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What changed in COHERENT CORP.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of COHERENT CORP.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+517 added−525 removedSource: 10-K (2023-08-18) vs 10-K (2022-08-29)

Top changes in COHERENT CORP.'s 2023 10-K

517 paragraphs added · 525 removed · 353 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

116 edited+67 added−55 removed34 unchanged
Biggest changePhotonic Solutions Business Unit Our Products ROADM • Products and solutions that enable high-bit-rate interconnects for datacenters and communications service providers, datacenter interconnects, ROADM systems, and undersea fiber-optic transmission Transceivers • Pluggable transceivers for Ethernet and Fibre Channel applications in cloud and enterprise datacenter applications • High-speed optoelectronics and modules for optical communications in telecom networks, including for datacenter interconnects and for metro, regional, long-haul, and ultralong-haul networks Advanced Optics • Fiber optics and precision optics used in projection displays; crystal materials and components for optical communications; high-power UV, visible, and NIR optics for industrial lasers; filters and assemblies for life sciences as well as for sensors, instrumentation, and semiconductor equipment 11 Compound Semiconductors Business Unit Our Products Engineered Materials & Laser Optics • Laser optics and accessories for CO 2 lasers used in industrial, semiconductors, and life sciences applications • High-power fiber and direct-diode laser optics • Infrared thermal imaging optics and assemblies • Polycrystalline materials production including ZnSe, ZnS, and CVD diamond • Thermoelectric components, subassemblies, and systems for heating, cooling, temperature tuning, thermal cycling, and power generation in aerospace and defense, medical, industrial, automotive, consumer, telecommunications, and energy-production markets • Specialty refining, recycling, and materials-recovery services for high-purity rare metals such as selenium and tellurium, as well as related chemical products such as tellurium dioxide for optics, photovoltaics, semiconductors, thermoelectric coolers, metallurgy, agriculture, and industrial applications • Advanced ceramic and metal-matrix composite products for semiconductor capital equipment, flat-panel displays, industrial and optical equipment, and defense applications Laser Devices & Systems • High-power semiconductor lasers and laser bars enabling fiber and direct-diode lasers for industrial, defense, consumer, and printing applications • Laser heads and modules, Q-switched laser modules, high-power uncooled pump laser modules, laser solutions for superhard materials processing • Laser processing heads and beam delivery systems for laser materials processing with industrial lasers • High-speed VCSELs for optical communications • High-power pumps for amplifiers and optical communications • Precision optical assemblies, objectives, infrared optics, thin-film coatings, and optical materials • Optical solutions for critical and complex design, engineering, and production challenges in aerospace and defense • Semiconductor lasers and detectors for optical interconnects New Ventures & Wide-Bandgap Electronics Technologies • SiC and advanced semiconductor materials for high-frequency and high-power electronic device applications in defense, telecommunications, automotive, and industrial markets Optoelectronic & RF Devices • VCSELs for sensing, including 3D sensing in consumer electronics and automotive applications • GaAs-based RF electronic devices • Integrated circuits for transceivers for optical communications • III-V epitaxial wafers to enable higher-performance photonic and RF components for consumer, communications, network, and mobile applications • Semiconductors lasers and detectors for sensing applications Aerospace & Defense • Ultraviolet to long wavelength infrared materials and optics • High energy lasers and optics 12 Our Markets Our market-focused businesses are currently organized by technologies and products.
Biggest changeEach of these business units develops and markets products as described below. 10 Networking Business Unit Our Products Telecommunications • Products and solutions that enable high-bit-rate interconnects for communications and cloud service providers, including in terrestrial and undersea fiber-optic transmission Datacom Transceivers • Pluggable transceivers for Ethernet and Fibre Channel applications in cloud, hyperscale and enterprise datacenter applications, including AI/ML Advanced Optics • Fiber optics and precision optics used in projection displays; crystal materials and components for optical communications; high-power UV, visible, and NIR optics for industrial lasers; filters and assemblies for life sciences as well as for sensors, instrumentation, and semiconductor equipment Materials Business Unit Our Products Engineered Materials & Laser Optics • Laser optics and accessories for CO 2 lasers • High-power fiber and direct-diode laser optics • Infrared thermal imaging optics and assemblies • Polycrystalline materials production including ZnSe, ZnS, and CVD diamond • Thermoelectric components, subassemblies, and systems • Specialty refining, recycling, and materials-recovery services for high-purity rare metals such as selenium and tellurium, as well as related chemical products such as tellurium dioxide • Advanced ceramic and metal-matrix composite products Laser Components & Subsystems • High-power semiconductor lasers and laser bars • Laser heads and modules, Q-switched laser modules, high-power uncooled pump laser modules, laser systems for superhard materials processing • Laser processing heads and beam delivery systems for laser materials processing with industrial lasers • High-power fiber lasers for materials processing • EELs, VCSELs, and detectors • High-power pumps for amplifiers • Precision optical assemblies, infrared optics, thin-film coatings, and optical materials • Optical solutions for critical and complex design, engineering, and production challenges in aerospace & defense New Ventures & Wide-Bandgap Electronics Technologies • SiC and semiconductor materials for high-frequency and high-power electronic devices Optoelectronic Devices & Modules • VCSELs for sensing • EELs and detectors • Integrated circuits for transceivers 11 Lasers Business Unit Our Products Excimer Lasers • High pulse energy UV gas and solid-state lasers from 193 nm to 355 nm • Advanced UV optical systems, line beams, and mask-based imaging systems Solid-State Lasers North America • Ultrafast lasers from UV to IR wavelengths • High pulse energy UV nanosecond lasers • Low-power continuous-wave lasers and systems • Miniature low-power continuous-wave lasers and systems • High-power ultrafast amplifiers • Continuous-wave UV gas lasers Solid-State Lasers Europe • Ultrafast lasers from UV to IR wavelengths • High pulse energy UV nanosecond lasers • Miniature low-power continuous-wave lasers from UV to IR wavelengths Laser Systems • Subsystems incorporating various lasers, optics, beam manipulation, monitoring, and control electronics • Standard systems incorporating standard subsystems in a complete mechanical housing, sold to the end user CO 2 Lasers • kW class continuous-wave gas IR lasers • 50 W to 1 kW continuous-wave and pulse gas IR lasers Aerospace & Defense • Specialty polishing and coating of optics, optical systems, and assemblies requiring high complexity and precision at dimensions of up to 2 meters • Specialty lasers and laser systems • Specialty crystals • Specialty diode lasers Markets Our market-focused businesses are currently organized by technologies and products.
Semiconductor Capital Equipment Market Semiconductor capital equipment requires advanced materials to meet the need for tighter tolerances, enhanced thermal stability, faster wafer transfer speeds, and reduced stage settling times. Our metal-matrix composites and reaction-bonded ceramics enable these applications, thanks to their optimum combination of light weight, strength, hardness, and coefficient of thermal expansion.
Semiconductor capital equipment requires advanced materials to meet the need for tighter tolerances, enhanced thermal stability, faster wafer transfer speeds, and reduced stage settling times. Our metal matrix composites and reaction-bonded ceramics enable these applications, thanks to their optimum combination of light weight, strength, hardness, and coefficient of thermal expansion.
Our thermoelectric coolers are qualified to automotive standards and enable LiDAR systems to operate with optimal performance and efficiency. New generations of vehicles will be equipped with a greater number of sensors that can monitor a driver’s alertness and let occupants interact with the console using touch sensing or gesture recognition.
Our thermoelectric coolers are qualified to automotive standards and enable LiDAR systems to operate with optimal performance and efficiency. 15 New generations of vehicles will be equipped with a greater number of sensors that can monitor a driver’s alertness and let occupants interact with the console using touch sensing or gesture recognition.
Our advanced sapphire, germanium, and multispectral domes provide unique protection to our advanced imaging, seeker, and laser solutions that are packaged behind them. The domes provide hemispherical coverage for airborne, naval, and ground-based systems. 14 Our solutions for the Lunar Reconnaissance Orbiter (LRO) provided the first images proving that the astronauts’ footprints on the moon are still there.
Our advanced sapphire, germanium, and multispectral domes provide unique protection to our advanced imaging, seeker, and laser solutions that are packaged behind them. The domes provide hemispherical coverage for airborne, naval, and ground-based systems. Our solutions for the Lunar Reconnaissance Orbiter (LRO) provided the first images proving that the astronauts’ footprints on the moon are still there.
These lasers enable optical signal transmission, reception, and amplification in terrestrial and submarine communications networks; high-bit-rate server connectivity between and within datacenters; optical communications network monitoring; materials processing; and fast and accurate measurements in biomedical instruments and consumer electronics.
These lasers enable optical signal transmission, reception, and amplification in terrestrial and submarine communications networks; high-bit-rate server connectivity between and within datacenters; optical communications network monitoring; materials processing; and fast and accurate measurements in biomedical instruments and sensing in consumer electronics.
These products rely on advanced components such as semiconductor lasers and photodetectors, in conjunction with integrated circuits and novel optoelectronic packaging to provide a cost-effective means for transmitting and receiving digital signals over fiber-optic cable at speeds ranging from less than 1 Gbps to more than 400 Gbps, over distances of less than 10 meters to more than 5,000 kilometers, using a wide range of network protocols and physical configurations.
These products rely on advanced components such as semiconductor lasers and photodetectors, in conjunction with integrated circuits and novel optoelectronic packaging to provide a cost-effective means for transmitting and receiving digital signals over fiber-optic cable at speeds ranging from less than 1 Gbps to more than 800 Gbps, over distances of less than 10 meters to more than 5,000 kilometers, using a wide range of network protocols and physical configurations.
From uniquely grown single crystals and advanced ceramics, to completely engineered gimbal subsystems, II-VI solutions are embedded on nearly every platform in the field as well as those under development. Coherent laser beam combining and advanced lightweight gimbal technologies, along with domestically produced high-power fiber laser pumps and amplifiers, are enabling next-generation HEL systems and space-based laser communications applications.
From uniquely grown single crystals and advanced ceramics, to completely engineered gimbal subsystems, Coherent solutions are embedded on nearly every platform in the field as well as those under development. Coherent laser beam combining and advanced lightweight gimbal technologies, along with domestically produced high-power fiber laser pumps and amplifiers, are enabling next-generation HEL systems and space-based laser communications applications.
An increasing number of consumer devices are coming on the market with embedded VCSELs, including multiple smartphones and tablets, smart watches, and household robots. In addition to VCSELs, our products for the consumer electronics market include wafer-scale optics, diffraction gratings, thermoelectric coolers, and substrates for sensing and AR/VR applications.
An increasing number of consumer devices are coming on the market with embedded VCSELs, including multiple smartphones and tablets, smart watches, and household robots. In addition to VCSELs, our products for the consumer electronics market include wafer-scale optics, diffraction gratings, thermoelectric coolers, and substrates for sensing and AR/VR applications. • Automotive Market Vertical.
Additionally, she was the Vice President, Merger Integration, at Lucent Technologies from 1997 to 2002 and held several management positions at Cummins Engine Company from 1988 to 1997. In 2019, Ms. Raymond was named to the board of directors and Audit Committee of Veeco, Inc. Ms. Raymond holds a B.A. degree in Public Management from St.
In addition, she was the Vice President, Merger Integration, at Lucent Technologies, Inc., from 1997 to 2002, and held several management positions at Cummins Engine Company from 1988 to 1997. In 2019, Ms. Raymond was named to the Board of Directors and Audit Committee of Veeco, Inc. Ms. Raymond holds a B.A. degree in Public Management from St.
Our “One II-VI” approach to total rewards provides a competitive total compensation package that attracts, motivates, and retains high-quality talent; matches total rewards of competitors with which we compete for talent; increases transparency of rewards programs, company and segment metrics, and measurement of achievements in relation to challenging objectives; balances fixed costs (benefits and base pay) and variable costs (bonus and equity), with a substantial portion of total direct compensation tied to performance; pays for performance – base, bonus, and equity reflect both company and individual performance; and aligns with the interests of our shareholders.
Our “One Coherent” approach to total rewards provides a competitive total compensation package that attracts, motivates, and retains high-quality talent; matches total rewards of competitors with which we compete for talent; increases transparency of rewards programs, company and segment metrics, and measurement of achievements in relation to challenging objectives; balances fixed costs (benefits and base pay) and variable costs (bonus and equity), with a substantial portion of total direct compensation tied to performance; pays for performance – base, bonus, and equity reflect both company and individual performance; and aligns with the interests of our shareholders.
Joseph’s University, and an MBA from Stanford University. Christopher Koeppen joined the Company in 2011 following the acquisition of Aegis Lightwave, Inc., where he served as General Manager, Aegis-NJ. He was named General Manager of II-VI’s Agile Network Products Division in 2012 and Director of Corporate Strategic Technology Planning in 2015.
Joseph’s University, and an MBA from Stanford University. Christopher Koeppen joined the Company in 2011 following the acquisition of Aegis Lightwave, Inc., where he served as General Manager, Aegis-NJ. He was named General Manager of the Agile Network Products Division in 2012 and Director of Corporate Strategic Technology Planning in 2015.
With the addition of nano-machined single-crystal silicon and grating technologies, together with II-VI’s advanced HEL coating capabilities, we enable advanced spectral beam combining and novel microstructured surface capabilities, which are highly valued within the aerospace and defense industry. Our advanced missile warning, electro-optical targeting, and imaging systems are deployed on virtually every U.S. fixed-wing and rotary platform.
With the addition of nano-machined single-crystal silicon and grating technologies, together with Coherent’s advanced HEL coating capabilities, we enable advanced spectral beam combining and novel microstructured surface capabilities, which are highly valued within the aerospace & defense industry. Our advanced missile warning, electro-optical targeting, and imaging systems are deployed on virtually every U.S. fixed-wing and rotary platform.
We also make our corporate governance documents available on our website, including the Company’s Code of Ethical Business Conduct, Governance Guidelines, and the charters for our board committees. All such documents are located on the Investors page of our website and are available free of charge. 24
We also make our corporate governance documents available on our website, including the Company’s Code of Ethical Business Conduct, Governance Guidelines, and the charters for our board committees. All such documents are located on the Investors page of our website and are available free of charge. 25
Therefore, 3D sensing applications created the need to scale up manufacturing to 6-inch wafer processing. Today, II-VI is one of the very few vertically integrated 6-inch VCSEL manufacturers with a proven track record in high-volume manufacturing of high-reliability, large multi-emitter VCSEL dies designed for 3D sensing.
Therefore, 3D sensing applications created the need to scale up manufacturing to 6-inch wafer processing. Today, Coherent is one of the very few vertically integrated 6-inch VCSEL manufacturers with a proven track record in high-volume manufacturing of high-reliability, large multi-emitter VCSEL dies designed for 3D sensing.
In the event of a collision, sensors can help provide critical information about the position and attention of occupants to activate restraints and deploy airbags in the best possible manner. II-VI’s products enable the most advanced in-cabin control and monitoring systems for the latest applications in human-vehicle interactions.
In the event of a collision, sensors can help provide critical information about the position and attention of occupants to activate restraints and deploy airbags in the best possible manner. Coherent’s products enable the most advanced in-cabin control and monitoring systems for the latest applications in human-vehicle interactions.
Based on the results, our employee teams then collaborate on action plans to improve in targeted areas. Our most recent employee engagement survey (2021) saw 94% participation from our global workforce, and the results showed that overall engagement increased by 10% from our original survey.
Based on the results, our employee teams then collaborate on action plans to improve in targeted areas. Our most recent employee engagement survey (2021) saw 94% participation from our global workforce, and the results showed that overall engagement increased by 10% from our original survey. • Occupational Health and Safety .
II-VI’s broad portfolio of components and modules for LiDAR include high-power laser diodes, fiber amplifiers, frequency-modulated continuous-wave detection solutions, optical filters for detection, mirrors for scanning, and thermoelectric coolers for temperature control.
Coherent’s broad portfolio of components and modules for LiDAR include high-power laser diodes, fiber amplifiers, frequency-modulated continuous-wave detection solutions, optical filters for detection, mirrors for scanning, and thermoelectric coolers for temperature control.
Before that, his 28-year career at Buchanan Ingersoll & Rooney PC involved significant client engagements on corporate, governance, securities, capital markets transactions, M&A, and executive compensation matters. He served on the II-VI IPO team in 1987 and as II-VI’s SEC counsel for 25 years until he joined Black Box. Mr.
Before that, his 28-year career at Buchanan Ingersoll & Rooney PC involved significant client engagements on corporate, governance, securities, capital markets transactions, M&A, and executive compensation matters. He served on the Coherent IPO team in 1987 and as Coherent’s SEC counsel for 25 years until he joined Black Box. Mr.
We believe that our RD&E activities are essential to establishing and maintaining a leadership position in each of the markets we serve. In addition, certain manufacturing personnel support or participate in our research and development efforts on an ongoing basis.
We believe that our R&D activities are essential to establishing and maintaining a leadership position in each of the markets we serve. In addition, certain manufacturing personnel support or participate in our research and development efforts on an ongoing basis.
We also utilize contract manufacturers and strategic suppliers. In addition to sales offices co-located at most of our manufacturing sites, we have sales and marketing subsidiaries in Belgium, Canada, China, Germany, Hong Kong, Italy, Japan, South Korea, Switzerland, Taiwan, and the United Kingdom, and, following the Coherent acquisition, in France, Israel, the Netherlands, and Spain.
We also utilize contract manufacturers and strategic suppliers. In addition to sales offices co-located at most of our manufacturing sites, we have sales and marketing subsidiaries in Belgium, Canada, China, France, Germany, Israel, Italy, Japan, the Netherlands, South Korea, Spain, Switzerland, Taiwan, and the United Kingdom.
In addition to offering competitive and fair compensation, we also offer a compelling suite of benefits, including comprehensive health benefits to all of our employees globally. 9 • Diversity and Inclusion . II-VI supports fundamental human rights – values inherent to all human beings. We expect all leaders and employees to treat each other with dignity, fairness, and respect.
In addition to offering competitive and fair compensation, we also offer a compelling suite of benefits, including comprehensive health benefits to all of our employees globally. 8 • Diversity and Inclusion . Coherent supports fundamental human rights – values inherent to all human beings. We expect all leaders and employees to treat each other with dignity, fairness, and respect.
Mattera has nearly 40 years of leadership experience in the compound semiconductor materials, device technology, operations, and markets that are core to II-VI’s business and strategy. Dr. Mattera holds a B.S. degree in chemistry from the University of Rhode Island (1979) and a Ph.D. in chemistry from Brown University (1984). He completed the Stanford University Executive Program (1996). Dr.
