FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 000-15760
Hardinge Inc.
(Exact name of Registrant as specified in its charter)
New York 16-0470200
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Hardinge Inc.
One Hardinge Drive
Elmira, NY 14902
(Address of principal executive offices) (Zip code)
(607) 734-2281
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
As of September 30, 1998 there were 9,824,746 shares of Common Sock of
the Registrant outstanding.
<PAGE>
HARDINGE INC. AND SUBSIDIARIES
INDEX
Part I Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1998 and
December 31, 1997. 3
Consolidated Statements of Income and Retained
Earnings for the three months ended September 30, 1998
and 1997 and the nine months ended September 30, 1998
and 1997. 5
Condensed Consolidated Statements of Cash Flows for
the nine months ended September 30, 1998 and 1997. 6
Notes to Consolidated Financial Statements. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 10
Item 3. Quantitative and Qualitative Disclosures About Market
Risks. 14
Part II Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Default upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
<PAGE>
PART I, ITEM 1
HARDINGE INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands)
Sept. 30, Dec. 31,
1998 1997
-------------------------------
(Unaudited)
Assets
Current assets:
Cash $ 3,170 $ 1,565
Accounts receivable 55,069 56,210
Notes receivable 6,472 5,886
Inventories 94,979 91,969
Deferred income taxes 2,961 2,961
Prepaid expenses 1,635 1,790
-------------------------------
Total current assets 164,286 160,381
Property, plant and equipment:
Property, plant and equipment 144,807 128,640
Less accumulated depreciation 69,156 63,453
-------------------------------
75,651 65,187
Other assets:
Notes receivable 11,927 11,951
Deferred income taxes 837 837
Goodwill 3,974 4,082
Other 1,808 2,846
-------------------------------
18,546 19,716
-------------------------------
Total assets $258,483 $245,284
===============================
See accompanying notes.
<PAGE>
HARDINGE INC. AND SUBSIDIARIES
Consolidated Balance Sheets--Continued
(Dollars In Thousands)
Sept. 30, Dec. 31,
1998 1997
------------------------------
(Unaudited)
Liabilities and shareholders' equity:
Current liabilities:
Accounts payable $ 12,466 $ 18,323
Notes payable to bank 4,251 7,282
Accrued expenses 13,565 9,756
Accrued income taxes 2,980 1,614
Deferred income taxes 2,012 1,553
Current portion long-term debt 3,629 3,468
-------------------------------
Total current liabilities 38,903 41,996
Other liabilities:
Long-term debt 34,362 31,012
Accrued pension plan expense 2,311 2,311
Deferred income taxes 1,646 1,575
Accrued postretirement benefits 5,316 5,206
-------------------------------
43,635 40,104
Shareholders' equity:
Preferred stock, Series A, par value $.01:
Authorized - 2,000,000; issued - none
Common stock, $.01 par value:
Authorized shares - 20,000,000
Issued shares - 9,843,992 at Sept. 30, 1998
and 6,511,703 at December 31, 1997 98 65
Additional paid-in capital 60,012 58,065
Retained earnings 123,868 112,625
Treasury shares (444) (552)
Accumulated other comprehensive income -
Foreign currency translation adjustments (2,253) (2,763)
Deferred employee benefits (5,336) (4,256)
-------------------------------
Total shareholders' equity 175,945 163,184
-------------------------------
Total liabilities and shareholders' equity $258,483 $245,284
===============================
See accompanying notes.
<PAGE>
HARDINGE INC AND SUBSIDIARIES
Consolidated Statements of Income and Retained Earnings (Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Net Sales $62,041 $56,772 $192,891 $180,496
Cost of sales 39,435 37,579 123,832 119,791
----------------------------------------------------------------------------------------- -----------------------------
Gross profit 22,606 19,193 69,059 60,705
Selling, general and
administrative expenses 14,886 12,393 43,089 37,172
Unusual expense 1,960
----------------------------------------------------------------------------------------- -----------------------------
Income from operations 7,720 6,800 25,970 21,573
Interest expense 572 531 1,743 1,896
Interest (income) (120) (176) (379) (530)
----------------------------------------------------------------------------------------- -----------------------------
Income before income taxes 7,268 6,445 24,606 20,207
Income taxes 2,737 2,460 9,212 7,875
----------------------------------------------------------------------------------------- -----------------------------
Net income 4,531 3,985 15,394 12,332
Retained earnings at beginning of period 120,714 105,498 112,625 99,622
Less dividends declared 1,377 1,234 4,118 3,705
Less stock split effected in the form
of a dividend 33
========================================================================================= =============================
Retained earnings at end of period $123,868 $ 108,249 $123,868 $ 108,249
========================================================================================= =============================
Per share data:
Basic earnings per share $ .48 $ .42 $ 1.63 $ 1.32
========================================================================================= =============================
Weighted average number
of common shares outstanding 9,426 9,380 9,419 9,339
============================= =============================
Diluted earnings per share $ .48 $ .42 $ 1.63 $ 1.31
========================================================================================= =============================
Weighted average number
of common shares outstanding 9,468 9,413 9,452 9,419
============================= =============================
Cash dividends declared $ .14 $ .13 $ .42 $ .39
============================= =============================
</TABLE>
1997 per share data restated for stock split - see Note D.
See accompanying notes.
<PAGE>
HARDINGE INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
Nine Months Ended
September 30,
1998 1997
----------------------------------
Net cash provided by operating activities $20,659 $ 32,042
Investing activities:
Capital expenditures (15,263) (6,211)
Proceeds frpm sale of assets 17
Investment in subsidiary (4,588)
----------------------------------
Net cash (used in) investing activities (15,263) (10,782)
Financing activities:
(Decrease) in short-term notes payable to bank (3,158) (8,124)
Increase (decrease) in long-term debt 3,835 (7,977)
(Purchase) sale of treasury stock (430) 84
Dividends paid (4,118) (3,705)
---------------------------------
Net cash (used in) financing activities (3,871) (19,722)
Effect of exchange rate changes on cash 80 (57)
---------------------------------
Net increase in cash $ 1,605 $1,481
=================================
See accompanying notes
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1998
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1998, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report for the year ended December 31, 1997.
The Company has adopted Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information."
The Company operates in only one business segment - industrial machine tools.
NOTE B--INVENTORIES
Inventories are summarized as follows (dollars in thousands):
September 30, December 31,
1998 1997
----------------------------------
Finished products $ 39,885 $ 32,290
Work-in-process 27,921 32,328
Raw materials and purchased components 27,173 27,351
=========== ===========
$ 94,979 $ 91,969
=========== ===========
NOTE C--UNUSUAL EXPENSE
1997's first quarter included a one-time charge of $1,960,000
(approximately $1,200,000 after tax, or $.13 per share). This non-recurring
charge involves outside costs incurred in connection with a major acquisition
that the Company carried into the final stages of the due diligence process but
decided not to complete.
