Company Quick10K Filing
Price36.31 EPS1
Shares66 P/E43
MCap2,395 P/FCF37
Net Debt1,938 EBIT106
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-09
10-K 2020-06-30 Filed 2020-08-26
10-Q 2020-03-31 Filed 2020-05-11
10-Q 2019-12-31 Filed 2020-02-10
10-Q 2019-09-30 Filed 2019-11-12
10-K 2019-06-30 Filed 2019-08-16
10-Q 2019-03-31 Filed 2019-05-09
10-Q 2018-12-31 Filed 2019-02-08
10-Q 2018-09-30 Filed 2018-11-08
10-K 2018-06-30 Filed 2018-08-28
10-Q 2018-03-31 Filed 2018-05-09
10-Q 2017-12-31 Filed 2018-02-08
10-Q 2017-09-30 Filed 2017-11-08
10-K 2017-06-30 Filed 2017-08-21
10-Q 2017-03-31 Filed 2017-05-02
10-Q 2016-12-31 Filed 2017-02-01
10-Q 2016-09-30 Filed 2016-11-08
10-K 2016-06-30 Filed 2016-08-26
10-Q 2016-03-31 Filed 2016-05-09
10-Q 2015-12-31 Filed 2016-02-08
10-Q 2015-09-30 Filed 2015-11-06
10-K 2015-06-30 Filed 2015-08-28
10-Q 2015-03-31 Filed 2015-05-08
10-Q 2014-12-31 Filed 2015-02-06
10-Q 2014-09-30 Filed 2014-11-07
10-K 2014-06-30 Filed 2014-08-28
10-Q 2014-03-31 Filed 2014-05-12
10-Q 2013-12-31 Filed 2014-02-07
10-Q 2013-09-30 Filed 2013-11-08
10-K 2013-06-30 Filed 2013-08-28
10-Q 2013-03-31 Filed 2013-05-09
10-Q 2012-12-31 Filed 2013-02-08
10-K 2012-06-30 Filed 2012-08-28
10-Q 2012-03-31 Filed 2012-05-09
10-Q 2011-12-31 Filed 2012-02-08
10-Q 2011-09-30 Filed 2011-11-08
10-K 2011-06-30 Filed 2011-08-26
10-Q 2011-03-31 Filed 2011-05-09
10-Q 2010-12-31 Filed 2011-02-08
10-Q 2010-09-30 Filed 2010-11-08
10-K 2010-06-30 Filed 2010-08-27
10-Q 2010-03-31 Filed 2010-05-07
10-Q 2009-12-31 Filed 2010-02-08
8-K 2020-11-09 Officers, Shareholder Vote, Other Events, Exhibits
8-K 2020-11-05 Earnings, Regulation FD, Exhibits
8-K 2020-10-05 Other Events, Exhibits
8-K 2020-09-16 Regulation FD, Exhibits
8-K 2020-08-26 Regulation FD, Exhibits
8-K 2020-08-13 Earnings, Regulation FD, Exhibits
8-K 2020-07-01 Shareholder Rights, Amend Bylaw, Other Events, Exhibits
8-K 2020-06-30 Regulation FD, Other Events, Exhibits
8-K 2020-06-29 Other Events, Exhibits
8-K 2020-06-29 Other Events, Exhibits
8-K 2020-06-29 Other Events, Exhibits
8-K 2020-05-29
8-K 2020-05-29
8-K 2020-05-18
8-K 2020-05-11
8-K 2020-02-10
8-K 2020-01-29
8-K 2019-12-23
8-K 2019-12-03
8-K 2019-11-12
8-K 2019-11-12
8-K 2019-11-12
8-K 2019-10-23
8-K 2019-09-24
8-K 2019-09-24
8-K 2019-09-20
8-K 2019-09-18
8-K 2019-08-22
8-K 2019-08-16
8-K 2019-08-15
8-K 2019-08-14
8-K 2019-08-13
8-K 2019-08-13
8-K 2019-08-01
8-K 2019-07-25
8-K 2019-07-05
8-K 2019-06-27
8-K 2019-05-24
8-K 2019-05-21
8-K 2019-05-20
8-K 2019-05-01
8-K 2019-05-01
8-K 2019-03-26
8-K 2019-03-11
8-K 2019-03-06
8-K 2019-03-01
8-K 2019-02-01
8-K 2019-01-31
8-K 2018-12-27
8-K 2018-12-03
8-K 2018-11-13
8-K 2018-11-09
8-K 2018-11-09
8-K 2018-11-09
8-K 2018-11-09
8-K 2018-11-01
8-K 2018-11-01
8-K 2018-09-04
8-K 2018-08-08
8-K 2018-08-07
8-K 2018-07-09
8-K 2018-05-11
8-K 2018-05-01
8-K 2018-05-01
8-K 2018-03-26
8-K 2018-03-13
8-K 2018-02-02
8-K 2018-02-01

