10-Q

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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 December 31, 2019

☐ 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: 0-16195

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

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

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  ☒

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

At February 6, 2020, 91,059,636 shares of Common Stock, no par value, of the registrant were outstanding.

II-VI INCORPORATED

INDEX

		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets – December 31, 2019 and June 30, 2019 (Unaudited)	3
	Condensed Consolidated Statements of Earnings (Loss) – Three and six months ended December 31, 2019 and 2018 (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) – Three and six months ended December 31, 2019 and 2018 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows – Six months ended December 31, 2019 and 2018 (Unaudited)	7
	Condensed Consolidated Statements of Shareholders’ Equity – Three and six months ended December 31, 2019 and 2018 (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Issuer Purchases of Equity Securities	33
Item 6.	Exhibits	34

2

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

II-VI Incorporated and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

($000)

	December 31,			June 30,
	2019			2019
Assets
Current Assets
Cash and cash equivalents	$	376,840		$	204,872
Accounts receivable - less allowance for doubtful accounts of $1,868 at December 31, 2019 and $1,292 at June 30, 2019		488,902			269,642
Inventories		662,982			296,282
Prepaid and refundable income taxes		8,449			11,778
Prepaid and other current assets		52,016			30,337
Total Current Assets		1,589,189			812,911
Property, plant & equipment, net		1,347,147			582,790
Goodwill		1,096,691			319,778
Other intangible assets, net		929,773			139,324
Investments		77,795			76,208
Deferred income taxes		17,487			8,524
Other assets		150,127			14,238
Total Assets	$	5,208,209		$	1,953,773
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of long-term debt	$	69,250		$	23,834
Accounts payable		229,042			104,462
Accrued compensation and benefits		95,019			71,847
Operating lease current liabilities		29,245			-
Accrued income taxes payable		21,121			20,476
Other accrued liabilities		127,922			49,944
Total Current Liabilities		571,599			270,563
Long-term debt		2,228,207			443,163
Deferred income taxes		98,448			23,913
Operating lease liabilities		93,347			-
Other liabilities		150,911			82,925
Total Liabilities		3,142,512			820,564
Shareholders' Equity
Preferred stock, no par value; authorized - 5,000,000 shares; none issued		-			-
Common stock, no par value; authorized - 300,000,000 shares; issued - 104,043,057 shares at December 31, 2019; 76,315,337 shares at June 30, 2019		1,441,180			382,423
Accumulated other comprehensive income (loss)		(9,208	)		(24,221	)
Retained earnings		819,370			943,581
		2,251,342			1,301,783
Treasury stock, at cost - 13,080,375 shares at December 31, 2019 and 12,603,781 shares at June 30, 2019		(185,645	)		(168,574	)
Total Shareholders' Equity		2,065,697			1,133,209
Total Liabilities and Shareholders' Equity	$	5,208,209		$	1,953,773
- See notes to condensed consolidated financial statements.

3

II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Earnings (Loss) (Unaudited)

($000 except per share data)

	Three Months Ended
	December 31,
	2019			2018
Revenues	$	666,331		$	342,839
Costs, Expenses, and Other Expense (Income)
Cost of goods sold		517,991			211,333
Internal research and development		107,700			33,764
Selling, general and administrative		119,218			58,136
Interest expense		28,390			5,580
Other expense (income), net		487			(701	)
Total Costs, Expenses, & Other Expense (Income)		773,786			308,112
Earnings (Loss) Before Income Taxes		(107,455	)		34,727
Income Taxes		(9,242	)		6,025
Net Earnings (Loss)	$	(98,213	)	$	28,702
Basic Earnings (Loss) Per Share	$	(1.08	)	$	0.45
Diluted Earnings (Loss) Per Share	$	(1.08	)	$	0.44

- See notes to condensed consolidated financial statements.

4

II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Earnings (Loss) (Unaudited)
($000 except per share data)
	Six Months Ended
	December 31,
	2019			2018
Revenues	$	1,006,740		$	657,272
Costs, Expenses, and Other Expense (Income)
Cost of goods sold		735,260			401,859
Internal research and development		143,820			66,935
Selling, general and administrative		224,713			111,659
Interest expense		35,358			11,164
Other expense (income), net		5,566			(1,414	)
Total Costs, Expenses, & Other Expense (Income)		1,144,717			590,203
Earnings (Loss) Before Income Taxes		(137,977	)		67,069
Income Taxes		(13,766	)		12,218
Net Earnings (Loss)	$	(124,211	)	$	54,851
Basic Earnings (Loss) Per Share	$	(1.58	)	$	0.86
Diluted Earnings (Loss) Per Share	$	(1.58	)	$	0.83
- See notes to condensed consolidated financial statements.

5

II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

($000)

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2019			2018			2019			2018
Net earnings (loss)	$	(98,213	)	$	28,702		$	(124,211	)	$	54,851
Other comprehensive income (loss):
Foreign currency translation adjustments	$	24,590		$	(4,454	)	$	11,571		$	(15,105	)
Change in fair value of interest rate swap, net of taxes of $989 for both the three and six months ended December 31, 2019	$	3,609		$	-		$	3,609		$	-
Pension adjustment, net of taxes of ($92) and ($69) for the three and six months ended December 31, 2019, respectively, and ($24) and ($9) for the three and six months ended December 31, 2018, respectively	$	(251	)	$	(85	)	$	(167	)	$	(33	)
Comprehensive income (loss)	$	(70,265	)	$	24,163		$	(109,198	)	$	39,713

- See notes to condensed consolidated financial statements.

6

II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

($000)

	Six Months Ended
	December 31,
	2019			2018
Cash Flows from Operating Activities
Net earnings (loss)	$	(124,211	)	$	54,851
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation		69,386			36,679
Amortization		39,714			7,820
Share-based compensation expense		34,380			9,277
Amortization of discount on convertible debt and debt issuance costs		9,639			6,255
Debt extinguishment costs		3,960			-
Losses on foreign currency remeasurements and transactions		4,575			1,726
Earnings from equity investments		(918	)		(2,767	)
Deferred income taxes		(42,076	)		(3,506	)
Increase (decrease) in cash from changes in (net of effect of acquisitions):
Accounts receivable		31,237			(8,610	)
Inventories		78,065			(39,588	)
Accounts payable		(1,963	)		22,777
Income taxes		8,930			(856	)
Accrued compensation and benefits		(9,642	)		(10,436	)
Other operating net assets (liabilities)		(44,816	)		14,584
Net cash provided by operating activities		56,260			88,206
Cash Flows from Investing Activities
Additions to property, plant & equipment		(80,288	)		(74,368	)
Purchases of businesses, net of cash acquired		(1,036,609	)		(54,229	)
Purchases of equity investments		-			(4,480	)
Other investing activities		(1,102	)		116
Net cash used in investing activities		(1,117,999	)		(132,961	)
Cash Flows from Financing Activities
Proceeds from borrowings of Term A Facility		1,241,000			-
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			120,000
Payments on Finisar Notes		(560,112	)		-
Payments on borrowings under prior Term Loan, Credit Facility and other loans		(176,596	)		(85,000	)
Payments on borrowings under Term A Facility		(15,513	)		-
Payments on borrowings under Term B Facility		(1,800	)		-
Payments on borrowings under Revolving Credit Facility		(66,000	)		-
Debt issuance costs		(63,510	)		-
Proceeds from exercises of stock options		3,077			6,222
Payments on earnout arrangements		-			(3,540	)
Common stock repurchase		(1,626	)		-
Payments in satisfaction of employees' minimum tax obligations		(15,031	)		(6,350	)
Other financing activities		(1,839	)		-
Net cash provided by financing activities		1,232,050			31,332
Effect of exchange rate changes on cash and cash equivalents		1,657			(3,359	)
Net increase (decrease) in cash and cash equivalents		171,968			(16,782	)
Cash and Cash Equivalents at Beginning of Period		204,872			247,038
Cash and Cash Equivalents at End of Period	$	376,840		$	230,256
Cash paid for interest	$	24,745		$	4,293
Cash paid for income taxes	$	25,087		$	14,527
Additions to property, plant & equipment included in accounts payable	$	12,502		$	10,347

- See notes to condensed consolidated financial statements.

7

e II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

(000)

					Accumulated
					Other
	Common Stock				Comprehensive			Retained			Treasury Stock
Three Months Ended December 31, 2019	Shares		Amount		Income (Loss)			Earnings			Shares			Amount			Total
Balance - September 30, 2019		103,736	$	1,429,173	$	(37,156	)	$	917,583			(12,855	)	$	(178,406	)	$	2,131,194
Share-based and deferred compensation activities		307		12,007		-			-			(175	)		(5,614	)		6,393
Common stock repurchase		-		-		-			-			(50	)		(1,625	)		(1,625	)
Net loss		-		-		-			(98,213	)		-			-			(98,213	)
Foreign currency translation adjustments		-		-		24,590			-			-			-			24,590
Change in fair value of interest rate swap, net of taxes of $989		-		-		3,609			-			-			-			3,609
Pension adjustment, net of taxes of ($92)		-		-		(251	)		-			-			-			(251	)
Balance - December 31, 2019		104,043	$	1,441,180	$	(9,208	)	$	819,370			(13,080	)	$	(185,645	)	$	2,065,697

					Accumulated
					Other
	Common Stock				Comprehensive			Retained		Treasury Stock
Three Months Ended December 31, 2018	Shares		Amount		Income (Loss)			Earnings		Shares			Amount			Total
Balance - September 30, 2018		76,075	$	360,276	$	(14,379	)	$	862,213		(12,497	)	$	(164,522	)	$	1,043,588
Share-based and deferred compensation activities		49		6,919		-			-		(41	)		(1,497	)		5,422
Net earnings		-		-		-			28,702		-			-			28,702
Foreign currency translation adjustments		-		-		(4,454	)		-		-			-			(4,454	)
Pension adjustment, net of taxes of ($24)		-		-		(85	)		-		-			-			(85	)
Balance - December 31, 2018		76,124	$	367,195	$	(18,918	)	$	890,915		(12,538	)	$	(166,019	)	$	1,073,173

					Accumulated
					Other
	Common Stock				Comprehensive			Retained			Treasury Stock
Six Months Ended December 31, 2019	Shares		Amount		Income (Loss)			Earnings			Shares			Amount			Total
Balance - June 30, 2019		76,315	$	382,423	$	(24,221	)	$	943,581			(12,604	)	$	(168,574	)	$	1,133,209
Share-based and deferred compensation activities		1,015		71,050		-			-			(426	)		(15,446	)		55,604
Common stock repurchase		-		-		-			-			(50	)		(1,625	)		(1,625	)
Shares issued related to Finisar acquisition		26,713		987,707		-			-			-			-			987,707
Net loss		-		-		-			(124,211	)		-			-			(124,211	)
Foreign currency translation adjustments		-		-		11,571			-			-			-			11,571
Change in fair value of interest rate swap, net of taxes of $989		-		-		3,609			-			-			-			3,609
Pension adjustment, net of taxes of ($69)		-		-		(167	)		-			-			-			(167	)
Balance - December 31, 2019		104,043	$	1,441,180	$	(9,208	)	$	819,370			(13,080	)	$	(185,645	)	$	2,065,697

					Accumulated
					Other
	Common Stock				Comprehensive			Retained		Treasury Stock
Six Months Ended December 31, 2018	Shares		Amount		Income (Loss)			Earnings		Shares			Amount			Total
Balance - June 30, 2018		75,693	$	351,761	$	(3,780	)	$	836,064		(12,396	)	$	(159,734	)	$	1,024,311
Share-based and deferred compensation activities		431		15,434		-			-		(142	)		(6,285	)		9,149
Net earnings		-		-		-			54,851		-			-			54,851
Foreign currency translation adjustments		-		-		(15,105	)		-		-			-			(15,105	)
Pension adjustment, net of taxes of $(9)		-		-		(33	)		-		-			-			(33	)
Balance - December 31, 2018	$	76,124	$	367,195	$	(18,918	)	$	890,915	$	(12,538	)	$	(166,019	)	$	1,073,173

- See notes to condensed consolidated financial statements.

8

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 six months ended December 31, 2019 and 2018 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 16, 2019. The consolidated results of operations for the three and six months ended December 31, 2019 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, 2019 was derived from the Company’s audited consolidated financial statements.

Effective July 1, 2019, the Company has realigned its organizational structure into two reporting segments for the purpose of making operational decisions and assessing financial performance: (i) Compound Semiconductors and (ii) Photonic Solutions.

On September 24, 2019, the Company completed the 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.

Note 2. Recently Issued Financial Accounting Standards

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). This ASU modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements. The Company adopted this standard on July 1, 2019.  The Company has elected to utilize the optional transition method. See Note 5.

Derivatives and Hedging

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), which more closely aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.  The Company adopted this standard on July 1, 2019.  The adoption of this standard did not have a material effect on the consolidated financial statements.

Pronouncements Currently Under Evaluation

In July 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which among other things, requires the measurement of all expected credit losses of financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward looking information to better inform their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company is in the process of evaluating the impact of the pronouncement.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (“ASU 2018-16”), which permits the use of the OIS rate based on SOFR as a U.S. benchmark interest rate eligible for hedge accounting purposes.  For public business entities that already have adopted the amendments in ASU 2017-12, the amendments in ASU 2018-16 are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.  Early adoption is permitted in any interim period upon issuance of this update if an entity already has adopted ASU 2017-12.  The Company is in the process of evaluating the impact of the pronouncement.

9

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.

Pursuant to the terms of the Agreement and Plan of Merger, dated as of November 8, 2018 (the “Merger Agreement”), Mutation Merger Sub Inc., a wholly owned subsidiary of the Company (“Merger Sub”), merged with and into Finisar (the “Merger”), with Finisar surviving the Merger. Each issued and outstanding share of Finisar’s common stock was automatically cancelled and converted into the right to receive the following consideration (collectively the “Merger Consideration”), at the election of the holder of the share of Finisar’s common stock:

• $26.00 in cash, without interest (the “Cash Consideration”),

• 0.5546 of a share of the Company’s common stock (the “Stock Consideration”), or

• a combination of $15.60 in cash, without interest, and 0.2218 of a share of the Company’s common stock (the “Mixed Consideration”).

The per share Cash Consideration and Stock Consideration were subject to adjustment pursuant to the terms of the Merger Agreement such that the aggregate Merger Consideration consisted of approximately 60.0% cash and approximately 40.0% shares of the Company’s common stock (assuming a per share price of the Company’s common stock equal to the closing price as of November 8, 2018, which was $46.88 per share) across all shares of Finisar’s common stock (the “Proration Adjustment”).  Following the Proration Adjustment, the resulting consideration for Cash Consideration was adjusted to $15.94 in cash and 0.2146 shares of the Company’s Common Stock. No adjustment was made to the Stock Consideration and Mixed Consideration.

The preliminary total fair value of consideration paid in connection with the acquisition of Finisar consisted of the following (in $000):

	Shares			Per Share			Total Consideration
Cash paid for outstanding shares of Finisar common stock						$		1,879,086
II-VI common shares issued to Finisar stockholders		26,712,822	$		36.98			987,707
Replacement equity awards attributable to pre-combination service								41,710
						$		2,908,503

The Company recorded $8.0 million and $40.2 million of acquisition related costs in the three and six months ended December 31, 2019, respectively, representing professional and other direct acquisition costs. These costs are recorded within selling, general, and administrative expense in our Condensed Consolidated Statement of Earnings (Loss).

On the Closing Date, the Company entered into an Amended and Restated Credit Agreement, dated as of September 24, 2019 (the “New Credit Agreement”), by and among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other lender parties thereto. Refer to Note 10 for additional information on the new credit facility.  

From the Closing Date, Finisar contributed $306.6 million and $328.7 million of our consolidated revenue for the three and six months ended December 31, 2019, respectively. Including severance related costs, Finisar’s contribution to our net loss was a loss of $7.3 million and $22.7 million during the three and six months ended December 31, 2019, respectively.

The Company allocated the fair value of the purchase price consideration to the tangible assets, liabilities, and intangible assets acquired, generally based on estimated fair values. The excess purchase price over those fair values is recorded as goodwill. Our valuation assumptions of acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets. Our preliminary 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):

10

		Purchase Price Allocation (Preliminary)
Cash and cash equivalents	$		842,477
Current assets			260,864
Inventories			439,708
Property, plant & equipment			748,858
Intangible assets			828,630
Other assets			82,929
Deferred tax assets			12,267
Accounts payable			(123,707	)
Other accrued liabilities			(163,109	)
Deferred tax liabilities			(219,544	)
Debt			(575,000	)
Goodwill			774,130
Total Purchase Price	$		2,908,503

The purchase price allocation set forth herein is preliminary and will be revised as additional information becomes available during the measurement period, which could be up to 12 months from the Closing Date. Any such revisions or changes may be material. The Company utilized market available benchmarking analysis to perform the preliminary allocation above.

As of December 31, 2019, the goodwill and intangibles have been allocated to the Photonic Solutions and Compound Semiconductors segments. The preliminary goodwill of $774.1 million arising from the acquisition is attributed to the expected synergies, including future cost savings, and other benefits expected to be generated by combining II-VI and Finisar. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes. See Note 9 for additional information on goodwill and intangibles.

Supplemental Pro Forma Information

The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the acquisition had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position.  The pro forma adjustments are based upon currently available information and certain assumptions that we believe are reasonable under the circumstances.

The following supplemental pro forma information presents the combined results of operations for the three and six months ended December 31, 2018 and 2019, as if Finisar had been acquired as of July 1, 2018.  The supplemental pro forma information includes adjustments to amortization and depreciation for acquired intangible assets, property, plant and equipment, adjustments to share-based compensation expense, fair value adjustments on the inventories acquired, transaction costs, and interest expense and amortization of debt issuance costs related to the New Senior Credit Facilities as defined in Note 10.

The unaudited supplemental pro forma financial information for the period presented is as follows (in $000):

		Three Months				Six Months				Three Months				Six Months
		Ended December				Ended December				Ended December				Ended December
		31, 2019				31, 2019				31, 2018				31, 2018
Revenue	$		666,331		$		1,274,487		$		672,403		$		1,300,266
Net Earnings (Loss)			(29,318	)			(30,956	)			(16,633	)			(147,820	)

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Note 4. Revenue from Contracts with Customers

The following tables summarize disaggregated revenue by revenue market, and product for the three and six months ended December 31, 2019 and 2018 ($000):

	Three Months Ended December 31, 2019
	Compound		Photonic		Unallocated
	Semiconductors		Solutions		& Other			Total
Commercial							`
Direct Ship Parts	$	157,848	$	459,253	$	-		$	617,101
Services		3,297		1,140		-			4,437
U.S. Government
Direct Ship Parts		40,165		-		-			40,165
Services		4,628		-		-			4,628
Total Revenues	$	205,938	$	460,393	$	-		$	666,331

	Three Months Ended December 31, 2018
	Compound		Photonic		Unallocated
	Semiconductors		Solutions		& Other			Total
Commercial							`
Direct Ship Parts	$	140,698	$	157,965	$	-		$	298,663
Services		2,889		1,729		-			4,618
U.S. Government
Direct Ship Parts		33,507		-		-			33,507
Services		6,051		-		-			6,051
Total Revenues	$	183,145	$	159,694	$	-		$	342,839

	Six Months Ended December 31, 2019
	Compound		Photonic		Unallocated
	Semiconductors		Solutions		& Other		Total
Commercial
Direct Ship Parts	$	288,036	$	599,598	$	22,051	$	909,685
Services		8,989		2,151		-		11,140
U.S. Government
Direct Ship Parts		77,247		-		-		77,247
Services		8,668		-		-		8,668
Total Revenues	$	382,940	$	601,749	$	22,051	$	1,006,740

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	Six Months Ended December 31, 2018
	Compound		Photonic		Unallocated
	Semiconductors		Solutions		& Other		Total
Commercial
Direct Ship Parts	$	285,565	$	291,330	$	-	$	576,895
Services		6,884		3,520		-		10,404
U.S. Government
Direct Ship Parts		60,687		-		-		60,687
Services		9,286		-		-		9,286
Total Revenues	$	362,422	$	294,850	$	-	$	657,272

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 and six months ended December 31, 2019, the Company recognized revenue of $21.2 million and $50.2 million, respectively, related to customer payments that were included as contract liabilities in the Condensed Consolidated Balance Sheet as of July 1, 2019. The Company had $37.7 million and $19.4 million of contract liabilities recorded in the Condensed Consolidated Balance Sheets as of December 31, 2019 and June 30, 2019, respectively.

Note 5. Leases

On July 1, 2019, the Company adopted Topic 842, Leases, using the modified retrospective transition approach. The reported results for the three and six months ended December 31, 2019 reflect the application of Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under Topic 840.

The Company elected the practical expedient package permitted under the transition approach. As such, the Company did not reassess whether any expired or existing contracts are or contain leases, did not reassess historical lease classification, and did not reassess initial direct costs for any leases that existed prior to July 1, 2019.

As of the date of adoption, the Company recognized operating lease assets and liabilities of approximately $80.1 million on the Condensed Consolidated Balance Sheet. In addition, we acquired approximately $45 million and $48 million of operating lease assets and liabilities, respectively, through the acquisition of Finisar, which remains preliminary as discussed in Note 3.

All existing leases that were classified as capital leases under Topic 840 are classified as finance leases under Topic 842. As of the date of adoption, the Company recognized finance lease assets of $25 million in property, plant and equipment, net, with corresponding finance lease liabilities of $24 million on the Condensed Consolidated Balance Sheet.

We determine if an arrangement is a lease at inception and classify it as either finance or operating.