NOTE D--CHANGES IN SHAREHOLDERS' EQUITY
On April 28, 1998, the Board of Directors approved a three-for-two
stock split of the Company's common shares to be paid in the form of a 50
percent stock dividend. As a result of the split, 3,281,351 additional shares
were issued on May 29, 1998 to shareholders of record on May 8, 1998 and
retained earnings were reduced by $32,813. Any fractional shares resulting from
the split were paid in cash. All references in the accompanying consolidated
financial statements to common shares outstanding and earnings per share have
been restated to reflect this stock split.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
September 30, 1998
NOTE E--EARNINGS PER SHARE AND WEIGHTED AVERAGE SHARES OUTSTANDING
Earnings per share are computed using the weighted average number of
shares of common stock outstanding during the period. For diluted earnings per
share, the weighted average number of shares includes common stock equivalents
related primarily to restricted stock. In 1997, Statement of Financial
Accounting Standards No. 128 "Earnings per Share" was issued. Statement 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. All earnings per share amounts have been
restated to conform to the requirements of Statement 128. All earnings per share
amounts and shares outstanding have been restated to reflect the stock split
mentioned above.
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations required by Statement No. 128.
The table sets forth the computation of basic and diluted earnings per share:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------------------------------------
1998 1997 1998 1997
--------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Numerator:
Net income $ 4,531 $ 3,985 $ 15,394 $12,332
Numerator for basic earnings per share 4,531 3,985 15,394 12,332
Numerator for diluted earnings per share 4,531 3,985 15,394 12,332
Denominator:
Denominator for basic earnings per share
-weighted average shares 9,426 9,380 9,419 9,339
Effect of diluted securities:
Restricted stock and stock options 42 33 33 80
Denominator for diluted earnings per share
-adjusted weighted average shares 9,468 9,413 9,452 9,419
Basic earnings per share $ .48 $ .42 $ 1.63 $ 1.32
========================= ==========================
Diluted earnings per share $ .48 $ .42 $ 1.63 $ 1.31
========================= ==========================
</TABLE>
NOTE F--DIVIDENDS DECLARED
Dividends declared per share have been restated to reflect the
additional shares issued in the stock split mentioned above.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
September 30, 1998
NOTE G--REPORTING COMPREHENSIVE INCOME
As of January 1, 1998 the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." Statement 130
establishes new rules for the reporting and display of comprehensive income and
its components. However, the adoption of this Statement had no impact on the
Company's net income or shareholders' equity. Statement 130 requires that
foreign currency translation adjustments, which prior to adoption were reported
separately in shareholders' equity, be included in shareholders' equity as other
comprehensive income. Prior year financial statements were reclassified to
conform to the requirements of Statement 130.
During the three months and nine months ended September 30, 1998 and
1997, the components of total comprehensive income consisted of the following
(dollars in thousands):
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
--------- --------- --------- ----------
Net Income $ 4,531 $ 3,985 $ 15,394 $ 12,332
Foreign currency
translation adjustments 814 (96) 510 (1,880)
--------- --------- --------- ----------
Comprehensive Income $ 5,345 $ 3,889 $ 15,904 10,452
========= ========= ========= ==========
<PAGE>
PART I, ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following are management's comments relating to significant changes
in the results of operations for the three month and nine month periods ended
September 30, 1998 and 1997 and in the Company's financial condition during the
nine month period ended September 30, 1998.
Results of Operations
Net Sales. Net sales for the quarter ended September 30, 1998
totaled $62,041,000 compared to $56,772,000 during the same 1997 quarter, an in-
crease of 9.3%. Year to date sales of $192,891,000 for the first nine months of
1998 represent an increase of 6.9% over 1997's nine month total of $180,496,000.
Sales of machines accounted for $42,112,000 of net sales for the
third quarter of 1998, while sales of non-machine products and services
contributed the remaining $19,929,000. Compared to the prior year's third
quarter, machine sales increased by 14.8% while other products experienced a
slight decline of 0.9%. This difference in rates of change was due in part to
shipment of a particularly large machine order to an automotive customer during
this year's third quarter. For the nine months ended September 30, 1998 machine
revenues were $133,679,000 or 69.3% of total volume with the remaining
$59,212,000 or 30.7% coming from other products. This compares to the first nine
months of 1997 where machine revenues totaled $121,789,000 or 67.5%, and other
revenues totaled $58,707,000 or 32.5%. The increase in the relative percentage
of machine sales throughout these periods reflects the Company's continued
aggressive introduction of new machine products and strategic acquisitions.
Sales to customers in the United States for the quarter ended
September 30, 1998 increased by $1,687,000 or 4.1% over the same 1997 quarter.
Sales to European customers increased by $876,000 or 7.6%, while sales to all
other parts of the world increased by $2,706,000, an increase of 68.4%. For the
nine months ended September 30, the 1998 sales apportionment among the US,
Europe, and all other areas was 69.6%, 21.2%, and 9.2%, respectively, compared
to 72.0%, 18.7%, and 9.3% during 1997.
Gross Profit. As in both previous quarters this year, the
Company's gross margin continued to increase during the third quarter. Gross
margin, as a percentage of sales, was 36.4% in the third quarter of 1998
compared to 33.8% for the same 1997 quarter. Gross margin percentages for the
nine month periods ended September 30, 1998 and 1997 were 35.8% and 33.6%,
respectively. The improved margins reported throughout the year are the result
of a more profitable mix of machine sales and better factory utilization.
Selling, General,and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses as a percentage of sales for the quarter ended
September 30 were 24.0% in 1998 compared to 21.8% during 1997. The same upward
trend is true for the nine month periods ended September 30, 1998 and 1997, at
22.3% and 20.6%, respectively. The additional expense during the first nine
months of 1998 is a result of several factors. The implementation of the
Company's strategy to provide better service to our growing marketplace has
resulted in the addition of both sales and service personnel, and the opening of
new regional technical centers in Ohio and Texas. The Company has just completed
participation in the International Manufacturing Technology Show in Chicago. The
show, held every two years, is the premier showcase for Hardinge products. The
Company's presence at this year's show was broadly expanded to accommodate its
growing product lines. Finally, 1997's year-to-date SG&A expenses include only
two quarters of Hansvedt Industries costs as a result of the Hansvedt
acquisition having taken place in April, 1997.
<PAGE>
Income from Operations. Operating income for the quarter ended
September 30, 1998 was $7,720,000 (12.4% of sales) compared to $6,800,000
(12.0%) during the same quarter last year. Income from operations for the nine
months ended September 30, 1998 was $25,970,000, or 13.5% of sales, compared to
1997's $23,533,000, or 13.0%, as calculated prior to the non-recurring charge
related to acquisition efforts which was reported during 1997's first quarter.
With this non-recurring charge taken into consideration, operating income for
the nine months ended September 30, 1997 was $21,573,000, or 12.0% of sales. The
increases in sales volume and gross margin rates described earlier have more
than offset the additional SG&A costs during 1998, resulting in these
improvements.
Interest Expense. Interest expense for the quarter ended September 30,
1998 was $572,000, compared to $531,000 a year earlier, resulting from slightly
higher average borrowing at slightly lower rates. For the nine month periods
ended September 30, 1998 and 1997, interest expense totaled $1,743,000 and
$1,896,000, respectively.
Interest Income. Interest income is derived mainly from financing of
customer purchases. A program of reduced interest rates as a sales incentive
during 1998 is responsible for the reduced interest income of $120,000 and
$379,000 for the quarter and nine months ended September 30, 1998 compared to
$176,000 and $530,000 for the same periods a year earlier.