Mattera has 39 years of leadership experience in the compound semiconductor materials and device technology, operations and markets that are core to Company’s business and strategy. Dr. Mattera holds a B.S. degree in chemistry from the University of Rhode Island (1979), and a Ph.D. in chemistry from Brown University (1984). He completed the Stanford University Executive Program in 1996.
II-VI’s optics are shaped by precision surfacing techniques to meet the most stringent requirements for flat or curved geometries, functionalized with smooth or structured surfaces, or with patterned metallization. Proprietary processes developed at our global optical coating centers differentiate our products’ durability against high-energy lasers and extreme operating environments.
Our optics are shaped by precision surfacing techniques to meet the most stringent requirements for flat or curved geometries, functionalized with smooth or structured surfaces, or with patterned metallization. Proprietary processes developed at our global optical coating centers differentiate our products’ durability against HELs and extreme operating environments.
II-VI continues to introduce products that address new and growing applications for low-power CO 2 lasers, such as drilling and cutting plastics, textiles, leather, wood, and other organic materials, for which the CO 2 laser’s 10-micron wavelength is ideally suited.
We continue to introduce products that address new and growing applications for low-power CO 2 lasers, such as drilling and cutting plastics, textiles, leather, wood, and other organic materials, for which the CO 2 laser’s 10-micron wavelength is ideally suited.
II-VI supplies a broad range of materials, components, and subsystems that enable many functions within these fiber lasers, from the laser chips that generate the input optical power to the beam delivery systems that direct the output optical power to the target. The same set of II-VI products is at the core of existing and emerging direct-diode laser systems.
We supply a broad range of materials, components, and subsystems that enable many functions within these fiber lasers, from the laser chips that generate the input optical power to the beam delivery systems that direct the output optical power to the target. The same set of Coherent products is at the core of existing and emerging direct-diode laser systems.
Looking forward, II-VI continues to advance the state of the art in SiC substrates, with a strong technology portfolio of 30 active patents using highly differentiated and proprietary manufacturing platforms and technologies including crystal growth, substrate fabrication, and polishing.
Looking forward, we continue to advance the state of the art in SiC substrates, with a strong technology portfolio of 30 active patents using highly differentiated and proprietary manufacturing platforms and technologies including crystal growth, substrate fabrication, and polishing.
Ronald Basso joined II-VI in 2019 as Vice President, Corporate Development, and was named Chief Legal and Compliance Officer and Corporate Secretary in March 2022. Previously, Mr. Basso was the Executive Vice President of Business Development, General Counsel & Secretary for Black Box Corp. for six years.
Ronald Basso joined the Company in 2019 as Vice President, Corporate Development, and was named Chief Legal and Compliance Officer and Corporate Secretary in March 2022. Previously, Mr. Basso was the Executive Vice President of Business Development, General Counsel & Secretary for Black Box Corporation for six years.
During the fiscal year ended June 30, 2022, we focused our RD&E investments in the following areas: Photonic Solutions Area of Development: Our RD&E Investments: Photonics design Continue to develop and improve crystal materials, precision optical parts, and laser device components for photonics applications; develop new platforms and capabilities 20 Datacom transceivers Continue cost reduction on 10G-100G products by leveraging our engineering resources and manufacturing scale; continue to develop high-end 200G/400G/800G/1.6T products, including RF and packaging designs; explore high-density, high-bandwidth co-packaged designs through silicon photonics; continue to develop vertically integrated designs, including with lasers and ICs Coherent optics and transceivers Drive further integration to reduce size and power consumption; increase bandwidth to enable 100G/200G/400G coherent transceivers; optimize product cost with new design architectures and more efficient manufacturing flow Pump lasers Continue to invest in our next-generation GaAs pump laser portfolio and flexible manufacturing footprint to address evolving terrestrial and undersea markets Develop InP growth and processing capability together with associated packaging technology for Raman amplification applications Optical amplifiers and subsystems Invest in and broaden the range of amplifiers and integrated subsystems, including ROADMs WSS Develop LC and LCOS technologies and associated module designs for WSS; invest in manufacturing equipment, including the WSS automated assembly platform Optical monitoring Continue optical channel monitoring investment Develop OTDRs to monitor the health of the fiber plant Micro-optics manufacturing Shift toward smaller, more compact optics and automated assembly platforms and packages Invest in manufacturing equipment for computerized processes Compound Semiconductors Area of Development: Our RD&E Investments: High-power laser diodes Semiconductor lasers Devices for optical communications, sensing, and high-volume manufacturing Increase output power and reliability of edge-emitting laser diodes for fiber laser, optical communications, and sensing applications Develop high-power VCSELs, including multi-junction VCSELs for 3D sensing and consumer devices as well as next-generation, high-speed VCSELs for datacom applications Develop high-power and high-speed InP lasers, detectors, and components for applications in optical communications and sensing High-power beam delivery Develop multi-kW beam delivery systems and cables for welding and cutting CVD diamond technology Develop CVD diamond for EUV applications and as substrates for high-performance RF devices Broaden our portfolio beyond infrared window applications SiC technology SiC epitaxial wafers, devices, and modules Develop advanced SiC substrate growth technologies to support emerging markets in GaN RF and SiC power electronics Continuous improvement to maintain world-class, high-quality, large-diameter substrates and epitaxial wafers Develop SiC epitaxial wafers, SiC diodes and MOSFET devices, and SiC power modules Thermoelectric materials and devices Continue to develop leading Bi 2 Te 3 materials for thermoelectric cooling/heating Focus on thermoelectric power-generation capability in order to introduce new products Metal-matrix composites and reaction-bonded ceramics Support industrial customers in developing application-specific material wear-out, light-weight high mechanical stability materials, and thermal-management solutions 21 Fiber laser technologies Develop high-power fiber laser technologies for aerospace, defense, and commercial applications High-speed ICs Develop high-performance analog TIAs, laser drivers, and clock and data-recovery retimer (CDR) ICs Other R&D Area of Development: Our RD&E Investments: Digital signal processors (DSPs) Develop high-speed DSPs for coherent optical communications Optoelectronic chip hybrid integration platform (OCHIP) Develop wafer-scale assembly technologies and processes for integration of lasers, optics, and ICs Silicon photonics devices Develop silicon-based photonic ICs for coherent and direct-detection transceivers and co-packaging solutions Battery technology Develop technology for lithium-ion batteries and recycling processes Space-based laser communications Develop technology and devices for space-based laser communications Additive manufacturing Develop alloys and multibeam delivery systems for laser additive manufacturing Develop binder jet additive manufacturing for advanced ceramic components Research and development expenditures were $377 million, $330 million, and $339 million for the fiscal years 2022, 2021, and 2020, respectively.
During the fiscal year ended June 30, 2023, we focused our R&D investments in the following areas: Networking Area of Development: Our R&D Investments: Photonics design Continue to develop and improve crystal materials, precision optical parts, and laser device components for photonics applications; develop new platforms and capabilities Datacom transceivers Continue cost reduction on 10G-100G products by leveraging our engineering resources and manufacturing scale; continue to develop high-end 200G/400G/800G/1.6T products, including RF and packaging designs; explore high-density, high-bandwidth co-packaged designs through silicon photonics; continue to develop vertically integrated designs, including with lasers and ICs Coherent optics and transceivers Drive further integration to reduce size and power consumption; increase bandwidth to enable 100G/200G/400G coherent transceivers; optimize product cost with new design architectures and more efficient manufacturing flow Integrated circuits Develop high-speed integrated circuits for coherent optical communications Pump lasers Continue to invest in our next-generation GaAs pump laser portfolio and flexible manufacturing footprint to address evolving terrestrial and undersea markets Develop InP growth and processing capability together with associated packaging technology for Raman amplification applications Optical amplifiers and subsystems Invest in and broaden the range of amplifiers and integrated subsystems, including ROADMs Optoelectronic chip hybrid integration platform (OCHIP) Develop wafer-scale assembly technologies and processes for integration of lasers, optics, and ICs Silicon photonics devices Develop silicon-based photonic ICs for coherent and direct-detection transceivers and co-packaging solutions WSS Develop LC and LCoS technologies and associated module designs for WSS; invest in manufacturing equipment, including the WSS automated assembly platform Optical monitoring Continue optical channel monitoring investment Develop OTDRs to monitor the health of the fiber plant Micro-optics manufacturing Shift toward smaller, more compact optics and automated assembly platforms and packages Invest in manufacturing equipment for computerized processes Materials Area of Development: Our R&D Investments: 20 High-power laser diodes Semiconductor lasers Devices for optical communications, sensing, and high-volume manufacturing Increase output power and reliability of edge-emitting laser diodes for fiber laser, optical communications, and sensing applications Develop high-power VCSELs, including multi-junction VCSELs for 3D sensing and consumer devices as well as next-generation, high-speed VCSELs for datacom applications Develop high-power and high-speed InP lasers, detectors, and components for applications in optical communications and sensing High-power beam delivery Develop multi-kW beam delivery systems and cables for welding and cutting CVD diamond technology Develop CVD diamond for EUV applications and as substrates for high-performance RF devices Broaden our portfolio beyond infrared window applications SiC technology SiC epitaxial wafers, devices, and modules Develop advanced SiC substrate growth technologies to support emerging markets in GaN RF and SiC power electronics Continuous improvement to maintain world-class, high-quality, large-diameter substrates and epitaxial wafers Develop SiC epitaxial wafers, SiC diodes and MOSFET devices, and SiC power modules Thermoelectric materials and devices Continue to develop leading Bi 2 Te 3 materials for thermoelectric cooling/heating Focus on thermoelectric power-generation capability in order to introduce new products Metal matrix composites and reaction-bonded ceramics Support industrial customers in developing application-specific material wear-out, light-weight high mechanical stability materials, and thermal-management solutions Fiber laser technologies Develop high-power fiber laser technologies for aerospace & defense and commercial applications High-speed ICs Develop high-performance analog TIAs, laser drivers, and clock and data-recovery retimer ICs Battery technology Develop technology for lithium-ion batteries and recycling processes Additive manufacturing Develop alloys and multibeam delivery systems for laser additive manufacturing Develop binder jet additive manufacturing for advanced ceramic components Lasers Area of Development: Our R&D Investments: Diode-pumped Solid-State Lasers Continue to develop solid-state lasers for industrial applications for materials processing, instrumentation, and scientific applications, including extension of wavelengths using nonlinear optics (harmonic generation), especially into the ultraviolet wavelength range.
Ltd. • Tencent Advanced Optics Global manufacturers of industrial and medical laser optics and crystals including commercial and consumer products used in a wide array of instruments, sensors, fiber lasers, displays, and projection devices • Coherent, Inc. • Corning Incorporated. • Han’s Laser Technology Industry Group Co.
Ltd. • Hewlett Packard Enterprise, Co. • Tencent Advanced Optics Global manufacturers of industrial and medical laser optics and crystals including commercial and consumer products used in a wide array of instruments, sensors, fiber lasers, displays, and projection devices • Corning Incorporated • Cytek Biosciences, Inc. • Han’s Laser Technology Industry Group Co.
He then served as Vice President of the Industrial Laser Group and Corporate Strategic Technology Planning from 2017, until his appointment as Chief Technology Officer in 2019. Previously, Dr. Koeppen was co-founder and Chief Executive Officer of CardinalPoint Optics, prior to its acquisition by Aegis Lightwave.
He then served as Vice President of the Industrial Laser Group and Corporate Strategic Technology Planning from 2017 until his appointment as Chief Technology Officer in 2019. In October, 2022, Dr. Koeppen was appointed Chief Innovation Officer of the Company. Previously, Dr. Koeppen was co-founder and CEO of CardinalPoint Optics, prior to its acquisition by Aegis Lightwave.
In connection with the Merger, effective July 1, 2022, the Company realigned its organizational structure into three reporting segments for the purpose of making operational decisions and assessing financial performance: (i) Materials, which previously was referred to as our Compound Semiconductors segment (ii) Networking, which previously was referred to as our Photonic Solutions segment, and (iii) Lasers.
Information Regarding Reporting Segments and Foreign Operations In connection with the acquisition of Coherent, Inc., effective July 1, 2022, the Company realigned its organizational structure into three reporting segments for the purpose of making operational decisions and assessing financial performance: (i) Materials, which previously was referred to as our Compound Semiconductors segment; (ii) Networking, which previously was referred to as our Photonic Solutions segment; and (iii) Lasers segment.
Each executive officer listed has been appointed by the board of directors to serve until removed or until a successor is appointed and qualified. Name Age Position Vincent D. Mattera, Jr. 66 Chair and Chief Executive Officer Giovanni Barbarossa 60 Chief Strategy Officer and President, Compound Semiconductors Walter R.
Each executive officer listed has been appointed by the Board of Directors to serve until removed or until a successor is appointed and qualified. Name Age Position Vincent D. Mattera, Jr. 67 Chair and Chief Executive Officer Giovanni Barbarossa 61 Chief Strategy Officer and President, Materials Walter R.
Our U.S. production and RD&E operations are located in Arizona, California, Colorado, Connecticut, Delaware, Florida, Illinois, Massachusetts, Michigan, Mississippi, New Jersey, New York, Ohio, Oregon, Pennsylvania, and Texas, and our non-U.S. production and RD&E operations are based in Australia, China, Germany, India, Malaysia, the Philippines, Singapore, Sweden, Switzerland, Thailand, the United Kingdom, and Vietnam.
Our U.S. production and R&D operations are located in Arizona, California, Colorado, Connecticut, Delaware, Florida, Illinois, Massachusetts, Michigan, Mississippi, New Jersey, New York, Ohio, Oregon, Pennsylvania, and Texas, and our non-U.S. production and R&D operations are based in Australia, China, Finland, Germany, India, Malaysia, the Philippines, Singapore, South Korea, Spain, Sweden, Switzerland, Thailand, the United Kingdom, and Vietnam.
Automotive Market II-VI is a global leader in SiC substrates for power electronics that improve the energy efficiency of electric and hybrid-electric vehicles. Power electronics based on SiC enable systems to achieve significantly improved power utilization and conversion efficiencies, lower operating temperatures, and reduced thermal loads.
We are a global leader in SiC substrates for power electronics that improve the energy efficiency of electric and hybrid-electric vehicles. Power electronics based on SiC enable systems to achieve significantly improved power utilization and conversion efficiencies, lower operating temperatures, and reduced thermal loads.
The following defined terms are used in this Annual Report on Form 10-K: augmented reality (AR); bismuth telluride (Bi 2 Te 3 ); cadmium telluride (CdTe); carbon dioxide (CO 2 ); Centers for Disease Control (CDC); chemical vapor deposition (CVD) of materials including diamond; datacenter interconnect (DCI); dense wavelength division multiplexing (DWDM); digital signal processors (DSPs); diversity, equity, and inclusion (DEI); extreme-ultraviolet (EUV) lithography; fifth-generation (5G) wireless; fourth-generation (4G) wireless; gallium arsenide (GaAs); gallium nitride (GaN); Geostationary Operational Environment Satellite Program (GOES); gigabit Ethernet (GbE); gigabit per second (Gbps); high-definition multimedia interface (HDMI); high-electron-mobility transistor (HEMT); indium phosphide (InP); infrared (IR); integrated circuit (IC); intellectual property (IP); kilowatt (kW); light detection and ranging (LiDAR); liquid crystal (LC); liquid crystal on silicon (LCOS); metal-oxide-semiconductor field-effect transistor (MOSFET); millimeters (mm); nanometers (nm); near-infrared (NIR); optical channel monitor (OCM); optoelectronic chip hybrid integration platform (OCHIP); original equipment manufacturer (OEM); optical time-domain reflectometer (OTDR); polymerase chain reaction (PCR); radio frequency (RF); reconfigurable optical add/drop multiplexer (ROADM); research and development (R&D); research, development, and engineering (RD&E); silicon carbide (SiC); terabit per second (Tbps); three-dimensional (3D); transimpedance amplifier (TIA); ultraviolet (UV); vertical-cavity surface-emitting laser (VCSEL); virtual reality (VR); wavelength division multiplexing (WDM); wavelength selective switching (WSS); zinc selenide (ZnSe); and zinc sulfide (ZnS).
The following defined terms are used in this Annual Report on Form 10-K: artificial intelligence (AI); bismuth telluride (Bi 2 Te 3 ); cadmium telluride (CdTe); carbon dioxide (CO 2 ); chemical vapor deposition (CVD) of materials including diamond; continuous wave (CW); datacenter interconnect (DCI); dense wavelength division multiplexing (DWDM); diversity, equity, and inclusion (DEI); edge-emitting lasers (EELs); extreme-ultraviolet (EUV) lithography; fifth-generation (5G) wireless; fourth-generation (4G) wireless; gallium arsenide (GaAs); gallium antimonide (GaSb), gallium nitride (GaN); Geostationary Operational Environment Satellite Program (GOES); gigabit per second (Gbps); high-definition multimedia interface (HDMI); high-electron-mobility transistor (HEMT); high-energy laser (HEL); indium phosphide (InP); infrared (IR); integrated circuit (IC); intellectual property (IP); kilowatt (kW); light detection and ranging (LiDAR); liquid crystal (LC); liquid crystal on silicon (LCoS); machine learning (ML); metal-oxide-semiconductor field-effect transistor (MOSFET); millimeters (mm); nanometers (nm); near-infrared (NIR); optical channel monitor (OCM); optoelectronic chip hybrid integration platform (OCHIP); original equipment manufacturer (OEM); optical time-domain reflectometer (OTDR); polymerase chain reaction (PCR); radio frequency (RF); reconfigurable optical add/drop multiplexer (ROADM); research and development (R&D); silicon carbide (SiC); terabit per second (Tbps); three-dimensional (3D); ultraviolet (UV); vertical-cavity surface-emitting laser (VCSEL); virtual reality (VR); wavelength division multiplexing (WDM); wavelength selective switching (WSS); zinc selenide (ZnSe); and zinc sulfide (ZnS).
With our strategic focus on fast-growing and sustainable markets, II-VI pursues its mission of enabling the world to be safer, healthier, closer, and more efficient, and strives to attain its vision of a world transformed through innovations vital to a better life today and the sustainability of future generations. Acquisition and Background of Coherent, Inc.
With our strategic focus on fast-growing and sustainable markets, we pursue our mission of enabling the world to be safer, healthier, closer, and more efficient, and strive to attain our vision of a world transformed through innovations vital to a better life today and the sustainability of future generations. Acquisition and Background of Coherent, Inc. The acquisition of Coherent, Inc.