Finance leases are generally those that allow us to substantially utilize or pay for the entire asset over its estimated useful life. Finance leases are recorded in property, plant and equipment, net, and finance lease liabilities within other current and other non-current liabilities on our Condensed Consolidated Balance Sheet. Finance lease assets are amortized in operating expenses on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term, with the interest component for lease liabilities included in interest expense and recognized using the effective interest method over the lease term.

Operating leases are recorded in other assets and operating lease liabilities, current and non-current on the Company’s Condensed Consolidated Balance Sheet. Operating lease assets are amortized on a straight-line basis in operating expenses over the lease term.

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. We account for non-lease components, such as common area maintenance, as a component of the lease, and include it in the initial measurement of our lease assets and corresponding liabilities. The Company’s lease terms and

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conditions may include options to extend or terminate. An option is recognized when it is reasonably certain that we will exercise that option.

The Company’s lease assets also include any lease payments made and exclude any lease incentives received prior to commencement. Our lease assets are tested for impairment in the same manner as long-lived assets used in operations.

The following table presents lease costs, which include short-term leases, lease term, and discount rates ($000):

	Three Months				Six Months
	Ended				Ended
	December 31, 2019				December 31, 2019
Finance Lease Cost
Amortization of right-of-use Assets	$	417			$	833
Interest on Lease Liabilities		334				671
Total Finance Lease Cost		751				1,505
Operating Lease Cost		11,073				17,180
Total Lease Cost	$	11,824			$	18,685
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating Cash Flows from Finance Leases		334				671
Operating Cash Flows from Operating Leases		10,731				16,671
Financing Cash Flows from Finance Leases		247				490
Weighted-Average Remaining Lease Term (in Years)
Finance Leases			12.0
Operating Leases			6.2
Weighted-Average Discount Rate
Finance Leases			5.6	%
Operating Leases			6.0	%

The following table presents future minimum lease payments, which include short-term leases ($000):

	Payments Due By Period
			Less Than		1-3		3-5
	Total		1 Year		Years		Years		Thereafter
Operating leases	$	159,620	$	35,107	$	49,305	$	29,818	$	45,390
Less interest		37,028
Operating lease liability	$	122,592
Finance leases	$	33,393	$	2,387	$	4,972	$	5,249	$	20,785
Less interest		9,409
Finance lease liability	$	23,984

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Note 6. Other Investments

The Company holds a 93.8% equity investment in a privately-held company (“Equity Investment”), which it acquired for $51.7 million. The Company’s pro-rata share of earnings/(loss) from this investment for the three and six months ended December 31, 2019 was insignificant. The Company’s pro rata share of earnings from this investment for the three and six months ended December 31, 2018 was $0.9 million and $2.0 million, and was recorded in other expense (income), net in the Condensed Consolidated Statement of Earnings (Loss).  

This investment is accounted for under the equity method of accounting. The following table summarizes the Company's equity in this nonconsolidated investment:

	Interest	Ownership % as of	Equity as of
Location	Type	December 31, 2019	December 31, 2019 ($000)
USA	Equity Investment	93.8%	$	57,658

The Equity Investment has been determined to be a variable interest entity because the Company has an overall 93.8% economic position in the investee, comprising a significant portion of its capitalization, but has only a 25% voting interest. The Company’s right to receive rewards and obligation to absorb expected losses is disproportionate to its voting interest. The Company is not the primary beneficiary because it does 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 the Equity Investment.  The Company accounts for its interest as an equity method investment as the Company has the ability to exercise significant influence over operating and financial policies of the Equity Investment.

As of December 31, 2019 and June 30, 2019, the Company’s maximum financial statement exposure related to this Equity Investment was approximately $57.7 million and $57.6 million, respectively, which is included in Investments on the Condensed Consolidated Balance Sheets.

The Company has the right to purchase all of the outstanding interest of each of the minority equity holders, and the minority equity holders have the right to cause the Company to purchase all of their outstanding interests, at any time on or after the third anniversary of the investment, or earlier upon certain events.  

Note 7. Inventories

The components of inventories were as follows ($000):

	December 31,		June 30,
	2019		2019
Raw materials	$	208,364	$	119,917
Work in progress		307,303		101,091
Finished goods		147,315		75,274
	$	662,982	$	296,282

Note 8. Property, Plant and Equipment

Property, plant and equipment consists of the following ($000):

	December 31,			June 30,
	2019			2019
Land and improvements	$	17,552		$	9,001
Buildings and improvements		310,398			249,238
Machinery and equipment		1,411,511			739,330
Construction in progress		136,514			71,425
Finance lease right-of-use asset		25,000			-
		1,900,975			1,068,994
Less accumulated depreciation		(553,828	)		(486,204	)
	$	1,347,147		$	582,790

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Included in the table above is a building acquired under a finance lease. As of December 31, 2019 and June 30, 2019, the accumulated depreciation of the finance lease right-of-use asset was $5.0 million and $4.2 million, respectively.

Note 9. Goodwill and Other Intangible Assets

Effective July 1, 2019, the Company realigned its organizational structure into two reporting segments for the purpose of making operational decisions and assessing financial performance: (i) Compound Semiconductors and (ii) Photonic Solutions. All applicable information has been restated to reflect this change.

Changes in the carrying amount of goodwill were as follows ($000):

	Six Months Ended December 31, 2019
	Compound		Photonic
	Semiconductors		Solutions		Total
Balance-beginning of period	$	185,721	$	134,057	$	319,778
Goodwill acquired		61,085		713,045		774,130
Foreign currency translation		2,482		301		2,783
Balance-end of period	$	249,288	$	847,403	$	1,096,691

The gross carrying amount and accumulated amortization of the Company’s intangible assets other than goodwill as of December 31, 2019 and June 30, 2019 were as follows ($000):

	December 31, 2019							June 30, 2019
	Gross					Net		Gross					Net
	Carrying		Accumulated			Book		Carrying		Accumulated			Book
	Amount		Amortization			Value		Amount		Amortization			Value
Technology and Patents	$	92,513	$	(43,397	)	$	49,116	$	91,637	$	(39,679	)	$	51,958
Trade Names		15,714		(1,667	)		14,047		15,759		(1,601	)		14,158
Customer Lists		133,656		(64,355	)		69,301		132,872		(59,664	)		73,208
Other		830,199		(32,890	)		797,309		1,572		(1,572	)		-
Total	$	1,072,082	$	(142,309	)	$	929,773	$	241,840	$	(102,516	)	$	139,324

Other intangible assets primarily include $828.6 million related to the preliminary purchase price allocation of Finisar. This includes preliminary amounts for technology of $615.8 million, customer lists of $125.4 million, in process research and development of $76.0 million, and trade names of $11.4 million. These items will be included in other intangible assets until the purchase price allocation is finalized.

As a result of the July 1, 2019 segment realignment, the Company reviewed the recoverability of the carrying value of goodwill at its reporting units. The Company performed a quantitative test to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill and other intangible assets. The Company did not record any impairment of goodwill or long-lived assets, as the quantitative assessment did not indicate deterioration in the fair value of its reporting units.

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Note 10. Debt

The components of debt for the periods indicated were as follows ($000):

	December 31,			June 30,
	2019			2019
Term A Facility, interest at LIBOR, as defined, plus 2.00%	$	1,225,488		$	-
Revolving Credit Facility, interest at LIBOR, as defined, plus 2.00%		94,000			-
Debt issuance costs, Term A Facility and Revolving Credit Facility		(35,592	)		-
Term B Facility, interest at LIBOR, as defined, plus 3.50%		718,200			-
Debt issuance costs, Term B Facility		(27,214	)		-
0.50% convertible senior notes, assumed in the Finisar acquisition		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		(37,313	)		(43,859	)
Term loan, interest at LIBOR, as defined, plus 1.75%		-			45,000
Line of credit, interest at LIBOR, as defined, plus 1.75%		-			115,000
Credit facility unamortized debt issuance costs		-			(761	)
Yen denominated line of credit, interest at LIBOR, as defined, plus 1.75%		-			2,783
Note payable assumed in IPI acquisition		-			3,834
Total debt		2,297,457			466,997
Current portion of long-term debt		(69,250	)		(23,834	)
Long-term debt, less current portion	$	2,228,207		$	443,163

New Senior Credit Facilities

On September 24, 2019, in connection with the Finisar acquisition, the Company entered the New 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 New Credit Agreement provides for senior secured financing of $2.425 billion in the aggregate, consisting of

(i) Aggregate principal amount of $1.255 billion 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”) 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 “New Senior Credit Facilities”).

The New 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 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. Similarly, the Company is obligated to repay the outstanding principal amount of the Term B Facility in quarterly installments equal to 0.25% of the initial aggregate principal amount of the Term B Facility, with the remaining outstanding balance due and payable on the seventh anniversary of the Closing Date. The Company is obligated to repay the aggregate principal amount of all outstanding revolving loans made under the Revolving Credit Facility on the fifth anniversary of the Closing Date.

The Company’s obligations under the New 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 New 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 New Senior Credit Facilities.

All amounts outstanding under the New 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.

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The Company voluntarily may prepay, at any time or from time to time, any amounts outstanding under the New Senior Credit Facilities in whole or in part without premium or penalty; except for the Term B Facility, pursuant to which in the event of (a) a repayment made before September 24, 2020, (b) the occurrence of a repricing event, or (c) a change to the lenders, the Company will be subject to a prepayment premium in an amount equal to one percent of: (i) the principal amount of the Term B Facility that is prepaid under an optional or mandatory prepayment due to a repricing event, (ii) the aggregate outstanding principal amount of the Term B Facility resulting from an amendment to the New Credit Agreement, and (iii) the principal amount of the Term B Facility that is mandatorily assigned. The Company may be subject to mandatory prepayment of amounts outstanding under the New Senior Credit Facilities under certain circumstances, including in connection with certain asset sales or other dispositions of property and debt issuances.

The Company also may be required to prepay amounts under the Term B Facility based on the Company’s excess cash flow (as calculated in accordance with the terms of the New Credit Agreement) for the Company’s prior fiscal year beginning with its fiscal year ending June 30, 2020 and the Company’s consolidated secured net leverage ratio (as calculated in accordance with the terms of the New Credit Agreement) as of the end of such fiscal year.

Amounts outstanding under the New 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 New 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 New Senior Credit Facilities.  Refer to Note 15 for further information regarding this interest rate swap.

The New Credit Agreement contains customary affirmative and negative covenants with respect to the New 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 new 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 New 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 December 31, 2019, the Company was in compliance with all financial covenants under the New Credit Agreement.

The Company incurred $69.8 million of debt issuance costs in connection with the New Senior Credit Facilities. The Company evaluated these costs to determine appropriate recognition of expense under ASC 470, to account for debt modification and extinguishment. As a result of the Company’s assessment, $65.8 million have been capitalized in the Condensed Consolidated Balance Sheet.  Debt extinguishment costs of $4.0 million were expensed in other expense (income), net in the Condensed Consolidated Statement of Earnings (Loss) during the six months ended December 31, 2019.  The Company expensed $2.9 million of capitalized debt issuance costs during the three and six months ended December 31, 2019 in interest expense in the Condensed Consolidated Statement of Earnings (Loss). The capitalized costs are being amortized to interest expense using the effective interest rate method from the issuance date of September 24, 2019, through the end of each facility.   The unamortized discount amounted to $62.8 million as of December 31, 2019 and is being amortized over five and seven years, for the Term A Facility and Revolving Credit Facility, and the Term B Facility, respectively.

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.

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

18

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 December 31, 2019, 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 $246.8 million as of December 31, 2019 and $268.0 million as of June 30, 2019 (based on the Company’s closing stock price on the last trading day of the fiscal periods then ended). As of December 31, 2019, 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 and six months ended December 31, 2019 and 2018:

	Three Months Ended December 31, 2019		Six Months Ended December 31, 2019
0.25% contractual coupon	$	221	$	441
Amortization of debt discount and debt issuance costs including initial purchaser discount		3,291		6,546
Interest expense	$	3,512	$	6,987
	Three Months Ended December 31, 2018		Six Months Ended December 31, 2018
0.25% contractual coupon	$	221	$	441
Amortization of debt discount and debt issuance costs including initial purchaser discount		3,145		6,255
Interest expense	$	3,366	$	6,696

The effective interest rate on the liability component for both periods presented was 4.5%. The unamortized discount amounted to $32.6 million as of December 31, 2019 and $38.3 million as of June 30, 2019 and is being amortized over three years.

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Aggregate Availability

The Company had aggregate availability of $356.0 million under its line of credit as of December 31, 2019.

Weighted Average Interest Rate

The weighted average interest rate of total borrowings was 3.8% and 1.7% for the six months ended December 31, 2019 and 2018, respectively.     

Note 11. Income Taxes

The Company’s year-to-date effective income tax rate at December 31, 2019 was an income tax benefit of 10.0% compared to an income tax expense of 18.2% for the same period in fiscal 2018. 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. 

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 December 31, 2019 and June 30, 2019, the Company’s gross unrecognized income tax benefit, excluding interest and penalties, was $74.0 million and $11.5 million, respectively. In conjunction with the acquisition of Finisar, the Company assumed $64.0 million of uncertain tax positions. The Company has classified the uncertain tax positions as noncurrent income tax liabilities, as the amounts are not expected to be paid within one year. If recognized, $70.3 million of the gross unrecognized tax benefits at December 31, 2019 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 $15.6 million and $1.2 million, at December 31, 2019 and June 30, 2019, respectively. Fiscal years 2017 to 2020 remain open to examination by the U.S. Internal Revenue Service, fiscal years 2015 to 2020 remain open to examination by certain state jurisdictions, and fiscal years 2009 to 2020 remain open to examination by certain foreign taxing jurisdictions.  The Company is currently under examination for certain subsidiary companies in Florida for the years 2016 through 2018; Philippines for the year 2017; Germany for the years 2012 through 2015; Vietnam for the years 2018 through 2019; 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 12. Earnings Per Share

The following table sets forth the computation of earnings per share for the periods indicated. Basic net income per share has been computed using the weighted average number of shares of Common Stock outstanding during the period. Diluted net income per share has been computed using the weighted average number of common shares outstanding during the period plus dilutive potential shares of Common Stock from (1) stock options, performance and restricted shares (under the treasury stock method) and (2) convertible debt (under the If Converted method) outstanding during the period. The Company’s convertible debt calculated under the if-converted method was anti-dilutive for the three and six months ended December 31, 2019 and 2018, and was excluded from the calculation of earnings per share (000 except per share data):

20

	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2019			2018		2019			2018
Basic Earnings per Share
Net earnings (loss)	$	(98,213	)	$	28,702	$	(124,211	)	$	54,851
Divided by:
Weighted average shares		90,886			63,588		78,428			63,504
Basic earnings (loss) per common share	$	(1.08	)	$	0.45	$	(1.58	)	$	0.86
Diluted Earnings per Share
Net earnings (loss)	$	(98,213	)	$	28,702	$	(124,211	)	$	54,851
Divided by:
Weighted average shares		90,886			63,588		78,428			63,504
Dilutive effect of common stock equivalents		-			2,085		-			2,412
Diluted weighted average common shares		90,886			65,673		78,428			65,916
Diluted earnings (loss) per common share	$	(1.08	)	$	0.44	$	(1.58	)	$	0.83

The following table presents potential shares of Common Stock excluded from the calculation of diluted net income per share as their effect would have been anti-dilutive (000):

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2019		2018		2019		2018
Common stock equivalents		3,392		138		2,714		125
0.25% Convertible Senior Notes due 2022		7,331		7,331		7,331		7,331
0.50% Finisar Convertible Notes		391		-		502		-
Total anti-dilutive shares		11,114		7,469		10,547		7,456

Note 13. Segment Reporting

The Company reports its business segments using the “management approach” model for segment reporting. This means that the Company determines its reportable business segments based on the way the chief operating decision maker organizes business segments within the Company for making operating decisions and assessing financial performance.

The Company reports its financial results in the following two segments: (i) Compound Semiconductors, and (ii) Photonic Solutions, and the Company’s chief operating decision maker receives and reviews financial information based on these segments.  The Company evaluates business segment performance based upon segment operating income, which is defined as earnings before income taxes, interest and other income or expense. The segments are managed separately due to the market, production requirements and facilities unique to each segment.

On September 24, 2019, the Company completed its acquisition of Finisar. See Note 3, Finisar Acquisition. Through September 30, 2019, the operating results of the Finisar acquisition are reflected in Unallocated and Other.  Finisar results have been included in the Photonic Solutions and Compound Semiconductors segments during the three months ended December 31, 2019.

The accounting policies are consistent across each segment. To the extent possible, the Company’s corporate expenses and assets are allocated to the segments. Unallocated and Other includes eliminating inter-segment sales and transfers, the results of Finisar since the acquisition date through September 30, 2019, and transaction costs related to the Finisar transaction. See Note 3 for additional information.

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The following tables summarize selected financial information of the Company’s operations by segment ($000):

	Three Months Ended December 31, 2019
	Photonic			Compound			Unallocated
	Solutions			Semiconductors			& Other			Total
Revenues	$	460,393		$	205,938		$	-		$	666,331
Inter-segment revenues		22,190			66,123			(88,313	)		-
Operating loss		(60,937	)		(8,835	)		(8,808	)		(78,580	)
Interest expense		-			-			-			(28,390	)
Other income (expense), net		-			-			-			(487	)
Income taxes		-			-			-			9,242
Net loss		-			-			-			(98,213	)
Depreciation and amortization		55,174			26,978			-			82,152
Expenditures for property, plant & equipment		21,313			33,339			-			54,652
Segment assets		3,194,032			2,014,177			-			5,208,209
Goodwill		847,403			249,288			-			1,096,691
	Three Months Ended December 31, 2018
	Photonic			Compound			Unallocated
	Solutions			Semiconductors			& Other			Total
Revenues	$	159,694		$	183,145		$	-		$	342,839
Inter-segment revenues		2,504			17,538			(20,041	)		-
Operating income (loss)		23,087			23,622			(7,103	)		39,606
Interest expense		-			-			-			(5,580	)
Other income, net		-			-			-			701
Income taxes		-			-			-			(6,025	)
Net earnings		-			-			-			28,702
Depreciation and amortization		6,462			15,867			-			22,329
Expenditures for property, plant & equipment		11,223			27,246			-			38,468
	Six Months Ended December 31, 2019
	Photonic			Compound			Unallocated
	Solutions			Semiconductors			& Other			Total
Revenues	$	601,749		$	382,940		$	22,051		$	1,006,740
Inter-segment revenues		24,840			80,056			(104,896	)		-
Operating income (loss)		(47,913	)		17,686			(66,827	)		(97,054	)
Interest expense		-			-			-			(35,358	)
Other income (expense), net		-			-			-			(5,566	)
Income taxes		-			-			-			13,766
Net loss		-			-			-			(124,211	)
Depreciation and amortization		61,990			43,367			3,743			109,100
Expenditures for property, plant & equipment		30,702			46,822			2,764			80,288
	Six Months Ended December 31, 2018
	Photonic			Compound			Unallocated
	Solutions			Semiconductors			& Other			Total
Revenues	$	294,850		$	362,422		$	-		$	657,272
Inter-segment revenues		7,726			34,708			(42,434	)		-
Operating income (loss)		38,999			44,923			(7,103	)		76,819
Interest expense		-			-			-			(11,164	)
Other income, net		-			-			-			1,414
Income taxes		-			-			-			(12,218	)
Net earnings		-			-			-			54,851
Depreciation and amortization		12,661			31,838			-			44,499
Expenditures for property, plant & equipment		23,274			50,113			-			73,386

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Note 14. Share-Based Compensation

The Company’s Board of Directors adopted the II-VI Incorporated 2018 Omnibus Incentive Plan (the “Plan”), which was approved by the Company’s shareholders. The Plan provides for the grant of performance-based cash incentive awards, non-qualified stock options, stock appreciation rights, restricted share awards, restricted share units, deferred share awards, performance share awards and performance share units to employees, officers and directors of the Company. The maximum number of shares of the Company’s Common Stock authorized for issuance under the Plan is limited to 3,550,000 shares of Common Stock, not including any remaining shares forfeited under the predecessor plans that may be rolled into the Plan. The Company records share-based compensation expense for these awards in accordance with U.S. GAAP, which requires the recognition of grant-date fair value of share-based compensation in net earnings (loss) and over the requisite service period of the individual grantees, which generally equals the vesting period. The Company accounts for cash-based stock appreciation rights, cash-based restricted share unit awards and cash-based performance share unit awards as liability awards, in accordance with applicable accounting standards.  

Upon consummation of the acquisition, the Company assumed approximately 6.6 million restricted stock units previously granted by Finisar under the Amended and Restated Finisar Corporation 2005 Stock Incentive Plan (each an “Assumed RSU”). Each Assumed RSU is subject to substantially the same terms and conditions as applied to the Assumed RSU immediately prior to the consummation of the acquisition, except that the number of shares of the Company’s common stock subject to each Assumed RSU has been adjusted in accordance with the terms of the Merger Agreement. Other than the Assumed RSUs, the Company did not assume any other awards outstanding under the Amended and Restated Finisar Corporation 2005 Stock Incentive Plan (the “Finisar 2005 Plan”). As of the Closing Date, the Company also assumed the unused capacity under the Finisar 2005 Plan.