Income Taxes. The provision for income taxes as a percentage of pre-tax
income was 37.7% and 37.4%, for the third quarter and first nine months of 1998,
respectively, compared to 38.2% and 39.0% for the same 1997 periods. The rate
reductions are a reflection of higher utilization of US income tax credits.
Net Income. Net income for the third quarter of 1998 was $4,531,000, or
$.48 per share, an increase of $546,000 or 13.7% from 1997's income of
$3,985,000 or $.42 per share which was restated for the Company's May 1998
3-for-2 stock split. Year to date 1998 net income was $15,394,000, or $1.63 per
share, compared to $12,332,000, or $1.31 per share for the same 1997 period
after restatement. As previously reported, 1997's net income has been reduced by
$1,200,000, or $.13 per share (after restatement), resulting from a
non-recurring charge related to first quarter 1997 acquisition efforts.
Excluding that charge, net income for the first nine months of 1997 was
$13,532,000, or $1.44 per share as restated. The net income gain is attributable
to the accumulation of factors already discussed.
Earnings Per Share. All earnings per share and weighted average share
amounts are presented, and where appropriate, restated as diluted to conform
with Financial Accounting Standards Board Statement No. 128, Earnings Per Share.
Additionally, to provide comparability between periods, prior periods' data have
also been restated to give effect to the Company's 3-for-2 stock split which
took place in May, 1998.
<PAGE>
Quarterly Information
The following table sets forth certain quarterly financial data for
each of the periods indicated.
Three Months Ended
Mar. 31, June 30, Sept. 30, Dec. 31,
1997 1997 1997 1997
---------------------------------------------------
(in thousands, except per share data)
---------------------------------------------------
Net Sales $ 60,056 $ 63,668 $ 56,772 $66,083
Gross Profit 20,178 21,334 19,193 21,713
Income from operations 6,414 8,359 6,800 8,926
Net income 3,514 4,833 3,985 5,608
Diluted earnings per share .38 .52 .42 .59
Weighted average shares
outstanding 9,328 9,356 9,413 9,443
Three Months Ended
Mar. 31, June 30, Sept. 30,
1998 1998 1998
---------------------------------------------------
(in thousands, except per share data)
---------------------------------------------------
Net Sales $ 65,779 $ 65,071 $ 62,041
Gross Profit 22,853 23,600 22,606
Income from operations 9,182 9,068 7,720
Net income 5,454 5,409 4,531
Diluted earnings per share .58 .57 .48
Weighted average shares
outstanding 9,441 9,468 9,468
Liquidity and Capital Resources
Hardinge's operating activities for the nine months ended September 30,
1998 provided funds totaling $20,659,000 compared to $ 32,042,000 for the same
period a year earlier. The 1998 and 1997 nine month periods generated
$22,509,000 and $18,813,000, respectively, from net income plus depreciation and
amortization. However, funds were used to increase inventory by $2,031,000
during the nine months ended September 30, 1998. During the nine months ended
September 30, 1997, funds were generated by an inventory reduction of
$11,804,000 as inventory levels, which had been increased during 1996 for new
product introductions and large auto business orders, were reduced. These
significant changes in inventory levels were largely responsible for the overall
difference in funds provided by operations between the two nine month periods.
Throughout the nine months ended September 30, 1998, total debt
remained nearly level. However, during the same 1997 period the Company repaid
short and long-term borrowings totaling $16,101,000. Capital expenditures and
acquisition activities required $15,263,000 and $10,782,000 in funds for the
nine month periods ended September 30, 1998 and 1997, respectively. 1998's
capital expenditures include a number of very large items of manufacturing
equipment purchased to machine larger part sizes and to increase productivity of
our manufacturing operations in both the U.S. and Switzerland. The net result of
all operating, financing, and investing activities was an increase in cash of
$1,605,000 for the nine months ended September 30, 1998 compared to $1,481,000
during the same period of the previous year.
<PAGE>
Hardinge's current ratio at September 30, 1998 was 4.22:1, compared to
3.82:1 at December 31, 1997.
Hardinge provides long-term financing for the purchase of its equipment
by qualified customers. We periodically sell portfolios of our customer notes to
financial institutions in order to reduce debt and finance current operations.
Our customer financing program has an impact on our month-to-month borrowings,
but it has had little long-term impact on our working capital because of the
ability to sell the underlying notes. We sold $30,455,000 of customer notes in
the first nine months of 1998, compared to $25,400,000 during the same period of
1997.
At September 30, 1998 Hardinge maintained revolving loan agreements
with several U.S. banks providing for unsecured borrowing up to $70,000,000 on a
revolving basis, $20,000,000 through November 1, 1999 and $50,000,000 through
August 1, 2002. Any amounts outstanding on the $20,000,000 line expiring
November 1, 1999 convert, at the Company's option, to term loans payable
quarterly over four years through 2003. These facilities, along with other short
term credit agreements, provide for immediate access of up to $77,000,000. At
September 30, 1998, outstanding borrowings under these arrangements totaled
$23,684,000.
We believe that the currently available funds and credit facilities,
along with internally generated funds, will provide sufficient financial
resources for ongoing operations.
Year 2000 Issue
The Year 2000 issue arises from the use of two-digit date fields in
certain computer programs which may cause problems as the year changes from
1999 to 2000. If the Company's computer systems do not correctly recognize date
information, there could be a material adverse effect on the Company's
operations. The Company has identified risk associated with the Year 2000
problem in the following areas: (i) systems used by the Company to operate its
business; (ii) systems used by the Company's critical suppliers; and (iii)
warranty or other potential claims from the Company's customers. The Company has
evaluated its risks in these areas and is in the process of implementing a
program to minimize any potential impact on operations arising out of the Year
2000 problem. The Company's efforts have been directed by a Steering Committee
consisting of executive officers and other appropriate personnel. Costs
associated with the program are not expected to be significant and are being
expensed as incurred with funding through operating cash flows.
With respect to IT (Information Technology) systems, the Company has
reviewed, tested and corrected, where necessary, all internally-generated
software for the ability to recognize the year 2000. Where the Company relies on
outside software vendors, the Company has received written assurance of, and
tested for, such software's ability to properly perform beyond December 31,
1999.
Non-information technology ("Non-IT") systems include plant floor
machinery and systems with embedded technology such as microprocessors or
microcontrollers which operate such facility related items as phone systems,
access controls and heating, ventilation and air conditioning systems. The
Company has identified, tested where possible and received when available
written confirmation that its facility-related Non-IT equipment is Year 2000
compliant and has requested written assurance from its key equipment suppliers
that their internal operations and products are and will be Year 2000 compliant.
Currently, a majority of suppliers have provided the requested assurance and the
Company anticipates concluding this analysis, including equipment testing, in
early 1999.
<PAGE>
The Company believes that its past and current products are Year 2000
compliant and therefore exposure to warranty and other potential claims is not
expected to be outside the ordinary course of business. With respect to the
computerized control systems in place on the Company's machines sold in prior
years, the Company's primary supplier of these controls has provided written
assurance that both their previously-supplied and current controls are Year 2000
compliant.
