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Segment and Geographic Reporting

12 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment and Geographic Reporting

Note 14.  Segment and Geographic Reporting

Effective July 1, 2019, the Company realigned the composition of its operating segments. The Company combined II-VI Laser Solutions and II-VI Performance Products and renamed the combined segment Compound Semiconductors.  All applicable segment information has been restated to reflect this change. Additionally, the Company changed the name of II-VI Photonics to Photonic Solutions.

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 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 Compound Semiconductors segment is located in the United States, Singapore, China, Germany, Switzerland, Japan, Belgium, the United Kingdom, Italy, South Korea, the Philippines, Vietnam and Taiwan. Compound Semiconductors designs, manufactures and markets: (i) 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) infrared optical components and high-precision optical assemblies for aerospace and defense, medical and commercial laser imaging applications; and (iii) unique engineered materials for thermoelectric and silicon carbide applications servicing the semiconductor, aerospace and defense and medical markets. Compound Semiconductors 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 Photonic Solutions segment is located in the United States, China, Vietnam, Germany, Japan, the United Kingdom, Italy and Hong Kong. Photonic Solutions 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.

In September 2018, November 2018, and March 2019, the Company completed its acquisitions of CoAdna, an additional product line, and Redstone, respectively. See Note 3, Acquisitions.  The operating results of these acquisitions have been reflected in the selected financial information of the Company’s Photonic Solutions segment, with the exclusion of Redstone that is reflected in the Compound Semiconductors segment, since the date of the acquisitions.

The accounting policies are consistent across each of the segments. To the extent possible, 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. Eliminations and Other include eliminating inter-segment sales and transfers as well as transaction costs related to the pending Finisar acquisition.

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

						Compound Semiconductors						Photonic Solutions						Unallocated & Other						Total
($000)
2019
Revenues						$	723,607					$	638,889					$	—					$	1,362,496
Inter-segment revenues						94,405						12,568						(106,973)						—
Operating income						82,414						81,898						(15,643)						148,668
Interest expense						—						—						—						(22,417)
Other income, net						—						—						—						2,562
Income taxes						—						—						—						(21,296)
Net earnings						—						—						—						107,517
Depreciation and amortization						66,092						26,273						—						92,365
Expenditures for property, plant & equipment						83,899						44,851						—						128,750
Segment assets						1,272,163						681,610						—						1,953,773
Goodwill						185,721						134,057						—						319,778

						Compound Semiconductors						Photonic Solutions						Unallocated & Other						Total
($000)
2018
Revenues						$	672,309					$	486,485					$	—					$	1,158,794
Inter-segment revenues						37,723						24,867						(62,591)						—
Operating income						73,611						63,152						—						136,763
Interest expense						—						—						—						(18,352)
Other income, net						—						—						—						3,783
Income taxes						—						—						—						(34,192)
Net earnings						—						—						—						88,002
Depreciation and amortization						57,528						23,242						—						80,770
Expenditures for property, plant & equipment						125,201						36,122						—						161,323
Segment assets						1,207,087						554,574						—						1,761,661
Goodwill						161,008						109,670						—						270,678

						Compound Semiconductors						Photonic Solutions						Unallocated & Other						Total
($000)
2017
Revenues						$	531,685					$	440,361					$	—					$	972,046
Inter-segment revenues						34,740						18,223						(52,963)						—
Operating income						49,094						66,462						—						115,556
Interest expense						—						—						—						(6,809)
Other income, net						—						—						—						10,041
Income taxes						—						—						—						(23,514)
Net earnings						—						—						—						95,274
Depreciation and amortization						42,025						21,612						—						63,637
Expenditures for property, plant & equipment						114,134						28,811						—						142,945

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,						2019						2018						2017
($000)
United States						$	405,404					$	373,735					$	294,200
Non-United States
Hong Kong						319,601						186,978						190,702
China						290,287						253,672						208,595
Germany						155,000						132,161						88,304
Japan						109,670						89,153						76,212
Switzerland						32,770						49,557						50,497
Vietnam						22,322						26,898						22,497
Korea						11,674						9,757						6,584
Singapore						6,868						5,941						3,913
Philippines						4,179						3,909						3,057
United Kingdom						2,712						9,359						8,473
Taiwan						2,005						1,705						718
Belgium						4						4,511						7,503
Italy						—						11,458						10,791
Total Non-United States						957,092						785,059						677,846
						$	1,362,496					$	1,158,794					$	972,046

						Long-Lived Assets
June 30,						2019						2018						2017
($000)
United States						$	345,866					$	309,062					$	240,029
Non-United States
China						108,688						81,175						62,024
United Kingdom						60,369						65,357						396
Switzerland						35,592						37,155						36,795
Germany						14,857						14,876						15,323
Vietnam						11,656						10,042						8,272
Philippines						7,793						6,628						6,115
Hong Kong						5,032						2,818						1,914
Other						1,190						598						704
Total Non-United States						245,177						218,649						131,543
						$	591,043					$	527,711					$	371,572

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- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-URI http://asc.fasb.org/topic&trid=2134510

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