16)	Business Segment, Geographic Area, Product and Significant Customer Information

The Company has four reportable segments based upon the manner in which information is produced internally and provided to the Company’s chief operating decision-maker (“CODM”).

The Company develops, manufactures, sells and services products that measure, control, power and monitor critical parameters of advanced manufacturing processes. The Company’s CODM utilizes consolidated financial information to make decisions about allocating resources and assessing performance for the entire Company. In addition, certain disaggregated financial information is also provided to the CODM. Based upon the information provided to the CODM, the Company has determined it has eight operating segments and four reportable segments.

The eight operating segments are PFMC Products, Controls Products, ASTeX Products, ENI Products, HPS Products (Vacuum Products), Analytical Solutions Group, Europe Region Sales & Service and Asia Region Sales & Service.

PFMC Products, Controls Products, ASTeX Products, ENI Products and HPS Products comprise a single reportable segment due to the similarities of the operating segments. This reportable segment, Advanced Manufacturing Capital Equipment, includes the development, manufacturing, sales and servicing of instruments and control products, power and reactive gas products, and vacuum products, all of which are utilized in semiconductor processing and other similar advanced manufacturing processes. Sales in this segment include both external sales and intercompany sales (which are stated at agreed upon transfer prices). External sales of these products made in Europe or Asia are reported as sales in the Europe Region Sales & Service or Asia Region Sales & Service segments.

Analytical Solutions Group, Asia Region Sales & Service and Europe Region Sales & Service are each separate reportable segments. The Company has reported corporate expenses and certain intercompany pricing transactions in a Corporate, Eliminations and Other reconciling column. The Analytical Solutions Group includes gas composition analysis and information technology products. The Europe and Asia region sales and service segments mainly resell and service the Advanced Manufacturing Capital Equipment and Analytical Solutions Group products sold in their respective regions.

MKS derives the segment results directly from the manner in which results are reported in its management reporting system. The accounting policies MKS uses to derive reportable segment results are substantially the same as those used for external reporting purposes except that a substantial portion of the sales of the Advanced Manufacturing Capital Equipment and Analytical Solutions Group segments are intercompany sales to the regions at tax-based transfer prices and certain significant costs, including stock-based compensation and management incentive compensation, are not allocated to the segments and are included in Corporate, Eliminations and Other. The CODM reviews several metrics of each operating segment, including net revenues and gross profit (loss).

The following is net revenues by reportable segment:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Advanced Manufacturing Capital Equipment	$	133,307		$	104,191			$363,512			$382,016
Analytical Solutions Group		13,313			15,160			41,217			47,680
Europe Region Sales & Service Operations⁽¹⁾		12,436			13,485			35,287			38,141
Asia Region Sales & Service Operations⁽¹⁾		52,558			46,782			149,267			182,663
Corporate, Eliminations and Other		(45,161	)		(38,171	)		(124,257	)		(140,788	)

	$	166,453		$	141,447			$465,026			$509,712

(1)

The Europe and Asia foreign sales and service operations do not represent total geographical Europe and Asia financial information. These sales and service operations mainly represent the sales from the resale and service of Advanced Manufacturing Capital Equipment and Analytical Solutions Group products in their respective regions. The Advanced Manufacturing Capital Equipment and Analytical Solutions Group segments both have sales in each region. Accordingly, total geographical sales include sales from multiple reportable segments.

The following is gross profit by reportable segment:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
Advanced Manufacturing Capital Equipment	$	43,151		$	34,829	$	121,647		$	141,521
Analytical Solutions Group		6,758			8,100		21,239			24,485
Europe Region Sales & Service Operations⁽¹⁾		3,427			3,547		10,005			11,292
Asia Region Sales & Service Operations⁽¹⁾		11,580			9,030		31,366			28,143
Corporate, Eliminations and Other		(2,682	)		1,065		(5,363	)		11,437

	$	62,234		$	56,571	$	178,894		$	216,878

(1)

The following is capital expenditures by reportable segment for the three and nine months ended September 30, 2013 and 2012:


	Product Groups				Foreign Sales & Service Operations
	Advanced Manufacturing Capital Equipment		Analytical Solutions Group		Europe		Asia		Corporate, Eliminations and Other		Total
Three Months Ended September 30, 2013:
Capital expenditures	$	1,893	$	125	$	24	$	239	$	513	$	2,794


Nine Months Ended September 30, 2013:
Capital expenditures	$	6,599	$	265	$	137	$	435	$	1,718	$	9,154


	Product Groups				Foreign Sales & Service Operations
	Advanced Manufacturing Capital Equipment		Analytical Solutions Group		Europe		Asia		Corporate, Eliminations and Other		Total
Three Months Ended September 30, 2012:
Capital expenditures	$	2,102	$	283	$	35	$	237	$	371	$	3,028