As part of its Year 2000 compliance program, the Company has developed
a contingency plan to address what it views as the most likely worst-case
scenario resulting from one or more of the above-identified risks being
realized. At this time, the Company believes that the failure of a third-party's
system to perform as represented poses the greatest risk to the Company's
operations. The contingency plan identifies alternative suppliers and addresses
other potential third-party failures. While the Company believes it has
addressed all critical Year 2000 issues, there is no guarantee against internal,
external and third-party system failures related to the Year 2000 problem. Such
failures could have a material adverse effect on the Company's results of
operations, liquidity and financial condition.
Euro Conversion
The Company conducts operations in several European countries which
will begin conversion in 1999 to the new common currency (the Euro) to be used
by members of the European Union. The Company does not anticipate any
significant risk to its operations as a result of the conversion.
This report contains statements, including those relating to the year
2000 issue, of a forward-looking nature relating to the financial
performance of Hardinge Inc. Such statements are based upon information known to
management at this time. The company cautions that such statements necessarily
involve uncertainties and risk and deal with matters beyond the company's
ability to control, and in many cases the company cannot predict what factors
would cause actual results to differ materially from those indicated. Among the
many factors that could cause actual results to differ from those set forth in
the forward-looking statements are fluctuations in the machine tool business
cycles, changes in general economic conditions in the U.S. or internationally,
the mix of products sold and the profit margins thereon, the relative success of
the company's entry into new product and geographic markets , the company's
ability to manage its operating costs, actions taken by customers such as order
cancellations or reduced bookings by customers or distributors, competitors'
actions such as price discounting or new product introductions, governmental
regulations and environmental matters, changes in the availability and cost of
materials and supplies, the implementation of new technologies and currency
fluctuations. Any forward-looking statement should be considered in light of
these factors. The company undertakes no obligation to revise its
forward-looking statements if unanticipated events alter their accuracy.
PART I. ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
10.1 Swap Transaction Agreement effective June 1, 1998 between
Hardinge Inc. and The Chase Manhattan Bank.
10.2 Employment Agreement with Richard C. Amadril, dated August
August 3, 1998.
27.1 Financial Data Schedule
27.2 Restated Finacial Data Scedule
B. Reports on Form 8-K
There were no reports filed on Form 8-K during the quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Hardinge Inc.
November 12, 1998 By:_/s/ Robert E. Agan____________________
Date Robert E. Agan
Chairman of the Board, President /CEO
November 12, 1998 By:_/s/ J. Patrick Ervin__________________
Date J. Patrick Ervin
Executive Vice President
November 12, 1998 By:_/s/ Malcolm L Gibson__________________
Date Malcolm L. Gibson
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
November 12, 1998 By:_/s/ Richard L. Simons_________________
Date Richard L. Simons
Vice President - Finance
(Principal Accounting Officer)
EXHIBIT 10.1
CONFIRMATION
--------------
SWAP TRANSACTION
JUNE 05 1998
HARDINGE INC.
ELMIRA
ATTN: TOM CONNELLY
PHONE: 607-734-2281
FAX: 607-734-5517
RE: SWAP TRANSACTION (OUR REF. NO. 0000050820 / 47154018)
DEAR SIRS:
THE PURPOSE OF THIS LETTER AGREEMENT IS TO SET FORTH THE TERMS AND CONDITIONS OF
THE SWAP TRANSACTION ENTERED INTO BETWEEN US ON THE TRADE DATE SPECIFIED BELOW
(THE "SWAP TRANSACTION"). THIS LETTER AGREEMENT CONSTITUTES A "CONFIRMATION" AS
REFERRED TO IN THE AGREEMENT SPECIFIED BELOW.
THE DEFINITIONS AND PROVISIONS CONTAINED IN THE 1991 ISDA DEFINITIONS (THE
"DEFINITIONS") (AS PUBLISHED BY THE INTERNTIONAL SWAPS AND DERIVATIVES
ASSOCIATION, INC.) ARE INCORPORATED INTO THIS CONFIRMATION. IN THE EVENT OF ANY
INCONSISTENCY BETWEEN THOSE DEFINITIONS AND PROVISIONS AND THIS CONFIRMATION,
THIS CONFIRMATION WILL GOVERN.
1. THIS CONFIRMATION SUPPLEMENTS, FORMS PART OF, AND IS SUBJECT TO THE ISDA
MASTER AGREEMENT, DATED FEBRUARY 15, 1996, AS AMENDED AND SUPPLEMENTED FROM
TIME TO TIME (THE "AGREEMENT") BETWEEN THE CHASE MANHATTAN BANK ("CHASE")
AND HARDINGE INC. (THE "COUNTERPARTY"). ALL PROVISIONS CONTAINED IN THE
AGREEMENT SHALL GOVERN THIS CONFIRMATION EXCEPT AS EXPRESSLY MODIFIED
BELOW.
2. THE TERMS OF THE PARTICULAR SWAP TRANSACTION TO WHICH THIS CONFIRMATION
RELATES ARE AS FOLLOWS:
NOTIONAL AMOUNT: USD 15,000,000.00
TRADE DATE: MAY 28, 1998
EFFECTIVE DATE: JUNE 01 1998
TERMINATION DATE: JUNE 02 2003, SUBJECT TO ADJUSTMENT
IN ACCORDANCE WITH THE MODIFIED
FOLLOWING BUSINESS DAY CONVENTION
FIXED AMOUNTS
FIXED RATE PAYER: THE COUNTERPARTY
<PAGE>
CONFIRMATION
--------------
SWAP TRANSACTION
JUNE 05 1998
HARDINGE INC.
ELMIRA
ATTN: TOM CONNELLY
PHONE: 607-734-2281
FAX: 607-734-5517
RE: SWAP TRANSACTION (OUR REF. NO. 0000050820 / 471540018)
CONTINUATION - (1)
FIXED RATE PAYER PAYMENT DATES, SUBJECT TO ADJUSTMENT IN ACCORDANCE WITH THE
MODIFIED FOLLOWING BUSINESS DAY CONVENTION: SEPTEMBER 01, DECEMBER 01,
MARCH 01, JUNE 01 OF EACH YEAR PRIOR TO AND INCLUDING THE TERMINATION
DATE, COMMENCING WITH SEPTEMBER 01 1998.
FIXED RATE AND FIXED RATE DAY COUNT FRACTION: 6.01%; ACTUAL/ 360
FLOATING AMOUNTS
FLOATING RATE PAYER: CHASE
FLOATING RATE PAYER PAYMENT DATES, SUBJECT TO ADJUSTMENT IN ACCORDANCE WITH THE
MODIFIED FOLLOWING BUSINESS DAY CONVENTION: SEPTEMBER 01, DECEMBER 01,
MARCH 01, JUNE 01 OF EACH YEAR PRIOR TO AND INCLUDING THE TERMINATION
DATE COMMENCING WITH SEPTEMBER 01 1998.
