10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 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 October 31, 2016 there were 12,895,670 shares of Common Stock of the registrant outstanding.

1

HARDINGE INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		PAGE
	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited).
	Consolidated Balance Sheets at September 30, 2016 and December 31, 2015 (Audited)	4
	Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015	5
	Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2016 and 2015	6
	Consolidated Statements of Cash Flows for the nine months ended September 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.	28
Item 4.	Controls and Procedures.	28
	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings.	29
Item 1A.	Risk Factors.	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	29
Item 3.	Defaults Upon Senior Securities.	29
Item 4.	Mine Safety Disclosures.	29
Item 5.	Other Information.	29
Item 6.	Exhibits.	30
SIGNATURES		31
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)

	September 30, 2016			December 31, 2015
	(Unaudited)
Assets
Cash and cash equivalents	$	22,943		$	32,774
Restricted cash	3,423			2,192
Accounts receivable, net	47,205			56,945
Inventories, net	120,350			110,232
Other current assets	11,189			9,314
Total current assets	205,110			211,457
Property, plant and equipment, net	59,664			62,025
Goodwill	6,612			6,620
Other intangible assets, net	27,402			28,018
Other non-current assets	4,061			3,015
Total non-current assets	97,739			99,678
Total assets	$	302,849		$	311,135
Liabilities and shareholders’ equity
Accounts payable	$	24,278		$	24,696
Accrued expenses	25,592			27,964
Customer deposits	18,122			19,845
Accrued income taxes	1,780			1,919
Deferred income taxes	2,567			2,164
Current portion of long-term debt	4,777			5,621
Total current liabilities	77,116			82,209
Long-term debt	3,848			5,985
Pension and postretirement liabilities	54,102			57,322
Deferred income taxes	1,241			1,121
Other liabilities	3,178			3,393
Total non-current liabilities	62,369			67,821
Commitments and contingencies (see Note 10)
Common stock ($0.01 par value, 20,000,000 authorized; 12,893,537 issued and outstanding as of September 30, 2016, and 12,856,716 issued and 12,838,227 outstanding as of December 31, 2015)	129			128
Additional paid-in capital	121,189			120,524
Retained earnings	86,112			89,368
Treasury shares (at cost, none as of September 30, 2016, and 18,489 as of December 31, 2015)	—			(202		)
Accumulated other comprehensive loss	(44,066		)	(48,713		)
Total shareholders’ equity	163,364			161,105
Total liabilities and shareholders’ equity	$	302,849		$	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   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(Unaudited)						(Unaudited)
Sales	$	67,211		$	76,805		$	205,218		$	228,289
Cost of sales	44,060			51,435			135,770			154,103
Gross profit	23,151			25,370			69,448			74,186
Selling, general and administrative expenses	19,992			19,925			60,221			60,596
Research & development	3,296			3,611			9,953			10,715
Restructuring	182			877			608			877
Other expense (income), net	321			201			249			276
(Loss) income from operations	(640		)	756			(1,583		)	1,722
Interest expense	142			161			427			472
Interest income	(56		)	(40		)	(192		)	(80		)
(Loss) income before income taxes	(726		)	635			(1,818		)	1,330
Income tax expense	657			962			666			1,479
Net loss	$	(1,383	)	$	(327	)	$	(2,484	)	$	(149	)
Per share data:
Basic loss per share:	$	(0.11	)	$	(0.03	)	$	(0.19	)	$	(0.01	)
Diluted loss per share:	$	(0.11	)	$	(0.03	)	$	(0.19	)	$	(0.01	)
Cash dividends declared per share:	$	0.02		$	0.02		$	0.06		$	0.06

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   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
	(Unaudited)						(Unaudited)
Net loss	$	(1,383	)	$	(327	)	$	(2,484	)	$	(149	)
Other comprehensive (loss) income:
Foreign currency translation adjustments	(368		)	(7,169		)	531			(1,641		)
Retirement plans related adjustments	3,031			1,748			4,333			1,736
Unrealized gain (loss) on cash flow hedges	78			(751		)	210			(433		)
Other comprehensive income (loss) before tax	2,741			(6,172		)	5,074			(338		)
Income tax expense (benefit)	322			(506		)	427			324
Other comprehensive income (loss), net of tax	2,419			(5,666		)	4,647			(662		)
Total comprehensive income (loss)	$	1,036		$	(5,993	)	$	2,163		$	(811	)

See accompanying notes to the unaudited consolidated financial statements.

6

HARDINGE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended   September 30,
	2016			2015
	(Unaudited)
Operating activities
Net loss	$	(2,484	)	$	(149	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	6,095			6,831
Debt issuance costs amortization	98			101
Deferred income taxes	(705		)	(284		)
Loss (gain) on sale of assets	23			(1		)
Unrealized foreign currency transaction loss (gain)	219			(4		)
Changes in operating assets and liabilities:
Accounts receivable	9,761			6,015
Inventories	(9,458		)	(8,688		)
Other assets	(2,301		)	(1,432		)
Accounts payable	(586		)	990
Customer deposits	(1,604		)	3,494
Accrued expenses	(3,338		)	2,161
Accrued pension and postretirement liabilities	(65		)	(13		)
Net cash (used in) provided by operating activities	(4,345		)	9,021
Investing activities
Capital expenditures	(1,543		)	(3,103		)
Proceeds from sales of assets	38			38
Net cash used in investing activities	(1,505		)	(3,065		)
Financing activities
Proceeds from short-term notes payable to bank	35,974			24,937
Repayments of short-term notes payable to bank	(35,974		)	(24,937		)
Repayments of long-term debt	(3,186		)	(3,245		)
Dividends paid	(792		)	(781		)
Purchases of treasury stock	—			(201		)
Net cash used in financing activities	(3,978		)	(4,227		)
Effect of exchange rate changes on cash	(3		)	513
Net (decrease) increase in cash	(9,831		)	2,242
Cash and cash equivalents at beginning of period	32,774			16,293
Cash and cash equivalents at end of period	$	22,943		$	18,535

See accompanying notes to the unaudited consolidated financial statements.

7

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 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 nine months ended September 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 of $0.7 million to correct finished goods inventory. This adjustment was related to periods beginning in 2013. The adjustment of $0.7 million, 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 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)

SEPTEMBER 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):

	September 30, 2016				December 31, 2015				Level of Fair Value Hierarchy
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	22,943	$	22,943	$	32,774	$	32,774	Level 1
Restricted cash	3,423		3,423		2,192		2,192		Level 1
Foreign currency forward contracts	414		414		163		163		Level 2
Liabilities:
Variable interest rate debt	8,625		8,625		11,606		11,606		Level 2
Foreign currency forward contracts	264		264		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 variable interest rate debt approximates its respective carrying amount. The fair value of foreign currency forward contracts is measured using models based on observable market inputs such as spot and forward rates. Based on the Company’s continued ability to enter into forward contracts, the markets for the fair value instruments are considered to be active. As of September 30, 2016 and December 31, 2015, there were no 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):

	September 30, 2016		December 31, 2015
Raw materials and purchased components	$	35,104	$	34,438
Work-in-process	37,878		33,682
Finished products	47,368		42,112
Inventories, net	$	120,350	$	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 September 30, 2016 and December 31, 2015, the notional amounts of the derivative financial instruments designated to qualify for cash flow hedges were $50.9 million and $27.4 million, respectively. The Company expects that approximately $0.02 million of expense, net of income tax effect, to be reclassified from AOCI to earnings within the next 12 months. 

As of September 30, 2016 and December 31, 2015, the notional amounts of the derivative financial instruments not qualifying or otherwise designated as hedges were $34.3 million and $38.5 million, respectively. For the three months ended September 30, 2016 and 2015, gains of $0.5 million and losses of $1.9 million, respectively, were recorded related to this type of derivative financial instrument. For the nine months ended September 30, 2016 and 2015, respectively, gains of $0.03 million and losses of $0.3 million were recorded related to this type of derivative financial instrument. For contracts that are not

9

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2016

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):

	September 30, 2016			December 31, 2015
Foreign currency forwards designated as hedges:
Other current assets	$	246		$	49
Accrued expenses	(179		)	(222		)
Foreign currency forwards not designated as hedges:
Other current assets	168			114
Accrued expenses	(85		)	(196		)
Foreign currency forwards, net	$	150		$	(255	)

NOTE 5.  PROPERTY, PLANT AND EQUIPMENT

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

	September 30, 2016			December 31, 2015
Land, buildings and improvements	$	83,821		$	82,201
Machinery, equipment and fixtures	78,951			79,176
Office furniture, equipment and vehicles	22,798			22,689
Construction in progress	126			238
	185,696			184,304
Accumulated depreciation	(126,032		)	(122,279		)
Property, plant and equipment, net	$	59,664		$	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	—			(8		)	(8		)
Accumulated impairment losses	(32,434		)	—			(32,434		)
Balance at September 30, 2016	$	—		$	6,612		$	6,612

10

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2016

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

	September 30, 2016			December 31, 2015
Gross amortizable intangible assets:
Technical know-how	$	12,962		$	12,956
Customer lists	8,997			9,011
Land rights	2,601			2,672
Patents, trade names, drawings, and other	4,353			4,393
Total gross amortizable intangible assets	28,913			29,032
Accumulated amortization:
Technical know-how	(7,295		)	(6,833		)
Customer lists	(1,639		)	(1,315		)
Land rights	(303		)	(271		)
Patents, trade names, drawings, and other	(3,458		)	(3,406		)
Total accumulated amortization	(12,695		)	(11,825		)
Amortizable intangible assets, net	16,218			17,207
Indefinite lived intangible assets:
Trade names	11,184			10,811
Intangible assets other than goodwill, net	$	27,402		$	28,018

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

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Amortization expense	$	321	$	452	$	961	$	1,354

NOTE 7.  WARRANTIES

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

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Balance at the beginning of period	$	3,824		$	4,037		$	3,802		$	3,891
Warranties issued	568			682			1,649			2,081
Warranty settlement costs	(533		)	(620		)	(1,680		)	(2,068		)
Changes in accruals for pre-existing warranties	(141		)	(11		)	(77		)	64
Currency translation adjustments	14			(109		)	38			11
Balance at the end of period	$	3,732		$	3,979		$	3,732		$	3,979

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HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 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 essentially complete, with the exception of approximately $0.2 million of certain costs in our German subsidiary associated with the remaining one month of a facility lease and other related expenses. 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 nine months ended September 30, 2016 and the cumulative costs recognized to date by the Program (in thousands):

	Total Costs Expected to be Incurred		Costs Recognized for Three Months Ended September 30, 2016		Costs Recognized for the Nine Months Ended September 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		—		269		3,314
Facility exit costs	137		68		114		114
Other related costs	605		114		225		483
Total ATA Segment	4,065		182		608		3,911
Total:
Employee termination costs	3,583		—		269		3,569
Facility exit costs	137		68		114		114
Other related costs	605		114		225		483
Total Company	$	4,325	$	182	$	608	$	4,166

During the three and nine months ended September 30, 2015 the Company recognized $0.9 million of costs under the Program. 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
Facility exit costs	—			114			114
Other related costs	—			225			225
Total restructuring charges for the period	—			608			608
Cash expenditures	(14		)	(1,539		)	(1,553		)
Foreign currency translation adjustment	—			40			40
Balance at September 30, 2016	$	153		$	351		$	504

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HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 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 (90.5)% and (36.6)% for the three and nine months ended September 30, 2016, 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.  Additionally, in 2016, the Company’s effective tax rate was impacted by a one-time dividend from an indirect wholly-owned subsidiary in China to its parent, a direct wholly-owned subsidiary in Switzerland, of which $0.6 million of the total income tax expense is related to the associated withholding taxes.

The tax years 2013 through 2015 remain open to examination by the U.S. federal taxing authorities. 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 September 30, 2016, a liability of $2.2 million is recorded with respect to uncertain income tax positions, which includes related interest of $0.1 million.  If recognized, essentially all of the uncertain tax positions and related interest at September 30, 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

13

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2016

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. On July 6, 2012 the PRPs submitted the Remedial Investigation (RI). On July 18, 2016 the PRPs submitted the final Feasibility Study (FS) and the EPA issued the Record of Decision on September 30, 2016.

