II-VI INC [COHR] Filings

10-Q 1 iivi-20220331.htm 10-Q iivi-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________________________________

FORM 10-Q

________________________________________________________________


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2022


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from to .

Commission File Number: 001-39375

________________________________________________________________

II-VI INCORPORATED

(Exact name of registrant as specified in its charter)

________________________________________________________________


PENNSYLVANIA		25-1214948
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

375 Saxonburg Boulevard		16056
Saxonburg,	PA	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: 724-352-4455

N/A

(Former name, former address and former fiscal year, if changed since last report)

________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	IIVI	Nasdaq Global Select Market
Series A Mandatory Convertible Preferred Stock, no par value	IIVIP	Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

At May 6, 2022, 106,456,567 shares of Common Stock, no par value, of the registrant were outstanding.

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II-VI INCORPORATED

INDEX


		Page No.

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets – March 31, 2022 and June 30, 2021 (Unaudited)	3
	Condensed Consolidated Statements of Earnings – Three and nine months ended March 31, 2022 and 2021 (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income – Three and nine months ended March 31, 2022 and 2021 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows – Nine months ended March 31, 2022 and 2021 (Unaudited)	7
	Condensed Consolidated Statements of Shareholders’ Equity and Mezzanine Equity – Three and nine months ended March 31, 2022 and 2021 (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37

Item 6.	Exhibits	38

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PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

II-VI Incorporated and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

($000)


	March 31, 2022		June 30, 2021
Assets
Current Assets
Cash, cash equivalents, and restricted cash	$	2,600,315	$	1,591,892
Accounts receivable - less allowance for doubtful accounts of $2,899 at March 31, 2022 and $924 at June 30, 2021	653,095		658,962
Inventories	879,510		695,828
Prepaid and refundable income taxes	16,032		13,095
Prepaid and other current assets	84,847		67,617
Total Current Assets	4,233,799		3,027,394
Property, plant & equipment, net	1,320,191		1,242,906
Goodwill	1,292,649		1,296,727
Other intangible assets, net	657,590		718,460

Deferred income taxes	38,708		33,498
Other assets	224,259		193,665
Total Assets	$	7,767,196	$	6,512,650
Liabilities, Mezzanine Equity and Shareholders' Equity
Current Liabilities
Current portion of long-term debt	$	1,383,959	$	62,050
Accounts payable	361,533		294,486
Accrued compensation and benefits	141,461		181,491
Operating lease current liabilities	28,050		25,358
Accrued income taxes payable	35,508		20,295
Other accrued liabilities	173,370		145,909
Total Current Liabilities	2,123,881		729,589
Long-term debt	928,745		1,313,091
Deferred income taxes	74,523		73,962
Operating lease liabilities	115,230		125,541
Other liabilities	140,641		138,119
Total Liabilities	3,383,020		2,380,302
Mezzanine Equity
Series B redeemable convertible preferred stock, no par value, 5% cumulative; authorized - 215,000 shares; issued - 75,000 shares at March 31, 2022 and June 30, 2021; redemption value - $788,326 and $759,583, respectively	756,411		726,178
Shareholders' Equity
Series A preferred stock, no par value, 6% cumulative; authorized - 5,000,000 shares; issued - 2,300,000 shares at March 31, 2022 and June 30, 2021	445,319		445,319
Common stock, no par value; authorized - 300,000,000 shares; issued - 120,319,353 shares at March 31, 2022; 119,126,585 shares at June 30, 2021	2,045,850		2,028,273
Accumulated other comprehensive income	48,117		14,267
Retained earnings	1,321,779		1,136,777
	3,861,065		3,624,636
Treasury stock, at cost; 13,868,570 shares at March 31, 2022 and 13,640,555 shares at June 30, 2021	(233,300)		(218,466)
Total Shareholders' Equity	3,627,765		3,406,170
Total Liabilities, Mezzanine Equity and Shareholders' Equity	$	7,767,196	$	6,512,650

- See notes to condensed consolidated financial statements.

