		90
Accounting Standards Update 2015-03 | Other Current Assets
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred finance costs, net		(70)
Accounting Standards Update 2015-03 | Other Noncurrent Assets
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred finance costs, net		$ (90)