The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same amounts shown in the Condensed Consolidated Statements of Cash Flows. Restricted cash, non-current is included in the Condensed Consolidated Balance Sheets under 'Other Assets'. At March 31, 2023, we had $21 million of restricted cash.

The condensed consolidated financial statements of ~~II-VI Incorporated~~Coherent Corp. (“~~II-VI”~~Coherent”, the “Company”, “we”, “us” or “our”) for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 and ~~2016~~2022 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 ~~for the fiscal year ended June 30, 2017.~~dated August 29, 2022. The condensed consolidated results of operations for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 are not necessarily indicative of the results to be expected for the full fiscal year. The ~~June 30, 2017~~ Condensed Consolidated Balance Sheet information as of June 30, 2022 was derived from the Company’s audited consolidated financial statements.

On February 8, 2023, the Company announced the voluntary transfer of the listing of its common stock, no par value (“Coherent Common Stock”) and Series A Mandatory Convertible Preferred Stock, no par value (“Mandatory Convertible Preferred Stock”), from the NASDAQ Global Select Market to the New York Stock Exchange (the “NYSE”), effective as of the close of trading on February 22, 2023. The Coherent Common Stock and Mandatory Convertible Preferred Stock began trading on the NYSE on February 23, 2023 under the ticker symbols “COHR” and “IIVI”, respectively.

In ~~January 2017,~~October 2021, the FASB issued ASU ~~2017-04, Intangibles – Goodwill and Other~~No. 2021-08, Business Combinations (Topic ~~350)~~805): ~~Simplifying the~~ Accounting for ~~Goodwill Impairment. This standard removes the second step of the goodwill impairment test, where a determination of the fair value of individual~~Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires an acquirer to recognize and measure contract assets and liabilities ofacquired in a reporting unit were needed to measure the goodwill impairment. Under this updated standard, goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The Company has adopted this standard for any impairment test that is performed after July 1, 2017 as permitted under the standard.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This update simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, and classificationbusiness combination in the statement of cash flows. Under this ASU, excess tax benefits or deficiencies are recognized in income tax expense in the Condensed Consolidated Statement of Earnings. Upon adoption of this ASU, the Company had a valuation allowance for its U.S. deferred tax assets and did not recognize any tax benefit. Had the Company not had a valuation allowance, the Company would have recognized a tax benefit of $2.4 million. The impact to the Company’s dilutive shares under this new standard was immaterial.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825). This update requires that public entities measure equity investmentsaccordance with readily determinable fair values, at fair value, with changes in their fair value recorded through net income. This ASU also clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entity’s other deferred tax assets. The adoption of this standard did not have a material effect on the Company’s Consolidated Financial Statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. This update simplifies the measurement of inventory valuation at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The adoption of this standard did not have a material effect on the Company’s Consolidated Financial Statements.

In March 2016, the FASB issued ASU 2016-07, Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting. This update eliminates the requirement to retrospectively apply the equity method in previous periods when an investor obtains significant influence over an investee. The adoption of this standard did not have a material effect on the Company’s Consolidated Financial Statements.

~~Revenue Recognition Pronouncement Currently Under Evaluation~~

~~In May 2014, the FASB issued ASU 2014-09:~~Accounting Standards Codification ASC 606: Revenue from Contracts with Customers, ~~(Topic 606) which supersedes virtually all existing revenue recognition guidance under U.S. GAAP.~~rather than adjust them to fair value at the acquisition date. We have adopted this accounting standard as of July 1, 2022. The ~~update's core principle is that an entity should recognize revenue~~acquisition of Coherent, Inc. has been accounted for in accordance with ASU 2021-08, as will any future acquisitions. Results of operations for quarterly periods prior to ~~depict~~adoption remain unchanged as a result of the ~~transfer~~adoption of ~~promised goods or services~~ASU No. 2021-08. Refer to Note 3. Coherent Acquisition for further information.

On July 1, 2022 (the “Closing Date”), the Company completed its acquisition of Coherent, Inc. (the “Merger”), a global provider of lasers and laser-based technology for scientific, commercial, and industrial customers, in ~~an amount that reflects~~a combined cash and stock transaction in accordance with the ~~consideration~~Agreement and Plan of Merger dated March 25, 2021 (the “Merger Agreement”). Pursuant to ~~which~~ the entity expects to be entitled in exchange for those goods or services. The update allows for the use of either the retrospective or modified retrospective approach of adoption. The update will be effective for the Company’s 2019 fiscal year (July 1, 2018).

~~We continue our evaluation~~terms of the ~~impact~~Merger Agreement, and subject to the conditions set forth therein, each share of common stock of legacy Coherent, Inc. (“Legacy Coherent”), par value $0.01 per share (the “Legacy Coherent Common Stock”), issued and outstanding immediately prior to July 1, 2022, was canceled and extinguished and automatically converted into the right to receive $220.00 in cash and 0.91 of a share of Coherent Common Stock.

Following the completion of the ~~ASU~~Legacy Coherent acquisition, the Company announced a new brand identity, including a corporate name change to Coherent Corp. (NYSE: COHR) on September 8, 2022.

On the Closing Date, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the lenders, and other parties thereto, and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, which provides for senior secured financing of $4.0 billion, consisting of a new term loan A credit facility (the “Term A Facility”) in ~~fiscal 2018 by evaluating its impact~~an aggregate principal amount of $850 million, a new term loan B credit facility (the “Term B Facility”) (and, together with the Term A Facility, the “Term Facilities”) in an aggregate principal amount of $2.8 billion, and a new revolving credit facility (the “Revolving Credit Facility”) in an aggregate available amount of $350 million, including a letter of credit sub-facility of up to $50 million. For further on ~~selected contracts at each of our business segments. As~~ the ASU will supersede all existing revenue guidance affecting U.S. GAAP, it could impact revenue and cost recognition on our contracts across all our business segments, as well as our business processes and our information technology. As a result, our evaluationcredit facility refer to Note 8. Debt.

In order to complete the funding of the ~~effect~~Merger, the Company had a net cash outflow of $2.1 billion on July 1, 2022. The Company recorded $11 million and $83 million of acquisition related costs in the three and nine months ended March 31, 2023, 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). Approximately 23 million shares of Coherent Common Stock in the aggregate were issued in conjunction with the closing of the ~~ASU will continue through fiscal year 2018.~~ Merger. Total preliminary Merger consideration was $7.1 billion, including replacement equity awards attributable to pre-combination service for certain Legacy Coherent restricted stock units.

The Company ~~is evaluating the impact of this guidance on the Company’s Consolidated Financial Statements.~~

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update is intended to provide financial statement users with more decision-useful information about expected credit losses and other commitments to extend credit held by the reporting entity. The standard replaces the incurred loss impairment methodology in current GAAP with one that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The update will be effective for the Company’s 2021 fiscal year. Early adoption is permitted. The Company is evaluating the impact of this guidance on the Company’s Consolidated Financial Statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update requires that a lessee recognize leased assets with terms greater than 12 months on the balance sheet for the rights and obligations created by those leases. The standard will be effective for the Company’s 2020 fiscal year. Early adoption is permitted. The Company is evaluating the impact of this guidance on the Company’s Consolidated Financial Statements.

~~Note 3.~~

~~Acquisitions and Investment~~

~~Purchase of Equity Investment~~

In November 2017, the Company acquired a 93.8% equity investment in a privately-held company for $51.5 million. The Company’s pro-rata share of earnings from this investment since the acquisition date was $1.1 million, and was recorded in other expense (income), net for the three and six months ended December 31, 2017, in the Consolidated Statements of Earnings.

The Company has a nonconsolidated investment that is accounted for under the equity method of accounting (“Equity Investment”). The following table summarizes the Company's equity in the nonconsolidated investment:

Interest

Ownership % as of

Equity as of
Location

Type

December 31, 2017

December 31, 2017 ($000)

USA

Equity Investment

93.80%

$

54,835

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 obligation to receive rewards and 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 impact its economic performance. Certain business decisions, including, but not limited to, 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. Beginning on the date it was acquired, the Company accounted 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, 2017, the Company’s maximum financial statement exposure related to the Equity Investment was approximately $54.8 million, which is the investment balance on the Consolidated Balance Sheet as of December 31, 2017.

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 outstanding interest at any time on or after the third anniversary of the investment or earlier upon certain events. The purchase price is equal to the greater of: (a) (i) the product of the aggregate trailing 12-month revenues of the investment preceding the date of purchase, multiplied by (ii) a factor of 2.9 multiplied by (iii) a factor of 0.723, multiplied by (iv) the percentage interest owned by each minority equity holder and (b) $966,666. The Company performed a Monte Carlo simulation to estimateallocated the fair value of the ~~net put option~~preliminary purchase price consideration to the tangible assets, liabilities, and intangible assets acquired, generally based on estimated fair values. The excess preliminary 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, inventories, property, plant & equipment and deferred income taxes. In determining the fair value of intangible assets acquired, the Company must make assumptions about the future performance of the acquired business, including among other things, the forecasted revenue growth attributable to the asset group and projected operating expenses inclusive of expected synergies, future cost savings, and other benefits expected to be achieved by combining the Company and Legacy Coherent. The Company’s intangible assets are comprised of trade names and trademarks, customer relationships, developed technology and backlog. The Company utilized widely accepted income-based, market-based, and cost-based valuation approaches to perform the preliminary purchase price allocation. The estimated fair value of the customer relationships and backlog are determined using the multi-period excess earnings method and the estimated fair value of the trade names and trademarks and developed technology are determined using the relief from royalty method. Both methods require forward looking estimates that are discounted to determine the fair value of the intangible asset using a risk-adjusted discount rate that is reflective of the level of risk associated with future estimates associated with the asset group that could be affected by future economic and market conditions.

The purchase price allocation set forth is preliminary and will be revised as third party valuations are finalized or 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.

(i) The Company recorded measurement period adjustments to its preliminary acquisition date fair values due to the refinement of its valuation models, assumptions and inputs. The following measurement period adjustments were based upon information obtained about facts and circumstances that existed at the ~~investment~~acquisition date that, if known, would have affected the measurement of the amounts recognized at that date.

(ii) The Condensed Combined Balance Sheet has been adjusted to record Legacy Coherent’s inventories at a preliminary fair value of approximately $564 million, an increase of $67 million from the preliminary fair value reported at September 30, 2022 with a corresponding decrease to goodwill. The Condensed Combined Statement of Earnings (Loss) for the three and nine months ended March 31, 2023 includes cost of goods sold of approximately zero and $158 million, respectively, related to the increased basis in the preliminary fair value compared to the carrying value. The costs are being amortized over the expected period during which the acquired inventory is sold, and thus are not anticipated to affect the Condensed Consolidated Statements of Earnings (Loss) beyond twelve months after the Closing Date.

(iii) The Company has adjusted its prepaid and refundable income taxes, deferred tax asset and deferred tax liability positions as of March 31, 2023, to $7 million, zero and $856 million, respectively, as a result of measurement period adjustments.

(iv) The Condensed Consolidated Balance Sheet has been adjusted to record Legacy Coherent’s property, plant and equipment (consisting of land, buildings and improvements, equipment, furniture and fixtures, and leasehold improvements) at a preliminary fair value of approximately $441 million, an increase of $17 million from the preliminary fair value reported at September 30, 2022 with a corresponding decrease to goodwill. The Condensed Consolidated Statements of Earnings (Loss) have been adjusted to recognize additional depreciation expense related to the increased basis. The additional depreciation expense is computed with the assumption that the various categories of assets will be depreciated over their remaining useful lives on a straight-line basis.

(v) Preliminary identifiable intangible assets in the Condensed Combined Balance Sheet increased $1.1 billion from the preliminary fair value reported at September 30, 2022 with a corresponding decrease to goodwill. Intangibles amortization recorded ~~a liability~~in cost of ~~$2.2~~goods sold for the three and nine months ended March 31, 2023 was $21 million and $64 million, respectively. Intangibles amortization recorded in selling, general and administrative expenses for the three and nine months ended March 31, 2023 was $51 million and $156 million, respectively.

(vi) The Company recorded approximately $1 million of increases in other ~~long-term~~current liabilities and $5 million of increases in other liabilities as measurement period adjustments.

Operating results, including goodwill and intangibles, of Legacy Coherent are reflected in the Company’s consolidated financial statements from the Closing Date, within the Lasers segment. Revenues and net loss for the Lasers segment for the three months ended March 31, 2023 were $365 million and $65 million, respectively. Revenues and net loss for the Lasers segment for the nine months ended March 31, 2023 were $1,137 million and $364 million, respectively. Goodwill in the amount of $3.1 billion arising from the acquisition is attributed to the expected synergies, including future cost savings, and other benefits expected to be generated by combining Coherent and Legacy Coherent. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes.

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 supplemental pro forma information presents the combined results of operations for the three and nine months ended March 31, 2023 and March 31, 2022, as if Legacy Coherent had been acquired as of July 1, 2021. 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, interest expense and amortization of debt issuance costs related to the Senior Credit Facilities (as defined in Note 8. Debt).

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

The Company believes that disaggregating revenue by end market provides the most relevant information regarding the nature, amount, timing, and uncertainty of revenues and cash flows.

As of July 1, 2022, the Company disaggregates revenue into four end markets: industrial, communications, electronics and instrumentation. All prior period market and segment disclosure information has been reclassified to conform to the current reporting structure.

Effective July 1, 2022, the Company updated the operating segments due to the closing of the Merger. In addition, prior year numbers were recast to reflect the transfer of two entities between the Networking and Materials segments. See Note 13. Segment Reporting for further information.