IIVI 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1. Basis of Presentation
Note 2. Recently Issued Financial Accounting Standards
Note 3. Finisar Acquisition
Note 4. Other Acquisitions and Investments
Note 5. Revenue From Contracts with Customers
Note 6. Inventories
Note 7. Property, Plant and Equipment
Note 8. Goodwill and Other Intangible
Note 9. Debt
Note 10. Income Taxes
Note 11. Leases
Note 12. Equity
Note 13. Earnings per Share
Note 14. Segment Reporting
Note 15. Share - Based Compensation
Note 16. Fair Value of Financial Instruments
Note 17. Share Repurchase Programs
Note 18. Accumulated Other Comprehensive Income (Loss)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Issuer Purchases of Equity Securities
Item 6. Exhibits
EX-31.01 iivi-2021930xexx3101.htm
EX-31.02 iivi-2021930xexx3102.htm
EX-32.01 iivi-2021930xexx3201.htm
EX-32.02 iivi-2021930xexx3202.htm

II-VI Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
Assets, Equity
Rev, G Profit, Net Income
Ops, Inv, Fin

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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2020
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
(Exact name of registrant as specified in its charter)
(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
(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  

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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 November 3, 2020, 103,726,262 shares of Common Stock, no par value, of the registrant were outstanding.

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Page No.
Condensed Consolidated Balance Sheets – September 30, 2020 and June 30, 2020 (Unaudited)
Condensed Consolidated Statements of Earnings (Loss) – Three months ended September 30, 2020 and 2019 (Unaudited)
Condensed Consolidated Statements of Comprehensive Income (Loss) – Three months ended September 30, 2020 and 2019 (Unaudited)
Condensed Consolidated Statements of Cash Flows – Three months ended September 30, 2020 and 2019 (Unaudited)
Condensed Consolidated Statements of Shareholders’ Equity – Three months ended September 30, 2020 and 2019


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II-VI Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
September 30,
June 30,
Current Assets
Cash and cash equivalents$683,985 $493,046 
Accounts receivable - less allowance for doubtful accounts of $1,622 at September 30, 2020
and $1,698 at June 30, 2020
577,127 598,124 
Inventories639,833 619,810 
Prepaid and refundable income taxes12,794 12,279 
Prepaid and other current assets78,003 65,710 
Total Current Assets1,991,742 1,788,969 
Property, plant & equipment, net1,218,575 1,214,772 
Goodwill1,254,338 1,239,009 
Other intangible assets, net757,770 758,368 
Investments75,188 73,767 
Deferred income taxes27,940 22,938 
Other assets145,066 136,891 
Total Assets$5,470,619 $5,234,714 
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of long-term debt$62,050 $69,250 
Accounts payable256,029 268,773 
Accrued compensation and benefits122,584 157,557 
Operating lease current liabilities24,142 24,634 
Accrued income taxes payable42,460 33,341 
Other accrued liabilities137,628 119,338 
Total Current Liabilities644,893 672,893 
Long-term debt1,468,096 2,186,092 
Deferred income taxes55,031 45,551 
Operating lease liabilities99,566 94,701 
Other liabilities156,356 158,674 
Total Liabilities2,423,942 3,157,911 
Shareholders' Equity
Preferred stock, no par value, 6% cumulative; authorized - 5,000,000; issued - 2,300,000 shares at September 30, 2020
Common stock, no par value; authorized - 300,000,000 shares; issued - 117,188,859 shares at September 30, 2020; 105,916,068 shares at June 30, 2020
1,942,300 1,486,947 
Accumulated other comprehensive loss
Retained earnings916,283 876,552 
3,251,488 2,276,116 
Treasury stock, at cost; 13,476,334 shares at September 30, 2020 and 13,356,447 shares at June 30, 2020
Total Shareholders' Equity3,046,677 2,076,803 
Total Liabilities and Shareholders' Equity$5,470,619 $5,234,714 
- See notes to condensed consolidated financial statements.