Nine Months Ended September 30, 2012:
Capital expenditures	$	6,741	$	698	$	109	$	654	$	2,838	$	11,040

The following is depreciation and amortization by reportable segment for the three and nine months ended September 30, 2013 and 2012:


	Product Groups				Foreign Sales & Service Operations
	Advanced Manufacturing Capital Equipment		Analytical Solutions Group		Europe		Asia		Corporate, Eliminations and Other		Total
Three Months Ended September 30, 2013:
Depreciation and amortization	$	2,861	$	319	$	86	$	294	$	685	$	4,245


Nine Months Ended September 30, 2013:
Depreciation and amortization	$	8,819	$	923	$	260	$	876	$	1,837	$	12,715


	Product Groups				Foreign Sales & Service Operations
	Advanced Manufacturing Capital Equipment		Analytical Solutions Group		Europe		Asia		Corporate, Eliminations and Other		Total
Three Months Ended September 30, 2012:
Depreciation and amortization	$	2,409	$	248	$	102	$	537	$	344	$	3,640


Nine Months Ended September 30, 2012:
Depreciation and amortization	$	6,797	$	715	$	305	$	1,330	$	1,050	$	10,197

The following is segment assets by reportable segment:


	Product Groups				Foreign Sales & Service Operations
	Advanced Manufacturing Capital Equipment		Analytical Solutions Group		Europe		Asia		Corporate, Eliminations and Other			Total
September 30, 2013:
Segment assets:
Accounts receivable⁽¹⁾	$	14,645	$	4,263	$	6,611	$	36,380	$	36,234		$	98,133
Inventory		107,935		4,354		3,950		28,532		(8,711	)		136,060

Total segment assets	$	122,580	$	8,617	$	10,561	$	64,912	$	27,523		$	234,193


	Product Groups				Foreign Sales & Service Operations
	Advanced Manufacturing Capital Equipment		Analytical Solutions Group		Europe		Asia		Corporate, Eliminations and Other			Total
December 31, 2012:
Segment assets:
Accounts receivable⁽¹⁾	$	9,644	$	5,889	$	5,813	$	32,088	$	28,626		$	82,060
Inventory		108,397		3,841		3,691		29,534		(10,824	)		134,639

Total segment assets	$	118,041	$	9,730	$	9,504	$	61,622	$	17,802		$	216,699

(1)	A significant portion of segment receivables are processed at the Company’s shared services center at the Corporate location.

A reconciliation of segment assets to consolidated total assets is as follows:


	September 30, 2013		December 31, 2012
Total segment assets	$	234,193	$	216,699
Cash and cash equivalents and investments		625,837		627,399
Other current assets		38,710		36,242
Property, plant and equipment, net		78,020		80,516
Goodwill and intangible assets, net		164,016		162,294
Other assets		31,198		29,412

Consolidated total assets	$	1,171,974	$	1,152,562

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 four groups of similar products based upon the similarity of product function. Worldwide net revenue for each group of products is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Instruments and Control Products	$	60,615	$	57,761	$	184,729	$	205,654
Power and Reactive Gas Products		72,471		52,031		182,294		199,864
Vacuum Products		18,098		15,435		53,588		53,158
Analytical Solutions Group Products		15,269		16,220		44,415		51,036

	$	166,453	$	141,447	$	465,026	$	509,712

Sales of Instruments and Control Products, Power and Reactive Gas Products and Vacuum Products are included in the Company’s Advanced Manufacturing Capital Equipment Products segment as well as in the foreign sales and service operations because the products are sold through the foreign sales and service operations in their respective regions. Sales of the Analytical Solutions Group products are included in the Analytical Solutions Group segment as well as in the foreign sales and service operations because the products are sold through the foreign sales and service operations in their respective regions.

Geographic

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.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Net revenues:
United States	$	91,286	$	73,775	$	252,704	$	259,954
Korea		16,491		12,574		46,597		54,472
Japan		13,825		14,270		40,243		67,122
Europe		20,433		21,341		57,958		65,800
Asia (excluding Korea and Japan)		24,418		19,487		67,524		62,364

	$	166,453	$	141,447	$	465,026	$	509,712


	September 30, 2013		December 31, 2012
Long-lived assets:⁽¹⁾
United States	$	61,404	$	62,203
Europe		5,175		5,844
Asia		13,398		14,664

	$	79,977	$	82,711

(1)	Long-lived assets include property, plant and equipment, net and certain other long-term assets, excluding long-term income tax receivable.

Major Customers

The Company had two customers with net revenues greater than 10% of total net revenues in the periods shown as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Customer A		16.4	%		13.9	%		16.7	%		14.8	%
Customer B		13.5	%		8.5	%		11.8	%		10.3	%