Business Segment, Geographic Area, Product and Significant Customer Information | 21) Business Segment, Geographic Area, Product and Significant Customer Information The Company is a global provider of instruments, subsystems and process control solutions that measure, control, deliver, power, monitor and analyze critical parameters of advanced manufacturing processes to improve process performance and productivity. The Company also provides services relating to the maintenance and repair of products it sells, software maintenance, installation services and training. The Company’s Chief Operating Decision Maker (“CODM”) utilizes financial information to make decisions about allocating resources and assessing performance for the entire Company, which is used in the decision making process to assess performance. Based upon the information provided to the CODM, the Company has determined it has two reportable segments. Effective April 29, 2016, in conjunction with the Newport Merger, the Company changed its reportable segments based upon the organizational structure of the Company and how the CODM utilizes information provided to allocate resources and make decisions. The Company’s two reportable segments are: Vacuum & Analysis and Light & Motion. The Vacuum & Analysis segment represents the legacy MKS business and the Light & Motion segment represents the legacy Newport business. The Vacuum & Analysis segment provides a broad range of instruments, components, subsystems and software which are derived from the Company’s core competencies in pressure measurement and control, flow measurement and control, gas and vapor delivery, gas composition analysis, residual gas analysis, leak detection, control and information technology, ozone generation and delivery, RF & DC power, reactive gas generation and vacuum technology. The Light & Motion segment provides a broad range of instruments, components and subsystems which are derived from the Company’s core competencies in lasers, photonics and optics. The Company derives its segment results directly from the manner in which results are reported in its management reporting system. The accounting policies that the Company uses to derive reportable segment results are substantially the same as those used for external reporting purposes. The Company does not disclose external or intersegment revenues separately by reportable segment as this information is not presented to the CODM for decision making purposes. The following is net revenues by reportable segment: Years Ended December 31, 2016 2015 2014 Vacuum & Analysis $ 872,291 $ 813,524 $ 780,869 Light & Motion 423,051 — — $ 1,295,342 $ 813,524 $ 780,869 The following is a reconciliation of segment gross profit to consolidated net income: Years Ended December 31, 2016 2015 2014 Gross profit by reportable segment: Vacuum & Analysis $ 388,220 $ 362,872 $ 337,766 Light & Motion 177,399 — — Total gross profit by reportable segment 565,619 362,872 337,766 Operating expenses: Research and development 110,579 68,305 62,888 Selling, general and administrative 229,171 129,087 131,828 Acquisition and integration costs 27,279 30 499 Restructuring 642 2,074 2,464 Asset impairment 5,000 — — Amortization of intangible assets 35,681 6,764 4,945 Income from operations 157,267 156,612 135,142 Interest income 2,560 2,999 1,323 Interest expense 30,611 143 72 Other expense, net 1,239 — — Income before income taxes 127,977 159,468 136,393 Provision for income taxes 23,168 37,171 20,615 Net income $ 104,809 $ 122,297 $ 115,778 The following is capital expenditures by reportable segment for the years ended December 31, 2016, 2015 and 2014: Vacuum & Analysis Light & Motion Total December 31, 2016: Capital expenditures $ 11,732 $ 7,391 $ 19,123 December 31, 2015: Capital expenditures $ 12,414 $ — $ 12,414 December 31, 2014: Capital expenditures $ 13,183 $ — $ 13,183 The following is depreciation and amortization of intangible assets for the years ended December 31, 2016, 2015 and 2014: Vacuum & Analysis Light & Motion Total December 31, 2016: Depreciation and amortization $ 20,820 $ 45,106 $ 65,926 December 31, 2015: Depreciation and amortization $ 22,103 $ — $ 22,103 December 31, 2014: Depreciation and amortization $ 20,514 $ — $ 20,514 Total income tax expense is not presented by reportable segment because the necessary information is not available or used by the CODM. The following is segment assets by reportable segment: Vacuum & Analysis Light & Motion Corporate, Total December 31, 2016: Segment assets: Accounts receivable $ 148,516 $ 121,516 $ (21,275 ) $ 248,757 Inventory 165,040 110,829 — 275,869 Total segment assets $ 313,556 $ 232,345 $ (21,275 ) $ 524,626 Vacuum & Analysis Light & Motion Corporate, Total December 31, 2015: Segment assets: Accounts receivable $ 101,883 $ — $ — $ 101,883 Inventory 152,631 — — 152,631 Total segment assets $ 254,514 $ — $ — $ 254,514 A reconciliation of segment assets to consolidated total assets is as follows: Years Ended December 31, 2016 2015 Total segment assets $ 524,626 $ 254,514 Cash and cash equivalents, restricted cash and investments 433,231 658,237 Income tax receivable and other current assets 50,770 26,760 Property, plant and equipment, net 174,559 68,856 Goodwill and intangible assets, net 996,589 243,730 Other assets 32,467 21,250 Consolidated total assets $ 2,212,242 $ 1,273,347 Information about the Company’s operations in different geographic regions is presented in the tables below. Net revenues to unaffiliated customers are based on the location in which the sale originated. Transfers between geographic areas are at negotiated transfer prices and have been eliminated from consolidated net revenues. Years Ended December 31, Net revenues: 2016 2015 2014 United States $ 675,601 $ 458,313 $ 448,452 Korea 112,432 106,909 97,323 Japan 96,954 62,879 61,092 Europe 156,365 79,927 80,659 Asia (excluding Korea and Japan) 253,990 105,496 93,343 $ 1,295,342 $ 813,524 $ 780,869 Years Ended December 31, Long-lived assets:(1) 2016 2015 United States $ 122,547 $ 56,594 Europe 28,717 5,783 Asia 49,406 8,952 $ 200,670 $ 71,329 (1) Long-lived assets include property, plant and equipment, net and certain other assets, and exclude goodwill and intangibles and long-term tax-related accounts. Goodwill associated with each of our reportable segments is as follows: Years Ended December 31, 2016 2015 Reportable segment: Vacuum & Analysis $ 199,453 $ 199,703 Light & Motion 389,132 — Total goodwill $ 588,585 $ 199,703 Worldwide Product Information Because the reportable segment information above does not reflect worldwide sales of the Company’s products, the Company groups its products into seven groups of similar products based upon the similarity of product function. Worldwide net revenue for each group of products is as follows: Years Ended December 31, 2016 2015 2014 Analytical and Control Solutions Products $ 115,758 $ 102,658 $ 104,189 Materials Delivery Solutions Products 135,989 131,996 126,267 Power, Plasma and Reactive Gas Solutions Products 367,665 350,469 335,271 Pressure and Vacuum Measurement Products 252,879 228,401 215,142 Lasers Products 124,432 — — Optics Products 124,218 — — Photonics Products 174,401 — — $ 1,295,342 $ 813,524 $ 780,869 Sales of Analytical and Control Solutions Products; Materials Delivery Solutions Products; Power, Plasma and Reactive Gas Solutions Products; and Pressure and Vacuum Measurement Products are included in the Company’s Vacuum & Analysis segment. Sales of Lasers Products; Optics Products; and Photonics Products are included in the Light & Motion segment. Major Customers The Company had two customers with net revenues greater than 10% of total net revenues in the periods shown as follows: Years Ended December 31, 2016 2015 2014 Applied Materials, Inc. 13.6 % 17.8 % 19.1 % Lam Research Corporation 11.2 % 13.4 % 12.9 % Net revenues for each of our reportable segments include revenues from each of the two customers, which represent net revenues greater than 10% of total net revenues. |