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II-VI Incorporated and Subsidiaries
Condensed Consolidated Statement of Earnings (Loss) (Unaudited)
($000, except per share data)
Three Months Ended
September 30,
Revenues$728,084 $340,409 
Costs, Expenses, and Other Expense (Income)
Cost of goods sold441,520 217,269 
Internal research and development78,248 36,120 
Selling, general and administrative107,186 105,495 
Interest expense17,214 6,968 
Other expense (income), net24,339 5,079 
Total Costs, Expenses, & Other Expense (Income)668,507 370,931 
Earnings (Loss) Before Income Taxes59,577 (30,522)
Income Tax Expense (Benefit)13,311 (4,524)
Net Earnings (Loss)$46,266 $(25,998)
Series A Mandatory Convertible Preferred Stock Dividends6,440  
Net Earnings (Loss) available to the Common Shareholders$39,826 $(25,998)
Basic Earnings (Loss) Per Share$0.39 $(0.39)
Diluted Earnings (Loss) Per Share$0.38 $(0.39)
- See notes to condensed consolidated financial statements.

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II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
Three Months Ended
September 30,
Net earnings (loss)$46,266 $(25,998)
Other comprehensive income (loss):
Foreign currency translation adjustments35,524 (13,019)
Change in fair value of interest rate swap, net of taxes of ($152) for the three months ended September 30, 2020
Pension adjustment, net of taxes of $23 for the three months ended September 30, 2019
Comprehensive income (loss)$81,235 $(38,933)
- See notes to condensed consolidated financial statements.

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II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
September 30,
Cash Flows from Operating Activities
Net earnings (loss)$46,266 $(25,998)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation44,474 20,796 
Amortization20,211 6,152 
Share-based compensation expense15,757 15,603 
Amortization of discount on convertible debt and debt issuance costs5,170 3,570 
Debt extinguishment costs24,747 3,960 
Losses on foreign currency remeasurements and transactions4,703 1,131 
Earnings from equity investments(1,417)(600)
Deferred income taxes22,567 (16,434)
Increase (decrease) in cash from changes in (net of effect of acquisitions):
Accounts receivable22,483 8,783 
Accounts payable(15,165)748 
Contract liabilities(3,256)12,597 
Income taxes2,484 (1,344)
Accrued compensation and benefits(34,973)(14,721)
Other operating net assets (liabilities)(15,053)(25,031)
Net cash provided by (used in) operating activities134,327 (25,615)
Cash Flows from Investing Activities
Additions to property, plant & equipment(33,792)(25,636)
Purchases of businesses, net of cash acquired(36,064)(1,036,609)
Other investing activities (1,940)
Net cash used in investing activities(69,856)(1,064,185)
Cash Flows from Financing Activities
Proceeds from issuance of common shares460,000  
Proceeds from issuance of preferred shares460,000  
Proceeds from borrowings of Term A Facility 680,000 
Proceeds from borrowings of Term B Facility 720,000 
Proceeds from borrowings of Revolving Credit Facility 160,000 
Proceeds from borrowings under prior Credit Facility 10,000 
Payments on borrowings under prior Term Loan, Credit Facility and other loans (172,780)
Payments on borrowings under Term A Facility(15,513) 
Payments on borrowings under Term B Facility(714,600) 
Payments on borrowings under Revolving Credit Facility(25,000) 
Debt issuance costs (63,510)
Equity issuance costs(36,092) 
Proceeds from exercises of stock options1,083 2,975 
Payments in satisfaction of employees' minimum tax obligations(5,574)(9,418)
Other financing activities(1,329)(660)
Net cash provided by financing activities122,975 1,326,607 
Effect of exchange rate changes on cash and cash equivalents3,493 (2,128)
Net increase in cash and cash equivalents190,939 234,679 
Cash and Cash Equivalents at Beginning of Period493,046 204,872 
Cash and Cash Equivalents at End of Period$683,985 $439,551 
Cash paid for interest$7,615 $1,702 
Cash paid for income taxes$13,606 $8,218 
Additions to property, plant & equipment included in accounts payable$17,472 $13,228 
- See notes to condensed consolidated financial statements.