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II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)

($000, except per share data)


	Three Months Ended March 31,
	2022		2021
Revenues	$	827,724	$	783,232

Costs, Expenses, and Other Expense (Income)
Cost of goods sold	506,051		493,242
Internal research and development	96,895		83,231
Selling, general and administrative	118,009		121,678
Interest expense	43,499		13,034
Other expense (income), net	241		(21,432)
Total Costs, Expenses, & Other Expense (Income)	764,695		689,753

Earnings Before Income Taxes	63,029		93,479

Income Tax Expense	14,027		12,387

Net Earnings	$	49,002	$	81,092




Less: Dividends on Preferred Stock	$	17,148	$	7,013
Net Earnings available to the Common Shareholders	$	31,854	$	74,079

Basic Earnings Per Share	$	0.30	$	0.71

Diluted Earnings Per Share	$	0.28	$	0.66

- See notes to condensed consolidated financial statements.

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II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)

($000, except per share data)


	Nine Months Ended March 31,
	2022		2021
Revenues	$	2,429,654	$	2,297,885

Costs, Expenses, and Other Expense (Income)
Cost of goods sold	1,490,190		1,418,219
Internal research and development	281,189		246,337
Selling, general and administrative	358,234		328,403
Interest expense	72,752		45,833
Other expense (income), net	(5,535)		(246)
Total Costs, Expenses, & Other Expense (Income)	2,196,830		2,038,546

Earnings Before Income Taxes	232,824		259,339

Income Tax Expense	41,701		44,081

Net Earnings	$	191,123	$	215,258




Less: Dividends on Preferred Stock	$	50,933	$	20,353
Net Earnings available to the Common Shareholders	$	140,190	$	194,905

Basic Earnings Per Share	$	1.32	$	1.88

Diluted Earnings Per Share	$	1.22	$	1.78

- See notes to condensed consolidated financial statements.

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II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

($000)


	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Net earnings	$	49,002	$	81,092	$	191,123	$	215,258
Other comprehensive income:
Foreign currency translation adjustments	327		(18,400)		(11,461)		81,191
Change in fair value of interest rate swap, net of taxes of $6,519 and $9,967 for the three and nine months ended March 31, 2022, respectively, and $2,299 and $2,929 for the three and nine months ended March 31, 2021, respectively	23,804		8,394		36,395		10,693
Change in fair value of interest rate cap, net of taxes of $2,370 for the three and nine months ended March 31, 2022	8,916		—		8,916		—
Comprehensive income	$	82,049	$	71,086	$	224,973	$	307,142

- See notes to condensed consolidated financial statements.

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II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

($000)


	Nine Months Ended March 31,
	2022		2021
Cash Flows from Operating Activities
Net earnings	$	191,123	$	215,258
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	153,714		138,300
Amortization	59,820		61,570
Share-based compensation expense	57,424		54,417
Amortization of discount on convertible debt and debt issuance costs	12,159		15,512
Debt extinguishment costs	—		24,747
Unrealized losses (gains) on foreign currency remeasurements and transactions	(912)		4,260
Earnings from equity investments	(1,641)		(2,011)
Deferred income taxes	(8,917)		(2,959)

Increase (decrease) in cash from changes in (net of effect of acquisitions):
Accounts receivable	3,764		(8,454)
Inventories	(184,073)		(27,155)
Accounts payable	27,056		(2,320)

Income taxes	19,957		(7,592)
Accrued compensation and benefits	(40,030)		(16,030)
Other operating net assets (liabilities)	(13,437)		(691)
Net cash provided by operating activities	276,007		446,852
Cash Flows from Investing Activities
Additions to property, plant & equipment	(195,991)		(105,331)
Purchases of businesses, net of cash acquired	—		(34,431)




Other investing activities	(5,750)		(1,057)
Net cash used in investing activities	(201,741)		(140,819)
Cash Flows from Financing Activities
Proceeds from issuance of common shares	—		460,000
Proceeds from issuance of Series A preferred shares	—		460,000
Proceeds from issuance of Series B preferred shares	—		750,000
Proceeds from issuance of Senior Notes	990,000		—




