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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)
________________________________________________________________
PENNSYLVANIA25-1214948
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
375 Saxonburg Boulevard16056
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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, no par valueIIVINasdaq Global Select Market
Series A Mandatory Convertible Preferred Stock, no par valueIIVIPNasdaq 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 filerSmaller 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  




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.


II-VI INCORPORATED
INDEX
Page No.
Condensed Consolidated Balance Sheets – March 31, 2022 and June 30, 2021 (Unaudited)
Condensed Consolidated Statements of Earnings – Three and nine months ended March 31, 2022 and 2021 (Unaudited)
Condensed Consolidated Statements of Comprehensive Income Three and nine months ended March 31, 2022 and 2021 (Unaudited)
Condensed Consolidated Statements of Cash Flows – Nine months ended March 31, 2022 and 2021 (Unaudited)
Condensed Consolidated Statements of Shareholders’ Equity and Mezzanine Equity – Three and nine months ended March 31, 2022 and 2021 (Unaudited)

2

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 
Inventories879,510 695,828 
Prepaid and refundable income taxes16,032 13,095 
Prepaid and other current assets84,847 67,617 
Total Current Assets4,233,799 3,027,394 
Property, plant & equipment, net1,320,191 1,242,906 
Goodwill1,292,649 1,296,727 
Other intangible assets, net657,590 718,460 
Deferred income taxes38,708 33,498 
Other assets224,259 193,665 
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 payable361,533 294,486 
Accrued compensation and benefits141,461 181,491 
Operating lease current liabilities28,050 25,358 
Accrued income taxes payable35,508 20,295 
Other accrued liabilities173,370 145,909 
Total Current Liabilities2,123,881 729,589 
Long-term debt928,745 1,313,091 
Deferred income taxes74,523 73,962 
Operating lease liabilities115,230 125,541 
Other liabilities140,641 138,119 
Total Liabilities3,383,020 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 earnings1,321,779 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' Equity3,627,765 3,406,170 
Total Liabilities, Mezzanine Equity and Shareholders' Equity$7,767,196 $6,512,650 
- See notes to condensed consolidated financial statements.
3

II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
($000, except per share data)

Three Months Ended
March 31,
20222021
Revenues$827,724 $783,232 
Costs, Expenses, and Other Expense (Income)
Cost of goods sold506,051 493,242 
Internal research and development96,895 83,231 
Selling, general and administrative118,009 121,678 
Interest expense43,499 13,034 
Other expense (income), net241 (21,432)
Total Costs, Expenses, & Other Expense (Income)764,695 689,753 
Earnings Before Income Taxes63,029 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.













4

II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
($000, except per share data)
Nine Months Ended
March 31,
20222021
Revenues$2,429,654 $2,297,885 
Costs, Expenses, and Other Expense (Income)
Cost of goods sold1,490,190 1,418,219 
Internal research and development281,189 246,337 
Selling, general and administrative358,234 328,403 
Interest expense72,752 45,833 
Other expense (income), net(5,535)(246)
Total Costs, Expenses, & Other Expense (Income)2,196,830 2,038,546 
Earnings Before Income Taxes232,824 259,339 
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.













5


II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
($000)
Three Months Ended
March 31,
Nine Months Ended
March 31,
2022202120222021
Net earnings$49,002 $81,092 $191,123 $215,258 
Other comprehensive income:
Foreign currency translation adjustments327 (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.
6

II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
($000)
Nine Months Ended March 31,
20222021
Cash Flows from Operating Activities
Net earnings$191,123 $215,258 
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation153,714 138,300 
Amortization59,820 61,570 
Share-based compensation expense57,424 54,417 
Amortization of discount on convertible debt and debt issuance costs12,159 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 receivable3,764 (8,454)
Inventories(184,073)(27,155)
Accounts payable27,056 (2,320)
Income taxes19,957 (7,592)
Accrued compensation and benefits(40,030)(16,030)
Other operating net assets (liabilities)(13,437)(691)
Net cash provided by operating activities276,007 446,852 
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 Notes990,000  
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 plan17,177 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 activities891,283 709,189 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash42,874 27,042 
Net increase in cash, cash equivalents, and restricted cash1,008,423 1,042,264 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period1,591,892 493,046 
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.
7

II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity and Mezzanine Equity (Unaudited)
($000, including share amounts)

Common StockPreferred StockAccumulated Other Comprehensive Income (Loss)Retained EarningsTreasury StockTotalMezzanine Equity
SharesAmountSharesAmountSharesAmountPreferred SharesAmount
Balance - June 30, 2021119,127 $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 activities844 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, 2021119,971 $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 activities82 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, 2021120,053 $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 activities266 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, 2022120,319 $2,045,850 2,300 $445,319 $48,117 $1,321,779 (13,869)$(233,300)$3,627,765 75 $756,411 


8

Common StockPreferred StockAccumulated Other Comprehensive Income (Loss)Retained EarningsTreasury StockTotalMezzanine Equity
SharesAmountSharesAmountSharesAmountPreferred SharesAmount
Balance - June 30, 2020105,916 $1,486,947 — $— $(87,383)$876,552 (13,356)$(199,313)$2,076,803 — $— 
Share-based and deferred compensation activities575 16,764 — — — — (120)(5,498)11,266 — — 
Shares issued in underwritten public offering10,698 438,589 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, 2020117,189 $1,942,300 2,300 $445,319 $(52,414)$916,283 (13,476)$(204,811)$3,046,677 — $— 
Share-based and deferred compensation activities854 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, 2020118,043 $1,985,833 2,300 $445,319 $14,507 $997,283 (13,487)$(206,129)$3,236,813  $ 
Share-based and deferred compensation activities327 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, 2021118,370 $2,011,210 2,300 $445,319 $4,501 $1,071,362 (13,490)$(207,244)$3,325,148 75 $716,200 
9

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
10


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,
11


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.
12


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, 2022Nine Months Ended March 31, 2022
Photonic
Solutions
Compound
Semiconductors
TotalPhotonic
Solutions
Compound
Semiconductors
Total
Industrial$18,372 $82,421 $100,793 $53,372 $251,721 $305,093 
Communications531,256 34,006 565,262 1,519,733 94,813 1,614,546 
Aerospace & Defense 45,096 45,096  136,405