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II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)
($000, including share amounts)
Common StockPreferred Stock Accumulated
Income (Loss)
Treasury StockTotal
Three Months Ended September 30, 2020SharesAmountSharesAmount SharesAmount
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 activities575 16,764 — — — — (120)(5,498)11,266 
Shares issued in July 2020 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 

Common StockAccumulated
Income (Loss)
Treasury StockTotal
Three Months Ended September 30, 2019SharesAmountSharesAmount
Balance - June 30, 2019
76,315 $382,423 $(24,221)$943,581 (12,604)$(168,574)$1,133,209 
Share-based and deferred compensation activities708 59,043 — — (251)(9,832)49,211 
Shares issued and related to Finisar acquisition26,713 987,707 — — — — 987,707 
Net loss— — — (25,998)— — (25,998)
Foreign currency translation adjustments— — (13,019)— — — (13,019)
Pension adjustment, net of taxes of $23
— — 84 — — — 84 
Balance - September 30, 2019103,736 $1,429,173 $(37,156)$917,583 (12,855)$(178,406)$2,131,194 
- See notes to condensed consolidated financial statements.

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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 months ended September 30, 2020 and 2019 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 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K dated August 26, 2020. The condensed consolidated results of operations for the three months ended September 30, 2020 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, 2020 was derived from the Company’s audited consolidated financial statements.
On September 24, 2019, the Company completed its acquisition of Finisar Corporation (“Finisar”). The Company’s condensed consolidated financial statements include the operating results of Finisar from the date of acquisition. Refer to Note 3 for further discussion of the acquisition.
In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, which continues to spread throughout the United States and world. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business including the impact to our suppliers and customers as well as the impact to the countries and markets in which we operate. At the onset of the COVID-19 outbreak, we began focusing intensely on mitigating the adverse impacts of COVID-19 on our foreign and domestic operations starting by protecting our employees, suppliers and customers.
Note 2.    Recently Issued Financial Accounting Standards
Financial Instruments - Credit Losses
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326), which modifies the measurement of expected credit losses on certain types of financial instruments, including trade receivables. The Company adopted this standard on July 1, 2020. The adoption did not have a material impact on the Company's condensed consolidated financial statements.
Note 3.    Finisar Acquisition
On September 24, 2019 (the “Closing Date”), the Company completed its acquisition of Finisar, a global technology leader for subsystems and components for fiber optic communications.

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The purchase price allocation set forth herein is final. The Company utilized widely accepted income-based, market-based, and cost-based valuation approaches to perform the purchase price allocation. Income-based valuation approaches included the use of the discounted cash flow and relief-from-royalty methods for certain acquired intangible assets.
Our final allocation of the purchase price of Finisar, based on the estimated fair value of the assets acquired and liabilities assumed as of the Closing Date, is as follows (in $000):
Final Purchase Price Allocation
September 30, 2019Adjustments
Adjustments (a)
As Adjusted
Cash and cash equivalents
$842,764 $(287)$— $842,477 
Accounts receivable260,864 — (1,523)259,341 
Inventories437,867 — 1,841 439,708 
Property, plant & equipment748,858 — (91,145)657,713 
Intangible assets827,689 — (162,489)665,200 
Other assets
82,624 287 (6,443)76,468 
Deferred tax assets — 16,267 16,267 
Accounts payable(123,707)— — (123,707)
Other accrued liabilities (a)
Deferred tax liabilities (a)
(197,809)43,964 85,179 (68,666)
Debt(575,000)— — (575,000)
Goodwill (a)
759,239 — 155,051 914,290 
Total Purchase Price$2,914,964 $— $(6,461)$2,908,503 

(a) During the quarter ended September 30, 2020, the Company finalized its warranty reserve liabilities resulting in a reduction of other accrued liabilities by approximately $6.5 million, with a corresponding decrease to goodwill and deferred tax liabilities.
Note 4.    Other Acquisitions and Investments
Acquisition of Ascatron AB
On August 20, 2020, the Company acquired all of the outstanding shares of Ascatron AB, located in Sweden. The acquisition will add essential elements to the Company's vertically integrated silicon carbide technology platform. Purchase price consideration totaled $36.7 million.
Due to the timing of the acquisition, the Company is in the process of measuring the fair value of assets acquired and liabilities assumed, including tangible and intangible assets and related deferred income taxes. The following table presents a
preliminary allocation of the purchase price of the assets acquired and liabilities assumed at the date of acquisition ($000):

Developed technology$20,000 
Other assets2,511 
Total assets acquired$41,433 
Non-interest bearing liabilities$(203)
Deferred tax liability(4,526)
Total liabilities assumed(4,729)
Net assets acquired$36,704 