Share-based compensation expense for the periods indicated was as follows ($000):

	Three Months Ended				Six Months Ended
December 31,		2019		2018		2019		2018
Stock Options and Cash-Based Stock Appreciation Rights	$	2,989	$	454	$	4,659	$	2,782
Restricted Share Awards and Cash-Based Restricted Share Unit Awards		12,871		2,007		25,602		4,799
Performance Share Awards and Cash-Based Performance Share Unit Awards		3,400		2,497		5,159		2,714
	$	19,260	$	4,958	$	35,420	$	10,295

Note 15. Fair Value of Financial Instruments

The FASB defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous markets for the asset and liability in an orderly transaction between market participants at the measurement date. The Company estimates fair value of its financial instruments utilizing an established three-level hierarchy in accordance with U.S. GAAP. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date as follows:

• Level 1 –Valuation is based upon unadjusted quoted prices for identical assets or liabilities in active markets.

• Level 2 –Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instruments.

• Level 3 –Valuation is based upon other unobservable inputs that are significant to the fair value measurements.

The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement.  

The Company entered into an interest rate swap with notional amount of $1,075 million to limit the exposure to its variable interest rate debt by effectively converting it to a fixed interest rate. The Company receives payments based on the one-month LIBOR and makes payments based on a fixed rate of 1.52%. The Company receives payments with a floor of 0.00%. The interest rate swap agreement has an effective date of November 24, 2019, with an expiration date of September 24, 2024. The initial notional amount of the interest rate swap is scheduled to decrease to $825 million in July 2022 and will remain at that amount through the expiration date. The Company designated this instrument as a cash flow hedge and deemed the hedge relationship effective at inception of the contract. The interest rate swap is recognized in the Consolidated Balance Sheet within other assets at fair value. Changes in fair value are recorded within other comprehensive income (loss) on the consolidated balance sheet and reclassified into the Consolidated Statement of Earnings (Loss) as interest expense in the period in which the underlying transaction affects earnings.  The fair value of the interest rate swap is determined using widely accepted valuation techniques and reflects the contractual terms of the interest rate swap including the period to maturity, and while there are no quoted prices in active markets, it uses observable market-based inputs,

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including interest rate curves.  The fair value analysis also considers a credit valuation adjustment to reflect nonperformance risk.  The interest rate swap is classified as a Level 2 item within the fair value hierarchy.

The Company estimated the fair value of the II-VI Notes and Finisar Notes based on quoted market prices as of the last trading day prior to December 31, 2019; however, the II-VI Notes and Finisar Notes have only a limited trading volume and as such this fair value estimate is not necessarily the value at which the II-VI Notes and Finisar Notes could be retired or transferred. The Company concluded that this fair value measurement should be categorized within Level 2. The carrying value of the II-VI Notes and Finisar Notes is net of unamortized discount and issuance costs. See Note 10. Debt for details on the Company’s debt facilities. The fair value and carrying value of the II-VI Notes and Finisar Notes were as follows at December 31, 2019 ($000):

	Fair Value		Carrying Value
II-VI Notes	$	353,266	$	307,687
Finisar Notes		13,771		14,888

The fair values of cash and cash equivalents are considered Level 1 among the fair value hierarchy and approximate fair value because of the short-term maturity of those instruments. The Company’s borrowings including its lease obligations, excluding the 0.25% Convertible Notes and the 0.50% Finisar convertible notes are considered Level 2 among the fair value hierarchy and their principal amounts approximate fair value.

Note 16. Share Repurchase Programs

In August 2014, the Company’s Board of Directors authorized the Company to purchase up to $50 million of its Common Stock through a share repurchase program (the “Program”) that calls for shares to be purchased in the open market or in private transactions from time to time. The Program has no expiration and may be suspended or discontinued at any time. Shares purchased by the Company are retained as treasury stock and available for general corporate purposes.  During the three and six months ended December 31, 2019, the Company purchased 50,000 shares of its common stock for $1.6 million under this program.  Through December 31, 2019, the Company has cumulatively purchased 1,416,587 shares of its Common Stock pursuant to the Program for approximately $22.3 million.

Note 17. Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (“AOCI”) by component, net of tax, for the six months ended December 31, 2019 were as follows ($000):

	Foreign									Total
	Currency			Interest			Defined			Accumulated Other
	Translation			Rate			Benefit			Comprehensive
	Adjustment			Swap			Pension Plan			Income (Loss)
AOCI - June 30, 2019	$	(15,627	)	$	-		$	(8,594	)	$	(24,221	)
Other comprehensive income before reclassifications		11,571			3,774			(167	)		15,178
Amounts reclassified from AOCI		-			(165	)		-			(165	)
Net current-period other comprehensive income		11,571			3,609			(167	)		15,013
AOCI - December 31, 2019	$	(4,056	)	$	3,609		$	(8,761	)	$	(9,208	)

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations (“Management’s Discussion and Analysis”), contains forward-looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding projected growth rates, markets, product development, financial position, capital expenditures and foreign currency exposure. Forward-looking statements are also identified by words such as “expects,” “anticipates,” “intends,” “plans,” “projects” or similar expressions.

Although our management considers these expectations and assumptions to have a reasonable basis, there can be no assurance that management’s expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct. In addition to general industry and global economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to: (i) the failure of any one or more of the assumptions stated above to prove to be correct; (ii) the risks relating to forward-looking statements and other “Risk Factors” discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019; (iii) the purchasing patterns of customers and end-users; (iv) the timely release of new products, and acceptance of such new products by the market; (v) the introduction of new products by competitors and other competitive responses; (vi) the Company’s ability to assimilate recently acquired businesses, and risks, costs and uncertainties associated with such acquisitions; and/or (vii) the Company’s ability to devise and execute strategies to respond to market conditions. The Company disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events or developments, or otherwise.

In addition, we operate in a highly competitive and rapidly changing environment; new risk factors can arise, and it is not possible for management to anticipate all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statement. The forward-looking statements included in this Quarterly Report on Form 10-Q are based only on information currently available to us and speak only as of the date of this Report. We do not assume any obligation, and do not intend to, update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by the securities laws. Investors should, however, consult any further disclosures of a forward-looking nature that the Company may make in its subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, or other disclosures filed with or furnished to the SEC.

Investors should also be aware that, while the Company does communicate with securities analysts from time to time, such communications are conducted in accordance with applicable securities laws. Investors should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report.

Introduction

II-VI Incorporated (“II-VI,” the “Company,” “we,” “us” or “our”), a worldwide leader in engineered materials and opto-electronic components, is a vertically integrated manufacturing company that develops innovative products industrial materials processing, communications, aerospace-and-defense, consumer electronics, semiconductor capital equipment, life sciences and automotive end markets. The Company produces a wide variety of application-specific photonic and electronic materials and components, and deploys them in various forms, including integration with advanced software.

The Company generates revenues, earnings and cash flows from developing, manufacturing and marketing a broad portfolio of products for our end markets. We also generate revenue, earnings and cash flows from government-funded research and development contracts relating to the development and manufacture of new technologies, materials and products.

Our customer base includes original equipment manufacturers, laser end users, system integrators of high-power lasers, manufacturers of equipment and devices for industrial, optical communications, consumer electronics, security and monitoring applications, U.S. government prime contractors, and various U.S. government agencies.

On September 24, 2019 (the “Closing Date”), the Company completed its acquisition of Finisar Corporation (“Finisar”), a global technology leader for subsystems and components for fiber optic communications. Additional information regarding the Company’s acquisition of Finisar is set forth below and in Note 3. Finisar Acquisition to our unaudited condensed consolidated financial statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q. Due to timing of the acquisition, the results of Finisar for the three months ended September 30, 2019, have not been allocated to an Operating Segment, and are presented in the Unallocated and Other. Within this quarterly report on Form 10-Q for the three months ended December 31, 2019, the results of Finisar have been allocated to the Photonic Solutions and Compound Semiconductors Segments.

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Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America and the Company’s discussion and analysis of its financial condition and results of operations require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its condensed consolidated financial statements and accompanying notes. Note 1 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K dated August 16, 2019 describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. The Company adopted ASU 2016-02, Leases (Topic 842), on July 1, 2019 using the modified retrospective method of adoption. There have been no other changes in significant accounting policies as of December 31, 2019.

New Accounting Standards

See Note 2. Recent Accounting Pronouncements to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements.

Results of Operations ($ in millions, except per share data)

The following tables set forth select items from our Condensed Consolidated Statements of Earnings (Loss) for the three and six months ended December 31, 2019 and 2018:

	Three Months Ended						Three Months Ended
	December 31, 2019						December 31, 2018
				% of					% of
				Revenues					Revenues
Total revenues	$	666.3			100.0	%	$	342.9		100.0	%
Cost of goods sold		518.0			77.7			211.3		61.6
Gross margin		148.3			22.3			131.6		38.4
Operating expenses:
Internal research and development		107.7			16.2			33.8		9.9
Selling, general and administrative		119.2			17.9			58.1		16.9
Interest and other, net		28.9			4.3			5.0		1.5
Earnings (loss) before income tax		(107.5	)		(16.1	)		34.7		10.1
Income taxes		(9.2	)		(1.4	)		6.0		1.7
Net earnings (loss)	$	(98.2	)		(14.7	%)	$	28.7		8.4	%
Diluted earnings (loss) per share	$	(1.08	)				$	0.44
	Six Months Ended						Six Months Ended
	December 31, 2019						December 31, 2018
				% of					% of
				Revenues					Revenues
Total revenues	$	1,006.7			100.0	%	$	657.3		100.0	%
Cost of goods sold		735.3			73.0			401.9		61.1
Gross margin		271.4			27.0			255.4		38.9
Operating expenses:
Internal research and development		143.8			14.3			66.9		10.2
Selling, general and administrative		224.7			22.3			111.7		17.0
Interest and other, net		40.9			4.1			9.7		1.5
Earnings (loss) before income tax		(138.0	)		(13.7	)		67.1		10.2
Income taxes		(13.8	)		(1.4	)		12.2		1.9
Net earnings (loss)	$	(124.2	)		(12.3	%)	$	54.9		8.4	%
Diluted earnings (loss) per share	$	(1.58	)				$	0.83

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Executive Summary

Net loss for the three months ended December 31, 2019 was $(98.2) million ($(1.08) per share diluted), compared to net earnings of $28.7 million ($0.44 per share diluted) for the same period last fiscal year.  Net loss for the six months ended December 31, 2019 was ($124.2) million ($(1.58) per share diluted), compared to net earnings of $54.9 million or ($0.83 per share diluted).

Net loss was impacted by expenses of $119.9 million and $185.6 million incurred in relation to the September 24, 2019 acquisition of Finisar Corporation during the current three and six months ended December 31, 2019, respectively.  These expenses include transaction expenses such as legal and professional fees as well as expenses related to the fair value adjustments of acquired inventory and intangible assets.

During the three months ended December 31, 2019, these expenses included $0.6 million of severance and related compensation expenses, $80.6 million of expenses associated with fair value adjustments of acquired inventory, $29.1 million of amortization expense associated with fair value adjustments of acquired intangible assets and $9.6 million of other transaction expenses.

During the six months ended December 31, 2019, these expenses included $25.3 million of investment banker fees, $18.9 million of severance and related compensation expenses, $87.7 million of expenses associated with fair value adjustments of acquired inventory, $31.3 million of amortization expense associated with fair value adjustments of acquired intangible assets, $5.6 million of expenses relating to incremental interest expenses and debt extinguishment and $16.8 million of other transaction expenses.

Consolidated

Revenues. Revenues for the three months ended December 31, 2019 increased 94% to $666.3 million, compared to $342.9 million for the same period last fiscal year. Revenues for the six months ended December 31, 2019 increased 53% to $1,006.7 million, compared to $657.3 million for the same period last fiscal year. Finisar contributed $306.6 million and $328.7 million of revenues during the three and six months December 31, 2019.  In addition to the revenues contributed by Finisar, the increase in revenues was driven by increased demand from the Company’s ROADM product line for the optical communications market as well as increased revenues related to the Company’s VCSEL products used in the 3D Sensing market and increased demand from customers in the aerospace and defense markets.

Gross margin. Gross margin for the three months ended December 31, 2019 was $148.3 million, or 22.3% of total revenues, compared to $131.6 million, or 38.4% of total revenues, for the same period last fiscal year. Gross margin for the six months ended December 31, 2019 was $271.4 million, or 27.0% of total revenues, compared to $255.4 million, or 38.9% of total revenues, for the same period last fiscal year. Gross margin was negatively impacted by approximately $80.6 million and $87.7 million of additional cost of goods sold related to the preliminary fair value adjustment of the acquired Finisar inventory for the three and six months ended December 31, 2019, respectively. Absent the above amount, gross margin as a percentage of revenues decreased despite the revenue growth primarily as a result of product mix relating to the Transceiver product line which has a lower gross margin profile than the Company’s historical margins.

Internal research and development. Internal research and development (“IR&D”) expenses for the three months ended December 31, 2019 were $107.7 million, or 16.2% of revenues, compared to $33.8 million, or 9.9% of revenues, for the same period last fiscal year. IR&D expenses for the six months ended December 31, 2019 were $143.8 million, or 14.3% of revenues, compared to $66.9 million, or 10.2% of revenues, for the same period last fiscal year. The increase in IR&D expenses during the current three and six month period was primarily due to the acquisition of Finisar in the first quarter of fiscal 2020, as well as the Company’s continued investment in new products and technologies focused on 5G and other emerging market trends.  

Selling, general and administrative. Selling, general and administrative (“SG&A”) expenses for the three months ended December 31, 2019 were $119.2 million, or 17.9% of revenues, compared to $58.1 million, or 16.9% of revenues, for the same period last fiscal year. SG&A expenses for the six months ended December 31, 2019 were $224.7 million, or 22.3% of revenues, compared to $111.7 million, or 17.0% of revenues, for the same period last fiscal year. The increase in SG&A for the current three and six months was primarily the result of transaction costs incurred relating to the acquisition of Finisar as well as the acquired SG&A from the Finisar acquisition.  During the six months ended December 31, 2019, the Company incurred $40.2 million of transaction related expenses.

Interest and other, net. Interest and other, net for the three months ended December 31, 2019 was expense of $28.9 million, compared to expense of $5.0 million for the same period last fiscal year.  Interest and other, net for the six months ended December 31, 2019 was expense of $40.9 million, compared to expense of $9.7 million for the same period last fiscal year.  Included in interest and other, net were interest expense on borrowings, equity earnings from its unconsolidated investments, foreign currency gains and losses, and interest income on excess cash balances.  Interest expense increased $22.8 million and $24.2 million for both the current

27

three and six month periods, respectively, due to the higher levels of outstanding debt incurred in conjunction with the acquisition of Finisar.  In addition, the Company expensed $4.0 million of debt extinguishment costs in the six months ended December 31, 2019.

Income taxes. The Company’s year-to-date effective income tax rate at December 31, 2019 was 10.0%, compared to an effective tax rate of 18.2% for the same period last fiscal year. 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.

Segment Reporting

Revenues and operating income for the Company’s reportable segments are discussed below. Operating income differs from net earnings (loss) in that operating income excludes certain operational expenses included in other expense (income) – net as reported. Management believes operating income to be a useful measure for investors, as it reflects the results of segment performance over which management has direct control and is used by management in its evaluation of segment performance. See Note 13. Segment Reporting, to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on the Company’s reportable segments and for the reconciliation of the Company’s operating income to net earnings (loss), which is incorporated herein by reference.

Effective July 1, 2019, the Company realigned its composition of its operating segments. The Company realigned its operating segments into two segments, Photonic Solutions and Compound Semiconductors for the purpose of making operational decisions and assessing financial performance. All applicable segment information has been restated to reflect this change.

Compound Semiconductors ($ in millions)

	Three Months Ended					% Increase	Six Months Ended				% Increase
	December 31,					(Decrease)	December 31,				(Decrease)
	2019			2018			2019		2018
Revenues	$	205.9		$	183.2	12%	$	382.9	$	362.5	6%
Operating income (loss)	$	(8.8	)	$	23.6	(137%)	$	17.7	$	44.9	(61%)

Revenues for the three months ended December 31, 2019 for Compound Semiconductors increased 12% to $205.9 million, compared to revenues of $183.2 million for the same period last fiscal year. Revenues for the six months ended December 31, 2019 for Compound Semiconductors increased 6% to $382.9 million, compared to revenues of $362.5 million for the same period last fiscal year. The increase in revenues during the three and six months ended December 31, 2019 primarily related to increased VCSEL product shipments addressing the 3D sensing commercial market.  In addition, the segment also experienced increased revenues to customers in the aerospace and defense market.

Operating loss for the three months ended December 31, 2019 decreased 137% to $(8.8) million, compared to operating income of $23.6 million for the same period last fiscal year. Operating income for the six months ended December 31, 2019 decreased 61% to $17.7 million, compared to $44.9 million for the same period last fiscal year. The decrease in operating income during the current three and six month periods compared to the same periods last fiscal year was driven by unabsorbed operating costs incurred at the segment’s Sherman, Texas wafer fabrication facility.  The Company anticipates this facility to begin shipping to customers in the second half of fiscal year 2020.  In addition, the segment incurred approximately $12.4 million and $14.4 million of acquisition related expenses associated with amortization of acquired intangible assets, expensing of the fair value inventory write-up and other related acquisition expenses during the current three and six month periods, respectively.

Photonic Solutions ($ in millions)

	Three Months Ended					% Increase	Six Months Ended					% Increase
	December 31,					(Decrease)	December 31,					(Decrease)
	2019			2018			2019			2018
Revenues	$	460.4		$	159.7	188%	$	601.8		$	294.8	104%
Operating income (loss)	$	(60.9	)	$	23.1	(364%)	$	(47.9	)	$	39.0	(223%)

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Revenues for the three months ended December 31, 2019 for Photonic Solutions increased 188% to $460.4 million, compared to $159.7 million for the same period last fiscal year. Revenues for the six months ended December 31, 2019 for Photonic Solutions increased 104% to $601.8 million, compared to $294.8 million for the same period last fiscal year. The increase in revenues for the three and six months ended December 31, 2019 compared to the same periods last fiscal year was primarily due to the acquisition of Finisar and the strengthening of demand of our transceiver product line. The segment also has experienced increased demand from customers in the optical communication market for ROADM components.

Operating loss for the three months ended December 31, 2019 decreased 364% to a loss of $(60.9) million, compared to operating income of $23.1 million for the same period last fiscal year. Operating loss for the six months ended December 31, 2019 decreased 223% to a loss of $(47.9) million, compared to operating income of $39.0 million for the same period last fiscal year.  The decrease in operating income during the current three and six month periods compared to the same periods last fiscal year was driven by acquisition related expenses of $103.4 million and $105.5 million related to amortization expense on acquired intangible assets and the expensing of inventory fair market value step-up.

Liquidity and Capital Resources

Historically, our primary sources of cash have been from operations, long-term borrowing, and advance funding from customers. Other sources of cash include proceeds received from the exercises of stock options and sale of equity investments and businesses. Our historic uses of cash have been for capital expenditures, investment in research and development, business acquisitions, payments of principal and interest on outstanding debt obligations and payments in satisfaction of employees’ minimum tax obligations. Supplemental information pertaining to our sources and uses of cash for the periods indicated is presented as follows:

Sources (uses) of Cash (millions):

	Six Months Ended
	December 31,
	2019			2018
Net cash provided by operating activities	$	56.3		$	88.2
Proceeds on long-term borrowings		2,131.0			35.0
Proceeds from exercises of stock options		3.1			6.2
Purchases of businesses		(1,036.6	)		(54.2	)
Payments on Finisar Notes		(560.1	)		-
Debt issuance costs		(63.5	)		-
Additions to property, plant & equipment		(80.3	)		(74.4	)
Payments under prior term loan		(176.6	)		-
Payments under new credit facility		(83.3	)		-
Common stock repurchase		(1.6	)		-
Payments in satisfaction of employees' minimum tax obligations		(15.0	)		(6.4	)
Payments on earnout arrangements		-			(3.5	)
Purchases of equity and other investments		-			(4.5	)
Effect of exchange rate changes on cash and cash equivalents and other items		(1.4	)		(3.2	)

Net cash provided by operating activities:

Net cash provided by operating activities was $56.3 million during the current six month period compared to $88.2 million of cash provided by operating activities during the same period last fiscal year.   The lower levels of cash flow from operations during the current six months ended December 31, 2019 were the result of lower earnings generated during the current fiscal year related to acquisition related expenses incurred for the acquisition of Finisar.

Net cash used in investing activities:

Net cash used in investing activities was $1,118.0 million for the six months ended December 31, 2019, compared to net cash used of $133.0 million for the same period last fiscal year. Net cash used in investing activities during the current period primarily included

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$1,036.6 million for cash paid for the acquisition of Finisar, and $80.3 million of cash paid for property, plant and equipment to increase capacity to meet the growing demand for the Company’s product portfolio.

Net cash provided by financing activities:

Net cash provided by financing activities was $1,232.1 million for the six months ended December 31, 2019, compared to net cash provided by financing activities of $31.3 million for the same period last fiscal year. Net cash provided by financing activities during the current fiscal year included net borrowings on long-term debt of $1,311.0 million primarily to fund the acquisition of Finisar, and $3.1 million of cash received from the exercise of stock options.  Net cash provided by financing activities was offset by $63.5 million of debt issuance costs associated with the increased borrowings, $15.0 million of cash payments in satisfaction of employees’ minimum tax obligations from the vesting of equity awards, a $1.6 million payment to repurchase common stock through its share repurchase program and a $1.0 million earn-out payment relating to a prior year acquisition.

New Senior Credit Facilities

On September 24, 2019, in connection with the Finisar acquisition, the Company entered into an Amended and Restated Credit Agreement (the “New Credit Agreement”) with Bank of America, N.A., and the other lenders.