Based upon Alternative 3 (Capping), the preferred EPA remedy, the Company, under present circumstances, would be responsible for $0.3 million of the estimated $1.92 million cost. This 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 nine months ended September 30, 2016 and 2015 is presented below (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended   September 30,						Three Months Ended   September 30,
	2016			2015			2016			2015
Service cost	$	566		$	484		$	3		$	3
Interest cost	1,662			1,673			19			19
Expected return on plan assets	(2,305		)	(2,395		)	—			—
Amortization of prior service credit	(64		)	(79		)	—			—
Amortization of transition asset	(78		)	(19		)	—			—
Settlement loss	765			—			—			—
Amortization of actuarial loss (gain)	951			772			(14		)	(13		)
Net periodic cost	$	1,497		$	436		$	8		$	9

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HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2016

	Pension Benefits						Postretirement Benefits
	Nine Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Service cost	$	1,695		$	1,475		$	9		$	9
Interest cost	5,010			5,024			57			56
Expected return on plan assets	(6,942		)	(7,208		)	—			—
Amortization of prior service credit	(191		)	(241		)	—			—
Amortization of transition asset	(234		)	(61		)	—			—
Settlement loss	765			—			—			—
Amortization of actuarial loss (gain)	2,850			2,334			(42		)	(38		)
Net periodic cost	$	2,953		$	1,323		$	24		$	27

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   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Restricted stock/unit awards (“RSA”)	$	67	$	63	$	190	$	264
Performance share incentives (“PSI”)	—		1		—		(61		)
Total stock based compensation	$	67	$	64	$	190	$	203

There were no RSAs granted during the nine months ended September 30, 2016, and 2015, respectively. The deferred compensation is being amortized on a straight-line basis over the specified service period. There were no PSIs granted during the nine months ended September 30, 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 September 30, 2016 and December 31, 2015, are as follows:

	September 30, 2016				December 31, 2015
	RSAs		PSIs		RSAs		PSIs
Unrecognized compensation cost (in thousands)	$	159	$	529	$	349	$	1,192
Expected weighted-average recognition period for unrecognized compensation    cost (in years)	0.63		1.32		1.20		1.16

As of March 31, 2016, $0.6 million of unrecognized compensation cost associated with the cancellation of PSIs granted in 2011 was released as a result of not meeting performance targets prior to the date of expiration.

15

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2016

NOTE 13.  CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

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

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

	Three Months Ended September 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	$	30,487		$	(64,418	)	$	134		$	(33,797	)
Other comprehensive (loss) income before reclassifications	(7,169		)	1,087			(893		)	(6,975		)
Less (loss) income reclassified from AOCI	—			(661		)	(142		)	(803		)
Net other comprehensive (loss) income	(7,169		)	1,748			(751		)	(6,172		)
Income taxes	(625		)	218			(99		)	(506		)
Ending balance, net of tax	$	23,943		$	(62,888	)	$	(518	)	$	(39,463	)

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

16

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2016

	Nine Months Ended September 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 loss before reclassifications	(1,641		)	(258		)	(396		)	(2,295		)
Less (loss) income reclassified from AOCI	—			(1,994		)	37			(1,957		)
Net other comprehensive (loss) income	(1,641		)	1,736			(433		)	(338		)
Income taxes	329			54			(59		)	324
Ending balance, net of tax	$	23,943		$	(62,888	)	$	(518	)	$	(39,463	)

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

	Three Months Ended   September 30,						Nine Months Ended   September 30,						Affected line item on the Consolidated Statements of Operations
Details of AOCI components	2016			2015			2016			2015
Unrealized gain (loss) on cash flow hedges:
	$	39		$	(119	)	$	62		$	26		Sales
	87			(23		)	48			11			Other expense (income), net
	126			(142		)	110			37			Total before tax
	21			(25		)	18			7			Income taxes
	$	147		$	(167	)	$	128		$	44		Net of tax
Retirement plans related adjustments:
Amortization of prior service credit	$	64		$	79		$	191		$	241		(a)
Amortization of transition asset	78			19			234			61			(a)
Settlement loss	(765		)	—			(765		)	—			(a)
Amortization of actuarial loss	(937		)	(759		)	(2,808		)	(2,296		)	(a)
	(1,560		)	(661		)	(3,148		)	(1,994		)	Total before tax
	228			47			396			143			Income taxes
	$	(1,332	)	$	(614	)	$	(2,752	)	$	(1,851	)	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.

17

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2016

NOTE 14.  EARNINGS (LOSS) PER SHARE

Basic earnings (loss) 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 (loss) per share computation (in thousands):  

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Numerator for basic and diluted loss per share:
Net loss applicable to common shareholders	$	(1,383	)	$	(327	)	$	(2,484	)	$	(149	)
Denominator:
Denominator for basic and diluted loss per share — weighted average shares	12,835			12,793			12,815			12,770

There is no dilutive effect of the restricted stock and stock options for the three and nine months ended September 30, 2016 and September 30, 2015 due to the net loss in those periods. There would have been 90,405 and 93,245 of shares included in the diluted calculation for the three and nine months ended September 30, 2016, respectively, and 85,723 and 97,539 shares included in the diluted earnings per share calculation for the three and nine months ended September 30, 2015, respectively, had the impact of including these securities not been anti-dilutive. Common stock equivalents of certain stock-based awards totaling 10,877 were excluded from the calculation of diluted earnings per share for the three months ended September 30, 2015 as they were anti-dilutive. Common stock equivalents of certain stock-based awards totaling 771 and 19,989 were excluded from the calculation of diluted earnings per share for the nine months ended September 30, 2016 and September 30, 2015, respectively, 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 September 30, 2016
	MMS			ATA		Inter-Segment Eliminations			Total
Sales	$	52,089		$	15,270	$	(148	)	$	67,211
Depreciation and amortization	1,433			498		—			1,931
Segment income (loss)	(984		)	1,847					863
Capital expenditures	433			118					551

	Three Months Ended September 30, 2015
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	60,856	$	16,005	$	(56	)	$	76,805
Depreciation and amortization	1,643		553		—			2,196
Segment income	895		1,083		—			1,978
Capital expenditures	983		127		—			1,110

18

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2016

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

	Nine Months Ended September 30, 2015
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	180,042	$	48,904	$	(657	)	$	228,289
Depreciation and amortization	4,881		1,738					6,619
Segment income	1,729		4,137					5,866
Capital expenditures	2,229		874					3,103
Segment assets(1)	239,594		49,566					289,160

____________________

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

A reconciliation of segment income to consolidated income (loss) before income taxes for the three and nine months ended September 30, 2016 and 2015 are as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Segment income	$	863		$	1,978		$	3,478		$	5,866
Unallocated corporate expense	(1,503		)	(1,222		)	(5,061		)	(4,144		)
Interest expense, net	(86		)	(121		)	(235		)	(392		)
(Loss) income before income taxes	$	(726	)	$	635		$	(1,818	)	$	1,330

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

	September 30, 2016		December 31, 2015
Total segment assets	$	274,959	$	274,334
Unallocated assets	27,890		36,801
Total assets	$	302,849	$	311,135

Unallocated assets include cash of $22.9 million and $32.8 million at September 30, 2016 and December 31, 2015, respectively.

19

HARDINGE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEPTEMBER 30, 2016

NOTE 16.  NEW ACCOUNTING STANDARDS

In April 2015, the Financial Accounting Standards Board (“FASB”) issued 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 of 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 $0.05 million are recorded as Other current assets and Other non-current assets respectively, and $0.07 million and $0.04 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 Consolidated Balance Sheet at September 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 understand 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 35% of overall sales through the third 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 Yuan (“CNY”), Euro (“EUR”), New Taiwanese Dollar (“NTD”), and Swiss Franc (“CHF”). Under U.S. generally accepted accounting principles, results of foreign subsidiaries are translated into U.S. Dollars (“USD”) at the average exchange rate during the periods presented. Period-to-period changes in the exchange rate between their local currency and the USD may affect comparative data significantly. We also purchase computer controls and other components from suppliers throughout the world, with purchase costs reflecting currency changes.

For the three and nine months ended September 30, 2016, respectively, foreign currency fluctuations resulted in unfavorable currency translation impact of approximately $1.3 million and $4.8 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 nine months ended September 30, 2016 and 2015 (in thousands): 

	Three Months Ended   September 30,						$ Change				% Change		Nine Months Ended   September 30,
	2016			2015									2016			2015			$ Change				% Change
Sales	$	67,211		$	76,805		$	(9,594	)		(12.5	)%	$	205,218		$	228,289		$	(23,071	)		(10.1	)%
Gross profit	23,151			25,370			(2,219		)		(8.7	)%	69,448			74,186			(4,738		)		(6.4	)%
% of sales	34.4		%	33.0		%	1.4			pts.			33.8		%	32.5		%	1.3				pts.
Selling, general and administrative expenses	19,992			19,925			67				—	%	60,221			60,596			(375		)		(0.6	)%
% of sales	29.7		%	25.9		%	3.8			pts.			29.3		%	26.5		%	2.8				pts.
Research & development	3,296			3,611			(315		)		(8.7	)%	9,953			10,715			(762		)		(7.1	)%
Restructuring	182			877			(695		)		(79.2	)%	608			877			(269		)		(30.7	)%
Other expense (income), net	321			201			120				59.7	%	249			276			(27		)		(9.8	)%
(Loss) income from operations	(640		)	756			(1,396		)		(184.7	)%	(1,583		)	1,722			(3,305		)		(191.9	)%
% of sales	(1.0		)%	1.0		%	(2.0		)	pts.			(0.8		)%	0.8		%	(1.6		)		pts.
Interest expense, net	86			121			(35		)		(28.9	)%	235			392			(157		)		(40.1	)%
(Loss) income before income taxes	(726		)	635			(1,361		)		(214.3	)%	(1,818		)	1,330			(3,148		)		(236.7	)%
Income tax expense	657			962			(305		)		(31.7	)%	666			1,479			(813		)		(55.0	)%
Net loss	$	(1,383	)	$	(327	)	$	(1,056	)		322.9	%	$	(2,484	)	$	(149	)	$	(2,335	)		1,567.1	%
% of sales	(2.1)%			(0.4		)%	(1.7		)	pts.			(1.2		)%	(0.1		)%	(1.1		)	pts.

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

	Three Months Ended   September 30,								Nine Months Ended   September 30,
	2016		2015		$ Change			% Change	2016		2015		$ Change			% Change
Sales to customers in:
North America	$	24,780	$	24,661	$	119		0.5%	$	62,924	$	80,039	$	(17,115	)	(21.4)%
Europe	18,271		21,569		(3,298		)	(15.3)%	64,355		66,553		(2,198		)	(3.3)%
Asia and other	24,160		30,575		(6,415		)	(21.0)%	77,939		81,697		(3,758		)	(4.6)%
Total	$	67,211	$	76,805	$	(9,594	)	(12.5)%	$	205,218	$	228,289	$	(23,071	)	(10.1)%

22

Sales for the three months ended September 30, 2016 were $67.2 million, a decrease of $9.6 million, or 12.5%, compared with the prior-year period. The decline in sales is primarily related to a $8.8 million decrease in our Metalcutting Machine Solutions ("MMS") segment. Foreign currency translation was unfavorable by $1.3 million. Excluding the translation impact, the decline in sales would have been 10.8%.

Sales for the nine months ended September 30, 2016 were $205.2 million, a decrease of $23.1 million, or 10.1%, compared with the prior-year period. The decline in sales is primarily related to a $21.1 million decrease in our MMS segment. Foreign currency translation was unfavorable by $4.8 million. Excluding the translation impact, the decline in sales would have been 8.0%.

North America sales were $24.8 million during the three months ended September 30, 2016, flat when compared with the prior-year period, despite weaker industrial conditions in the U.S. through 2016. North America sales were $62.9 million during the nine months ended September 30, 2016, down 21.4% when compared with the same prior-year period. The year-over-year decrease in sales for the nine months ended September 30, 2016 is mainly the result of lower sales from the MMS segment as compared with the prior-year due to lower demand for capital goods in that market, as also exhibited in industry published data.