Payments on Finisar Notes	(14,888)		—

Payments on borrowings under Term A Facility	(46,538)		(121,538)
Payments on borrowings under Term B Facility	—		(714,600)
Payments on borrowings under Revolving Credit Facility	—		(74,000)
Debt issuance costs	(10,197)		—
Equity issuance costs	—		(58,596)
Proceeds from exercises of stock options and purchases of stock under employee stock purchase plan	17,177		31,562

Payments in satisfaction of employees' minimum tax obligations	(14,948)		(8,253)
Payment of dividends	(27,608)		(13,419)
Other financing activities	(1,715)		(1,967)
Net cash provided by financing activities	891,283		709,189
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	42,874		27,042
Net increase in cash, cash equivalents, and restricted cash	1,008,423		1,042,264
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	1,591,892		493,046
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	2,600,315	$	1,535,310
Cash paid for interest	$	24,158	$	17,963
Cash paid for income taxes	$	34,757	$	53,696
Additions to property, plant & equipment included in accounts payable	$	71,477	$	21,650

- See notes to condensed consolidated financial statements.

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II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity and Mezzanine Equity (Unaudited)

($000, including share amounts)


	Common Stock			Preferred Stock			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total		Mezzanine Equity
	Shares	Amount		Shares	Amount						Shares	Amount				Preferred Shares	Amount
Balance - June 30, 2021	119,127	$	2,028,273	2,300	$	445,319	$	14,267	$	1,136,777	(13,640)	$	(218,466)	$	3,406,170	75	$	726,178
Share-based and deferred compensation activities	844	30,567		—	—		—		—		(200)	(12,935)		17,632		—	—


Net Earnings	—	—		—	—		—		74,464		—	—		74,464		—	—
Foreign currency translation adjustments	—	—		—	—		(14,381)		—		—	—		(14,381)		—	—
Change in fair value of interest rate swap, net of taxes of $734	—	—		—	—		2,681		—		—	—		2,681		—	—
Accretion to redemption value of Series B shares issued in March 2021	—	—		—	—		—		(478)		—	—		(478)		—	478

Dividends	—	—		—	—		—		(16,604)		—	—		(16,604)		—	9,704
Adjustment for ASU 2020-06	—	(56,388)		—	—		—		44,916		—	—		(11,472)		—	—
Balance - September 30, 2021	119,971	$	2,002,452	2,300	$	445,319	$	2,567	$	1,239,075	(13,840)	$	(231,401)	$	3,458,012	75	$	736,360
Share-based and deferred compensation activities	82	16,854		—	—		—		—		(13)	(806)		16,048		—	—

Net Earnings	—	—		—	—		—		67,657		—	—		67,657		—	—
Foreign currency translation adjustments	—	—		—	—		2,593		—		—	—		2,593		—	—
Change in fair value of interest rate swap, net of taxes of $2,714	—	—		—	—		9,910		—		—	—		9,910		—	—

Accretion to redemption value of Series B shares issued in March 2021	—	—		—	—		—		(496)		—	—		(496)		—	496
Dividends	—	—		—	—		—		(16,311)		—	—		(16,311)		—	9,307
Balance - December 31, 2021	120,053	$	2,019,306	2,300	$	445,319	$	15,070	$	1,289,925	(13,853)	$	(232,207)	$	3,537,413	75	$	746,163
Share-based and deferred compensation activities	266	26,544		—	—		—		—		(16)	(1,093)		25,451		—	—

Net Earnings	—	—		—	—		—		49,002		—	—		49,002		—	—
Foreign currency translation adjustments	—	—		—	—		327		—		—	—		327		—	—
Change in fair value of interest rate swap, net of taxes of $6,519	—	—		—	—		23,804		—		—	—		23,804		—	—
Change in fair value of interest rate cap, net of taxes of $2,370	—	—		—	—		8,916		—		—	—		8,916		—	—

Accretion to redemption value of Series B shares issued in March 2021	—	—		—	—		—		(516)		—	—		(516)		—	516
Dividends	—	—		—	—		—		(16,632)		—	—		(16,632)		—	9,732
Balance - March 31, 2022	120,319	$	2,045,850	2,300	$	445,319	$	48,117	$	1,321,779	(13,869)	$	(233,300)	$	3,627,765	75	$	756,411