The New Credit Agreement provides for senior secured financing of $2.425 billion in the aggregate, consisting of

(i) Aggregate principal amount of $1.255 billion 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”) 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 “New Senior Credit Facilities”).

The New Credit Agreement also provides for a letter of credit sub-facility not to exceed $25 million and a swing loan sub-facility initially not to exceed $20 million.

Additional information regarding the New Senior Credit Facilities is set forth in Note 10. Debt to our unaudited condensed consolidated financial statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Contractual Obligations

The following table presents information about the Company’s contractual obligations and commitments as of December 31, 2019:

	Payments Due By Period
			Less Than 1		1-3		3-5		More Than 5
Contractual Obligations	Total		Year		Years		Years		Years
($000)
Long-term debt obligations	$	2,397,576	$	69,250	$	498,388		1,147,738	$	682,200
Interest payments(1)		461,109		88,098		167,599		144,050		61,362
Operating lease obligations, including imputed interest (2)		159,620		35,107		49,305		29,818		45,390
Finance lease obligations, including imputed interest		33,393		2,387		4,972		5,249		20,785
Purchase obligations(3) (4)		148,942		145,148		3,794		-		-
Total	$	3,200,639	$	339,989	$	724,057	$	1,326,855	$	809,738

(1) Interest payments represent both variable and fixed rate interest obligations based on the interest rate in place at December 31, 2019 relating to the New Senior Credit Facilities and the Company’s currently outstanding 0.25% Convertible Senior Notes due 2022.  These interest payments do not reflect the impact of the interest rate swap that is used to convert variable interest payments to fixed interest payments.

(2) Includes an obligation for the use of two parcels of land related to II-VI Performance Metals. The lease obligations extend through 2039 and 2061, respectively.

(3) A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on the Company and that specifies all significant terms, including fixed or minimum quantities to be purchased, minimum or variable price provisions, and the approximate timing of the transaction. These amounts are primarily composed of open purchase order commitments to vendors for the purchase of supplies and materials.

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(4) Includes cash earn out opportunities based on certain acquisitions’ achieving agreed-upon financial, operational and technology targets, and the value of the net purchase option for the Company’s equity investment in a privately held company.

The Company’s gross unrecognized income tax benefit at December 31, 2019 has been excluded from the table above because the Company is not currently able to reasonably estimate the amount by which the liability will increase or decrease over time.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISKS

The Company is exposed to market risks arising from adverse changes in foreign currency exchange rates and interest rates. In the normal course of business, the Company uses a variety of techniques and derivative financial instruments as part of its overall risk management strategy, which is primarily focused on its exposure in relation to the Japanese Yen, Chinese Renminbi, Swiss Franc, Euro, and the Malaysian Ringgit. No significant changes have occurred in the techniques and instruments used other than those described below.

Foreign Exchange Risks

In the normal course of business, the Company enters into foreign currency forward exchange contracts with its financial institutions. The purpose of these contracts is to hedge ordinary business risks regarding foreign currencies on product sales. Foreign currency exchange contracts are used to limit transactional exposure to changes in currency rates.

Japanese Yen

The Company enters into foreign currency forward contracts that permit it to sell specified amounts of Japanese Yen expected to be received from its export sales for pre-established U.S. dollar amounts at specified dates. The forward contracts are denominated in the same foreign currencies in which export sales are denominated. These contracts provide the Company with an economic hedge in which settlement will occur in future periods, thereby limiting the Company’s exposure. These contracts had a total notional amount of $12.0 million and $17.0 million at December 31, 2019 and June 30, 2019, respectively.

A 10% change in the Yen to U.S. dollar exchange rate would have changed revenues in the range from a decrease of $3.9 million to an increase of $4.7 million for the three months ended December 31, 2019 and a decrease of $6.5 million to an increase of $8.0 million for the six months ended December 31, 2019.

Chinese Renminbi

The Company enters into month-to-month forward contracts at varying amounts maturing monthly to limit exposure to the Chinese Renminbi. The Company recorded a loss of $0.8 million and $2.5 million in the Condensed Consolidated Statement of Earnings (Loss) related to these contracts for the three and six months ended December 31, 2019, respectively.

Swiss Franc

The Company enters into month-to-month forward contracts to limit exposure to the Swiss Franc.  The Company recorded a gain of $0.3 million and a loss of $1.2 million in the Condensed Consolidated Statement of Earnings (Loss) related to these contracts for the three and six months ended December 31, 2019, respectively.

Interest Rate Risks

As of December 31, 2019, the Company’s total borrowings include variable rate borrowings, exposing the Company to changes in interest rates. On November 24, 2019, the Company entered into an interest rate swap contract to limit the exposure of its variable interest rate debt by effectively converting it to fixed interest rate debt.  If the Company had not effectively fixed its variable rate debt, a change in the interest rate of 100 basis points on these variable rate borrowings would have resulted in additional interest expense of $19.7 million and $22.1 million for the three and six months ended December 31, 2019.

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Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management evaluated, with the participation of the Company’s and Chief Executive Officer, and the Company’s Chief Financial Officer and Treasurer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. The Company’s disclosure controls were designed to provide reasonable assurance that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. However, the controls have been designed to provide reasonable assurance of achieving the controls’ stated goals. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial Reporting

No changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) were implemented during the Company’s most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

On September 24, 2019, the Company completed its acquisition of Finisar. In conducting its assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2020, management intends to exclude Finisar from that assessment, as permitted under SEC rules. The Company is in the process of integrating the historical internal control over financial reporting of Finisar with the rest of the Company. Finisar’s operations are included in the Company’s unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for the period from September 24, 2019 to December 31, 2019 and represented 61.3% of the Company’s consolidated total assets as of December 31, 2019 and 46.0% and 32.7% of the Company’s consolidated total revenues for the three and six months ended December 31, 2019, respectively.

Other than the foregoing, no changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) were implemented during the Company’s most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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Part II – Other Information

Item 1. LEGAL PROCEEDINGS

The Company and its subsidiaries are involved from time to time in various claims, lawsuits, and regulatory proceedings incidental to its business. The resolution of each of these matters is subject to various uncertainties, and it is possible that these matters may be resolved unfavorably to the Company. Management believes, after consulting with legal counsel, that the ultimate liabilities, if any, resulting from these legal and regulatory proceedings will not materially affect the Company’s financial condition, liquidity or results of operations.

Item 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, including the factors discussed below, carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2019, any of which could materially affect our business, financial condition or future results. Those risk factors are not the only risks facing the Company. Additional risks and uncertainties not currently known or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

We face risks related to worldwide health epidemics and other outbreaks.

As a company with international operations, we are exposed to the risk of business and economic disruption related to worldwide health epidemics and other outbreaks, such as the Coronavirus.  Government imposed travel restrictions and local statutory quarantines may result in direct operational and administrative disruptions to our foreign facilities and may also indirectly impact our domestic facilities.  Additionally, our suppliers and customers may be adversely affected by these disruptions, which in turn could negatively impact our sales and operating results.

Item 2. ISSUER PURCHASES OF EQUITY SECURITIES

In August 2014, the Company’s Board of Directors authorized the Company to purchase up to $50 million of its Common Stock through a share repurchase program (the “Program”) that calls for shares to be purchased in the open market or in private transactions from time to time. The Program has no expiration and may be suspended or discontinued at any time.  Shares purchased by the Company are retained as treasury stock and available for general corporate purposes. As of December 31, 2019, the Company has cumulatively purchased 1,416,587 shares of its Common Stock pursuant to the Program for approximately $22.3 million. The dollar value of shares that may yet be purchased under the Program is approximately $27.7 million.

The following table sets forth repurchases of our Common Stock during the quarter ended December 31, 2019:

						Total Number of		Dollar Value of
						Shares Purchased		Shares That May
						as Part of Publicly		Yet be Purchased
	Total Number of			Average Price Paid		Announced Plans or		Under the Plan or
Period	Shares Purchased			Per Share		Programs		Program
October 1, 2019 to October 31, 2019		128,212	(1)	$	32.64		50,000	$	27,658,759
November 1, 2019 to November 30, 2019		3,349	(1)	$	31.65		-	$	27,658,759
December 1, 2019 to December 31, 2019		43,718	(1)	$	30.10		-	$	27,658,759
Total		175,279		$	31.99		50,000

(1) Represents shares of Common Stock transferred to the Company from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock awards.

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Item 6. EXHIBITS

Exhibit Number	Description of Exhibit	Reference
10.01	Amended and Restated Employment Agreement, effective January 26, 2020, between II-VI Incorporated and Vincent D. Mattera, Jr.	Incorporated herein by reference to Exhibit 10.1 to II-VI’s Current Report on Form 8-K (File No. 000-16195) filed on January 30, 2020.
31.01	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.
31.02	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.
32.01	Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith.
32.02	Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith.
101.INS	Inline XBRL Instance Document - the instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	II-VI INCORPORATED
	(Registrant)
Date: February 10, 2020	By:	/s/    Vincent D. Mattera, Jr.
		Vincent D. Mattera, Jr
		Chief Executive Officer
Date: February 10, 2020	By:	/s/    Mary Jane Raymond
		Mary Jane Raymond
		Chief Financial Officer and Treasurer

35

EX-31.01

Exhibit 31.01

CERTIFICATIONS

I, Vincent D. Mattera, Jr. certify that:

1. I have reviewed this quarterly report on Form 10-Q of II-VI Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 10, 2020	By:	/s/     Vincent D. Mattera, Jr.
		Vincent D. Mattera, Jr.
		Chief Executive Officer

EX-31.02

Exhibit 31.02

CERTIFICATIONS

I, Mary Jane Raymond, certify that:

1. I have reviewed this quarterly report on Form 10-Q of II-VI Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 10, 2020	By:	/s/    Mary Jane Raymond
		Mary Jane Raymond
		Chief Financial Officer and Treasurer

EX-32.01

Exhibit 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of II-VI Incorporated (the “Corporation”) on Form 10-Q for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Corporation certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: February 10, 2020	By:	/s/ Vincent D. Mattera, Jr.
		Vincent D. Mattera, Jr.
		Chief Executive Officer

* This certification is made solely for purposes of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

EX-32.02

Exhibit 32.02

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of II-VI Incorporated (the “Corporation”) on Form 10-Q for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Corporation certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to her knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: February 10, 2020	By:	/s/    Mary Jane Raymond
		Mary Jane Raymond
		Chief Financial Officer and Treasurer

* This certification is made solely for purposes of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

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Income Taxes

6 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Note 11. Income Taxes

The Company’s year-to-date effective income tax rate at December 31, 2019 was an income tax benefit of 10.0% compared to an income tax expense of 18.2% for the same period in fiscal 2018. 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. 

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 December 31, 2019 and June 30, 2019, the Company’s gross unrecognized income tax benefit, excluding interest and penalties, was $74.0 million and $11.5 million, respectively. In conjunction with the acquisition of Finisar, the Company assumed $64.0 million of uncertain tax positions. The Company has classified the uncertain tax positions as noncurrent income tax liabilities, as the amounts are not expected to be paid within one year. If recognized, $70.3 million of the gross unrecognized tax benefits at December 31, 2019 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 $15.6 million and $1.2 million, at December 31, 2019 and June 30, 2019, respectively. Fiscal years 2017 to 2020 remain open to examination by the U.S. Internal Revenue Service, fiscal years 2015 to 2020 remain open to examination by certain state jurisdictions, and fiscal years 2009 to 2020 remain open to examination by certain foreign taxing jurisdictions.  The Company is currently under examination for certain subsidiary companies in Florida for the years 2016 through 2018; Philippines for the year 2017; Germany for the years 2012 through 2015; Vietnam for the years 2018 through 2019; 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.

XML

Fair Value of Financial Instruments

6 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

Fair Value of Financial Instruments

Note 15. Fair Value of Financial Instruments

The FASB defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous markets for the asset and liability in an orderly transaction between market participants at the measurement date. The Company estimates fair value of its financial instruments utilizing an established three-level hierarchy in accordance with U.S. GAAP. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date as follows:

• Level 1 –Valuation is based upon unadjusted quoted prices for identical assets or liabilities in active markets.

• Level 2 –Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instruments.

• Level 3 –Valuation is based upon other unobservable inputs that are significant to the fair value measurements.

The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement.  

The Company entered into an interest rate swap with notional amount of $1,075 million to limit the exposure to its variable interest rate debt by effectively converting it to a fixed interest rate. The Company receives payments based on the one-month LIBOR and makes payments based on a fixed rate of 1.52%. The Company receives payments with a floor of 0.00%. The interest rate swap agreement has an effective date of November 24, 2019, with an expiration date of September 24, 2024. The initial notional amount of the interest rate swap is scheduled to decrease to $825 million in July 2022 and will remain at that amount through the expiration date. The Company designated this instrument as a cash flow hedge and deemed the hedge relationship effective at inception of the contract. The interest rate swap is recognized in the Consolidated Balance Sheet within other assets at fair value. Changes in fair value are recorded within other comprehensive income (loss) on the consolidated balance sheet and reclassified into the Consolidated Statement of Earnings (Loss) as interest expense in the period in which the underlying transaction affects earnings.  The fair value of the interest rate swap is determined using widely accepted valuation techniques and reflects the contractual terms of the interest rate swap including the period to maturity, and while there are no quoted prices in active markets, it uses observable market-based inputs,

including interest rate curves.  The fair value analysis also considers a credit valuation adjustment to reflect nonperformance risk.  The interest rate swap is classified as a Level 2 item within the fair value hierarchy.

The Company estimated the fair value of the II-VI Notes and Finisar Notes based on quoted market prices as of the last trading day prior to December 31, 2019; however, the II-VI Notes and Finisar Notes have only a limited trading volume and as such this fair value estimate is not necessarily the value at which the II-VI Notes and Finisar Notes could be retired or transferred. The Company concluded that this fair value measurement should be categorized within Level 2. The carrying value of the II-VI Notes and Finisar Notes is net of unamortized discount and issuance costs. See Note 10. Debt for details on the Company’s debt facilities. The fair value and carrying value of the II-VI Notes and Finisar Notes were as follows at December 31, 2019 ($000):

	Fair Value		Carrying Value
II-VI Notes	$	353,266	$	307,687
Finisar Notes		13,771		14,888

The fair values of cash and cash equivalents are considered Level 1 among the fair value hierarchy and approximate fair value because of the short-term maturity of those instruments. The Company’s borrowings including its lease obligations, excluding the 0.25% Convertible Notes and the 0.50% Finisar convertible notes are considered Level 2 among the fair value hierarchy and their principal amounts approximate fair value.

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Finisar Acquisition (Tables) - Finisar Corporation

6 Months Ended

Dec. 31, 2019

Preliminary Fair Value of Consideration

The preliminary total fair value of consideration paid in connection with the acquisition of Finisar consisted of the following (in $000):

	Shares			Per Share			Total Consideration
Cash paid for outstanding shares of Finisar common stock						$		1,879,086
II-VI common shares issued to Finisar stockholders		26,712,822	$		36.98			987,707
Replacement equity awards attributable to pre-combination service								41,710
						$		2,908,503

Preliminary Allocation of Purchase Price Based on Estimated Fair Value of Assets Acquired and Liabilities Assumed

The Company allocated the fair value of the purchase price consideration to the tangible assets, liabilities, and intangible assets acquired, generally based on estimated fair values. The excess purchase price over those fair values is recorded as goodwill. Our valuation assumptions of acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets. Our preliminary 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):

		Purchase Price Allocation (Preliminary)
Cash and cash equivalents	$		842,477
Current assets			260,864
Inventories			439,708
Property, plant & equipment			748,858
Intangible assets			828,630
Other assets			82,929
Deferred tax assets			12,267
Accounts payable			(123,707	)
Other accrued liabilities			(163,109	)
Deferred tax liabilities			(219,544	)
Debt			(575,000	)
Goodwill			774,130
Total Purchase Price	$		2,908,503

Unaudited Supplemental Pro Forma Financial Information

The unaudited supplemental pro forma financial information for the period presented is as follows (in $000):

		Three Months				Six Months				Three Months				Six Months
		Ended December				Ended December				Ended December				Ended December
		31, 2019				31, 2019				31, 2018				31, 2018
Revenue	$		666,331		$		1,274,487		$		672,403		$		1,300,266
Net Earnings (Loss)			(29,318	)			(30,956	)			(16,633	)			(147,820	)

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Leases - Schedule of Future Minimum Lease Payments Including Short Term Leases (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jul. 01, 2019
Leases [Abstract]
Operating leases, Total	$ 159,620
Operating leases, Less Than 1 Year	35,107
Operating leases, 1-3 Years	49,305
Operating leases, 3-5 Years	29,818
Operating leases, Thereafter	45,390
Less interest, Total	37,028
Operating lease liabilities	122,592	$ 80,100
Finance leases, Total	33,393
Finance leases, Less Than 1 Year	2,387
Finance leases, 1-3 Years	4,972
Finance leases, 3-5 Years	5,249
Finance leases, Thereafter	20,785
Less interest, Total	9,409
Finance lease liabilities	$ 23,984	$ 24,000

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Revenue from Contracts with Customers - Summary of Disaggregated Revenue by Revenue Market and Product (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Disaggregation Of Revenue [Line Items]
Revenue	$ 666,331	$ 342,839	$ 1,006,740	$ 657,272
Compound Semiconductors
Disaggregation Of Revenue [Line Items]
Revenue	205,938	183,145	382,940	362,422
Photonic Solutions
Disaggregation Of Revenue [Line Items]
Revenue	460,393	159,694	601,749	294,850
Unallocated & Other
Disaggregation Of Revenue [Line Items]
Revenue			22,051
Commercial | Direct Ship Parts
Disaggregation Of Revenue [Line Items]
Revenue	617,101	298,663	909,685	576,895
Commercial | Services
Disaggregation Of Revenue [Line Items]
Revenue	4,437
Commercial | Services
Disaggregation Of Revenue [Line Items]
Revenue		4,618	11,140	10,404
Commercial | Compound Semiconductors | Direct Ship Parts
Disaggregation Of Revenue [Line Items]
Revenue	157,848	140,698	288,036	285,565
Commercial | Compound Semiconductors | Services
Disaggregation Of Revenue [Line Items]
Revenue	3,297
Commercial | Compound Semiconductors | Services
Disaggregation Of Revenue [Line Items]
Revenue		2,889	8,989	6,884
Commercial | Photonic Solutions | Direct Ship Parts
Disaggregation Of Revenue [Line Items]
Revenue	459,253	157,965	599,598	291,330
Commercial | Photonic Solutions | Services
Disaggregation Of Revenue [Line Items]
Revenue	1,140
Commercial | Photonic Solutions | Services
Disaggregation Of Revenue [Line Items]
Revenue		1,729	2,151	3,520
Commercial | Unallocated & Other | Direct Ship Parts
Disaggregation Of Revenue [Line Items]
Revenue			22,051
U.S. Government | Direct Ship Parts
Disaggregation Of Revenue [Line Items]
Revenue	40,165	33,507	77,247	60,687
U.S. Government | Services
Disaggregation Of Revenue [Line Items]
Revenue	4,628	6,051	8,668	9,286
U.S. Government | Compound Semiconductors | Direct Ship Parts
Disaggregation Of Revenue [Line Items]
Revenue	40,165	33,507	77,247	60,687
U.S. Government | Compound Semiconductors | Services
Disaggregation Of Revenue [Line Items]
Revenue	$ 4,628	$ 6,051	$ 8,668	$ 9,286

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Finisar Acquisition - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended	6 Months Ended
	Nov. 08, 2018	Dec. 31, 2019	Dec. 31, 2019	Jun. 30, 2019
Business Acquisition [Line Items]
Goodwill		$ 1,096,691	$ 1,096,691	$ 319,778
Finisar Corporation
Business Acquisition [Line Items]
Percentage of aggregate consideration in cash	60.00%
Percentage of aggregate consideration in stock	40.00%
Acquisition related costs		8,000	40,200
Business acquisition, revenue of acquired entity		306,600	328,700
Business acquisition, net loss of acquired entity excluding severance related costs		$ (7,300)	$ (22,700)
Goodwill	$ 774,130
Finisar Corporation | Proration Adjustment
Business Acquisition [Line Items]
Common stock price	$ 46.88
Cash Consideration | Finisar Corporation
Business Acquisition [Line Items]
Amount per share to be received	$ 26.00
Stock Consideration | Finisar Corporation
Business Acquisition [Line Items]
Number of shares to be received	0.5546
Stock Consideration | Finisar Corporation | Proration Adjustment
Business Acquisition [Line Items]
Number of shares to be received	0
Mixed Consideration | Finisar Corporation
Business Acquisition [Line Items]
Amount per share to be received	$ 15.60
Number of shares to be received	0.2218
Mixed Consideration | Finisar Corporation | Proration Adjustment
Business Acquisition [Line Items]
Amount per share to be received	$ 0
Number of shares to be received	0
Final Cash Consideration | Finisar Corporation | Proration Adjustment
Business Acquisition [Line Items]
Amount per share to be received	$ 15.94
Number of shares to be received	0.2146

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Summary of Total Interest Expense Recognized (Parenthetical) (Detail)	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
0.25% Convertible Senior Note Due 2022
Debt Instrument [Line Items]
Debt instrument, interest rate	0.25%	0.25%	0.25%

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Schedule of Potential Shares of Common Stock Excluded from the Calculation of Diluted Net Income Per Share (Parenthetical) (Detail)		6 Months Ended
	Sep. 24, 2019	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
0.25% Convertible Senior Note Due 2022
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Debt instrument, interest rate		0.25%	0.25%	0.25%
Debt instrument maturity date		Sep. 01, 2022
0.50% Finisar Convertible Notes
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Debt instrument, interest rate	0.50%	0.50%
Debt instrument maturity date	Dec. 15, 2036

