COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2011

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 10.  COMMITMENTS AND CONTINGENCIES

Certain environmental laws can impose joint and several liabilities 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 properties we own or previously owned and on adjacent areas.

In particular, our Elmira, New York manufacturing facility is located within the Kentucky Avenue Wellfield on the National Priorities List of Hazardous Waste Sites (the “Site”) designated for cleanup by the United States Environmental Protection Agency (“EPA”) because of groundwater contamination.

In February 2006, we received a Special Notice Concerning a Remedial Investigation/Feasibility Study (“RI/FS”) for the Koppers Pond (the “Pond”) portion of the Site.  The Notice stated that the EPA had 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 included metals and polychlorinated biphenyls.

A substantial portion of the Pond is located on our property.  Hardinge, along with Beazer East, Inc., the Village of Horseheads, the Town of Horseheads, the County of Chemung, CBS Corporation, and Toshiba America, Inc., the Potentially Responsible Parties (the “PRPs”) have agreed to voluntarily participate in the Remedial Investigation and Feasibility Study (“RI/FS”) by signing an Administrative Settlement Agreement and Order of Consent (the “Order”) on September 29, 2006; the EPA approved and executed the Order that day.

The PRPs also signed a PRP Member Agreement to share the cost of the RI/FS Study on a per capita basis.  We estimated our portion of the cost to be $0.12 million for which we established a reserve. As of September 30, 2011, we have spent $0.12 million with respect to the study and other activities relating to the Site.

The PRPs, with their consultants, developed and submitted a Revised RI/FS on December 6, 2007. In May 2008, the EPA approved the RI/FS Work Plan.  On September 7, 2011, the PRPs submitted a draft Remedial Investigation Report to the EPA.  The PRPs are continuing to address the EPA comments and to perform the tasks required by the Work Plan and the Order.

Until receipt of this Special Notice, Hardinge had never been named as a PRP at the Site nor had we received any requests for information from the EPA concerning the Site.  Environmental sampling on our property within this Site under supervision of regulatory authorities had identified off-site sources for such groundwater contamination and contamination in the Pond, and had found no evidence that our operations or property have contributed or are contributing to the contamination. Other than as described above, we have not established a reserve for any potential costs relating to this Site, as the issue whether remediation is necessary, and if so to what extent and cost, has yet to be determined.

We have notified all appropriate insurance carriers, but whether coverage will be available has not yet been determined and possible insurance recovery cannot now be estimated with any degree of certainty.

Although we believe, based upon information currently available, that, except as described in the preceding paragraphs, we will not have material liabilities for environmental remediation, it is possible that future remedial requirements or changes in the enforcement of existing laws and regulations, which are subject to extensive regulatory discretion, may result in material liabilities to Hardinge.