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	Common Stock			Preferred Stock			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total		Mezzanine Equity
	Shares	Amount		Shares	Amount						Shares	Amount				Preferred Shares	Amount
Balance - June 30, 2020	105,916	$	1,486,947	—	$	—	$	(87,383)	$	876,552	(13,356)	$	(199,313)	$	2,076,803	—	$	—
Share-based and deferred compensation activities	575	16,764		—	—		—		—		(120)	(5,498)		11,266		—	—

Shares issued in underwritten public offering	10,698	438,589		2,300	445,319		—		—		—	—		883,908		—	—
Net Earnings	—	—		—	—		—		46,266		—	—		46,266		—	—
Foreign currency translation adjustments	—	—		—	—		35,524		—		—	—		35,524		—	—
Change in fair value of interest rate swap, net of taxes of $(152)	—	—		—	—		(555)		—		—	—		(555)		—	—

Dividends	—	—		—	—		—		(6,535)		—	—		(6,535)		—	—
Balance - September 30, 2020	117,189	$	1,942,300	2,300	$	445,319	$	(52,414)	$	916,283	(13,476)	$	(204,811)	$	3,046,677	—	$	—
Share-based and deferred compensation activities	854	43,533		—	—		—		—		(11)	(1,318)		42,215		—	—

Net Earnings	—	—		—	—		—		87,900		—	—		87,900		—	—
Foreign currency translation adjustments	—	—		—	—		64,067		—		—	—		64,067		—	—
Change in fair value of interest rate swap, net of taxes of $782	—	—		—	—		2,854		—		—	—		2,854		—	—

Dividends	—	—		—	—		—		(6,900)		—	—		(6,900)		—	—
Balance - December 31, 2020	118,043	$	1,985,833	2,300	$	445,319	$	14,507	$	997,283	(13,487)	$	(206,129)	$	3,236,813	—	$	—
Share-based and deferred compensation activities	327	25,377		—	—		—		—		(3)	(1,115)		24,262		—	—
Common stock repurchase	—	—		—	—		—		—		—	—		—		—	—
Net Earnings	—	—		—	—		—		81,092		—	—		81,092		—	—
Series B shares issued in March 2021	—	—		—	—		—		—		—	—		—		75	716,087
Accretion to redemption value of Series B shares issued in March 2021	—	—		—	—		—		(9)		—	—		(9)		—	9
Foreign currency translation adjustments	—	—		—	—		(18,400)		—		—	—		(18,400)		—	—
Change in fair value of interest rate swap, net of taxes of $2,299	—	—		—	—		8,394		—		—	—		8,394		—	—

Dividends	—	—		—	—		—		(7,004)		—	—		(7,004)		—	104
Balance - March 31, 2021	118,370	$	2,011,210	2,300	$	445,319	$	4,501	$	1,071,362	(13,490)	$	(207,244)	$	3,325,148	75	$	716,200

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II-VI Incorporated and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. Basis of Presentation

The condensed consolidated financial statements of II-VI Incorporated (“II-VI”, the “Company”, “we”, “us” or “our”) for the three and nine months ended March 31, 2022 and 2021 are unaudited. In the opinion of management, all adjustments considered necessary for a fair presentation for the periods presented have been included. All adjustments are of a normal recurring nature unless disclosed otherwise. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K dated August 20, 2021. The condensed consolidated results of operations for the three and nine months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full fiscal year. The Condensed Consolidated Balance Sheet information as of June 30, 2021 was derived from the Company’s audited consolidated financial statements.

The Company is closely monitoring the ongoing impact of the COVID-19 pandemic and related factors on all aspects of our business, including the impact to our employees, suppliers and customers, as well as the impact to the countries and markets in which II-VI operates. In particular, the Company is continuing to focus intensely on mitigating any resulting adverse impacts on our foreign and domestic operations, starting by prioritizing the safety of our employees, suppliers and customers.

We previously classified intangible asset amortization expense within Selling, general and administrative (“SG&A”) expenses in our Condensed Consolidated Statements of Earnings. Amortization expense on the developed technology intangible assets is now classified within Cost of goods sold, with amortization expense on customer lists and trade names remaining within SG&A expenses in our Condensed Consolidated Statements of Earnings. Prior period amounts have been conformed to the current period presentation, which resulted in an increase to Cost of goods sold and a decrease to SG&A expenses of $10 million and $29 million for the three and nine months ended March 31, 2021, respectively.