Our optical transport products are at the core of both terrestrial and undersea optical networks. Our market-leading 980 nm pump lasers are the key enablers of our erbium-doped fiber amplifiers, which boost the power of optical signals in fiber-optic cables at intervals spanning 80 kilometers, typically, to allow high-speed signals to be transmitted over longer distances.
Our market-leading 980 nm pump lasers are the key enablers of our erbium-doped fiber amplifiers, which boost the power of optical signals in fiber-optic cables at intervals spanning 80 kilometers, typically, to allow high-speed signals to be transmitted over longer distances.
Our optical communications products can be divided into two main groups, optical transmission and optical transport. Our optical transmission products consist primarily of transmitters, receivers, transceivers, transponders, and active optical cables, which provide the fundamental optical-electrical, or optoelectronic, interface for interconnecting the electronic equipment used in networks.
Our optical communications products can be divided into two main groups, optical transmission and optical transport. Our optical transmission products consist primarily of transmitters, receivers (as stand-alone parts or combined in different integrated solutions), transceivers, transponders, and active optical cables, which provide the fundamental optical-electrical, or optoelectronic, interface for interconnecting the electronic equipment used in networks.
This approach is managed under a disciplined innovation program that we refer to as the II-VI Phase Gate Process. We devote significant resources to RD&E programs directed at the continuous improvement of our existing products and processes, and to the timely development of new materials, technologies, platforms, and products.
This approach is managed under a disciplined innovation program that we refer to as the Coherent Phase Gate Process. 19 We devote significant resources to R&D programs directed at the continuous improvement of our existing products and processes, and to the timely development of new materials, technologies, platforms, and products.
II-VI’s Aerospace & Defense (A&D) Division maintains separate business development, IT infrastructure, accounting, finance, engineering, and manufacturing facilities in the United States with strictly controlled access; they are dedicated to our U.S. government-supported contracts.
Coherent’s Aerospace & Defense (A&D) Division maintains separate business development, IT infrastructure, accounting, finance, engineering, and manufacturing facilities in the United States with strictly controlled access; they are dedicated to our U.S. government-supported contracts. • Semiconductor Capital Equipment Market Vertical.
We define our backlog as bookings that have not been converted to revenues by the end of the reporting period. As of June 30, 2022, our backlog was approximately $2.3 billion, compared with approximately $1.3 billion as of June 30, 2021. 7 Global Operations II-VI is headquartered in Saxonburg, Pennsylvania, USA, with RD&E, manufacturing, and sales facilities worldwide.
Backlog We define our backlog as bookings that have not been converted to revenues by the end of the reporting period. As of June 30, 2023, our backlog was approximately $2.7 billion, compared with approximately $2.3 billion as of June 30, 2022. Global Operations Coherent is headquartered in Saxonburg, Pennsylvania, USA, with R&D, manufacturing, and sales facilities worldwide.
II-VI’s broad portfolio of coated optics and crystal materials serves all of these growing laser markets. Aerospace and Defense Market II-VI’s aerospace and defense solutions enable mission-critical capabilities for applications in high-energy lasers (HELs); contested space; and intelligence, surveillance, and reconnaissance.
Coherent’s broad portfolio of coated optics and crystal materials serves all of these growing laser markets. 12 • Aerospace & Defense Market Vertical. Coherent’s aerospace & defense solutions enable mission-critical capabilities for applications in HELs; contested space; and intelligence, surveillance, and reconnaissance.
In September 2016, Dr. Mattera became the Company’s third President and Chief Executive Officer in 45 years and served as the Company’s President through June 2019, when the roles of President and Chief Executive Officer were separated. Dr. Mattera became the Company’s Board Chair in November 2021.
Mattera became the Company’s third President and Chief Executive Officer in 45 years and served as the Company’s President through June 2019, when the roles of President and Chief Executive Officer were separated. Dr. Mattera became the Company’s Board Chair immediately following the 2021 Annual Meeting.
The Photonic Solutions Segment leverages II-VI’s compound semiconductor technology platforms and deep knowledge of end-user applications for our key end markets to deliver differentiated components and subsystems. The Compound Semiconductors Segment is a market leader in engineered materials and optoelectronic devices such as those based on GaAs, InP, GaN, and SiC.
The Networking segment leverages Coherent’s compound semiconductor technology platforms and deep knowledge of end-user applications for our key end markets to deliver differentiated components and subsystems. The Materials segment is a market leader in engineered materials and optoelectronic devices, such as those based on ZnSe, ZnS, GaAs, InP, GaSb, and SiC.
As of June 30, 2022, we had a total of approximately 2,100 patents globally. 22 Executive Officers of the Registrant The executive officers of the Company and their respective ages and positions as of June 30, 2022, are set forth below.
As of June 30, 2023, we had a total of approximately 3,000 patents globally. Executive Officers of the Registrant The executive officers of the Company and their respective ages and positions as of June 30, 2023, are set forth below.
Tuition reimbursement and funding for growth and development is built into the annual budget to ensure that II-VI has the skilled workforce we need. Our global internship programs welcome a new talent pipeline. In FY22, II-VI pledged $1,000,000 to fund STEM educational and research programs in 2022. • Total Rewards .
Tuition reimbursement and funding for growth and development is also built into the annual budget to ensure that Coherent has the skilled workforce we need. Our global internship programs also welcome a new talent pipeline. In fiscal 2023, we pledged $1.3 million to fund STEM educational and research programs in 2023. • Total Rewards .
Our businesses address the following primary markets: optical and wireless communications, industrial, aerospace and defense, semiconductor capital equipment, life sciences, consumer electronics, and automotive. In connection with the acquisition of Coherent, effective July 1, 2022, the Company has reconfigured its primary markets. The combined company will serve the four markets of industrial, communications, electronics, and instrumentation.
Our businesses historically addressed the following primary markets: optical and wireless communications, industrial, aerospace & defense, semiconductor capital equipment, life sciences, consumer electronics, and automotive. In connection with the acquisition of Coherent, effective July 1, 2022, the Company reconfigured its primary markets and is reporting based on the following markets effective July 1, 2022: industrial, communications, electronics, and instrumentation.
Information Regarding Market Segments and Foreign Operations Financial data regarding our revenues, results of operations, industry segments, and international sales for the three years ended June 30, 2022, are set forth in the Consolidated Statements of Earnings (Loss) and in Note 14.
Effective July 1, 2022, the Company reports financial information for these three segments. Financial data regarding our revenues, results of operations, reporting segments, and international sales for the three years ended June 30, 2023, are set forth in the Consolidated Statements of Earnings (Loss) and in Note 14.
Barbarossa graduated from the University of Bari, Italy, with a B.S. degree in Electrical Engineering, and holds a Ph.D. in Photonics from the University of Glasgow, U.K. Walter R. Bashaw II has served as the Company’s President since July 2019. Mr. Bashaw served as the Company's Senior Vice President, Corporate Strategy and Development, Administration, from October 2018 to July 2019.
Barbarossa graduated from the University of Bari, Italy, with a B.S. in Electrical Engineering, and has a Ph.D. in Photonics from the University of Glasgow, U.K. 23 Walter R. Bashaw II joined the Company in 2018 and has been President of the Company since July 2019. Mr. Bashaw previously served as Vice President of Strategy.
Mattera joined the Company as a Vice President in 2004 and served as Executive Vice President from January 2010 to November 2013, when he became the Chief Operating Officer. In November 2014, Dr. Mattera became the President and Chief Operating Officer and was reappointed to the board of directors. In November 2015, he became the President of II-VI.
Mattera joined the Company as a Vice President in 2004, and served as Executive Vice President from January 2010 to November 2013, when he became the Chief Operating Officer. He was re-appointed to the Board in 2012. In November 2014, Dr. Mattera became the President and Chief Operating Officer. In September 2016, Dr.
Raymond was Executive Vice President and Chief Financial Officer of Hudson Global Inc. from 2005 to 2013. Ms. Raymond was the Chief Risk Officer and Vice President and Corporate Controller at Dun and Bradstreet Inc. from 2002 to 2005.
Mary Jane Raymond has been Chief Financial Officer and Treasurer of the Company since March 2014. Previously, Ms. Raymond was Executive Vice President and Chief Financial Officer of Hudson Global Inc., from 2005 to 2013. Ms. Raymond was the Chief Risk Officer and Vice President and Corporate Controller at Dun and Bradstreet, Inc., from 2002 to 2005.
Hiring talented individuals and continuing to develop them are critical to our operations, and we are focused on creating experiences and programs that foster growth and performance. We have a robust succession-planning process that identifies internal candidates for development.
Hiring talented individuals and continuing to develop them are critical to our operations, and we are focused on creating experiences and programs that foster growth and performance. Our Talent Acquisition teams continue their outreach efforts to engage and attract diverse, high-quality talent to our organization. We have a robust succession-planning process that identifies internal candidates for development.
We have entered into selective intellectual property licensing agreements. We have confidentiality and noncompetition agreements with certain personnel. We require our U.S. employees to sign a confidentiality and noncompetition agreement upon commencement of their employment with us.
We aggressively pursue process and product patents in certain areas of our businesses and in certain jurisdictions across the globe. We have entered into selective intellectual property licensing agreements. We have confidentiality and noncompetition agreements with certain personnel. We require our U.S. employees to sign a confidentiality and noncompetition agreement upon commencement of their employment with us.
These have contributed to a new positioning of the Company into large and transformative global growth markets while increasing considerably the global reach of the Company, deepening the technology and IP portfolio, broadening the product roadmap and customer base, and increasing the potential of II-VI. Prior to joining II-VI as an executive, Dr.
The platforms that the Company has added under his leadership have contributed to positioning the Company into large and transformative global growth markets while increasing our global reach, deepening our technology and IP portfolio, broadening our product roadmap and customer base, and increasing the potential of the Company. Prior to joining the Company as an executive, Dr.
The ability to produce, process, and refine these complex materials, and to control their quality and in-process yields, is an expertise of the Company that is critical to the performance of our customers’ subsystems and systems. In the markets we serve, there is a limited number of high-quality suppliers of many of the components we manufacture.
The ability to produce, process, and refine these complex materials, and to control their quality and in-process yields, is an expertise of the Company that is critical to our customers. In the markets we serve, there is a limited number of high-quality suppliers of many of the components we manufacture. Aside from datacenter transceivers, there are very few industry-standard products.
Barbarossa was employed at Avanex Corporation from 2000 through 2009, serving in various executive positions in product development and general management, ultimately serving as President and Chief Executive Officer. When Avanex merged with Bookham Technology, forming Oclaro, Dr. Barbarossa became a member of the board of directors of Oclaro and served as such from 2009 to 2012.
Previously, he was the Chief Technology Officer of the Company and the President of the Laser Solutions Segment. Dr. Barbarossa was employed at Avanex Corporation from 2000 through 2009, serving in various executive positions in product development and general management, ultimately serving as the President and Chief Executive Officer. When Avanex merged with Bookham Technology, forming Oclaro, Inc. ,Dr.
Bashaw II 57 President Mary Jane Raymond 61 Chief Financial Officer and Treasurer Christopher Koeppen 51 Chief Technology Officer Ronald Basso 62 Chief Legal Officer and Compliance Officer and Secretary Vincent D. Mattera, Jr. initially served as a member of the II-VI board of directors from 2000 to 2002. Dr.
Bashaw II 58 President Mary Jane Raymond 62 Chief Financial Officer and Treasurer Christopher Koeppen 52 Chief Innovation Officer Julie Sheridan Eng 56 Chief Technology Officer Ronald Basso 63 Chief Legal and Compliance Officer & Secretary Mark Sobey 63 President, Lasers Vincent D. Mattera, Jr. initially served as a member of the Coherent Board from 2000 to 2002. Dr.
Our VCSEL products leverage our world-class 6-inch GaAs platform, combining our epitaxial wafer growth and wafer fabrication capabilities. Our VCSELs have been used in consumer products such as computer mice and mobile phones for many years. Our VCSELs are also widely deployed in datacenters and HDMI optical cables as well as in vehicle steering wheels.
Our VCSELs have been used in consumer products such as computer mice and mobile phones for many years. Our VCSELs are also widely deployed in datacenters and HDMI optical cables as well as in vehicle steering wheels.
II-VI leverages these capabilities to deliver miniature to large-scale precision optical assemblies, including those in combination with thermal-management components, integrated electronics, and software. 6 II-VI also offers a broad portfolio of compound semiconductor lasers that are used in a variety of applications in our end markets.
Optical coatings also provide the desired spectral characteristics, ranging from the ultraviolet to the far-infrared. We leverage these capabilities to deliver miniature to large-scale precision optical assemblies, including those in combination with thermal-management components, integrated electronics, and software. We also offer a broad portfolio of compound semiconductor lasers that are used in a variety of applications in our end markets.
Due to its very high mechanical and thermal performance characteristics, our reaction-bonded SiC is used in structural support systems that are integral to EUV lithography optics to meet critical requirements for optical system stability. Life Sciences Market Within the life sciences end market, II-VI focuses on analytical instrumentation that integrates light and/or thermal-management solutions.
Due to its very high mechanical and thermal performance characteristics, our reaction-bonded SiC is used in structural support systems that are integral to EUV lithography optics to meet critical requirements for optical system stability.
This equipment includes switches, routers, and servers used in wireline networks, as well as antennas and base stations used in wireless networks.
This equipment includes switches, routers, and servers used in wireline networks.
It enables them to show up as their “best self” to work every day. This includes creating an inclusive environment in which every individual is considered a valued and valuable member of the team.
It enables them to show up as their “best self” to work every day. This includes creating an inclusive environment in which every individual is considered a valued and valuable member of the team. We listen to the voice of the employee through focus groups, personal interviews, our open-door policy, and engagement surveys, among other methods.
Sobey spent over 20 years in the Laser and Fiber Optics Telecommunications industries, including serving in Senior Vice President roles in Product Management at Cymer and Global Sales at JDS Uniphase. Dr. Sobey received his PhD in Engineering and BSc in Physics from the University of Strathclyde in Scotland. Availability of Information Our internet addresses are www.ii-vi.com and www.coherent.com.
Sobey spent over 20 years in the laser and fiber optics telecommunications industries, including senior vice president roles in product management at Cymer and in global sales at JDS Uniphase. He received his Ph.D. in Engineering and B.Sc. in Physics from the University of Strathclyde in Scotland. In July 2023, Dr.
We are consciously expanding the diversity of our workforce with a focus on underrepresented groups in leadership and technical positions, creating growth and development opportunities for our employees, embracing different perspectives, and fostering an inclusive work environment.
We are consciously expanding the diversity of our workforce including underrepresented groups in leadership and technical positions, creating growth and development opportunities for our employees, embracing different perspectives, and fostering an inclusive work environment. Recognizing the opportunity to increase gender representation at all levels of the organization, we piloted a Women in Leadership Program in fiscal 2023.
Department of Commerce, Bureau of Industry and Security, which among other things impose licensing requirements on certain dual-use goods, technology, and software; and • The regulations administered by the U.S. Department of the Treasury, Office of Foreign Assets Control, implementing economic sanctions against designated countries, governments, and persons based on U.S. foreign policy and national security considerations.
Department of Commerce, Bureau of Industry and Security, which among other things impose licensing requirements on certain dual-use goods, technology, and software; and • The regulations administered by the U.S.
In addition to competitors who manufacture products similar to those we produce, there are other technologies and products available that may compete with our technologies and products. 19 Our Strategy Our strategy is to grow businesses with world-class engineered materials capabilities to advance our current customers’ strategies, reach new markets through innovative technologies and platforms, and enable new applications in large and growing markets.
Our Strategy Our strategy is to grow businesses with world-class engineered materials and laser processing capabilities to advance our current customers’ strategies, reach new markets through innovative technologies and platforms, and enable new applications in large and growing markets.
II-VI continuously updates its comprehensive quality management systems that feature manufacturing quality best practices. II-VI is committed to delivering products within specification, on time, and with high quality, with a goal of fully satisfying customers and continually improving. We continue to focus our efforts to convert locations to renewable energy.
We are committed to delivering products within specification, on time, and with high quality, with a goal of fully satisfying customers and continually improving. 9 The Use of Renewable Energy We continue to focus our efforts to convert locations to renewable energy, and our program is now in its fourth year.
We provide our employees upfront and ongoing safety training to ensure that safety policies and procedures are effectively communicated and implemented. We have experienced employees on-site at each of our manufacturing locations who are tasked with environmental, health, and personal safety education and compliance.
We have experienced employees on-site at each of our manufacturing locations who are tasked with environmental, health, and personal safety education and compliance. We customize our policies to the local requirements and circumstances of each plant. • Talent Acquisition, Development, and Training .
Number of employees Percent of total Direct production 16,293 69% Research, development, engineering, sales and marketing 4,379 18% General administration 2,986 13% Total: 23,658 100% We believe that our efforts in managing our workforce have been effective, as evidenced by a strong culture and a good relationship between the Company and our employees. • Our People .
Number of employees Percent of total Manufacturing 21,818 82% Research and development 2,426 9% Sales, general and administrative 2,378 9% Total: 26,622 100% We believe that our efforts in managing our workforce have been effective, as evidenced by a strong culture and a good relationship between the Company and our employees. • Our People .
We use advanced engineered materials growth technologies and proprietary high-precision fabrication, microassembly, optical thin-film coating, and electronic integration to manufacture complex optoelectronic devices and modules.
General Description of Business We develop, manufacture, and market engineered materials, optoelectronic components and devices, optical and laser subsystems and systems for use in the industrial, communications, electronics, and instrumentation markets. We use advanced engineered materials growth technologies and proprietary high-precision fabrication, microassembly, optical thin-film coating, and electronic integration to manufacture complex optoelectronic devices and modules.
Sobey previously served as Coherent Inc.’s Executive Vice President and General Manager of OEM Laser Sources (OLS) from 2016 to April 2020, Executive Vice President and General Manager of Specialty Laser Systems (SLS) from 2010 to 2016, and Senior Vice President and General Manager of SLS from 2007 until 2010. Prior to Coherent Inc., Dr.
He was previously Executive Vice President and General Manager of Coherent, Inc.’s, OEM Laser Sources until being promoted to COO, and before that he was Executive Vice President and General Manager of Specialty Laser Systems (SLS) from 2010 to 2016, and Vice President and General Manager of SLS from 2007 until 2010. Prior to his service with Legacy Coherent, Dr.
Mattera is a member of the Cleveland Clinic Florida Regional Board of Directors. Giovanni Barbarossa joined II-VI in October 2012 and has been the Chief Strategy Officer of the Company and the President of the Compound Semiconductors Segment since July 2019. Previously, he was the Chief Technology Officer of the Company and the President of the Laser Solutions Segment. Dr.