Europe sales were $18.3 million during the three months ended September 30, 2016, a decrease of $3.3 million, or 15.3%, when compared with the prior-year period. Foreign currency translation adjustment for the three months ended September 30, 2016 had an unfavorable impact on sales of approximately $0.3 million. Excluding the impact of translation, the sales decline was $3.0 million, or 13.9%, compared with the prior-year period. Virtually all of the decrease was driven by lower levels of grinding machine order activity in late 2015 and early 2016.

Europe sales were $64.4 million during the nine months ended September 30, 2016, a decrease of $2.2 million, or 3.3%, when compared with the prior-year period. Foreign currency translation adjustment for the nine months ended September 30, 2016 had an unfavorable impact on sales of approximately $1.4 million. Excluding the impact of translation, the sales decline was $0.8 million, or 1.2%, for the nine months ended September 30, 2016 compared with the prior-year period.

 Asia and other sales were $24.2 million during the three months ended September 30, 2016, a decrease of $6.4 million, or 21.0%, when compared with the prior-year period. Foreign currency translation adjustment for the three months ended September 30, 2016 had an unfavorable impact on sales of approximately $1.0 million. Excluding the impact of translation, the sales decline was $5.4 million, or 17.6%, for the three months ended September 30, 2016 compared with the prior-year period. This decrease was driven by a $4.1 million multiple machine sale to a customer supplying the consumer electronics industry in China in 2015 which did not recur in 2016.

Asia and other sales were $77.9 million during the nine months ended September 30, 2016, a decrease of $3.8 million, or 4.6%, when compared with the prior-year period. Foreign currency translation adjustment for the nine months ended September 30, 2016 had an unfavorable impact of approximately $3.4 million. Excluding the impact of translation, the sales decline was $0.4 million, or 0.5%, for the nine months ended September 30, 2016 compared with the prior-year period. Sales for the nine months ended September 30, 2015 included a $5.3 million of multiple machine sales to a customer supplying the consumer electronics industry in China. Demand from customers in China is the key driver of the performance of the machine tool industry, and while machine tool industry data from China has been subdued, Hardinge has been able to maintain sales volume levels in the customer segments that it serves.

Sales of machines accounted for approximately 65% of the consolidated sales for the three and nine months ended September 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 35% of the consolidated sales for the three and nine months ended September 30, 2016 and 2015.

Gross Profit.  Gross profit was $23.2 million, or 34.4% of sales for the three months ended September 30, 2016, compared with $25.4 million, or 33.0% of sales for the prior-year period. The primary cause of reduced gross profit was the impact of lower sales volume, partially offset by $0.5 million in savings from the Company’s 2015 restructuring program. The improvement in gross margin percentage was due to an improved product mix and the restructuring savings, partially offset by the impact of lower volume over fixed manufacturing costs.

Gross profit was $69.4 million or 33.8% of sales for the nine months ended September 30, 2016, compared with $74.2 million or 32.5% of sales for the prior-year period. Gross profit and margin for the nine months ended September 30, 2016 was impacted by lower volume, partially offset by $1.0 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.

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Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses were $20.0 million, or 29.7% of sales for the three months ended September 30, 2016, a $0.1 million increase compared with $19.9 million, or 25.9% of sales for the three months ended September 30, 2015. For the quarter ended September 30, 2016, SG&A included $0.8 million for a pension settlement charge due to the retirement of a senior executive, $0.2 million related to severance and $0.1 million for professional fees related to the strategic review process. For the quarter ended September 30, 2015, SG&A included an expense of $0.3 million related to the strategic review process. Excluding these items, SG&A would have been $18.9 million and $19.6 million for the quarter ended September 30, 2016 and 2015, respectively, a decrease of $0.7 million. For the quarter ended September 30, 2016, the Company realized $0.3 million in savings from the restructuring program and $0.4 million in favorable currency translation.

SG&A expenses were $60.2 million, or 29.3% of sales for the nine months ended September 30, 2016, down $0.4 million compared with $60.6 million, or 26.5% of sales for the nine months ended September 30, 2015. For the nine months ended September 30, 2016, SG&A included costs of $1.2 million for professional fees related to the strategic review process, $0.8 million for a pension settlement charge and $0.3 million related to severance. For the nine months ended September 30, 2015, SG&A included an expense of $0.3 million related to the strategic review process. Excluding these items, SG&A for the nine months ended September 30, 2016 and 2015 would have been $57.9 million and $60.3 million, respectively, a decrease of $2.4 million. For the nine months ended September 30, 2016, the Company realized $1.1 million of savings from the restructuring program and $1.5 million in favorable currency translation, offset by an increase of $0.2 million in variable selling expense.

Research and Development Expenses. Research and Development ("R&D") expenses were $3.3 million, or 4.9% of sales for the three months ended September 30, 2016, down $0.3 million or 9%, compared with $3.6 million, or 4.7% of sales for the three months ended September 30, 2015. For the quarter, $0.2 million of savings resulted from the restructuring program.

R&D expenses were $10.0 million, or 4.8% of sales for the nine months ended September 30, 2016, a decrease of $0.8 million, or 7.1% compared with $10.7 million, or 4.7% of sales for the nine months ended September 30, 2015. For the year, $0.7 million of savings resulted from the restructuring program.

Other (Income) Expense, Net. Net other expense increased by $0.1 million for the three months ended September 30, 2016 compared with the same prior-year period while net other expense for the nine months ended September 30, 2016 remained flat compared with the same prior-year period. Variances are primarily a result of fluctuations in foreign currency exchange rates during the periods as compared with the same periods in 2015.

(Loss) Income Before Income Taxes.  As a result of the foregoing, loss before income taxes was $0.7 million for the three months ended September 30, 2016, compared with income before income taxes of $0.6 million for the same period in 2015. For the nine months ended September 30, 2016, loss before income taxes was $1.8 million compared with income before income taxes of $1.3 million for the same period in 2015.

Income Taxes.  The income tax provision was $0.7 million for both the three and nine months ended September 30, 2016, compared with an income tax provision of $1.0 million and $1.5 million for the same periods in 2015.  The effective tax rate was (90.5)% and (36.6)% for the three and nine months ended September 30, 2016, compared with 151.5% and 111.2% 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. Additionally, in 2016, the Company's effective tax rate was impacted by a withholding tax of $0.6 million on a one-time dividend from an indirect wholly-owned subsidiary in China to its parent, a direct wholly-owned subsidiary in Switzerland.

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

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

Net Loss.  As a result of the foregoing, net loss for the three months ended September 30, 2016 was $1.4 million, or 2.1% of sales, compared with a net loss of $0.3 million, or 0.4% of sales, for the same period in 2015. Net loss for the nine months ended September 30, 2016 was $2.5 million, or 1.2% of sales, compared with a net loss of $0.1 million, or 0.1% of sales, for the same period in 2015. Both basic and diluted loss per share for the three and nine months ended September 30, 2016 were $(0.11) and $(0.19), compared to $(0.03) and $(0.01) for the same periods in 2015.

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Business Segment Information — Comparison of the three and nine months ended September 30, 2016 and 2015

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

	Three Months Ended   September 30,										Nine Months Ended   September 30,
	2016			2015		$ Change			% Change		2016			2015		$ Change			% Change
Sales	$	52,089		$	60,856	$	(8,767	)	(14.4	)%	$	158,718		$	180,042	$	(21,324	)	(11.8	)%
Segment (loss) income	(984		)	895		(1,879		)	(209.9	)%	(1,864		)	1,729		(3,593		)	(207.8	)%

MMS sales were $52.1 million for the three months ended September 30, 2016, a decrease of $8.8 million, or 14.4% when compared with the corresponding period in 2015. After considering $1.2 million of unfavorable impact of foreign currency translation adjustments, sales would have decreased by $7.6 million or 12.5%. The decrease was driven by a $10.0 million decline in the Turning & Milling product line, primarily due to the uncertainty in the global industrial markets for capital goods, offset by a $1.2 million increase in the Grinding product line. MMS sales for the nine months ended September 30, 2016 were $158.7 million, a decrease of $21.3 million, or 11.8%, when compared with the same period in 2015 primarily due to the uncertainty in global industrial markets. This decrease was driven by a $15.2 million decline in the Turning & Milling product line and $6.1 million in the Grinding product line. After considering $4.7 million of unfavorable impact of foreign currency translation adjustments, sales would have decreased by $16.6 million or 9.2%.

Segment loss for the three months ended September 30, 2016 was $1.0 million, a decrease of $1.9 million, or 209.9% when compared with segment income of $0.9 million in 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 thenine months ended September 30, 2016, segment loss was $1.9 million, a decrease of $3.6 million, or 207.8%, when compared with segment income of $1.7 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 $0.6 million of savings from the restructuring program.

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

	Three Months Ended   September 30,									Nine Months Ended   September 30,
	2016		2015		$ Change			% Change		2016		2015		$ Change			% Change
Sales	$	15,270	$	16,005	$	(735	)	(4.6	)%	$	46,773	$	48,904	$	(2,131	)	(4.4	)%
Segment income	1,847		1,083		764			70.5	%	5,342		4,137		1,205			29.1	%

ATA sales for the three months ended September 30, 2016 were $15.3 million, a decrease of $0.7 million, or 4.6%, when compared with the corresponding period in 2015. The primary driver of the decline in sales was $0.7 million in North America, as sales in Asia and Europe remained generally flat compared to the prior year period. For the nine months ended September 30, 2016, ATA sales were $46.8 million, a decrease of $2.1 million, or 4.4%, when compared with the same period in 2015. The primary driver of the decline in sales was $1.2 million of lower sales to Europe and $1.1 million of lower sales to Asia, offset by a $.03 million increase in North America when compared to the prior year period.

Segment income for the three months ended September 30, 2016 was $1.8 million, a $0.8 million, or 71% increase from the prior year. The ATA segment experienced increased profitability primarily as a result of $0.8 million in savings from the restructuring program, reduced by $0.2 million of cost to implement. For the nine months ended September 30, 2016, segment income was $5.3 million, an increase of $1.2 million or 29.1%, when compared with segment income of $4.1 million in the same period 2015. The primary driver of this increase is $2.2 million in savings from the restructuring program, reduced by $0.6 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.

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

	Three Months ended September 30, 2016											Three Months Ended September 30, 2015
	MMS			ATA		Inter-Segment Eliminations			Total			MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	52,089		$	15,270	$	(148	)	$	67,211		$	60,856	$	16,005	$	(56	)	$	76,805
Segment (loss) income	(984		)	1,847					863			895		1,083					1,978
Unallocated corporate    expense									(1,503		)								(1,222		)
Interest expense, net									(86		)								(121		)
(Loss) income before    income taxes									$	(726	)								$	635

	Nine Months Ended September 30, 2016											Nine Months Ended September 30, 2015
	MMS			ATA		Inter-Segment Eliminations			Total			MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	158,718		$	46,773	$	(273	)	$	205,218		$	180,042	$	48,904	$	(657	)	$	228,289
Segment (loss) income	(1,864		)	5,342					3,478			1,729		4,137		—			5,866
Unallocated corporate    expense									(5,061		)								(4,144		)
Interest expense, net									(235		)								(392		)
(Loss) income before    income taxes									$	(1,818	)								$	1,330

Summary of Cash Flows for the Nine Months EndedSeptember 30, 2016 and 2015:

	Nine Months Ended   September 30,
	2016			2015
Net cash (used in) provided by operating activities	$	(4,345	)	$	9,021
Net cash used in investing activities	$	(1,505	)	$	(3,065	)
Net cash used in financing activities	$	(3,978	)	$	(4,227	)

During the nine months ended September 30, 2016, we used $4.3 million net cash from operating activities. The net cash used was driven by a net loss (adjusted for non-cash charges 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 nine months ended September 30, 2015, we generated $9.0 million net cash from operating activities. The net cash generated was driven by an add back of non-cash depreciation and amortization expense to the net 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, an increase in other accrued expenses primarily as a result of accruals made during the third quarter of 2015 in connection with the restructuring activities combined with higher commissions payable and increased warranty reserves as a result of higher sales compared to the prior year period, and an increase in accounts payable due to

26

timing of purchases and payment activity. These cash inflows were partially offset by an increase in inventories based on orders and associated production levels combined with an increase in other assets.