Note 2. Recently Issued Financial Accounting Standards

Debt - Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity's Own Equity

In August 2020, the Financial Accounting Standards Board (the "FASB") issued ASC Update No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06"). The update simplifies the accounting for convertible instruments by eliminating two accounting models (i.e., the cash conversion model and beneficial conversion feature model) and reducing the number of embedded conversion features that could be recognized separately from the host contract. ASU 2020-06 also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. The Company adopted this standard as of July 1, 2021. The Company elected to use the modified retrospective method to report the effect of the changes. Adoption of the standard affected the Company's currently outstanding 0.25% convertible senior notes due 2022 (the "II-VI Convertible Notes"). Refer to Note 8. Debt for the impact of the adoption on the II-VI Convertible Notes.

Note 3. Pending Coherent Acquisition

On March 25, 2021, II-VI, Coherent, Inc., and Watson Merger Sub Inc., a wholly owned subsidiary of II-VI (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, and subject to the conditions set forth therein, Merger Sub will be merged with and into Coherent, and Coherent will continue as the surviving corporation in the merger and a wholly owned subsidiary of II-VI (the “Merger”).

Pursuant to the terms of the Merger Agreement, and subject to the conditions set forth therein, at the effective time of the Merger (the “Effective Time”), each share of common stock of Coherent, par value $0.01 per share (the “Coherent Common

Stock”), issued and outstanding immediately prior to the Effective Time will be canceled and extinguished and automatically converted into the right to receive the following consideration (collectively, the “Merger Consideration”):

(A) $220.00 in cash, without interest (the "Cash Consideration"), and

(B) 0.91 of a validly issued, fully paid and nonassessable share of common stock of II-VI, no par value per share ("II-VI Common Stock").

Pursuant to the terms of the Merger Agreement, each Coherent restricted stock unit award (a “Coherent RSU”), other than Director RSUs (as defined below), outstanding immediately prior to the Effective Time will be automatically converted into time-based restricted stock units denominated in shares of II-VI Common Stock entitling the holder to receive, upon settlement, a number of shares of II-VI Common Stock equal to the number of shares of Coherent Common Stock subject to the Coherent RSU multiplied by the sum of (A) 0.91, and (B) the quotient obtained by dividing the Cash Consideration by the volume weighted average price of a share of II-VI Common Stock for a 10-trading day period ending prior to the closing of the Merger (the “Closing”). For Coherent RSUs subject to performance-based vesting conditions and metrics, the number of shares of II-VI Common Stock subject to the converted Coherent RSUs will be determined after giving effect to the Coherent Board of Directors’ determination of the number of Coherent RSUs earned, based on the greater of the target or actual level of achievement of such goals or metrics immediately prior to the Effective Time.

The converted Coherent RSUs generally will be subject to the same terms and conditions that applied to the awards immediately prior to the Effective Time, provided that any Coherent RSUs subject to performance-based vesting conditions will be subject solely to time-and service-based vesting. Each Coherent RSU that is outstanding as of the date of the Merger Agreement and as of immediately prior to the Effective Time will be entitled to the following vesting acceleration benefits:

(A) for any holder of Coherent RSUs who is a participant under Coherent’s Change of Control and Leadership Change Severance Plan (the “CIC Plan”), the acceleration benefits under the CIC Plan upon such participant’s involuntary termination of employment in accordance with the terms and conditions set forth therein; and

(B) for any holder who is not a participant in the CIC Plan, upon his or her termination of employment by Coherent, II-VI or their respective subsidiaries without “cause” within the period beginning immediately following the date of the Closing and ending on December 31, 2022 (a “Qualifying Termination”), 50% of the total number of converted Coherent RSUs that otherwise would have vested during calendar year 2022 under the applicable vesting schedule in effect on the Closing had such holder remained employed with Coherent, II-VI or their respective subsidiaries through the last applicable vesting date for such award in calendar year 2022 (and reduced by the total number of converted Coherent RSUs that vested in calendar year 2022 prior to such Qualifying Termination).