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Other Investments - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Schedule Of Equity Method Investments [Line Items]
Equity interest, percentage		93.80%
Aggregate cost of equity method investments		$ 51,700
Pro-rata share of earnings from equity method investment		$ 918	$ 2,767
Voting interest		25.00%
Equity Investment		$ 77,795		$ 76,208
Equity Investment
Schedule Of Equity Method Investments [Line Items]
Equity Investment		$ 57,700		$ 57,600
Privately-held Company
Schedule Of Equity Method Investments [Line Items]
Pro-rata share of earnings from equity method investment	$ 900		$ 2,000

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Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Treasury Stock
Beginning Balance at Jun. 30, 2018	$ 1,024,311	$ 351,761	$ (3,780)	$ 836,064	$ (159,734)
Beginning Balance, shares at Jun. 30, 2018		75,693			(12,396)
Share-based and deferred compensation activities	9,149	$ 15,434			$ (6,285)
Share-based and deferred compensation activities (in shares)		431			(142)
Net earnings (loss)	54,851			54,851
Foreign currency translation adjustments	(15,105)		(15,105)
Pension adjustment, net of taxes	(33)		(33)
Ending Balance at Dec. 31, 2018	1,073,173	$ 367,195	(18,918)	890,915	$ (166,019)
Ending Balance, shares at Dec. 31, 2018		76,124			(12,538)
Beginning Balance at Sep. 30, 2018	1,043,588	$ 360,276	(14,379)	862,213	$ (164,522)
Beginning Balance, shares at Sep. 30, 2018		76,075			(12,497)
Share-based and deferred compensation activities	5,422	$ 6,919			$ (1,497)
Share-based and deferred compensation activities (in shares)		49			(41)
Net earnings (loss)	28,702			28,702
Foreign currency translation adjustments	(4,454)		(4,454)
Pension adjustment, net of taxes	(85)		(85)
Ending Balance at Dec. 31, 2018	1,073,173	$ 367,195	(18,918)	890,915	$ (166,019)
Ending Balance, shares at Dec. 31, 2018		76,124			(12,538)
Beginning Balance at Jun. 30, 2019	1,133,209	$ 382,423	(24,221)	943,581	$ (168,574)
Beginning Balance, shares at Jun. 30, 2019		76,315			(12,604)
Share-based and deferred compensation activities	55,604	$ 71,050			$ (15,446)
Share-based and deferred compensation activities (in shares)		1,015			(426)
Common stock repurchase	(1,625)				$ (1,625)
Common stock repurchase (in shares)					(50)
Shares issued related to Finisar acquisition	987,707	$ 987,707
Shares issued related to Finisar acquisition (in shares)		26,713
Net earnings (loss)	(124,211)			(124,211)
Foreign currency translation adjustments	11,571		11,571
Change in fair value of interest rate swap, net of taxes	3,609		3,609
Pension adjustment, net of taxes	(167)		(167)
Ending Balance at Dec. 31, 2019	2,065,697	$ 1,441,180	(9,208)	819,370	$ (185,645)
Ending Balance, shares at Dec. 31, 2019		104,043			(13,080)
Beginning Balance at Sep. 30, 2019	2,131,194	$ 1,429,173	(37,156)	917,583	$ (178,406)
Beginning Balance, shares at Sep. 30, 2019		103,736			(12,855)
Share-based and deferred compensation activities	6,393	$ 12,007			$ (5,614)
Share-based and deferred compensation activities (in shares)		307			(175)
Common stock repurchase	(1,625)				$ (1,625)
Common stock repurchase (in shares)					(50)
Net earnings (loss)	(98,213)			(98,213)
Foreign currency translation adjustments	24,590		24,590
Change in fair value of interest rate swap, net of taxes	3,609		3,609
Pension adjustment, net of taxes	(251)		(251)
Ending Balance at Dec. 31, 2019	$ 2,065,697	$ 1,441,180	$ (9,208)	$ 819,370	$ (185,645)
Ending Balance, shares at Dec. 31, 2019		104,043			(13,080)

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Property Plant and Equipment - Additional Information (Detail) - USD ($) $ in Millions	Dec. 31, 2019	Jun. 30, 2019
Property Plant And Equipment [Abstract]
Accumulated depreciation of finance lease right-of-use asset	$ 5.0	$ 4.2

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Components of Debt (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Line Of Credit Facility [Line Items]
Total debt	$ 2,297,457	$ 466,997
Current portion of long-term debt	(69,250)	(23,834)
Long-term debt, less current portion	2,228,207	443,163
0.25% Convertible Senior Note Due 2022
Line Of Credit Facility [Line Items]
Total debt, Gross	345,000	345,000
0.25% convertible senior notes unamortized discount attributable to cash conversion option and debt issuance costs including initial purchaser discount	(37,313)	(43,859)
Integrated Photonics, Inc | Note payable
Line Of Credit Facility [Line Items]
Total debt, Gross		3,834
Finisar Corporation | 0.50% convertible senior notes
Line Of Credit Facility [Line Items]
Total debt, Gross	14,888
Term A Loan Facility
Line Of Credit Facility [Line Items]
Total debt, Gross	1,225,488
Line of credit
Line Of Credit Facility [Line Items]
Total debt, Gross		115,000
Revolving Credit Facility
Line Of Credit Facility [Line Items]
Total debt, Gross	94,000
Term Loans
Line Of Credit Facility [Line Items]
Total debt, Gross		45,000
Term A Facility and Revolving Credit Facility
Line Of Credit Facility [Line Items]
Credit facility unamortized debt issuance costs	(35,592)
Yen denominated line of credit
Line Of Credit Facility [Line Items]
Total debt, Gross		2,783
Term B Loan Facility
Line Of Credit Facility [Line Items]
Total debt, Gross	718,200
Credit facility unamortized debt issuance costs	$ (27,214)
Credit Facility
Line Of Credit Facility [Line Items]
Credit facility unamortized debt issuance costs		$ (761)

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Condensed Consolidated Statements of Earnings (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Income Statement [Abstract]
Revenues	$ 666,331	$ 342,839	$ 1,006,740	$ 657,272
Costs, Expenses, and Other Expense (Income)
Cost of goods sold	517,991	211,333	735,260	401,859
Internal research and development	107,700	33,764	143,820	66,935
Selling, general and administrative	119,218	58,136	224,713	111,659
Interest expense	28,390	5,580	35,358	11,164
Other expense (income), net	487	(701)	5,566	(1,414)
Total Costs, Expenses, & Other Expense (Income)	773,786	308,112	1,144,717	590,203
Earnings (Loss) Before Income Taxes	(107,455)	34,727	(137,977)	67,069
Income Taxes	(9,242)	6,025	(13,766)	12,218
Net Earnings (Loss)	$ (98,213)	$ 28,702	$ (124,211)	$ 54,851
Basic Earnings (Loss) Per Share	$ (1.08)	$ 0.45	$ (1.58)	$ 0.86
Diluted Earnings (Loss) Per Share	$ (1.08)	$ 0.44	$ (1.58)	$ 0.83

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Share Repurchase Programs (Detail) - USD ($)	3 Months Ended	6 Months Ended	65 Months Ended
	Dec. 31, 2019	Dec. 31, 2019	Dec. 31, 2019	Aug. 31, 2014
Equity Class Of Treasury Stock [Line Items]
Stock repurchase program, authorized amount				$ 50,000,000
Purchase of common stock, shares			1,416,587
Purchase of Treasury Stock	$ 1,625,000	$ 1,625,000	$ 22,300,000
Program
Equity Class Of Treasury Stock [Line Items]
Purchase of common stock, shares	50,000	50,000
Purchase of Treasury Stock	$ 1,600,000	$ 1,600,000

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Finisar Acquisition

6 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

Finisar Acquisition

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.

Pursuant to the terms of the Agreement and Plan of Merger, dated as of November 8, 2018 (the “Merger Agreement”), Mutation Merger Sub Inc., a wholly owned subsidiary of the Company (“Merger Sub”), merged with and into Finisar (the “Merger”), with Finisar surviving the Merger. Each issued and outstanding share of Finisar’s common stock was automatically cancelled and converted into the right to receive the following consideration (collectively the “Merger Consideration”), at the election of the holder of the share of Finisar’s common stock:

• $26.00 in cash, without interest (the “Cash Consideration”),

• 0.5546 of a share of the Company’s common stock (the “Stock Consideration”), or

• a combination of $15.60 in cash, without interest, and 0.2218 of a share of the Company’s common stock (the “Mixed Consideration”).

The per share Cash Consideration and Stock Consideration were subject to adjustment pursuant to the terms of the Merger Agreement such that the aggregate Merger Consideration consisted of approximately 60.0% cash and approximately 40.0% shares of the Company’s common stock (assuming a per share price of the Company’s common stock equal to the closing price as of November 8, 2018, which was $46.88 per share) across all shares of Finisar’s common stock (the “Proration Adjustment”).  Following the Proration Adjustment, the resulting consideration for Cash Consideration was adjusted to $15.94 in cash and 0.2146 shares of the Company’s Common Stock. No adjustment was made to the Stock Consideration and Mixed Consideration.

The preliminary total fair value of consideration paid in connection with the acquisition of Finisar consisted of the following (in $000):

	Shares			Per Share			Total Consideration
Cash paid for outstanding shares of Finisar common stock						$		1,879,086
II-VI common shares issued to Finisar stockholders		26,712,822	$		36.98			987,707
Replacement equity awards attributable to pre-combination service								41,710
						$		2,908,503

The Company recorded $8.0 million and $40.2 million of acquisition related costs in the three and six months ended December 31, 2019, respectively, representing professional and other direct acquisition costs. These costs are recorded within selling, general, and administrative expense in our Condensed Consolidated Statement of Earnings (Loss).

On the Closing Date, the Company entered into an Amended and Restated Credit Agreement, dated as of September 24, 2019 (the “New Credit Agreement”), by and among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other lender parties thereto. Refer to Note 10 for additional information on the new credit facility.  

From the Closing Date, Finisar contributed $306.6 million and $328.7 million of our consolidated revenue for the three and six months ended December 31, 2019, respectively. Including severance related costs, Finisar’s contribution to our net loss was a loss of $7.3 million and $22.7 million during the three and six months ended December 31, 2019, respectively.

The Company allocated the fair value of the purchase price consideration to the tangible assets, liabilities, and intangible assets acquired, generally based on estimated fair values. The excess purchase price over those fair values is recorded as goodwill. Our valuation assumptions of acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets. Our preliminary 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):

		Purchase Price Allocation (Preliminary)
Cash and cash equivalents	$		842,477
Current assets			260,864
Inventories			439,708
Property, plant & equipment			748,858
Intangible assets			828,630
Other assets			82,929
Deferred tax assets			12,267
Accounts payable			(123,707	)
Other accrued liabilities			(163,109	)
Deferred tax liabilities			(219,544	)
Debt			(575,000	)
Goodwill			774,130
Total Purchase Price	$		2,908,503

The purchase price allocation set forth herein is preliminary and will be revised as additional information becomes available during the measurement period, which could be up to 12 months from the Closing Date. Any such revisions or changes may be material. The Company utilized market available benchmarking analysis to perform the preliminary allocation above.

As of December 31, 2019, the goodwill and intangibles have been allocated to the Photonic Solutions and Compound Semiconductors segments. The preliminary goodwill of $774.1 million arising from the acquisition is attributed to the expected synergies, including future cost savings, and other benefits expected to be generated by combining II-VI and Finisar. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes. See Note 9 for additional information on goodwill and intangibles.

Supplemental Pro Forma Information

The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the acquisition had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position.  The pro forma adjustments are based upon currently available information and certain assumptions that we believe are reasonable under the circumstances.

The following supplemental pro forma information presents the combined results of operations for the three and six months ended December 31, 2018 and 2019, as if Finisar had been acquired as of July 1, 2018.  The supplemental pro forma information includes adjustments to amortization and depreciation for acquired intangible assets, property, plant and equipment, adjustments to share-based compensation expense, fair value adjustments on the inventories acquired, transaction costs, and interest expense and amortization of debt issuance costs related to the New Senior Credit Facilities as defined in Note 10.

The unaudited supplemental pro forma financial information for the period presented is as follows (in $000):

		Three Months				Six Months				Three Months				Six Months
		Ended December				Ended December				Ended December				Ended December
		31, 2019				31, 2019				31, 2018				31, 2018
Revenue	$		666,331		$		1,274,487		$		672,403		$		1,300,266
Net Earnings (Loss)			(29,318	)			(30,956	)			(16,633	)			(147,820	)

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Inventories

6 Months Ended

Dec. 31, 2019

Inventory Disclosure [Abstract]

Inventories

Note 7. Inventories

The components of inventories were as follows ($000):

	December 31,		June 30,
	2019		2019
Raw materials	$	208,364	$	119,917
Work in progress		307,303		101,091
Finished goods		147,315		75,274
	$	662,982	$	296,282

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

Summary of Fair Value and Carrying Value of II-VI Notes and Finisar Notes

The fair value and carrying value of the II-VI Notes and Finisar Notes were as follows at December 31, 2019 ($000):

	Fair Value		Carrying Value
II-VI Notes	$	353,266	$	307,687
Finisar Notes		13,771		14,888

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Debt (Tables)

6 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Components of Debt

The components of debt for the periods indicated were as follows ($000):

	December 31,			June 30,
	2019			2019
Term A Facility, interest at LIBOR, as defined, plus 2.00%	$	1,225,488		$	-
Revolving Credit Facility, interest at LIBOR, as defined, plus 2.00%		94,000			-
Debt issuance costs, Term A Facility and Revolving Credit Facility		(35,592	)		-
Term B Facility, interest at LIBOR, as defined, plus 3.50%		718,200			-
Debt issuance costs, Term B Facility		(27,214	)		-
0.50% convertible senior notes, assumed in the Finisar acquisition		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		(37,313	)		(43,859	)
Term loan, interest at LIBOR, as defined, plus 1.75%		-			45,000
Line of credit, interest at LIBOR, as defined, plus 1.75%		-			115,000
Credit facility unamortized debt issuance costs		-			(761	)
Yen denominated line of credit, interest at LIBOR, as defined, plus 1.75%		-			2,783
Note payable assumed in IPI acquisition		-			3,834
Total debt		2,297,457			466,997
Current portion of long-term debt		(69,250	)		(23,834	)
Long-term debt, less current portion	$	2,228,207		$	443,163

Summary of Total Interest Expense Recognized

The following tables set forth total interest expense recognized related to the II-VI Notes for the three and six months ended December 31, 2019 and 2018:

	Three Months Ended December 31, 2019		Six Months Ended December 31, 2019
0.25% contractual coupon	$	221	$	441
Amortization of debt discount and debt issuance costs including initial purchaser discount		3,291		6,546
Interest expense	$	3,512	$	6,987
	Three Months Ended December 31, 2018		Six Months Ended December 31, 2018
0.25% contractual coupon	$	221	$	441
Amortization of debt discount and debt issuance costs including initial purchaser discount		3,145		6,255
Interest expense	$	3,366	$	6,696

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Other Investments (Tables)

6 Months Ended

Dec. 31, 2019

Nonconsolidated Investment

Schedule of Equity in Nonconsolidated Investment

The following table summarizes the Company's equity in this nonconsolidated investment:

	Interest	Ownership % as of	Equity as of
Location	Type	December 31, 2019	December 31, 2019 ($000)
USA	Equity Investment	93.8%	$	57,658

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Document and Entity Information - shares	6 Months Ended
	Dec. 31, 2019	Feb. 06, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Dec. 31, 2019
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Trading Symbol	IIVI
Entity Registrant Name	II-VI INCORPORATED
Entity Central Index Key	0000820318
Entity Current Reporting Status	Yes
Current Fiscal Year End Date	--06-30
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		91,059,636
Entity Shell Company	false
Entity File Number	0-16195
Entity Tax Identification Number	25-1214948
Entity Address, Address Line One	375 Saxonburg Boulevard
Entity Address, City or Town	Saxonburg
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	16056
City Area Code	724
Entity Interactive Data Current	Yes
Local Phone Number	352-4455
Title of 12(b) Security	Common Stock, no par value
Security Exchange Name	NASDAQ
Entity Incorporation, State or Country Code	PA
Document Quarterly Report	true
Document Transition Report	false

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Components of Debt (Parenthetical) (Detail)	6 Months Ended	12 Months Ended
	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
0.25% Convertible Senior Note Due 2022
Line Of Credit Facility [Line Items]
Debt instrument, interest rate	0.25%	0.25%	0.25%
0.50% Convertible Notes
Line Of Credit Facility [Line Items]
Debt instrument, interest rate	0.50%
London Interbank Offered Rate (LIBOR) | Term A Loan
Line Of Credit Facility [Line Items]
Debt instrument, rate added on variable rate	2.00%
London Interbank Offered Rate (LIBOR) | Revolving Credit Facility
Line Of Credit Facility [Line Items]
Debt instrument, rate added on variable rate	2.00%
London Interbank Offered Rate (LIBOR) | Term Loans
Line Of Credit Facility [Line Items]
Debt instrument, rate added on variable rate		1.75%
London Interbank Offered Rate (LIBOR) | Term B Loan Facility
Line Of Credit Facility [Line Items]
Debt instrument, rate added on variable rate	3.50%
London Interbank Offered Rate (LIBOR) | Line of credit
Line Of Credit Facility [Line Items]
Debt instrument, rate added on variable rate		1.75%
London Interbank Offered Rate (LIBOR) | Yen denominated line of credit
Line Of Credit Facility [Line Items]
Debt instrument, rate added on variable rate		1.75%

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net earnings (loss)	$ (98,213)	$ 28,702	$ (124,211)	$ 54,851
Other comprehensive income (loss):
Foreign currency translation adjustments	24,590	(4,454)	11,571	(15,105)
Change in fair value of interest rate swap, net of taxes of $989 for both the three and six months ended December 31, 2019	3,609		3,609
Pension adjustment, net of taxes of ($92) and ($69) for the three and six months ended December 31, 2019, respectively, and ($24) and ($9) for the three and six months ended December 31, 2018, respectively	(251)	(85)	(167)	(33)
Comprehensive income (loss)	$ (70,265)	$ 24,163	$ (109,198)	$ 39,713

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Schedule of Equity in Nonconsolidated Investment (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Schedule Of Equity Method Investments [Line Items]
Equity Investment, Ownership Percentage	93.80%
Equity Investment	$ 77,795	$ 76,208
Equity Investment
Schedule Of Equity Method Investments [Line Items]
Equity Investment	$ 57,700	$ 57,600
Nonconsolidated Investment | Equity Investment | USA
Schedule Of Equity Method Investments [Line Items]
Equity Investment, Ownership Percentage	93.80%
Equity Investment	$ 57,658

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Condensed Consolidated Statements of Shareholders' Equity (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Statement Of Stockholders Equity [Abstract]
Pension adjustment tax	$ (92)	$ (24)	$ (69)	$ (9)
Change in fair value of interest rate swap, net of taxes	$ 989		$ 989

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Changes in Carrying Amount of Goodwill (Detail) $ in Thousands	6 Months Ended
	Dec. 31, 2019 USD ($)
Goodwill [Line Items]
Balance-beginning of period	$ 319,778
Goodwill acquired	774,130
Foreign currency translation	2,783
Balance-end of period	1,096,691
Compound Semiconductors
Goodwill [Line Items]
Balance-beginning of period	185,721
Goodwill acquired	61,085
Foreign currency translation	2,482
Balance-end of period	249,288
Photonic Solutions
Goodwill [Line Items]
Balance-beginning of period	134,057
Goodwill acquired	713,045
Foreign currency translation	301
Balance-end of period	$ 847,403

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Summary of Fair Value and Carrying Value of II-VI Notes and Finisar Notes (Detail) $ in Thousands	Dec. 31, 2019 USD ($)
0.25% Convertible Senior Note Due 2022
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Convertible notes fair value	$ 353,266
Convertible notes carrying value	307,687
Finisar Notes
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Convertible notes fair value	13,771
Convertible notes carrying value	$ 14,888

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Revenue from Contracts with Customers

6 Months Ended

Dec. 31, 2019

Revenue From Contract With Customer [Abstract]

Revenue from Contracts with Customers

Note 4. Revenue from Contracts with Customers

The following tables summarize disaggregated revenue by revenue market, and product for the three and six months ended December 31, 2019 and 2018 ($000):

	Three Months Ended December 31, 2019
	Compound		Photonic		Unallocated
	Semiconductors		Solutions		& Other			Total
Commercial							`
Direct Ship Parts	$	157,848	$	459,253	$	-		$	617,101
Services		3,297		1,140		-			4,437
U.S. Government
Direct Ship Parts		40,165		-		-			40,165
Services		4,628		-		-			4,628
Total Revenues	$	205,938	$	460,393	$	-		$	666,331

	Three Months Ended December 31, 2018
	Compound		Photonic		Unallocated
	Semiconductors		Solutions		& Other			Total
Commercial							`
Direct Ship Parts	$	140,698	$	157,965	$	-		$	298,663
Services		2,889		1,729		-			4,618
U.S. Government
Direct Ship Parts		33,507		-		-			33,507
Services		6,051		-		-			6,051
Total Revenues	$	183,145	$	159,694	$	-		$	342,839

	Six Months Ended December 31, 2019
	Compound		Photonic		Unallocated
	Semiconductors		Solutions		& Other		Total
Commercial
Direct Ship Parts	$	288,036	$	599,598	$	22,051	$	909,685
Services		8,989		2,151		-		11,140
U.S. Government
Direct Ship Parts		77,247		-		-		77,247
Services		8,668		-		-		8,668
Total Revenues	$	382,940	$	601,749	$	22,051	$	1,006,740

	Six Months Ended December 31, 2018
	Compound		Photonic		Unallocated
	Semiconductors		Solutions		& Other		Total
Commercial
Direct Ship Parts	$	285,565	$	291,330	$	-	$	576,895
Services		6,884		3,520		-		10,404
U.S. Government
Direct Ship Parts		60,687		-		-		60,687
Services		9,286		-		-		9,286
Total Revenues	$	362,422	$	294,850	$	-	$	657,272

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 and six months ended December 31, 2019, the Company recognized revenue of $21.2 million and $50.2 million, respectively, related to customer payments that were included as contract liabilities in the Condensed Consolidated Balance Sheet as of July 1, 2019. The Company had $37.7 million and $19.4 million of contract liabilities recorded in the Condensed Consolidated Balance Sheets as of December 31, 2019 and June 30, 2019, respectively.