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The goodwill is recorded in the Compound Semiconductor segment and is attributed to the workforce acquired as part of the transaction. The goodwill is non-deductible for income tax purposes. Transaction expenses related to the acquisition totaled $1.9 million for three months ended September 30, 2020 and is included in Selling, General and Administrative expenses in the Condensed Consolidated Statement of Earnings.
The amount of revenues and net earnings from the acquisition included in the Company’s Condensed Consolidated Statement of Earnings for the three months ended September 30, 2020 were insignificant.
Purchase of Equity Investment in INNOViON Corporation
As of September 30, 2020, the Company holds a 93.8% equity investment in INNOViON Corporation ("Innovion"), a leader in ion implantation technology for silicon and compound semiconductor devices, which was acquired in November 2017 for $51.5 million. The Company’s pro-rata share of earnings from this investment for the three months ended September 30, 2020 and 2019 was insignificant.
This investment is accounted for under the equity method of accounting. The following table summarizes the Company's equity in this nonconsolidated investment:
Ownership % as of September 30, 2020Equity as of September 30, 2020 ($000)
USAEquity Investment93.8%$59,539 
Innovion was determined to be a variable interest entity because the Company had an overall 93.8% economic position in Innovion, comprising a significant portion of its capitalization, but had only a 25% voting interest. The Company’s right to receive rewards and obligation to absorb expected losses was disproportionate to its voting interest. The Company was not the primary beneficiary because it did not have the power to direct the activities of the equity investment that most significantly impacts its economic performance. Certain business decisions, including decisions with respect to operating budgets, material capital expenditures, indebtedness, significant acquisitions or dispositions, and strategic decisions, require the approval of owners holding a majority percentage in Innovion.  The Company previously accounted for its interest as an equity method investment as the Company had the ability to exercise significant influence over operating and financial policies of Innovion.
As of September 30, 2020 and June 30, 2020, the Company’s maximum financial statement exposure related to Innovion was approximately $59.5 million and $58.8 million, respectively, which is included in Investments on the Condensed Consolidated Balance Sheets.
On August 10, 2020, the Company entered into an agreement to acquire all the outstanding interests of Innovion. The Company acquired the remaining outstanding interests of Innovion on October 1, 2020.
Note 5.    Revenue from Contracts with Customers
The following tables summarize disaggregated revenue by revenue market, and product for the three months ended September 30, 2020 and 2019 ($000):
Three Months Ended September 30, 2020
Photonic SolutionsCompound SemiconductorsUnallocated
& Other
Direct Ship Parts$493,928 $180,915 $ $674,843 
Services3,799 4,077  7,876 
U.S. Government
Direct Ship Parts 36,488  36,488 
Services 8,877  8,877 
Total Revenues$497,727 $230,357 $ $728,084 


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Three Months Ended September 30, 2019
Photonic SolutionsCompound SemiconductorsUnallocated
& Other
Direct Ship Parts$140,345 $130,188 $22,051 $292,584 
Services1,012 5,691  6,703 
U.S. Government
Direct Ship Parts 37,082  37,082 
Services 4,040  4,040 
Total Revenues$141,357 $177,001 $22,051 $340,409 

Contracts with the United States (“U.S.”) government disclosed above are through its prime contractors.
Contract Liabilities
Payments received from customers are based on invoices or billing schedules as established in contracts with customers. Contract liabilities relate to billings in advance of performance under the contract. Contract liabilities are recognized as revenue when the performance obligation has been performed. During the three months ended September 30, 2020, the Company recognized revenue of $9.7 million related to customer payments that were included as contract liabilities in the Condensed Consolidated Balance Sheet as of June 30, 2020. The Company had $35.4 million of contract liabilities recorded in the Condensed Consolidated Balance Sheets as of September 30, 2020.
Note 6.    Inventories
The components of inventories were as follows ($000):
September 30,
June 30,
Raw materials$189,141 $190,237 
Work in progress308,788 298,577 
Finished goods141,904 130,996 
$639,833 $619,810 

Note 7.    Property, Plant and Equipment
Property, plant and equipment consists of the following ($000):
September 30,
June 30,
Land and improvements$19,726 $18,396 
Buildings and improvements387,696 345,736 
Machinery and equipment1,339,809 1,352,835 
Construction in progress114,298 111,394 
Finance lease right-of-use asset25,000 25,000 
1,886,529 1,853,361 
Less accumulated depreciation(667,954)(638,589)
$1,218,575 $1,214,772 