Each Coherent RSU granted to a non-employee member of Coherent’s Board of Directors (“Director RSUs”) (whether or not vested) that is outstanding immediately prior to the Effective Time will automatically vest in full and be canceled and converted into the right to receive the Merger Consideration as if such Director RSU had been settled in shares of Coherent Common Stock immediately prior to the Effective Time.

The Boards of Directors of II-VI and Coherent unanimously approved the Merger and the Merger Agreement. II-VI filed with the Securities and Exchange Commission (the "SEC") a registration statement on Form S-4 relating to the Merger, and the SEC declared that registration statement to be effective on May 6, 2021. Shareholders of II-VI and stockholders of Coherent voted to approve proposals related to the Merger at special meetings held on June 24, 2021 by the respective companies.

The completion of the Merger is subject to the termination or expiration of any applicable waiting period (or extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder, and the approval by the State Administration for Market Regulation in China, along with the satisfaction and completion of other customary closing conditions. Subject to the satisfaction or waiver of each of the closing conditions, II-VI anticipates that the Merger will be completed by the end of the second calendar quarter of 2022. However, it is possible that factors outside the control of both companies could result in the Merger being completed later or not at all.

In connection with entering into the Merger Agreement, II-VI has obtained a fully underwritten financing commitment pursuant to a commitment letter (the “Commitment Letter”), dated as of March 25, 2021, as further amended and restated on April 21, 2021, with JPMorgan Chase Bank, N.A., Citigroup Global Markets Inc., MUFG Bank, Ltd., MUFG Securities Americas Inc., PNC Capital Markets LLC, PNC Bank, National Association, HSBC Securities (USA) Inc., HSBC Bank USA, National Association, Citizens Bank, N.A., Mizuho Bank, Ltd., BMO Capital Markets Corp., Bank of Montreal, TD Securities (USA) LLC, The Toronto-Dominion Bank, New York Branch, TD Bank, N.A. and First National Bank of Pennsylvania (collectively,

the “Commitment Parties”) pursuant to which the Commitment Parties have committed to provide up to $5.1 billion in debt financing. II-VI and the Commitment Parties amended and restated the Commitment Letter on October 25, 2021 (the "Amended and Restated Commitment Letter") to effect certain amendments thereto, including to reduce the total amounts of commitments thereunder to $4.99 billion. The obligation of the Commitment Parties to provide the debt financing provided for in the Amended and Restated Commitment Letter is subject to a number of customary conditions. Subject to the terms of the Amended and Restated Commitment Letter, the commitment parties thereto committed to provide a senior unsecured bridge loan facility in an aggregate principal amount of $990 million (the "Bridge Loan Commitment"). As a result of the issuance of the Senior Notes (defined in Note 8), the Bridge Loan Commitment was terminated, such that the total amounts of commitments under the Amended and Restated Commitment Letter are $4.0 billion.

On December 10, 2021, II-VI issued $990 million of the Senior Notes. The Senior Notes are guaranteed by each of the Company’s domestic subsidiaries that guarantee its obligations under its existing credit agreement. The Senior Notes were offered and sold either to persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), or to persons outside the United States under Regulation S of the Securities Act. Interest on the Senior Notes will be payable on December 15 and June 15 of each year, commencing on June 15, 2022, at a rate of 5.000% per annum. The Senior Notes will mature on December 15, 2029.

As of December 10, 2021, the New Term Facilities and the New Revolving Credit Facility (as defined in Note 8) contemplated by the Amended and Restated Commitment Letter have been fully priced and allocated. The Company intends to borrow under the New Term Facilities and to use the net proceeds from the issuance and sale of the Senior Notes in connection with the Merger. The New Revolving Credit Facility is expected to be available concurrently with the Closing.