He is a member of Business Roundtable and serves on the board of the U.S.-Japan Business Council and of the Cleveland Clinic Florida Regional Board of Directors. Giovanni Barbarossa joined the Company in 2012 and has been the Chief Strategy Officer of the Company and the President of the Materials Segment since July 2019.
Our proprietary OTDR modules allow systems to automatically detect and pinpoint issues along the transmission path in real time. Together with our OCM solutions, which monitor the optical power of the channels transmitted in a fiber-optic link, they enable real-time intelligence to perform preventive maintenance so as to preserve data transmission.
Together with our OCM solutions, which monitor the optical power of the channels transmitted in a fiber-optic link, they enable real-time intelligence to perform preventive maintenance so as to preserve data transmission. In addition, we offer a portfolio of WSS products, which we also incorporate into ROADM line cards and subsystems.
Demand for our products is largely driven by the continually growing need for additional network bandwidth created by the ongoing proliferation of data and video traffic from video conferencing for work, school, and leisure; video downloads and streaming; live TV; social networking; online gaming; file sharing; enterprise IP/internet traffic; cloud computing; and datacenter virtualization that must be handled by both wireline and wireless networks.
Coherent’s optical communications products and technologies enable next-generation high-speed optical transmission systems, networks, and datacenter solutions necessary to meet the accelerating global bandwidth demand. 13 Demand for our products is largely driven by the continually growing need for additional network bandwidth created by the ongoing proliferation of data and video traffic from video conferencing for work, school, and leisure; video downloads and streaming; live TV; social networking; online gaming; file sharing; enterprise IP/internet traffic; cloud computing; datacenter virtualization; and, more recently, the new optical connectivity needed to support AI/ML algorithms.
In addition, the Company renamed its existing two reporting segments from Photonics Solutions to Networking and from Compound Semiconductors to Materials. Beginning with fiscal year 2023, the Company is divided into three reporting segments: (i) Materials, (ii) Networking, and (iii) Lasers. The Company will report financial information for these new reporting segments in fiscal 2023.
Beginning with fiscal year 2023, the Company is divided into three reporting segments: (i) Materials, (ii) Networking, and (iii) Lasers. We have reported financial information for these new reporting segments in fiscal year 2023. In addition, prior year numbers were recast to reflect the transfer of two entities between the Networking and Materials segments.
Trade Secrets, Patents, and Trademarks Our use of trade secrets, proprietary know-how, trademarks, copyrights, patents, contractual confidentiality, and IP ownership provisions helps us develop and maintain our competitive position with respect to our products and manufacturing processes. We aggressively pursue process and product patents in certain areas of our businesses and in certain jurisdictions across the globe.
Risk Factors of this Annual Report on Form 10-K. Trade Secrets, Patents, and Trademarks Our use of trade secrets, proprietary know-how, trademarks, copyrights, patents, contractual confidentiality, and IP ownership provisions helps us develop and maintain our competitive position with respect to our products and manufacturing processes.
Our transceivers, submodules, pluggable amplifiers, and configurable line cards are able to meet the requirements of low power consumption, compactness, ease of installation and operation, and cost savings, which are often mandatory features in the DCI market. The accelerating adoption of applications such as cloud computing is driving the rapid growth of datacenter buildouts.
Our proven experience in both transmission and transport allows us to effectively address the emerging DCI market. Our transceivers, submodules, pluggable amplifiers, and configurable line cards are able to meet the requirements of low power consumption, compactness, ease of installation and operation, and cost savings, which are often mandatory features in the DCI market. • Datacom Market Vertical .
We do occasionally experience problems associated with vendor-supplied raw materials not meeting contract specifications for quality or purity. Risks associated with reliance on third parties for the timely and reliable delivery of raw materials is discussed in greater detail in Item 1A. Risk Factors of this Annual Report on Form 10-K.
We continue to develop strategic second sources as part of our overall business continuity planning, and occasionally experience problems associated with raw materials not meeting contract specifications for quality or purity. Risks associated with reliance on third parties for the timely and reliable delivery of raw materials are discussed in greater detail in Item 1A.
These applications are performed at or near the patient, requiring extreme precision and often complex designs and typically reach into the NIR and IR wavelengths. Applications are varied, from laser-based treatments and surgeries to medical imaging and even point of care. II-VI’s semiconductor laser bars and stacks are used in applications such as hair and wrinkle removal.
Medical laser and clinical procedures are increasingly performed with systems that integrate our lasers, optics, and thermal solutions. These applications are performed at or near the patient, requiring extreme precision and often complex designs and typically reaching into the NIR and IR wavelengths. Applications are varied, from laser-based treatments and surgeries to medical imaging and point of care.
We segment this market into three application areas (biotechnology, medical laser, and scientific) and deliver targeted and unique product portfolios for each segment. II-VI vertically integrates from the component level to more complex subassemblies and even full systems. Applications within the biotechnology segment include flow cytometry, genome sequencing, PCR, molecular diagnostics, imaging, and spectroscopy, to name a few.
Within the life sciences end market, we focus on analytical instrumentation that integrates light- and/or thermal-management solutions. We segment this market into three application areas (biotechnology, medical laser, and scientific) and deliver targeted and unique product portfolios for each segment. We vertically integrate from the component level to more complex subassemblies and even full systems.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeNatural disasters or other global or regional catastrophic events could disrupt our operations, give rise to substantial environmental hazards, and adversely affect our results. We may be exposed to business interruptions due to extreme weather caused by climate change and deforestation, force majeure catastrophes, natural disaster, pandemic, terrorism, or acts of war that are beyond our control.
Biggest changeWe may be exposed to business interruptions due to extreme weather caused by climate change and deforestation, force majeure catastrophes, natural disasters, (including, but not limited to, droughts; earthquakes; flooding; heavy rains; landslides; rotating storms like cyclones, hurricanes, tornados, and typhoons; tsunamis and other giant waves; wildfires and volcanic eruptions), pandemic, terrorism, or acts of war that are beyond our control.
We may face particular data privacy and security and data protection risks due to laws and regulations regulating the protection or security of personal and other sensitive data, including in particular several laws and regulations that have recently been enacted or adopted or are likely to be enacted or adopted in the future.
We may face particular data privacy, security and data protection risks due to laws and regulations regulating the protection or security of personal and other sensitive data, including in particular several laws and regulations that have recently been enacted or adopted or are likely to be enacted or adopted in the future.
In addition, the Term Loan A Facility and Revolving Credit Facility require that the Company maintain (i) a maximum total net leverage ratio, as defined in the New Credit Agreement, initially of 5.25 to 1.00 as of the last day of each fiscal quarter, commencing with the end of the first full fiscal quarter after the Closing Date, stepping down to 4.00 to 1.00 at December 31, 2023 and thereafter and (ii) an interest coverage ratio, as defined in the New Credit Agreement, of at least 2.50 to 1.00.
In addition, the Term Loan A Facility and Revolving Credit Facility require that the Company maintain (i) a maximum total net leverage ratio, as defined in the New Credit Agreement, initially of 5.25 to 1.00 as of the last day of each fiscal quarter, commencing with the end of the first full fiscal quarter after the Closing Date, stepping down to 4.00 to 1.00 at December 31, 2023 and thereafter and (ii) an interest coverage ratio, as defined in the Credit Agreement, of at least 2.50 to 1.00.
The markets in which we have historically sold our optical subsystems and components products are dominated by a relatively small number of systems manufacturers, thereby limiting the number of our potential customers. Our dependence on large orders from a relatively small number of customers makes our relationship with each customer critically important to our business.
The markets in which we have historically sold our optical subsystems and components products are dominated by a relatively small number of systems manufacturers, thereby limiting the number of our potential customers. Our dependence on large orders from a relatively small number of large customers makes our relationship with each large customer critically important to our business.
In addition, if we experience problems with our manufacturing facilities, it would be costly and require a long period of time to move the manufacture of these components and finished good products to a different facility or contract manufacturer, which could result in interruptions in supply and would likely materially impact our financial condition and results of operations.
In addition, if we experience problems with our manufacturing facilities, it would be costly and require a long period of time to move the manufacture of these components and finished good products to a different facility or contract manufacturer, which could result in interruptions in supply and would likely materially impact our results of operations and financial condition.
We also may not, unless BCPE otherwise consents in writing (or if such action is taken with respect to a Permitted Issuance (as defined in the Investment Agreement)), so long as it owns at least 25% of the number of shares of Series B Preferred Stock that it held immediately following the issuance and sale of the Series B-2 Preferred Stock upon completion of our acquisition of Coherent, redeem, repurchase or otherwise acquire (or make or declare any dividend or distribution in respect of) any junior stock (subject to certain exceptions, including, among other things, ordinary dividends, non-cash dividends or other distributions paid pro rata to all holders of our common stock and, if applicable, holders of Series B Preferred Stock, repurchases of junior stock of up to $100 million on an aggregate annual basis and dividends on junior stock in kind or in the form of other junior securities or securities convertible into or exchange for such junior securities).
We also may not, unless BCPE otherwise consents in writing (or if such action is taken with respect to a Permitted Issuance (as defined in the Investment Agreement)), so long as it owns at least 25% of the number of shares of Series B Preferred Stock that it held immediately following the issuance and sale of the Series B-2 Preferred Stock upon completion of our acquisition of Coherent, Inc., redeem, repurchase or otherwise acquire (or make or declare any dividend or distribution in respect of) any junior stock (subject to certain exceptions, including, among other things, ordinary dividends, non-cash dividends or other distributions paid pro rata to all holders of our common stock and, if applicable, holders of Series B Preferred Stock, repurchases of junior stock of up to $100 million on an aggregate annual basis and dividends on junior stock in kind or in the form of other junior securities or securities convertible into or exchange for such junior securities).
Furthermore, we may not, unless holders of Series B Preferred Stock otherwise consent in writing (or if such action is taken with respect to a Permitted Issuance (as defined in the Investment Agreement)), so long as BCPE owns at least 5% of the number of shares of Series B Preferred Stock that it held immediately following the issuance and sale of the Series B-2 Preferred Stock upon completion of our acquisition of Coherent, (i) authorize or issue any parity stock and (ii) pay any cash dividend on our common stock (other than ordinary dividends).
Furthermore, we may not, unless holders of Series B Preferred Stock otherwise consent in writing (or if such action is taken with respect to a Permitted Issuance (as defined in the Investment Agreement)), so long as BCPE owns at least 5% of the number of shares of Series B Preferred Stock that it held immediately following the issuance and sale of the Series B-2 Preferred Stock upon completion of our acquisition of Coherent, Inc., (i) authorize or issue any parity stock and (ii) pay any cash dividend on our common stock (other than ordinary dividends).
Potential impacts on our operations include: • significant reductions in demand for one or more of our products or a curtailment to one or more of our product lines caused by, among other things, any temporary inability of our customers to purchase and utilize our products in next-stage manufacturing due to shutdown orders or financial hardship; • workforce constraints triggered by any applicable shutdown orders or stay-at-home polices; • disruptions to our third-party manufacturing and raw materials supply arrangements caused by constraints over our suppliers’ workforce capacity, financial, or operational difficulties; • disruption in our own ability to produce and ship products, including components we use in the production of other products; • heightened risk and uncertainty regarding the loss or disruption of essential third-party service providers, including transportation services, contract manufacturing, marketing, and distribution services; 29 • requirements to comply with governmental and regulatory responses such as quarantines, import/export restrictions, price controls, or other governmental or regulatory actions, including closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our workforce’s ability to travel or perform necessary business functions, or otherwise impact our suppliers or customers, which could adversely impact our operating results; and • increased operating expenses and potentially reduced efficiency of operations.
Potential impacts on our operations include: • significant reductions in demand for one or more of our products or a curtailment to one or more of our product lines caused by, among other things, any temporary inability of our customers to purchase and utilize our products in next-stage manufacturing due to shutdown orders or financial hardship; 31 • workforce constraints triggered by any applicable shutdown orders or stay-at-home polices; • disruptions to our third-party manufacturing and raw materials supply arrangements caused by constraints over our suppliers’ workforce capacity, financial, or operational difficulties; • disruption in our own ability to produce and ship products, including components we use in the production of other products; • heightened risk and uncertainty regarding the loss or disruption of essential third-party service providers, including transportation services, contract manufacturing, marketing, and distribution services; • requirements to comply with governmental and regulatory responses such as quarantines, import/export restrictions, price controls, or other governmental or regulatory actions, including closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our workforce’s ability to travel or perform necessary business functions, or otherwise impact our suppliers or customers, which could adversely impact our operating results; and • increased operating expenses and potentially reduced efficiency of operations.
We are also impacted by the establishment or release of valuation allowances against deferred tax assets, changes in generally accepted accounting principles and continued eligibility for tax holiday benefits. 35 The enactment of the Tax Cuts and Jobs Act (the “Tax Act”) in December 2017 significantly affected U.S. tax law by changing how the United States imposes tax on multinational corporations.
We are also impacted by the establishment or release of valuation allowances against deferred tax assets, changes in generally accepted accounting principles and continued eligibility for tax holiday benefits. The enactment of the Tax Cuts and Jobs Act (the “Tax Act”) in December 2017 significantly affected U.S. tax law by changing how the United States imposes tax on multinational corporations.
Failure to obtain export licenses for these shipments, or having one or more of our customers be restricted from receiving exports from us, could significantly reduce our revenue and materially adversely affect our business, financial condition, and results of 31 operations. Compliance with regulations of the United States and other governments also subjects us to additional fees and costs.
Failure to obtain export licenses for these shipments, or having one or more of our customers be restricted from receiving exports from us, could significantly reduce our revenue and materially adversely affect our business, financial condition, and results of operations. Compliance with regulations of the United States and other governments also subjects us to additional fees and costs.
Subject to certain exceptions, we must not: (1) alter or change the rights, preferences or privileges of our Series B Preferred Stock or amend, modify or supplement any provision of our organizational documents in a manner that adversely affects the rights, powers, preferences or privileges of our Series B Preferred Stock; (2) authorize or issue any senior stock (or securities convertible into senior stock), or amend or alter our articles of incorporation to increase the number of authorized or issued shares of our Series B Preferred Stock; (3) decrease the number of authorized shares of our Series B Preferred Stock (other than as permitted pursuant to a conversion, redemption or repurchase by us thereof); (4) issue any shares of our Series B Preferred Stock (other than pursuant to the amended and restated invested agreement, entered into on March 30, 2021, by and between Bain Capital Private Equity, LP (“BCPE”) and us (the “Investment Agreement”); and (5) effect any voluntary deregistration or delisting with Nasdaq of our common stock.
Subject to certain exceptions, we must not: (1) alter or change the rights, preferences or privileges of our Series B Preferred Stock or amend, modify or supplement any provision of our organizational documents in a manner that adversely affects the rights, powers, preferences or privileges of our Series B Preferred Stock; (2) authorize or issue any senior stock (or securities convertible into senior stock), or amend or alter our articles of incorporation to increase the number of authorized or issued shares of our Series B Preferred Stock; (3) decrease the number of authorized shares of our Series B Preferred Stock (other than as permitted pursuant to a conversion, redemption or repurchase by us thereof); (4) issue any shares of our Series B Preferred Stock (other than pursuant to the amended and restated invested agreement, entered into on March 30, 2021, by and between Bain Capital Private Equity, LP (“BCPE”) and us (the “Investment Agreement”); and (5) effect any voluntary deregistration or delisting with the NYSE of our common stock.
Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could delay the reporting of our financial results or cause us to be subject to investigations, enforcement actions by regulatory agencies, stockholder lawsuits, or other adverse actions requiring us to incur defense costs or pay fines, settlements, or 38 judgments.
Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could delay the reporting of our financial results or cause us to be subject to investigations, enforcement actions by regulatory agencies, stockholder lawsuits, or other adverse actions requiring us to incur defense costs or pay fines, settlements, or judgments.
Further, given the volatility of exchange rates, we may not be able to effectively manage our currency risks, and any volatility in currency exchange rates may increase the price of our products in local currency to our foreign customers or 30 increase the manufacturing cost of our products, either of which may have an adverse effect on our financial condition, cash flows, and profitability.
Further, given the volatility of exchange rates, we may not be able to effectively manage our currency risks, and any volatility in currency exchange rates may increase the price of our products in local currency to our foreign customers or increase the manufacturing cost of our products, either of which may have an adverse effect on our financial condition, cash flows, and profitability.
Failure to obtain export licenses for these shipments could significantly reduce our revenue and materially adversely affect our business, financial condition, relationships with our customers and results of operations. Additionally, failure to comply with the various regulatory requirements could subject us to significant fines, suspension of export privileges or disbarment.
Failure to obtain and/or retain export licenses for these shipments could significantly reduce our revenue and materially adversely affect our business, financial condition, results of operations and relationships with our customers. Additionally, failure to comply with the various regulatory requirements could subject us to significant fines, suspension of export privileges or disbarment.
In the event that a third party were successful in a claim that one of our processes infringed its proprietary rights, we could be required to pay substantial damages or royalties, or spend substantial amounts in order to obtain a license or modify processes so that they 32 no longer infringe such proprietary rights.
In the event that a third party were successful in a claim that one of our processes infringed its proprietary rights, we could be required to pay substantial damages or royalties, or spend substantial amounts in order to obtain a license or modify processes so that they no longer infringe such proprietary rights.
Our ability to comply with these provisions may be affected by events beyond our control. Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations under the New Credit Agreement or the Indenture, as applicable.
Our ability to comply with these provisions may be affected by events beyond our control. Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations under the Credit Agreement or the Indenture, as applicable.
In addition, the overall integration of an acquired business can be a time-consuming and expensive process that, without proper planning and effective and timely implementation, could significantly disrupt our business. 26 Potential difficulties that we may encounter in the integration process include: • the integration of management teams, strategies, technologies and operations, products, and services; • the disruption of ongoing businesses and distraction of their respective management teams from ongoing business concerns; • the retention of, and possible decrease in business from, existing customers; • the creation of uniform standards, controls, procedures, policies, and information systems; • the reduction of the costs associated with combined operations; • the integration of corporate cultures and maintenance of employee morale; • the retention of key employees; and • potential unknown liabilities associated with the acquired business.
In addition, the overall integration of an acquired business can be a time-consuming and expensive process that, without proper planning and effective and timely implementation, could significantly disrupt our business. 27 Potential difficulties that we may encounter in the integration process include: • the integration of management teams, strategies, technologies and operations, products, and services; • the disruption of ongoing businesses and distraction of their respective management teams from ongoing business concerns; • the retention of, and possible decrease in business from, existing customers; • the creation of uniform standards, controls, procedures, policies, and information systems; • the reduction of the costs associated with combined operations; • the integration of corporate cultures and maintenance of employee morale; • the retention of key employees; and • potential unknown liabilities associated with the acquired business.