The following tables summarize disaggregated revenue for the three and nine months ended March 31, 2023 and 2022 ($000):

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 satisfied. During the nine months ended March 31, 2023, the Company recognized revenue of $18 million related to customer payments that were included as contract liabilities in the Condensed Consolidated Balance Sheet ~~at December 31, 2017 in accordance with ASC 815-10, Derivatives and Hedging.~~as of June 30, 2022. The ~~fair value~~Company had $181 million of ~~the net put option will be adjusted on a quarterly basis with any changes~~contract liabilities recorded in the ~~fair value recorded through earnings.~~

~~Kaiam Laser Limited, Inc.~~

~~In August 2017, the Company~~Condensed Consolidated Balance Sheet as of March 31, 2023. Contract liabilities acquired Kaiam Laser Limited, Inc. (“Kaiam”) a privately held company based in Newton Aycliffe, United Kingdom. Under the terms of the merger agreement, the consideration consisted of cash paid at the acquisition date of $79.5 million, net of cash acquired. The acquisition of Kaiam provides the Company with a 150mm wafer fabrication platform to significantly expand the Company’s capacity for the production of vertical cavity surface emitting lasers (“VCSELs”) for the 3D sensing market and broadens the capability to address new market opportunities in other compound semiconductor materials. Kaiam now operates under the name II-VI Compound Semiconductor Ltd. within the Company’s II-VI Laser Solutions operating segment. Due to the timing of the acquisition, the Company is still in the process of measuring the fair value of assets acquired, including tangible, intangible assets and related deferred income taxes.

The following table presents the preliminary allocation of the purchase price of the assets acquired and liabilities assumed at the date of acquisition, as the Company intends to finalize its accounting for the acquisition of II-VI Compound Semiconductor Ltd. within one year from the ~~date~~Merger totaled $77 million. As of ~~acquisition ($000):~~

Assets

Accounts receivable

$
79

Inventories

4,559

Prepaid and other assets

1,246

Property, plant & equipment

63,899

Intangible assets

4,046

Goodwill

19,670

Total assets acquired

$
93,499

Liabilities

Accounts payable

$
751

Other accrued liabilities

2,486

Deferred tax liabilities

10,797

Total liabilities assumed

14,034

Net assets acquired

$
79,465

~~The goodwill~~March 31, 2023, $116 million of ~~$19.7~~deferred revenue is included other accrued liabilities and $65 million is included inwithin other liabilities on the II-VI Laser Solutions segment and is attributed to the expected synergies and the assembled workforce of II-VI Compound Semiconductor Ltd. None of the goodwill is deductible for income tax purposes. The Company expensed transaction costs of $0.6 million for the six months ended December 31, 2017.

~~The amount of revenues of II-VI Compound Semiconductor Ltd. included in the Company’s~~Condensed Consolidated Statement of Earnings for the three and six months ended December 31, 2017 was $1.0 million and $1.6 million, respectively. The amount of net loss of II-VI Compound Semiconductor Ltd. included in the Company’s Consolidated Statement of Earnings for the three and six months ended December 31, 2017 was $2.5 million and $6.2 million, respectively.

~~Integrated Photonics, Inc.~~

In June 2017, the Company acquired Integrated Photonics, Inc. (“IPI”), a privately held company based in New Jersey. IPI is a leader in engineered magneto-optic materials that enable high-performance directional components such as optical isolators for the optical communications market. Under the terms of the merger agreement, the consideration consisted of initial cash paid at the acquisition date of $40.1 million, net of cash acquired and a working capital adjustment of $0.8 million. In addition, the agreement provides up to a maximum of $2.5 million of additional cash earnout opportunities based upon IPI achieving certain agreed upon financial and transitional objectives, which if earned would be payable in the amount of $2.5 million for the achievement of the annual target.

~~The following table presents the preliminary purchase price at the date of acquisition ($000):~~

Balance Sheet.

During the nine months ended March 31, 2023, as part of the Merger, a fair value inventory step-up in the amount of $158 million was recorded as part of the preliminary purchase price allocation. The inventory step-up was amortized to cost of goods sold over the expected period during which the acquired inventory is sold. Refer to Note 3. Coherent Acquisition for further information. These costs are non-recurring in nature and not anticipated to affect the Condensed Combined Statements of Earnings (Loss) beyond twelve months after the Closing Date.

December 31,

June 30,

2017

2017

Land and improvements

$
9,210

$
5,667

Buildings and improvements

200,886

144,293

Machinery and equipment

567,724

492,042

Construction in progress

93,288

88,458

871,108

730,460

Less accumulated depreciation

(390,094
)

(362,732
)

$
481,014

$
367,728

During the nine months ended March 31, 2023, as part of the Merger, a fair value step-up in the amount of $145 million was recorded to property, plant and equipment as part of the preliminary purchase price allocation. The step-up will be amortized over the useful lives of the related assets. Refer to Note 3. Coherent Acquisition for further information.

The gross carrying amount and accumulated amortization of the Company’s intangible assets other than goodwill as of ~~December~~March 31, ~~2017~~2023 and June 30, ~~2017~~2022 were as follows ($000):

Refer to Note 3. Coherent Acquisition for further information on intangibles acquired in the ~~Company’s intangible assets was $3.8 million and $7.4 million for the three and six~~nine months ended ~~December~~March 31, ~~2017, respectively, and was $3.2 million and $6.4 million for the three and six months ended December 31, 2016, respectively.~~

~~In conjunction with the acquisition~~2023.

On ~~August 24, 2017, the Company~~July 1, 2022 (the “Closing Date”), Coherent entered into a ~~purchase~~Credit Agreement by and among the Company, as borrower (in such capacity, the “Borrower”), the lenders, and other parties thereto, and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, which provides for senior secured financing of $4.0 billion, consisting of a term loan A credit facility (“the Term A Facility”), with an aggregate principal amount of $850 million, a term loan B credit facility (“the Term B Facility” and, together with the Term A Facility, the “Term Facilities”), with an aggregate principal amount of $2,800 million, and a revolving credit facility (the “Revolving Credit Facility”), in an aggregate available amount of $350 million, including a letter of credit sub-facility of up to $50 million. On March 31, 2023, Coherent entered into Amendment No. 1 to the Credit Agreement, which replaced the adjusted LIBOR-based rate of interest therein with an adjusted SOFR-based rate of interest. As amended, the Term A Facility and the Revolving Credit Facility each bear interest at an adjusted SOFR rate subject to a 0.10% floor plus a range of 1.75% to 2.50%, based on the Company’s total net leverage ratio. The Term A Facility and the Revolving Credit Facility borrowings bear interest at adjusted SOFR plus 1.75% as of March 31, 2023. As amended, the Term B Facility bears interest at an adjusted SOFR rate (subject to a 0.50% floor) plus 2.75%. In relation to the Term Facilities, the Company incurred interest expense, including amortization of debt issuance costs, of $69 million and $183 million in the three and nine months ended March 31, 2023, respectively, which is included in interest expense in the Condensed Consolidated Statements of Earnings (Loss).

On the Closing Date, the Borrower and certain of its direct and indirect subsidiaries, provided a guaranty of all obligations of the Borrower and the other loan parties under the Credit Agreement and the other loan documents, secured cash management agreements and secured hedge agreements with the lenders and/or their affiliates (subject to certain exceptions). The Borrower and the other guarantors have also granted a security interest in substantially of their assets to secure such obligations.

Proceeds of the loans borrowed under the Term Facilities on July 1, 2022, together with other financing sources (including the net proceeds from Coherent's offer and sale of its 5.000% Senior Notes due 2029 (the “Senior Notes”) and cash on hand) were used to fund the cash portion of the Merger consideration, the repayment of certain indebtedness (including the repayment in full of all amounts outstanding under the Prior Credit Agreement as defined below), and certain fees and expenses in connection with the Merger and otherwise for general corporate purposes.

The Company capitalized approximately $90 million of debt issuance costs during the nine months ended March 31, 2023. These capitalized costs are presented as contra-debt within the long-term debt caption in the Condensed Consolidated Balance Sheet. Amortization of debt issuance costs related to the New Term Facilities for the three and nine months ended March 31, 2023 totaled $5 million and $14 million, respectively, and is included in interest expense in the Condensed Consolidated Statements of Earnings (Loss). As of March 31, 2023, the Company was in compliance with all covenants under the New Term Facilities.

Through June 30, 2022, the Company had senior credit facilities (the “Prior Senior Credit Facilities”) with Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other lenders party thereto.

The credit agreement governing the Senior Credit Facilities (the “Prior Credit Agreement”) provided for senior secured financing of $2.4 billion in the aggregate, consisting of

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

On July 1, 2022, the Company terminated the Prior Credit Agreement and repaid all amounts outstanding thereunder, of which $62 million was recorded as current portion of long-term debt and $933 million was recorded as long-term debt at June 30, 2022.

Debt extinguishment costs related to the termination of the Prior Credit Agreement of $17 million were expensed in other expense (income), net in the Condensed Consolidated Statement of Earnings (Loss) during the nine months ended March 31, 2023.

Subject to the terms of an amended and restated commitment letter entered into in connection with Coherent entering into the Merger Agreement, the commitment parties thereto committed to provide, in addition to the Term Facilities and the Revolving Credit Facility, a senior unsecured bridge loan facility in an aggregate principal amount of $990 million (the "Bridge Loan Commitment"). As a result of the issuance and sale of the Senior Notes, the Bridge Loan Commitment was terminated. During the nine months ended March 31, 2023, the Company incurred expenses of $18 million, respectively, related to the termination of the Bridge Loan Commitment, which is included in other expense (income) in the Condensed Consolidated Statements of Earnings (Loss). There will be no additional expense related to the Bridge Loan Commitment going forward.

The Company assumed the remaining balances of three term loans with the closing of the Merger. The aggregate principal amount outstanding is $25 million as of March 31, 2023. The terms loans assumed consisted of the following: (i) 1.3% Term Loan due 2024, (ii) 1.0% State of Connecticut Term Loan due 2023, and (iii) Facility construction loan in Germany due 2030. For the Facility construction loan, on December 21, 2020, Coherent LaserSystems GmbH & Co. KG entered into a loan agreement with ~~Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives~~Commerzbank for borrowings of up to 24 million Euros, which were drawn down by October 29, 2021, to finance a portion of the ~~several initial purchasers named therein (collectively,~~construction of a new facility in Germany. The term of the ~~“Initial Purchasers”), to issue~~loan is 10 years, and ~~sell $300~~borrowings bear interest at 1.55% per annum. Payments are made quarterly.

On or after December 15, 2024, the Company may redeem the Senior Notes, in whole at any time or in part from time to time, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. In addition, at any time prior to December 15, 2024, the Company may redeem the Senior Notes, at its option, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the Senior Notes redeemed, plus a “make-whole” premium set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. Notwithstanding the foregoing, at any time and from time to time prior to December 15, 2024, the Company may redeem up to 40% of the aggregate principal amount of the Senior Notes using the proceeds of certain equity offerings as set forth in the Indenture, at a redemption price equal to 105.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

In relation to the Senior Notes, the Company incurred interest expense of $13 million and $38 million in the three and nine months ended March 31, 2023, respectively, which is included in interest expense in the Condensed Consolidated Statements of Earnings (Loss).

The Indenture contains customary covenants and events of default, including default relating to among other things, payment default, failure to comply with covenants or agreements contained in the Indenture or the Senior Notes and certain provisions related to bankruptcy events. As of March 31, 2023, the Company was in compliance with all covenants under the Indenture.

In August 2017, the Company issued and sold $345 million aggregate principal amount of its 0.25% Convertible Senior Notes due 2022 (the ~~"Notes"~~“Convertible Notes”) in a private placement to qualified institutional buyers within the meaning of Rule 144A under the Securities Act of 1933, as amended. ~~In addition, we granted the Initial Purchasers a 30-day option to purchase up to an additional $45 million aggregate principal amount of the Notes (the “Over-Allotment Option”).~~

~~On August 29, 2017, the Initial Purchasers exercised their Over-Allotment Option to purchase the entire $45 million in aggregate principal amount of additional Notes. The Notes mature~~

Beginning on September 1, 2022, unless earlier repurchased by the Company or converted by holders in accordance with the terms of the Notes. Interest is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2018.

The sale of the Notes to the Initial Purchasers settled on August 29, 2017, and resulted in approximately $336 million in net proceeds to the Company after deducting the initial purchasers’ discount and the estimated offering expenses. The net proceeds from the offering and sale of the Notes were used, in part, to repurchase approximately $49.9 million of our Common Stock. The Company used the remaining net proceeds to repay $252 million on its revolving credit facility and to pay debt issuance costs of $10.1 million.

The Notes are governed by an Indenture between the Company, as issuer, and U.S. Bank, National Association, as trustee. The Notes will be our senior unsecured obligations and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of our indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries. In the event of our bankruptcy, liquidation, reorganization or other winding up, our assets that secure secured debt will be available to pay obligations on the Notes only after all indebtedness under such secured debt has been repaid in full from such assets. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of our Common Stock or a combination of cash and shares of our Common Stock, at the Company’s election.

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 Notes using the effective interest method with an effective interest rate of 4.5% per annum.

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 Notes, which is equivalent to an initial conversion price of $47.06 per share of Common Stock. Throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events.

Holders of the Notes will not receive any cash payment representing accrued and unpaid interest upon conversion of a note. Accrued but unpaid interest will be deemed to be paid in full upon conversion rather than cancelled, extinguished or forfeited.

~~Prior to the close of business on the business day immediately preceding June 1, 2022, the Notes will be convertible only upon satisfaction of at least one of the conditions as follows:~~

a)

During any fiscal quarter beginning after the fiscal quarter ended on December 31, 2017 (and only during such fiscal quarter), if the last reported sale price of our Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

b)

During the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Common Stock and the conversion rate on each such trading day;

c)

~~Upon the occurrence of specified corporate events~~

~~On or after~~ June 1, 2022 until the close of business on the business day immediately preceding September 1, 2022 (the “Maturity Date”), holders were able to convert their Convertible Notes at any time. For the ~~maturity date,~~fiscal quarter ended September 30, 2022, the holders ~~may convert all or any~~of the Convertible Notes converted $332 million of principal, which was recorded as current portion of ~~their Notes,~~long-term debt at June 30, 2022, and received approximately 7 million shares of Coherent Common Stock in ~~multiples~~settlement of ~~$1,000~~the conversions.

