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, Eliminations and Other			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, Eliminations and Other		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.