Some of the risks that may affect our ability to integrate or realize anticipated benefits from acquired companies, businesses, or assets include those associated with: • unexpected losses of key employees of the acquired company; • conforming the acquired company’s standards, processes, procedures, and controls with our operations, including integrating enterprise resource planning systems and other key business applications; • coordinating new product and process development; • increasing complexity from combining operations; • increasing the scope, geographic diversity, and complexity of our operations; • difficulties in consolidating facilities and transferring processes and know-how; • diversion of management’s attention from other business concerns; and • actions we may take in connection with acquisitions, such as: ◦ using a significant portion of our available cash; ◦ issuing equity securities, which would dilute current shareholders’ percentage ownership; ◦ incurring significant debt; ◦ incurring or assume contingent liabilities, known or unknown, including potential lawsuits, infringement actions, or similar liabilities; ◦ incurring impairment charges related to goodwill or other intangibles; and ◦ facing antitrust or other regulatory inquiries or actions.
Some of the risks that may affect our ability to integrate or realize anticipated benefits from acquired companies, businesses, or assets include those associated with: • unexpected losses of key employees of the acquired company; • standardizing the combined company’s standards, processes, procedures, and controls, including integrating enterprise resource planning systems and other key business applications; • coordinating new product and process development; • increasing complexity from combining operations; • increasing the scope, geographic diversity, and complexity of our operations; • difficulties in consolidating facilities and transferring processes and know-how; • diversion of management’s attention from other business concerns; and • actions we may take in connection with acquisitions, such as: ◦ using a significant portion of our available cash; ◦ issuing equity securities, which would dilute current shareholders’ percentage ownership; ◦ incurring significant debt; ◦ incurring or assume contingent liabilities, known or unknown, including potential lawsuits, infringement actions, or similar liabilities; ◦ incurring impairment charges related to goodwill or other intangibles; and ◦ facing antitrust or other regulatory inquiries or actions.
Our success requires us to attract, retain, and develop key personnel and maintain good relations with our employees. We are highly dependent upon the experience and continuing services of certain scientists, engineers, production, and management personnel. Competition for the services of these personnel is intense.
Our success requires us to attract, retain, and develop key personnel and maintain good relations with our employees. We are highly dependent upon the experience and continuing services of certain scientists, engineers, production, sales, and management personnel. Competition for the services of these personnel is intense.
Hazardous substances used or generated in some of our research and manufacturing facilities are subject to stringent environmental regulation. We believe that our handling of such substances is in material compliance with applicable environmental, safety, and health regulations at each operating location.
Hazardous substances used or generated in some of our research and manufacturing facilities are subject to stringent environmental and safety regulations. We believe that our handling of such substances is in material compliance with applicable environmental, safety, and health regulations at each operating location.
We may not be able to offset any decline in revenues from our existing major customers with revenues from new customers, and our quarterly results may be volatile because we are dependent on large orders from these customers that may be reduced, delayed, or cancelled.
We may not be able to offset any decline in revenues from our existing large customers with revenues from new customers, and our quarterly results may be volatile because we are dependent on large orders from these customers that may be reduced, delayed, or cancelled.
A substantial portion of our research and development activities, manufacturing, and other critical business operations are located near major earthquake faults, for example in Santa Clara, California, an area with a history of seismic events.
A portion of our research and development activities, manufacturing, and other critical business operations are located near major earthquake faults, for example in Santa Clara, California, an area with a history of seismic events. .
Some of our business units depend from time to time on large purchases from a few significant customers, and any loss, cancellation, reduction, or delay in purchases by these customers could harm the longevity of the business.
Some of our business units depend from time to time on large purchases from a few large customers, and any loss, cancellation, reduction, or delay in purchases by these large customers could harm the longevity of the business.
Further, some of our customers may in the future shift their purchases of products from us to our competitors or to joint ventures between these customers and our competitors, or may in certain circumstances produce competitive products themselves.
Further, some of our large customers may in the future shift their purchases of products from us to our competitors or to joint ventures between these customers and our competitors, or may in certain circumstances produce competitive products themselves.
The New Credit Agreement also contains customary events of default that include, among other things, certain payment defaults, covenant defaults, cross-defaults to other indebtedness, change of control defaults, judgment defaults, and bankruptcy and insolvency defaults.
The Credit Agreement also contains customary events of default that include, among other things, certain payment defaults, covenant defaults, cross-defaults to other indebtedness, change of control defaults, judgment defaults, and bankruptcy and insolvency defaults.
Regardless of the amount of a person’s holdings, if a shareholder or shareholder group (including affiliated persons) would be a party to certain proposed transactions with us or would be treated differently from other shareholders of ours in certain proposed transactions, the BCL requires approval by a majority of votes entitled to be cast by all shareholders other than the interested shareholder or affiliate group, unless the transaction is approved by independent directors or other criteria are satisfied.
Regardless of the amount of a person’s holdings, if a shareholder or shareholder group (including affiliated persons) would be a party to certain proposed transactions with us or would be treated differently from other shareholders of ours in certain proposed transactions, the Code requires approval by a majority of votes entitled to be cast by all shareholders other than the interested shareholder or affiliate group, unless the transaction is approved by independent directors or other criteria are satisfied.
The market prices of our securities could fluctuate significantly for many reasons, including the following: • future announcements concerning us or our competitors; • the overall performance of equity markets; • the trading volume of our securities; • additions or changes to our board of directors, management, or key personnel; • regulatory actions (including, but not limited to, developments in international trade policy) and enforcement actions bearing on manufacturing, development, marketing, or sales; • the commencement or outcome of litigation; • reports and recommendations of analysts and whether or not we meet the milestones, metrics, and other expectations set forth in such reports; • gaining or losing large customers; • the introduction of new products or services and market acceptance of such products or services; • fluctuations in demand for our products or downturns in the industries that we serve, particularly the continued build-out of the capacity for the manufacture of OLED and the increased use of the installed base of our products in such manufacturing; • the impact of any public health crisis on our business, financial condition, results of operations, or prospects or those of our customers and suppliers; • the acquisition or loss of significant manufacturers, distributors, or suppliers or an inability to obtain sufficient quantities of materials needed to provide our services; • the issuance of common stock or other securities (including shares of common stock issued upon conversion of any shares of Mandatory Convertible Preferred Stock or Series B Preferred Stock or upon conversion of our outstanding convertible notes); • incurrence of indebtedness; • quarterly variations in operating results; • our ability to accurately forecast future performance; • business acquisitions or divestitures; • fluctuations in the economy, political events, or general market conditions; and • changes in our operating industry generally.
The market prices of our securities could fluctuate significantly for many reasons, including the following: • future announcements by or concerning us or our competitors; • the overall performance of equity markets; • the trading volume of our securities; • additions or changes to our Board of Directors, management, or key personnel; • regulatory actions (including, but not limited to, developments in international trade policy) and enforcement actions bearing on manufacturing, development, marketing, or sales; • the commencement or outcome of litigation; • reports and recommendations of analysts and whether or not we meet the milestones, metrics, and other expectations set forth in such reports; • gaining or losing large customers; • the introduction of new products or services and market acceptance of such products or services; • fluctuations in demand for our products or downturns in the industries that we serve, particularly the continued build-out of the capacity for the manufacture of OLED and the increased use of the installed base of our products in such manufacturing; • the impact of any public health crisis on our business, financial condition, results of operations, or prospects or those of our customers and suppliers; • the acquisition or loss of significant manufacturers, distributors, or suppliers or an inability to obtain sufficient quantities of materials needed to provide our services; • the issuance of common stock or other securities (including shares of common stock issued upon conversion of any shares of Series B Preferred Stock); 41 • incurrence of indebtedness; • quarterly variations in operating results; • our ability to accurately forecast future performance; • business acquisitions or divestitures; • fluctuations in the economy, political events, or general market conditions; and • changes in our operating industry generally.
The New Credit Agreement and the Indenture, dated as of December 10, 2021 (the “Indenture), which provides for the 2029 Notes, contain various affirmative and negative covenants that will, subject to certain significant exceptions, restrict our ability to, among other things, have liens on our property, incur additional indebtedness, enter into sale and lease-back transactions, make loans, advances or other investments, make non-ordinary course asset sales, declare or pay dividends or make other distributions with respect to equity interests, and/or merge or consolidate with any other person or sell or convey certain of our assets to any one person, among other things.
The Credit Agreement and the Indenture, dated as of December 10, 2021 (the “Indenture”), which provides for the 2029 Notes, contain various affirmative and negative covenants that will, subject to certain significant exceptions, restrict our ability to, among other things, have liens on our property, incur additional indebtedness, enter into sale and lease-back transactions, make loans, advances or other investments, make non-ordinary course asset sales, declare or pay dividends or make other distributions with respect to equity interests, and/or merge or consolidate with any other person or sell or convey certain of our assets to any one person, among other things.
If we fail to fulfill our commitments under these supply agreements, our business, after using all remedies available, financial conditions, and results of operations may suffer a material adverse effect. We depend on highly complex manufacturing processes that require feeder materials, components, and products from limited sources of supply.
If we fail to fulfill our commitments under these supply agreements, our business, after using all remedies available, financial conditions, and results of operations may suffer a material adverse effect. We depend on highly complex manufacturing processes that require strategic materials, components, and products from limited sources of supply.
The BCL expressly provides that directors do not violate their fiduciary duties solely by relying on “poison pills” or the anti-takeover provisions of the BCL. We do not currently have a “poison pill.” All of these provisions may limit the price that investors may be willing to pay for shares of our capital stock.
The Code expressly provides that directors do not violate their fiduciary duties solely by relying on “poison pills” or the anti-takeover provisions of the Code. We do not currently have a “poison pill.” All of these provisions may limit the price that investors may be willing to pay for shares of our capital stock.
This means that, unless accumulated dividends have been paid on all the Mandatory Convertible Preferred Stock and Series B Preferred Stock then outstanding through the most recently completed dividend period, no dividends may be declared or paid on our common stock and we will not be permitted to repurchase any of our common stock, subject to limited exceptions.
This means that, unless accumulated dividends have been paid on all the Series B Preferred Stock then outstanding through the most recently completed dividend period, no dividends may be declared or paid on our common stock and we will not be permitted to repurchase any of our common stock, subject to limited exceptions.
A significant portion of our operations is conducted through our subsidiaries, and our ability to generate cash to meet our debt service obligations or to make future dividend payments with respect to the Mandatory Convertible Preferred Stock and, to the extent we elect to make such payments in cash, our Series B Preferred Stock is highly dependent on the earnings and the receipt of funds from our subsidiaries.
A significant portion of our operations is conducted through our subsidiaries, and our ability to generate cash to meet our debt service obligations or to make future dividend payments, to the extent we elect to make such payments in cash, with respect to our Series B Preferred Stock is highly dependent on the earnings and the receipt of funds from our subsidiaries.
We also enter into development projects from time to time that might result in intellectual property developed during a project that is assigned to the other party without us retaining rights to that intellectual property or is jointly owned with the other party. Our global operations are subject to complex legal and regulatory requirements.
We also enter into development projects from time to time that might result in intellectual property developed during a project that is assigned to the other party without us retaining rights to that intellectual property or is jointly owned with the other party. Our global operations are subject to complex and rapidly changing legal and regulatory requirements.
Changes in trade policies, such as increased import duties, could increase the costs of goods imported into the United States or China. In March 2018, President Trump announced new steel and aluminum tariffs. Then, in July 2018, the United States imposed increased tariffs on products of Chinese origin, and China responded by increasing tariffs on U.S.-origin goods.
Changes in trade policies, such as increased import duties, could increase the costs of goods imported into the United States or China. In March 2018, the United States announced new steel and aluminum tariffs. Then, in July 2018, the United States imposed increased tariffs on products of Chinese origin, and China responded by increasing tariffs on U.S.-origin goods.
Furthermore, the BCL provides that directors, in discharging their duties, may consider, to the extent they deem appropriate, the effects of any action upon shareholders, employees, suppliers, customers, and the communities in which the corporation’s offices are located. Directors are not required to consider the interests of shareholders to a greater degree than other constituencies’ interests.
Furthermore, the Code provides that directors, in discharging their duties, may consider, to the extent they deem appropriate, the effects of any action upon shareholders, employees, suppliers, customers, and the communities in which the corporation’s offices are located. Directors are not required to consider the interests of shareholders to a greater degree than other constituencies’ interests.
In addition, the BCL contains provisions that may have the effect of delaying or preventing a change in our control or changes in our management. Many of these provisions are triggered if any person or group acquires, or discloses the intent to acquire, 20% or more of a corporation’s voting power, subject to certain exceptions.
In addition, the Code contains provisions that may have the effect of delaying or preventing a change in our control or changes in our management. Many of these provisions are triggered if any person or group acquires, or discloses the intent to acquire, 20% or more of a corporation’s voting power, subject to certain exceptions.
Department of Commerce placed a number of entities, including Huawei, on the U.S. Entity List. If we cannot obtain relief from, or take other action to mitigate the impact of, these additional duties and restrictions and duties, our business and profits may be materially and adversely affected.
Department of Commerce placed a number of entities on the U.S. Entity List. If we cannot obtain relief from, or take other action to mitigate the impact of, these additional duties and restrictions and duties, our business and profits may be materially and adversely affected.
If we are unable to prevent or contain such security or privacy breaches, our operations could be disrupted or we could suffer legal claims, loss of reputation, financial loss, property damage, or regulatory penalties. We use and generate potentially hazardous substances that are subject to stringent environmental regulations.
If we are unable to prevent or contain such security or privacy breaches, our operations could be disrupted or we could suffer legal claims, loss of reputation, financial loss, property damage, or regulatory penalties. 35 We use and generate potentially hazardous substances that are subject to stringent environmental and safety regulations.
Changes in tax laws or tax rulings may have a significantly adverse impact on our effective tax rate, including the newly-enacted “Inflation Reduction Act of 2022” and the two-pillar solution for a global minimum level of taxation by the Organization for Economic Co-operation and Development (“OECD”).
Changes in tax laws or tax rulings may have a significantly adverse impact on our effective tax rate, including the “Inflation Reduction Act of 2022” and the two-pillar solution for a global minimum level of taxation by the Organization for Economic Co-operation and Development (“OECD”).
In the event of a bankruptcy, liquidation, dissolution, or winding-up of our affairs, there may not be sufficient assets remaining, after paying our and our subsidiaries’ liabilities, to pay amounts due on any or all of the Mandatory Convertible Preferred Stock and Series B Preferred Stock then outstanding.
In the event of a bankruptcy, liquidation, dissolution, or winding-up of our affairs, there may not be sufficient assets remaining, after paying our and our subsidiaries’ liabilities, to pay amounts due on any or all of the Series B Preferred Stock then outstanding.
We cannot ensure that we will be able to retain our major customers, attract additional customers, or that our customers will be successful in selling their products that incorporate our products. In addition, governmental trade action or economic sanctions may limit or preclude our ability to do business with certain customers.
We cannot ensure that we will be able to retain our large customers, attract additional large customers, or that our large customers will be successful in selling their products that incorporate our products. In addition, governmental trade action or economic sanctions may limit or preclude our ability to do business with certain large customers.
We may be unable to successfully implement our acquisitions strategy or integrate acquired companies and personnel with existing operations. We have acquired several companies, including Finisar Corporation (“Finisar”) in September 2019 and Coherent in July 2022.
We may be unable to successfully implement our acquisitions strategy or integrate acquired companies and personnel with existing operations. We have acquired several companies, including Finisar Corporation in September 2019 and Legacy Coherent in July 2022.
There also have also been recent significant developments concerning privacy and data security in China, where we have significant operations. For example, the Data Security Law of the People’s Republic of China (the “Data Security Law”) took effect in September 2021.
As and additional example, there have also been recent developments concerning privacy and data security in China, where we have significant operations. For example, the Data Security Law of the People’s Republic of China (the “Data Security Law”) took effect in September 2021.
Our board of directors also has the power, without shareholder approval, subject to applicable law, to set the terms of any such series of preferred stock that may be issued, including voting 41 rights, dividend rights, preferences over our common stock with respect to dividends, and other terms, or upon our liquidation, dissolution, or winding-up of our affairs.
Our Board of Directors also has the authority, without shareholder approval, subject to applicable law, to set the terms of any such series of preferred stock that may be issued, including voting rights, dividend rights, preferences over our common stock with respect to dividends, and other terms, or upon our liquidation, dissolution, or winding-up of our affairs.
We have in the past experienced delays and reductions in orders from some of our major customers. In addition, our customers have in the past sought price concessions from us, and we expect that they will continue to do so in the future.
We have in the past experienced delays and reductions in orders from some of our large customers. In addition, our large customers have in the past sought price concessions from us, and we expect that they will continue to do so in the future.
Our common stock ranks junior to our Mandatory Convertible Preferred Stock and Series B Preferred Stock with respect to the payment of dividends and amounts payable in the event of our liquidation, dissolution, or winding-up of our affairs.
Our common stock ranks junior to our Series B Preferred Stock with respect to the payment of dividends and amounts payable in the event of our liquidation, dissolution, or winding-up of our affairs.
Expense reduction measures that we have implemented over the past several years, and additional action we are taking to reduce costs, may adversely affect our ability to introduce new and improved products, which may, in turn, adversely affect our relationships with some of our key customers.
Cost and expense reduction measures that we have implemented over the past several years, and additional action we are taking to reduce costs, may adversely affect our ability to introduce new and improved products, which may, in turn, adversely affect our relationships with some of our large customers.
Likewise, if any of certain fundamental changes were to occur, we or the surviving entity would be required to make an offer to repurchase, at the option and election of the holders thereof, for cash each share of Series B Preferred Stock then outstanding.
In addition, if any of certain fundamental changes were to occur, we or the surviving entity would be required to make an offer to repurchase, at the option and election of the holders thereof, for cash each share of Series B Preferred Stock then outstanding.
The introduction by our competitors of products or processes using new developments that are better or faster than ours could render our products or processes obsolete or unmarketable. We intend to continue to make significant investments in research, development, and engineering to achieve our goals.
The introduction by our competitors of products or processes using new developments that are better or lower cost than ours could render our products or processes obsolete or unmarketable. We intend to continue to make significant investments in research, development, and engineering to achieve our goals.
