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Business Segment, Geographic Area, and Significant Customer Information
 9 Months Ended
Sep. 30, 2022
Segment Reporting [Abstract]  
Business Segment, Geographic Area, and Significant Customer Information Business Segment, Geographic Area, and Significant Customer Information

The Company has three reportable segments, VSD, PSD and MSD. During the third quarter of 2022, MKS consolidated its Equipment Solutions business, previously ESD, into a component of PSD and prior periods were recast to reflect this change. The Company's Chief Operating Decision Maker ("CODM"), which is the Company's Chief Executive Officer, 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 and allocate resources to the three segments.

Reportable Segments

VSD delivers foundational technology solutions to leading edge semiconductor manufacturing, advanced electronics and specialty industrial applications. VSD products are derived from our core competencies in pressure measurement and control, flow measurement and control, gas and vapor delivery, gas composition analysis, electronic control technology, reactive gas generation and delivery, power generation and delivery, and vacuum technology.

PSD provides a full range of solutions including lasers, beam measurement and profiling, precision motion control, vibration isolation systems, photonics instruments, temperature sensing, opto-mechanical components, optical elements, systems for flexible PCB laser processing, high-speed multilayer ceramic capacitor testing, laser-based systems for high density interconnect PCB and IC substrate manufacturing.

MSD develops leading process and manufacturing technologies for advanced surface modification, electroless and electrolytic plating, and surface finishing. Atotech is a brand within MSD. Applying a comprehensive systems-and-solutions approach, MSD's portfolio includes chemistry, equipment, software, and services for innovative and high-technology applications in a wide variety of end-markets.

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 groups similar products within its three reportable segments.

The following table sets forth net revenues by reportable segment:

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Vacuum Solutions Division

 

$

510

 

 

$

483

 

 

$

1,491

 

 

$

1,377

 

Photonics Solutions Division

 

 

267

 

 

 

259

 

 

 

793

 

 

 

809

 

Materials Solutions Division

 

 

177

 

 

 

—

 

 

 

177

 

 

 

—

 

 

 

$

954

 

 

$

742

 

 

$

2,461

 

 

$

2,186

 

 

 

The following table sets forth a reconciliation of gross profit by reportable segment to net income:

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Gross profit by reportable segment:

 

 

 

 

 

 

 

 

 

 

 

 

Vacuum Solutions Division

 

$

220

 

 

$

226

 

 

$

645

 

 

$

644

 

Photonics Solutions Division

 

 

125

 

 

 

122

 

 

 

372

 

 

 

382

 

Materials Solutions Division

 

 

45

 

 

 

—

 

 

 

45

 

 

 

—

 

Total gross profit by reportable segment

 

 

390

 

 

 

348

 

 

 

1,062

 

 

 

1,026

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

63

 

 

 

52

 

 

 

168

 

 

 

149

 

Selling, general and administrative

 

 

126

 

 

 

95

 

 

 

319

 

 

 

289

 

Acquisition and integration costs

 

 

31

 

 

 

9

 

 

 

41

 

 

 

21

 

Restructuring and other

 

 

5

 

 

 

2

 

 

 

10

 

 

 

10

 

Amortization of intangible assets

 

 

47

 

 

 

15

 

 

 

77

 

 

 

40

 

Gain on sale of long-lived assets

 

 

—

 

 

 

—

 

 

 

(7

)

 

 

—

 

Income from operations

 

 

118

 

 

 

175

 

 

 

454

 

 

 

517

 

Interest income

 

 

1

 

 

 

—

 

 

 

2

 

 

 

1

 

Interest expense

 

 

80

 

 

 

6

 

 

 

93

 

 

 

19

 

Other (income) expense, net

 

 

(1

)

 

 

3

 

 

 

(4

)

 

 

12

 

Income before income taxes

 

 

40

 

 

 

166

 

 

 

367

 

 

 

487

 

Provision for income taxes

 

 

34

 

 

 

34

 

 

 

88

 

 

 

86

 

Net income

 

$

6

 

 

$

132

 

 

$

279

 

 

$

401

 

Interest income, interest expense and income tax expense are not presented by reportable segment because the necessary information is not classified within the segments nor used by the CODM.