FLOATING RATE FOR INITIAL
CALCULATION PERIOD: 5.6875 PER CENT
FLOATING RATE OPTION: USD-LIBOR-BBA
DESIGNATED MATURITY: 3 MONTHS
FLOATING RATE DAY
COUNT FRACTION: ACTUAL/360
SPREAD: PLUS 0.0%
RESET DATES: THE FIRST DAY OF EACH
CALCULATION PERIOD
BUSINESS DAYS FOR PAYMENTS
BY BOTH PARTIES: LONDON, NEW YORK,
CALCULATION AGENT: CHASE, OR AS STATED IN THE
AGREEMENT
3. ACCOUNT DETAILS
<PAGE>
CONFIRMATION
--------------
SWAP TRANSACTION
JUNE 05 1998
HARDINGE INC.
ELMIRA
ATTN: TOM CONNELLY
PHONE: 607-734-2281
FAX: 607-734-5517
RE: SWAP TRANSACTION (OUR REF. NO. 0000050820 / 47154018)
CONTINUATION - (2)
PAYMENTS TO CHASE
ACCOUNT FOR PAYMENTS IN USD:
CHASE MANHATTAN BANK
NEW YROK
FED ABA 021-000-021
A/C# 900-9-001364
PAYMENTS TO COUNTERPARTY
ACCOUNT FOR PAYMENTS IN USD:
TO BE ADVISED
4. OFFICE AND ADDRESS FOR NOTICES IN CONNECTION WITH THIS SWAP TRANSACTION:
(A) CHASE: ITS HEAD OFFICE IN NEW YORK AT 4 CHASE METROTECH CENTER,
17TH FLOOR, BROOKLYN, NY 11245, ATTN: GLOBAL DERIVATIVE OPERATIONS.
(B) COUNTERPARTY: ITS OFFICE IN ELMIRA, ATTN: TOM CONNELLY, PHONE:
(607) 734-2281, FAX: (607) 734-5517.
5. DOCUMENTS TO BE DELIVERED:
EACH PARTY SHALL DELIVER TO THE OTHER, AT THE TIME OF ITS EXECUTION OF THIS
CONFIRMATION, EVIDENCE OF THE SPECIMEN SIGNATURE AND INCUMBENCY OF EACH
PERSON WHO IS EXECUTING THE CONFIRMATION ON THE PARTY'S BEHALF, UNLESS SUCH
EVIDENCE HAS PREVIOUSLY BEEN SUPPLIED IN CONNECTION WITH THE AGREEMENT AND
REMAINS TRUE AND IN EFFECT .
6. EACH PARTY WILL BE DEEMED TO REPRESENT TO THE OTHER PARTY ON THE DATE ON
WHICH IT ENTERS INTO A SWAP TRANSACTION THAT (ABSENT A WRITTEN AGREEMENT
BETWEEM THE PARTIES THAT EXPRESSLY IMPOSES AFFIRMATIVE OBLIGATIONS TO THE
CONTRARY FOR THAT SWAP TRANSACTION):
<PAGE>
CONFIRMATION
--------------
SWAP TRANSACTION
JUNE 05 1998
HARDINGE INC.
ELMIRA
ATTN: TOM CONNELLY
PHONE: (607) 734-2281
FAX: (607) 734-5517
RE: SWAP TRANSACTION (OUR REF. NO. 0000050820 / 47154018)
CONTINUATION - (3)
(A) NON RELIANCE. IT IS ACTING FOR ITS OWN ACCOUNT, AND IT HAS MADE ITS
OWN INDEPENDENT DECISIONS TO ENTER INTO THAT SWAP TRANSACTION AND
AS TO WHETHER THAT SWAP TRANSACTION IS APPROPRIATE OR PROPER FOR IT
BASED UPON ITS OWN JUDGEMENT AND UPON ADVICE FROM SUCH ADVISERS AS
IT HAS DEEMED NECESSARY. IT IS NOT RELYING ON ANY COMMUNICATION
(WRITTEN OR ORAL) OF THE OTHER PARTY AS INVESTMENT ADVICE OR AS A
RECOMMENDATION TO ENTER INTO THAT SWAP TRANSACTION: IT BEING
UNDERSTOOD THAT INFORMATION AND EXPLANATIONS RELATED TO THE TERMS
AND CONDITIONS OF A SWAP TRANSACTION SHALL NOT BE CONSIDERED
INVESTMENT ADVICE OR A RECOMMENDATION TO ENTER INTO THAT SWAP
TRANSACTION. NO COMMUNICATION (WRITTEN OR ORAL) RECEIVED FROM THE
OTHER PARTY SHALL BE DEEMED TO BE AN ASSURANCE OR GUARANTEE AS TO
THE EXPECTED RESULTS OF THAT SWAP TRANSACTION.
(B) ASSESSMENT AND UNDERSTANDING. IT IS CAPABLE OF ASSESSING THE MERITS
OF AND UNDERSTANDING (ON ITS OWN BEHALF OR THROUGH INDEPENDENT
PROFESSIONAL ADVICE), AND UNDERSTANDS AND ACCEPTS, THE TERMS,
CONDITIONS AND RISKS OF THAT SWAP TRANSACTION.IT ALSO IS CAPABLE OF
ASSUMING, AND ASSUMES, THE RISKS OF THAT SWAP TRANSACTION.
(C) STATUS OF PARTIES. THE OTHER PARTY IS NOT ACTING AS A FIDUCIARY FOR
OR AN ADVISER TO IT IN RESPECT OF THAT SWAP TRANSACTION.
7. NEGATIVE INTEREST RATES.
(A) CHASE AND COUNTERPARTY AGREE THAT, IF WITH RESPECT TO A CALCULATION
PERIOD, EITHER PARTY IS OBLIGATED TO PAY A FLOATING AMOUNT THAT IS
A NEGATIVE NUMBER (EITHER DUE TO A QUOTED NEGATIVE FLOATING RATE OR
BY OPERATION OF A SPREAD THAT IS SUBTRACTED FROM THE FLOATING
RATE), THE FLOATING AMOUNT WITH RESPECT TO THAT PARTY FOR THAT
CALCULATION PERIOD WILL BE DEEMED TO BE ZERO, AND THE OTHER PARTY
WILL PAY TO THAT PARTY THE ABSOLUTE VALUE OF THE NEGATIVE FLOATING
AMOUNT AS CALCULATED, IN ADDITION TO ANY AMOUNTS OTHERWISE OWED BY
THE OTHER PARTY FOR THAT CALCULATION PERIOD, ON THE PAYMENT DATE
THAT THE FLOATING AMOUNT WOULD HAVE BEEN DUE IF IT HAD BEEN A
POSITIVE NUMBER.
PLEASE CONFIRM THAT THE FOREGOING CORRECTLY SETS FOR THE TERMS OF
<PAGE>
CONFIRMATION
--------------
SWAP TRANSACTION
JUNE 05 1998
HARDINGE INC.
ELMIRA
ATTN: TOM CONNELLY
PHONE: (607) 734-2281
FAX: (607) 734-5517
RE: SWAP TRANSACTION (OUR REF. NO. 0000050820 / 47154018)
CONTINUATION - (4)
OUR AGREEMENT BY EXECUTING THE COPIES OF THIS CONFIRMATION ENCLOSED FOR THAT
PURPOSE AND RETURNING THEM TO US.
