Note 12.

Segment and Geographic 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 performance.

The Company reports its financial results in the following three segments: (i) II-VI Laser Solutions, (ii) II-VI Photonics, and (iii) II-VI Performance Products, 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 II-VI Laser Solutions segment is located in the United States, Singapore, China, Germany, Switzerland, Japan, Belgium, the United Kingdom, Italy, South Korea, the Philippines and Taiwan. II-VI Laser Solutions designs, manufactures and markets optical and electro-optical components and materials sold under the II-VI Infrared brand name and used primarily in high-power CO₂ lasers, fiber-delivered beam delivery systems and processing tools and direct diode lasers for industrial lasers sold under the II-VI HIGHYAG and II-VI Laser Enterprise brand names. II-VI Laser Solutions also manufactures compound semiconductor epitaxial wafers for applications in optical components, wireless devices, and high-speed communication systems and manufactures 6-inch GaAs wafers allowing for the production of high performance lasers and integrated circuits in high volume sold under the II-VI EpiWorks and II-VI OptoElectronic Devices Division brand names.

The II-VI Photonics segment is located in the United States, China, Vietnam, Germany, Japan, the United Kingdom, Italy and Hong Kong. II-VI Photonics manufactures crystal materials, optics, microchip lasers and optoelectronic modules for use in optical communication networks and other diverse consumer and commercial applications. In addition, the segment manufactures pump lasers, optical isolators, and optical amplifiers and micro-optics for optical amplifiers, for both terrestrial and submarine applications within the optical communications market.

The II-VI Performance Products segment is located in the United States, Vietnam, Japan, China, Germany and the Philippines. II-VI Performance Products is further divided into production and administrative units that are directed by managers. II-VI Performance Products designs, manufactures and markets infrared optical components and high-precision optical assemblies for military, medical and commercial laser imaging applications. In addition, the segment designs, manufactures and markets unique engineered materials for thermoelectric and silicon carbide applications servicing the semiconductor, military and medical markets.

On August 7, 2017, the Company completed its acquisition of II-VI Compound Semiconductor Ltd. See Note 2. Acquisitions. The operating results of this acquisition have been reflected in the selected financial information of the Company’s II-VI Laser Solutions segment.

On June 19, 2017, the Company completed its acquisition of IPI. See Note 2. Acquisitions. The operating results of this acquisition have been reflected in the selected financial information of the Company’s II-VI Photonics segment.

The accounting policies of the segments are the same as those of the Company. The Company’s corporate expenses are allocated to the segments. The Company evaluates segment performance based upon reported segment operating income, which is defined as earnings from continuing operations before income taxes, interest and other income or expense. Inter-segment sales and transfers have been eliminated.

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

	II-VI				II-VI
	Laser		II-VI		Performance
	Solutions		Photonics		Products		Eliminations			Total
($000)
2018
Revenues	$	427,968	$	464,457	$	266,369	$	-		$	1,158,794
Inter-segment revenues		34,661		14,542		5,609		(54,812	)		-
Operating income		36,797		67,732		30,758		-			135,287
Interest expense		-		-		-		-			(18,352	)
Other income, net		-		-		-		-			5,259
Income taxes		-		-		-		-			(34,192	)
Net earnings		-		-		-		-			88,002
Depreciation and amortization		38,552		24,984		17,234		-			80,770
Expenditures for property, plant & equipment		82,478		39,162		39,683		-			161,323
Segment assets		760,988		595,909		404,764		-			1,761,661
Equity investments		-		-		69,215		-			69,215
Goodwill		103,390		114,398		52,890		-			270,678

	II-VI				II-VI
	Laser		II-VI		Performance
	Solutions		Photonics		Products		Eliminations			Total
($000)
2017
Revenues	$	339,341	$	418,515	$	214,190	$	-		$	972,046
Inter-segment revenues		33,792		14,236		10,189		(58,217	)		-
Operating income		30,931		62,975		21,635		-			115,540
Interest expense		-		-		-		-			(6,809	)
Other income, net		-		-		-		-			10,056
Income taxes		-		-		-		-			(23,514	)
Net earnings		-		-		-		-			95,274
Depreciation and amortization		24,958		21,442		17,237		-			63,637
Expenditures for property, plant & equipment		82,760		27,397		32,788		-			142,945
Segment assets		589,239		578,315		309,743		-			1,477,297
Equity investment		-		-		11,727		-			11,727
Goodwill		84,180		113,272		52,890		-			250,342

	II-VI				II-VI
	Laser		II-VI		Performance
	Solutions		Photonics		Products		Eliminations			Total
($000)
2016
Revenues	$	303,002	$	325,879	$	198,335	$	-		$	827,216
Inter-segment revenues		24,290		12,081		7,274		(43,645	)		-
Operating income		36,184		37,849		17,780		-			91,813
Interest expense		-		-		-		-			(3,081	)
Other income, net		-		-		-		-			1,223
Income taxes		-		-		-		-			(24,469	)
Net earnings		-		-		-		-			65,486
Depreciation and amortization		17,222		19,855		19,586		-			56,663
Expenditures for property, plant & equipment		25,620		21,096		11,454		-			58,170

Geographic information for revenues from the country of origin (shipped from), and long-lived assets from the country of origin, which include property, plant and equipment, net of related depreciation, and certain other long-term assets, were as follows:

	Revenues
Year Ended June 30,	2018		2017		2016
($000)
United States	$	373,735	$	294,200	$	266,347
Non-United States
China		253,672		208,595		172,292
Hong Kong		186,978		190,702		140,821
Germany		132,161		88,304		72,070
Japan		89,153		76,212		57,287
Switzerland		49,557		50,497		54,760
Vietnam		26,898		22,497		24,267
Italy		11,458		10,791		10,160
Korea		9,757		6,584		3,887
United Kingdom		9,359		8,473		8,154
Singapore		5,941		3,913		3,039
Belgium		4,511		7,503		6,026
Philippines		3,909		3,057		8,106
Taiwan		1,705		718		-
Total Non-United States		785,059		677,846		560,869
	$	1,158,794	$	972,046	$	827,216

	Long-Lived Assets
June 30,	2018		2017		2016
($000)
United States	$	309,062	$	240,029	$	137,521
Non-United States
China		81,175		62,024		51,824
United Kingdom		65,357		396		203
Switzerland		37,155		36,795		38,202
Germany		14,876		15,323		15,162
Vietnam		10,042		8,272		8,895
Philippines		6,628		6,115		4,399
Hong Kong		2,818		1,914		1,765
Other		598		704		943
Total Non-United States		218,649		131,543		121,393
	$	527,711	$	371,572	$	258,914