On the Maturity Date, $4 million aggregate principal amount atof Convertible Notes remained outstanding, and was repaid in cash, and the ~~option of the holder regardless of the foregoing circumstances.~~

~~As of December 31, 2017, the~~Convertible Notes are ~~not yet convertible. In accounting for~~no longer outstanding. At the ~~transaction costs~~Maturity Date, the accrued interest on the Coherent Convertible Notes was immaterial. The total interest expense related to the Note issuance, the Company allocated the total amount of offering costs incurred to the debt and equity components based on their relative values. Offering costs attributable to the debt component, totaling $8.4 million, are being amortized as non-cash interest expense over the term of theConvertible Notes ~~and offering costs attributable to the equity component, totaling $1.7 million, were recorded within stockholders' equity.~~

~~The following table sets forth total interest expense recognized related to the Notes~~was immaterial for both the three and ~~six~~nine months ended ~~December~~March 31, ~~2017:~~

Three Months Ended December 31, 2017

Six Months Ended December 31, 2017

0.25% contractual coupon

$
219

$
297

Amortization of debt discount and debt issuance costs including initial purchaser discount

2,935

4,043

Interest expense

$
3,154

$
4,340

2023 and March 31, 2022.

~~Amended Credit Facility~~

On July 28, 2016, the Company amended and restated its existing credit agreement. The Third Amended and Restated Credit Agreement (the “Amended Credit Facility”) provides for a revolving credit facility of $325 million, as well as a $100 million term loan. The term loan is being repaid in consecutive quarterly principal payments on the first business day of each January, April, July and October, with the first payment having commenced on October 1, 2016, as follows: (i) twenty consecutive quarterly installments of $5 million and (ii) a final installment of all remaining principal due and payable on the maturity date of July 27, 2021. Amounts borrowed under the revolving credit facility are due and payable on the maturity date. The Amended Credit Facility is unsecured, but is guaranteed by each existing and subsequently acquired or organized wholly-owned domestic subsidiary of the Company. The Company has the option to request an increase to the size of the revolving credit facility in an aggregate additional amount not to exceed $100 million. The Amended Credit Facility has a five-year term through July 27, 2021 and has an interest rate of either a Base Rate Option or a Euro-Rate Option, plus an Applicable Margin, as defined in the agreement governing the Amended Credit Facility. If the Base Rate option is selected for a borrowing, the Applicable Margin is 0.00% to 1.25% and if the Euro-Rate Option is selected for a borrowing, the Applicable Margin is 1.00% to 2.25%. The Applicable Margin is based on the ratio of the Company’s consolidated indebtedness to consolidated EBITDA. Additionally, the Credit Facility is subject to certain covenants, including those relating to minimum interest coverage and maximum leverage ratios. As of December 31, 2017, the Company was in compliance with all financial covenants under its Amended Credit Facility.

~~Yen Loan~~

The Company’s Yen denominated line of credit is a 500 million Yen (approximately $4.4 million) facility. The Yen line of credit matures in August 2020. The interest rate is equal to LIBOR, as defined in the loan agreement, plus 0.625% to 1.75%. At December 31, 2017 and June 30, 2017, the Company had 300 million Yen borrowed. Additionally, the facility is subject to certain covenants, including those relating to minimum interest coverage and maximum leverage ratios. As of December 31, 2017, the Company was in compliance with all financial covenants under its Yen facility.

~~Note Payable~~

In conjunction with the acquisition of IPI, the Company assumed a non-interest bearing note payable owed to a major customer of IPI. The agreement if not terminated early by either party is payable in full in May 2019.

Aggregate Availability

The Company had aggregate availability of ~~$225.6 million and $73.5~~$348 million under its ~~lines of credit~~Revolving Credit Facility as of ~~December~~March 31, 2017 and June 30, 2017, respectively. The amounts available under the Company’s lines of credit are reduced by outstanding letters of credit. As of December 31, 2017 and June 30, 2017, total outstanding letters of credit supported by these credit facilities were $1.2 million for both periods.

~~Weighted Average Interest Rate~~

~~The weighted average interest rate of total borrowings was 1.4% and 2.1% for the six months ended December 31, 2017 and 2016, respectively.~~

~~Remaining Annual Principal Payments~~

~~Remaining annual principal payments under the Company’s existing credit obligations from December 31, 2017 were as follows:~~

U.S.

Dollar

Term

Yen Line

Line of

Note

Convertible

Period

Loan

of Credit

Credit

Payable

Notes

Total

Year 1

$
20,000

$
-

$
-

$
-

$
-

$
20,000

Year 2

20,000

-

-

3,834

-

23,834

Year 3

20,000

2,666

-

-

-

22,666

Year 4

15,000

-

100,000

-

-

115,000

Year 5

-

-

-

-

345,000

345,000

Total

$
75,000

$
2,666

$
100,000

$
3,834

$
345,000

$
526,500

2023.

~~Note 8.~~

~~Income Taxes~~

Note 9. Income Taxes

The Company’s year-to-date effective income tax rate at ~~December~~March 31, ~~2017 and 2016~~2023 was ~~45.9% and 27.8%, respectively.~~33% compared to an effective tax rate of 18% for the same period in 2022. The variations between the Company’s effective tax rate and the U.S. statutory rate of ~~28% for our fiscal year ending June 30, 2018~~21% were ~~primarily~~ due to ~~the impact of the~~nondeductible expenses and tax rate differentials between U.S. ~~enacted tax legislation~~ and ~~earnings generated from the Company’s~~ foreign ~~operations, which are subject to income taxes at lower statutory rates.~~

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~~March 31, ~~2017~~2023 and June 30, ~~2017,~~2022, the Company’s gross unrecognized income tax benefit, excluding interest and penalties, was ~~$7.7~~$66 million and ~~$7.6~~$37 million, respectively. The Company has classified the uncertain tax positions as ~~noncurrent~~non-current income tax liabilities, as the amounts are not expected to be paid within one year. If recognized, ~~$5.5~~$27 million of the gross unrecognized tax benefits at ~~December~~March 31, ~~2017~~2023 would impact the effective tax rate. The Company recognizes interest and penalties related to uncertain tax positions in the income tax provision onin the Condensed Consolidated Statements of ~~Earnings.~~Earnings (Loss). The amount of accrued interest and penalties included in the gross unrecognized income tax benefit was ~~$0.5~~$6 million and ~~$0.3~~$3 million at ~~December~~March 31, ~~2017~~2023 and June 30, ~~2017,~~2022, respectively.

Fiscal years ~~2014~~2019 to ~~2018~~2022 remain open to examination by the ~~United States~~ Internal Revenue Service, fiscal years ~~2012~~2018 to ~~2018~~2022 remain open to examination by certain state jurisdictions, and fiscal years ~~2006~~2011 to ~~2018~~2022 remain open to examination by certain foreign taxing jurisdictions. The ~~Company’s income tax returns are not~~Company is currently under ~~examination.~~examination for certain subsidiary companies in California for the years ended September 30, 2018 through September 30, 2019; Colorado for the years ended September 30, 2018 through September 30, 2021; Vietnam for the years ended September 30, 2018 through September 30, 2021; Singapore for the year ended September 30, 2020; and Germany for the years ended September 30, 2011 through September 30, 2020. The Company believes its income tax reserves for these tax matters are adequate.

~~U.S. Tax Reform~~

19

Note 10. Leases

We determine if an arrangement is a lease at inception for arrangements with an initial term of more than 12 months, 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 lease assets are recorded in property, plant and equipment, net, and finance lease liabilities within other accrued liabilities and other liabilities on our Condensed Consolidated Balance Sheets. 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 Sheets. 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, the Company considers 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. The Company accounts for non-lease components, such as common area maintenance, as a component of the lease, and includes it in the initial measurement of leased 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 Coherent 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.

20

The following table presents lease costs, which include leases for arrangements with an initial term of more than 12 months, lease term, and discount rates ($000):


	Three Months Ended March 31, 2023			Nine Months Ended March 31, 2023
Finance lease cost
Amortization of right-of-use assets	$	417		$	1,250
Interest on lease liabilities	279			851
Total finance lease cost	696			2,101
Operating lease cost	13,324			39,817

Total lease cost	$	14,020		$	41,918

Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating cash flows from finance leases	$	279		$	851
Operating cash flows from operating leases	12,578			37,843
Financing cash flows from finance leases	369			1,056

Weighted-Average Remaining Lease Term (in Years)
Finance leases	8.8
Operating leases	6.7

Weighted-Average Discount Rate
Finance leases	5.6		%
Operating leases	5.5		%


	Three Months Ended March 31, 2022		Nine Months Ended March 31, 2022
Finance Lease Cost
Amortization of right-of-use assets	$	417	$	1,255
Interest on lease liabilities	298		907
Total finance lease cost	$	715	$	2,162
Operating lease cost	9,240		27,635
Sublease income	—		507
Total lease cost	$	9,955	$	29,290

Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating cash flows from finance leases	$	298	$	907
Operating cash flows from operating leases	8,899		26,565
Financing cash flows from finance leases	332		954

Note 11. Equity and Redeemable Preferred Stock

Mandatory Convertible Preferred Stock

In July 2020, the Company issued 2.3 million shares of Mandatory Convertible Preferred Stock.

Unless previously converted, each outstanding share of Mandatory Convertible Preferred Stock will automatically convert on the Mandatory Conversion Date (as defined in the Statement with Respect to Shares establishing the Mandatory Convertible Preferred Stock) into a number of shares of Coherent Common Stock equal to not more than 4.6512 shares and not less than 3.8760 shares (the “Minimum Conversion Rate”), depending on the applicable market value of the Coherent Common Stock, subject to certain anti-dilution adjustments.

21

Other than in the event of one of certain fundamental changes, a holder of Mandatory Convertible Preferred Stock may, at any time prior to July 1, 2023, elect to convert such holder's shares, in whole or in part, at a Minimum Conversion Rate per share of Mandatory Convertible Preferred Stock, subject to certain anti-dilution adjustments.

If one of certain fundamental changes occurs on or prior to July 1, 2023, holders of the Mandatory Convertible Preferred Stock will have the right to convert their shares of Mandatory Convertible Preferred Stock, in whole or in part, into shares of Coherent Common Stock at the conversion rate determined in accordance with the terms of the Mandatory Convertible Preferred Stock during the period beginning on, and including, the effective date of such change and ending on, and including, the date that is 20 calendar days after the effective date of such fundamental change (or, if later, the date that is 20 calendar days after holders receive notice of such fundamental change, but in no event later than July 1, 2023). Holders who convert their shares of the Mandatory Convertible Preferred Stock during that period will also receive a dividend make-whole amount and, to the extent there is any, the accumulated dividend amount, in each case as calculated in accordance with the terms of the Mandatory Convertible Preferred Stock.

The Company recognized $7 million and $21 million of preferred stock dividends for the three and nine months ended March 31, 2023, respectively, associated with the Mandatory Convertible Preferred Stock. The Company recognized $7 million and $21 million of preferred stock dividends for the three and nine months ended March 31, 2022, respectively, associated with the Mandatory Convertible Preferred Stock. The preferred dividends were presented as a reduction to retained earnings on the Condensed Consolidated Balance Sheet as of March 31, 2023.

The following table presents dividends per share and dividends recognized for the three and nine months ended March 31, 2023 and March 31, 2022:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Dividends per share	$	3.00	$	3.00	$	9.00	$	9.00
Mandatory Convertible Preferred Stock dividends ($000)	6,900		6,900		20,700		20,700

Series B-1 Convertible Preferred Stock

In March 2021, the Company issued 75,000 shares of Series B-1 Convertible Preferred Stock, no par value per share ("Series B-1 Preferred Stock").

The shares of Series B-1 Preferred Stock are convertible into shares of Coherent Common Stock as follows:

•at the election of the holder, at an initial conversion price of $85 per share (as it may be adjusted from time to time, the “Conversion Price”) upon the delivery by Coherent to the holders of the Series B-1 Preferred Stock of an offer to repurchase the Series B-1 Preferred Stock upon the occurrence of a Fundamental Change (as defined in the Statement with Respect to Shares establishing the Series B Preferred Stock as defined below); and

•at the election of the Company, any time following March 31, 2024 at the then-applicable Conversion Price if the volume-weighted average price of Coherent Common Stock exceeds 150% of the then-applicable Conversion Price for 20 trading days out of any 30 consecutive trading days.

The issued shares of Series B-1 Preferred Stock currently have voting rights, voting as one class with the Coherent Common Stock and the Series B-2 Preferred Stock (as defined below), on an as-converted basis, subject to limited exceptions.

On ~~December 22, 2017,~~or at any time after March 31, 2031:

•each holder has the ~~U.S. government enacted comprehensive tax legislation commonly referred~~right to asrequire the ~~Tax Cuts~~Company to redeem all of their Coherent Series B-1 Convertible Preferred Stock, for cash, at a redemption price per share equal to the sum of the Stated Value (as defined in the Statement with Respect to Shares establishing the Series B Preferred Stock) for such shares plus an amount equal to all accrued or declared and ~~Jobs Act (the “Tax Act”). The Tax Act significantly revises~~unpaid dividends on such shares that had not previously been added to the ~~future ongoing U.S. corporate income tax by, among other things, lowering U.S. corporate income tax rates~~Stated Value (such price the “Redemption Price,” and ~~implementing a territorial tax system. As~~ such right the “Put Right”); and

•the Company has the right to redeem, in whole or in part, on a ~~June~~pro rata basis from all holders based on the aggregate number of shares of Series B-1 Preferred Stock outstanding, for cash, at the Redemption Price.

22

In connection with any Fundamental Change (as defined in the Statement with Respect to Shares establishing the Series B Preferred Stock), and subject to the procedures set forth in the Statement with Respect to Shares establishing the Series B Preferred Stock, the Company must, or will cause the survivor of a Fundamental Change to, make an offer to repurchase, at the option and election of the holder thereof, each share of Series B-1 Preferred Stock then-outstanding at a purchase price per share in cash equal to (i) the Stated Value for such shares plus an amount equal to all accrued or declared and unpaid dividends on such shares that had not previously been added to the Stated Value as of the date of repurchase plus (ii) if prior to March 31, 2026, the aggregate amount of all dividends that would have been paid (subject to certain exceptions), from the date of repurchase through March 31, 2026.

