21)

Business Segment, Geographic Area, Product and Significant Customer Information

The Company develops, manufactures, sells and services products that measure, control, power and monitor critical parameters of advanced manufacturing processes. The Company’s Chief Operating Decision Maker (“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 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, Europe Region Sales & Service and Asia 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 and custom fabrication services. The Europe and Asia 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:


	Years Ended December 31,
	2013			2012			2011
Advanced Manufacturing Capital Equipment	$	528,001		$	479,751		$	647,908
Analytical Solutions Group		56,324			62,765			61,303
Europe Region Sales & Service(1)		48,518			51,440			75,253
Asia Region Sales & Service(1)		218,048			229,731			305,448
Corporate, Eliminations and Other		(181,471	)		(180,179	)		(267,395	)

	$	669,420		$	643,508		$	822,517

(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 only 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:


	Years Ended December 31,
	2013			2012		2011
Advanced Manufacturing Capital Equipment	$	187,685		$	171,308	$	263,863
Analytical Solutions Group		29,431			32,741		31,800
Europe Region Sales & Service(1)		13,600			15,156		21,323
Asia Region Sales & Service(1)		42,948			36,962		45,267
Corporate, Eliminations and Other		(7,090	)		13,312		12,735

	$	266,574		$	269,479	$	374,988

(1)

The following is capital expenditures by reportable segment for the years ended December 31, 2013, 2012 and 2011:


	Product Groups				Foreign Sales & Service Operations
	Advanced Manufacturing Capital Equipment		Analytical Solutions Group		Europe		Asia		Corporate, Eliminations and Other		Total
December 31, 2013:
Capital expenditures	$	8,729	$	513	$	250	$	857	$	2,061	$	12,410

December 31, 2012:
Capital expenditures	$	11,817	$	1,228	$	132	$	886	$	3,642	$	17,705

December 31, 2011:
Capital expenditures	$	11,947	$	868	$	362	$	1,552	$	838	$	15,567

The following is depreciation and amortization expense by reportable segment for the years ended December 31, 2013, 2012 and 2011:


	Product Groups				Foreign Sales & Service Operations
	Advanced Manufacturing Capital Equipment		Analytical Solutions Group		Europe		Asia		Corporate, Eliminations and Other		Total
December 31, 2013:
Depreciation and amortization	$	11,836	$	1,252	$	348	$	1,177	$	2,489	$	17,102

December 31, 2012:
Depreciation and amortization	$	9,594	$	1,176	$	326	$	1,711	$	1,635	$	14,442

December 31, 2011:
Depreciation and amortization	$	8,143	$	1,470	$	366	$	1,539	$	1,462	$	12,980

Total income tax expense is impracticable to present by reportable segment because the necessary information is not available or used by the CODM.

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
December 31, 2013:
Segment assets:
Accounts receivable	$	20,767	$	5,603	$	6,538	$	44,207	$	39,629		$	116,744
Inventory		117,822		4,391		4,254		25,094		(8,834	)		142,727

Total segment assets	$	138,589	$	9,994	$	10,792	$	69,301	$	30,795		$	259,471


	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	$	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

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


	Years Ended December 31,
	2013		2012
Total segment assets	$	259,471	$	216,699
Cash and cash equivalents and investments		650,022		627,399
Other current assets		30,143		36,242
Property, plant and equipment, net		77,536		80,516
Goodwill and intangible assets, net		163,999		162,294
Other assets		31,847		29,412

Consolidated total assets	$	1,213,018	$	1,152,562

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,
	2013		2012		2011
Net revenues:
United States	$	363,948	$	326,894	$	391,122
Korea		75,401		64,541		29,193
Japan		56,978		81,883		106,003
Europe		77,910		85,362		115,362
Asia (excluding Korea and Japan)		95,183		84,828		180,837

	$	669,420	$	643,508	$	822,517


	Years Ended December 31,
	2013		2012
Long-lived assets:(1)
United States	$	60,700	$	62,203
Europe		5,484		5,844
Asia		13,475		14,664

	$	79,659	$	82,711

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

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:


	Years Ended December 31,
	2013		2012		2011
Instruments and Control Products	$	266,838	$	258,521	$	348,735
Power and Reactive Gas Products		273,357		251,669		327,151
Vacuum Products		74,537		66,418		81,782
Analytical Solutions Group Products		54,688		66,900		64,849

	$	669,420	$	643,508	$	822,517

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 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.

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,
	2013			2012			2011
Customer A		17.0	%		14.5	%		13.6	%
Customer B		12.3	%		10.1	%		6.5	%