Net cash used in investing activities was $1.5 million for the nine months ended September 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 $3.1 million for the nine months ended September 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 $4.0 million for the nine months ended September 30, 2016. Cash used was primarily attributable to $3.2 million of payments on long-term debt due to normal scheduled payment activity and year-to-date dividends paid of $0.8 million.

Net cash flow used by financing activities was $4.2 million for the nine months ended September 30, 2015. Cash used by financing activities was primarily driven by $3.2 million of payments on long-term debt due to normal scheduled payment activity and year-to-date dividends paid of $0.8 million.

Liquidity and Capital Resources

We maintain financing arrangements with several financial institutions. These financing arrangements are in the form of long term loans, credit facilities, and lines of credit. The credit facilities allow us to borrow up to $76.2 million at September 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 September 30, 2016 and December 31, 2015, $67.4 million and $69.8 million was available for borrowing under these respective arrangements, of which $51.9 million and $53.2 million, respectively, was available for working capital needs. Total consolidated borrowings outstanding were $8.6 million and $11.6 million at September 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 September 30, 2016, we were in compliance with all of our debt covenants.

Our liquidity requirements primarily include funding for operations, including working capital requirements, and funding for capital investments and acquisitions. We expect to meet these requirements in the long term through cash provided by operating activities and availability under various credit facilities and other financing arrangements. Cash flows from operating activities are primarily driven by earnings before non-cash charges and change in working capital needs. During the nine months ended September 30, 2016, available cash was 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

27

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 nine 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 September 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 September 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.

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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.

On October 28, 2016, L. Kellenberger & Co. AG (“Kellenberger”), a Swiss aktiengesellschaft and an indirect wholly-owned subsidiary of Hardinge Inc. (the “Company”) and Urs. Baumgartner, Chief Executive Officer of Kellenberger entered into employment agreement (the “Baumgartner Employment Agreement”).

The Baumgartner Employment Agreement provides that it is an amended and restated version of an employment agreement that was previously executed by the parties on August 1, 2015. The term of employment under the Baumgartner Employment Agreement is indefinite; provided, however, that except as noted below, the agreement may be terminated if the terminating party delivers a notice of termination twelve months in advance of the termination date. In the event that the Company seeks to terminate Mr. Baumgartner’s employment within the twelve-month period following a change of control (as defined in the agreement), Mr. Baumgartner is entitled to receive eighteen months advance notice of such termination.

The Baumgartner Employment Agreement provides that Mr. Baumgartner’s annual base salary rate is CHF 275,000 (approximately $282,000). Thereafter, Mr. Baumgartner’s base salary is subject to review, no less frequently than on an annual basis, by the Managing Director of Kellenberger. Mr. Baumgartner is eligible for bonus payments, as may be awarded from time to time by the Board of Directors of Kellenberger. Mr. Baumgartner is also entitled to the use of a company car in accordance with Kellenberger’s current policy. During the term of his employment by Kellenberger and to the extent he is eligible to participate, Mr. Baumgartner will be included in all employee benefit plans that are compulsory under Swiss law, established by Kellenberger and/or otherwise generally made available to Kellenberger employees.

The Baumgartner Employment Agreement provides that in the event of a termination of Mr. Baumgartner’s employment by reason of death, permanent disability or retirement, Mr. Baumgartner (or his estate, as applicable) will be entitled to his base salary and benefits through the end of the month following the month in which the termination occurred.

The Baumgartner Employment Agreement contains covenants protecting Kellenberger’s intellectual property and confidential information. Additionally, the agreement includes covenants restricting competition with Kellenberger and the solicitation of employees, customers and clients of Kellenberger during the term of Mr. Baumgartner’s employment and for a period of two years following the termination of his employment.

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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. (incorporated by reference to Exhibit 3.3 to Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 5, 2016 (File No. 000-15760)).
4.1	Specimen of certificate for shares of Common Stock, par value $.01 per share, of Hardinge Inc. (incorporated by reference to Exhibit 3 to Registrant’s Registration Statement on Form 8-A, filed with the Securities and Exchange Commission on May 19, 1995 (File No. 000-15760)).
10.1	Employment Agreement between L. Kellenberger & Co. AG and Urs Baumgartner
31.1	Chief Executive Officer Certification pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Chief Financial Officer Certification pursuant to Rule 13a-14(a) and 15d-14(a), 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

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		HARDINGE INC.
		Registrant
November 2, 2016	By:	/s/ Richard L. Simons
Date		Richard L. Simons
		President and Chief Executive Officer
		(Principal Executive Officer)
November 2, 2016	By:	/s/ Douglas J. Malone
Date		Douglas J. Malone
		Vice President and Chief Financial Officer
		(Principal Financial Officer)

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EX-10.1

EMPLOYMENT AGREEMENT

between

L. Kellenberger & Co. AG, Heiligkreuzstrasse 28, 9008 St. Gallen

(hereinafter referred to as the "Company")

and

Urs Baumgartner, Sommerauweg 8, CH-8555 Mühlheim-Dorf

(hereinafter referred to as the "Employee")

WHEREAS, the Company desires to continue to employ the Employee to provide services pursuant to the terms of this Agreement;

NOW THEREFORE, in consideration of the covenants and agreements hereinafter set forth, the parties hereto agree as follows:

1.     EMPLOYMENT AND DUTIES

1.1. General. The Company hereby continues to employ the Employee, and the Employee agrees to serve, as Chief Executive Officer of the Company, upon the terms and conditions herein contained.

The Employee shall perform such duties and services for the Company as may be designated from time to time by the Chairman of the Board of the Company. The Employee agrees to serve the Company faithfully and to the best of his ability under the direction of the Board of Directors of the Company (the “Board”) or the Chief Executive Officer of Hardinge Inc., the parent corporation of the Company (the “Parent”).

1.2. Exclusive Services. Except as may otherwise be approved in advance by the Managing Director, and except during vacation periods and reasonable periods of absence due to sickness, personal injury or other disability, the Employee shall devote his full working

1 -

time throughout the Employment Term (as defined in Section 1.3) to the services required of him hereunder. The Employee shall render his services exclusively to the Company during the Employment Term, and shall use his best efforts, judgment and energy to improve and advance the business and interests of the Company in a manner consistent with the duties of his position.

1.3. Term of Employment. The employment shall continue for an indefinite period of time. The present agreement came into effect as per August 1^st, 2015 and shall be amended as of October 28, 2016. The employment can be terminated subject to twelve months notice as per the end of a calendar month. Reservation is made for Art. 337 CO. If the Employee’s employment is terminated by the Company within twelve months following a Change in Control (i.e., (i) the sale of all or substantially all of the Company’s assets to any entity of which the Parent does not own, directly or indirectly, at least 85% of the outstanding voting securities; or (ii) the sale or other transfer of more than 50% of the outstanding voting securities to any person or entity other than the Parent or an entity of which the Parent owns, directly or indirectly, at least 50% of the outstanding voting securities ), the employment can be terminated subject to eighteen months notice as per the end of a calendar month.

1.4 Reimbursement of Expenses. The Company shall reimburse the Employee for reasonable travel and other business expenses incurred by him in the fulfillment of his duties hereunder upon presentation by the Employee of an itemized account of such expenditures, in accordance with Company practices consistently applied.

2.     ANNUAL COMPENSATION

2.1     Base Salary. From the date hereof, the Employee shall be entitled to receive a base salary ("Base Salary") at a gross rate of CHF 275'000 per annum payable in accordance with the Company's payroll practices, with such changes as may be provided in accordance with the terms hereof. Once changed, such amount shall constitute the Employee's annual Base Salary.

2.2     Annual Review. The Employee's Base Salary shall be reviewed by the Managing Director, based upon the Employee's performance, not less often than annually.

2.3     Bonus. After the date hereof, the Employee shall be entitled to such bonus, if any, as may be awarded to the Employee from time to time by the Board of Directors.

2.4     Company Car. The Employee shall be entitled to a Company car, in accordance with Company's current policy.

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3.     EMPLOYEE BENEFITS

The Employee shall, during his employment under this Agreement, be included to the extent eligible thereunder in all employee benefit plans, programs or arrangements including, without limitation, any plans, programs or arrangements providing for retirement benefits, incentive compensation, profit sharing, disability benefits, which are compulsory under Swiss law or shall be established by the Company for, or made available to, its employees generally.

4.     WORKING TIME AND HOLIDAYS

4.1     The working time of the Employee shall be commensurate with the task and responsibility and must therefore be adapted by the Employee to the necessities of the business and the proper conduct of the Company's affairs.

421     Any overtime work shall be deemed to be remunerated by the compensation set out in Art. 2 and 3.

4.3     The Employee is entitled to at least 25 working days paid holidays in accordance with Art. 13 of the Collective Employment Contract of the Machine Industry of 1st July 2013, inforce until 31st December 2018. In an uncompleted year of employment, the Employee shall be entitled to holidays ratably in proportion to the time of employment in the respective year of employment.

5.     DEATH, DISABILITY OR RETIREMENT.

In the event of termination of employment by reason of death, permanent disability or retirement, the Employee (or his estate, as applicable) shall be entitled to Base Salary and benefits determined under Section 3 and 4 through the end of the month following the termination. Other benefits shall be determined in accordance with the benefit plans maintained by the Company, and the Company shall have no further obligation hereunder.

6.     NONSOLICITATION; CONFIDENTIALY; NONCOMPETITION

6.1     Nonsolicitation. For so long as the Employee is employed by the Company, and continuing until two years after the Employee ceases to be an employee of the Company, the Employee shall not, without the prior written consent of the Company, directly or indirectly, as a sole proprietor, member of a partner­ ship, stockholder or investor, officer or director of a corporation, or as an employee, associate, consultant or agent of any person,

3 -

partnership, corporation or other business organization or entity other than the Company: (x) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or, during the then most recent 12-month period, was employed by, or had served as an agent or key consult­ ant of the Company or any of its subsidiaries; or (y) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or was within the then most recent 12-month period, a customer or client (or reasonably anticipated to the general knowledge of the Employee or the public to become a customer or client) of the Company or any of its subsidiaries.

6.2     Non-competition. For as long as the Employee is employed by the Company, and continuing for two years after he ceases to be an employee of the Company, the Employee may not compete with the Company in any manner, in particular by

• being active for any person, partnership, corporation or other business organization or entity other than the Company that is in the same business of producing, selling or otherwise providing grinding machines;

• alienating, or in the case of the two years after employment,soliciting existing customers of the Company.

The competition prohibition is valid for the entire area in which the Company conducts its business, and in the countries in which the company has been active. In the event of any infringement against the competition prohibition, the Employee owes the Company a contractual penalty equivalent to one half of the most recent total annual compensation paid by the Company to the Employee, without limiting the Company to claim the real damages if the damages suffered by the Company are more important than the Contractual penalty.

6.3     Confidentiality. The Employee covenants and agrees with the Company that he will not at any time, except in performance of his obligations to the Company hereunder or with the prior written consent of the Company, directly or indirectly, disclose any secret or confidential information that he may learn or has learned by reason of his association with the Company or any of its subsidiaries and affiliates. The term "confidential information" includes information not previously dis­closed to the public or to the trade by the Company's management, or otherwise in the public domain, with respect to the Company's or any of its subsidiaries' or affiliates' products, facilities, applications and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, customer lists, technical in­ formation, financial information (including the revenues, costs of profits associated with any of the Company's products), business plans, prospects or opportunities, but shall exclude any information which (i) is or becomes available to the public or is generally known in the industry or industries in which the Company operates other than as a result of disclosure by the Employee in violation of his agreements under this

4 -

Section 6.2 or (ii) the Employee is required to disclose under any applicable laws, regulations or directives or any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law.