If the Company defaults on a payment obligation with respect to the Series B-1 Preferred Stock and such default is not cured within 30 ~~fiscal year-end,~~days, the ~~lower corporate income tax~~dividend rate will increase to 8% per annum and will be ~~phased~~increased by an additional 2% per annum each quarter the Company remains in ~~resulting in a U.S. statutory federal rate of approximately 28%~~default, not to exceed 14% per annum.

The Series B-1 Preferred Stock is redeemable for ~~the Company’s fiscal year ending June 30, 2018, and 21% for subsequent fiscal years. As part~~cash outside of the ~~transition~~control of the Company upon the exercise of the Put Right, and upon a Fundamental Change, and is therefore classified as mezzanine equity.

The Series B-1 Preferred Stock is initially measured at fair value less issuance costs, accreted to its redemption value over a 10-year period (using the effective interest method) with such accretion accounted for as deemed dividends and reductions to Net Earnings Available to Common Shareholders.

Series B-2 Convertible Preferred Stock

On July 1, 2022, the Company issued 140,000 shares of Series B-2 Convertible Preferred Stock, no par value per share (“Series B-2 Preferred Stock” and, together with the Series B-1 Preferred Stock, the “Series B Preferred Stock”).

The shares of Series B-2 Preferred Stock are convertible into shares of Coherent Common Stock as follows:

•at the election of the holder the Conversion Price upon the delivery by Coherent to the ~~new territorial tax system,~~holders of the ~~Tax Act imposes~~Series B-2 Preferred Stock of an offer to repurchase the Coherent Series B-2 Convertible Preferred Stock upon the occurrence of a ~~one-time repatriation tax~~Fundamental Change (as defined in the Statement with Respect to Shares establishing the Series B Preferred Stock); and

•at the election of the Company, any time following July 1, 2025 at the then-applicable Conversion Price if the volume-weighted average price of Coherent Common Stock exceeds 150% of the then-applicable Conversion Price for 20 trading days out of any 30 consecutive trading days.

The issued shares of Series B-2 Convertible Preferred Stock currently have voting rights, voting as one class with the Coherent Common Stock and the Series B-1 Preferred Stock, on ~~total post-1986 earnings~~an as-converted basis, subject to limited exceptions.

On or at any time after July 1, 2032:

•each holder has the right to require the Company to redeem all of their Series B-2 Preferred Stock, for cash, at a redemption price per share equal to the sum of the Stated Value for such shares (as defined in the Statement with Respect to Shares establishing the Series B Preferred Stock) plus an amount equal to all accrued or declared and ~~profits (“E&P”) of foreign subsidiaries~~unpaid dividends on such shares that ~~were~~had not previously ~~deferred from U.S. income taxes.~~

~~At December 31, 2017,~~ been added to the Stated Value (such price the “Redemption Price,” and such right the “Put Right”); and

•the Company has ~~not finalized its accounting for~~ the tax effects of the Tax Act; however, as described below, management has made a reasonable estimate of the effects on existing deferred tax balances and has recorded an estimated amount for its one-time repatriation tax, resultingright to redeem, in ~~an increase in income tax expense. The Company has yet to complete its calculation of the total post-1986 foreign E&P. Further, the one-time repatriation tax is based~~whole or in part, on a pro rata basis from all holders based on the aggregate number of shares of Series B-2 Preferred Stock outstanding, for cash, at the Redemption Price.

In connection with any Fundamental Change, and subject to the procedures set forth in the Statement with Respect to Shares establishing the Series B Preferred Stock, the Company must, or will cause the survivor of a Fundamental Change to, make an offer to repurchase, at the option and election of the holder thereof, each share of Series B-2 Preferred Stock then-outstanding at a purchase price per share in cash equal to (i) the Stated Value for such shares plus an amount equal to all accrued or declared and unpaid dividends on such shares that had not previously been added to the Stated Value as of the date of repurchase plus (ii) if prior to July 1, 2027, the aggregate amount of ~~those~~all dividends that would have been paid (subject to certain exceptions), from the date of repurchase through July 1, 2027.

If the Company defaults on a payment obligation with respect to the Series B-2 Preferred Stock and such default is not cured within 30 days, the dividend rate will increase to 8% per annum and will be increased by an additional 2% per annum each quarter the Company remains in default, not to exceed 14% per annum.

The Series B-2 Preferred Stock is redeemable for cash outside of the control of the Company upon the exercise of the Put Right, and upon a Fundamental Change, and is therefore classified as mezzanine equity.

23

The Series B-2 Preferred Stock is initially measured at fair value less issuance costs, accreted to its redemption value over a 10-year period (using the effective interest method) with such accretion accounted for as deemed dividends and reductions to Net Earnings Available to Common Shareholders.

The Company recognized $29 million and $87 million of preferred stock dividends related to the Series B Preferred Stock for the three and nine months ended March 31, 2023, respectively. The Company recognized $10 million and $30 million of preferred stock dividends related to the Series B Preferred Stock for the three and nine months ended March 31, 2022, respectively. The preferred stock dividends were presented as a reduction to retained earnings ~~held in cash~~on the Condensed Consolidated Balance Sheet as of March 31, 2023.

The following table presents dividends per share and ~~other specified assets~~dividends recognized for the three and ~~could be impacted~~nine months ended March 31, 2023 and March 31, 2022:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Dividends per share	$	136	$	137	$	404	$	403
Dividends ($000)	27,969		9,732		83,267		28,743
Deemed dividends ($000)	1,202		516		3,570		1,490

Note 12. Earnings (Loss) Per Share

Basic earnings (loss) per common share is computed by dividing net earnings (loss) available to common shareholders by the ~~balance~~weighted-average number of ~~those assets at June 30, 2018, which~~shares of common stock outstanding during the period.

Diluted earnings (loss) per common share is ~~not yet known. This amount may change when~~computed by dividing the diluted earnings (loss) available to common shareholders by the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period. For the three and nine months ended March 31, 2023, as the Company ~~finalizes~~was in a net loss position, no dilution was included in the calculation of ~~post-1986 foreign E&P previously deferred~~earnings (loss) per share.

Potentially dilutive shares whose effect would have been anti-dilutive are excluded from ~~U.S. taxation and the amounts held in cash or other specified assets as of June 30, 2018 are known.~~

The impact of the repatriation tax is expected to be offset by available net operating loss and credit carryforwards which currently have a valuation allowance. Thus the tax expense reported is reduced by the release of the valuation allowance on U.S. deferred tax assets. The reduction of the U.S. corporate tax rate caused the Company to adjust the U.S. deferred tax assets and liabilities to the lower U.S. statutory federal rate of 21%. However, the Company will continue to analyze certain aspects of the Tax Act which could affect the measurement of these balances or give rise to new deferred tax amounts. In addition, the Company has recorded withholding taxes on planned repatriation due to the change to a territorial tax system. The transitional impacts described above resulted in a cumulative provisional net charge of $15.8 million for the quarter ended December 31, 2017.

The changes included in the Tax Act are broad and complex. The final transition impacts of the Tax Act may differ from the estimates recorded during the quarter ended December 31, 2017, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the Company has utilized to calculate the transition impacts, including impacts from changes to current year earnings estimates and foreign exchange rates of foreign subsidiaries. The Securities Exchange Commission has issued rules that allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. The Company currently anticipates finalizing and recording any resulting adjustments by the end of the quarter ending December 31, 2018.

~~Note 9.~~

~~Earnings Per Share~~

~~The following table sets forth~~ the computation of diluted earnings (loss) per common share. For the three and nine months ended March 31, 2023, diluted earnings (loss) per share ~~for~~excluded the ~~periods indicated. Weighted average shares issuable upon~~potentially dilutive effect of the ~~exercises of stock options and the release of~~ performance and restricted shares, ~~are not included in~~calculated based on the ~~calculation because they~~average stock price for each fiscal period, using the treasury stock method, as well as the shares of Coherent Common Stock issuable upon conversion of outstanding convertible debt, the Mandatory Convertible Preferred Stock and the Series B Convertible Preferred Stock (under the If-Converted method), as their effects were ~~anti-dilutive~~anti-dilutive.

24

Table of Contents

The following is a reconciliation of the numerators and ~~totaled approximately 133,000~~denominators of the basic and ~~110,000~~diluted earnings (loss) per share computations for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017, respectively,~~2023 and ~~86,000 and 227,000~~March 31, 2022 ($000):


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022			2023		2022
Numerator
Net earnings (loss)	$	2,546	$	49,002		$	(81,224)	$	191,123
Deduct Series A preferred stock dividends	(6,900)		(6,900)			(20,700)		(20,700)
Deduct Series B dividends and deemed dividends	(29,171)		(10,248)			(86,837)		(30,233)
Basic earnings (loss) available to common shareholders	$	(33,525)	$	31,854		$	(188,761)	$	140,190

Effect of dilutive securities:
Add back interest on Convertible Notes (net of tax)	$	—	$	571		$	—	$	1,650

Diluted earnings (loss) available to common shareholders	$	(33,525)	$	32,425		$	(188,761)	$	141,840

Denominator
Weighted average shares	139,113		106,323			136,990		106,079
Effect of dilutive securities:
Common stock equivalents	—		3,296			—		3,001
Convertible Notes	—		7,330			—		7,330


Diluted weighted average common shares	139,113		116,949			136,990		116,410

Basic earnings (loss) per common share	$	(0.24)	$	0.30		$	(1.38)	$	1.32

Diluted earnings (loss) per common share	$	(0.24)	$	0.28		$	(1.38)	$	1.22

The following table presents potential shares of Coherent Common Stock excluded from the calculation of diluted earnings (loss) per share as their effect would have been anti-dilutive for the three and ~~six~~nine months ended ~~December 31,2016, respectively. The earnings per share computation does not include the effects of the convertible note issuance as these notes were not convertible at December~~March 31, ~~2017,~~2023 and March 31, 2022 ($~~000 except per share data)~~000):

Three Months Ended

Six Months Ended

December 31,

December 31,

2017

2016

2017

2016

Net earnings

$
9,596

$
23,903

$
30,737

$
40,197

Divided by:

Weighted average shares

62,302

62,390

62,523

62,205

Basic earnings per common share

$
0.15

$
0.38

$
0.49

$
0.65

Net earnings

$
9,596

$
23,903

$
30,737

$
40,197

Divided by:

Weighted average shares

62,302

62,390

62,523

62,205

Dilutive effect of common stock equivalents

2,736

2,017

2,638

1,794

Diluted weighted average common shares

65,038

64,407

65,161

63,999

Diluted earnings per common share

$
0.15

$
0.37

$
0.47

$
0.63


	Three Months Ended March 31,		Nine Months Ended March 31,
	2023	2022	2023	2022
Common stock equivalents	2,416	2	2,334	12
Convertible Notes	—	—	1,491	—
Series A Mandatory Convertible Preferred Stock	10,697	8,915	10,331	8,915
Series B Convertible Preferred Stock	26,511	9,217	26,185	9,105
Total anti-dilutive shares	39,624	18,134	40,341	18,032

~~Note 10.~~

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~~decision-maker organizes business segments within the Company for making operating decisions and assessing financial performance.

On July 1, 2022, the Company completed its acquisition of Legacy Coherent. See Note 3. Coherent Acquisition for further information. The operating results of Legacy Coherent are reflected in the Lasers segment.

Effective July 1, 2022, the Company reports its financial results in the following three segments: (i) ~~II-VI Laser Solutions,~~Networking, (ii) ~~II-VI Photonics,~~Materials, and (iii) ~~II-VI Performance Products,~~Lasers. Previously, financial results had been reported in the following two segments: (i) Photonic Solutions and (ii) Compound Semiconductors. The Networking segment represents the former Photonic Solutions segment and the Materials segment represents the former Compound Semiconductors segment.

The Company’s chief operating decision maker receives and reviews financial information based on these three 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 ofare consistent across each segment. To the ~~segments are~~extent possible, the ~~same as those of the Company. The~~ Company’s corporate expenses and assets are allocated to the segments. The ~~Company evaluates~~expenses associated with the Legacy Coherent acquisition for the three and nine months ended March 31, 2023 are wholly allocated to the Lasers segment. For the three and nine months ended March 31, 2022, the expenses associated with the acquisition of Legacy Coherent were not allocated to an operating 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~~were presented in Unallocated and ~~transfers are eliminated.~~

Other. In addition, prior year numbers were recast to reflect the transfer of two entities between the Networking and Materials segments.

The Company’s Board of Directors ~~adopted~~amended and restated the ~~II-VI Incorporated Amended and Restated 2012~~Coherent Corp. 2018 Omnibus Incentive Plan, ~~(the “Plan”),~~ which originally was approved by the ~~Company’s shareholders.~~Company's shareholders at the Annual Meeting in November 2018 (as amended and restated, the "Plan"). The Plan was approved by the Company's shareholders at the Annual Meeting in November 2020. The Plan provides for the grant of ~~performance-based cash incentive awards,~~ non-qualified stock options, stock appreciation rights, restricted ~~share awards,~~shares, restricted share units, deferred ~~share awards,~~shares, performance ~~share awards~~shares and performance share units to employees, officers and directors of the Company. The maximum number of shares of ~~the Company’s~~Coherent Common Stock authorized for issuance under the Plan is limited to ~~4,900,000~~9,550,000 shares of Coherent 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~~Plan has vesting provisions predicated upon the ~~recognition of grant-date fair value of share-based compensation in net earnings and over the requisite service period~~death, retirement or disability of the ~~individual grantees,~~grantee.

On the Closing Date, the Company assumed 403,675 Legacy Coherent restricted stock units ("Converted RSUs"). The Converted RSUs are generally subject to the same terms and conditions that applied to the RSUs immediately prior to the Closing Date. Other than the assumed Converted RSUs, Coherent did not assume any other awards outstanding under Legacy Coherent equity incentive plans. On the Closing Date, Coherent assumed the unused capacity under Legacy Coherent equity incentive plan, 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.

~~Share-based compensation expense is allocated approximately 20% to cost~~totaled 10,959,354 shares of ~~goods sold and 80% to selling, general and administrative expense, based on the employee classification of the grantees.~~ issuable Coherent Common Stock.

