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 positioning, vibration control, 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,
	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, Eliminations and Other			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, 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

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 accounts.

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.