Likewise, in the event of our voluntary or involuntary liquidation, dissolution, or winding-up of our affairs, no distribution of our assets may be made to holders of our common stock until we have paid to holders of the Mandatory Convertible Preferred Stock and Series B Preferred Stock then outstanding the applicable liquidation preferences.
Likewise, in the event of our voluntary or involuntary liquidation, dissolution, or winding-up of our affairs, no distribution of our assets may be made to holders of our common stock until we have paid to holders of the Series B Preferred Stock then outstanding the applicable liquidation preferences.
Our subsidiaries are separate legal entities that have no obligation to make any funds available to us, whether by dividends, loans, or other payments. 43
Our subsidiaries are separate legal entities that have no obligation to make any funds available to us, whether by dividends, loans, or other payments. 45
Circumstances may occur in which the interests of BCPE could conflict with the interests of holders of other outstanding capital stock, including our common stock and our Mandatory Convertible Preferred Stock. 42 Reports published by securities or industry analysts, freelance bloggers and credit rating agencies, including projections in those reports that exceed our actual results, could adversely affect our share price and trading volume.
Circumstances may occur in which the interests of BCPE could conflict with the interests of holders of other outstanding capital stock, including our common stock. Reports published by securities or industry analysts, freelance bloggers and credit rating agencies, including projections in those reports that exceed our actual results, could adversely affect our share price and trading volume.
As a result of the technological complexity of our products, in particular our excimer laser annealing tools used in the flat panel display market, changes in our or our suppliers’ manufacturing processes or the inadvertent use of defective materials by us or our suppliers could result in a material adverse effect on our ability to achieve acceptable manufacturing yields and product reliability.
As a result of the technological complexity of our products, in particular our excimer laser annealing tools used in the display capital equipment market, changes in our or our suppliers’ manufacturing processes or the inadvertent use of defective materials by us or our suppliers could result in a material adverse effect on our ability to achieve acceptable manufacturing yields and product reliability.
The microelectronics market is characterized by rapid technological change, frequent product introductions, the volatility of product supply and demand, changing customer requirements and evolving industry standards. The nature of this market requires significant research and development expenses to participate, with substantial resources invested in advance of material sales of our products to our customers in this market.
The semiconductor capital equipment market is characterized by rapid technological change, frequent product introductions, the volatility of product supply and demand, changing customer requirements and evolving industry standards. The nature of this market requires significant research and development expenses to participate, with substantial resources invested in advance of material sales of our products to our customers in this market.
Item 1A. RISK FACTORS The following are certain risk factors that could affect our business, results of operations, financial position or cash flows.
Item 1A. RISK FACTORS The following are certain risk factors that could affect our business, results of operations, financial condition or cash flows.
Additionally, our product offerings may become obsolete given the frequent introduction of alternative technologies. In the event either our customers’ or our products fail to gain market acceptance, or the microelectronics market fails to grow, it would likely have a significant negative effect on our business and results of operations.
Additionally, our product offerings may become obsolete given the frequent introduction of alternative technologies. In the event either our customers’ or our products fail to gain market acceptance, or the semiconductor capital equipment market fails to grow, it would likely have a significant negative effect on our business and results of operations.
In the flat panel display market, it is unclear when the timing will be, or whether it will occur at all, for any further build-out of fabs for the manufacture of OLED screens, and there are a relatively limited number of manufacturers who are the end customers for our annealing products.
In the display capital equipment market, it is unclear when the timing will be, or whether it will occur at all, for any further build-out of fabs for the manufacture of OLED screens, and there are a relatively limited number of manufacturers who are the end customers for our annealing products.
Additionally we have $350 million of undrawn capacity under our senior secured revolving credit facility (the “Revolving Credit Facility. We may also incur additional indebtedness in the future by entering into new financing arrangements.
Additionally we have $348 million of undrawn capacity under our senior secured revolving credit facility (the “Revolving Credit Facility”). We may also incur additional indebtedness in the future by entering into new financing arrangements.
This may have the effect of reducing funds available for working capital, capital expenditures, acquisitions and other general corporate purposes, thereby negatively affecting the interests of holders of our other capital stock, including our common stock and our Mandatory Convertible Preferred Stock.
This may have the effect of reducing funds available for working capital, capital expenditures, acquisitions and other general corporate purposes, thereby negatively affecting the interests of holders of our other capital stock, including our common stock.
In addition, we produce and use other high-purity and relatively uncommon materials and compounds to manufacture our products, including, but not limited to, ZnS, GaAs, yttrium aluminum garnet, yttrium lithium fluoride, calcium fluoride, germanium, selenium, telluride, Bi 2 Te 3 , and SiC.
In addition, we use rare earth minerals and produce and use high-purity and relatively uncommon materials and compounds to manufacture our products, including, but not limited to, ZnS, GaAs, yttrium aluminum garnet, yttrium lithium fluoride, calcium fluoride, germanium, selenium, telluride, Bi 2 Te 3 , and SiC.
Furthermore, large customers have increased buying power and ability to require onerous terms in our contracts with them, including pricing, warranties, and indemnification terms. If we are unable to satisfy the terms of these contracts, it could result in liabilities of a material nature, including litigation, damages, additional costs, loss of market share, and loss of reputation.
Furthermore, large customers have increased buying power and ability to negotiate onerous terms into our contracts with them, including pricing, warranties, indemnification and production capability terms. If we are unable to satisfy the terms of these contracts, it could result in liabilities of a material nature, including litigation, damages, additional costs, loss of market share, and loss of reputation.
Our products may contain defects that are not detected until deployed, which could increase our costs, reduce our revenues, cause us to lose key customers, or expose us to litigation related to our products. Some systems that use our products are inherently complex in design and require ongoing maintenance.
Our products may contain defects that are not detected until deployed, which could increase our costs, reduce our revenues, cause us to lose key customers, or expose us to litigation related to our products. Some systems that use our products are inherently complex in design.
The agreements that govern our senior credit facilities and our 2029 Notes contain various covenants that impose restrictions on our business, which may affect our ability to operate our businesses.
The agreements that govern our senior credit facilities and our 5.000% senior notes due 2029 contain various covenants that impose restrictions on our business, which may affect our ability to operate our businesses.
Our indebtedness could have important consequences for us, including: • making it difficult for us to satisfy all of our obligations with respect to our debt, or to our trade or other creditors; • increasing our vulnerability to adverse economic or industry conditions; • limiting our ability to obtain additional financing to fund capital expenditures and acquisitions, particularly when the availability of financing in the capital markets is limited; • requiring us to pay higher interest rates upon refinancing or on our variable-rate indebtedness if interest rates rise; • requiring a substantial portion of our cash flows from operations and the proceeds of any capital markets offerings or loan borrowings for the payment of interest on our debt and reducing our ability to use our cash flows to fund working capital, capital expenditures, acquisitions, and general corporate requirements; 34 • limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; and • placing us at a competitive disadvantage to less leveraged competitors.
Our indebtedness could have important consequences for us, including: • making it difficult for us to satisfy all of our obligations with respect to our debt, or to our trade or other creditors; • increasing our vulnerability to adverse economic or industry conditions; • limiting our ability to obtain additional financing to fund capital expenditures and acquisitions, particularly when the availability of financing in the capital markets is limited; • requiring us to pay higher interest rates upon refinancing or on our variable-rate indebtedness if interest rates rise; • requiring a substantial portion of our cash flows from operations and the proceeds of any capital markets offerings or loan borrowings for the payment of interest on our debt and reducing our ability to use our cash flows to fund working capital, capital expenditures, acquisitions, and general corporate requirements; • limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; and • placing us at a competitive disadvantage to less leveraged competitors. 36 We may not generate sufficient cash flow from operations, together with any future borrowings, to enable us to pay our indebtedness or to fund our other liquidity needs.
Furthermore, under the BCL, a “short-form” merger of II-VI cannot be implemented without the consent of our board of directors. In addition, as permitted by Pennsylvania law, an amendment to our Articles of Incorporation or other corporate action that is approved by shareholders may provide mandatory special treatment for specified groups of nonconsenting shareholders of the same class.
Furthermore, under the Code, a “short-form” merger of Coherent Corp. cannot be implemented without the consent of our Board of Directors. In addition, as permitted by Pennsylvania law, an amendment to our Articles of Incorporation or other corporate action that is approved by shareholders may provide mandatory special treatment for specified groups of nonconsenting shareholders of the same class.
Compliance with the import laws that apply to our businesses may restrict our access to, and may increase the cost of obtaining, certain products and could interrupt our supply of imported inventory. • Exported technologies necessary to develop and manufacture certain products are subject to U.S. export control laws and similar laws of other jurisdictions.
Compliance with the import laws that apply to our businesses may restrict our access to, and may increase the cost of obtaining, certain products and could interrupt our supply of imported inventory. • Exported technologies, including, but not limited to, equipment necessary to develop and manufacture certain products are subject to U.S. export control laws and similar laws of other jurisdictions.
As we seek to expand our sales to existing customers and acquire new customers, we may be 36 required to agree to terms and conditions that are favorable to our customers and that may affect the timing of our ability to recognize revenue, increase our costs, and have an adverse effect on our business, financial condition, and results of operations.
As we seek to expand our sales to existing and new large customers, we may be required to agree to terms and conditions that are more favorable to these customers and that may affect the timing of our ability to recognize revenue, increase our costs, and have an adverse effect on our business, results of operations and financial condition.
We participate in the microelectronics market, which requires significant research and development expenses to develop and maintain products and a failure to achieve market acceptance for our products could have a significant negative impact on our business and results of operations.
We participate in the semiconductor capital equipment market, which requires significant research and development expenses to develop and maintain products, and a failure to achieve market acceptance for our products could have a significant negative impact on our business and results of operations.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act of 2002, as amended (“the Sarbanes-Oxley Act”), and Nasdaq listing requirements. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act of 2002, as amended (“the Sarbanes-Oxley Act”), and New York Stock Exchange (“NYSE”) listing requirements. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
When we transition locations, we may increase our inventory of such products as a "safety stock" during the transition, which may cause the amount of inventory reflected on our balance sheet to increase. Additionally, many of our customers rely on sole source suppliers.
When we transition locations, we may increase our inventory of such products as a “safety stock” during the transition, which may cause the amount of inventory reflected on our balance sheet to increase. Additionally, many of our customers rely on sole source suppliers.
The photonics industry is characterized by extensive research and development, rapid technological change, frequent new product introductions, changes in customer requirements and evolving industry standards. Because this industry is subject to rapid change, it is difficult to predict its potential size or future growth rate.
Our markets are characterized by extensive research and development, rapid technological change, frequent new product introductions, changes in customer requirements and evolving industry standards. Because this industry is subject to rapid change, it is difficult to predict its potential size or future growth rate.
Our common stock is subordinate to our existing and future indebtedness; the Mandatory Convertible Preferred Stock and Series B Preferred Stock; and any other preferred stock we may issue in the future. Our Mandatory Convertible Preferred Stock and Series B Preferred Stock rank junior to all of our and our subsidiaries’ consolidated liabilities.
Our common stock is subordinate to our existing and future indebtedness; the Series B Preferred Stock; and any other preferred stock we may issue in the future. Our Series B Preferred Stock ranks junior to all of our and our subsidiaries’ consolidated liabilities.
We also manufacture certain large format optics. Because we manufacture, package and test these components, products and systems at our own facilities, and such components, products and systems are not readily available from other sources, any interruption in manufacturing would adversely affect our business.
Because we manufacture, package and test these components, products and systems at our own facilities, and such components, products and systems are not readily available from other sources, any interruption in manufacturing would adversely affect our business.
There are risks associated with our participation in the flat panel display market, including as a result of there being a relatively limited number of end customer manufacturers.
There are risks associated with our participation in the display capital equipment market, including as a result of there being a relatively limited number of end customer manufacturers.
Like GDPR, other similar laws and regulations, as well as any associated inquiries or investigations or any other government actions, may be costly to comply with, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to remedies that may harm our business.
Compliance with global privacy and security laws and regulations, as well as any associated inquiries or investigations or any other government actions, may be costly to comply with, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to remedies that may harm our business.
In many of the countries in which we operate, government bodies are increasingly enacting legislation and regulations in response to potential impacts of climate change. These laws and regulations may be mandatory. They have the potential to impact our operations directly or indirectly as a result of required compliance by our customers or our supply chain.
In many of the countries in which we operate, government bodies are increasingly enacting legislation and regulations in response to potential impacts of climate change. These laws and regulations have the potential to impact our operations directly or indirectly as a result of required compliance by our customers and/or suppliers.
Our competitive position depends on our ability to develop new products and processes. To meet our strategic objectives, we must develop, manufacture, and market new products and continue to update our existing products and processes to keep pace with market developments to address increasingly sophisticated customer requirements.
Our competitive position depends on our ability to develop new products and processes. To meet our strategic objectives, we must develop, manufacture, and market new products and continue to update our existing products and processes to keep pace sudden increases in market demand and other market developments to address increasingly sophisticated customer requirements.
We may be required to make adjustments to our business practices to comply with the personal information protection laws and regulations in China. Data breach incidents and breakdowns of information and communication technologies could disrupt our operations and impact our financial results.
We may be required to make adjustments to our business practices to comply with the personal information protection laws and regulations in China as they evolve. Data breach incidents and breakdowns of information and communication technologies could disrupt our operations, subject us to legal claims, and impact our financial results.
We may not be able to refinance any of our indebtedness on commercially reasonable terms or at all. In addition, we may incur additional indebtedness in order to finance our operations, fund acquisitions, or repay existing indebtedness.
We may need to refinance all or a portion of our indebtedness, on or before its maturity. We may not be able to refinance any of our indebtedness on commercially reasonable terms or at all. In addition, we may incur additional indebtedness in order to finance our operations, fund acquisitions, or repay existing indebtedness.
The implementation of health and safety practices by us or our suppliers, distributors or customers could impact customer demand, supplier deliveries, our productivity, and costs, which could have a material adverse impact on our business, financial condition and results of operations.
The implementation of health and safety practices by us or our suppliers, distributors or customers could impact customer demand, supplier deliveries, our productivity, and costs, which could have a material adverse impact on our business, financial condition and results of operations. Global economic downturns may adversely affect our business, operating results, and financial condition.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES Information regarding our principal U.S. properties at June 30, 2022, is set forth below: Location Primary Use(s) Primary Business Segment(s) Approximate Square Footage Ownership Sherman, TX Manufacturing Compound Semiconductors 700,000 Owned Easton, PA Manufacturing and Research and Development Compound Semiconductors 281,000 Leased Saxonburg, PA Manufacturing and Research and Development Compound Semiconductors 235,000 Owned and Leased Warren, NJ Manufacturing and Research and Development Compound Semiconductors 159,000 Leased Newark, DE Manufacturing and Research and Development Compound Semiconductors 135,000 Leased Fremont, CA Manufacturing and Research and Development Compound Semiconductors 128,000 Leased Murrieta, CA Manufacturing and Research and Development Compound Semiconductors 108,000 Leased Information regarding our principal foreign properties at June 30, 2022, is set forth below: Location Primary Use(s) Primary Business Segment(s) Approximate Square Footage Ownership China Manufacturing, Research and Development, and Distribution Compound Semiconductors and Photonic Solutions 2,991,000 Owned and Leased Malaysia Manufacturing Photonic Solutions 640,000 Owned United Kingdom Manufacturing, Research and Development Compound Semiconductors and Photonic Solutions 319,000 Owned and Leased Philippines Manufacturing Compound Semiconductors 318,000 Leased Vietnam Manufacturing Compound Semiconductors and Photonic Solutions 211,000 Owned and Leased Switzerland Manufacturing, Research and Development, and Distribution Compound Semiconductors 112,000 Leased Germany Manufacturing and Distribution Compound Semiconductors and Photonic Solutions 110,000 Owned and Leased The square footage listed for each of the above properties represents facility square footage, except in the case of the Philippines location, which includes land.
Biggest changePROPERTIES Information regarding our principal U.S. properties at June 30, 2023, is set forth below: Location Primary Use(s) Primary Business Segment(s) Approximate Square Footage Ownership Sherman, TX Manufacturing Materials 700,000 Owned Easton, PA Manufacturing and Research and Development Materials 281,000 Leased Saxonburg, PA Manufacturing and Research and Development Materials 235,000 Owned and Leased Santa Clara, CA Manufacturing and Research and Development Lasers 200,000 Owned Warren, NJ Manufacturing and Research and Development Materials 159,000 Leased Fremont, CA Manufacturing and Research and Development Materials 153,000 Leased Newark, DE Manufacturing and Research and Development Materials 135,000 Leased Murrieta, CA Manufacturing and Research and Development Materials 108,000 Leased Information regarding our principal foreign properties at June 30, 2023, is set forth below: Location Primary Use(s) Primary Business Segment(s) Approximate Square Footage Ownership China Manufacturing, Research and Development, and Distribution Materials and Networking 3,047,000 Owned and Leased Germany Manufacturing, Research and Development Lasers 846,000 Owned and Leased Malaysia Manufacturing Networking 640,000 Owned United Kingdom Manufacturing, Research and Development Materials and Networking 319,000 Owned and Leased Philippines Manufacturing Materials 318,000 Leased Vietnam Manufacturing Materials and Networking 211,000 Owned and Leased Germany Manufacturing and Distribution Materials and Networking 138,000 Owned and Leased Switzerland Manufacturing, Research and Development, and Distribution Materials 112,000 Leased The square footage listed for each of the above properties represents facility square footage, except in the case of the Philippines location, which includes land.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeManagement believes, after consulting with legal counsel, that the ultimate liabilities, if any, resulting from such legal proceedings will not materially affect the Company’s financial condition, liquidity, or results of operations.
Biggest changeManagement believes, after consulting with legal counsel, that the ultimate liabilities, if any, resulting from such legal proceedings will not materially affect the Company’s financial condition, liquidity, or results of operations. 46

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is traded on the Nasdaq Global Select Market under the symbol “IIVI.” As of August 24, 2022, there were approximately 860 holders of record of our common stock.
Biggest changeItem 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is traded on the New York Stock Exchange (the “NYSE”) under the symbol “COHR”, beginning February 23, 2023 when the Company voluntarily transferred the listing of its common stock from the NASDAQ Global Select Market to the NYSE.
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 fiscal years ended June 30, 2022 or June 30, 2021.
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 fiscal years ended June 30, 2023 or June 30, 2022.
Dividends on the Company’s Series B Convertible Preferred Stock will be payable on a cumulative basis when, as and if declared by our board of directors, or an authorized committee of our board of directors, at an annual rate of 5%, subject to increase if II-VI defaults on payment obligation with respect to these shares, not to exceed 14% per annum.