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Property, Plant and Equipment

6 Months Ended

Dec. 31, 2019

Property Plant And Equipment [Abstract]

Property, Plant and Equipment

Note 8. Property, Plant and Equipment

Property, plant and equipment consists of the following ($000):

	December 31,			June 30,
	2019			2019
Land and improvements	$	17,552		$	9,001
Buildings and improvements		310,398			249,238
Machinery and equipment		1,411,511			739,330
Construction in progress		136,514			71,425
Finance lease right-of-use asset		25,000			-
		1,900,975			1,068,994
Less accumulated depreciation		(553,828	)		(486,204	)
	$	1,347,147		$	582,790

Included in the table above is a building acquired under a finance lease. As of December 31, 2019 and June 30, 2019, the accumulated depreciation of the finance lease right-of-use asset was $5.0 million and $4.2 million, respectively.

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Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Dec. 31, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Changes in Carrying Amount of Goodwill

Changes in the carrying amount of goodwill were as follows ($000):

	Six Months Ended December 31, 2019
	Compound		Photonic
	Semiconductors		Solutions		Total
Balance-beginning of period	$	185,721	$	134,057	$	319,778
Goodwill acquired		61,085		713,045		774,130
Foreign currency translation		2,482		301		2,783
Balance-end of period	$	249,288	$	847,403	$	1,096,691

Gross Carrying Amount and Accumulated Amortization of Intangible Assets Other Than Goodwill

The gross carrying amount and accumulated amortization of the Company’s intangible assets other than goodwill as of December 31, 2019 and June 30, 2019 were as follows ($000):

	December 31, 2019							June 30, 2019
	Gross					Net		Gross					Net
	Carrying		Accumulated			Book		Carrying		Accumulated			Book
	Amount		Amortization			Value		Amount		Amortization			Value
Technology and Patents	$	92,513	$	(43,397	)	$	49,116	$	91,637	$	(39,679	)	$	51,958
Trade Names		15,714		(1,667	)		14,047		15,759		(1,601	)		14,158
Customer Lists		133,656		(64,355	)		69,301		132,872		(59,664	)		73,208
Other		830,199		(32,890	)		797,309		1,572		(1,572	)		-
Total	$	1,072,082	$	(142,309	)	$	929,773	$	241,840	$	(102,516	)	$	139,324

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Leases (Tables)

6 Months Ended

Dec. 31, 2019

Leases [Abstract]

Schedule of Lease Costs, Including Short-Term Leases, Lease Term, and Discount Rates

The following table presents lease costs, which include short-term leases, lease term, and discount rates ($000):

	Three Months				Six Months
	Ended				Ended
	December 31, 2019				December 31, 2019
Finance Lease Cost
Amortization of right-of-use Assets	$	417			$	833
Interest on Lease Liabilities		334				671
Total Finance Lease Cost		751				1,505
Operating Lease Cost		11,073				17,180
Total Lease Cost	$	11,824			$	18,685
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating Cash Flows from Finance Leases		334				671
Operating Cash Flows from Operating Leases		10,731				16,671
Financing Cash Flows from Finance Leases		247				490
Weighted-Average Remaining Lease Term (in Years)
Finance Leases			12.0
Operating Leases			6.2
Weighted-Average Discount Rate
Finance Leases			5.6	%
Operating Leases			6.0	%

Schedule of Future Minimum Lease Payments Including Short Term Leases

The following table presents future minimum lease payments, which include short-term leases ($000):

	Payments Due By Period
			Less Than		1-3		3-5
	Total		1 Year		Years		Years		Thereafter
Operating leases	$	159,620	$	35,107	$	49,305	$	29,818	$	45,390
Less interest		37,028
Operating lease liability	$	122,592
Finance leases	$	33,393	$	2,387	$	4,972	$	5,249	$	20,785
Less interest		9,409
Finance lease liability	$	23,984

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Share-Based Compensation (Tables)

6 Months Ended

Dec. 31, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-Based Compensation Expense by Award Type

Share-based compensation expense for the periods indicated was as follows ($000):

	Three Months Ended				Six Months Ended
December 31,		2019		2018		2019		2018
Stock Options and Cash-Based Stock Appreciation Rights	$	2,989	$	454	$	4,659	$	2,782
Restricted Share Awards and Cash-Based Restricted Share Unit Awards		12,871		2,007		25,602		4,799
Performance Share Awards and Cash-Based Performance Share Unit Awards		3,400		2,497		5,159		2,714
	$	19,260	$	4,958	$	35,420	$	10,295

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Revenue from Contracts with Customers (Tables)

6 Months Ended

Dec. 31, 2019

Disaggregation Of Revenue [Abstract]

Summary of Disaggregated Revenue by Revenue Market and Product

The following tables summarize disaggregated revenue by revenue market, and product for the three and six months ended December 31, 2019 and 2018 ($000):

	Three Months Ended December 31, 2019
	Compound		Photonic		Unallocated
	Semiconductors		Solutions		& Other			Total
Commercial							`
Direct Ship Parts	$	157,848	$	459,253	$	-		$	617,101
Services		3,297		1,140		-			4,437
U.S. Government
Direct Ship Parts		40,165		-		-			40,165
Services		4,628		-		-			4,628
Total Revenues	$	205,938	$	460,393	$	-		$	666,331

	Three Months Ended December 31, 2018
	Compound		Photonic		Unallocated
	Semiconductors		Solutions		& Other			Total
Commercial							`
Direct Ship Parts	$	140,698	$	157,965	$	-		$	298,663
Services		2,889		1,729		-			4,618
U.S. Government
Direct Ship Parts		33,507		-		-			33,507
Services		6,051		-		-			6,051
Total Revenues	$	183,145	$	159,694	$	-		$	342,839

	Six Months Ended December 31, 2019
	Compound		Photonic		Unallocated
	Semiconductors		Solutions		& Other		Total
Commercial
Direct Ship Parts	$	288,036	$	599,598	$	22,051	$	909,685
Services		8,989		2,151		-		11,140
U.S. Government
Direct Ship Parts		77,247		-		-		77,247
Services		8,668		-		-		8,668
Total Revenues	$	382,940	$	601,749	$	22,051	$	1,006,740

	Six Months Ended December 31, 2018
	Compound		Photonic		Unallocated
	Semiconductors		Solutions		& Other		Total
Commercial
Direct Ship Parts	$	285,565	$	291,330	$	-	$	576,895
Services		6,884		3,520		-		10,404
U.S. Government
Direct Ship Parts		60,687		-		-		60,687
Services		9,286		-		-		9,286
Total Revenues	$	362,422	$	294,850	$	-	$	657,272

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Earnings Per Share

6 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Note 12. Earnings Per Share

The following table sets forth the computation of earnings per share for the periods indicated. Basic net income per share has been computed using the weighted average number of shares of Common Stock outstanding during the period. Diluted net income per share has been computed using the weighted average number of common shares outstanding during the period plus dilutive potential shares of Common Stock from (1) stock options, performance and restricted shares (under the treasury stock method) and (2) convertible debt (under the If Converted method) outstanding during the period. The Company’s convertible debt calculated under the if-converted method was anti-dilutive for the three and six months ended December 31, 2019 and 2018, and was excluded from the calculation of earnings per share (000 except per share data):

	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2019			2018		2019			2018
Basic Earnings per Share
Net earnings (loss)	$	(98,213	)	$	28,702	$	(124,211	)	$	54,851
Divided by:
Weighted average shares		90,886			63,588		78,428			63,504
Basic earnings (loss) per common share	$	(1.08	)	$	0.45	$	(1.58	)	$	0.86
Diluted Earnings per Share
Net earnings (loss)	$	(98,213	)	$	28,702	$	(124,211	)	$	54,851
Divided by:
Weighted average shares		90,886			63,588		78,428			63,504
Dilutive effect of common stock equivalents		-			2,085		-			2,412
Diluted weighted average common shares		90,886			65,673		78,428			65,916
Diluted earnings (loss) per common share	$	(1.08	)	$	0.44	$	(1.58	)	$	0.83

The following table presents potential shares of Common Stock excluded from the calculation of diluted net income per share as their effect would have been anti-dilutive (000):

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2019		2018		2019		2018
Common stock equivalents		3,392		138		2,714		125
0.25% Convertible Senior Notes due 2022		7,331		7,331		7,331		7,331
0.50% Finisar Convertible Notes		391		-		502		-
Total anti-dilutive shares		11,114		7,469		10,547		7,456

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Share Repurchase Programs

6 Months Ended

Dec. 31, 2019

Equity [Abstract]

Share Repurchase Programs

Note 16. Share Repurchase Programs

In August 2014, the Company’s Board of Directors authorized the Company to purchase up to $50 million of its Common Stock through a share repurchase program (the “Program”) that calls for shares to be purchased in the open market or in private transactions from time to time. The Program has no expiration and may be suspended or discontinued at any time. Shares purchased by the Company are retained as treasury stock and available for general corporate purposes.  During the three and six months ended December 31, 2019, the Company purchased 50,000 shares of its common stock for $1.6 million under this program.  Through December 31, 2019, the Company has cumulatively purchased 1,416,587 shares of its Common Stock pursuant to the Program for approximately $22.3 million.

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Unaudited Supplemental Pro Forma Financial Information (Detail) - Finisar Corporation - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Business Acquisition [Line Items]
Revenue	$ 666,331	$ 672,403	$ 1,274,487	$ 1,300,266
Net Earnings (Loss)	$ (29,318)	$ (16,633)	$ (30,956)	$ (147,820)

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Dec. 31, 2019

Equity [Abstract]

Changes in Accumulated Other Comprehensive Income ("AOCI") by Component, Net of Tax

The changes in accumulated other comprehensive income (“AOCI”) by component, net of tax, for the six months ended December 31, 2019 were as follows ($000):

	Foreign									Total
	Currency			Interest			Defined			Accumulated Other
	Translation			Rate			Benefit			Comprehensive
	Adjustment			Swap			Pension Plan			Income (Loss)
AOCI - June 30, 2019	$	(15,627	)	$	-		$	(8,594	)	$	(24,221	)
Other comprehensive income before reclassifications		11,571			3,774			(167	)		15,178
Amounts reclassified from AOCI		-			(165	)		-			(165	)
Net current-period other comprehensive income		11,571			3,609			(167	)		15,013
AOCI - December 31, 2019	$	(4,056	)	$	3,609		$	(8,761	)	$	(9,208	)

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Leases - Schedule of Lease Costs, Including Short-Term Leases, Lease Term, and Discount Rates (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Dec. 31, 2019 USD ($)	Dec. 31, 2019 USD ($)
Finance Lease Cost
Amortization of right-of-use Assets	$ 417	$ 833
Interest on Lease Liabilities	334	671
Total Finance Lease Cost	751	1,505
Operating Lease Cost	11,073	17,180
Total Lease Cost	11,824	18,685
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating Cash Flows from Finance Leases	334	671
Operating Cash Flows from Operating Leases	10,731	16,671
Financing Cash Flows from Finance Leases	$ 247	$ 490
Weighted-Average Remaining Lease Term (in Years)
Finance Leases	12 years	12 years
Operating Leases	6 years 2 months 12 days	6 years 2 months 12 days
Weighted-Average Discount Rate
Finance Leases	5.60%	5.60%
Operating Leases	6.00%	6.00%

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Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Income Tax Contingency [Line Items]
U.S. statutory rate	21.00%
Effective income tax rate (benefit) expense	(10.00%)	18.20%
Unrecognized tax benefits that would impact effective tax rate	$ 74.0		$ 11.5
Interest and penalties accrued	15.6		$ 1.2
Liability for uncertain tax positions	70.3
Finisar Corporation
Income Tax Contingency [Line Items]
Liability for uncertain tax positions	$ 64.0
United States Internal Revenue Service | Earliest Tax Year
Income Tax Contingency [Line Items]
Tax year remain open to examination	2017
United States Internal Revenue Service | Latest Tax Year
Income Tax Contingency [Line Items]
Tax year remain open to examination	2020
State Jurisdictions | Earliest Tax Year
Income Tax Contingency [Line Items]
Tax year remain open to examination	2015
State Jurisdictions | Latest Tax Year
Income Tax Contingency [Line Items]
Tax year remain open to examination	2020
Foreign Taxing Jurisdictions | Earliest Tax Year
Income Tax Contingency [Line Items]
Tax year remain open to examination	2009
Foreign Taxing Jurisdictions | Latest Tax Year
Income Tax Contingency [Line Items]
Tax year remain open to examination	2020
Subsidiaries in Philippines
Income Tax Contingency [Line Items]
Income tax examination, year(s) under examination	2017
Subsidiary in Germany | Earliest Tax Year
Income Tax Contingency [Line Items]
Income tax examination, year(s) under examination	2012
Subsidiary in Germany | Latest Tax Year
Income Tax Contingency [Line Items]
Income tax examination, year(s) under examination	2015
Subsidiary in Florida | Earliest Tax Year
Income Tax Contingency [Line Items]
Income tax examination, year(s) under examination	2016
Subsidiary in Florida | Latest Tax Year
Income Tax Contingency [Line Items]
Income tax examination, year(s) under examination	2018
Subsidiary in Vietnam | Earliest Tax Year
Income Tax Contingency [Line Items]
Income tax examination, year(s) under examination	2018
Subsidiary in Vietnam | Latest Tax Year
Income Tax Contingency [Line Items]
Income tax examination, year(s) under examination	2019
Subsidiary in Australia | Earliest Tax Year
Income Tax Contingency [Line Items]
Income tax examination, year(s) under examination	2011
Subsidiary in Australia | Latest Tax Year
Income Tax Contingency [Line Items]
Income tax examination, year(s) under examination	2014
Subsidiary in India
Income Tax Contingency [Line Items]
Income tax examination, year(s) under examination	2016

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Segment Reporting - Additional Information (Detail)	6 Months Ended
	Dec. 31, 2019 Segment
Segment Reporting [Abstract]
Number of reporting segments	2

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Changes in Accumulated Other Comprehensive Income ("AOCI") by Component, Net of Tax (Detail) $ in Thousands	6 Months Ended
	Dec. 31, 2019 USD ($)
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	$ 1,133,209
Other comprehensive income before reclassifications	15,178
Amounts reclassified from AOCI	(165)
Net current-period other comprehensive income	15,013
Ending Balance	2,065,697
Foreign Currency Translation Adjustment
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	(15,627)
Other comprehensive income before reclassifications	11,571
Net current-period other comprehensive income	11,571
Ending Balance	(4,056)
Defined Benefit Pension Plan
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	(8,594)
Other comprehensive income before reclassifications	(167)
Net current-period other comprehensive income	(167)
Ending Balance	(8,761)
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	(24,221)
Ending Balance	(9,208)
Interest Rate Swap
Accumulated Other Comprehensive Income Loss [Line Items]
Other comprehensive income before reclassifications	3,774
Amounts reclassified from AOCI	(165)
Net current-period other comprehensive income	3,609
Ending Balance	$ 3,609

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Share-Based Compensation Expense by Award Type (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	$ 19,260	$ 4,958	$ 35,420	$ 10,295
Stock Options and Cash-Based Stock Appreciation Rights
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	2,989	454	4,659	2,782
Restricted Share Awards and Cash-Based Restricted Share Unit Awards
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	12,871	2,007	25,602	4,799
Performance Share Awards and Cash-Based Performance Share Unit Awards
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	$ 3,400	$ 2,497	$ 5,159	$ 2,714

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Statement Of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 1,868	$ 1,292
Preferred stock, par value
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Common stock, par value
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	104,043,057	76,315,337
Treasury stock, shares	13,080,375	12,603,781

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash Flows from Operating Activities
Net earnings (loss)	$ (124,211)	$ 54,851
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation	69,386	36,679
Amortization	39,714	7,820
Share-based compensation expense	34,380	9,277
Amortization of discount on convertible debt and debt issuance costs	9,639	6,255
Debt extinguishment costs	3,960
Losses on foreign currency remeasurements and transactions	4,575	1,726
Earnings from equity investments	(918)	(2,767)
Deferred income taxes	(42,076)	(3,506)
Increase (decrease) in cash from changes in (net of effect of acquisitions):
Accounts receivable	31,237	(8,610)
Inventories	78,065	(39,588)
Accounts payable	(1,963)	22,777
Income taxes	8,930	(856)
Accrued compensation and benefits	(9,642)	(10,436)
Other operating net assets (liabilities)	(44,816)	14,584
Net cash provided by operating activities	56,260	88,206
Cash Flows from Investing Activities
Additions to property, plant & equipment	(80,288)	(74,368)
Purchases of businesses, net of cash acquired	(1,036,609)	(54,229)
Purchases of equity investments		(4,480)
Other investing activities	(1,102)	116
Net cash used in investing activities	(1,117,999)	(132,961)
Cash Flows from Financing Activities
Proceeds from borrowings of Revolving Credit Facility	160,000
Proceeds from borrowings under prior Credit Facility	10,000	120,000
Payments on Finisar Notes	(560,112)
Payments on borrowings under prior Term Loan, Credit Facility and other loans	(176,596)	(85,000)
Payments on borrowings under Revolving Credit Facility	(66,000)
Debt issuance costs	(63,510)
Proceeds from exercises of stock options	3,077	6,222
Payments on earnout arrangements		(3,540)
Common stock repurchase	(1,626)
Payments in satisfaction of employees' minimum tax obligations	(15,031)	(6,350)
Other financing activities	(1,839)
Net cash provided by financing activities	1,232,050	31,332
Effect of exchange rate changes on cash and cash equivalents	1,657	(3,359)
Net increase (decrease) in cash and cash equivalents	171,968	(16,782)
Cash and Cash Equivalents at Beginning of Period	204,872	247,038
Cash and Cash Equivalents at End of Period	376,840	230,256
Cash paid for interest	24,745	4,293
Cash paid for income taxes	25,087	14,527
Additions to property, plant & equipment included in accounts payable	12,502	$ 10,347
Term A Loan
Cash Flows from Financing Activities
Proceeds from borrowings	1,241,000
Payments on borrowings	(15,513)
Term B Loan
Cash Flows from Financing Activities
Proceeds from borrowings	720,000
Payments on borrowings	$ (1,800)

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Property Plant and Equipment (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Property Plant And Equipment [Line Items]
Property, Plant and Equipment, gross	$ 1,900,975	$ 1,068,994
Less accumulated depreciation	(553,828)	(486,204)
Property, Plant and Equipment, net	1,347,147	582,790
Land and Improvements
Property Plant And Equipment [Line Items]
Property, Plant and Equipment, gross	17,552	9,001
Buildings and Improvements
Property Plant And Equipment [Line Items]
Property, Plant and Equipment, gross	310,398	249,238
Machinery and Equipment
Property Plant And Equipment [Line Items]
Property, Plant and Equipment, gross	1,411,511	739,330
Construction in Progress
Property Plant And Equipment [Line Items]
Property, Plant and Equipment, gross	136,514	$ 71,425
Finance Lease Right-of-Use Asset
Property Plant And Equipment [Line Items]
Property, Plant and Equipment, gross	$ 25,000

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Goodwill and Other Intangible Assets - Additional Information (Detail) - USD ($)	6 Months Ended
	Dec. 31, 2019	Nov. 08, 2018
Goodwill And Other Intangible Assets [Line Items]
Impairment of goodwill and long-lived assets	$ 0
Finisar Corporation
Goodwill And Other Intangible Assets [Line Items]
Identifiable intangibles assets recorded in connection with acquisitions	828,600,000	$ 828,630,000
Finisar Corporation | Technology
Goodwill And Other Intangible Assets [Line Items]
Identifiable intangibles assets recorded in connection with acquisitions	615,800,000
Finisar Corporation | Customer Lists
Goodwill And Other Intangible Assets [Line Items]
Identifiable intangibles assets recorded in connection with acquisitions	125,400,000
Finisar Corporation | In Progress Research and Development
Goodwill And Other Intangible Assets [Line Items]
Identifiable intangibles assets recorded in connection with acquisitions	76,000,000.0
Finisar Corporation | Trade Names
Goodwill And Other Intangible Assets [Line Items]
Identifiable intangibles assets recorded in connection with acquisitions	$ 11,400,000

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Earnings Per Share (Tables)

6 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Computation of Earnings Per Share

The following table sets forth the computation of earnings per share for the periods indicated. Basic net income per share has been computed using the weighted average number of shares of Common Stock outstanding during the period. Diluted net income per share has been computed using the weighted average number of common shares outstanding during the period plus dilutive potential shares of Common Stock from (1) stock options, performance and restricted shares (under the treasury stock method) and (2) convertible debt (under the If Converted method) outstanding during the period. The Company’s convertible debt calculated under the if-converted method was anti-dilutive for the three and six months ended December 31, 2019 and 2018, and was excluded from the calculation of earnings per share (000 except per share data):

	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2019			2018		2019			2018
Basic Earnings per Share
Net earnings (loss)	$	(98,213	)	$	28,702	$	(124,211	)	$	54,851
Divided by:
Weighted average shares		90,886			63,588		78,428			63,504
Basic earnings (loss) per common share	$	(1.08	)	$	0.45	$	(1.58	)	$	0.86
Diluted Earnings per Share
Net earnings (loss)	$	(98,213	)	$	28,702	$	(124,211	)	$	54,851
Divided by:
Weighted average shares		90,886			63,588		78,428			63,504
Dilutive effect of common stock equivalents		-			2,085		-			2,412
Diluted weighted average common shares		90,886			65,673		78,428			65,916
Diluted earnings (loss) per common share	$	(1.08	)	$	0.44	$	(1.58	)	$	0.83

Schedule of Potential Shares of Common Stock Excluded from the Calculation of Diluted Net Income Per Share

The following table presents potential shares of Common Stock excluded from the calculation of diluted net income per share as their effect would have been anti-dilutive (000):

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2019		2018		2019		2018
Common stock equivalents		3,392		138		2,714		125
0.25% Convertible Senior Notes due 2022		7,331		7,331		7,331		7,331
0.50% Finisar Convertible Notes		391		-		502		-
Total anti-dilutive shares		11,114		7,469		10,547		7,456

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Inventories (Tables)

6 Months Ended

Dec. 31, 2019

Inventory Disclosure [Abstract]

Components of Inventories

The components of inventories were as follows ($000):

	December 31,		June 30,
	2019		2019
Raw materials	$	208,364	$	119,917
Work in progress		307,303		101,091
Finished goods		147,315		75,274
	$	662,982	$	296,282

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Recently Issued Financial Accounting Standards

6 Months Ended

Dec. 31, 2019

New Accounting Pronouncements And Changes In Accounting Principles [Abstract]

Recently Issued Financial Accounting Standards

Note 2. Recently Issued Financial Accounting Standards

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). This ASU modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements. The Company adopted this standard on July 1, 2019.  The Company has elected to utilize the optional transition method. See Note 5.

