Reportable Segments and Geographic Information

Reportable Segments:

Harley-Davidson, Inc. is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two segments: the Motorcycles and Related Products (Motorcycles) segment and the Financial Services segment. The Company’s reportable segments are strategic business units that offer different products and services and are managed separately based on the fundamental differences in their operations.

The Motorcycles segment consists of HDMC which designs, manufactures and sells at wholesale on-road Harley-Davidson motorcycles as well as motorcycle parts, accessories, general merchandise and related services. The Company’s products are sold to retail customers through a network of independent dealers. The Company conducts business on a global basis, with sales in the United States, Canada, Latin America, Europe/Middle East/Africa (EMEA) and Asia Pacific.

The Financial Services segment consists of HDFS which provides wholesale and retail financing and provides insurance and insurance-related programs primarily to Harley-Davidson dealers and their retail customers. HDFS conducts business principally in the United States and Canada.

Information by segment is set forth below for the years ended December 31 (in thousands):



	2018		2017		2016
Motorcycles net revenue	$	4,968,646	$	4,915,027	$	5,271,376
Gross profit	1,616,850		1,642,697		1,845,379
Selling, administrative and engineering expense	1,101,086		1,035,921		1,074,615
Restructuring expense	93,401		—		—
Operating income from Motorcycles	422,363		606,776		770,764
Financial Services revenue	748,229		732,197		725,082
Financial Services expense	457,069		456,892		449,552
Operating income from Financial Services	291,160		275,305		275,530
Operating income	$	713,523	$	882,081	$	1,046,294

As discussed in Note 1, the Company adopted ASU 2017-07 on January 1, 2018, which required the Company to record the non-service cost components of net periodic benefit cost in non-operating income on a prospective and retrospective basis. As a result, operating income from Motorcycles excludes these costs for all periods presented.

Financial Services revenue includes $9.0 million, $6.9 million and $4.4 million of interest that HDMC paid to HDFS on wholesale finance receivables in 2018, 2017 and 2016, respectively. The offsetting cost of these interest incentives was recorded as a reduction to Motorcycles net revenue.

Information by segment is set forth below as of December 31 (in thousands):



	Motorcycles		Financial Services		Consolidated
2018
Total assets	$	2,562,931	$	8,102,733	$	10,665,664
Depreciation and amortization	$	260,707	$	4,156	$	264,863
Capital expenditures	$	197,905	$	15,611	$	213,516
2017
Total assets	$	2,449,603	$	7,523,069	$	9,972,672
Depreciation and amortization	$	215,639	$	6,549	$	222,188
Capital expenditures	$	193,204	$	13,090	$	206,294
2016
Total assets	$	2,490,450	$	7,399,790	$	9,890,240
Depreciation and amortization	$	202,122	$	7,433	$	209,555
Capital expenditures	$	245,316	$	10,947	$	256,263

Geographic Information:

Included in the consolidated financial statements are the following amounts relating to geographic locations for the years ended December 31 (in thousands):



	2018		2017		2016
Revenue from Motorcycles^(a):
United States	$	3,159,049	$	3,215,513	$	3,579,129
EMEA	893,589		790,725		798,489
Japan	161,370		180,938		200,309
Canada	230,211		232,883		212,099
Australia and New Zealand	147,561		168,670		181,809
Other foreign countries	376,866		326,298		299,541
Total revenue from Motorcycles	$	4,968,646	$	4,915,027	$	5,271,376
Revenue from Financial Services^(a):
United States	$	712,898	$	698,383	$	692,784
Europe	8,411		6,845		6,528
Canada	23,120		22,580		21,626
Other foreign countries	3,800		4,389		4,144
Total revenue from Financial Services	$	748,229	$	732,197	$	725,082
Long-lived assets^(b):
United States	$	838,446	$	912,032	$	943,479
International	65,686		55,749		38,114
Total long-lived assets	$	904,132	$	967,781	$	981,593


(a)	Revenue is attributed to geographic regions based on location of customer.


(b)	Long-lived assets include all long-term assets except those specifically excluded under ASC Topic 280, “Segment Reporting,” such as deferred income taxes and finance receivables.