Business Segment, Geographic Area, Product/Service Offerings and Significant Customer Information

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Business Segment, Geographic Area, Product/Service Offerings and Significant Customer Information

17) Business Segment, Geographic Area, Product/Service Offerings 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, 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’s primary served markets include semiconductor, industrial technologies, life and health sciences, research and defense.

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. Effective February 1, 2019, in conjunction with its acquisition of ESI, the Company created a third reportable segment known as the Equipment & Solutions segment in addition to its two then-existing reportable segments: the Vacuum & Analysis segment and the Light & Motion segment.

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, electronic control technology, reactive gas generation and delivery, power generation and delivery 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, optics, precision motion control and vibration control.

The Equipment & Solutions segment provides laser-based manufacturing systems solutions for the micro-machining industry that enable customers to optimize production. The Equipment & Solutions segment’s primary served markets include flexible and rigid PCB processing/fabrication, semiconductor wafer processing, and passive component manufacturing and testing. The Equipment & Solutions segment’s systems incorporate specialized laser technology and proprietary control software to efficiently process the materials and components that are an integral part of electronic devices and 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 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 table sets forth net revenues by reportable segment:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Vacuum & Analysis	$	361.3	$	240.7	$	995.1	$	710.7
Light & Motion		175.9		172.4		507.3		549.0
Equipment & Solutions		52.6		49.4		167.4		140.4
	$	589.8	$	462.5	$	1,669.8	$	1,400.1

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

	Three Months Ended September 30,					Nine Months Ended September 30,
	2020		2019			2020			2019
Gross profit by reportable segment:
Vacuum & Analysis	$	163.5	$	102.8		$	444.1		$	303.0
Light & Motion		76.0		79.9			227.8			257.6
Equipment & Solutions		22.5		22.3			76.0			53.5
Total gross profit by reportable segment		262.0		205.0			747.9			614.1
Operating expenses:
Research and development		42.5		41.7			127.7			122.3
Selling, general and administrative		87.0		82.1			260.3			247.8
Acquisition and integration costs		0.5		2.1			3.4			35.5
Restructuring and other		3.1		1.5			6.8			4.7
Amortization of intangible assets		12.5		17.0			42.6			50.3
Asset impairment		—		—			1.2			—
COVID-19 related net credits		—		—			(1.2	)		—
Fees and expenses related to repricing of Term Loan Facility		—		0.6			—			6.5
Gain on sale of long-lived assets		—		(6.8	)		—			(6.8	)
Income from operations		116.4		66.8			307.1			153.8
Interest and other expense, net		7.6		11.4			24.6			31.2
Income before income taxes		108.8		55.4			282.5			122.6
Provision for income taxes		17.1		8.0			48.0			25.0
Net income	$	91.7	$	47.4		$	234.5		$	97.6

The following table sets forth capital expenditures by reportable segment for the three and nine months ended September 30, 2020 and 2019:

	Vacuum & Analysis		Light & Motion		Equipment & Solutions		Total
Three Months Ended September 30, 2020:
Capital expenditures	$	9.7	$	12.9	$	6.4	$	29.0
Nine Months Ended September 30, 2020:
Capital expenditures	$	28.8	$	21.4	$	9.7	$	59.9
Three Months Ended September 30, 2019:
Capital expenditures	$	7.4	$	6.8	$	2.3	$	16.5
Nine Months Ended September 30, 2019:
Capital expenditures	$	21.6	$	16.9	$	6.2	$	44.7

The following table sets forth depreciation and amortization by reportable segment for the three and nine months ended September 30, 2020 and 2019:

	Vacuum & Analysis		Light & Motion		Equipment & Solutions		Total
Three Months Ended September 30, 2020:
Depreciation and amortization	$	5.1	$	9.6	$	8.6	$	23.3
Nine Months Ended September 30, 2020:
Depreciation and amortization	$	15.1	$	33.5	$	27.2	$	75.8
Three Months Ended September 30, 2019:
Depreciation and amortization	$	4.2	$	13.0	$	10.0	$	27.2
Nine Months Ended September 30, 2019:
Depreciation and amortization	$	12.2	$	40.4	$	27.3	$	79.9

Total income tax expense is not presented by reportable segment because the necessary information is not available nor used by the CODM.

The following table sets forth segment assets by reportable segment:

September 30, 2020	Vacuum & Analysis		Light & Motion		Equipment & Solutions		Corporate, Eliminations & Other			Total
Segment assets:
Trade accounts receivable, net	$	202.9	$	143.7	$	42.5	$	(25.2	)	$	363.9
Inventory, net		261.0		169.9		64.6		(1.3	)		494.2
Total segment assets	$	463.9	$	313.6	$	107.1	$	(26.5	)	$	858.1

December 31, 2019	Vacuum & Analysis		Light & Motion		Equipment & Solutions		Corporate, Eliminations & Other			Total
Segment assets:
Trade accounts receivable, net	$	185.9	$	147.2	$	40.1	$	(32.1	)	$	341.1
Inventory, net		224.8		163.7		73.5		0.1			462.1
Total segment assets	$	410.7	$	310.9	$	113.6	$	(32.0	)	$	803.2

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

	September 30, 2020		December 31, 2019
Total segment assets	$	858.1	$	803.2
Cash and cash equivalents		493.3		414.6
Short-term investments		222.4		109.4
Other current assets		95.9		106.3
Property, plant and equipment, net		267.9		241.9
Right-of-use asset		180.1		64.5
Goodwill and intangible assets, net		1,585.4		1,623.1
Other assets and long-term investments		47.8		53.3
Consolidated total assets	$	3,750.9	$	3,416.3

Geographic

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 tax transfer prices and have been eliminated from consolidated net revenues.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net revenues:
United States	$	281.2	$	211.1	$	757.7	$	653.0
South Korea		65.8		41.3		206.8		116.0
China		67.6		46.7		192.5		140.5
Japan		39.9		32.4		117.1		105.5
Israel		34.3		26.4		98.3		76.6
Germany		29.4		36.4		94.3		111.9
Other		71.6		68.2		203.1		196.6
	$	589.8	$	462.5	$	1,669.8	$	1,400.1

Long-lived assets:(1)	September 30, 2020		December 31, 2019
United States	$	353.1	$	208.3
Europe		37.3		41.4
Asia		88.7		89.6
	$	479.1	$	339.3

⁽¹⁾ 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.

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

	September 30, 2020		December 31, 2019
Reportable segment:
Vacuum & Analysis	$	196.5	$	196.7
Light & Motion		391.7		388.5
Equipment & Solutions		473.9		473.3
Total goodwill	$	1,062.1	$	1,058.5

Major Customers

For the three and nine months ended September 30, 2020, the Company had two customers that each accounted for 10% or more of the Company’s total net revenues. Net revenues from LAM Research Corporation constituted 14.1% and 12.3%, of the Company’s total net revenues for the three and nine month periods ended September 30, 2020, respectively, and net revenues from Applied Materials, Inc. constituted 11.0% and 10.8% of the Company’s total net revenues for the same periods. For the three and nine months ended September 30, 2019, no single customer accounted for 10% or more of the Company’s total net revenues.