Business Segment, Geographic Area, and Significant Customer Information

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Business Segment, Geographic Area, and Significant Customer Information

Business Segment, Geographic Area, and Significant Customer Information

The Company is a global provider of instruments, systems, 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 for its customers. 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, electronic control technology, reactive gas generation and delivery, power generation and delivery, vacuum technology, temperature sensing, lasers, photonics, optics, precision motion control, vibration control and laser-based manufacturing systems solutions. The Company also provides services relating to the maintenance and repair of its products, installation services and training. The Company primarily serves the semiconductor, advanced electronics and specialty industrial markets.

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.

Reportable Segments

VSD 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, electronic control technology, reactive gas generation and delivery, power generation and delivery and vacuum technology.

PSD provides a broad range of instruments, components and subsystems which are derived from the Company's core competencies in lasers, photonics, optics, temperature sensing, precision motion control and vibration control.

ESD provides a range of laser-based systems and test products, including laser-based systems for printed circuit board ("PCB") manufacturing, which includes flexible interconnect PCB processing systems and high density interconnect solutions for rigid PCB manufacturing and substrate processing, and multi-layer ceramic capacitor test systems.

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				Six Months Ended June 30,
	June 30, 2022		June 30, 2021		2022		2021
Vacuum Solutions Division	$	507	$	458	$	981	$	894
Photonics Solutions Division		228		193		456		375
Equipment Solutions Division		30		99		70		175
	$	765	$	750	$	1,507	$	1,444

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022			2021
Gross profit by reportable segment:
Vacuum Solutions Division	$	219	$	212	$	425		$	417
Photonics Solutions Division		109		90		222			172
Equipment Solutions Division		10		53		25			88
Total gross profit by reportable segment		338		355		672			677
Operating expenses:
Research and development		53		50		105			97
Selling, general and administrative		101		97		193			193
Acquisition and integration costs		2		6		10			12
Restructuring and other		3		3		5			8
Amortization of intangible assets		15		13		30			25
Gain on sale of long-lived assets		—		—		(7	)		—
Income from operations		164		186		336			342
Interest income		1		—		1			—
Interest expense		7		6		13			12
Other expense (income), net		2		8		(3	)		9
Income before income taxes		156		172		327			321
Provision for income taxes		26		26		54			52
Net income	$	130	$	146	$	273		$	269

The following table sets forth capital expenditures by reportable segment for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Vacuum Solutions Division	$	55	$	8	$	65	$	17
Photonics Solutions Division		8		5		16		17
Equipment Solutions Division		1		3		2		9
Total capital expenditures	$	64	$	16	$	83	$	43

Capital expenditures for the three and six months ended June 30, 2022 included a $42 million purchase and expansion of a facility in South Korea.

The following table sets forth depreciation and amortization by reportable segment for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Vacuum Solutions Division	$	6	$	6	$	12	$	12
Photonics Solutions Division		13		10		26		19
Equipment Solutions Division		9		9		18		18
Total depreciation and amortization	$	28	$	25	$	56	$	49

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:

June 30, 2022	Accounts  receivable			Inventory			Total
Vacuum Solutions Division	$	344		$	421		$	765
Photonics Solutions Division		162			202			364
Equipment Solutions Division		35			67			102
Corporate, Eliminations & Other		(60	)		(1	)		(61	)
Total segment assets	$	481		$	689		$	1,170

December 31, 2021	Accounts  receivable			Inventory			Total
Vacuum Solutions Division	$	285		$	339		$	624
Photonics Solutions Division		146			177			323
Equipment Solutions Division		36			62			98
Corporate, Eliminations & Other		(24	)		(1	)		(25	)
Total segment assets	$	443		$	577		$	1,020

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

	June 30, 2022		December 31, 2021
Total segment assets	$	1,170	$	1,020
Cash and cash equivalents and short-term investments		1,067		1,042
Other current assets		112		85
Property, plant and equipment, net		377		326
Right-of-use assets		170		184
Goodwill and intangible assets, net		1,764		1,804
Other assets and long-term investments		89		79
Total assets	$	4,749	$	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. North America includes revenue from the United States and an immaterial amount of revenue from Canada.

	Three Months Ended June 30,				Six Months Ended June 30,
Net revenues:	2022		2021		2022		2021
North America	$	356	$	292	$	736	$	574
South Korea		95		104		177		202
China		82		102		140		183
Other Asia		169		191		330		370
Europe		63		61		124		115
	$	765	$	750	$	1,507	$	1,444

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:	June 30, 2022		December 31, 2021
United States	$	227	$	292
Mexico		223		133
Asia		133		106
Europe		35		36
	$	618	$	567

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

	June 30, 2022		December 31, 2021
Reportable segment:
Vacuum Solutions Division	$	195	$	195
Photonics Solutions Division		552		558
Equipment Solutions Division		473		475
Total goodwill	$	1,220	$	1,228

Major Customers

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Lam Research Corporation		15	%		12	%		16	%		13	%
Applied Materials, Inc.		13	%		11	%		12	%		11	%