Dividends on the Company’s Series B Convertible Preferred Stock will be payable on a cumulative basis when, as and if declared by our Board of Directors, or an authorized committee of our Board of Directors, at an annual rate of 5%, subject to increase if Coherent defaults on payment obligation with respect to these shares, not to exceed 14% per annum.
As of June 30, 2022, the Company has cumulatively purchased 1,416,587 shares of its common stock pursuant to the Program for approximately $22 million. The dollar value of shares as of June 30, 2022 that may yet be purchased under the Program is approximately $28 million.
As of June 30, 2023, the Company has cumulatively purchased 1,416,587 shares of its common stock pursuant to the Program for approximately $22 million. The dollar value of shares as of June 30, 2023 that may yet be purchased under the Program is approximately $28 million.
Dividends on the Company’s Series A Mandatory Convertible Preferred Stock will be payable on a cumulative basis when, as and if declared by our board of directors, or an authorized committee of our board of directors, at an annual rate of 6% of the liquidation preference of $200.00 per share.
Dividends on the Company’s Series A Mandatory Convertible Preferred Stock were payable on a cumulative basis when, as and if declared by our Board of Directors, or an authorized committee of our Board of Directors, at an annual rate of 6% of the liquidation preference of $200.00 per share.
PERFORMANCE GRAPH The following graph compares cumulative total shareholder return on the Company’s common stock with the cumulative total shareholder return of the Nasdaq Composite Index and with a peer group of companies constructed by the Company for the period from June 30, 2017, through June 30, 2022.
PERFORMANCE GRAPH The following graph compares cumulative total shareholder return on the Company’s common stock with the cumulative total shareholder return of the Russell 1000 Index, Nasdaq Composite Index and with a peer group of companies constructed by the Company for the period from June 30, 2018, through June 30, 2023.
The Company’s current fiscal year peer group includes CMC Materials Inc., Coherent, Inc., Corning Incorporated, Franklin Electric Co., Inc., Lumentum Holdings Inc., MKS Instruments Inc., and Silicon Laboratories, Inc. 45 46
The Company’s current fiscal year peer group includes IPG Photonics Corp., Wolfspeed Inc., Lumentum Holdings, Inc., Corning, Inc., MKS Instruments, Inc., and Honeywell International, Inc. The old peer group includes CMC Materials Inc., Corning Incorporated, Franklin Electric Co., Inc., Lumentum Holdings Inc., MKS Instruments Inc., and Silicon Laboratories, Inc. 48 49
The Company historically has not paid cash dividends on its common stock and does not presently anticipate paying cash dividends on its common stock in the future.
As of August 15, 2023, there were approximately 918 holders of record of our common stock. The Company historically has not paid cash dividends on its common stock and does not presently anticipate paying cash dividends on its common stock in the future.
Removed
The Company may pay declared dividends on the Mandatory Convertible Preferred Stock in cash or, subject to certain limitations, in shares of our common stock or in any combination of cash and shares of our common stock on January 1, April 1, July 1 and October 1 of each year, commencing on October 1, 2020 and ending on, and including, July 1, 2023.
Added
All outstanding shares of Series A Mandatory Convertible Preferred Stock were converted to Company Common Stock on July 3, 2023, and no shares of Series A Mandatory Convertible Preferred Stock are currently issued and outstanding.
Added
The peer group was changed to better represent the Company following its acquisition of Coherent, Inc. on July 1, 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSupplemental information pertaining to our sources and uses of cash for the periods indicated is presented as follows: Sources (uses) of Cash (millions): Year Ended June 30, 2022 2021 2020 Net cash provided by operating activities $ 413 $ 574 $ 297 Net proceeds from debt and equity issuances 990 1,611 2,121 Effect of exchange rate changes on cash and cash equivalents and other items 34 22 (12) Proceeds from exercises of stock options and purchases of stock under employee stock purchase plan 18 32 14 Proceeds from prior credit facility and other borrowings — — 10 Common stock repurchases — — (2) Payments under prior term loan and credit facility — — (177) Purchases of businesses, net of cash acquired — (34) (1,037) Other investing and financing (8) 5 — Debt issuance costs (10) — (64) Payment of Finisar Notes (15) — (560) Payments in satisfaction of employees' minimum tax obligations (21) (20) (29) Payment of dividends (35) (20) — Payments under long-term borrowings and credit facility (62) (926) (138) Additions to property, plant & equipment (314) (146) (137) Net cash provided by operating activities: Net cash provided by operating activities was $413 million during the current fiscal year ended June 30, 2022 compared to $574 million of cash provided by operating activities during the same period last fiscal year.
Biggest changeSupplemental information pertaining to our sources and uses of cash for the periods indicated is presented as follows: 59 Sources (uses) of Cash (millions): Year Ended June 30, 2023 2022 2021 Proceeds from long-term borrowings and revolving credit facility $ 3,715 $ — $ — Net proceeds from debt and equity issuances 1,358 990 1,611 Net cash provided by operating activities 634 413 574 Proceeds from exercises of stock options and purchases of stock under employee stock purchase plan 24 18 32 Effect of exchange rate changes on cash and cash equivalents and other items (4) 34 22 Payment on Convertible Debt and Finisar Notes (4) (15) — Other investing and financing (5) (8) 5 Payment of dividends (28) (35) (20) Payments in satisfaction of employees’ minimum tax obligations (54) (21) (20) Debt issuance costs (127) (10) — Additions to property, plant & equipment (436) (314) (146) Payments on existing debt (1,330) (62) (926) Purchases of businesses, net of cash acquired (5,489) — (34) Net cash provided by operating activities: Net cash provided by operating activities was $634 million during the current fiscal year ended June 30, 2023 compared to $413 million of cash provided by operating activities during the same period last fiscal year.
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, which is used by management in its evaluation of segment performance. See Note 14.
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 14.
Foreign currency losses were $16 million for the year ended June 30, 2022, as compared to $6 million of losses for the year ended June 30, 2021. The increased foreign currency impact was the result of volatility in the foreign exchange market, particularly in regard to the Euro.
Foreign currency losses were $16 million for the year ended June 30, 2022, as compared to $6 million of losses for fiscal 2021. The increased foreign currency impact was the result of volatility in the foreign exchange market, particularly in regard to the Euro.
The IR&D expenses are primarily related to the Company's continued investment in new products and manufacturing processes across all its businesses including significant investments in indium phosphide semiconductor lasers, silicon carbide materials and devices for both power electronics and wireless devices, semiconductor technology, gallium arsenide semiconductor lasers, and silicon carbide semiconductor technology. Selling, general and administrative.
The IR&D expenses are primarily related to our continued investment in new products and manufacturing processes across all its businesses including significant investments in indium phosphide semiconductor lasers, silicon carbide materials and devices for both power electronics and wireless devices, semiconductor technology, gallium arsenide semiconductor lasers, and silicon carbide semiconductor technology. Selling, general and administrative.
Revenues for the year ended June 30, 2022 increased 7% to $3,317 million, compared to $3,106 million for the prior fiscal year. The biggest driver of increased revenue was strength in the communications market, which grew by 7% year-over-year, contributing an incremental $151 million in sales.
Revenues for the year ended June 30, 2022 increased 7% to $3,317 million, compared to $3,106 million for fiscal 2021. The biggest driver of increased revenue was strength in the communications market, which grew by 7% year-over-year, contributing an incremental $151 million in sales.
Interest and other, net for the year ended June 30, 2022 included expense of $132 million compared to expense of $50 million last fiscal year, or an increase of $83 million year over year. Interest and other, net includes $121 million for interest expense on borrowings, and $16 million of foreign currency losses.
Interest and other, net for the year ended June 30, 2022 included expense of $132 million compared to expense of $50 million in fiscal 2021, or an increase of $83 million year over year. Interest and other, net includes $121 million for interest expense on borrowings, and $16 million of foreign currency losses.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of II-VI’s financial statements with a narrative from the perspective of management.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of Coherent’s financial statements with a narrative from the perspective of management.
Our historic uses of cash have been for capital expenditures, investments in research and development, business acquisitions, payments of principal and interest on outstanding debt obligations, payments of debt issuance costs to obtain financing, payments in satisfaction of employees’ minimum tax obligations and purchases of treasury stock.
Our historic uses of cash have been for business acquisitions, capital expenditures, investments in research and development, payments of principal and interest on outstanding debt obligations, payments of debt and equity issuance costs to obtain financing and payments in satisfaction of employees’ minimum tax obligations.
For fiscal year 2022, the fair values of the reporting units were determined using a discounted cash flow analysis with projected financial information based on our most recently completed long-term strategic planning processes and also considers the current financial performance compared to our prior projections of the reporting units, as well as a market analysis.
For fiscal year 2023, we performed a quantitative assessment, The fair values of the reporting units were determined using a discounted cash flow analysis with projected financial information based on our most recently completed long-term strategic planning processes and also considers the current financial performance compared to our prior projections of the reporting units, as well as a market analysis.
Net cash used in investing activities during the fiscal year ended June 30, 2021 primarily included $34 million for 55 net cash paid for the acquisition of Ascatron and Innovion and $146 million of cash expenditures to continue to increase capacity to meet the growing demand for the Company's product portfolio.
Net cash used in investing activities during the fiscal year ended June 30, 2021 primarily included $34 million for net cash paid for the acquisition of Ascatron AB and INNOViON Corporation and $146 million of cash expenditures to continue to increase capacity to meet the growing demand for our product portfolio.
Operating income differs from income from operations in that operating income excludes certain expenses, including interest, the impact of foreign exchange, and other miscellaneous expenses as reported.
Operating income differs from net earnings in that operating income excludes certain expenses, including interest, the impact of foreign exchange, and other miscellaneous expenses as reported.
The strength in the communications market was due to strong demand in datacom and transceivers, specifically for transceivers with data rates greater than 100G. In addition, semiconductor capital equipment sales grew 29% and industrial sales grew 26% compared to the same period last year, with an additional $34 million and $85 million in incremental revenue, respectively.
The strength in the communications market was due to strong demand in datacom and transceivers, specifically for transceivers with data rates greater than 100G. In addition, semiconductor capital equipment sales grew 29% and industrial sales grew 26% compared to fiscal 2021, with an additional $34 million and $85 million in incremental revenue, respectively.
The Company believes existing cash, cash flow from operations, and available borrowing capacity from its New Senior Credit Facilities will be sufficient to fund its needs for working capital, capital expenditures, repayment of scheduled long-term borrowings and lease obligations, investments in internal research and development, and internal and external growth objectives at least through fiscal year 2023.
The Company believes existing cash, cash flow from operations, and available borrowing capacity from its Senior Credit Facilities will be sufficient to fund its needs for working capital, capital expenditures, repayment of scheduled long-term borrowings and lease obligations, investments in IR&D, and internal and external growth objectives at least through fiscal year 2024.
The current fiscal year’s effective tax rate was lower than statutory rates because of favorable research and development incentives in certain jurisdictions and tax rate differentials between U.S. and foreign jurisdictions. Segment Reporting Revenues and operating income for the Company’s reportable segments are discussed below.
The fiscal 2022 effective tax rate was lower than statutory rates because of favorable research and development incentives in certain jurisdictions and tax rate differentials between U.S. and foreign jurisdictions. 58 Segment Reporting Revenues and operating income for our reportable segments are discussed below.
The following table sets forth select items from our Consolidated Statements of Earnings (Loss) for the years ended June 30, 2022 and 2021 ($ in millions except per share information): Year Ended June 30, 2022 Year Ended June 30, 2021 % of Revenues % of Revenues Total revenues $ 3,317 100 % $ 3,106 100 % Cost of goods sold 2,051 62 1,928 62 Gross margin 1,265 38 1,177 38 Operating expenses: Internal research and development 377 11 330 11 Selling, general and administrative 474 14 445 14 Interest and other, net 132 4 50 2 Earnings before income taxes 282 8 353 11 Income taxes 47 1 55 2 Net earnings $ 235 7 % $ 298 10 % Diluted earnings per share $ 1.45 $ 2.37 Consolidated Revenues.
We are reporting financial information (revenue and operating income) for these new reporting segments in this Annual Report on Form 10-K. 57 The following table sets forth select items from our Consolidated Statements of Earnings (Loss) for the years ended June 30, 2022 and 2021 ($ in millions except per share information): Year Ended Year Ended June 30, 2022 June 30, 2021 % of Revenues % of Revenues Total revenues $ 3,317 100 % $ 3,106 100 % Cost of goods sold 2,051 62 1,928 62 Gross margin 1,265 38 1,177 38 Operating expenses: Internal research and development 377 11 330 11 Selling, general and administrative 474 14 445 14 Interest and other, net 132 4 50 2 Earnings before income tax 282 8 353 11 Income taxes 47 1 55 2 Net earnings $ 235 7 % $ 298 10 % Diluted earnings per share $ 1.45 $ 2.37 Consolidated Revenues.
Our customer base includes original equipment manufacturers, laser end users, system integrators of high-power lasers, manufacturers of equipment and devices for industrial, optical communications, consumer electronics, security and monitoring applications, U.S. government prime contractors, and various U.S. government agencies.
Our customer base includes original equipment manufacturers; laser end users; system integrators of high-power lasers; manufacturers of equipment and devices for industrial, optical communications, electronics, and instrumentation markets; U.S. government prime contractors; and various U.S. government agencies.
Interest expense of $121 million incurred in FY22 was related to funding both raised in advance of the closing of the Coherent acquisition, as well as fees for financing to be funded contingent upon the close of the transaction, the combined expense totaling $79 million.
Interest expense of $121 million incurred in fiscal 2022 was related to funding both raised in advance of the closing of the Merger, as well as fees for financing to be funded contingent upon the close of the transaction, the combined expense totaling $79 million.
The decrease in cash flows provided by operating activities during the year ended June 30, 2022 compared to the same period last fiscal year was driven by decreased net earnings of $63 million in the year ended June 30, 2022 due to increased interest expense.
The increase in cash flows provided by operating activities during the fiscal year ended June 30, 2022 compared to the fiscal year ended June 30, 2021 was primarily driven by decreased net earnings of $63 million due to increased interest expense.
The Company purchased $345 million Euros to pay off the Euro based debt of Coherent at transaction closing, which resulted in a $24 million realized loss during the year ended June 30, 2022. Income taxes. The Company’s year-to-date effective income tax rate at June 30, 2022 was 17%, compared to an effective tax rate of 16% last fiscal year.
The Company purchased $345 million Euros to pay off the Euro based debt of Coherent at transaction closing, which resulted in a $24 million realized loss during fiscal 2022. Income taxes. Our effective income tax rate in fiscal 2022 was 17%, compared to an effective tax rate of 16% in fiscal 2021.
Net cash provided by financing activities: Net cash provided by financing activities was $863 million for the fiscal year ended June 30, 2022, compared to net cash provided by financing activities of $676 million for the same period last fiscal year.
Net cash provided by financing activities was $863 million for the year ended June 30, 2022 compared to net cash provided by financing activities of $676 million for the year ended June 30, 2021.
SG&A expenses for the year ended June 30, 2022 were $474 million, or 14% of revenues, compared to $445 million, or 14% of revenues, last fiscal year. The Company incurred transaction and integration costs relating to the acquisition of Coherent, which increased $9 million year-over-year. 51 Interest and other, net.
SG&A expenses for the year ended June 30, 2022 were $474 million, or 14% of revenues, compared to $445 million, or 14% of revenues, in fiscal 2021. We incurred transaction and integration costs relating to the Merger, which increased $9 million year-over-year. Interest and other, net.
The Company’s cash and cash equivalent balances are generated and held in numerous locations throughout the world, including amounts held outside the United States. As of June 30, 2022 , the Company held approxim ately $332 million of c ash and cash equivalents outside of the United States.
Our cash and cash equivalent balances are generated and held in numerous locations throughout the world, including amounts held outside the United States. As of June 30, 2023 , we held approxim ately $636 million of c ash and cash equivalents outside of the United States.
Contractual Obligations As of June 30, 2022, in the ordinary course of business, we had total estimated purchase commitments from vendors of approximately $704 million. In addition, as of June 30, 2022, we had obligations under our operating leases of approximately $171 million, $34 million of which will be paid in the fiscal year 2023. 59
Contractual Obligations As of June 30, 2023, in the ordinary course of business, we had total estimated purchase commitments from vendors of approximately $757 million. In addition, as of June 30, 2023, we had obligations under our operating leases of approximately $219 million, $47 million of which will be paid in the fiscal year 2024. 61
Our transceiver business grew across all product lines including the 200G and 400G modules, an increase of $152 million year-over-year. Operating income for the year ended June 30, 2022 for Photonic Solutions increased 11% to $230 million, compared to an operating income of $208 million last fiscal year.
Our transceiver business grew across all product lines including the 200G and 400G modules, an increase of $152 million year-over-year. Operating income for the year ended June 30, 2022 for Networking increased 15% to $232 million, compared to operating income of $201 million for fiscal year 2021.
Net cash used in investing activities: Net cash used in investing activities was $320 million for the fiscal year ended June 30, 2022, compared to net cash used of $173 million for the same period last fiscal year.
Net cash used in investing activities: Net cash used in investing activities was $5.9 billion for the fiscal year ended June 30, 2023, compared to net cash used of $320 million for the same period last fiscal year. In fiscal 2023, $5.5 billion was used to fund the Merger.
II-VI’s MD&A is presented in nine sections: • Forward-Looking Statements • Overview • Acquisition and Background of Coherent, Inc. • Critical Accounting Policies and Estimates • COVID-19 Update • Fiscal Year 2022 Compared to Fiscal Year 2021 • Fiscal Year 2021 Compared to Fiscal Year 2020 • Liquidity and Capital Resources • Off Balance Sheet Arrangements Forward-looking statements in Item 7 may involve risks and uncertainties that could cause results to differ materially from those projected (refer to Item 1A for discussion of these risks and uncertainties).
Coherent’s MD&A is presented in ten sections: • Forward-Looking Statements • Overview • Acquisition and Background of Coherent, Inc. • Restructuring and Site Consolidation • Critical Accounting Policies and Estimates • Transfer to the New York Stock Exchange and Conversion of Series A Preferred Stock • Fiscal Year 2023 Compared to Fiscal Year 2022 • Fiscal Year 2022 Compared to Fiscal Year 2021 • Liquidity and Capital Resources • Off Balance Sheet Arrangements Forward-looking statements in Item 7 may involve risks and uncertainties that could cause results to differ materially from those projected (refer to Item 1A for discussion of these risks and uncertainties).