Derivatives and Hedging

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), which more closely aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.  The Company adopted this standard on July 1, 2019.  The adoption of this standard did not have a material effect on the consolidated financial statements.

Pronouncements Currently Under Evaluation

In July 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which among other things, requires the measurement of all expected credit losses of financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward looking information to better inform their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company is in the process of evaluating the impact of the pronouncement.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (“ASU 2018-16”), which permits the use of the OIS rate based on SOFR as a U.S. benchmark interest rate eligible for hedge accounting purposes.  For public business entities that already have adopted the amendments in ASU 2017-12, the amendments in ASU 2018-16 are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.  Early adoption is permitted in any interim period upon issuance of this update if an entity already has adopted ASU 2017-12.  The Company is in the process of evaluating the impact of the pronouncement.

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Other Investments

6 Months Ended

Dec. 31, 2019

Equity Method Investments And Joint Ventures [Abstract]

Other Investments

Note 6. Other Investments

The Company holds a 93.8% equity investment in a privately-held company (“Equity Investment”), which it acquired for $51.7 million. The Company’s pro-rata share of earnings/(loss) from this investment for the three and six months ended December 31, 2019 was insignificant. The Company’s pro rata share of earnings from this investment for the three and six months ended December 31, 2018 was $0.9 million and $2.0 million, and was recorded in other expense (income), net in the Condensed Consolidated Statement of Earnings (Loss).  

This investment is accounted for under the equity method of accounting. The following table summarizes the Company's equity in this nonconsolidated investment:

	Interest	Ownership % as of	Equity as of
Location	Type	December 31, 2019	December 31, 2019 ($000)
USA	Equity Investment	93.8%	$	57,658

The Equity Investment has been determined to be a variable interest entity because the Company has an overall 93.8% economic position in the investee, comprising a significant portion of its capitalization, but has only a 25% voting interest. The Company’s right to receive rewards and obligation to absorb expected losses is disproportionate to its voting interest. The Company is not the primary beneficiary because it does 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 the Equity Investment.  The Company accounts for its interest as an equity method investment as the Company has the ability to exercise significant influence over operating and financial policies of the Equity Investment.

As of December 31, 2019 and June 30, 2019, the Company’s maximum financial statement exposure related to this Equity Investment was approximately $57.7 million and $57.6 million, respectively, which is included in Investments on the Condensed Consolidated Balance Sheets.

The Company has the right to purchase all of the outstanding interest of each of the minority equity holders, and the minority equity holders have the right to cause the Company to purchase all of their outstanding interests, at any time on or after the third anniversary of the investment, or earlier upon certain events.  

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Debt

6 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Debt

Note 10. Debt

The components of debt for the periods indicated were as follows ($000):

	December 31,			June 30,
	2019			2019
Term A Facility, interest at LIBOR, as defined, plus 2.00%	$	1,225,488		$	-
Revolving Credit Facility, interest at LIBOR, as defined, plus 2.00%		94,000			-
Debt issuance costs, Term A Facility and Revolving Credit Facility		(35,592	)		-
Term B Facility, interest at LIBOR, as defined, plus 3.50%		718,200			-
Debt issuance costs, Term B Facility		(27,214	)		-
0.50% convertible senior notes, assumed in the Finisar acquisition		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		(37,313	)		(43,859	)
Term loan, interest at LIBOR, as defined, plus 1.75%		-			45,000
Line of credit, interest at LIBOR, as defined, plus 1.75%		-			115,000
Credit facility unamortized debt issuance costs		-			(761	)
Yen denominated line of credit, interest at LIBOR, as defined, plus 1.75%		-			2,783
Note payable assumed in IPI acquisition		-			3,834
Total debt		2,297,457			466,997
Current portion of long-term debt		(69,250	)		(23,834	)
Long-term debt, less current portion	$	2,228,207		$	443,163

New Senior Credit Facilities

On September 24, 2019, in connection with the Finisar acquisition, the Company entered the New 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 New Credit Agreement provides for senior secured financing of $2.425 billion in the aggregate, consisting of

(i) Aggregate principal amount of $1.255 billion 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”) 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 “New Senior Credit Facilities”).

The New 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 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. Similarly, the Company is obligated to repay the outstanding principal amount of the Term B Facility in quarterly installments equal to 0.25% of the initial aggregate principal amount of the Term B Facility, with the remaining outstanding balance due and payable on the seventh anniversary of the Closing Date. The Company is obligated to repay the aggregate principal amount of all outstanding revolving loans made under the Revolving Credit Facility on the fifth anniversary of the Closing Date.

The Company’s obligations under the New 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 New 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 New Senior Credit Facilities.

All amounts outstanding under the New 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.

The Company voluntarily may prepay, at any time or from time to time, any amounts outstanding under the New Senior Credit Facilities in whole or in part without premium or penalty; except for the Term B Facility, pursuant to which in the event of (a) a repayment made before September 24, 2020, (b) the occurrence of a repricing event, or (c) a change to the lenders, the Company will be subject to a prepayment premium in an amount equal to one percent of: (i) the principal amount of the Term B Facility that is prepaid under an optional or mandatory prepayment due to a repricing event, (ii) the aggregate outstanding principal amount of the Term B Facility resulting from an amendment to the New Credit Agreement, and (iii) the principal amount of the Term B Facility that is mandatorily assigned. The Company may be subject to mandatory prepayment of amounts outstanding under the New Senior Credit Facilities under certain circumstances, including in connection with certain asset sales or other dispositions of property and debt issuances.

The Company also may be required to prepay amounts under the Term B Facility based on the Company’s excess cash flow (as calculated in accordance with the terms of the New Credit Agreement) for the Company’s prior fiscal year beginning with its fiscal year ending June 30, 2020 and the Company’s consolidated secured net leverage ratio (as calculated in accordance with the terms of the New Credit Agreement) as of the end of such fiscal year.

Amounts outstanding under the New 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 New 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 New Senior Credit Facilities.  Refer to Note 15 for further information regarding this interest rate swap.

The New Credit Agreement contains customary affirmative and negative covenants with respect to the New 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 new 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 New 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 December 31, 2019, the Company was in compliance with all financial covenants under the New Credit Agreement.

The Company incurred $69.8 million of debt issuance costs in connection with the New Senior Credit Facilities. The Company evaluated these costs to determine appropriate recognition of expense under ASC 470, to account for debt modification and extinguishment. As a result of the Company’s assessment, $65.8 million have been capitalized in the Condensed Consolidated Balance Sheet.  Debt extinguishment costs of $4.0 million were expensed in other expense (income), net in the Condensed Consolidated Statement of Earnings (Loss) during the six months ended December 31, 2019.  The Company expensed $2.9 million of capitalized debt issuance costs during the three and six months ended December 31, 2019 in interest expense in the Condensed Consolidated Statement of Earnings (Loss). The capitalized costs are being amortized to interest expense using the effective interest rate method from the issuance date of September 24, 2019, through the end of each facility.   The unamortized discount amounted to $62.8 million as of December 31, 2019 and is being amortized over five and seven years, for the Term A Facility and Revolving Credit Facility, and the Term B Facility, respectively.

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.

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 December 31, 2019, 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 $246.8 million as of December 31, 2019 and $268.0 million as of June 30, 2019 (based on the Company’s closing stock price on the last trading day of the fiscal periods then ended). As of December 31, 2019, 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 and six months ended December 31, 2019 and 2018:

	Three Months Ended December 31, 2019		Six Months Ended December 31, 2019
0.25% contractual coupon	$	221	$	441
Amortization of debt discount and debt issuance costs including initial purchaser discount		3,291		6,546
Interest expense	$	3,512	$	6,987
	Three Months Ended December 31, 2018		Six Months Ended December 31, 2018
0.25% contractual coupon	$	221	$	441
Amortization of debt discount and debt issuance costs including initial purchaser discount		3,145		6,255
Interest expense	$	3,366	$	6,696

The effective interest rate on the liability component for both periods presented was 4.5%. The unamortized discount amounted to $32.6 million as of December 31, 2019 and $38.3 million as of June 30, 2019 and is being amortized over three years.

Aggregate Availability

The Company had aggregate availability of $356.0 million under its line of credit as of December 31, 2019.

Weighted Average Interest Rate

The weighted average interest rate of total borrowings was 3.8% and 1.7% for the six months ended December 31, 2019 and 2018, respectively.     

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Share-Based Compensation

6 Months Ended

Dec. 31, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-Based Compensation

Note 14. Share-Based Compensation

The Company’s Board of Directors adopted the II-VI Incorporated 2018 Omnibus Incentive Plan (the “Plan”), which was approved by the Company’s shareholders. The Plan provides for the grant of performance-based cash incentive awards, non-qualified stock options, stock appreciation rights, restricted share awards, restricted share units, deferred share awards, performance share awards and performance share units to employees, officers and directors of the Company. The maximum number of shares of the Company’s Common Stock authorized for issuance under the Plan is limited to 3,550,000 shares of Common Stock, not including any remaining shares forfeited under the predecessor plans that may be rolled into the Plan. The Company records share-based compensation expense for these awards in accordance with U.S. GAAP, which requires the recognition of grant-date fair value of share-based compensation in net earnings (loss) and over the requisite service period of the individual grantees, which generally equals the vesting period. The Company accounts for cash-based stock appreciation rights, cash-based restricted share unit awards and cash-based performance share unit awards as liability awards, in accordance with applicable accounting standards.  

Upon consummation of the acquisition, the Company assumed approximately 6.6 million restricted stock units previously granted by Finisar under the Amended and Restated Finisar Corporation 2005 Stock Incentive Plan (each an “Assumed RSU”). Each Assumed RSU is subject to substantially the same terms and conditions as applied to the Assumed RSU immediately prior to the consummation of the acquisition, except that the number of shares of the Company’s common stock subject to each Assumed RSU has been adjusted in accordance with the terms of the Merger Agreement. Other than the Assumed RSUs, the Company did not assume any other awards outstanding under the Amended and Restated Finisar Corporation 2005 Stock Incentive Plan (the “Finisar 2005 Plan”). As of the Closing Date, the Company also assumed the unused capacity under the Finisar 2005 Plan.

Share-based compensation expense for the periods indicated was as follows ($000):

	Three Months Ended				Six Months Ended
December 31,		2019		2018		2019		2018
Stock Options and Cash-Based Stock Appreciation Rights	$	2,989	$	454	$	4,659	$	2,782
Restricted Share Awards and Cash-Based Restricted Share Unit Awards		12,871		2,007		25,602		4,799
Performance Share Awards and Cash-Based Performance Share Unit Awards		3,400		2,497		5,159		2,714
	$	19,260	$	4,958	$	35,420	$	10,295

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Recently Issued Financial Accounting Standards (Policies)

6 Months Ended

Dec. 31, 2019

New Accounting Pronouncements And Changes In Accounting Principles [Abstract]

Recently Issued Financial Accounting Standards

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). This ASU modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements. The Company adopted this standard on July 1, 2019.  The Company has elected to utilize the optional transition method. See Note 5.

Derivatives and Hedging

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), which more closely aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.  The Company adopted this standard on July 1, 2019.  The adoption of this standard did not have a material effect on the consolidated financial statements.

Pronouncements Currently Under Evaluation

In July 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which among other things, requires the measurement of all expected credit losses of financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward looking information to better inform their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company is in the process of evaluating the impact of the pronouncement.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (“ASU 2018-16”), which permits the use of the OIS rate based on SOFR as a U.S. benchmark interest rate eligible for hedge accounting purposes.  For public business entities that already have adopted the amendments in ASU 2017-12, the amendments in ASU 2018-16 are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.  Early adoption is permitted in any interim period upon issuance of this update if an entity already has adopted ASU 2017-12.  The Company is in the process of evaluating the impact of the pronouncement.

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Summary of Total Interest Expense Recognized (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Amortization of discount on convertible debt and debt issuance costs			$ 9,639	$ 6,255
0.25% Convertible Senior Note Due 2022
Debt Instrument [Line Items]
0.25% contractual coupon	$ 221	$ 221	441	441
Amortization of discount on convertible debt and debt issuance costs	3,291	3,145	6,546	6,255
Interest expense	$ 3,512	$ 3,366	$ 6,987	$ 6,696

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Schedule of Potential Shares of Common Stock Excluded from the Calculation of Diluted Net Income Per Share (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total anti-dilutive shares	11,114	7,469	10,547	7,456
0.25% Convertible Senior Note Due 2022
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total anti-dilutive shares	7,331	7,331	7,331	7,331
0.50% Finisar Convertible Notes
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total anti-dilutive shares	391		502
Common Stock Equivalents
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total anti-dilutive shares	3,392	138	2,714	125

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Share-Based Compensation - Additional Information (Detail) - USD ($) $ in Millions	Dec. 31, 2019	Nov. 08, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Assumed RSUs		$ 6.6
Omnibus Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock authorized for issuance under the Plan	3,550,000

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Revenue from Contracts with Customers - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Dec. 31, 2019	Dec. 31, 2019	Jun. 30, 2019
Disaggregation Of Revenue [Abstract]
Revenue recognized related to customer payments	$ 21.2	$ 50.2
Contract liabilities	$ 37.7	$ 37.7	$ 19.4

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Preliminary Fair Value of Consideration (Detail) - Finisar Corporation $ / shares in Units, $ in Thousands	Nov. 08, 2018 USD ($) $ / shares shares
Business Acquisition [Line Items]
II-VI common shares issued to Finisar stockholders, Shares | shares	26,712,822
II-VI common shares issued to Finisar stockholders, Per Share | $ / shares	$ 36.98
Cash paid for outstanding shares of Finisar common stock	$ 1,879,086
II-VI common shares issued to Finisar stockholders	987,707
Replacement equity awards attributable to pre-combination service	41,710
Total fair value of consideration	$ 2,908,503

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Segment Reporting

6 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Segment Reporting

Note 13. Segment Reporting

The Company reports its business segments using the “management approach” model for segment reporting. This means that the Company determines its reportable business segments based on the way the chief operating decision maker organizes business segments within the Company for making operating decisions and assessing financial performance.

The Company reports its financial results in the following two segments: (i) Compound Semiconductors, and (ii) Photonic Solutions, and the Company’s chief operating decision maker receives and reviews financial information based on these segments.  The Company evaluates business segment performance based upon segment operating income, which is defined as earnings before income taxes, interest and other income or expense. The segments are managed separately due to the market, production requirements and facilities unique to each segment.

On September 24, 2019, the Company completed its acquisition of Finisar. See Note 3, Finisar Acquisition. Through September 30, 2019, the operating results of the Finisar acquisition are reflected in Unallocated and Other.  Finisar results have been included in the Photonic Solutions and Compound Semiconductors segments during the three months ended December 31, 2019.

The accounting policies are consistent across each segment. To the extent possible, the Company’s corporate expenses and assets are allocated to the segments. Unallocated and Other includes eliminating inter-segment sales and transfers, the results of Finisar since the acquisition date through September 30, 2019, and transaction costs related to the Finisar transaction. See Note 3 for additional information.

The following tables summarize selected financial information of the Company’s operations by segment ($000):

	Three Months Ended December 31, 2019
	Photonic			Compound			Unallocated
	Solutions			Semiconductors			& Other			Total
Revenues	$	460,393		$	205,938		$	-		$	666,331
Inter-segment revenues		22,190			66,123			(88,313	)		-
Operating loss		(60,937	)		(8,835	)		(8,808	)		(78,580	)
Interest expense		-			-			-			(28,390	)
Other income (expense), net		-			-			-			(487	)
Income taxes		-			-			-			9,242
Net loss		-			-			-			(98,213	)
Depreciation and amortization		55,174			26,978			-			82,152
Expenditures for property, plant & equipment		21,313			33,339			-			54,652
Segment assets		3,194,032			2,014,177			-			5,208,209
Goodwill		847,403			249,288			-			1,096,691
	Three Months Ended December 31, 2018
	Photonic			Compound			Unallocated
	Solutions			Semiconductors			& Other			Total
Revenues	$	159,694		$	183,145		$	-		$	342,839
Inter-segment revenues		2,504			17,538			(20,041	)		-
Operating income (loss)		23,087			23,622			(7,103	)		39,606
Interest expense		-			-			-			(5,580	)
Other income, net		-			-			-			701
Income taxes		-			-			-			(6,025	)
Net earnings		-			-			-			28,702
Depreciation and amortization		6,462			15,867			-			22,329
Expenditures for property, plant & equipment		11,223			27,246			-			38,468
	Six Months Ended December 31, 2019
	Photonic			Compound			Unallocated
	Solutions			Semiconductors			& Other			Total
Revenues	$	601,749		$	382,940		$	22,051		$	1,006,740
Inter-segment revenues		24,840			80,056			(104,896	)		-
Operating income (loss)		(47,913	)		17,686			(66,827	)		(97,054	)
Interest expense		-			-			-			(35,358	)
Other income (expense), net		-			-			-			(5,566	)
Income taxes		-			-			-			13,766
Net loss		-			-			-			(124,211	)
Depreciation and amortization		61,990			43,367			3,743			109,100
Expenditures for property, plant & equipment		30,702			46,822			2,764			80,288
	Six Months Ended December 31, 2018
	Photonic			Compound			Unallocated
	Solutions			Semiconductors			& Other			Total
Revenues	$	294,850		$	362,422		$	-		$	657,272
Inter-segment revenues		7,726			34,708			(42,434	)		-
Operating income (loss)		38,999			44,923			(7,103	)		76,819
Interest expense		-			-			-			(11,164	)
Other income, net		-			-			-			1,414
Income taxes		-			-			-			(12,218	)
Net earnings		-			-			-			54,851
Depreciation and amortization		12,661			31,838			-			44,499
Expenditures for property, plant & equipment		23,274			50,113			-			73,386

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Dec. 31, 2019

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

Note 17. Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (“AOCI”) by component, net of tax, for the six months ended December 31, 2019 were as follows ($000):

	Foreign									Total
	Currency			Interest			Defined			Accumulated Other
	Translation			Rate			Benefit			Comprehensive
	Adjustment			Swap			Pension Plan			Income (Loss)
AOCI - June 30, 2019	$	(15,627	)	$	-		$	(8,594	)	$	(24,221	)
Other comprehensive income before reclassifications		11,571			3,774			(167	)		15,178
Amounts reclassified from AOCI		-			(165	)		-			(165	)
Net current-period other comprehensive income		11,571			3,609			(167	)		15,013
AOCI - December 31, 2019	$	(4,056	)	$	3,609		$	(8,761	)	$	(9,208	)