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

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:

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

In

The Company entered into an interest rate swap with a 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. Through February ~~2016,~~28, 2023, the Company received payments based on the one-month LIBOR and made payments based on a fixed rate of 1.52%. The Company received payments with a floor of 0.00%. The interest rate swap agreement had an effective date of November 24, 2019, with an expiration date of September 24, 2024. The initial notional amount of the interest rate swap was decreased to $825 million in June 2022 and will remain at that amount through the expiration date. On March 20, 2023, the Company amended its $825 million interest rate swap ("Amended Swap"), effective as of February 28, 2023, to replace the current reference rate (LIBOR) with SOFR, to be consistent with the amended credit agreement. See Note 8. Debt for further information. Under the Amended Swap, the Company receives payments based on the one-month SOFR and makes payments based on a fixed rate of 1.42%. The Company receives payments with a floor of 0.10%. The Company designated this instrument as a cash flow hedge and deemed the hedge relationship effective at inception of the contract and amended contract.

The Cap, as amended, is designed to mirror the terms of the Credit Agreement as amended on March 31, 2023. The Company designated the Cap as a cash flow hedge of the variability of the SOFR based interest payments on the Term Loan Facilities. Every period over the ~~next three years.~~ life of the hedging relationship, the entire change in fair value related to the hedging instrument will first be recorded within accumulated other comprehensive income (loss). Amounts accumulated in accumulated other comprehensive income (loss) will be reclassified into interest expense in the same period or periods in which interest expense is recognized on the Credit Agreement, or its direct replacement. The fair value of the Cap is determined using widely accepted valuation techniques and reflects the contractual terms of the Cap 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 Cap is classified as a Level 2 item within the fair value hierarchy.

The Company ~~paid~~estimated the ~~first year earnout amount~~fair value of ~~$2.0 million during~~ the ~~quarter ended June 30, 2017.~~

~~In June 2017,~~Senior Notes based on quoted market prices as of the last trading day prior to March 31, 2023; however, the Senior Notes have only a limited trading volume and as such this fair value estimate is not necessarily the value at which the Senior 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 Senior Notes is net of unamortized discount and issuance costs. See Note 8. Debt for details on the Company’s debt facilities.

The fair value and carrying value of the Convertible Notes and Senior Notes were as followed ($000):

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 and the Senior Notes, are considered Level 2 among the fair value hierarchy and their principal amounts approximate fair value.

The Company, from time to time, purchases foreign currency forward exchange contracts that permit it to transact specified amounts of these foreign currencies for pre-established U.S. dollar amounts at specified dates that represent assets or liabilities on the balance sheets of certain subsidiaries. These contracts are entered into a contingent earnout arrangement which provides up to a maximum of $2.5 million of additional cash earnout opportunities based upon IPI achieving certain agreed upon financial and transitional objectives relating to finance, information technology and human resources, which if earned would be payable for the ~~achievement~~purpose of ~~each specific annual target over~~limiting translational exposure to changes in currency exchange rates and which otherwise would expose the ~~next year.~~

Company's earnings, on the revaluation of its aggregate net assets or liabilities in respective currencies, to foreign currency risk. At ~~December~~March 31, ~~2017,~~2023, the Company had foreign currency forward contracts recorded at fair value. The fair values of these instruments were measured using valuations based upon quoted prices for similar assets and liabilities in active markets (Level 2) and are valued by reference to similar financial instruments, adjusted for credit risk and restrictions and other terms specific to the contracts.

~~In November 2017,~~ Realized gains related to these contracts for the ~~Company acquired a 93.8% equity ownership of a privately held company. The Company has the right to purchase all of the outstanding interest of each of the minority equity holders~~three and the minority equity holders have the right to cause the Company to purchase all of outstanding interest at any time on or after the third anniversary of the investment or earlier upon certain events. The Company performed a Monte Carlo simulation to estimate the fair value of the net put option at the investment datenine months ended March 31, 2023 were $0 million and ~~recorded a liability of $2.2~~$5 million, respectively, and were included in other ~~long-term liabilities~~expense (income), net in the Condensed Consolidated ~~Balance Sheet at December 31, 2017 in accordance with ASC 815-10, Derivatives and Hedging. The fair value~~Statements of ~~the net put option will be adjusted on a quarterly basis with any changes in the fair value recorded through earnings.~~

The fair values of the contingent earnout arrangements and the net put option were measured using valuations based upon other unobservable inputs that are significant to the fair value measurement (Level 3)Earnings (Loss).

The Company estimated the fair value of the 0.25% convertible notes based on quoted market prices as of the last trading day prior to December 31, 2017; however, the convertible notes have only a limited trading volume and as such this fair value estimate is not necessarily the value at which the convertible 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 convertible notes is net of unamortized discount and issuance costs. See Note 7. Debt for details on the Company’s debt facilities. The fair value and carrying value of the convertible notes were as follows at December 31, 2017 ($000):

On May 10, 2023, the Company announced that it plans to take certain additional restructuring actions that will run through the end of ~~amounts previously recorded within AOCI is included~~fiscal year 2025 (the "Plan") in light of the macro conditions and its ongoing efforts to make the Company more efficient. The Plan includes certain restructuring actions including workforce reductions to reduce costs and expenses as well as site consolidations, including the relocation of certain manufacturing facilities, to increase its resiliency and lower its costs. We anticipate incurring approximately $150 million to $200 million of restructuring and other non-recurring costs to reduce the workforce and relocate facilities, among others, in connection with the Plan.

On May 10, 2023, the Company announced that it has commenced a review of strategic alternatives for its Silicon Carbide “SiC” business. The Company expects to consider a range of strategic alternatives including a minority investment in the ~~computation~~SiC business by a strategic or financial partner, joint venture, and/or a sale of the ~~net periodic pension costs (See Note 14. Post-Retirement Benefits)~~

SiC business.

Gross margin for the ~~six~~nine months ended ~~December~~March 31, ~~2017 was $215.4~~2023 increased to $1,275 million, or ~~39.7%~~32% of total revenues, compared to ~~$181.8~~$940 million, or ~~40.1%~~39% of total revenues, for the same period last fiscal year, and decreased as a percent of revenue year-over-year by 650 basis points. The decrease as a percent of revenue for the nine months ended March 31, 2023 was driven by $158 million of additional expense related to the preliminary fair value adjustment on acquired inventory from the acquisition of Legacy Coherent (“Merger”), as well as $64 million of incremental amortization expense related to technology acquired as a result of the Merger. Gross margins excluding the fair value adjustment on acquired inventory and incremental amortization decreased 82 basis points for the nine months ended March 31, 2023 compared to the prior year period.

Revenues and operating income for the Company’s reportable segments are discussed below. Operating income differs from net earnings 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 10.~~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, which is incorporated herein by reference.

~~II- VI Laser~~ Effective July 1, 2022, the Company is reporting its financial results in the following three designated segments: (i) Materials, (ii) Networking, and (iii) Lasers. Financial results in prior years had been reported in the following two segments: (i) Compound Semiconductors, and (ii) Photonic Solutions. The Materials segment represents the former Compound Semiconductors segment and the Networking segment represents the former Photonic Solutions segment. The Lasers segment represents Legacy Coherent. In addition, prior year numbers were recast to reflect the transfer of two entities between the Networking and Materials segments.

Operating income for the three months ended ~~December~~March 31, ~~2017 for II-VI Laser Solutions increased 25%~~2023 decreased 9% to ~~$9.5~~$49 million, compared to ~~$7.6~~operating income of $55 million for the same period last fiscal year. The increase in operating income during the current three months compared to the same period last fiscal year is the result of incremental margin realized on the 35% increase in revenues during this period. Operating income for the ~~six~~nine months ended ~~December~~March 31, ~~2017 decreased 10%~~2023 increased 40% to ~~$12.8~~$230 million, ~~from $14.3~~compared to operating income of $164 million for the same period last fiscal year. The decrease in operating income ~~during~~for the ~~current six month period is~~three months ended months ended March 31, 2023 was driven by lower sales and the ~~result~~unfavorable impact of foreign exchange rates partially offset by lower variable compensation costs and the ~~incremental~~leveraging of corporate resources across each of our three segments. The increase in operating ~~expenses~~income for the nine months ended March 31, 2023 was driven by strong sales, lower variable compensation costs and the leveraging of ~~the acquisition~~corporate resources across each of II-VI Compound Semiconductor Ltd. Since the acquisition date, II-VI Compound Semiconductor Ltd. has invested approximately $8.0 million as the Company is ramping its investment for developing new technology addressing the consumer electronic market.

~~II-VI Photonics~~our three segments.

Revenues for the three months ended ~~December~~March 31, ~~2017 for II-VI Photonics~~2023 increased ~~10%~~21% to ~~$110.5~~$324 million, compared to ~~$100.9~~revenues of $268 million for the same period last fiscal year. Compared to the three months ended March 31, 2022, Materials contributed an additional $56 million year-over-year, with $76 million growth in the electronics end market for consumer products and electric vehicles as well as in semiconductor equipment. The growth was partially offset by softer revenues in datacom and precision manufacturing markets. Revenues for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 increased ~~12%~~29% to ~~$221.1~~$1,062 million, compared to ~~$196.7~~revenues of $823 million for the same period last fiscal year. The increase in revenues ~~for both~~of $239 million during the ~~three and six month periods~~nine months ended ~~December~~March 31, ~~2017 is~~2023 was primarily related to the ~~result of increased~~increase in demand ~~from customers~~ in the ~~datacenter communications~~electronics end market ~~as well as increased demand~~from innovations in ~~China.~~

sensing products.

Operating income for the three months ended ~~December~~March 31, ~~2017 for II-VI Photonics~~2023 increased 6%10% to ~~$16.9~~$68 million, compared to ~~$15.9~~operating income of $62 million for the same period last fiscal ~~year.~~year, primarily driven by strong sales in electronics markets and lower costs for reliance on corporate resources for some services. The margin percentage was lower than the three months ended March 31, 2022 due to mix and variations in demand across the operations. Operating income for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 increased ~~22%~~36% to ~~$36.4~~$225 million, compared to ~~$29.8~~$165 million ~~for the same periods last fiscal year. The increase in~~of operating income for both the three and six month periods ended December 31, 2017 was primarily due to incremental margin realized on increased revenues as well higher margin product mix, including terrestrial and submarine 980 nm pumps and amplifiers, and new product introductions which typically have higher margin profiles.

~~II-VI Performance Products ($ in millions)~~

Three Months Ended

%

Six Months Ended

%

December 31,

Increase

December 31,

Increase

2017

2016

2017

2016

Revenues

$
61.2

$
49.4

24
%

$
118.8

$
95.8

24
%
Operating income

$
6.1

$
3.6

69
%

$
13.1

$
6.7

96
%

Revenues for the three months ended December 31, 2017 for II-VI Performance Products increased 24% to $61.2 million compared to $49.4 million for the same period last fiscal year. Revenues for the six months ended December 31, 2017 increased 24% to $118.8 million compared to $95.8 million for the same period last fiscal year. The increase in revenues for both the three and six month periods ended December 31, 2017 compared to the same periods last fiscal year was driven by increased demand for the segment’s silicon carbide products addressing RF electronics and high-power voltage switching and power conversion systems for automotive, communications and military markets. In addition, the segment has seen increased demand for materials and components for the semiconductor equipment market.

Operating income for the three months ended December 31, 2017 for II-VI Performance Products increased 69% to $6.1 million, compared to $3.6 million for the same period last fiscal year. Operating income for the six months ended December 31, 2017 increased 96% to $13.1 million compared to $6.7 million for the same period last fiscal year. The increase in operating income for ~~both~~the nine months ended March 31, 2023 was driven by strong sales in electronics markets, partially offset by slower sales in industrial markets. The margin percentage was lower than the nine months ended March 31, 2022 due to mix and variations in demand across the operations.

Revenues for the three months ended March 31, 2023 were $365 million, with 72% of revenues from the industrial end market and ~~six month periods~~28% from the instrumentation end market. Revenues for the nine months ended ~~December~~March 31, ~~2017~~2023 were $1,137 million, with 74% of revenues from the industrial end market and 26% from the instrumentation end market.

Operating loss for the three months ended March 31, 2023 was $50 million. The loss was driven ~~primarily~~ by ~~increased sales volume as well as favorable product mix towards higher margin products.~~

$73 million of amortization expense related to the preliminary fair value of intangible assets acquired, and $13 million of integration costs. Operating loss for the nine months ended March 31, 2023 was $337 million. The loss was driven by $222 million of amortization expense related to the preliminary fair value of intangible assets acquired, $158 million of amortization of the preliminary fair value step-up on acquired inventory, one-time charges of $39 million for transaction fees and financing, $48 million of integration costs, and $18 million of nonrecurring share based compensation.

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

Net cash provided by operating activities was ~~$59.7~~$452 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2023 compared to $276 million of net cash provided by operating activities for the same period last fiscal year. The increase in cash flows provided by operating activities during the nine months ended March 31, 2023 compared to the same period last fiscal year was primarily due to improved management of working capital accounts.

Net cash used by investing activities was $5.8 billion for the nine months ended March 31, 2023, compared to net cash used of $202 million for the same period last fiscal year. In the three months ended September 30, 2022, $5.5 billion was used to fund the Merger. Cash used to fund capital expenditures increased by $147 million year-over-year, to continue to increase capacity to meet the growing demand for the Company’s product portfolio.

Net cash provided by financing activities was $3.7 billion for the nine months ended March 31, 2023, compared to net cash provided by ~~operating~~financing activities of ~~$58.7~~$891 million for the same period last fiscal year. Cash ~~flow from operations were relatively consistent between periods despite the significant revenue increase during~~inflow for the current ~~six month~~year-to-date period was from borrowings under the New Term Facilities, defined below, as well the net proceeds from the issuance of Coherent's Series B-2 Convertible Preferred Stock. Financing outflows included payments to settle the Company's existing senior credit facilities.

On July 1, 2022, the amounts outstanding under the Company's prior senior credit facilities were repaid in full using proceeds from the New Term Facilities (defined below).