The following table sets forth segment assets by reportable segment:

September 30, 2022

 

Accounts
 receivable

 

 

Inventory

 

 

Total

 

Vacuum Solutions Division

 

$

342

 

 

$

449

 

 

$

791

 

Photonics Solutions Division

 

 

185

 

 

 

282

 

 

 

467

 

Materials Solutions Division

 

 

301

 

 

 

230

 

 

 

531

 

Corporate, Eliminations & Other

 

 

(98

)

 

 

—

 

 

 

(98

)

Total segment assets

 

$

730

 

 

$

961

 

 

$

1,691

 

 

December 31, 2021

 

Accounts
 receivable

 

 

Inventory

 

 

Total

 

Vacuum Solutions Division

 

$

285

 

 

$

339

 

 

$

624

 

Photonics Solutions Division

 

 

182

 

 

 

239

 

 

 

421

 

Materials Solutions Division

 

 

—

 

 

 

—

 

 

 

—

 

Corporate, Eliminations & Other

 

 

(24

)

 

 

(1

)

 

 

(25

)

Total segment assets

 

$

443

 

 

$

577

 

 

$

1,020

 

The following is a reconciliation of segment assets to total assets:

 

 

September 30, 2022

 

 

December 31, 2021

 

Total segment assets

 

$

1,691

 

 

$

1,020

 

Cash and cash equivalents and short-term investments

 

 

885

 

 

 

1,042

 

Other current assets

 

 

215

 

 

 

85

 

Property, plant and equipment, net

 

 

655

 

 

 

326

 

Right-of-use assets

 

 

235

 

 

 

184

 

Goodwill and intangible assets, net

 

 

7,504

 

 

 

1,804

 

Other assets and long-term investments

 

 

187

 

 

 

79

 

Total assets

 

$

11,372

 

 

$

4,540

 

Geographic Area

Information about the Company's operations by geographic area is presented in the tables below. Net revenues from unaffiliated customers are based on the location in which the sale originated. Intercompany sales between geographic areas are at tax transfer prices and have been eliminated from consolidated net revenues.

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

Net revenues:

 

2022

 

 

2021

 

 

2022

 

 

2021

 

United States

 

$

393

 

 

$

343

 

 

$

1,112

 

 

$

917

 

China

 

 

135

 

 

 

80

 

 

 

275

 

 

 

263

 

Germany

 

 

100

 

 

 

37

 

 

 

176

 

 

 

108

 

South Korea

 

 

82

 

 

 

91

 

 

 

260

 

 

 

293

 

Other

 

 

244

 

 

 

191

 

 

 

638

 

 

 

605

 

 

 

$

954

 

 

$

742

 

 

$

2,461

 

 

$

2,186

 

Long-lived assets include property, plant and equipment, net, right-of-use assets, and certain other assets, and exclude goodwill, intangible assets and long-term tax-related accounts.

Long-lived assets:

 

September 30, 2022

 

 

December 31, 2021

 

United States

 

$

497

 

 

$

412

 

Germany

 

 

123

 

 

 

18

 

China

 

 

120

 

 

 

16

 

Other

 

 

310

 

 

 

128

 

 

 

$

1,050

 

 

$

574

 

 

Goodwill associated with each of the Company's reportable segments is as follows:

 

 

September 30, 2022

 

 

December 31, 2021

 

Reportable segment:

 

 

 

 

 

 

Vacuum Solutions Division

 

$

193

 

 

$

195

 

Photonics Solutions Division

 

 

1,020

 

 

 

1,033

 

Materials Solutions Division

 

 

2,638

 

 

 

—

 

Total goodwill

 

$

3,851

 

 

$

1,228

 

Major Customers

The following customers represented greater than 10% of the Company's net revenues:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Lam Research Corporation

 

 

15

%

 

 

15

%

 

 

15

%

 

 

15

%

Applied Materials, Inc.

 

 

10

%

 

 

11

%

 

 

11

%

 

 

11

%