SEGMENT INFORMATION

The Company operates through segments for which separate financial information is available, and for which operating results are evaluated regularly by the Company's chief operating decision maker in determining resource allocation and assessing performance. The two reportable business segments are Metalcutting Machine Solutions ("MMS") and Aftermarket Tooling and Accessories ("ATA").

Metalcutting Machine Solutions (MMS)

This segment includes operations related to grinding, turning, and milling, as discussed below, and related repair parts. The products are considered to be capital goods with sales prices ranging from approximately thirty thousand dollars for some high volume products to around two million dollars for some lower volume grinding machines or other specialty built turnkey systems of multiple machines. Sales are subject to economic cycles and, because they are most often purchased to add manufacturing capacity, the cycles can be severe with customers delaying purchases during down cycles and then aggressively requiring machine deliveries during up cycles. Machines are purchased to a lesser extent during down cycles as customers seek productivity improvements or they have new products that require new machining capabilities.

The Company engineers and sells high precision computer controlled metalcutting turning machines, vertical machining centers, horizontal machining centers, grinding machines, and repair parts related to those machines.

Turning Machines or lathes are power-driven machines used to remove material from either bar stock or a rough-formed part by moving multiple cutting tools against the surface of a part rotating at very high speeds in a spindle mechanism. The multi-directional movement of the cutting tools allows the part to be shaped to the desired dimensions. On parts produced by Hardinge machines, those dimensions are often measured in millionths of an inch. Management considers Hardinge to be a leader in the field of producing machines capable of consistently and cost-effectively producing parts to very close dimensions.

Machining centers are designed to remove material from stationary, prismatic or box-like parts of various shapes with rotating tools that are capable of milling, drilling, tapping, reaming, and routing. Machining centers have mechanisms that automatically change tools based on commands from an integrated computer control without operator assistance. Machining centers are generally purchased by the same customers who purchase other Hardinge equipment. The Company supplies a broad line of machining centers under the Bridgeport brand name addressing a range of sizes, speeds, and powers.

Grinding machines are used in a machining process in which a part's surface is shaped to closer tolerances with a rotating abrasive wheel or tool. Grinding machines can be used to finish parts of various shapes and sizes. The Kellenberger and Usach grinding machines are used to grind the inside and outside diameters of cylindrical parts. Such grinding machines are typically used to provide a more exact finish on a part that has been partially completed on a lathe. The Hauser jig grinding machines are used to make demanding contour components, primarily for tool and mold-making applications. The Jones & Shipman brand is a line of high quality grinder (surface, creepfeed, and cylindrical) machines used by a wide range of industries. Voumard machines are high quality internal diameter cylindrical grinding systems.

Aftermarket Tooling and Accessories (ATA)

This segment includes products that are purchased by manufacturers throughout the lives of their machines. The prices of units are relatively low per piece with prices ranging from forty dollars on high volume collets to two hundred thousand dollars or more for specialty chucks, and they typically are considered to be a fairly consumable, but durable, product. The Company's products are used on all types and brands of machine tools, not limited to Hardinge Brand machines. Sales levels are affected by manufacturing cycles, but not as severely as capital goods lines. While customers may not purchase large dollar machines during a down cycle, their factories are operating with their existing equipment, and accessories are still needed as they wear out or they are needed for a change in production requirements.

The two primary product groups are collets and chucks. Collets are cone-shaped, metal sleeves used for holding circular, or rod like pieces in a lathe, or other machine that provide effective part holding and accurate part location during machining operations. Chucks are a specialized clamping device used to hold an object with radial symmetry, especially a cylindrical object. A chuck is most commonly used to hold a rotating tool or a rotating work piece. Some of the specialty chucks can also hold irregularly shaped objects that lack radial symmetry. While the Company's products are known for accuracy and durability, they are consumable in nature.

Segment income is measured for internal reporting purposes by excluding corporate expenses, acquisition related charges, 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):



	Year Ended December 31, 2017
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	251,906	$	66,551	$	(537	)	$	317,920
Depreciation and amortization	5,566		1,949					7,515
Segment income	5,803		11,122					16,925
Capital expenditures	2,745		462					3,207
Segment assets⁽¹⁾	224,717		44,962					269,679



	Year Ended December 31, 2016
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	230,705	$	61,647	$	(339	)	$	292,013
Depreciation and amortization	5,764		2,055					7,819
Segment income	3,060		6,910					9,970
Capital expenditures	1,943		536					2,479
Segment assets⁽¹⁾	219,503		45,776					265,279



	Year Ended December 31, 2015
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	250,854	$	65,128	$	(733	)	$	315,249
Depreciation and amortization	6,497		2,285					8,782
Segment income	7,365		3,372					10,737
Capital expenditures	3,186		1,009					4,195
Segment assets⁽¹⁾	226,265		48,069					274,334

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⁽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) from continuing operations before income taxes for the years ended December 31, 2017, 2016, and 2015 are as follows (in thousands):



	Year Ended December 31,
	2017			2016			2015
Segment income	$	16,925		$	9,970		$	10,737
Unallocated corporate expense	(7,991		)	(6,575		)	(5,800		)
Interest expense, net	(251		)	(328		)	(499		)
Other unallocated income	—			—			—
Income from continuing operations before income taxes	$	8,683		$	3,067		$	4,438

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



	December 31, 2017		December 31, 2016		December 31, 2015
Total segment assets	$	269,679	$	265,279	$	274,334
Unallocated assets	49,270		32,271		36,604
Total assets	$	318,949	$	297,550	$	310,938

Unallocated assets include cash of $45.0 million, $28.3 million, and $32.8 million at December 31, 2017, 2016, and 2015, respectively.

No single customer accounted for more than 5% of the consolidated sales in 2017, 2016, or 2015. Products are sold throughout the world and sales are attributed to countries based on the country where the products are shipped. Information concerning the principal geographic areas is follows (in thousands):



	2017				2016				2015
	Sales		Long-lived Assets ⁽¹⁾		Sales		Long-lived Assets ⁽¹⁾		Sales		Long-lived Assets ⁽¹⁾
North America
United States	$	90,783	$	33,101	$	87,122	$	35,166	$	103,650	$	37,607
Other	9,165		—		5,546		—		4,820		—
Total North America	99,948		33,101		92,668		35,166		108,470		37,607
Europe
England	6,733		180		7,925		340		12,780		555
Germany	34,712		1,333		38,573		1,333		34,830		1,388
France	9,433		100		10,201		79		9,397		74
Italy	6,694		—		4,729		—		5,159		—
Switzerland	5,927		22,529		5,211		28,025		7,613		30,322
Other	27,830		—		24,743		—		27,490		—
Total Europe	91,329		24,142		91,382		29,777		97,269		32,339
Asia
China	101,719		9,345		94,816		9,242		92,727		10,515
Taiwan	6,605		14,645		2,957		13,534		3,772		13,453
India	5,030		2,620		3,722		2,551		4,356		2,749
Other	13,289		—		6,468		—		8,655		—
Total Asia	126,643		26,610		107,963		25,327		109,510		26,717
Consolidated Total	$	317,920	$	83,853	$	292,013	$	90,270	$	315,249	$	96,663

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⁽¹⁾	Long-lived assets consist of property, plant and equipment, goodwill, and other intangible assets.