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Note 8.    Goodwill and Other Intangible
Changes in the carrying amount of goodwill were as follows ($000):
Three Months Ended September 30, 2020
Photonic SolutionsCompound SemiconductorsTotal
Balance-beginning of period$1,052,494 $186,515 $1,239,009 
Goodwill acquired 18,922 18,922 
Finisar measurement period adjustments(4,901) (4,901)
Foreign currency translation1,557 (249)1,308 
Balance-end of period$1,049,150 $205,188 $1,254,338 
The gross carrying amount and accumulated amortization of the Company’s intangible assets other than goodwill as of September 30, 2020 and June 30, 2020 were as follows ($000):

September 30, 2020June 30, 2020
Net Book Value
Technology$463,936 $(77,782)$386,154 $444,315 $(68,048)$376,267 
Trade Names22,489 (4,316)18,173 22,369 (3,669)18,700 
Customer Lists457,106 (103,663)353,443 456,223 (92,822)363,401 
Other1,574 (1,574) 1,570 (1,570) 
Total$945,105 $(187,335)$757,770 $924,477 $(166,109)$758,368 

Note 9.    Debt
The components of debt for the periods indicated were as follows ($000):
September 30,
June 30,
Term A Facility, interest at LIBOR, as defined, plus 2.00%
$1,178,950 $1,194,463 
Revolving Credit Facility, interest at LIBOR, as defined, plus 2.00%
49,000 74,000 
Debt issuance costs, Term A Facility and Revolving Credit Facility(30,411)(32,174)
Term B Facility, interest at LIBOR, as defined, plus 3.50%
Debt issuance costs, Term B Facility (24,747)
0.50% convertible senior notes, assumed in the Finisar acquisition
14,888 14,888 
0.25% convertible senior notes
345,000 345,000 
0.25% convertible senior notes unamortized discount attributable to cash conversion option and debt issuance costs including initial purchaser discount
Total debt1,530,146 2,255,342 
Current portion of long-term debt(62,050)(69,250)
Long-term debt, less current portion$1,468,096 $2,186,092 
Senior Credit Facilities
The Company currently has Senior Credit Facilities with Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other lenders party thereto.
The Credit Agreement provides for senior secured financing of $2.425 billion in the aggregate, consisting of