On July 1, 2022, Coherent entered into a Credit Agreement by and among the Company, ~~is continuing to make significant investments in its new technology platforms to address anticipated future demands.~~

~~Net cash used in investing activities:~~

~~Net cash used in investing activities was $209.9 million~~the lenders, and other parties thereto, and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, which provides for ~~the six months ended December 31, 2017, compared to net cash used~~senior secured financing of ~~$58.2 million for the same period last fiscal year. The net cash used in investing activities during the six months ended December 31, 2017 included $77.6 million~~$4.0 billion, consisting of ~~cash paid for investments in capital expenditures, $81.0 million of cash paid for the acquisition of II-VI Compound Semiconductor Ltd. and $51.5 million for~~ a ~~93.8% equity investment in a U.S. based technology company. Net cash used of $58.2 million for the prior fiscal year was mainly investments in capital expenditures.~~

~~Net cash provided by financing activities:~~

Net cash provided by financing activities was $126.2 million for the six months ended December 31, 2017, compared to net cash provided by financing activities of $33.6 million for the same period last fiscal year. During the current fiscal year, the Company completed its offering and sale of $345 millionterm loan A credit facility (the “Term A Facility”), with an aggregate principal amount of ~~convertible notes. In addition, the Company borrowed $100~~$850 million, ~~on its revolving~~a term loan B credit facility ~~to fund its investments in capital expenditures~~(the “Term B Facility” and, ~~its investments in technology platforms. The net proceeds from~~together with the ~~convertible debt offering was used to repay $252 million on~~Term A Facility, the revolver, $10 million on the term loan, and $10.1 million of debt issuance costs and to repurchase $49.9 million of Common Stock. The Company also realized $6.8 million of proceeds from the exercise of stock options offset by $3.6 million on payments in satisfaction of employees’ minimum tax obligations.

~~0.25% Convertible Senior Notes~~

~~On August 24, 2017, the Company entered into a purchase agreement~~“Term Facilities”), with ~~Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several initial purchasers named therein (collectively, the “Initial Purchasers”), to issue and sell $300 million~~an aggregate principal amount of our 0.25% convertible senior notes due 2022 (the "Notes") in a private placement to qualified institutional buyers within the meaning of Rule 144A under the Securities Act of 1933, as amended. In addition, we granted the Initial Purchasers a 30-day option to purchase up to an additional $45$2,800 million, ~~aggregate principal amount of the Notes (the “Over-Allotment Option”).~~

On August 29, 2017, the Initial Purchasers exercised their Over-Allotment Option to purchase the entire $45 million in aggregate principal amount of additional Notes. The Notes mature on September 1, 2022, unless earlier repurchased by the Company or converted by holders in accordance with the terms of the Notes. Interest is payable semi-annually in arrears on March 1 and ~~September 1 of each year, beginning on March 1, 2018.~~

The sale of the Notes to the Initial Purchasers settled on August 29, 2017, and resulted in approximately $336 million in net proceeds to the Company after deducting the initial purchasers’ discount and the estimated offering expenses. The net proceeds from the offering and sale of the Notes were used, in part, to repurchase approximately $49.9 million of our Common Stock. The Company used the remaining net proceeds to repay $252 million on its revolving credit facility and to pay debt issuance costs of $10.1 million.

The Notes are governed by an Indenture between the Company, as issuer, and U.S. Bank, National Association, as trustee. The Notes will be our senior unsecured obligations and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of our indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries. In the event of our bankruptcy, liquidation, reorganization or other winding up, our assets that secure secured debt will be available to pay obligations on the Notes only after all indebtedness under such secured debt has been repaid in full from such assets. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of our Common Stock or a combination of cash and shares of our Common Stock, at the Company’s election.

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 Notes using the effective interest method with an effective interest rate of 4.5% per annum.

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 Notes, which is equivalent to an initial conversion price of $47.06 per share of Common Stock. Throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events.

Holders of the Notes will not receive any cash payment representing accrued and unpaid interest upon conversion of a note. Accrued but unpaid interest will be deemed to be paid in full upon conversion rather than cancelled, extinguished or forfeited.

~~Prior to the close of business on the business day immediately preceding June 1, 2022, the Notes will be convertible only upon satisfaction of at least one of the conditions as follows:~~

a)

During any fiscal quarter beginning after the fiscal quarter ended on December 31, 2017 (and only during such fiscal quarter), if the last reported sale price of our Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

b)

During the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Common Stock and the conversion rate on each such trading day;

c)

~~Upon the occurrence of specified corporate events~~

On or after June 1, 2022 until the close of business on the business day immediately preceding the maturity date, holders may convert all or any portion of their Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

~~As of~~ ~~December 31, 2017~~, the Notes are not yet convertible. In accounting for the transaction costs related to the Note issuance, the Company allocated the total amount of offering costs incurred to the debt and equity components based on their relative values. Offering costs attributable to the debt component, totaling $8.4 million, are being amortized as non-cash interest expense over the term of the Notes, and offering costs attributable to the equity component, totaling $1.7 million, were recorded within stockholders' equity.

~~The following table sets forth total interest expense recognized related to the Notes for the three months ended~~ ~~December 31, 2017~~:

Three Months Ended December 31, 2017

Six Months Ended December 31, 2017

0.25% contractual coupon

$
219

$
297

Amortization of debt discount and debt issuance costs including
initial purchaser discount

2,935

4,043

Interest expense

$
3,154

$
4,340

~~Amended Credit Facility~~

~~On July 28, 2016, the Company amended and restated its existing credit agreement. The Third Amended and Restated Credit Agreement (the “Amended Credit Facility”) provides for~~ a revolving credit facility ~~of $325 million, as well as a $100 million term loan. The term loan is being repaid in consecutive quarterly principal payments on the first business day of each January, April, July~~(the “Revolving Credit Facility” and, ~~October,~~together with the ~~first payment having commenced on October 1, 2016, as follows: (i) twenty consecutive quarterly installments of $5 million and (ii) a final installment of all remaining principal due and payable on~~Term Facilities, the ~~maturity date of July 27, 2021. Amounts borrowed under the revolving credit facility are due and payable on the maturity date. The Amended~~“Senior Credit Facility is unsecured, but is guaranteed by each existing and subsequently acquired or organized wholly-owned domestic subsidiary of the Company. The Company has the option to request an increase to the size of the revolving credit facilityFacilities”), in an aggregate ~~additional~~available amount ~~not~~of $350 million, including a letter of credit sub-facility of up to ~~exceed $100~~$50 million. ~~The Amended~~On March 31, 2023, Coherent entered into Amendment No. 1 to the Credit Agreement, which replaced the adjusted LIBOR-based rate of interest therein with an adjusted SOFR-based rate of interest. As amended, the Term A Facility and the Revolving Credit Facility ~~has~~each bear interest at an adjusted SOFR rate subject to a ~~five-year term through July 27, 2021 and has an interest rate~~0.10% floor plus a range of either a Base Rate Option or a Euro-Rate Option, plus an Applicable Margin, as defined in the agreement governing the Amended Credit Facility. If the Base Rate option is selected for a borrowing, the Applicable Margin is 0.00%1.75% to ~~1.25% and if the Euro-Rate Option is selected for a borrowing, the Applicable Margin is 1.00% to 2.25%. The Applicable Margin is~~2.50%, based on the ~~ratio of~~Company’s total net leverage ratio. The Term A Facility and the ~~Company’s consolidated indebtedness to consolidated EBITDA. Additionally, the~~Revolving Credit Facility borrowings bear interest at adjusted SOFR plus 1.75% as of March 31, 2023. As amended, the Term B Facility bears interest at an adjusted SOFR rate (subject to a 0.50% floor) plus 2.75%. In relation to the Term Facilities, the Company incurred expense of $69 million and $183 million for the three and nine months ended March 31, 2023, respectively, which is ~~subject to certain covenants,~~included in interest expense in the Consolidated Statements of Earnings (Loss).

During the nine months ended March 31, 2023, the Company made payments of $145 million for the Term Facilities, including ~~those relating to minimum interest coverage and maximum leverage ratios.~~ voluntary prepayments of $110 million.

As of ~~December~~March 31, ~~2017, the Company was in compliance with all financial covenants under its Amended Credit Facility.~~

~~Yen Loan~~

The Company’s Yen denominated line of credit is a 500 million Yen (approximately $4.4 million) facility. The Yen line of credit matures in August 2020. The interest rate is equal to LIBOR, as defined in the loan agreement, plus 0.625% to 1.75%. At December 31, 2017 and June 30, 2017,2023, the Company had 300 million Yen borrowed. Additionally, the facility is subject to certain covenants, including those relating to minimum interest coverage and maximum leverage ratios. As of December 31, 2017, the Company was in compliance with all financial covenants under its Yen facility.

~~Aggregate Availability~~

~~The Company had aggregate availability of $225.6 million and $73.5 million under its lines of credit as of December 31, 2017 and June 30, 2017, respectively. The amounts available~~no borrowings outstanding under the Company’s lines of credit are reduced by outstanding letters of credit. As of December 31, 2017 and June 30, 2017, total outstanding letters of credit supported by these credit facilities were $1.2 million for both periods.

~~Weighted Average Interest Rate~~

~~The weighted average interest rate of total borrowings was 1.4% and 2.1% for~~Revolving Credit Facility. In the three months ended December 31, ~~2017 and 2016, respectively.~~

~~Share Repurchase Programs~~

~~In August 2017, in conjunction with~~2022, we repaid the ~~Company’s offering and sale of the Notes, the Company’s Board of Directors authorized the Company to purchase up to $50~~$65 million ~~of its Common Stock with a portion of the net proceeds received from the offering and sale of the Notes. The shares~~ that were purchased by the Company pursuant to this authorization were retained as treasury stock and are available for general corporate purposes. The Company purchased 1,414,900 shares of its Common Stock for approximately $49.9 million pursuant to this authorization.

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 purchasedwas borrowed 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. The Company did not repurchase shares pursuant to this Program during the sixthree months ended ~~December 31, 2017. Through December 31, 2017, the Company has purchased 1,316,587 shares of its Common Stock pursuant to the Program for approximately $19.0 million.~~

~~The Company’s~~September 30, 2022.

Our cash position, borrowing capacity and debt obligations ~~for the periods indicated were~~are as follows (in millions):

On July 1, 2022, the Company utilized $2.1 billion of cash, cash equivalents, and restricted cash as part of the funding required to complete the Coherent acquisition. The Company believes ~~that~~existing cash, cash flow from operations, ~~existing cash reserves~~ and available borrowing capacity from its Senior Credit Facilities will ~~allow the Company~~be sufficient to fund its needs for working capital, ~~needs,~~ capital expenditures, repayment of scheduled long-term borrowings and ~~capital~~ lease obligations, investments in internal research and development, ~~share repurchases~~ and internal and external growth objectives ~~for~~at least through the next twelve months.

At March 31, 2023, we had $21 million of restricted cash.

The ~~recently enacted “Tax Cuts~~Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and ~~Jobs Act” created significant changes~~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 ~~taxation~~Securities Exchange Act of ~~undistributed foreign earnings~~1934 is recorded, processed, summarized and ~~could change~~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.

In July 2022, we completed the acquisition of Legacy Coherent. We are in the process of integrating Legacy Coherent into our ~~future intentions regarding repatriation~~systems and control environment as of ~~earnings. The Company is currently evaluating~~March 31, 2023. We believe that we have taken the ~~full~~necessary steps to monitor and maintain appropriate internal control over financial reporting during this integration. Other than the impact of ~~the new tax laws and will update future cash repatriation intentions as the Company further understands the new law.~~

~~Contractual Obligations~~

~~The following table presents information about~~this business acquisition, no changes in the Company’s ~~contractual obligations and commitments as of December 31, 2017.~~

~~Tabular-Disclosure of Contractual Obligations~~

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

$
526,500

$
20,000

$
46,500

$
460,000

$
-

Interest payments⁽¹⁾

33,119

7,522

13,215

5,994

6,388

Capital lease obligations

23,962

1,103

2,424

2,749

17,686

Operating lease obligations⁽²⁾

92,399

16,035

26,887

15,929

33,548

Purchase obligations^{(3) (4)}

29,550

22,093

7,450

7

-

Other long-term liabilities reflected on the Registrant's
balance sheet under GAAP

-

-

-

-

-

Total

$
705,530

$
66,753

$
96,476

$
484,679

$
57,622

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.

~~(1)~~

Interest payments represent both variable and fixed rate interest obligations based on the interest rate in place at December 31, 2017 relating to the Amended Credit Facility, the 0.25% convertible notes and interest relating to the Company’s capital lease obligation.

~~(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 amountsLegacy Coherent’s operations are ~~primarily composed of open purchase order commitments to vendors for the purchase of supplies and materials.~~

~~(4)~~

~~Includes cash earnout opportunities based upon II-VI EpiWorks and IPI for the achievement of certain agreed upon financial and operational targets.~~

The Company’s gross unrecognized income tax benefit at December 31, 2017 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. However, at this time, the Company does not expect a significant payment related to these obligations within the next year.

~~Pension obligations are not~~ included in the table above. The Company expects the remaining defined benefit plan employer contributions for fiscal year 2018 to be $1.8 million. Estimated funding obligations are determined by asset performance, workforce and retiree demographics, tax and employment laws and other actuarial assumptions which may change the annual funding obligations.

~~Item 3~~.

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

~~MARKET RISKS~~

~~The Company is exposed to market risks arising from adverse changes~~Company’s unaudited condensed consolidated financial statements in ~~foreign currency exchange rates and interest rates. In the normal course~~Part I, Item 1 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~~this Quarterly Report on ~~its exposure in relation to the Japanese Yen, Chinese Renminbi, and the Euro. 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 $14.7 million and $12.7 million at December 31, 2017 and June 30, 2017, respectively.

~~A 10% change in the Yen to U.S. dollar exchange rate would have changed revenues in the range from a decrease of $2.0 million to an increase of $2.4 million~~Form 10-Q for the ~~six months ended December~~entire period from July 1, 2022 to March 31, ~~2017.~~

~~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 has recorded $1.7 million of unrealized foreign currency gains in the Condensed Consolidated Statement of Earnings related to these contracts for the six months ended December 31, 2017.

