1)	Basis of Presentation

The terms “MKS” and the “Company” refer to MKS Instruments, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The interim financial data as of June 30, 2018, and for the three and six months ended June 30, 2018 are unaudited; however, in the opinion of MKS, the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The condensed consolidated balance sheet presented as of December 31, 2017 has been derived from the consolidated audited financial statements as of that date. The unaudited condensed consolidated financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by United States generally accepted accounting principles (“U.S. GAAP”). The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the MKS Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission on February 28, 2018.

The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, stock-based compensation, inventory, intangible assets, goodwill and other long-lived assets, warranty liabilities, pension liabilities, acquisition expenses, income taxes and investments. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Reclassification of certain line items in prior period financial statements

The Company has historically recorded the revenue and related cost of revenue for the sale of its spare parts within Products in its Statements of Operations for the Vacuum & Analysis segment. The Company has now determined that these items are better presented within revenue and related cost of revenue within Services for the Vacuum & Analysis segment in its Statements of Operations to align with the current manner in which the Company operates its services business, and has elected to reclassify these amounts in previously issued financial statements as shown below. This change in presentation has no impact on total revenue or total cost of revenue.


	Three Months Ended June 30, 2017
	As previously reported		Adjustment			As reclassified
Net revenues:
Products	$	431,950	$	(5,633	)	$	426,317
Services		48,807		5,633			54,440

Total net revenues		480,757		—			480,757

Cost of revenues:
Cost of products		229,304		1,402			230,706
Cost of services		31,870		(1,402	)		30,468

Total cost of revenues	$	261,174	$	—		$	261,174


	Six Months Ended June 30, 2017
	As previously reported		Adjustment			As reclassified
Net revenues:
Products	$	824,872	$	(10,617	)	$	814,255
Services		93,038		10,617			103,655

Total net revenues		917,910		—			917,910

Cost of revenues:
Cost of products		434,364		2,176			436,540
Cost of services		58,416		(2,176	)		56,240

Total cost of revenues	$	492,780	$	—		$	492,780