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(i)Aggregate principal amount of $1,255 million for a five-year senior secured first-lien term A loan facility (the “Term A Facility”),
(ii)Aggregate principal amount of $720 million for a seven-year senior secured term B loan facility (the “Term B Facility” and together with the Term A Facility, the “Term Loan Facilities”), which was repaid in full during the quarter ended September 30, 2020, and
(iii)Aggregate principal amount of $450 million for a five-year senior secured first-lien revolving credit facility (the “Revolving Credit Facility” and together with the Term Loan Facilities, the “Senior Credit Facilities”).
The Credit Agreement also provides for a letter of credit sub-facility not to exceed $25.0 million and a swing loan sub-facility initially not to exceed $20.0 million.
The Term B Facility was repaid in full by the Company subsequent to the public offerings that closed on July 7, 2020. In conjunction with the repayment, the Company paid $0.6 million in associated interest and expensed $24.7 million of debt issuance costs related to the Term B Facility.
The Company is obligated to repay the outstanding principal amount of the Term A Facility in quarterly installments equal to 1.25% of the initial aggregate principal amount of the Term A Facility, with the remaining outstanding balance due and payable on the fifth anniversary of the Closing Date.
The Company’s obligations under the Senior Credit Facilities are guaranteed by each of the Company’s existing or future direct and indirect domestic subsidiaries, including Finisar and its domestic subsidiaries (collectively, the “Guarantors”). Borrowings under the Senior Credit Facilities are collateralized by a first priority lien in substantially all of the assets of the Company and the Guarantors, except that no real property is collateral under the Senior Credit Facilities.
All amounts outstanding under the Senior Credit Facilities will become due and payable 120 days prior to the maturity of the Company’s currently outstanding 0.25% Convertible Senior Notes due 2022 (the “II-VI Notes”) if (i) the II-VI Notes remain outstanding, and (ii) the Company has insufficient cash and borrowing availability to repay the principal amount of the II-VI Notes.
Amounts outstanding under the Senior Credit Facilities will bear interest at a rate per annum equal to an applicable margin over a eurocurrency rate or an applicable margin over a base rate determined by reference to the highest of (a) the federal funds rate plus 0.50%, (b) Bank of America, N.A.’s prime rate and (c) a eurocurrency rate plus 1.00%, in each case as calculated in accordance with the terms of the Credit Agreement. The applicable interest rate would increase under certain circumstances relating to events of default.  The Company has entered into an interest rate swap contract to hedge its exposure to interest rate risk on its variable rate borrowings under the Senior Credit Facilities.  Refer to Note 16 for further information regarding this interest rate swap.
The Credit Agreement contains customary affirmative and negative covenants with respect to the Senior Credit Facilities, including limitations with respect to liens, investments, indebtedness, dividends, mergers and acquisitions, dispositions of assets and transactions with affiliates. The Company will be obligated to maintain a consolidated interest coverage ratio (as calculated in accordance with the terms of the Credit Agreement) as of the end of each fiscal quarter of not less than 3.00:1.00. The Company will be obligated to maintain a consolidated total net leverage ratio (as calculated in accordance with the terms of the Credit Agreement) of not greater than (i) 5.00 to 1.00 for the first four fiscal quarters after the Closing Date, commencing with the first full fiscal quarter after the Closing Date, (ii) 4.50 to 1.00 for the fifth fiscal quarter through and including the eighth fiscal quarter after the Closing Date, and (iii) 4.00 to 1.00 for each subsequent fiscal quarter. As of September 30, 2020, the Company was in compliance with all financial covenants under the Credit Agreement.
0.50% Finisar Convertible Notes
Finisar’s outstanding 0.50% Convertible Senior Notes due 2036 (the “Finisar Notes”) may be redeemed at any time on or after December 22, 2021 in whole or in part at the option of the Company at a redemption price equal to one hundred percent (100)% of the principal amount of such Finisar Notes plus accrued and unpaid interest. Each holder of Finisar Notes also may require Finisar to repurchase all or any portion of such holder’s outstanding Finisar Notes for cash on December 15, 2021, December 15, 2026 and December 15, 2031 at a repurchase price equal to one hundred percent (100%) of the principal amount of such Finisar Notes plus accrued and unpaid interest. The Finisar Notes will mature on December 15, 2036. Interest on the Finisar Notes accrues at 0.50% per annum, paid semi-annually, in arrears, on June 15 and December 15 of each year.

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In connection with the acquisition of Finisar, the Company, Finisar and the trustee entered into a First Supplemental Indenture, dated as of September 24, 2019 (the “First Supplemental Indenture”). The First Supplemental Indenture supplements the base indenture (as supplemented, the “Finisar Indenture”), which governs the Finisar Notes. Pursuant to the terms of the First Supplemental Indenture, the Company has fully and unconditionally guaranteed, on a senior unsecured basis, the due and punctual payment and performance of all obligations of Finisar to the holders of the Finisar Notes. The First Supplemental Indenture also provides that the right of holders of Finisar Notes to convert Finisar Notes into cash and/or shares of Finisar’s common stock, is changed to a right to convert Finisar Notes into cash and/or shares of the Company’s common stock, subject to the terms of the Finisar Indenture.
Under the terms of the Finisar Indenture, the consummation and effectiveness of the Merger on the Closing Date constituted a Fundamental Change (as defined in the Finisar Indenture) and a Make-Whole Fundamental Change (as defined in the Finisar Indenture). Accordingly, in accordance with the terms of the Finisar Indenture, each holder of Finisar Notes had the right to (i) convert its Finisar Notes into cash and/or shares of Company Common Stock, at Finisar’s option, or (ii) require that Finisar repurchase such holder’s Finisar Notes for an amount in cash equal to one hundred percent (100)% of the principal amount of such Finisar Notes plus accrued and unpaid interest.
Holders of approximately $560.1 million in aggregate principal amount of Finisar Notes exercised the repurchase right. The Company repurchased those Finisar Notes on October 23, 2019 for an aggregate consideration of approximately $561.1 million in cash, including accrued interest. No holders of Finisar Notes exercised the related conversion right. The Company borrowed $561.0 million under a delayed draw on its Term Loan A to fund the payment to the holders of Finisar Notes that exercised the repurchase right. As of September 30, 2020, approximately $14.9 million in aggregate principal amount of Finisar Notes remain outstanding.
0.25% Convertible Senior Notes
In August 2017, the Company issued and sold $345 million aggregate principal amount of the II-VI Notes in a private placement to qualified institutional buyers within the meaning of Rule 144A under the Securities Act of 1933, as amended.
As a result of our cash conversion option, the Company separately accounted for the value of the embedded conversion option as a debt discount. The value of the embedded conversion option was determined based on the estimated fair value of the debt without the conversion feature, which was determined using an expected present value technique (income approach) to estimate the fair value of similar nonconvertible debt; the debt discount is being amortized as additional non-cash interest expense over the term of the II-VI Notes using the effective interest method.
The equity component is not remeasured as long as it continues to meet the conditions for equity classification. The initial conversion rate is 21.25 shares of common stock per $1,000 principal amount of II-VI Notes, which is equivalent to an initial conversion price of $47.06 per share of common stock. Throughout the term of the II-VI Notes, the conversion rate may be adjusted upon the occurrence of certain events. The if-converted value of the II-VI Notes amounted to $297.4 million as of September 30, 2020 and $346.2 million as of June 30, 2020 (based on the Company’s closing stock price on the last trading day of the fiscal periods then ended). As of September 30, 2020, the II-VI Notes are not yet convertible based upon the II-VI Notes’ conversion features.  Holders of the II-VI Notes will not receive any cash payment representing accrued and unpaid interest upon conversion of a II-VI Note. Accrued but unpaid interest will be deemed to be paid in full upon conversion rather than cancelled, extinguished or forfeited.
The following tables set forth total interest expense recognized related to the II-VI Notes for the three months ended September 30, 2020 and September 30, 2019 ($000):
Three Months Ended
September 30, 2020
Three Months Ended
September 30, 2019
0.25% contractual coupon
$220 $220 
Amortization of debt discount and debt issuance costs including initial purchaser discount3,407 3,255 
Interest expense$3,627 $3,475 
The effective interest rate on the liability component for both periods presented was 4.5%. The unamortized discount amounted to $23.8 million as of September 30, 2020 and is being amortized over three years.