FOR INQUIRIES REGARDING THIS CONFIRMATION PLEASE CALL:
CUSTOMER SERVICE AT (718) 242-3155, OR FAX (718) 242-9262/4809/4811
YOURS SINCERELY,
THE CHASE MANHATTAN BANK
BY: /s/ SHEILA Y. HILTON
AUTHORIZED SIGNATURE
SHELIA Y. HILTON
ASSISTANT VICE PRESIDENT
CONFIRMED AS OF THE DATE FIRST
ABOVE WRITTEN:
HARDINGE INC.
BY: /s/ THOMAS T. CONNELLY
NAME: THOMAS T. CONELLY
TITLE: TREASURER
EXHIBIT 10.2
EMPLOYMENT AGREEMENT dated as of August 3, 1998 (the "Agreement"), between
HARDINGE INC., a New York corporation (the "Company") and RICHARD C. AMADRIL
(the "Executive").
WHEREAS, the Executive is currently employed by the Company;
and
WHEREAS, the Company desires to engage the Executive to
provide services pursuant to the terms of this Agreement;
NOW, THEREFORE, in consideration of the covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. EFFECTIVENESS OF AGREEMENT AND EFFECTIVE DATE
This Agreement shall become effective as of the date hereof.
For purposes of this Agreement, the term "Effective Date" shall mean January 1,
1998.
2. EMPLOYMENT AND DUTIES
2.1 General. The Company hereby employs the Executive, and the
Executive agrees to serve, upon the terms and conditions herein contained. The
Executive shall perform such duties and services for the Company as may be
designated from time to time by the Board of Directors of the Company (the
"Board") or the Chief Executive Officer of the Company. The Executive agrees to
serve the Company faithfully and to the best of his ability under the direction
of the Board and the Chief Executive Officer of the Company.
2.2 Exclusive Services. Except as may otherwise be approved in
advance by the Board or the Chief Executive Officer of the Company, and except
during vacation periods and reasonable periods of absence due to sickness,
personal injury or other disability, the Executive shall devote his full working
time throughout the Employment Term (as defined in Section 2.3) to the services
required of him hereunder. The Executive shall render his services exclusively
to the Company during the Employment Term, and shall use his best efforts,
judgment and energy to improve and advance the business and interests of the
Company in a manner consistent with the duties of his position.
2.3 Term of Employment. The Executive's employment under this
Agreement shall commence as of the date hereof and shall terminate on the
earlier of (i) the second anniversary of the Effective Date or (ii) termination
of the Executive's employment pursuant to this Agreement; provided, however,
that the term of the Executive's employment shall be automatically extended
without further action of either party for additional one year periods unless
written notice of either party's intention not to extend has been given to the
other party hereto at least 60 days prior to the expiration of the then
effective term. The period commencing as of the Effective Date and ending on the
second anniversary of the Effective Date or such later date to which the term of
the Executive's employment shall have been extended is hereinafter referred to
as the "Employment Term". Notwithstanding the foregoing, in the event of a
Change in Control (as defined in Section 5.5) occurring during the Employment
Term, the Employment Term shall be extended so that it terminates on the second
anniversary of the date of the Change in Control.
<PAGE>
2.4 Reimbursement of Expenses. The Company shall reimburse the
Executive for reasonable travel and other business expenses incurred by him in
the fulfillment of his duties hereunder upon presentation by the Executive of an
itemized account of such expenditures, in accordance with Company practices
consistently applied.
3. ANNUAL COMPENSATION
3.1 Base Salary. From August 1, 1998, the Executive shall be
entitled to receive a base salary ("Base Salary") at a rate of $120,000 per
annum, payable in accordance with the Company's payroll practices, with such
changes as may be provided in accordance with the terms hereof. Once changed,
such amount shall constitute the Executive's annual Base Salary.
3.2 Annual Review. The Executive's Base Salary shall be
reviewed by the Board, based upon the Executive's performance, not less often
than annually.
3.3 Bonus. After the Effective Date, the Executive shall be
entitled to such bonus, if any, as may be awarded to the Executive from time to
time by the Board.
4. EMPLOYEE BENEFITS
The Executive shall, during his employment under this
Agreement, be included to the extent eligible thereunder in all employee benefit
plans, programs or arrangements (including, without limitation, any plans,
programs or arrangements providing for retirement benefits, incentive
compensation, profit sharing, bonuses, disability benefits, health and life
insurance, or vacation and paid holidays) which shall be established by the
Company for, or made available to, its executives generally.
5. TERMINATION OF EMPLOYMENT
5.1 Termination Without Cause; Resignation for Good Reason.
5.1.1 Prior to a Change in Control. If, prior to the
expiration of the Employment Term, the Executive's employment is terminated by
the Company without Cause (as defined in Section 5.3), or the Executive resigns
from his employment hereunder for Good Reason (as defined in Section 5.4.1), at
any time prior to a Change in Control, the Company shall continue to pay the
Executive the Base Salary (at the rate in effect immediately prior to such
termination) for the greater of (i) 6 months or (ii) the remainder of the
Employment Term (such period being referred to hereinafter as the "Severance
Period"), at such intervals as the same would have been paid had the Executive
remained in the active service of the Company. In addition, the Executive shall
be entitled to continue to participate during the Severance Period in all
employee welfare benefit plans that the Company provides and continues to
provide generally to its employees, provided that the Executive is entitled to
continue to participate in such plans under the terms thereof. The Executive
shall have no further right to receive any other compensation or benefits after
such termination or resignation of employment except as determined in accordance
with the terms of the employee benefit plans or programs of the Company. In the
event of the Executive's death during the Severance Period, Base Salary
continuation payments under this Section 5.1.1 shall continue to be made during
the remainder of the Severance Period to the beneficiary designated in writing
for this purpose by the Executive or, if no such beneficiary is specifically
designated, to the Executive's estate.
If, during the Severance Period, the Executive materially
breaches his obligations under Section 8 of this Agreement, the Company may,
upon written notice to the Executive, terminate the Severance Period and cease
to make any further payments or provide any benefits described in this Section
5.1.1.
<PAGE>
5.1.2 Following a Change in Control. If, prior to the
expiration of the Employment Term, (a) the Executive's employment is terminated
by the Company without Cause (as defined in Section 5.3), or the Executive
terminates his employment hereunder for Good Reason (as defined in Section
5.4.2), at any time following a Change in Control or (b) the Executive resigns
from his employment hereunder for any reason at any time later than six months
following a Change in Control, the Company shall pay to the Executive a lump sum
cash payment equal to 1.5 times the sum of (i) his Base Salary (at the rate in
effect immediately prior to such termination or, if higher, as in effect
immediately prior to the Change in Control) and (ii) his average annual bonus
earned during the three fiscal years immediately preceding the Change in
Control. In addition, the Executive shall be entitled to continue to participate
for a period of three years following such termination in all employee benefit
welfare plans that the Company provides and continues to provide generally to
its executive employees (or, if the Executive is not entitled to participate in
any such plan under the terms thereof, in a comparable substitute arrangement
provided by the Company). The Company shall reimburse the Executive for any
premiums or other expenses incurred by the Executive with respect to his
participation and that of any of his dependents in any such employee benefit
welfare plan.
