Business Segment, Geographic Area, Product and Significant Customer Information | 19) Business Segment, Geographic Area, Product and Significant Customer Information The Company is a global provider of instruments, subsystems and process control solutions that measure, monitor, deliver, analyze, power and control critical parameters of advanced manufacturing processes to improve process performance and productivity. The Company’s products are derived from its core competencies in pressure measurement and control, flow measurement and control, gas and vapor delivery, gas composition analysis, residual gas analysis, leak detection, control technology, ozone generation and delivery, RF & DC power, reactive gas generation, vacuum technology, lasers, photonics, sub-micron positioning, vibration control, and optics. The Company also provides services related to the maintenance and repair of its products, 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 and subsystems 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 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, sub-micron 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, 2017 2016 2015 Vacuum & Analysis $ 1,207,457 $ 872,291 $ 813,524 Light & Motion 708,520 423,051 — $ 1,915,977 $ 1,295,342 $ 813,524 The following is a reconciliation of segment gross profit to consolidated net income: Years Ended December 31, 2017 2016 2015 Gross profit by reportable segment: Vacuum & Analysis $ 551,078 $ 388,220 $ 362,872 Light & Motion 340,373 177,399 — Total gross profit by reportable segment 891,451 565,619 362,872 Operating expenses: Research and development 132,555 110,579 68,305 Selling, general and administrative 290,548 229,171 129,087 Acquisition and integration costs 5,332 27,279 30 Restructuring 3,920 642 2,074 Asset impairment 6,719 5,000 — Amortization of intangible assets 45,743 35,681 6,764 Income from operations 406,634 157,267 156,612 Interest income 3,021 2,560 2,999 Interest expense 30,990 30,611 143 Gain on sale of business 74,856 — — Other expense, net 5,896 1,239 — Income before income taxes 447,625 127,977 159,468 Provision for income taxes 108,493 23,168 37,171 Net income $ 339,132 $ 104,809 $ 122,297 The following is capital expenditures by reportable segment for the years ended December 31, 2017, 2016 and 2015: Vacuum & Analysis Light & Motion Total December 31, 2017: Capital expenditures $ 17,111 $ 14,176 $ 31,287 December 31, 2016: Capital expenditures $ 11,732 $ 7,391 $ 19,123 December 31, 2015: Capital expenditures $ 12,414 $ — $ 12,414 The following is depreciation and amortization of intangible assets by reportable segment for the years ended December 31, 2017, 2016 and 2015: Vacuum & Analysis Light & Motion Total December 31, 2017: Depreciation and amortization $ 20,297 $ 62,259 $ 82,556 December 31, 2016: Depreciation and amortization $ 20,820 $ 45,106 $ 65,926 December 31, 2015: Depreciation and amortization $ 22,103 $ — $ 22,103 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, 2017: Segment assets: Accounts receivable $ 201,318 $ 119,934 $ (20,944 ) $ 300,308 Inventory 197,831 141,250 — 339,081 Total segment assets $ 399,149 $ 261,184 $ (20,944 ) $ 639,389 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 A reconciliation of segment assets to consolidated total assets is as follows: Years Ended December 31, 2017 2016 Total segment assets $ 639,389 $ 524,626 Cash and cash equivalents, restricted cash and investments 553,976 433,231 Other current assets 53,543 50,770 Property, plant and equipment, net 171,782 174,559 Goodwill and intangible assets, net 957,445 996,589 Other assets 37,883 32,467 Consolidated total assets $ 2,414,018 $ 2,212,242 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: 2017 2016 2015 United States $ 955,284 $ 675,601 $ 458,313 South Korea 212,763 112,432 106,909 Japan 167,318 96,954 62,879 Europe 209,912 156,365 79,927 Asia (excluding South Korea and Japan) 370,700 253,990 105,496 $ 1,915,977 $ 1,295,342 $ 813,524 Years Ended December 31, Long-lived assets:(1) 2017 2016 United States $ 124,689 $ 122,547 Europe 28,820 28,717 Asia 49,645 49,406 $ 203,154 $ 200,670 (1) Long-lived assets include property, plant and equipment, net and certain other assets, and exclude goodwill and intangibles and long-term tax-related Goodwill associated with each of our reportable segments is as follows: Years Ended December 31, 2017 2016 Reportable segment: Vacuum & Analysis $ 197,617 $ 199,453 Light & Motion 393,430 389,132 Total goodwill $ 591,047 $ 588,585 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 six 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, 2017 2016 2015 Analytical and Control Solutions Products $ 131,376 $ 115,758 $ 102,658 Power, Plasma and Reactive Gas Solutions Products 564,343 367,665 350,469 Vacuum Solutions Products 511,738 388,868 360,397 Laser Products 225,168 124,432 — Optics Products 203,775 124,218 — Photonics Products 279,577 174,401 — $ 1,915,977 $ 1,295,342 $ 813,524 Sales of Analytical and Control Solutions Products; Power, Plasma and Reactive Gas Solutions Products; and Vacuum Solutions Products are included in the Company’s Vacuum & Analysis segment. Sales of Laser 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, 2017 2016 2015 Applied Materials, Inc. 12.7 % 13.6 % 17.8 % Lam Research Corporation 11.7 % 11.2 % 13.4 % 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. |