In connection with entering into the Merger Agreement, II-VI entered into an Amended and Restated Investment Agreement, dated as of March 30, 2021, (the “Investment Agreement”), with BCPE Watson (DE) SPV, LP, an affiliate of Bain Capital Private Equity, LP (the “Investor”). Pursuant to the terms of the Investment Agreement, on March 31, 2021, II-VI issued, sold, and delivered to the Investor 75,000 shares of a new Series B-1 Convertible Preferred Stock of the Company, no par value per share (“II-VI Series B-1 Convertible Preferred Stock”), for $10,000 per share (the “Equity Per Share Price”), resulting in an aggregate purchase price of $750 million. Subject to the terms and conditions of the Investment Agreement, among other things, the Company and the Investor also agreed that the Company would issue, sell and deliver to the Investor:

•105,000 shares of a new Series B-2 Convertible Preferred Stock of the Company, no par value per share ("II-VI Series B-2 Convertible Preferred Stock," and together with the II-VI Series B-1 Convertible Preferred Stock, “New II-VI Convertible Preferred Stock”), for a purchase price per share equal to the Equity Per Share Price, resulting in an aggregate purchase price of $1.05 billion, immediately prior to the Closing; and

•immediately prior to the Closing, if elected by the Company and agreed by the Investor, up to an additional 35,000 shares of II-VI Series B-2 Convertible Preferred Stock (the "Upsize Shares") for a purchase price per share equal to the Equity Per Share Price, resulting in an aggregate maximum purchase price for the Upsize Shares of $350 million.

Following the Company’s provision of notice to the Investor of its election to offer the Upsize Shares, the Investor informed the Company on June 8, 2021 of its agreement to purchase the Upsize Shares from the Company immediately prior to the Closing, increasing the Investor’s total equity commitment to II-VI pursuant to the Investment Agreement to $2.15 billion.

The expenses associated with the Merger for the three and nine months ended March 31, 2022 have not been allocated to an Operating Segment, and are presented in the Unallocated and Other in Note 13. Segment Reporting.

Note 4. Revenue from Contracts with Customers

The Company believes that disaggregating revenue by end market provides the most relevant information regarding the nature, amount, timing, and uncertainty of revenues and cash flows.

The following tables summarize disaggregated revenue for the three and nine months ended March 31, 2022 and 2021 ($000):


	Three Months Ended March 31, 2022				Nine Months Ended March 31, 2022
	Photonic Solutions		Compound Semiconductors			Total		Photonic Solutions		Compound Semiconductors		Total

Industrial	$	18,372	$	82,421		$	100,793	$	53,372	$	251,721	$	305,093
Communications	531,256		34,006			565,262		1,519,733		94,813		1,614,546
Aerospace & Defense	—		45,096			45,096		—

II-VI INC [COHR] Filings
II-VI INC [IIVI] Filings
II-VI INC [IIVIP] Filings
10-Q	[2022-05-10]
10-Q	[2022-02-09]
10-Q	[2021-11-09]
10-K	[2021-08-20]
10-Q	[2021-05-07]
10-Q	[2021-02-09]
10-Q	[2020-11-09]
10-K	[2020-08-26]
10-Q	[2020-05-11]
10-Q	[2020-02-10]
10-Q	[2019-11-12]
10-K	[2019-08-16]
10-Q	[2019-05-09]
10-Q	[2019-02-08]
10-Q	[2018-11-08]
10-K	[2018-08-28]
10-Q	[2018-05-09]
10-Q	[2018-02-08]
10-Q	[2017-11-08]
10-K	[2017-08-21]
10-Q	[2017-05-02]
10-Q	[2017-02-01]
10-Q	[2016-11-08]
10-K	[2016-08-26]
10-Q	[2016-05-09]
10-Q	[2016-02-08]
10-Q	[2015-11-06]
10-K	[2015-08-28]
10-Q	[2015-05-08]
10-Q	[2015-02-06]
10-Q	[2014-11-07]
10-K	[2014-08-28]
10-Q	[2014-05-12]
10-Q	[2014-02-07]
10-Q	[2013-11-08]
10-K	[2013-08-28]
10-Q	[2013-05-09]
10-Q	[2013-02-08]
10-Q	[2012-11-08]
10-K	[2012-08-28]
10-Q	[2012-05-09]
10-Q	[2012-02-08]

II-VI INC [COHR] Filings

II-VI INC [IIVI] Filings

II-VI INC [IIVIP] Filings