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. In 2013, the Company changed its reportable business segment from one reportable segment to two reportable segments, Metalcutting Machine Solutions ("MMS") and Aftermarket Tooling and Accessories ("ATA"). The Company has recast its segment information disclosure for all periods presented to conform to this segment presentation.

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 forty 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 are looking for 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 a built-in computer control without the assistance of an operator. 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 represents a line of high quality grinders (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 fifty dollars on high volume collets to twenty 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. Sales levels are affected by manufacturing cycles, but not to the severity of the 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. It 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, 2014
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	243,199	$	68,788	$	(354	)	$	311,633
Depreciation and amortization	6,952		2,545					9,497
Segment income	3,950		6,708					10,658
Capital expenditures	2,088		1,098					3,186
Segment assets⁽¹⁾	238,462		51,838					290,300



	Year Ended December 31, 2013
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	278,377	$	51,553	$	(471	)	$	329,459
Depreciation and amortization	6,897		1,985					8,882
Segment income	16,338		5,689					22,027
Capital expenditures	2,603		1,268					3,871
Segment assets⁽¹⁾	253,173		46,082					299,255



	Year Ended December 31, 2012
	MMS		ATA		Inter-Segment Eliminations			Total
Sales	$	306,328	$	28,989	$	(904	)	$	334,413
Depreciation and amortization	6,041		706					6,747
Segment income	22,556		5,128					27,684
Capital expenditures	7,005		636					7,641
Segment assets⁽¹⁾	276,710		17,742					294,452

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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 (loss) income from operations before income taxes for the years ended December 31, 2014, 2013, and 2012 are as follows (in thousands):



	Year Ended December 31,
	2014			2013			2012
Segment income	$	10,658		$	22,027		$	27,684
Unallocated corporate expense	(5,540		)	(4,563		)	(7,167		)
Acquisition related inventory step-up charge	(86		)	(1,927		)	—
Acquisition related expenses	(178		)	(2,154		)	(290		)
Impairment charges	(5,766		)	(6,239		)	—
Interest expense, net	(678		)	(1,064		)	(741		)
Other unallocated income (expense)	465			(148		)	(145		)
(Loss) income from continuing operations before income taxes	$	(1,125	)	$	5,932		$	19,341

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



	December 31, 2014		December 31, 2013		December 31, 2012
Total segment assets	$	290,300	$	299,255	$	294,452
Unallocated assets	21,020		44,928		31,202
Total assets	$	311,320	$	344,183	$	325,654

Unallocated assets include cash of $16.3 million, $34.7 million and $26.9 million at December 31, 2014, 2013 and 2012, respectively.

There is no single customer who accounted for more than 6% of the consolidated sales in 2014, 2013 or 2012. Products are sold throughout the world and sales are attributed to countries based on the country where the products are shipped to. Information concerning the principal geographic areas is follows (in thousands):



	2014				2013				2012
	Sales		Long-lived Assets ⁽¹⁾		Sales		Long-lived Assets ⁽¹⁾		Sales		Long-lived Assets ⁽¹⁾
North America
United States	$	94,420	$	39,656	$	105,764	$	49,270	$	79,013	$	33,564
Other	6,474		—		3,693		—		4,533		—
Total North America	100,894		39,656		109,457		49,270		83,546		33,564
Europe
England	13,848		604		21,090		645		28,328		739
Germany	46,543		1,741		40,277		1,943		39,595		267
Switzerland	6,834		31,524		6,063		37,055		9,622		38,121
Other	35,838		107		32,696		143		43,463		10
Total Europe	103,063		33,976		100,126		39,786		121,008		39,137
Asia
China	88,933		11,543		96,532		12,468		102,550		12,405
Taiwan	4,296		14,603		4,541		15,197		5,474		16,010
Other	14,447		3,011		18,803		—		21,835		—
Total Asia	107,676		29,157		119,876		27,665		129,859		28,415
Consolidated Total	$	311,633	$	102,789	$	329,459	$	116,721	$	334,413	$	101,116

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