16)	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 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 June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Advanced Manufacturing Capital Equipment	$	150,739		$	124,487		$	319,936		$	229,297
Analytical Solutions Group		15,300			13,508			29,470			27,904
Europe Region Sales & Service Operations⁽¹⁾		12,656			11,803			27,042			22,851
Asia Region Sales & Service Operations⁽¹⁾		55,815			49,566			122,498			96,709
Corporate, Eliminations and Other		(49,813	)		(42,436	)		(107,896	)		(78,188	)

	$	184,697		$	156,928		$	391,050		$	298,573

(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 June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Advanced Manufacturing Capital Equipment	$	61,548		$	43,660		$	129,162		$	78,496
Analytical Solutions Group		7,853			7,033			14,399			14,481
Europe Region Sales & Service Operations⁽¹⁾		3,622			3,387			7,861			6,578
Asia Region Sales & Service Operations⁽¹⁾		9,641			10,954			22,665			19,786
Corporate, Eliminations and Other		(3,029	)		(3,076	)		(5,080	)		(2,681	)

	$	79,635		$	61,958		$	169,007		$	116,660

(1)

The following is capital expenditures by reportable segment for the three and six months ended June 30, 2014 and 2013:


	Product Groups				Foreign Sales & Service Operations
	Advanced Manufacturing Capital Equipment		Analytical Solutions Group		Europe		Asia		Corporate, Eliminations and Other		Total
Three Months Ended June 30, 2014:
Capital expenditures	$	2,232	$	788	$	12	$	131	$	994	$	4,157


Six Months Ended June 30, 2014:
Capital expenditures	$	3,941	$	1,802	$	27	$	253	$	1,232	$	7,255


	Product Groups				Foreign Sales & Service Operations
	Advanced Manufacturing Capital Equipment		Analytical Solutions Group		Europe		Asia		Corporate, Eliminations and Other		Total
Three Months Ended June 30, 2013:
Capital expenditures	$	2,094	$	29	$	98	$	133	$	650	$	3,004


Six Months Ended June 30, 2013:
Capital expenditures	$	4,706	$	140	$	113	$	196	$	1,205	$	6,360

The following is depreciation and amortization by reportable segment for the three and six months ended June 30, 2014 and 2013:


	Product Groups				Foreign Sales & Service Operations
	Advanced Manufacturing Capital Equipment		Analytical Solutions Group		Europe		Asia		Corporate, Eliminations and Other		Total
Three Months Ended June 30, 2014:
Depreciation and amortization	$	3,512	$	261	$	85	$	290	$	667	$	4,815


Six Months Ended June 30, 2014:
Depreciation and amortization	$	6,423	$	476	$	175	$	579	$	1,312	$	8,965


	Product Groups				Foreign Sales & Service Operations
	Advanced Manufacturing Capital Equipment		Analytical Solutions Group		Europe		Asia		Corporate, Eliminations and Other		Total
Three Months Ended June 30, 2013:
Depreciation and amortization	$	3,071	$	307	$	81	$	288	$	631	$	4,378


Six Months Ended June 30, 2013:
Depreciation and amortization	$	5,958	$	604	$	174	$	582	$	1,152	$	8,470

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
June 30, 2014:
Segment assets:
Accounts receivable⁽¹⁾	$	14,692	$	5,084	$	6,183	$	34,533	$	40,995		$	101,487
Inventory		125,221		4,711		4,067		27,568		(5,695	)		155,872

Total segment assets	$	139,913	$	9,795	$	10,250	$	62,101	$	35,300		$	257,359


	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⁽¹⁾	$	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

(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:


	June 30, 2014		December 31, 2013
Total segment assets	$	257,359	$	259,471
Cash and cash equivalents and investments		545,829		650,022
Other current assets		39,325		30,143
Property, plant and equipment, net		77,387		77,536
Goodwill and intangible assets, net		244,062		163,999
Other assets		33,939		31,847

Consolidated total assets	$	1,197,901	$	1,213,018

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 three 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 June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Instruments, Control and Vacuum Products	$	90,250	$	84,880	$	191,907	$	159,604
Power and Reactive Gas Products		79,360		57,760		169,962		109,823
Analytical Solutions Group Products		15,087		14,288		29,181		29,146

	$	184,697	$	156,928	$	391,050	$	298,573

Sales of Instruments, Control and Vacuum Products and Power and Reactive Gas 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 June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Net revenues:
United States	$	107,931	$	86,851	$	225,309	$	161,418
Korea		17,169		16,507		44,760		30,106
Japan		14,416		12,589		31,343		26,418
Europe		18,812		18,722		38,367		37,525
Asia (excluding Korea and Japan)		26,369		22,259		51,271		43,106

	$	184,697	$	156,928	$	391,050	$	298,573


	June 30, 2014		December 31, 2013
Long-lived assets:⁽¹⁾
United States	$	58,450	$	60,700
Europe		6,682		5,484
Asia		12,412		13,475

	$	77,544	$	79,659

(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 June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Customer A		18.9	%		18.8	%		19.6	%		16.8	%
Customer B		13.8	%		11.9	%		13.4	%		10.8	%