Segment and Geographic Information

9 Months Ended

Jul. 04, 2020

SEGMENT AND GEOGRAPHIC INFORMATIONAt July 4, 2020, we were organized into two reporting segments, OEM Laser Sources ("OLS") and Industrial Lasers & Systems ("ILS"), based upon our organizational structure and how the CODM receives and utilizes information provided to

allocate resources and make decisions. This segmentation reflects the go-to-market strategies and synergies for our broad portfolio of laser technologies and products. While both segments deliver cost-effective, highly reliable photonics solutions, the OLS business segment is focused on high performance laser sources and complex optical sub-systems, typically used in microelectronics manufacturing, medical diagnostics and therapeutic applications, as well as in scientific research. Our ILS business segment delivers high performance laser sources, sub-systems and tools primarily used for industrial laser materials processing, serving important end markets like automotive, machine tool, consumer goods and medical device manufacturing.

We have identified OLS and ILS as operating segments for which discrete financial information is available. Both units have dedicated engineering, manufacturing, product business management and product line management functions. A small portion of our outside revenue is attributable to projects and recently developed products for which a segment has not yet been determined. The associated direct and indirect costs are presented in the category of Corporate and other, along with other corporate costs as described below.

Our Chief Executive Officer has been identified as the CODM, as he assesses the performance of the segments and decides how to allocate resources to the segments. Income from operations is the measure of profit and loss that our CODM uses to assess performance and make decisions. Assets by segment are not a measure used to assess the performance of the company by the CODM and thus are not reported in our disclosures. Income from operations represents the net sales less the cost of sales and direct operating expenses incurred within the operating segments as well as allocated expenses such as shared sales and manufacturing costs. We do not allocate certain operating expenses to our operating segments and we manage them at the corporate level. These unallocated costs include stock-based compensation and corporate functions (certain research and development, management, finance, legal and human resources) and are included in the results below under Corporate and other in the reconciliation of operating results. Management does not consider unallocated Corporate and other costs in its measurement of segment performance.

The following table provides net sales and income (loss) from operations for our operating segments and a reconciliation of our total income (loss) from operations to income (loss) before income taxes (in thousands):


	Three Months Ended						Nine Months Ended
	July 4, 2020		June 29, 2019		July 4, 2020		June 29, 2019
Net sales:
OEM Laser Sources	$	184,694	$	206,285	$	559,364	$	680,230
Industrial Lasers & Systems	113,636		132,885		352,884		414,946
Total net sales	$	298,330	$	339,170	$	912,248	$	1,095,176

Income (loss) from operations:
OEM Laser Sources	$	42,853	$	48,310	$	126,030	$	190,003
Industrial Lasers & Systems	(20,571)		(39,569)		(512,716)		(70,925)
Corporate and other	(23,456)		(15,898)		(53,209)		(44,557)
Total income (loss) from operations	(1,174)		(7,157)		(439,895)		74,521
Total other expense, net	(4,282)		(4,386)		(12,979)		(17,789)
Income (loss) before income taxes	$	(5,456)	$	(11,543)	$	(452,874)	$	56,732

Geographic Information

Our foreign operations consist primarily of manufacturing facilities and sales offices in Europe and Asia-Pacific. Sales, marketing and customer service activities are conducted through sales subsidiaries throughout the world. Geographic sales information for the three and nine months ended July 4, 2020 and June 29, 2019 is based on the location of the end customer.

Sales to unaffiliated customers are as follows (in thousands):


	Three Months Ended						Nine Months Ended
SALES	July 4, 2020		June 29, 2019		July 4, 2020		June 29, 2019
United States	$	65,094	$	82,913	$	215,236	$	251,122
Foreign countries:
South Korea	63,428		65,717		180,412		235,443
China	52,837		57,519		148,407		152,134
Japan	22,272		24,119		70,990		114,702
Asia-Pacific, other	24,090		23,954		67,889		72,100
Germany	28,650		32,809		90,485		111,646
Europe, other	27,917		38,296		95,130		114,973
Rest of World	14,042		13,843		43,699		43,056
Total foreign countries sales	233,236		256,257		697,012		844,054
Total sales	$	298,330	$	339,170	$	912,248	$	1,095,176

Major Customers

We had one customer during the three and nine months ended July 4, 2020 that accounted for 17.1% and 16.7% of net sales, respectively. This same customer accounted for 15.6% and 15.9% of net sales during the three and nine months ended June 29, 2019, respectively. This customer purchased primarily from our OLS segment.

We had one customer that accounted for 22.3% and 28.6% of accounts receivable at July 4, 2020 and September 28, 2019, respectively. This customer purchased primarily from our OLS segment.