~~Euro~~

The Company enters into month-to-month forward contracts at varying amounts maturing monthly to limit exposure to the Euro. The Company has recorded $0.6 million of unrealized foreign currency gains in the Condensed Consolidated Statement of Earnings related to these contracts for the six months ended December 31, 2017.

~~The Company has short-term intercompany notes that are denominated in U.S. dollars with one~~2023 and represented 60% of the Company’s ~~European subsidiaries. A 10% change in the Euro to U.S. dollar exchange rate would have changed net earnings in the range from a decrease~~consolidated total assets as of ~~$0.8 million to an increase of $1.0 million for the six months ended December~~March 31, ~~2017.~~

~~The Company monitors its positions~~2023 and ~~the credit ratings~~29% of the parties to these contracts. While the Company may be exposed to potential losses due to risk in the event of non-performance by the counterparties to these financial instruments, it does not currently anticipate such losses.

Assets and liabilities of foreign operations are translated into U.S. dollars using the period-end exchange rate, while income and expenses are translated using the average exchange rates for the reporting period. Translation adjustments are recorded as accumulated other comprehensive income within shareholders’ equity.

~~Interest Rate Risks~~

~~As of December 31, 2017, the~~ Company’s consolidated total outstanding borrowings of $526.5 million consisted of $177.7 million of variable rate debt borrowings from a line of credit of $2.7 million denominated in Japanese Yen, borrowings under a term loan of $75.0 million under the Company’s Credit Facility denominated in U.S. dollars and a line of credit borrowing of $100.0 million under the Company’s Credit Facility denominated in U.S. dollars. As such, the Company is exposed to market risks arising from changes in interest rates. An increase in the interest rate of these borrowings of 1% would have resulted in additional interest expense of $0.4 and $1.1 millionrevenues for the three ~~and six~~ months ended ~~December~~March 31, ~~2017.~~

2023.

The Company is exposed to market risks arising from adverse changes in foreign currency exchange rates. In the normal course of ~~Disclosure Controls~~business, the Company uses a variety of techniques and ~~Procedures~~

~~The Company’s~~derivative financial instruments as part of its overall risk management ~~evaluated, with~~strategy, which is primarily focused on its exposure in relation to the ~~participation~~Chinese Renminbi, Euro, Swiss Franc, Japanese Yen, Singapore Dollar and Korean Won. No significant changes have occurred in the techniques and instruments used.

On February 23, 2022, the Company entered into an interest rate cap (the "Cap"), with an effective date of July 1, 2023. On March 20, 2023, the ~~Securities~~Company amended the swap contract. As the Cap is not effective until July 2023, there is no impact on variable rate borrowings from the Cap for the three and ~~Exchange Commission. It should be noted that the design~~nine months ended March 31, 2023.

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.

~~PENNSYLVANIA~~	~~25-1214948~~
PENNSYLVANIA				25-1214948
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

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


Large accelerated filer			☒		Accelerated filer		☐

Non-accelerated filer	☐			Smaller reporting company		☐

		Emerging growth company	☐


	March 31, 2023		June 30, 2022
Assets
Current Assets
Cash, cash equivalents, and restricted cash	$	901,028	$	2,582,371
Accounts receivable - less allowance for doubtful accounts of $8,344 at March 31, 2023 and $4,206 at June 30, 2022	924,369		700,331
Inventories	1,394,103		902,559
Prepaid and refundable income taxes	26,237		19,585
Prepaid and other current assets	160,907		100,346
Total Current Assets	3,406,644		4,305,192
Property, plant & equipment, net	1,910,561		1,363,195
Goodwill	4,505,137		1,285,759
Other intangible assets, net	3,954,198		635,404

Deferred income taxes	34,169		31,714
Other assets	306,923		223,582
Total Assets	$	14,117,632	$	7,844,846
Liabilities, Mezzanine Equity and Shareholders' Equity
Current Liabilities
Current portion of long-term debt	$	74,910	$	403,212
Accounts payable	428,860		434,917
Accrued compensation and benefits	177,811		172,109
Operating lease current liabilities	40,309		27,574
Accrued income taxes payable	74,156		29,317
Other accrued liabilities	311,410		199,830
Total Current Liabilities	1,107,456		1,266,959
Long-term debt	4,349,923		1,897,214
Deferred income taxes	847,212		77,259
Operating lease liabilities	148,010		110,214
Other liabilities	213,953		109,922
Total Liabilities	6,666,554		3,461,568
Mezzanine Equity
Series B redeemable convertible preferred stock, no par value, 5% cumulative; issued - 215,000 and 75,000 shares at March 31, 2023 and June 30, 2022, respectively; redemption value - $2,281,448 and $798,181, respectively	2,211,642		766,803
Shareholders' Equity
Series A preferred stock, no par value, 6% cumulative; issued - 2,300,000 shares at March 31, 2023 and June 30, 2022	445,319		445,319
Common stock, no par value; authorized - 300,000,000 shares; issued - 154,369,985 shares at March 31, 2023; 120,923,171 shares at June 30, 2022	3,755,410		2,064,552
Accumulated other comprehensive income (loss)	170,454		(2,167)
Retained earnings	1,159,322		1,348,125
	5,530,505		3,855,829
Treasury stock, at cost; 15,098,467 shares at March 31, 2023 and 13,972,758 shares at June 30, 2022	(291,069)		(239,354)
Total Shareholders' Equity	5,239,436		3,616,475
Total Liabilities, Mezzanine Equity and Shareholders' Equity	$	14,117,632	$	7,844,846

	December 31,			June 30,
	2017			2017
Assets
Current Assets
Cash and cash equivalents	$	254,456		$	271,888
Accounts receivable - less allowance for doubtful accounts of $1,231 at December 31, 2017 and $1,314 at June 30, 2017		196,045			193,379
Inventories		235,468			203,695
Prepaid and refundable income taxes		7,055			6,732
Prepaid and other current assets		30,391			26,602
Total Current Assets		723,415			702,296
Property, plant & equipment, net		481,014			367,728
Goodwill		272,209			250,342
Other intangible assets, net		132,328			133,957
Investments		67,068			11,727
Deferred income taxes		3,427			3,023
Other assets		8,413			8,224
Total Assets	$	1,687,874		$	1,477,297

Liabilities and Shareholders' Equity
Current Liabilities
Current portion of long-term debt	$	20,000		$	20,000
Accounts payable		71,236			65,540
Accrued compensation and benefits		49,776			58,178
Accrued income taxes payable		7,278			12,178
Other accrued liabilities		31,893			29,056
Total Current Liabilities		180,183			184,952
Long-term debt		442,768			322,022
Capital lease obligation		22,861			23,415
Deferred income taxes		37,158			15,345
Other liabilities		41,003			31,000
Total Liabilities		723,973			576,734
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 - 74,816,999 shares at December 31, 2017; 74,081,451 shares at June 30, 2017		340,548			269,638
Accumulated other comprehensive income (loss)		1,522			(13,778	)
Retained earnings		778,799			748,062
		1,120,869			1,003,922
Treasury stock, at cost - 12,453,513 shares at December 31, 2017 and 10,940,062 shares at June 30, 2017		(156,968	)		(103,359	)
Total Shareholders' Equity		963,901			900,563
Total Liabilities and Shareholders' Equity	$	1,687,874		$	1,477,297

	Three Months Ended
	December 31,
	2017			2016

Revenues	$	281,470		$	231,822

Costs, Expenses and Other Expense (Income)
Cost of goods sold		172,037			137,559
Internal research and development		27,764			23,632
Selling, general and administrative		49,122			43,495
Interest expense		4,644			1,365
Other expense (income), net		(1,965	)		(6,045	)
Total Costs, Expenses & Other Expense (Income)		251,602			200,006

Earnings Before Income Taxes		29,868			31,816

Income Taxes		20,272			7,913

Net Earnings	$	9,596		$	23,903

Basic Earnings Per Share	$	0.15		$	0.38

Diluted Earnings Per Share	$	0.15		$	0.37

☒
☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

☐
☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	COHR	New York Stock Exchange
Series A Mandatory Convertible Preferred Stock, no par value	IIVI	New York Stock Exchange

	Six Months Ended
	December 31,
	2017			2016
Revenues	$	542,973		$	453,342

Costs, Expenses and Other Expense (Income)
Cost of goods sold		327,565			271,477
Internal research and development		53,338			45,464
Selling, general and administrative		99,746			85,574
Interest expense		8,289			2,611
Other expense (income), net		(2,732	)		(7,447	)
Total Costs, Expenses & Other Expense (Income)		486,206			397,679

Earnings Before Income Taxes		56,767			55,663

Income Taxes		26,030			15,466

Net Earnings	$	30,737		$	40,197

Basic Earnings Per Share	$	0.49		$	0.65

Diluted Earnings Per Share	$	0.47		$	0.63

						Accumulated
						Other
	Common Stock					Comprehensive			Retained		Treasury Stock
	Shares		Amount			Income (Loss)			Earnings		Shares			Amount			Total
Balance - June 30, 2017		74,081	$	269,638		$	(13,778	)	$	748,062		(10,940	)	$	(103,359	)	$	900,563
Shares issued under share-based compensation plans		736		6,784			-			-		(99	)		(3,608	)		3,176
Shares acquired in satisfaction of minimum tax withholding obligations		-		(274	)		-			-		-			-			(274	)
Net earnings		-		-			-			30,737		-			-			30,737
Purchases of treasury stock		-		-			-			-		(1,415	)		(49,875	)		(49,875	)
Treasury stock under deferred compensation arrangements		-		126			-			-		-			(126	)		-
Foreign currency translation adjustments		-		-			15,182			-		-			-			15,182
Equity portion of convertible debt, net of issuance costs of $1,694		-		56,406			-			-		-			-			56,406
Share-based compensation expense		-		7,868			-			-		-			-			7,868
Amortization of net actuarial gains and losses, net of taxes of $32		-		-			118			-		-			-			118
Balance - December 31, 2017		74,817	$	340,548		$	1,522		$	778,799		(12,454	)	$	(156,968	)	$	963,901


	Common Stock			Preferred Stock			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total		Mezzanine Equity
	Shares	Amount		Shares	Amount						Shares	Amount				Preferred Shares	Amount
Balance - June 30, 2022	120,923	$	2,064,552	2,300	$	445,319	$	(2,167)	$	1,348,125	(13,973)	$	(239,354)	$	3,616,475	75	$	766,803
Share-based and deferred compensation activities	2,398	61,431		—	—		—		—		(830)	(40,860)		20,571		—	—
Coherent Acquisition	22,588	1,207,591		—	—		—		—		—	—		1,207,591		—	—
Convertible debt conversions	7,181	337,940		—	—		—		—		—	—		337,940		—	—
Net Loss	—	—		—	—		—		(38,698)		—	—		(38,698)		—	—
Foreign currency translation adjustments	—	—		—	—		(132,371)		—		—	—		(132,371)		—	—
Change in fair value of interest rate swap, net of taxes of $3,452	—	—		—	—		12,604		—		—	—		12,604		—	—
Change in fair value of interest rate cap, net of taxes of $5,440	—	—		—	—		20,464		—		—	—		20,464		—	—
Issuance of Series B shares	—	—		—	—		—		—		—	—		—		140	1,358,000
Pension adjustment, net of taxes of $0	—	—		—	—		39		—		—	—		39		—	—
Dividends	—	—		—	—		—		(35,577)		—	—		(35,577)		—	28,677
Balance - September 30, 2022	153,090	$	3,671,514	2,300	$	445,319	$	(101,431)	$	1,273,850	(14,803)	$	(280,214)	$	5,009,038	215	$	2,153,480
Share-based and deferred compensation activities	779	32,745		—	—		—		—		(266)	(9,551)		23,194		—	—

Net Loss	—	—		—	—		—		(45,072)		—	—		(45,072)		—	—
Foreign currency translation adjustments	—	—		—	—		232,035		—		—	—		232,035		—	—
Change in fair value of interest rate swap, net of taxes of $(92)	—	—		—	—		(334)		—		—	—		(334)		—	—
Change in fair value of interest rate cap, net of taxes of $(1,208)	—	—		—	—		(4,543)		—		—	—		(4,543)		—	—
Pension adjustment, net of taxes of $0	—	—		—	—		403		—		—	—		403		—	—
Dividends	—	—		—	—		—		(35,931)		—	—		(35,931)		—	28,992
Balance - December 31, 2022	153,869	$	3,704,259	2,300	$	445,319	$	126,130	$	1,192,847	(15,069)	$	(289,765)	$	5,178,790	215	$	2,182,471
Share-based and deferred compensation activities	501	51,151		—	—		—		—		(29)	(1,304)		49,847		—	—

Net Earnings	—	—		—	—		—		2,546		—	—		2,546		—	—
Foreign currency translation adjustments	—	—		—	—		58,141		—		—	—		58,141		—	—
Change in fair value of interest rate swap, net of taxes of $(1,712)	—	—		—	—		(6,251)		—		—	—		(6,251)		—	—
Change in fair value of interest rate cap, net of taxes of $(2,200)	—	—		—	—		(8,275)		—		—	—		(8,275)		—	—
Pension adjustment, net of taxes of $0	—	—		—	—		709		—		—	—		709		—	—
Dividends	—	—		—	—		—		(36,071)		—	—		(36,071)		—	29,171
Balance - March 31, 2023	154,370	$	3,755,410	2,300	$	445,319	$	170,454	$	1,159,322	(15,098)	$	(291,069)	$	5,239,436	215	$	2,211,642


	Shares	Per Share	Total Consideration
Cash paid for merger consideration	—	—	$	5,460,808
Shares of COHR common stock issued to Legacy Coherent stockholders	22,587,885	$49.83	1,125,554
Converted Legacy Coherent RSUs attributable to pre-combination service	—	—	82,037
Payment of Legacy Coherent debt	—	—	364,544
Payment of Legacy Coherent transaction expenses	—	—	62,840
			$	7,095,783



