Note 10.

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 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 segments are managed separately due to the market, production requirements and facilities unique to each segment.

In June 2017, the Company completed its acquisition of IPI. See Note 3. Acquisitions and Investment. The operating results of this acquisition have been reflected in the selected financial information of the Company’s II-VI Photonics segment since the date of acquisition.

In August 2017, the Company completed its acquisition of II-VI Compound Semiconductor Ltd. See Note 3. Acquisitions and Investment. The operating results of this acquisition have been reflected in the selected financial information of the Company’s II-VI Laser Solutions segment since the date of acquisition.

The accounting policies are consistent across each of the segments. The Company’s corporate expenses and assets are allocated to the segments. The Company evaluates segment performance based upon reported segment operating income, which is defined as earnings before income taxes, interest and other income or expense. Inter-segment sales and transfers are eliminated.

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

	Three Months Ended March 31, 2018
	II-VI					II-VI
	Laser		II-VI			Performance
	Solutions		Photonics			Products		Eliminations			Total
Revenues	$	109,796	$	116,778		$	68,172	$	-		$	294,746
Inter-segment revenues		8,256		(501	)		1,707		(9,462	)		-
Operating income		9,932		16,637			8,169		-			34,738
Interest expense		-		-			-		-			(5,014	)
Other income (expense), net		-		-			-		-			1,496
Income taxes		-		-			-		-			(1,122	)
Net earnings		-		-			-		-			30,098
Depreciation and amortization		10,306		5,651			3,967		-			19,924
Segment assets		769,649		586,475			381,110		-			1,737,234
Expenditures for property, plant & equipment		16,773		15,461			6,380		-			38,614
Investments		-		-			68,222		-			68,222

	Three Months Ended March 31, 2017
	II-VI				II-VI
	Laser		II-VI		Performance
	Solutions		Photonics		Products		Eliminations			Total
Revenues	$	83,648	$	109,099	$	52,240	$	-		$	244,987
Inter-segment revenues		9,661		3,450		2,713		(15,824	)		-
Operating income		8,337		15,898		4,804		-			29,039
Interest expense		-		-		-		-			(1,936	)
Other income (expense), net		-		-		-		-			2,164
Income taxes		-		-		-		-			(6,837	)
Net earnings		-		-		-		-			22,430
Depreciation and amortization		5,713		5,029		4,182		-			14,924
Expenditures for property, plant & equipment		23,299		8,727		9,287		-			41,313

	Nine Months Ended March 31, 2018
	II-VI				II-VI
	Laser		II-VI		Performance
	Solutions		Photonics		Products		Eliminations			Total
Revenues	$	312,875	$	337,912	$	186,932	$	-		$	837,719
Inter-segment revenues		22,270		10,991		3,691		(36,952	)		-
Operating income		22,689		53,066		21,307		-			97,062
Interest expense		-		-		-		-			(13,303	)
Other income (expense), net		-		-		-		-			4,228
Income taxes		-		-		-		-			(27,152	)
Net earnings		-		-		-		-			60,835
Depreciation and amortization		27,560		18,382		12,207		-			58,149
Expenditures for property, plant & equipment		53,949		35,077		26,411		-			115,437

	Nine Months Ended March 31, 2017
	II-VI				II-VI
	Laser		II-VI		Performance
	Solutions		Photonics		Products		Eliminations			Total
Revenues	$	244,421	$	305,824	$	148,084	$	-		$	698,329
Inter-segment revenues		24,361		10,049		7,091		(41,501	)		-
Operating income		22,628		45,689		11,549		-			79,866
Interest expense		-		-		-		-			(4,547	)
Other income (expense), net		-		-		-		-			9,611
Income taxes		-		-		-		-			(22,303	)
Net earnings		-		-		-		-			62,627
Depreciation and amortization		17,025		14,853		12,844		-			44,722
Expenditures for property, plant & equipment		59,161		21,224		18,750		-			99,135