6.4     Exclusive Property. The Employee confirms that all confidential information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Employee relating to the business of the Company shall be and remain the property of the Company.

7.     MISCELLANEOUS

7.1     Severability. Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

7.2    Assignment. The rights and obligations of this Agreement shall bind and inure to the benefit of any successor of the Company by reorganization, merger or consolidation, or any assignee of all or substantially all of the Company's business and properties. Neither Agreement nor any rights hereunder shall be assignable.

7.3     Entire Agreement. This Agreement represents the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between the Company and the Employee relating to the subject matter hereof. This Agreement may be amended at any time by mutual written agreement of the parties hereto.

7.4     Collective Employment Contract of the Machine Indus try. The Collective Employment Contract of the Machine Industry of 1st July 2013 will remain in force until 31st December 2018 and is applicable on the Employment with the exception of the provisions contained in this Agreement.

7.5     Internal Regulations of the Company. The internal regulation enacted 1st January 2015 are integral parts of the Agreement.

7.6     Withholding. The payment of any amount pursuant to this Agreement shall be subject to applicable withholding and payroll taxes, and such other deductions as may be required under the Company's employee benefit plans, if any.

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7.7     Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of Switzerland applicable to contracts executed in and to be performed entirely within Switzerland.

IN WITNESS WHEREOF,     the Company has caused this Agreement to be duly executed and the Employee has hereunto set his hand, as of the day and year fist above written.

Elmira, NY 10/28/2016        /s/ Richard L. Simons___________________

(Place, Date)                 L. Kellenberger & Co. AG

St. Gallen 10/28/2016            /s/ Urs Baumgartner___________________

(Place, Date)                 Urs Baumgartner

6 -

EX-31.1

EXHIBIT 31.1

HARDINGE INC.

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

I, Richard L. Simons, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	November 2, 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:	November 2, 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 September 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

November 2, 2016

/s/ Douglas J. Malone

Douglas J. Malone

Vice President and Chief Financial Officer

(Principal Financial Officer)

November 2, 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	9 Months Ended
	Sep. 30, 2016	Oct. 31, 2016
Document and Entity Information
Entity Registrant Name	HARDINGE INC.
Entity Central Index Key	0000313716
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		12,895,670
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Assets
Cash and cash equivalents	$ 22,943	$ 32,774
Restricted cash	3,423	2,192
Accounts receivable, net	47,205	56,945
Inventories, net	120,350	110,232
Other current assets	11,189	9,314
Total current assets	205,110	211,457
Property, plant and equipment, net	59,664	62,025
Goodwill	6,612	6,620
Other intangible assets, net	27,402	28,018
Other non-current assets	4,061	3,015
Total non-current assets	97,739	99,678
Total assets	302,849	311,135
Liabilities and shareholders’ equity
Accounts payable	24,278	24,696
Accrued expenses	25,592	27,964
Customer deposits	18,122	19,845
Accrued income taxes	1,780	1,919
Deferred income taxes	2,567	2,164
Current portion of long-term debt	4,777	5,621
Total current liabilities	77,116	82,209
Long-term debt	3,848	5,985
Pension and postretirement liabilities	54,102	57,322
Deferred income taxes	1,241	1,121
Other liabilities	3,178	3,393
Total non-current liabilities	62,369	67,821
Commitments and contingencies (see Note 10)
Common stock ($0.01 par value, 20,000,000 authorized; 12,893,537 issued and outstanding as of September 30, 2016, and 12,856,716 issued and 12,838,227 outstanding as of December 31, 2015)	129	128
Additional paid-in capital	121,189	120,524
Retained earnings	86,112	89,368
Treasury shares (at cost, none as of September 30, 2016, and 18,489 as of December 31, 2015)	0	(202)
Accumulated other comprehensive loss	(44,066)	(48,713)
Total shareholders’ equity	163,364	161,105
Total liabilities and shareholders’ equity	$ 302,849	$ 311,135

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 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)	12,893,537	12,856,716
Common stock, outstanding (in shares)	12,893,537	12,838,227
Treasury shares (in shares)	0	18,489

XML

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Income Statement [Abstract]
Sales	$ 67,211	$ 76,805	$ 205,218	$ 228,289
Cost of sales	44,060	51,435	135,770	154,103
Gross profit	23,151	25,370	69,448	74,186
Selling, general and administrative expenses	19,992	19,925	60,221	60,596
Research & development	3,296	3,611	9,953	10,715
Restructuring	182	877	608	877
Other expense (income), net	321	201	249	276
(Loss) income from operations	(640)	756	(1,583)	1,722
Interest expense	142	161	427	472
Interest income	(56)	(40)	(192)	(80)
(Loss) income before income taxes	(726)	635	(1,818)	1,330
Income tax expense	657	962	666	1,479
Net loss	$ (1,383)	$ (327)	$ (2,484)	$ (149)
Per share data:
Basic loss per share:	$ (0.11)	$ (0.03)	$ (0.19)	$ (0.01)
Diluted loss per share:	(0.11)	(0.03)	(0.19)	(0.01)
Cash dividends declared per share:	$ 0.02	$ 0.02	$ 0.06	$ 0.06

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (1,383)	$ (327)	$ (2,484)	$ (149)
Other comprehensive (loss) income:
Foreign currency translation adjustments	(368)	(7,169)	531	(1,641)
Retirement plans related adjustments	3,031	1,748	4,333	1,736
Unrealized gain (loss) on cash flow hedges	78	(751)	210	(433)
Other comprehensive income (loss) before tax	2,741	(6,172)	5,074	(338)
Income tax expense (benefit)	322	(506)	427	324
Other comprehensive income (loss), net of tax	2,419	(5,666)	4,647	(662)
Total comprehensive income (loss)	$ 1,036	$ (5,993)	$ 2,163	$ (811)

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Operating activities
Net income (loss)	$ (2,484)	$ (149)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	6,095	6,831
Debt issuance costs amortization	98	101
Deferred income taxes	(705)	(284)
Loss (gain) on sale of assets	23	(1)
Unrealized foreign currency transaction loss (gain)	219	(4)
Changes in operating assets and liabilities:
Accounts receivable	9,761	6,015
Inventories	(9,458)	(8,688)
Other assets	(2,301)	(1,432)
Accounts payable	(586)	990
Customer deposits	(1,604)	3,494
Accrued expenses	(3,338)	2,161
Accrued pension and postretirement liabilities	(65)	(13)
Net cash (used in) provided by operating activities	(4,345)	9,021
Investing activities
Capital expenditures	(1,543)	(3,103)
Proceeds from sales of assets	38	38
Net cash used in investing activities	(1,505)	(3,065)
Financing activities
Proceeds from short-term notes payable to bank	35,974	24,937
Repayments of short-term notes payable to bank	(35,974)	(24,937)
Repayments of long-term debt	(3,186)	(3,245)
Dividends paid	(792)	(781)
Purchases of treasury stock	0	(201)
Net cash used in financing activities	(3,978)	(4,227)
Effect of exchange rate changes on cash	(3)	513
Net (decrease) increase in cash	(9,831)	2,242
Cash and cash equivalents at beginning of period	32,774	16,293
Cash and cash equivalents at end of period	$ 22,943	$ 18,535

XML

BASIS OF PRESENTATION

9 Months Ended

Sep. 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 nine months ended September 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 of $0.7 million to correct finished goods inventory. This adjustment was related to periods beginning in 2013. The adjustment of $0.7 million, 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 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.

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 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):

	September 30, 2016				December 31, 2015				Level of Fair Value Hierarchy
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	22,943	$	22,943	$	32,774	$	32,774	Level 1
Restricted cash	3,423		3,423		2,192		2,192		Level 1
Foreign currency forward contracts	414		414		163		163		Level 2
Liabilities:
Variable interest rate debt	8,625		8,625		11,606		11,606		Level 2
Foreign currency forward contracts	264		264		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 variable interest rate debt approximates its respective carrying amount. The fair value of foreign currency forward contracts is measured using models based on observable market inputs such as spot and forward rates. Based on the Company’s continued ability to enter into forward contracts, the markets for the fair value instruments are considered to be active. As of September 30, 2016 and December 31, 2015, there were no transfers in and/or out of Level 1 and Level 2.

XML

INVENTORIES

9 Months Ended

Sep. 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):

	September 30, 2016		December 31, 2015
Raw materials and purchased components	$	35,104	$	34,438
Work-in-process	37,878		33,682
Finished products	47,368		42,112
Inventories, net	$	120,350	$	110,232

XML

DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 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 September 30, 2016 and December 31, 2015, the notional amounts of the derivative financial instruments designated to qualify for cash flow hedges were $50.9 million and $27.4 million, respectively. The Company expects that approximately $0.02 million of expense, net of income tax effect, to be reclassified from AOCI to earnings within the next 12 months. 

As of September 30, 2016 and December 31, 2015, the notional amounts of the derivative financial instruments not qualifying or otherwise designated as hedges were $34.3 million and $38.5 million, respectively. For the three months ended September 30, 2016 and 2015, gains of $0.5 million and losses of $1.9 million, respectively, were recorded related to this type of derivative financial instrument. For the nine months ended September 30, 2016 and 2015, respectively, gains of $0.03 million and losses of $0.3 million 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):

	September 30, 2016			December 31, 2015
Foreign currency forwards designated as hedges:
Other current assets	$	246		$	49
Accrued expenses	(179		)	(222		)
Foreign currency forwards not designated as hedges:
Other current assets	168			114
Accrued expenses	(85		)	(196		)
Foreign currency forwards, net	$	150		$	(255	)

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PROPERTY, PLANT AND EQUIPMENT

9 Months Ended

Sep. 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): 

	September 30, 2016			December 31, 2015
Land, buildings and improvements	$	83,821		$	82,201
Machinery, equipment and fixtures	78,951			79,176
Office furniture, equipment and vehicles	22,798			22,689
Construction in progress	126			238
	185,696			184,304
Accumulated depreciation	(126,032		)	(122,279		)
Property, plant and equipment, net	$	59,664		$	62,025

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GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 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	—			(8		)	(8		)
Accumulated impairment losses	(32,434		)	—			(32,434		)
Balance at September 30, 2016	$	—		$	6,612		$	6,612

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

	September 30, 2016			December 31, 2015
Gross amortizable intangible assets:
Technical know-how	$	12,962		$	12,956
Customer lists	8,997			9,011
Land rights	2,601			2,672
Patents, trade names, drawings, and other	4,353			4,393
Total gross amortizable intangible assets	28,913			29,032
Accumulated amortization:
Technical know-how	(7,295		)	(6,833		)
Customer lists	(1,639		)	(1,315		)
Land rights	(303		)	(271		)
Patents, trade names, drawings, and other	(3,458		)	(3,406		)
Total accumulated amortization	(12,695		)	(11,825		)
Amortizable intangible assets, net	16,218			17,207
Indefinite lived intangible assets:
Trade names	11,184			10,811
Intangible assets other than goodwill, net	$	27,402		$	28,018

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

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Amortization expense	$	321	$	452	$	961	$	1,354

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WARRANTIES

9 Months Ended

Sep. 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   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Balance at the beginning of period	$	3,824		$	4,037		$	3,802		$	3,891
Warranties issued	568			682			1,649			2,081
Warranty settlement costs	(533		)	(620		)	(1,680		)	(2,068		)
Changes in accruals for pre-existing warranties	(141		)	(11		)	(77		)	64
Currency translation adjustments	14			(109		)	38			11
Balance at the end of period	$	3,732		$	3,979		$	3,732		$	3,979

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RESTRUCTURING CHARGES

9 Months Ended

Sep. 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 essentially complete, with the exception of approximately $0.2 million of certain costs in our German subsidiary associated with the remaining one month of a facility lease and other related expenses. 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 nine months ended September 30, 2016 and the cumulative costs recognized to date by the Program (in thousands):

	Total Costs Expected to be Incurred		Costs Recognized for Three Months Ended September 30, 2016		Costs Recognized for the Nine Months Ended September 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		—		269		3,314
Facility exit costs	137		68		114		114
Other related costs	605		114		225		483
Total ATA Segment	4,065		182		608		3,911
Total:
Employee termination costs	3,583		—		269		3,569
Facility exit costs	137		68		114		114
Other related costs	605		114		225		483
Total Company	$	4,325	$	182	$	608	$	4,166

During the three and nine months ended September 30, 2015 the Company recognized $0.9 million of costs under the Program. 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
Facility exit costs	—			114			114
Other related costs	—			225			225
Total restructuring charges for the period	—			608			608
Cash expenditures	(14		)	(1,539		)	(1,553		)
Foreign currency translation adjustment	—			40			40
Balance at September 30, 2016	$	153		$	351		$	504

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INCOME TAXES

9 Months Ended

Sep. 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 (90.5)% and (36.6)% for the three and nine months ended September 30, 2016, 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.  Additionally, in 2016, the Company’s effective tax rate was impacted by a one-time dividend from an indirect wholly-owned subsidiary in China to its parent, a direct wholly-owned subsidiary in Switzerland, of which $0.6 million of the total income tax expense is related to the associated withholding taxes.