	Preliminary Allocation as of 7/1/2022 as adjusted through 3/31/23
	Previously Reported September 30, 2022		Measurement Period Adjustments (i)		As Adjusted (preliminary)
Assets
Current Assets
Cash, cash equivalents, and restricted cash	$	393,324	$	—	$	393,324
Accounts receivable	270,928		—		270,928
Inventories (ii)	497,345		66,540		563,885
Prepaid and refundable income taxes (iii)	8,869		(1,592)		7,277
Prepaid and other current assets	41,467		—		41,467
Total Current Assets	1,211,933		64,948		1,276,881
Property, plant & equipment, net (iv)	424,228		16,704		440,932
Deferred income taxes (iii)	1,115		(793)		322
Other assets	102,726		—		102,726
Other intangible assets, net (v)	2,425,454		1,079,546		3,505,000
Goodwill	4,005,727		(862,497)		3,143,230
Total Assets	$	8,171,183	$	297,908	$	8,469,091
Liabilities
Current Liabilities
Current portion of long-term debt	$	4,504	$	—	$	4,504
Accounts payable	116,754		—		116,754
Accrued compensation and benefits	60,596		—		60,596
Operating lease current liabilities	13,002		—		13,002
Accrued income taxes payable	16,936		—		16,936
Other accrued liabilities (vi)	136,042		702		136,744
Total Current Liabilities	347,834		702		348,536
Long-term debt	22,991		—		22,991
Deferred income taxes (iii)	563,824		292,168		855,992
Operating lease liabilities	43,313		—		43,313
Other liabilities (vi)	97,438		5,038		102,476
Total Liabilities	$	1,075,400	$	297,908	$	1,373,308

Preliminary aggregate acquisition consideration	$	7,095,783	$	—	$	7,095,783


	Preliminary Fair Value		Estimated Useful Life
Trade names and trademarks	$	430,000	N/A
Customer relationships	1,830,000		15 years
Developed technology	1,157,500		13.5 years
Backlog	87,500		1.0 year
Intangible assets acquired	$	3,505,000


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Revenue	$	1,240,194	$	1,197,928
Net Earnings	36,294		6,482

		~~Page No.~~


	Three Months Ended March 31, 2023								Nine Months Ended March 31, 2023
	Networking		Materials		Lasers		Total		Networking		Materials		Lasers		Total
Industrial	$	17,570	$	156,846	$	263,789	$	438,205	$	52,189	$	450,383	$	846,881	$	1,349,453
Communications	521,291		17,014		—		538,305		1,664,205		59,553		—		1,723,758
Electronics	2,849		136,229		—		139,078		9,674		509,803		—		519,477
Instrumentation	9,389		13,680		101,537		124,606		30,259		42,070		290,032		362,361
Total Revenues	$	551,099	$	323,769	$	365,326	$	1,240,194	$	1,756,327	$	1,061,809	$	1,136,913	$	3,955,049


	Three Months Ended March 31, 2022						Nine Months Ended March 31, 2022
	Networking		Materials		Total		Networking		Materials		Total
Industrial	$	21,325	$	164,346	$	185,671	$	63,050	$	486,094	$	549,144
Communications	527,821		25,999		553,820		1,510,092		69,436		1,579,528
Electronics	2,752		60,240		62,992		9,080		220,683		229,763
Instrumentation	7,662		17,579		25,241		24,892		46,327		71,219
Total Revenues	$	559,560	$	268,164	$	827,724	$	1,607,114	$	822,540	$	2,429,654

~~Net cash paid at acquisition~~	$	~~40,098~~
~~Working capital adjustment~~		~~837~~
~~Fair value of cash earnout arrangement~~		~~2,215~~
~~Purchase price~~	$	~~43,150~~

Assets
Accounts receivable	$	2,083
Inventories		3,968
Prepaid and other assets	322
Property, plant & equipment		11,235
Intangible assets		23,554
Goodwill		17,503
Total assets acquired	$	58,665

Liabilities
Accounts payable	$	847
Other accrued liabilities		1,032
Long-term debt assumed		3,834
Deferred tax liabilities		9,802
Total liabilities assumed		15,515
Net assets acquired	$	43,150


	March 31, 2023		June 30, 2022
Raw materials	$	490,479	$	318,758
Work in progress	621,295		408,405
Finished goods	282,329		175,396
	$	1,394,103	$	902,559


	March 31, 2023		June 30, 2022
Land and improvements	$	74,908	$	19,368
Buildings and improvements	686,293		415,530
Machinery and equipment	2,030,892		1,651,762
Construction in progress	311,051		271,605
Finance lease right-of-use asset	24,999		25,000
	3,128,143		2,383,265
Less accumulated depreciation	(1,217,582)		(1,020,070)
	$	1,910,561	$	1,363,195

	Six Months Ended December 31, 2017
	II-VI Laser		II-VI		II-VI Performance					Nine Months Ended March 31, 2023
	Solutions		Photonics		Products		Total			Networking		Materials		Lasers		Total
Balance-beginning of period	$	84,180	$	113,272	$	52,890	$	250,342	Balance-beginning of period	$	1,048,743	$	237,016	$	—	$	1,285,759
Transfer between segments(1)									Transfer between segments(1)	(35,466)		35,466		—		—
Goodwill acquired		19,670		-		-		19,670	Goodwill acquired	—		—		3,143,230		3,143,230
Goodwill adjustment for prior year acquisition - IPI		-		396		-		396
Foreign currency translation		691		1,110		-		1,801	Foreign currency translation	(1,271)		859		76,560		76,148
Balance-end of period	$	104,541	$	114,778	$	52,890	$	272,209	Balance-end of period	$	1,012,006	$	273,341	$	3,219,790	$	4,505,137

	December 31, 2017							June 30, 2017
	Gross					Net		Gross					Net
	Carrying		Accumulated			Book		Carrying		Accumulated			Book
	Amount		Amortization			Value		Amount		Amortization			Value
Technology and Patents	$	66,947	$	(30,490	)	$	36,457	$	65,438	$	(27,313	)	$	38,125
Trademarks		15,923		(1,406	)		14,517		15,806		(1,340	)		14,466
Customer Lists		127,844		(46,521	)		81,323		123,058		(41,740	)		81,318
Other		1,577		(1,546	)		31		1,571		(1,523	)		48
Total	$	212,291	$	(79,963	)	$	132,328	$	205,873	$	(71,916	)	$	133,957


	March 31, 2023						June 30, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Technology	$	1,669,863	$	(238,908)	$	1,430,955	$	473,845	$	(144,409)	$	329,436
Trade Names	452,461		(8,073)		444,388		22,536		(7,454)		15,082
Customer Lists	2,352,969		(296,873)		2,056,096		464,880		(173,994)		290,886
Backlog and Other	90,072		(67,313)		22,759		1,563		(1,563)		—
Total	$	4,565,365	$	(611,167)	$	3,954,198	$	962,824	$	(327,420)	$	635,404

Fiscal Year Ending June 30,	Amount
Remaining 2018	$	7,000
2019		14,000
2020		13,000
2021		12,300
2022		10,900


	March 31, 2023		June 30, 2022
New Term A Facility, interest at adjusted SOFR, as defined, plus 1.750%	$	828,750	$	—

Debt issuance costs, New Term A Facility and New Revolving Credit Facility	(19,290)		—
New Term B Facility, interest at adjusted SOFR, as defined, plus 2.750%	2,676,000		—
Debt issuance costs, New Term B Facility	(68,773)		—
1.30% Term loan due 2024	66		—
1.00% State of Connecticut term loan due 2023	2,040		—
Facility construction loan in Germany due 2030	23,126		—
Existing Term A Facility, interest at LIBOR, as defined, plus 1.375%	—		995,363

Debt issuance costs, Existing Term A Facility and Existing Revolving Credit Facility	—		(18,396)


5.000% Senior Notes	990,000		990,000
Debt issuance costs and discount, Senior Notes	(7,086)		(7,703)
0.25% Convertible Senior Notes	—		341,501
Debt issuance costs and discount, 0.25% Convertible Senior Notes	—		(339)

Total debt	4,424,833		2,300,426
Current portion of long-term debt	(74,910)		(403,212)
Long-term debt, less current portion	$	4,349,923	$	1,897,214

	Three Months Ended December 31, 2017		Six Months Ended December 31, 2017
0.25% contractual coupon	$	219	$	297
Amortization of debt discount and debt issuance costs including initial purchaser discount		2,935		4,043
Interest expense	$	3,154	$	4,340

					U.S.
					Dollar
	Term		Yen Line		Line of		Note		Convertible
Period	Loan		of Credit		Credit		Payable		Notes		Total
Year 1	$	20,000	$	-	$	-	$	-	$	-	$	20,000
Year 2		20,000		-		-		3,834		-		23,834
Year 3		20,000		2,666		-		-		-		22,666
Year 4		15,000		-		100,000		-		-		115,000
Year 5		-		-		-		-		345,000		345,000
Total	$	75,000	$	2,666	$	100,000	$	3,834	$	345,000	$	526,500

	Three Months Ended December 31, 2016
	II-VI				II-VI
	Laser		II-VI		Performance									Three Months Ended March 31, 2023
	Solutions		Photonics		Products		Eliminations			Total				Networking		Materials		Lasers		Unallocated & Other		Total
Revenues	$	81,483	$	100,906	$	49,433	$	-		$	231,822		Revenues	$	551,099	$	323,769	$	365,326	$	—	$	1,240,194
Inter-segment revenues		8,760		3,161		2,645		(14,566	)		-		Inter-segment revenues	17,759		96,604		317		(114,680)		—
Operating income		7,593		15,901		3,642		-			27,136
Operating income (loss)													Operating income (loss)	49,476		67,826		(49,914)		—		67,388
Interest expense		-		-		-		-			(1,365	)	Interest expense	—		—		—		—		(75,183)
Other income (expense), net		-		-		-		-			6,045		Other income (expense), net	—		—		—		—		3,048
Income taxes		-		-		-		-			(7,913	)
Income tax benefit													Income tax benefit	—		—		—		—		7,293
Net earnings		-		-		-		-			23,903		Net earnings	—		—		—		—		2,546
Depreciation and amortization		5,662		4,976		4,278		-			14,916		Depreciation and amortization	41,369		29,242		90,330		—		160,941
Expenditures for property, plant & equipment		15,737		5,900		6,191		-			27,828		Expenditures for property, plant & equipment	6,441		78,666		12,038		—		97,145
Segment assets													Segment assets	3,435,816		2,275,614		8,406,202		—		14,117,632
Goodwill													Goodwill	1,012,006		273,341		3,219,790		—		4,505,137

	Six Months Ended December 31, 2016
	II-VI				II-VI
	Laser		II-VI		Performance									Three Months Ended March 31, 2022
	Solutions		Photonics		Products		Eliminations			Total				Networking		Materials		Unallocated & Other		Total
Revenues	$	160,773	$	196,725	$	95,844	$	-		$	453,342		Revenues	$	559,560	$	268,164	$	—	$	827,724
Inter-segment revenues		14,700		6,599		4,378		(25,677	)		-		Inter-segment revenues	23,945		59,345		(83,290)		—
Operating income		14,291		29,791		6,745		-			50,827
Operating income (loss)													Operating income (loss)	54,618		61,754		(9,604)		106,768
Interest expense		-		-		-		-			(2,611	)	Interest expense	—		—		—		(43,499)
Other income (expense), net		-		-		-		-			7,447		Other income (expense), net	—		—		—		(241)
Income taxes		-		-		-		-			(15,466	)	Income taxes	—		—		—		(14,027)
Net earnings		-		-		-		-			40,197		Net earnings	—		—		—		49,002
Depreciation and amortization		11,312		9,824		8,662		-			29,798		Depreciation and amortization	44,126		28,691		—		72,817
Expenditures for property, plant & equipment		35,862		12,497		9,463		-			57,822		Expenditures for property, plant & equipment	18,363		75,939		—		94,302



•	~~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.~~


	March 31, 2023				June 30, 2022
	Fair Value		Carrying Value		Fair Value		Carrying Value
Convertible Notes	$	—	$	—	$	382,601	$	341,162
Senior Notes	$	901,326	$	982,914	$	865,527	$	982,297

	Fair Value Measurements at December 31, 2017 Using:
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	December 31, 2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Foreign currency forward contracts	$	68	$	-	$	68	$	-
Liabilities:
Contingent earnout arrangements	$	5,580	$	-	$	-	$	5,580
Net put option	$	2,233	$	-	$	-	$	2,233

	Fair Value Measurements at June 30, 2017 Using:
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	June 30, 2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Foreign currency forward contracts	$	191	$	-	$	191	$	-
Liabilities:
Contingent earnout arrangements	$	5,795	$	-	$	-	$	5,795

	Significant
	Unobservable Inputs
	(Level 3)
Balance at July 1, 2017	$	5,795
Contingent earnout arrangements:
Payments		-
Purchase price adjustment - IPI		(35	)
Net put option		2,233
Changes in fair value recorded in other expense, (income)		(180	)
Balance at December 31, 2017	$	7,813

Six Months Ended December 31, 2017	Amount
Balance-beginning of year	$	4,546
Settlements during the period		(2,475	)
Additional warranty liability recorded		1,908
Balance-end of period	$	3,979


	Foreign Currency Translation Adjustment		Interest Rate Swap		Interest Rate Cap		Defined Benefit Pension Plan		Total Accumulated Other Comprehensive Income
AOCI - June 30, 2022	$	(34,572)	$	11,735	$	14,306	$	6,364	$	(2,167)
Other comprehensive income before reclassifications	157,805		17,895		7,646		1,151		184,497
Amounts reclassified from AOCI	—		(11,876)		—		—		(11,876)
Net current-period other comprehensive income	157,805		6,019		7,646		1,151		172,621
AOCI - March 31, 2023	$	123,233	$	17,754	$	21,952	$	7,515	$	170,454

	Foreign						Total
	Currency			Defined			Accumulated Other
	Translation			Benefit			Comprehensive
	Adjustment			Pension Plan			Income (Loss)
AOCI - June 30, 2017	$	(8,460	)	$	(5,318	)	$	(13,778	)
Other comprehensive income before reclassifications		15,182			-			15,182
Amounts reclassified from AOCI ^(A)		-			118			118
Net current-period other comprehensive income		15,182			118			15,300
AOCI - December 31, 2017	$	6,722		$	(5,200	)	$	1,522