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Financial Information of Company's Operation by Segment (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items]
Revenues	$ 666,331	$ 342,839	$ 1,006,740	$ 657,272
Operating income (loss)	(78,580)	39,606	(97,054)	76,819
Interest expense	(28,390)	(5,580)	(35,358)	(11,164)
Other income (expense), net	(487)	701	(5,566)	1,414
Income taxes	9,242	(6,025)	13,766	(12,218)
Net earnings (loss)	(98,213)	28,702	(124,211)	54,851
Depreciation and amortization	82,152	22,329	109,100	44,499
Expenditures for property, plant & equipment	54,652	38,468	80,288	73,386
Segment assets	5,208,209		5,208,209		$ 1,953,773
Goodwill	1,096,691		1,096,691		319,778
Photonic Solutions
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items]
Revenues	460,393	159,694	601,749	294,850
Inter-segment revenues	22,190	2,504	24,840	7,726
Operating income (loss)	(60,937)	23,087	(47,913)	38,999
Depreciation and amortization	55,174	6,462	61,990	12,661
Expenditures for property, plant & equipment	21,313	11,223	30,702	23,274
Segment assets	3,194,032		3,194,032
Goodwill	847,403		847,403		134,057
Compound Semiconductors
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items]
Revenues	205,938	183,145	382,940	362,422
Inter-segment revenues	66,123	17,538	80,056	34,708
Operating income (loss)	(8,835)	23,622	17,686	44,923
Depreciation and amortization	26,978	15,867	43,367	31,838
Expenditures for property, plant & equipment	33,339	27,246	46,822	50,113
Segment assets	2,014,177		2,014,177
Goodwill	249,288		249,288		$ 185,721
Unallocated & Other
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items]
Revenues			22,051
Inter-segment revenues	(88,313)	(20,041)	(104,896)	(42,434)
Operating income (loss)	$ (8,808)	$ (7,103)	(66,827)	$ (7,103)
Depreciation and amortization			3,743
Expenditures for property, plant & equipment			$ 2,764

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Debt - Additional Information (Detail)		6 Months Ended	12 Months Ended
	Sep. 24, 2019 USD ($) d	Dec. 31, 2019 USD ($) $ / shares	Jun. 30, 2018 USD ($)	Oct. 23, 2019 USD ($)	Jun. 30, 2019 USD ($)	Dec. 31, 2018	Aug. 31, 2017 USD ($)
Line Of Credit Facility [Line Items]
Debt extinguishment costs		$ 3,960,000
Available credit under lines of credit		$ 356,000,000.0
Weighted average interest rate of total borrowings		3.80%				1.70%
0.25% Convertible Senior Note Due 2022
Line Of Credit Facility [Line Items]
Debt instrument, interest rate		0.25%			0.25%	0.25%
Unamortized discount amount		$ 32,600,000			$ 38,300,000
Amortization period		3 years
Debt instrument maturity date		Sep. 01, 2022
Debt instrument conversion, conversion price per share | $ / shares		$ 47.06
Aggregate principal amount							$ 345,000,000
Debt instrument conversion, shares issued per $1,000 principal amount		21.25
Debt instrument conversion, principal amount of each note converted		$ 1,000
Debt instrument conversion, If-converted value of notes		$ 246,800,000	$ 268,000,000.0
Effective interest rate		4.50%				4.50%
0.50% Convertible Senior Notes Due 2036
Line Of Credit Facility [Line Items]
Debt instrument, interest rate	0.50%
Zero Point Five Zero Finisar Convertible Notes
Line Of Credit Facility [Line Items]
Percentage of obligated to repay the outstanding principal amount	100.00%
Debt instrument, interest rate	0.50%	0.50%
Debt instrument redemption period date	Dec. 22, 2021
Debt instrument maturity date	Dec. 15, 2036
Debt instrument maturity date description		The Finisar Notes will mature on December 15, 2036
Debt instrument payment terms description		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.
Debt instrument frequency of periodic payment		semi-annually
Aggregate principal amount	$ 560,100,000
Debt instrument, repurchase amount				$ 561,100,000
Debt instrument, repurchase date	Oct. 23, 2019
Line of credit, outstanding		$ 14,900,000
Bank of America, N.A.
Line Of Credit Facility [Line Items]
Letter of credit sub-facility maximum borrowing capacity	$ 25,000,000.0
Swing loan sub-facility maximum initial borrowing capacity	20,000,000.0
Senior Secured Credit Facility | Bank of America, N.A.
Line Of Credit Facility [Line Items]
Aggregate principal amount	2,425,000,000
Term A Loan Facility
Line Of Credit Facility [Line Items]
Proceeds from term loan	561,000,000.0
Term A Loan Facility | Bank of America, N.A.
Line Of Credit Facility [Line Items]
Aggregate principal amount	$ 1,255,000,000
Debt Instrument, Term	5 years
Percentage of obligated to repay the outstanding principal amount	1.25%
Term B Loan Facility | Bank of America, N.A.
Line Of Credit Facility [Line Items]
Aggregate principal amount	$ 720,000,000,000
Debt Instrument, Term	7 years
Percentage of obligated to repay the outstanding principal amount	0.25%
Revolving Credit Facility | Bank of America, N.A.
Line Of Credit Facility [Line Items]
Aggregate principal amount	$ 450,000,000,000
Debt Instrument, Term	5 years
New Senior Credit Facilities
Line Of Credit Facility [Line Items]
Debt issuance costs incurred		69,800,000
Debt issuance costs capitalized		65,800,000
Debt issuance expense		2,900,000
Unamortized discount amount		62,800,000
Debt extinguishment costs		$ 4,000,000.0
New Senior Credit Facilities | Fifth Fiscal Quarter Through Eighth Fiscal Quarter After Closing Date
Line Of Credit Facility [Line Items]
Leverage ratio	4.50
New Senior Credit Facilities | Subsequent Fiscal Quarter
Line Of Credit Facility [Line Items]
Leverage ratio	4.00
New Senior Credit Facilities | Minimum
Line Of Credit Facility [Line Items]
Interest coverage ratio	3.00
Amortization period		5 years
New Senior Credit Facilities | Maximum
Line Of Credit Facility [Line Items]
Amortization period		7 years
New Senior Credit Facilities | Maximum | First Four Fiscal Quarters After Closing Date
Line Of Credit Facility [Line Items]
Leverage ratio	5.00
New Senior Credit Facilities | Federal Funds Rate
Line Of Credit Facility [Line Items]
Debt instrument, rate added on variable rate	0.50%
New Senior Credit Facilities | Eurodollar
Line Of Credit Facility [Line Items]
Debt instrument, rate added on variable rate	1.00%
New Senior Credit Facilities | 0.25% Convertible Senior Note Due 2022 | I I V I Notes
Line Of Credit Facility [Line Items]
Number of days prior to maturity of outstanding | d	120
Debt instrument, interest rate	0.25%
Debt instrument maturity year	2022

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Computation of Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Basic Earnings per Share
Net earnings (loss)	$ (98,213)	$ 28,702	$ (124,211)	$ 54,851
Weighted average shares	90,886	63,588	78,428	63,504
Basic earnings (loss) per common share	$ (1.08)	$ 0.45	$ (1.58)	$ 0.86
Diluted Earnings per Share
Net earnings (loss)	$ (98,213)	$ 28,702	$ (124,211)	$ 54,851
Weighted average shares	90,886	63,588	78,428	63,504
Dilutive effect of common stock equivalents		2,085		2,412
Diluted weighted average common shares	90,886	65,673	78,428	65,916
Diluted earnings (loss) per common share	$ (1.08)	$ 0.44	$ (1.58)	$ 0.83

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Leases - Narrative (Details) - USD ($) $ in Thousands	6 Months Ended
	Dec. 31, 2019	Jul. 01, 2019
Schedule Of Lease Assets And Liabilities [Line Items]
Revenue practical expedient	true
Revenue practical expedient description	The Company elected the practical expedient package permitted under the transition approach. As such, the Company did not reassess whether any expired or existing contracts are or contain leases, did not reassess historical lease classification, and did not reassess initial direct costs for any leases that existed prior to July 1, 2019.
Operating lease assets		$ 80,100
Operating lease liabilities	$ 122,592	80,100
Finance lease assets		$ 25,000
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]		us-gaap:PropertyPlantAndEquipmentNet
Finance lease liabilities	23,984	$ 24,000
Finisar Corporation
Schedule Of Lease Assets And Liabilities [Line Items]
Operating lease assets	45,000
Operating lease liabilities	$ 48,000

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Preliminary Allocation of Purchase Price Based on Estimated Fair Value of Assets Acquired and Liabilities Assumed (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019	Nov. 08, 2018
Business Acquisition [Line Items]
Goodwill	$ 1,096,691	$ 319,778
Finisar Corporation
Business Acquisition [Line Items]
Cash and cash equivalents			$ 842,477
Current assets			260,864
Inventories			439,708
Property, plant & equipment			748,858
Intangible assets	$ 828,600		828,630
Other assets			82,929
Deferred tax assets			12,267
Accounts payable			(123,707)
Other accrued liabilities			(163,109)
Deferred tax liabilities			(219,544)
Debt			(575,000)
Goodwill			774,130
Total Purchase Price			$ 2,908,503

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Fair Value of Financial Instruments - Additional Information (Detail) - USD ($)	Nov. 24, 2019	Jul. 31, 2022	Dec. 31, 2019	Sep. 24, 2019	Jun. 30, 2019	Dec. 31, 2018
0.25% Convertible Notes
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Debt instrument, interest rate			0.25%		0.25%	0.25%
0.50% Finisar Convertible Notes
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Debt instrument, interest rate			0.50%	0.50%
Interest Rate Swap
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Notional amount	$ 1,075,000,000
Fixed interest rate	1.52%
Floor Interest rate	0.00%
Swap agreements effective date	Nov. 24, 2019
Swap agreements expiration date	Sep. 24, 2024
Interest Rate Swap | Scenario Forecast
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Notional amount		$ 825,000,000

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Components of Inventories (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Inventory Disclosure [Abstract]
Raw materials	$ 208,364	$ 119,917
Work in progress	307,303	101,091
Finished goods	147,315	75,274
Inventories, Total	$ 662,982	$ 296,282

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Gross Carrying Amount and Accumulated Amortization of Intangible Assets Other Than Goodwill (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 1,072,082	$ 241,840
Accumulated Amortization	(142,309)	(102,516)
Net Book Value	929,773	139,324
Technology and Patents
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	92,513	91,637
Accumulated Amortization	(43,397)	(39,679)
Net Book Value	49,116	51,958
Trade Names
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	15,714	15,759
Accumulated Amortization	(1,667)	(1,601)
Net Book Value	14,047	14,158
Customer Lists
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	133,656	132,872
Accumulated Amortization	(64,355)	(59,664)
Net Book Value	69,301	73,208
Other
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	830,199	1,572
Accumulated Amortization	(32,890)	$ (1,572)
Net Book Value	$ 797,309

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Current Assets
Cash and cash equivalents	$ 376,840	$ 204,872
Accounts receivable - less allowance for doubtful accounts of $1,868 at December 31, 2019 and $1,292 at June 30, 2019	488,902	269,642
Inventories	662,982	296,282
Prepaid and refundable income taxes	8,449	11,778
Prepaid and other current assets	52,016	30,337
Total Current Assets	1,589,189	812,911
Property, plant & equipment, net	1,347,147	582,790
Goodwill	1,096,691	319,778
Other intangible assets, net	929,773	139,324
Investments	77,795	76,208
Deferred income taxes	17,487	8,524
Other assets	150,127	14,238
Total Assets	5,208,209	1,953,773
Current Liabilities
Current portion of long-term debt	69,250	23,834
Accounts payable	229,042	104,462
Accrued compensation and benefits	95,019	71,847
Operating lease current liabilities	29,245
Accrued income taxes payable	21,121	20,476
Other accrued liabilities	127,922	49,944
Total Current Liabilities	571,599	270,563
Long-term debt	2,228,207	443,163
Deferred income taxes	98,448	23,913
Operating lease liabilities	93,347
Other liabilities	150,911	82,925
Total Liabilities	3,142,512	820,564
Shareholders' Equity
Preferred stock, no par value; authorized - 5,000,000 shares; none issued
Common stock, no par value; authorized - 300,000,000 shares; issued - 104,043,057 shares at December 31, 2019; 76,315,337 shares at June 30, 2019	1,441,180	382,423
Accumulated other comprehensive income (loss)	(9,208)	(24,221)
Retained earnings	819,370	943,581
Shareholders' equity excluding treasury stock	2,251,342	1,301,783
Treasury stock, at cost - 13,080,375 shares at December 31, 2019 and 12,603,781 shares at June 30, 2019	(185,645)	(168,574)
Total Shareholders' Equity	2,065,697	1,133,209
Total Liabilities and Shareholders' Equity	$ 5,208,209	$ 1,953,773

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Statement Of Income And Comprehensive Income [Abstract]
Change in fair value of interest rate swap, net of taxes	$ 989		$ 989
Pension adjustment tax	$ (92)	$ (24)	$ (69)	$ (9)

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Segment Reporting (Tables)

6 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Financial Information of Company's Operation by Segment

The following tables summarize selected financial information of the Company’s operations by segment ($000):

	Three Months Ended December 31, 2019
	Photonic			Compound			Unallocated
	Solutions			Semiconductors			& Other			Total
Revenues	$	460,393		$	205,938		$	-		$	666,331
Inter-segment revenues		22,190			66,123			(88,313	)		-
Operating loss		(60,937	)		(8,835	)		(8,808	)		(78,580	)
Interest expense		-			-			-			(28,390	)
Other income (expense), net		-			-			-			(487	)
Income taxes		-			-			-			9,242
Net loss		-			-			-			(98,213	)
Depreciation and amortization		55,174			26,978			-			82,152
Expenditures for property, plant & equipment		21,313			33,339			-			54,652
Segment assets		3,194,032			2,014,177			-			5,208,209
Goodwill		847,403			249,288			-			1,096,691
	Three Months Ended December 31, 2018
	Photonic			Compound			Unallocated
	Solutions			Semiconductors			& Other			Total
Revenues	$	159,694		$	183,145		$	-		$	342,839
Inter-segment revenues		2,504			17,538			(20,041	)		-
Operating income (loss)		23,087			23,622			(7,103	)		39,606
Interest expense		-			-			-			(5,580	)
Other income, net		-			-			-			701
Income taxes		-			-			-			(6,025	)
Net earnings		-			-			-			28,702
Depreciation and amortization		6,462			15,867			-			22,329
Expenditures for property, plant & equipment		11,223			27,246			-			38,468
	Six Months Ended December 31, 2019
	Photonic			Compound			Unallocated
	Solutions			Semiconductors			& Other			Total
Revenues	$	601,749		$	382,940		$	22,051		$	1,006,740
Inter-segment revenues		24,840			80,056			(104,896	)		-
Operating income (loss)		(47,913	)		17,686			(66,827	)		(97,054	)
Interest expense		-			-			-			(35,358	)
Other income (expense), net		-			-			-			(5,566	)
Income taxes		-			-			-			13,766
Net loss		-			-			-			(124,211	)
Depreciation and amortization		61,990			43,367			3,743			109,100
Expenditures for property, plant & equipment		30,702			46,822			2,764			80,288
	Six Months Ended December 31, 2018
	Photonic			Compound			Unallocated
	Solutions			Semiconductors			& Other			Total
Revenues	$	294,850		$	362,422		$	-		$	657,272
Inter-segment revenues		7,726			34,708			(42,434	)		-
Operating income (loss)		38,999			44,923			(7,103	)		76,819
Interest expense		-			-			-			(11,164	)
Other income, net		-			-			-			1,414
Income taxes		-			-			-			(12,218	)
Net earnings		-			-			-			54,851
Depreciation and amortization		12,661			31,838			-			44,499
Expenditures for property, plant & equipment		23,274			50,113			-			73,386

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Property, Plant and Equipment (Tables)

6 Months Ended

Dec. 31, 2019

Property Plant And Equipment [Abstract]

Property, Plant and Equipment

Property, plant and equipment consists of the following ($000):

	December 31,			June 30,
	2019			2019
Land and improvements	$	17,552		$	9,001
Buildings and improvements		310,398			249,238
Machinery and equipment		1,411,511			739,330
Construction in progress		136,514			71,425
Finance lease right-of-use asset		25,000			-
		1,900,975			1,068,994
Less accumulated depreciation		(553,828	)		(486,204	)
	$	1,347,147		$	582,790

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Goodwill and Other Intangible Assets

6 Months Ended

Dec. 31, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Note 9. Goodwill and Other Intangible Assets

Effective July 1, 2019, the Company realigned its organizational structure into two reporting segments for the purpose of making operational decisions and assessing financial performance: (i) Compound Semiconductors and (ii) Photonic Solutions. All applicable information has been restated to reflect this change.

Changes in the carrying amount of goodwill were as follows ($000):

	Six Months Ended December 31, 2019
	Compound		Photonic
	Semiconductors		Solutions		Total
Balance-beginning of period	$	185,721	$	134,057	$	319,778
Goodwill acquired		61,085		713,045		774,130
Foreign currency translation		2,482		301		2,783
Balance-end of period	$	249,288	$	847,403	$	1,096,691

The gross carrying amount and accumulated amortization of the Company’s intangible assets other than goodwill as of December 31, 2019 and June 30, 2019 were as follows ($000):

	December 31, 2019							June 30, 2019
	Gross					Net		Gross					Net
	Carrying		Accumulated			Book		Carrying		Accumulated			Book
	Amount		Amortization			Value		Amount		Amortization			Value
Technology and Patents	$	92,513	$	(43,397	)	$	49,116	$	91,637	$	(39,679	)	$	51,958
Trade Names		15,714		(1,667	)		14,047		15,759		(1,601	)		14,158
Customer Lists		133,656		(64,355	)		69,301		132,872		(59,664	)		73,208
Other		830,199		(32,890	)		797,309		1,572		(1,572	)		-
Total	$	1,072,082	$	(142,309	)	$	929,773	$	241,840	$	(102,516	)	$	139,324

Other intangible assets primarily include $828.6 million related to the preliminary purchase price allocation of Finisar. This includes preliminary amounts for technology of $615.8 million, customer lists of $125.4 million, in process research and development of $76.0 million, and trade names of $11.4 million. These items will be included in other intangible assets until the purchase price allocation is finalized.

As a result of the July 1, 2019 segment realignment, the Company reviewed the recoverability of the carrying value of goodwill at its reporting units. The Company performed a quantitative test to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill and other intangible assets. The Company did not record any impairment of goodwill or long-lived assets, as the quantitative assessment did not indicate deterioration in the fair value of its reporting units.

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Basis of Presentation

6 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Basis of Presentation

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 six months ended December 31, 2019 and 2018 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 16, 2019. The consolidated results of operations for the three and six months ended December 31, 2019 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, 2019 was derived from the Company’s audited consolidated financial statements.

Effective July 1, 2019, the Company has realigned its organizational structure into two reporting segments for the purpose of making operational decisions and assessing financial performance: (i) Compound Semiconductors and (ii) Photonic Solutions.

On September 24, 2019, the Company completed the 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.

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Leases

6 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

Note 5. Leases

On July 1, 2019, the Company adopted Topic 842, Leases, using the modified retrospective transition approach. The reported results for the three and six months ended December 31, 2019 reflect the application of Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under Topic 840.

The Company elected the practical expedient package permitted under the transition approach. As such, the Company did not reassess whether any expired or existing contracts are or contain leases, did not reassess historical lease classification, and did not reassess initial direct costs for any leases that existed prior to July 1, 2019.

As of the date of adoption, the Company recognized operating lease assets and liabilities of approximately $80.1 million on the Condensed Consolidated Balance Sheet. In addition, we acquired approximately $45 million and $48 million of operating lease assets and liabilities, respectively, through the acquisition of Finisar, which remains preliminary as discussed in Note 3.

All existing leases that were classified as capital leases under Topic 840 are classified as finance leases under Topic 842. As of the date of adoption, the Company recognized finance lease assets of $25 million in property, plant and equipment, net, with corresponding finance lease liabilities of $24 million on the Condensed Consolidated Balance Sheet.

We determine if an arrangement is a lease at inception and classify it as either finance or operating.

Finance leases are generally those that allow us to substantially utilize or pay for the entire asset over its estimated useful life. Finance leases are recorded in property, plant and equipment, net, and finance lease liabilities within other current and other non-current liabilities on our Condensed Consolidated Balance Sheet. Finance lease assets are amortized in operating expenses on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term, with the interest component for lease liabilities included in interest expense and recognized using the effective interest method over the lease term.

Operating leases are recorded in other assets and operating lease liabilities, current and non-current on the Company’s Condensed Consolidated Balance Sheet. Operating lease assets are amortized on a straight-line basis in operating expenses over the lease term.

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. We account for non-lease components, such as common area maintenance, as a component of the lease, and include it in the initial measurement of our lease assets and corresponding liabilities. The Company’s lease terms and

conditions may include options to extend or terminate. An option is recognized when it is reasonably certain that we will exercise that option.

The Company’s lease assets also include any lease payments made and exclude any lease incentives received prior to commencement. Our lease assets are tested for impairment in the same manner as long-lived assets used in operations.

The following table presents lease costs, which include short-term leases, lease term, and discount rates ($000):

	Three Months				Six Months
	Ended				Ended
	December 31, 2019				December 31, 2019
Finance Lease Cost
Amortization of right-of-use Assets	$	417			$	833
Interest on Lease Liabilities		334				671
Total Finance Lease Cost		751				1,505
Operating Lease Cost		11,073				17,180
Total Lease Cost	$	11,824			$	18,685
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating Cash Flows from Finance Leases		334				671
Operating Cash Flows from Operating Leases		10,731				16,671
Financing Cash Flows from Finance Leases		247				490
Weighted-Average Remaining Lease Term (in Years)
Finance Leases			12.0
Operating Leases			6.2
Weighted-Average Discount Rate
Finance Leases			5.6	%
Operating Leases			6.0	%

The following table presents future minimum lease payments, which include short-term leases ($000):

	Payments Due By Period
			Less Than		1-3		3-5
	Total		1 Year		Years		Years		Thereafter
Operating leases	$	159,620	$	35,107	$	49,305	$	29,818	$	45,390
Less interest		37,028
Operating lease liability	$	122,592
Finance leases	$	33,393	$	2,387	$	4,972	$	5,249	$	20,785
Less interest		9,409
Finance lease liability	$	23,984