The tax years 2013 through 2015 remain open to examination by the U.S. federal taxing authorities. 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 September 30, 2016, a liability of $2.2 million is recorded with respect to uncertain income tax positions, which includes related interest of $0.1 million.  If recognized, essentially all of the uncertain tax positions and related interest at September 30, 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

9 Months Ended

Sep. 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. On July 6, 2012 the PRPs submitted the Remedial Investigation (RI). On July 18, 2016 the PRPs submitted the final Feasibility Study (FS) and the EPA issued the Record of Decision on September 30, 2016.

Based upon Alternative 3 (Capping), the preferred EPA remedy, the Company, under present circumstances, would be responsible for $0.3 million of the estimated $1.92 million cost. This 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

9 Months Ended

Sep. 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 nine months ended September 30, 2016 and 2015 is presented below (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended   September 30,						Three Months Ended   September 30,
	2016			2015			2016			2015
Service cost	$	566		$	484		$	3		$	3
Interest cost	1,662			1,673			19			19
Expected return on plan assets	(2,305		)	(2,395		)	—			—
Amortization of prior service credit	(64		)	(79		)	—			—
Amortization of transition asset	(78		)	(19		)	—			—
Settlement loss	765			—			—			—
Amortization of actuarial loss (gain)	951			772			(14		)	(13		)
Net periodic cost	$	1,497		$	436		$	8		$	9

	Pension Benefits						Postretirement Benefits
	Nine Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Service cost	$	1,695		$	1,475		$	9		$	9
Interest cost	5,010			5,024			57			56
Expected return on plan assets	(6,942		)	(7,208		)	—			—
Amortization of prior service credit	(191		)	(241		)	—			—
Amortization of transition asset	(234		)	(61		)	—			—
Settlement loss	765			—			—			—
Amortization of actuarial loss (gain)	2,850			2,334			(42		)	(38		)
Net periodic cost	$	2,953		$	1,323		$	24		$	27

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STOCK BASED COMPENSATION

9 Months Ended

Sep. 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   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Restricted stock/unit awards (“RSA”)	$	67	$	63	$	190	$	264
Performance share incentives (“PSI”)	—		1		—		(61		)
Total stock based compensation	$	67	$	64	$	190	$	203

There were no RSAs granted during the nine months ended September 30, 2016, and 2015, respectively. The deferred compensation is being amortized on a straight-line basis over the specified service period. There were no PSIs granted during the nine months ended September 30, 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 September 30, 2016 and December 31, 2015, are as follows:

	September 30, 2016				December 31, 2015
	RSAs		PSIs		RSAs		PSIs
Unrecognized compensation cost (in thousands)	$	159	$	529	$	349	$	1,192
Expected weighted-average recognition period for unrecognized compensation    cost (in years)	0.63		1.32		1.20		1.16

As of March 31, 2016, $0.6 million of unrecognized compensation cost associated with the cancellation of PSIs granted in 2011 was released as a result of not meeting performance targets prior to the date of expiration.

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

9 Months Ended

Sep. 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 nine months ended September 30, 2016 and 2015 are as follows (in thousands):

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

	Three Months Ended September 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	$	30,487		$	(64,418	)	$	134		$	(33,797	)
Other comprehensive (loss) income before reclassifications	(7,169		)	1,087			(893		)	(6,975		)
Less (loss) income reclassified from AOCI	—			(661		)	(142		)	(803		)
Net other comprehensive (loss) income	(7,169		)	1,748			(751		)	(6,172		)
Income taxes	(625		)	218			(99		)	(506		)
Ending balance, net of tax	$	23,943		$	(62,888	)	$	(518	)	$	(39,463	)

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

	Nine Months Ended September 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 loss before reclassifications	(1,641		)	(258		)	(396		)	(2,295		)
Less (loss) income reclassified from AOCI	—			(1,994		)	37			(1,957		)
Net other comprehensive (loss) income	(1,641		)	1,736			(433		)	(338		)
Income taxes	329			54			(59		)	324
Ending balance, net of tax	$	23,943		$	(62,888	)	$	(518	)	$	(39,463	)

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

	Three Months Ended   September 30,						Nine Months Ended   September 30,						Affected line item on the Consolidated Statements of Operations
Details of AOCI components	2016			2015			2016			2015
Unrealized gain (loss) on cash flow hedges:
	$	39		$	(119	)	$	62		$	26		Sales
	87			(23		)	48			11			Other expense (income), net
	126			(142		)	110			37			Total before tax
	21			(25		)	18			7			Income taxes
	$	147		$	(167	)	$	128		$	44		Net of tax
Retirement plans related adjustments:
Amortization of prior service credit	$	64		$	79		$	191		$	241		(a)
Amortization of transition asset	78			19			234			61			(a)
Settlement loss	(765		)	—			(765		)	—			(a)
Amortization of actuarial loss	(937		)	(759		)	(2,808		)	(2,296		)	(a)
	(1,560		)	(661		)	(3,148		)	(1,994		)	Total before tax
	228			47			396			143			Income taxes
	$	(1,332	)	$	(614	)	$	(2,752	)	$	(1,851	)	Net of tax

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

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EARNINGS (LOSS) PER SHARE

9 Months Ended

Sep. 30, 2016

Earnings Per Share [Abstract]

EARNINGS (LOSS) PER SHARE

ARNINGS (LOSS) PER SHARE

Basic earnings (loss) 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 (loss) per share computation (in thousands):  

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Numerator for basic and diluted loss per share:
Net loss applicable to common shareholders	$	(1,383	)	$	(327	)	$	(2,484	)	$	(149	)
Denominator:
Denominator for basic and diluted loss per share — weighted average shares	12,835			12,793			12,815			12,770

There is no dilutive effect of the restricted stock and stock options for the three and nine months ended September 30, 2016 and September 30, 2015 due to the net loss in those periods. There would have been 90,405 and 93,245 of shares included in the diluted calculation for the three and nine months ended September 30, 2016, respectively, and 85,723 and 97,539 shares included in the diluted earnings per share calculation for the three and nine months ended September 30, 2015, respectively, had the impact of including these securities not been anti-dilutive. Common stock equivalents of certain stock-based awards totaling 10,877 were excluded from the calculation of diluted earnings per share for the three months ended September 30, 2015 as they were anti-dilutive. Common stock equivalents of certain stock-based awards totaling 771 and 19,989 were excluded from the calculation of diluted earnings per share for the nine months ended September 30, 2016 and September 30, 2015, respectively, as they were anti-dilutive.

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SEGMENT INFORMATION

9 Months Ended

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

	Three Months Ended September 30, 2015
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	60,856	$	16,005	$	(56	)	$	76,805
Depreciation and amortization	1,643		553		—			2,196
Segment income	895		1,083		—			1,978
Capital expenditures	983		127		—			1,110

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

	Nine Months Ended September 30, 2015
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	180,042	$	48,904	$	(657	)	$	228,289
Depreciation and amortization	4,881		1,738					6,619
Segment income	1,729		4,137					5,866
Capital expenditures	2,229		874					3,103
Segment assets(1)	239,594		49,566					289,160

____________________

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

A reconciliation of segment income to consolidated income (loss) before income taxes for the three and nine months ended September 30, 2016 and 2015 are as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Segment income	$	863		$	1,978		$	3,478		$	5,866
Unallocated corporate expense	(1,503		)	(1,222		)	(5,061		)	(4,144		)
Interest expense, net	(86		)	(121		)	(235		)	(392		)
(Loss) income before income taxes	$	(726	)	$	635		$	(1,818	)	$	1,330

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

	September 30, 2016		December 31, 2015
Total segment assets	$	274,959	$	274,334
Unallocated assets	27,890		36,801
Total assets	$	302,849	$	311,135

Unallocated assets include cash of $22.9 million and $32.8 million at September 30, 2016 and December 31, 2015, respectively.

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NEW ACCOUNTING STANDARDS

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

NEW ACCOUNTING STANDARDS

NEW ACCOUNTING STANDARDS

In April 2015, the Financial Accounting Standards Board (“FASB”) issued 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 of 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 $0.05 million are recorded as Other current assets and Other non-current assets respectively, and $0.07 million and $0.04 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 Consolidated Balance Sheet at September 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)

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

In April 2015, the Financial Accounting Standards Board (“FASB”) issued 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 of 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 $0.05 million are recorded as Other current assets and Other non-current assets respectively, and $0.07 million and $0.04 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 Consolidated Balance Sheet at September 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)

9 Months Ended

Sep. 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):

	September 30, 2016				December 31, 2015				Level of Fair Value Hierarchy
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	22,943	$	22,943	$	32,774	$	32,774	Level 1
Restricted cash	3,423		3,423		2,192		2,192		Level 1
Foreign currency forward contracts	414		414		163		163		Level 2
Liabilities:
Variable interest rate debt	8,625		8,625		11,606		11,606		Level 2
Foreign currency forward contracts	264		264		418		418		Level 2

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INVENTORIES (Tables)

9 Months Ended

Sep. 30, 2016

Inventory Disclosure [Abstract]

Schedule of net inventories

Net inventories consist of the following (in thousands):

	September 30, 2016		December 31, 2015
Raw materials and purchased components	$	35,104	$	34,438
Work-in-process	37,878		33,682
Finished products	47,368		42,112
Inventories, net	$	120,350	$	110,232

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DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 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):

	September 30, 2016			December 31, 2015
Foreign currency forwards designated as hedges:
Other current assets	$	246		$	49
Accrued expenses	(179		)	(222		)
Foreign currency forwards not designated as hedges:
Other current assets	168			114
Accrued expenses	(85		)	(196		)
Foreign currency forwards, net	$	150		$	(255	)

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PROPERTY, PLANT AND EQUIPMENT (Tables)

9 Months Ended

Sep. 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): 

	September 30, 2016			December 31, 2015
Land, buildings and improvements	$	83,821		$	82,201
Machinery, equipment and fixtures	78,951			79,176
Office furniture, equipment and vehicles	22,798			22,689
Construction in progress	126			238
	185,696			184,304
Accumulated depreciation	(126,032		)	(122,279		)
Property, plant and equipment, net	$	59,664		$	62,025

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GOODWILL AND INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 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	—			(8		)	(8		)
Accumulated impairment losses	(32,434		)	—			(32,434		)
Balance at September 30, 2016	$	—		$	6,612		$	6,612

Summary of the major components of intangible assets other than goodwill

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

	September 30, 2016			December 31, 2015
Gross amortizable intangible assets:
Technical know-how	$	12,962		$	12,956
Customer lists	8,997			9,011
Land rights	2,601			2,672
Patents, trade names, drawings, and other	4,353			4,393
Total gross amortizable intangible assets	28,913			29,032
Accumulated amortization:
Technical know-how	(7,295		)	(6,833		)
Customer lists	(1,639		)	(1,315		)
Land rights	(303		)	(271		)
Patents, trade names, drawings, and other	(3,458		)	(3,406		)
Total accumulated amortization	(12,695		)	(11,825		)
Amortizable intangible assets, net	16,218			17,207
Indefinite lived intangible assets:
Trade names	11,184			10,811
Intangible assets other than goodwill, net	$	27,402		$	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   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Amortization expense	$	321	$	452	$	961	$	1,354