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Aggregate Availability
The Company had aggregate availability of $399.6 million under its line of credit as of September 30, 2020.
Weighted Average Interest Rate
The weighted average interest rate of total borrowings was 1.8% and 1.9% for the three months ended September 30, 2020 and 2019, respectively.
Note 10.    Income Taxes
The Company’s year-to-date effective income tax rate at September 30, 2020 was 22.3% compared to a benefit of 14.8% for the same period in 2019. The variations between the Company’s effective tax rate and the U.S. statutory rate of 21% were primarily due to the impact of the U.S. enacted tax legislation partially offset by research and development incentives in certain jurisdictions and foreign tax credits. 
U.S. GAAP prescribes the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements which includes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of September 30, 2020 and June 30, 2020, the Company’s gross unrecognized income tax benefit, excluding interest and penalties, was $40.5 million and $42.8 million, respectively. The Company has classified $7.4 million of uncertain tax positions as current income tax liabilities and the remaining uncertain tax positions of $33.1 million as noncurrent income tax liabilities, as the amounts are not expected to be paid within one year. If recognized, $37.7 million of the gross unrecognized tax benefits at September 30, 2020 would impact the effective tax rate. The Company recognizes interest and penalties related to uncertain tax positions in the income tax provision in the Condensed Consolidated Statements of Earnings (Loss). The amount of accrued interest and penalties included in the gross unrecognized income tax benefit was $3.6 million and $3.8 million at September 30, 2020 and June 30, 2020, respectively. Fiscal years 2017 to 2021 remain open to examination by the U.S. Internal Revenue Service, fiscal years 2015 to 2021 remain open to examination by certain state jurisdictions, and fiscal years 2009 to 2019 remain open to examination by certain foreign taxing jurisdictions.  The Company is currently under examination for certain subsidiary companies in the Philippines for the year 2017; Germany for the years 2012 through 2015; Australia for the years 2011 through 2014; and India for the year 2016. The Company believes its income tax reserves for these tax matters are adequate.
Note 11.    Leases
On July 1, 2019, the Company adopted Topic 842, Leases, using the modified retrospective transition approach. We determine if an arrangement is a lease at inception and classify it as either finance or operating. The Company's portfolio of leases contains certain real estate, equipment and vehicle leases.
The Company’s lease liabilities are recognized based on the present value of the remaining fixed lease payments, over the lease term, using a discount rate of similarly secured borrowings available to the Company. For the purpose of lease liability measurement, we consider only payments that are fixed and determinable at the time of commencement. Any variable payments that depend on an index or rate are expensed as incurred