Segment Reporting

9 Months Ended

Sep. 28, 2019

SEGMENT REPORTING

The Company’s financial segment reporting reflects an organizational alignment intended to leverage the Company’s unique portfolio of capabilities to create value for its customers by developing mission-critical solutions to maximize manufacturing yields and enable higher performance of devices. While these segments have separate products and technical know-how, they share common business systems and processes, technology centers, and strategic and technology roadmaps. The Company leverages its expertise from these three segments to create new and increasingly integrated solutions for its customers. The Company’s business is reported in the following segments:


•	Specialty Chemicals and Engineered Materials (SCEM): SCEM provides high-performance and high-purity process chemistries, gases, and materials and safe and efficient delivery systems to support semiconductor and other advanced manufacturing processes.


•	Microcontamination Control (MC): MC solutions to filter and purify critical liquid chemistries and gases used in semiconductor manufacturing processes and other high-technology industries.


•	Advanced Materials Handling (AMH): AMH develops solutions to monitor, protect, transport, and deliver critical liquid chemistries, wafers, and substrates for a broad set of applications in the semiconductor industry and other high-technology industries.

In the first quarter of 2019, the Company changed its definition of segment profit to include inter-segment sales. The Company updated its recognition of inter-segment sales to recognize the revenue and profit associated with products and components produced in one segment and supplied to another, before being sold to the ultimate end customer. The Company accounts for inter-segment sales and transfers as if the sales or transfers were to third parties, that is, at approximate market prices. Inter-segment sales are presented as an elimination below. Segment profit is defined as net sales less direct and indirect segment operating expenses, including certain general and administrative costs for the Company’s human resources, finance and information technology functions. The remaining unallocated expenses consist mainly of the Company’s corporate functions as well as interest expense, amortization of intangible assets and income tax expense. Prior quarter information has been recast to reflect the change in the Company’s definition of segment profit.

Summarized financial information for the Company’s reportable segments is shown in the following tables.



	Three months ended						Nine months ended
(In thousands)	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Net sales
SCEM	$	127,750		$	131,234		$	379,772		$	396,313
MC	155,979			151,478			463,870			395,338
AMH	117,256			123,227			340,835			377,877
Inter-segment elimination	(6,838		)	(7,342		)	(20,409		)	(20,673		)
Total net sales	$	394,147		$	398,597		$	1,164,068		$	1,148,855



	Three months ended				Nine months ended
(In thousands)	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Segment profit
SCEM	$	17,074	$	31,210	$	65,505	$	98,859
MC	46,792		42,448		137,241		119,973
AMH	17,077		22,226		54,487		73,231
Total segment profit	$	80,943	$	95,884	$	257,233	$	292,063

The following table reconciles total segment profit to income before income taxes:



	Three months ended						Nine months ended
(In thousands)	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Total segment profit	$	80,943		$	95,884		$	257,233		$	292,063
Less:
Amortization of intangible assets	15,152			21,419			50,400			45,102
Unallocated general and administrative expenses	12,998			6,490			51,640			25,580
Operating income	52,793			67,975			155,193			221,381
Interest expense	11,388			7,987			33,587			24,442
Interest income	(1,172		)	(309		)	(4,020		)	(2,613		)
Other expense (income), net	934			810			(121,329		)	4,826
Income before income tax expense	$	41,643		$	59,487		$	246,955		$	194,726

In the following tables, revenue is disaggregated by country or region for the three and nine months ended September 28, 2019 and September 29, 2018, respectively.



	Three months ended September 28, 2019											Nine months ended September 28, 2019
(In thousands)	SCEM		MC		AMH		Inter-segment			Total		SCEM		MC		AMH		Inter-segment			Total
Taiwan	$	23,186	$	32,521	$	19,164	$	—		$	74,871	$	69,943	$	102,216	$	50,027	$	—		$	222,186
United States	40,176		31,186		36,548		(6,838		)	101,072		106,590		83,860		110,287		(20,409		)	280,328
South Korea	18,441		27,239		20,195		—			65,875		55,463		81,585		52,939		—			189,987
Japan	13,587		25,160		9,417		—			48,164		40,354		74,976		32,761		—			148,091
China	14,699		23,544		12,354		—			50,597		49,269		68,247		32,853		—			150,369
Europe	7,806		9,845		12,587		—			30,238		24,235		32,022		42,594		—			98,851
Southeast Asia	9,855		6,484		6,991		—			23,330		33,918		20,964		19,374		—			74,256
	$	127,750	$	155,979	$	117,256	$	(6,838	)	$	394,147	$	379,772	$	463,870	$	340,835	$	(20,409	)	$	1,164,068



	Three months ended September 29, 2018											Nine months ended September 29, 2018
(In thousands)	SCEM		MC		AMH		Inter-segment			Total		SCEM		MC		AMH		Inter-segment			Total
Taiwan	$	25,436	$	34,452	$	18,745	$	—		$	78,633	$	79,653	$	80,556	$	50,942	$	—		$	211,151
United States	33,014		24,205		35,745		(7,342		)	85,622		99,543		65,794		111,089		(20,673		)	255,753
South Korea	21,088		18,893		19,858		—			59,839		62,206		58,698		66,407		—			187,311
Japan	12,141		27,479		12,049		—			51,669		40,707		82,016		35,160		—			157,883
China	18,667		27,360		12,263		—			58,290		50,373		56,417		38,793		—			145,583
Europe	7,579		10,873		16,899		—			35,351		23,345		30,963		49,859		—			104,167
Southeast Asia	13,309		8,216		7,668		—			29,193		40,486		20,894		25,627		—			87,007
	$	131,234	$	151,478	$	123,227	$	(7,342	)	$	398,597	$	396,313	$	395,338	$	377,877	$	(20,673	)	$	1,148,855