5.2 Termination for Cause; Resignation Without Good Reason.
If, prior to the expiration of the Employment Term, the Executive's employment
is terminated by the Company for Cause, or the Executive resigns from his
employment hereunder other than for Good Reason, the Executive shall (subject to
Section 5.1.2) be entitled only to payment of his Base Salary as then in effect
through and including the date of termination or resignation. Subject to Section
5.1.2, the Executive shall have no further right to receive any other
compensation or benefits after such termination or resignation of employment,
except as determined in accordance with the terms of the employee benefit plans
or programs of the Company.
5.3 Cause. Termination for "Cause" shall mean termination of
the Executive's employment because of:
(i) any act or omission that constitutes a material breach by the
Executive of any of his obligations under this
Agreement;
(ii) the continued failure or refusal of the Executive to
substantially perform the duties reasonably required of him as an
employee of the Company;
(iii) any willful and material violation by the Executive of any
Federal or state law or regulation applicable to the business of the
Company or any of its subsidiaries, or the Executive's conviction of a
felony, or any willful perpetration by the Executive of a common law
fraud; or
(iv) any other willful misconduct by the Executive which is
materially injurious to the financial condition or business reputation
of, or is otherwise materially injurious to, the Company or any of its
subsidiaries or affiliates.
5.4 Good Reason.
5.4.1 Prior to a Change in Control. For purposes of
this Agreement, "Good Reason" shall mean a material breach by the Company of any
term or provision of this Agreement (without the Executive's prior written
consent).
5.4.2 Following a Change in Control. Following a
Change in Control, for purposes of this Agreement, "Good Reason" shall also mean
(in addition to the event or condition described in Section 5.4.1), any of the
following (without the Executive's prior written consent):
<PAGE>
(i) decrease in the Executive's base rate of compensation or a
failure by the Company to pay material compensation due and payable to
the Executive in connection with his employment;
(ii) a material diminution of the responsibilities or title of the
Executive with the Company; or
(iii) a failure to continue in effect any medical, dental, accident,
disability or other material employee welfare benefit plan in which the
Executive is entitled to participate immediately prior to the Change in
Control or any material decrease in the benefits provided under any
such plan (except that employee contributions may be raised to the
extent of any cost increases imposed by third parties);
(iv) the Company's requiring the Executive to relocate to an office
or location more than 50 miles from his principal employment location
immediately prior to the Change in Control; or
(v) a failure or refusal of any successor company to assume the
Company's obligations under this Agreement.
5.5 Change in Control. For purposes of this Agreement, the
term "Change in Control" shall mean and shall be deemed to occur if and when:
(i) an offeror (other than the Company) purchases shares of Common
Stock of the Company pursuant to a tender or exchange offer for such
shares;
(ii) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended), other
than any employee benefit plan of the Company or any person or entity
appointed or established pursuant to any such plan, who is not now but
who shall hereafter become the beneficial owner, directly or
indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding securities,
excluding any such securities held by such person as trustee or other
fiduciary of an employee benefit plan of the Company;
(iii) the membership of the Board changes as the result of a
contested election or elections, so that a majority of the individuals
who are directors at any particular time were proposed by persons other
than (a) directors who were members of the Board immediately prior to a
first such contested election ("Continuing Directors") or (b) directors
proposed by the Continuing Directors and were initially elected to the
Board as a result of such a contested election or elections occurring
within the previous two years; or
(iv) the shareholders of the Company approve a merger,
consolidation, sale or disposition of all or substantially all of the
Company's assets, or a plan of partial or complete liquidation.
6. DEATH, DISABILITY OR RETIREMENT.
In the event of termination of employment by reason of death,
Permanent Disability (as hereinafter defined) or retirement, the Executive (or
his estate, as applicable) shall be entitled to Base Salary and benefits
determined under Sections 3 and 4 through the date of termination. Other
benefits shall be determined in accordance with the benefit plans maintained by
the Company, and the Company shall have no further obligation hereunder. For
purposes of this Agreement, "Permanent Disability" means a physical or mental
disability or infirmity of the Executive that prevents the normal performance of
substantially all his duties as an employee of the Company, which disability or
infirmity shall exist for any continuous period of 180 days.
<PAGE>
7. MITIGATION OF DAMAGES
The Executive shall be required to mitigate the amount of any
payment provided for in Section 5.1.1 by seeking other employment, and any such
payment will be reduced by any amounts which the Executive receives or is
entitled to receive from another employer with respect to the Severance Period.
The Executive shall promptly notify the Company in writing in the event that
other employment is obtained during the Severance Period.
8. NONSOLICITATION; CONFIDENTIALITY; NONCOMPETITION
8.1 Nonsolicitation. For so long as the Executive is employed
by the Company, and continuing for two years thereafter if termination of
employment occurs prior to a Change in Control, the Executive shall not, without
the prior written consent of the Company, directly or indirectly, as a sole
proprietor, member of a partnership, stockholder or investor, officer or
director of a corporation, or as an employee, associate, consultant or agent of
any person, partnership, corporation or other business organization or entity
other than the Company: (x) solicit or endeavor to entice away from the Company
or any of its subsidiaries any person or entity who is, or, during the then most
recent 12-month period, was employed by, or had served as an agent or key
consultant of the Company or any of its subsidiaries; or (y) solicit or endeavor
to entice away from the Company or any of its subsidiaries any person or entity
who is, or was within the then most recent 12-month period, a customer or client
(or reasonably anticipated to the general knowledge of the Executive or the
public to become a customer or client) of the Company or any of its
subsidiaries.
8.2 Confidentiality. The Executive covenants and agrees with
the Company that he will not at any time, except in performance of his
obligations to the Company hereunder or with the prior written consent of the
Company, directly or indirectly, disclose any secret or confidential information
that he may learn or has learned by reason of his association with the Company
or any of its subsidiaries and affiliates. The term "confidential information"
includes information not previously disclosed to the public or to the trade by
the Company's management, or otherwise in the public domain, with respect to the
Company's or any of its subsidiaries' or affiliates' products, facilities,
applications and methods, trade secrets and other intellectual property,
systems, procedures, manuals, confidential reports, product price lists,
customer lists, technical information, financial information (including the
revenues, costs or profits associated with any of the Company's products),
business plans, prospects or opportunities, but shall exclude any information
which (i) is or becomes available to the public or is generally known in the
industry or industries in which the Company operates other than as a result of
disclosure by the Executive in violation of his agreements under this Section
8.2 or (ii) the Executive is required to disclose under any applicable laws,
regulations or directives of any government agency, tribunal or authority having
jurisdiction in the matter or under subpoena or other process of law.
8.3 No Competing Employment. For so long as the Executive is
employed by the Company, and continuing for one year thereafter if termination
of employment occurs prior to a Change in Control, the Executive shall not,
directly or indirectly, as a sole proprietor, member of a partnership,
stockholder or investor (other than a stockholder or investor owning not more
than a 1% interest), officer or director of a corporation, or as an employee,
associate, consultant or agent of any person, partnership, corporation or other
business organization or entity other than the Company, render any service to or
in any way be affiliated with a competitor (or any person or entity that is
reasonably anticipated to the general knowledge of the Executive or the public
to become a competitor) of the Company or any of its subsidiaries.