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WARRANTIES (Tables)

9 Months Ended

Sep. 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   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Balance at the beginning of period	$	3,824		$	4,037		$	3,802		$	3,891
Warranties issued	568			682			1,649			2,081
Warranty settlement costs	(533		)	(620		)	(1,680		)	(2,068		)
Changes in accruals for pre-existing warranties	(141		)	(11		)	(77		)	64
Currency translation adjustments	14			(109		)	38			11
Balance at the end of period	$	3,732		$	3,979		$	3,732		$	3,979

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RESTRUCTURING CHARGES (Tables)

9 Months Ended

Sep. 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 nine months ended September 30, 2016 and the cumulative costs recognized to date by the Program (in thousands):

	Total Costs Expected to be Incurred		Costs Recognized for Three Months Ended September 30, 2016		Costs Recognized for the Nine Months Ended September 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		—		269		3,314
Facility exit costs	137		68		114		114
Other related costs	605		114		225		483
Total ATA Segment	4,065		182		608		3,911
Total:
Employee termination costs	3,583		—		269		3,569
Facility exit costs	137		68		114		114
Other related costs	605		114		225		483
Total Company	$	4,325	$	182	$	608	$	4,166

During the three and nine months ended September 30, 2015 the Company recognized $0.9 million of costs under the Program. 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
Facility exit costs	—			114			114
Other related costs	—			225			225
Total restructuring charges for the period	—			608			608
Cash expenditures	(14		)	(1,539		)	(1,553		)
Foreign currency translation adjustment	—			40			40
Balance at September 30, 2016	$	153		$	351		$	504

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PENSION AND POSTRETIREMENT PLANS (Tables)

9 Months Ended

Sep. 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 nine months ended September 30, 2016 and 2015 is presented below (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended   September 30,						Three Months Ended   September 30,
	2016			2015			2016			2015
Service cost	$	566		$	484		$	3		$	3
Interest cost	1,662			1,673			19			19
Expected return on plan assets	(2,305		)	(2,395		)	—			—
Amortization of prior service credit	(64		)	(79		)	—			—
Amortization of transition asset	(78		)	(19		)	—			—
Settlement loss	765			—			—			—
Amortization of actuarial loss (gain)	951			772			(14		)	(13		)
Net periodic cost	$	1,497		$	436		$	8		$	9

	Pension Benefits						Postretirement Benefits
	Nine Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Service cost	$	1,695		$	1,475		$	9		$	9
Interest cost	5,010			5,024			57			56
Expected return on plan assets	(6,942		)	(7,208		)	—			—
Amortization of prior service credit	(191		)	(241		)	—			—
Amortization of transition asset	(234		)	(61		)	—			—
Settlement loss	765			—			—			—
Amortization of actuarial loss (gain)	2,850			2,334			(42		)	(38		)
Net periodic cost	$	2,953		$	1,323		$	24		$	27

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STOCK BASED COMPENSATION (Tables)

9 Months Ended

Sep. 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   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Restricted stock/unit awards (“RSA”)	$	67	$	63	$	190	$	264
Performance share incentives (“PSI”)	—		1		—		(61		)
Total stock based compensation	$	67	$	64	$	190	$	203

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 September 30, 2016 and December 31, 2015, are as follows:

	September 30, 2016				December 31, 2015
	RSAs		PSIs		RSAs		PSIs
Unrecognized compensation cost (in thousands)	$	159	$	529	$	349	$	1,192
Expected weighted-average recognition period for unrecognized compensation    cost (in years)	0.63		1.32		1.20		1.16

As of March 31, 2016, $0.6 million of unrecognized compensation cost associated with the cancellation of PSIs granted in 2011 was released as a result of not meeting performance targets prior to the date of expiration.

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

9 Months Ended

Sep. 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 nine months ended September 30, 2016 and 2015 are as follows (in thousands):

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

	Three Months Ended September 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	$	30,487		$	(64,418	)	$	134		$	(33,797	)
Other comprehensive (loss) income before reclassifications	(7,169		)	1,087			(893		)	(6,975		)
Less (loss) income reclassified from AOCI	—			(661		)	(142		)	(803		)
Net other comprehensive (loss) income	(7,169		)	1,748			(751		)	(6,172		)
Income taxes	(625		)	218			(99		)	(506		)
Ending balance, net of tax	$	23,943		$	(62,888	)	$	(518	)	$	(39,463	)

Schedule of reclassification out of AOCI

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

	Three Months Ended   September 30,						Nine Months Ended   September 30,						Affected line item on the Consolidated Statements of Operations
Details of AOCI components	2016			2015			2016			2015
Unrealized gain (loss) on cash flow hedges:
	$	39		$	(119	)	$	62		$	26		Sales
	87			(23		)	48			11			Other expense (income), net
	126			(142		)	110			37			Total before tax
	21			(25		)	18			7			Income taxes
	$	147		$	(167	)	$	128		$	44		Net of tax
Retirement plans related adjustments:
Amortization of prior service credit	$	64		$	79		$	191		$	241		(a)
Amortization of transition asset	78			19			234			61			(a)
Settlement loss	(765		)	—			(765		)	—			(a)
Amortization of actuarial loss	(937		)	(759		)	(2,808		)	(2,296		)	(a)
	(1,560		)	(661		)	(3,148		)	(1,994		)	Total before tax
	228			47			396			143			Income taxes
	$	(1,332	)	$	(614	)	$	(2,752	)	$	(1,851	)	Net of tax

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

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EARNINGS (LOSS) PER SHARE (Tables)

9 Months Ended

Sep. 30, 2016

Earnings Per Share [Abstract]

Schedule of the basis of the earnings per share computation

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

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Numerator for basic and diluted loss per share:
Net loss applicable to common shareholders	$	(1,383	)	$	(327	)	$	(2,484	)	$	(149	)
Denominator:
Denominator for basic and diluted loss per share — weighted average shares	12,835			12,793			12,815			12,770

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SEGMENT INFORMATION (Tables)

9 Months Ended

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

	Three Months Ended September 30, 2015
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	60,856	$	16,005	$	(56	)	$	76,805
Depreciation and amortization	1,643		553		—			2,196
Segment income	895		1,083		—			1,978
Capital expenditures	983		127		—			1,110

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

	Nine Months Ended September 30, 2015
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	180,042	$	48,904	$	(657	)	$	228,289
Depreciation and amortization	4,881		1,738					6,619
Segment income	1,729		4,137					5,866
Capital expenditures	2,229		874					3,103
Segment assets(1)	239,594		49,566					289,160

____________________

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

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

A reconciliation of segment income to consolidated income (loss) before income taxes for the three and nine months ended September 30, 2016 and 2015 are as follows (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Segment income	$	863		$	1,978		$	3,478		$	5,866
Unallocated corporate expense	(1,503		)	(1,222		)	(5,061		)	(4,144		)
Interest expense, net	(86		)	(121		)	(235		)	(392		)
(Loss) income before income taxes	$	(726	)	$	635		$	(1,818	)	$	1,330

Schedule of reconciliation of segment assets to consolidated total assets

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

	September 30, 2016		December 31, 2015
Total segment assets	$	274,959	$	274,334
Unallocated assets	27,890		36,801
Total assets	$	302,849	$	311,135

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BASIS OF PRESENTATION (Details) $ in Millions	9 Months Ended
	Sep. 30, 2016 reportable_segment	Sep. 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	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2014
Financial instruments
Cash and cash equivalents	$ 22,943	$ 32,774	$ 18,535	$ 16,293
Restricted cash	3,423	2,192
Recurring | Level 1
Financial instruments
Cash and cash equivalents	22,943	32,774
Cash and cash equivalents, fair value	22,943	32,774
Restricted cash	3,423	2,192
Restricted cash, fair value	3,423	2,192
Recurring | Level 2
Financial instruments
Foreign currency forward contracts, assets	414	163
Variable interest rate debt	8,625	11,606
Variable interest rate debt, fair value	8,625	11,606
Foreign currency forward contracts, liabilities	$ 264	$ 418

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INVENTORIES (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials and purchased components	$ 35,104	$ 34,438
Work-in-process	37,878	33,682
Finished products	47,368	42,112
Inventories, net	$ 120,350	$ 110,232

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DERIVATIVE FINANCIAL INSTRUMENTS (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Derivative [Line Items]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	$ 500	$ 1,900	$ 30	$ 300
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	0		0
Notional Amount	50,900		50,900		$ 27,400
Not Designated as Hedging Instrument | Foreign Exchange Contract [Member]
Derivative [Line Items]
Notional Amount	$ 34,300		$ 34,300		$ 38,500

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DERIVATIVE FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Derivative Instruments, Gain (Loss) [Line Items]
Foreign currency forwards, net	$ 150	$ (255)
Foreign Exchange Forward | Other Current Assets | Designated as Hedging Instrument
Derivative Instruments, Gain (Loss) [Line Items]
Derivative asset, gross	246	49
Foreign Exchange Forward | Other Current Assets | Not Designated as Hedging Instrument
Derivative Instruments, Gain (Loss) [Line Items]
Derivative asset, gross	168	114
Foreign Exchange Forward | Accrued Liabilities | Designated as Hedging Instrument
Derivative Instruments, Gain (Loss) [Line Items]
Derivative liability, gross	179	222
Foreign Exchange Forward | Accrued Liabilities | Not Designated as Hedging Instrument
Derivative Instruments, Gain (Loss) [Line Items]
Derivative liability, gross	$ 85	$ 196

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PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Property, plant and equipment
Property, plant and equipment, gross	$ 185,696	$ 184,304
Accumulated depreciation	(126,032)	(122,279)
Property, plant and equipment, net	59,664	62,025
Land, buildings and improvements
Property, plant and equipment
Property, plant and equipment, gross	83,821	82,201
Machinery, equipment and fixtures
Property, plant and equipment
Property, plant and equipment, gross	78,951	79,176
Office furniture, equipment and vehicles
Property, plant and equipment
Property, plant and equipment, gross	22,798	22,689
Construction in progress
Property, plant and equipment
Property, plant and equipment, gross	$ 126	$ 238

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GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 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	(8)
Balance at September 30, 2016	6,612
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 September 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	(8)
Balance at September 30, 2016	$ 6,612

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GOODWILL AND INTANGIBLE ASSETS (Details 2) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	$ 28,913	$ 29,032
Finite-Lived Intangible Assets, Accumulated Amortization	(12,695)	(11,825)
Finite-Lived Intangible Assets, Net	16,218	17,207
Other intangible assets, net	27,402	28,018
Technical Know How [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	12,962	12,956
Finite-Lived Intangible Assets, Accumulated Amortization	(7,295)	(6,833)
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	8,997	9,011
Finite-Lived Intangible Assets, Accumulated Amortization	(1,639)	(1,315)
Land Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	2,601	2,672
Finite-Lived Intangible Assets, Accumulated Amortization	(303)	(271)
Patents, trade names, drawings, and other [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	4,353	4,393
Finite-Lived Intangible Assets, Accumulated Amortization	(3,458)	(3,406)
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Indefinite-Lived Intangible Assets (Excluding Goodwill)	$ 11,184	$ 10,811

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GOODWILL AND INTANGIBLE ASSETS (Details 3) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of Intangible Assets	$ 321	$ 452	$ 961	$ 1,354

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WARRANTIES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Changes in product warranty accrual
Balance at the beginning of period	$ 3,824	$ 4,037	$ 3,802	$ 3,891
Warranties issued	568	682	1,649	2,081
Warranty settlement costs	(533)	(620)	(1,680)	(2,068)
Changes in accruals for pre-existing warranties	(141)	(11)	(77)	64
Currency translation adjustments	14	(109)	38	11
Balance at the end of period	$ 3,732	$ 3,979	$ 3,732	$ 3,979

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RESTRUCTURING CHARGES (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Restructuring and Related Activities [Abstract]
Total Costs Expected to be Incurred		$ 4,325,000
Remaining restructuring costs expected		200,000
Annual pre-tax savings, generated from restructuring		$ 4,500,000.0
Restructuring costs recognized	$ 900,000		$ 900,000

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RESTRUCTURING CHARGES (Cost Incurred and Expected to be Incurred) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	$ 4,325		$ 4,325
Restructuring	182	$ 877	608	$ 877
Cumulative Costs Incurred to Date	4,166		4,166
Employee termination costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	3,583		3,583
Restructuring	0		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	137		137
Restructuring	68		114
Cumulative Costs Incurred to Date	114		114
Other related costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	605		605
Restructuring	114		225
Cumulative Costs Incurred to Date	483		483
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 | Facility exit costs
Restructuring Cost and Reserve [Line Items]
Restructuring			0
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	182		608
Cumulative Costs Incurred to Date	3,911		3,911
Operating segment | ATA | Employee termination costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	3,323		3,323
Restructuring	0		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	137		137
Restructuring	68		114
Cumulative Costs Incurred to Date	114		114
Operating segment | ATA | Other related costs
Restructuring Cost and Reserve [Line Items]
Total Costs Expected to be Incurred	605		605
Restructuring	114		225
Cumulative Costs Incurred to Date	$ 483		$ 483

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RESTRUCTURING CHARGES (Restructuring Reserve) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Restructuring Reserve [Roll Forward]
Balance at December 31, 2015			$ 1,409
Restructuring	$ 182	$ 877	608	$ 877
Cash expenditures			(1,553)
Foreign currency translation adjustment			40
Balance at September 30, 2016	504		504
Employee termination costs
Restructuring Reserve [Roll Forward]
Restructuring	0		269
Facility exit costs
Restructuring Reserve [Roll Forward]
Restructuring	68		114
Other related costs
Restructuring Reserve [Roll Forward]
Restructuring	114		225
Operating segment | MMS
Restructuring Reserve [Roll Forward]
Balance at December 31, 2015			167
Restructuring	0		0
Cash expenditures			(14)
Foreign currency translation adjustment			0
Balance at September 30, 2016	153		153
Operating segment | MMS | Employee termination costs
Restructuring Reserve [Roll Forward]
Restructuring	0		0
Operating segment | MMS | Facility exit costs
Restructuring Reserve [Roll Forward]
Restructuring			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	182		608
Cash expenditures			(1,539)
Foreign currency translation adjustment			40
Balance at September 30, 2016	351		351
Operating segment | ATA | Employee termination costs
Restructuring Reserve [Roll Forward]
Restructuring	0		269
Operating segment | ATA | Facility exit costs
Restructuring Reserve [Roll Forward]
Restructuring	68		114
Operating segment | ATA | Other related costs
Restructuring Reserve [Roll Forward]
Restructuring	$ 114		$ 225

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INCOME TAXES (Details) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2016 USD ($)
Income Tax Disclosure [Abstract]
Effective tax rate (as a percent)	(90.50%)	(36.60%)
Income tax expense related to foreign subsidiary		$ 0.6
Uncertain income tax position	$ 2.2	2.2
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	9 Months Ended
	Sep. 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		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Pension Benefits
Components of net periodic benefit cost (credit)
Service cost	$ 566	$ 484	$ 1,695	$ 1,475
Interest cost	1,662	1,673	5,010	5,024
Expected return on plan assets	(2,305)	(2,395)	(6,942)	(7,208)
Amortization of prior service credit	(64)	(79)	(191)	(241)
Amortization of transition asset	(78)	(19)	(234)	(61)
Settlement loss	765	0	765	0
Amortization of loss (gain)	951	772	2,850	2,334
Net periodic cost	1,497	436	2,953	1,323
Postretirement Benefits
Components of net periodic benefit cost (credit)
Service cost	3	3	9	9
Interest cost	19	19	57	56
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
Settlement loss	0	0	0	0
Amortization of loss (gain)	(14)	(13)	(42)	(38)
Net periodic cost	$ 8	$ 9	$ 24	$ 27

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STOCK BASED COMPENSATION (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Stock-based compensation
Stock based compensation expenses	$ 67	$ 64	$ 190	$ 203
Restricted stock/units awards
Stock-based compensation
Stock based compensation expenses	67	63	190	264
Unrecognized compensation and expected weighted-average recognition period
Unrecognized compensation cost	159		$ 159		$ 349
Expected weighted-average recognition period for unrecognized compensation cost (in years)			7 months 17 days		1 year 2 months 13 days
Performance share incentives
Stock-based compensation
Stock based compensation expenses	0	$ 1	$ 0	$ (61)
Unrecognized compensation and expected weighted-average recognition period
Unrecognized compensation cost	$ 529		$ 529		$ 1,192
Expected weighted-average recognition period for unrecognized compensation cost (in years)			1 year 3 months 26 days		1 year 1 month 28 days

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STOCK BASED COMPENSATION (Additional Information) (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Mar. 31, 2016
Restricted stock/units awards
Stock-based compensation
Shares granted during period	0	0
Performance share incentives
Stock-based compensation
Shares granted during period	0	0
Release of unrecognized compensation cost			$ 0.6

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Changes in AOCI by component
Beginning balance, net of tax	$ (46,485)	$ (33,797)	$ (48,713)	$ (38,801)
Other comprehensive (loss) income before reclassifications	1,307	(6,975)	2,036	(2,295)
Less income reclassified from AOCI	(1,434)	(803)	(3,038)	(1,957)
Net other comprehensive (loss) income	2,741	(6,172)	5,074	(338)
Income taxes	(322)	506	(427)	(324)
Ending balance, net of tax	(44,066)	(39,463)	(44,066)	(39,463)
Foreign currency translation adjustments
Changes in AOCI by component
Beginning balance, net of tax	21,359	30,487	20,529	25,913
Other comprehensive (loss) income before reclassifications	(368)	(7,169)	531	(1,641)
Less income reclassified from AOCI	0	0	0	0
Net other comprehensive (loss) income	(368)	(7,169)	531	(1,641)
Income taxes	256	(625)	325	329
Ending balance, net of tax	20,735	23,943	20,735	23,943
Retirement plans related adjustments
Changes in AOCI by component
Beginning balance, net of tax	(67,815)	(64,418)	(69,100)	(64,570)
Other comprehensive (loss) income before reclassifications	1,471	1,087	1,185	(258)
Less income reclassified from AOCI	(1,560)	(661)	(3,148)	(1,994)
Net other comprehensive (loss) income	3,031	1,748	4,333	1,736
Income taxes	53	218	70	54
Ending balance, net of tax	(64,837)	(62,888)	(64,837)	(62,888)
Unrealized gain (loss) on cash flow hedges
Changes in AOCI by component
Beginning balance, net of tax	(29)	134	(142)	(144)
Other comprehensive (loss) income before reclassifications	204	(893)	320	(396)
Less income reclassified from AOCI	126	(142)	110	37
Net other comprehensive (loss) income	78	(751)	210	(433)
Income taxes	13	(99)	32	(59)
Ending balance, net of tax	$ 36	$ (518)	$ 36	$ (518)

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details 2) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Reclassification out of AOCI
Sales		$ 67,211	$ 76,805	$ 205,218	$ 228,289
Other expense, net		(321)	(201)	(249)	(276)
Reclassification from AOCI, before taxes		(1,434)	(803)	(3,038)	(1,957)
Income from continuing operations before income taxes		(726)	635	(1,818)	1,330
Income taxes		(657)	(962)	(666)	(1,479)
Net loss applicable to common shareholders		(1,383)	(327)	(2,484)	(149)
Unrealized gain (loss) on cash flow hedges
Reclassification out of AOCI
Reclassification from AOCI, before taxes		126	(142)	110	37
Unrealized gain (loss) on cash flow hedges | Amount reclassified from AOCI
Reclassification out of AOCI
Sales		39	(119)	62	26
Other expense, net		87	(23)	48	11
Income from continuing operations before income taxes		126	(142)	110	37
Income taxes		21	(25)	18	7
Net loss applicable to common shareholders		147	(167)	128	44
Retirement plans related adjustments
Reclassification out of AOCI
Reclassification from AOCI, before taxes		(1,560)	(661)	(3,148)	(1,994)
Retirement plans related adjustments | Amount reclassified from AOCI
Reclassification out of AOCI
Amortization of prior service credit	[1]	64	79	191	241
Amortization of transition asset	[1]	78	19	234	61
Amortization of actuarial loss	[1]	(937)	(759)	(2,808)	(2,296)
Income from continuing operations before income taxes		(1,560)	(661)	(3,148)	(1,994)
Income taxes		228	47	396	143
Net loss applicable to common shareholders		(1,332)	(614)	(2,752)	(1,851)
Settlement loss
Reclassification out of AOCI
Reclassification from AOCI, before taxes		$ (765)	$ 0	$ (765)	$ 0

[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		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Earnings per share
Net loss applicable to common shareholders	$ (1,383,000)	$ (327,000)	$ (2,484,000)	$ (149,000)
Denominator:
Denominator for basic (loss) earnings per share - weighted average shares (in shares)	12,835,000	12,793,000	12,815,000	12,770,000
Stock Options and Restricted Stock
Denominator:
Dilutive securities, effect on basic earnings per share, dilutive convertible securities	$ 90,405	$ 85,723	$ 93,245	$ 97,539
Stock Compensation Plan
Denominator:
Anti-dilutive stock-based awards excluded from calculation of diluted earnings per share (in shares)		10,877	771	19,989

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SEGMENT INFORMATION (Details) - USD ($) $ in Thousands		3 Months Ended				9 Months Ended
		Sep. 30, 2016		Sep. 30, 2015		Sep. 30, 2016		Sep. 30, 2015		Dec. 31, 2015
Financial results of reportable segments
Sales		$ 67,211		$ 76,805		$ 205,218		$ 228,289
Depreciation and amortization						6,095		6,831
Segment (loss) income		(640)		756		(1,583)		1,722
Capital expenditures						1,543		3,103
Segment assets		302,849				302,849				$ 311,135
Reconciliation of segment income to consolidated income before income taxes
(Loss) income before income taxes		(726)		635		(1,818)		1,330
Operating segment
Financial results of reportable segments
Sales		67,211		76,805		205,218		228,289
Depreciation and amortization		1,931		2,196		5,915		6,619
Segment (loss) income		863		1,978		3,478		5,866
Capital expenditures		551		1,110		1,543		3,103
Segment assets		274,959	[1]	289,160	[1]	274,959	[1]	289,160	[1]	274,334
Reconciliation of segment income to consolidated income before income taxes
Unallocated corporate expense		(1,503)		(1,222)		(5,061)		(4,144)
Interest expense, net		86		121		235		392
(Loss) income before income taxes		(726)		635		(1,818)		1,330
Operating segment | MMS
Financial results of reportable segments
Sales		52,089		60,856		158,718		180,042
Depreciation and amortization		1,433		1,643		4,353		4,881
Segment (loss) income		(984)		895		(1,864)		1,729
Capital expenditures		433		983		1,119		2,229
Segment assets	[1]	226,618		239,594		226,618		239,594
Operating segment | ATA
Financial results of reportable segments
Sales		15,270		16,005		46,773		48,904
Depreciation and amortization		498		553		1,562		1,738
Segment (loss) income		1,847		1,083		5,342		4,137
Capital expenditures		118		127		424		874
Segment assets	[1]	48,341		49,566		48,341		49,566
Inter-Segment Eliminations
Financial results of reportable segments
Sales		(148)		$ (56)		(273)		$ (657)
Unallocated assets
Financial results of reportable segments
Segment assets		27,890				27,890				36,801
Reconciliation of segment income to consolidated income before income taxes
Cash		$ 22,900				$ 22,900				$ 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	Sep. 30, 2016	Dec. 31, 2015
Long-term Debt, Current Maturities
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Unamortized debt issuance costs	$ 70
Other Current Assets
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Unamortized debt issuance costs	60
Other Noncurrent Assets
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Unamortized debt issuance costs	50
Long-term Debt [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Unamortized debt issuance costs	$ 40
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)