<PAGE>
8.4 Exclusive Property. The Executive confirms that all
confidential information is and shall remain the exclusive property of the
Company. All business records, papers and documents kept or made by Executive
relating to the business of the Company shall be and remain the property of the
Company, except for such papers customarily deemed to be the personal copies of
the Executive.
8.5 Injunctive Relief. Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach of any of the
covenants contained in this Section 8 may result in material and irreparable
injury to the Company or its affiliates or subsidiaries for which there is no
adequate remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of such a breach or threat thereof,
the Company shall be entitled to seek a temporary restraining order and/or a
preliminary or permanent injunction restraining the Executive from engaging in
activities prohibited by this Section 8 or such other relief as may be required
specifically to enforce any of the covenants in this Section 8. If for any
reason, it is held that the restrictions under this Section 8 are not reasonable
or that consideration therefor is inadequate, such restrictions shall be
interpreted or modified to include as much of the duration and scope identified
in this Section 8 as will render such restrictions valid and enforceable.
9. ARBITRATION
Any dispute or controversy arising under or in connection with
this Agreement that cannot be mutually resolved by the parties hereto shall be
settled exclusively by arbitration in New York, New York, before one arbitrator
of exemplary qualifications and stature, who shall be selected jointly by the
Company and the Executive, or, if the Company and the Executive cannot agree on
the selection of the arbitrator, shall be selected by the American Arbitration
Association. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. The parties hereby agree that the arbitrator shall be
empowered to enter an equitable decree mandating specific enforcement of the
terms of this Agreement.
10. CERTAIN PAYMENTS
Notwithstanding anything in this Agreement to the contrary, if
any amounts due to the Executive under this Agreement and any other plan or
program of the Company constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")), then
the aggregate of the amounts constituting the parachute payment shall be reduced
to an amount that will equal three times his "base amount" (as defined in
Section 280G(b)(3) of the Code) less $1.00. The determination to be made with
respect to this Section 10 shall be made by an accounting firm jointly selected
by the Company and the Executive and paid by the Company, and which may be the
Company's independent auditors.
11. MISCELLANEOUS
11.1 Notices. All notices or communications hereunder shall be
in writing, addressed as follows:
To the Company:
Hardinge Inc.
One Hardinge Drive
Elmira, New York 14902-1507
Telecopier No. (607) 734-2353
Attention: Mr. Robert E. Agan
To the Executive:
Richard C. Amadril
611 Decker Avenue
Elmira, New York 14904
<PAGE>
All such notices shall be conclusively deemed to be received and shall be
effective, (i) if sent by hand delivery, upon receipt, (ii) if sent by telecopy
or facsimile transmission, upon confirmation of receipt by the sender of such
transmission, or (iii) if sent by registered or certified mail, on the fifth day
after the day on which such notice is mailed.
11.2 Severability. Each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
11.3 Assignment. The rights and obligations of this Agreement
shall bind and inure to the benefit of any successor of the Company by
reorganization, merger or consolidation, or any assignee of all or substantially
all of the Company's business and properties. Neither this Agreement nor any
rights hereunder shall be assignable or otherwise subject to hypothecation by
the Executive.
11.4 Entire Agreement. This Agreement represents the entire
agreement of the parties and shall supersede any and all previous contracts,
arrangements or understandings between the Company and the Executive relating to
the subject matter hereof. This Agreement may be amended at any time by mutual
written agreement of the parties hereto.
11.5 Withholding. The payment of any amount pursuant to this
Agreement shall be subject to applicable withholding and payroll taxes, and such
other deductions as may be required under the Company's employee benefit plans,
if any.
11.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed entirely within that state.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed and the Executive has hereunto set his hand, as of the day and
year first above written.
HARDINGE INC.
By /s/ Robert E. Agan
Name: Robert E, Agan
Title: Chairman of the Board, President
and Chief Executive Officer
/s/ Richard C. Amadril
Richard C. Amadril.
For purposes of this Agreement, I hereby designate Carol C.
Amadril as my beneficiary hereunder.
Date: August 3, 1998 /s/ Richard C. Amadril
--------------- ----------------------
Richard C. Amadril
<PAGE>
State of New York )
: ss.
County of Chemung )
On the 3rd day of August , 1998, before me, personally came
Robert E. Agan, to me known, who being by me duly sworn, did depose and say that
he resides in the Town of Elmira, Chemung County, New York; that he is the
Chairman of the Board, President and Chief Executive Officer of HARDINGE INC.,
the corporation described in and which executed the foregoing instrument; that
he knows the seal of said corporation; that it was so affixed by order of the
Board of Directors of said corporation and that he signed his name thereto by
like order.
/s/ Malcolm L. Gibson
Malcolm L. Gibson
Notary Public
State of New York )
: ss.
County of Chemung )
On this 3rd day of August , 1998, before me, the subscriber,
personally appeared RICHARD C. AMADRIL, to me personally known and known to me
to be the same person described in and who executed the foregoing instrument,
and he duly acknowledged to me that he executed the same.
/s/ Malcolm L. Gibson
Malcolm L. Gibson
Notary Public
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS INFORMATION EXTRACTED FROM THE COMPANY'S UNAUDITED
FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,170
<SECURITIES> 0
<RECEIVABLES> 73,468
<ALLOWANCES> 0
<INVENTORY> 94,979
<CURRENT-ASSETS> 164,286
<PP&E> 144,807
<DEPRECIATION> 69,156
<TOTAL-ASSETS> 258,483
<CURRENT-LIABILITIES> 38,903
<BONDS> 0
0
0
<COMMON> 98
<OTHER-SE> 175,847
<TOTAL-LIABILITY-AND-EQUITY> 258,483
<SALES> 192,891
<TOTAL-REVENUES> 192,891
<CGS> 123,832
<TOTAL-COSTS> 43,089
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,743
<INCOME-PRETAX> 24,606
<INCOME-TAX> 9,212
<INCOME-CONTINUING> 15,394
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,394
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.63
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS INFORMATION EXTRACTED FROM THE COMPANY'S
UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EARNINGS
PER SHARE AMOUNTS HAVE BEEN RESTATED TO REFLECT A THREE FOR TWO STOCK SPLIT IN
MAY, 1998
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,117
<SECURITIES> 0
<RECEIVABLES> 60,263
<ALLOWANCES> 0
<INVENTORY> 90,367
<CURRENT-ASSETS> 146,790
<PP&E> 126,651
<DEPRECIATION> 61,896
<TOTAL-ASSETS> 227,994
<CURRENT-LIABILITIES> 31,537
<BONDS> 0
0
0
<COMMON> 65
<OTHER-SE> 155,477
<TOTAL-LIABILITY-AND-EQUITY> 227,994
<SALES> 180,496
<TOTAL-REVENUES> 180,496
<CGS> 119,791
<TOTAL-COSTS> 31,172
<OTHER-EXPENSES> 1,960
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,896
<INCOME-PRETAX> 20,207
<INCOME-TAX> 7,875
<INCOME-CONTINUING> 12,332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,332
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.31
</TABLE>