Forward-looking statements are also identified by words such as “expects,” “anticipates,” “believes,” “intends,” “plans,” “projects” or similar expressions. Although our management considers these expectations and assumptions to have a reasonable basis, there can be no assurance that management’s expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct.
Although our management considers these expectations and assumptions to have a reasonable basis, there can be no assurance that management’s expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct.
The New Term A Facility and the New Revolving Credit Facility will each bear interest at LIBOR subject to a 0.00% floor plus a range of 1.75% to 2.50%, based on the Company’s total net leverage ratio. The New Term A Facility and the New Revolving Credit Facility borrowings are initially expected to bear interest at LIBOR plus 2.00%.
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 determination of whether goodwill is impaired requires us to make judgments based on long-term projections of future performance. Estimates of fair value are based on our projection of revenues, operating costs and cash flows of each reporting unit, considering historical and anticipated results and general economic and market conditions and their projections.
Estimates of fair value are based on our projection of revenues, operating costs and cash flows of each reporting unit, considering historical and anticipated results and general economic and market conditions and their projections.
This growth was partially offset by decreased revenue in the consumer market, which fell 20%, or $56 million, year-over-year due to lower sales in 3D sensing. Gross margin.
This growth was partially offset by decreased revenue in the consumer market, which fell 20%, or $56 million, year-over-year due to lower sales in 3D sensing. Gross margin. Gross margin for the year ended June 30, 2022 was $1,265 million, or 38%, of total revenues, compared to $1,177 million, or 38% of total revenues, for fiscal 2021.
Gross margin for the year ended June 30, 2022 was $1,265 million, or 38%, of total revenues, compared to $1,177 million, or 38% of total revenues, for the same period last fiscal year. Gross margin as a percentage of revenues increased 20 basis points compared to the prior fiscal year. Internal research and development.
Gross margin for the year ended June 30, 2023 was $1,618 million, or 31%, of total revenues, compared to $1,265 million, or 38% of total revenues, for fiscal 2022. Gross margin as a percentage of revenues decreased 680 basis points compared to the prior fiscal year.
The Company generates revenues, earnings and cash flows from developing, manufacturing and marketing a broad portfolio of products for our end markets. We also generate revenue, earnings and cash flows from government-funded research and development contracts relating to the development and manufacture of new technologies, materials and products.
We also generate revenue, earnings and cash flows from government-funded research and development contracts relating to the development and manufacture of new technologies, materials and products.
As we grow, we are focused on scaling our Company and deriving the continued benefits of vertical integration as we strive to be a best in class competitor in all of our highly competitive markets.
As we grow, we are focused on scaling our Company and deriving the continued benefits of vertical integration as we strive to be a best-in-class player in all of our highly competitive markets. We may elect to change the way in which we operate or are organized in the future to enable the most efficient implementation of our strategy.
Compound Semiconductors ($ in millions) Year Ended June 30, % Increase 2022 2021 Revenues $ 1,090 $ 1,068 2 % Operating income $ 220 $ 221 — % Revenues for the fiscal year ended June 30, 2022 for Compound Semiconductors increased 2% to $1,090 million, compared to revenues of $1,068 million last fiscal year.
Materials ($ in millions) Year Ended June 30, % Increase 2022 2021 Revenues $ 1,119 $ 1,102 2 % Operating income $ 219 $ 227 (4) % Revenues for the fiscal year ended June 30, 2022 for Materials increased 2% to $1,119 million, compared to revenues of $1,102 million for fiscal year 2021.
Net cash used in investing activities during the current period included $314 million of capital expenditures to continue to increase capacity to meet the growing demand for the Company’s product portfolio. Net cash used in investing activities was $173 million and $1,179 million for the fiscal years ended June 30, 2021 and 2020, respectively.
Net cash used in investing activities during the fiscal year ended June 30, 2022 primarily included $314 million of cash expenditures to continue to increase capacity to meet the growing demand for our product portfolio.
Forward-Looking Statements Certain statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations ("Management Discussion and Analysis") are forward-looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding projected growth rates, markets, product development, financial position, capital expenditures and foreign currency exposure.
Forward-Looking Statements Certain statements contained in this MD&A are forward-looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding projected growth rates, markets, product development, financial position, capital expenditures and foreign currency exposure. Forward-looking statements are also identified by words such as “expects,” “anticipates,” “believes,” “intends,” “plans,” “projects” or similar expressions.
If material adverse conditions occur that impact one or both of our reporting units, our determination of future fair value might not support the carrying amount of one or both of our reporting units, and the related goodwill would need to be impaired. 49 Income Taxes The Company prepares and files tax returns based on its interpretation of tax laws and regulations and records estimates based on these judgments and interpretations.
If material adverse conditions occur that impact one or more of our reporting units, our determination of future fair value might not support the carrying amount of one or more of our reporting units, and the related goodwill would need to be impaired.
Coherent’s products are manufactured at sites in California, Oregon, Michigan, New Jersey, and Connecticut in the United States; Germany, Scotland, Finland, Sweden, Switzerland, and Spain in Europe; and South Korea, China, Singapore, and Malaysia in Asia.
In addition, the advent of industrial grade ultrafast lasers continues to open up new applications for laser processing. 51 The Lasers segment’s products are manufactured at sites in California, Oregon, Michigan, New Jersey, and Connecticut in the United States; Germany, Scotland, Finland, Sweden, Switzerland, and Spain in Europe; and South Korea, Singapore, and Malaysia in Asia.
The increase in revenues during the current fiscal year was primarily driven by strong sales in the industrial and semiconductor capital equipment businesses, an increase of $64 million and $30 million in comparison to prior year, respectively. This growth was partially offset by a $56 million decrease in the consumer market.
The increase in revenues during the current fiscal year was primarily driven by strong sales in the industrial market with an increase of $77 million compared to fiscal 2021. This growth was partially offset by a $67 million decrease in the communications market.
Net cash provided by financing activities was driven by $980 million of net proceeds from the Company's issuance of 5.000% Senior Notes due 2029, issued in December 2021, partially offset by cash used to repay borrowings and Series A dividends, of $62 million and $35 million, respectively.
Net cash provided by financing activities during the fiscal year ended June 30, 2022 was primarily driven by $980 million of net proceeds from the Company’s issuance of 5.000% Senior Notes due 2029, issued in December 2021, partially offset by cash used to repay borrowings and Series A dividends, of $62 million and $35 million, respectively. 60 Senior Credit Facilities as of June 30, 2022 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).
Internal research and development (“IR&D”) expenses for the fiscal year ended June 30, 2022 were $377 million, or 11% of revenues, compared to $330 million, or 11%. of revenues, last fiscal year.
Gross margin as a percentage of revenues increased 20 basis points compared to fiscal 2021. Internal research and development. IR&D expenses for the fiscal year ended June 30, 2022 were $377 million, or 11% of revenues, compared to $330 million, or 11%. of revenues, in fiscal 2021.
Laser light can be monochromatic—all of the beam energy is confined to a narrow wavelength band. Lasers can produce the lasing action in the form of a gas, liquid, semiconductor, solid state crystal or fiber. Lasers can also be classified by their output wavelength: ultraviolet, visible, infrared or wavelength tunable.
Lasers can produce the lasing action in the form of a gas, liquid, semiconductor, solid state crystal or fiber. Lasers can also be classified by their output wavelength: ultraviolet, visible, infrared or wavelength tunable. The Lasers segment manufactures all of these laser types, in various options such as continuous wave, pulse duration, output power, and beam dimensions.
For example, UV lasers are enabling the continuous move towards miniaturization, which drives innovation and growth in many markets. In addition, the advent of industrial grade ultrafast lasers continues to open up new applications for laser processing.
For example, UV lasers are enabling the continuous move towards miniaturization, which drives innovation and growth in many markets.
Selling, general and administrative. SG&A expenses for the year ended June 30, 2021 were $445 million, or 14% of revenues, compared to $413 million, or 17% of revenues, fiscal year 2020.
Selling, general and administrative (“SG&A”) expenses for the year ended June 30, 2023 were $1,037 million, or 20% of revenues, compared to $474 million, or 14% of revenues, last fiscal year.
Liquidity and Capital Resources Historically, our primary sources of cash have been provided from operations, long-term borrowings, sale of our equity securities and advance funding from customers.
Additionally, supply chain costs increased year-over-year further driving the decrease in operating income as a percent of revenue. Liquidity and Capital Resources Historically, our primary sources of cash have been provided from operations, long-term borrowings, sale of our equity securities and advance funding from customers.
Operating income for the fiscal year ended June 30, 2022 for Compound Semiconductors remained flat, with operating income of $220 million in the current year, compared to operating income of $221 million last fiscal year.
Operating income for the fiscal year ended June 30, 2023 for Materials decreased 27%, with operating income of $160 million in the current year, compared to operating income of $219 million last fiscal year.
Photonic Solutions ($ in millions) Year Ended June 30, % Increase 2022 2021 Revenues $ 2,226 $ 2,038 9 % Operating income $ 230 $ 208 11 % Revenues for the year ended June 30, 2022 for Photonic Solutions increased 9% to $2,226 million, compared to $2,038 million for last fiscal year.
Networking ($ in millions) Year Ended June 30, % Increase 2022 2021 Revenues $ 2,197 $ 2,004 10 % Operating income $ 232 $ 201 15 % Revenues for the year ended June 30, 2022 for Networking increased 10% to $2,197 million, compared to $2,004 million for fiscal year 2021.
Weighted Average Interest Rate The weighted average interest rate of total borrowings was 2% and 1% for the years ended June 30, 2022 and 2021, respectively Our cash position, borrowing capacity and debt obligations are as follows (in millions): June 30, 2022 June 30, 2021 Cash, cash equivalents, and restricted cash $ 2,582 $ 1,592 Available borrowing capacity 450 449 Total debt obligations 2,300 1,375 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.
Our cash position, borrowing capacity and debt obligations are as follows (in millions): June 30, 2023 June 30, 2022 Cash, cash equivalents, and restricted cash $ 833 $ 2,582 Available borrowing capacity under New Revolving Credit Facility 348 450 Total debt obligations 4,310 2,300 On July 1, 2022, we utilized $2.1 billion of cash, cash equivalents, and restricted cash as part of the funding required to complete the Merger.
Net cash provided by financing activities was $676 million for the year ended June 30, 2021 compared to net cash provided by financing activities of $1,174 million for the year ended June 30, 2020.
Net cash provided by financing activities: Net cash provided by financing activities was $3.6 billion for the fiscal year ended June 30, 2023, compared to net cash provided by financing activities of $863 million for the same period last fiscal year.
Coherent delivers systems to the world's leading brands, innovators, and researchers, all backed with a global service and support network. Since inception in 1966, Coherent has grown through internal expansion and through strategic acquisitions of complementary businesses, technologies, intellectual property, manufacturing processes, and product offerings.
Since inception in 1966, Legacy Coherent has grown through internal organic expansion and through strategic acquisitions of complementary businesses, technologies, intellectual property, manufacturing processes, and product offerings.
In addition, higher levels of working capital were needed in order to ensure business continuity in the face of supply chain challenges and projected growth. Net cash provided by operating activities was $574 million and $297 million for the fiscal years ended June 30, 2021 and 2020, respectively.
In addition, higher levels of working capital were needed in order to ensure business continuity in the face of supply chain challenges and projected growth.
The increase in cash flows provided by operating activities during the fiscal year ended June 30, 2021 compared to the fiscal year ended June 30, 2020 was primarily driven by additional net earnings of $277 million.
The increase in cash flows provided by operating activities during the year ended June 30, 2023 compared to the same period last fiscal year was driven by improved management of working capital accounts. Net cash provided by operating activities was $413 million and $574 million for the fiscal years ended June 30, 2022 and 2021, respectively.
Implementation of tax planning strategies to recover these deferred tax assets or future income generation in these jurisdictions could lead to the reversal of these valuation allowances and a reduction of income tax expense. COVID-19 Update In response to the global spread of COVID-19, governments at various levels have implemented, and may continue to implement, unprecedented response measures.
Implementation of tax planning strategies to recover these deferred tax assets or future income generation in these jurisdictions could lead to the reversal of these valuation allowances and a reduction of income tax expense. Business Combinations Business combinations are accounted for using the purchase method of accounting.
In addition, Coherent also uses contract manufacturers in southeast Asia, Eastern Europe and the United States for the production of certain assemblies and turnkey solutions. 48 Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its Consolidated Financial Statements and accompanying notes.
We expect to consider a range of strategic alternatives including a minority investment in the SiC business by a strategic or financial partner, joint venture, and/or a sale of the SiC business in fiscal 2024. 52 Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its Consolidated Financial Statements and accompanying notes.
There were foreign currency losses of $6 million for the year ended June 30, 2021 due to the volatility in the foreign exchange market, compared to $8 million of losses for the year ended June 30, 2020. Income taxes.
The increases were partially offset by $6 million lower net foreign currency losses and $5 million of incremental interest income. Foreign currency losses were $11 million for the year ended June 30, 2023, primarily the result of volatility in the foreign exchange market, compared to $16 million of losses for the year ended June 30, 2022.
Revenue from Contracts with Customers of the Notes to our Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K.
Goodwill and Other Intangible Assets to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information).
Headquartered in Saxonburg, Pennsylvania, II-VI has research and development, manufacturing, sales, service, and distribution facilities worldwide. II-VI produces a wide variety of lasers, along with application-specific photonic and electronic materials and components, and deploys them in various forms, including integrated with advanced software to enable its customers.
Coherent produces a wide variety of lasers, along with application-specific photonic and electronic materials and components, and deploys them in various forms, including integrated with advanced software to enable its customers. We generate almost all of our revenues, earnings and cash flows from developing, manufacturing and marketing a broad portfolio of products and services for our end markets.
("Coherent"), one of the world's leading providers of laser solutions and optics for microelectronics, life sciences, industrial manufacturing, scientific and aerospace and defense markets, was acquired by II-VI Incorporated on July 1, 2022. In fiscal year 2023, it will be included in the combined company, to be rebranded Coherent Corp., as the Lasers Segment.
Acquisition and Background of Coherent, Inc. The acquisition of Coherent, Inc. (“Legacy Coherent”), one of the world’s leading providers of laser and optics-based product solutions, closed on July 1, 2022. For the full fiscal year 2023, Legacy Coherent was included in the combined company and renamed as the Lasers segment.
Coherent’s key laser applications include: semiconductor wafer inspection; manufacturing of advanced printed circuit boards; flat panel display manufacturing; solar cell production; medical and bio-instrumentation; materials processing; metal cutting and welding; industrial process and quality control; marking; imaging and printing; graphic arts and display; and research and development.
Each application has its own specific requirements in terms of laser performance. The Lasers segment's key laser applications include: semiconductor wafer inspection; manufacturing of advanced printed circuit boards; flat panel display manufacturing; metal cutting and welding, including welding of electric vehicle batteries; manufacturing of medical devices; marking; medical; bio-instrumentation and imaging; and research and development.
The following table sets forth select items from our Consolidated Statements of Earnings (Loss) for the years ended June 30, 2021 and 2020 ($ in millions except per share information): Year Ended Year Ended June 30, 2021 June 30, 2020 % of Revenues % of Revenues Total revenues $ 3,106 100 % $ 2,380 100 % Cost of goods sold 1,928 62 1,589 67 Gross margin 1,177 38 791 33 Operating expenses: Internal research and development 330 11 339 14 Selling, general and administrative 445 14 413 17 Interest and other, net 50 2 103 4 Earnings (loss) before income tax 353 11 (64) (3) Income taxes 55 2 3 — Net earnings (loss) $ 298 10 % $ (67) (3) % Diluted earnings (loss) per share $ 2.37 $ (0.79) Consolidated Revenues.
We are reporting financial information (revenue and operating income) for these new reporting segments in this Annual Report on Form 10-K. 54 The following table sets forth select items from our Consolidated Statements of Earnings (Loss) for the years ended June 30, 2023 and 2022 ($ in millions except per share information): Year Ended June 30, 2023 Year Ended June 30, 2022 % of Revenues % of Revenues Total revenues $ 5,160 100 % $ 3,317 100 % Cost of goods sold 3,542 69 2,051 62 Gross margin 1,618 31 1,265 38 Operating expenses: Internal research and development 500 10 377 11 Selling, general and administrative 1,037 20 474 14 Restructuring charges 119 2 — — Interest and other, net 318 6 132 4 Earnings (loss) before income taxes (356) (7) 282 8 Income Tax Expense (Benefit) (96) (2) 47 1 Net earnings (loss) $ (259) (5) % $ 235 7 % Diluted earnings (loss) per share $ (2.93) $ 1.45 Consolidated Revenues.
The dollar value of shares as of June 30, 2022 that may yet be purchased under the Program is approximately $28 million. 58 Off-Balance Sheet Arrangements We have no off-balance sheet arrangements as defined by Regulation S-K of the Securities Act of 1933.
Generally, cash balances held outside the United States could be repatriated to the United States. At June 30, 2023, we had $16 million of restricted cash. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements as defined by Regulation S-K of the Securities Act of 1933.
Revenues for the fiscal year ended June 30, 2021 for Compound Semiconductors increased 30% to $1,068 million, compared to revenues of $821 million for fiscal year 2020.
Operating income for the fiscal year ended June 30, 2022 for Materials decreased 4% to $219 million, compared to operating income of $227 million for fiscal year 2021.
The New Term B Facility will bear interest at LIBOR (subject to a 0.50% floor) plus 2.75%. In relation to the New Term B Facility, the Company incurred expense of $34 million in the year ended June 30, 2022, which is included in interest expense in the Consolidated Statements of Earnings (Loss).
In relation to the Term Facilities, the Company incurred expense of $256 million for the fiscal year ended June 30, 2023, which is included in interest expense in the Consolidated Statements of Earnings (Loss). During the fiscal year ended June 30, 2023, the Company made payments of $265 million for the Term Facilities, including voluntary prepayments of $212 million.
The Company is reporting financial information (revenue and operating income) for these reporting segments in this Annual Report on Form 10-K. We previously classified intangible asset amortization expense within SG&A expenses in our Consolidated Statements of Earnings (Loss).
Segment and Geographic Reporting to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information on the Company’s reportable segments and for the reconciliation of operating income to net earnings, which is incorporated herein by reference.
Interest and other, net for the year ended June 30, 2021 was expense of $50 million compared to expense of $103 million fiscal year 2020, or a decrease of $53 million year over year. Interest and other, net primarily includes $60 million for interest expense on borrowings, and $6 million of foreign currency losses.
Interest and other, net for the year ended June 30, 2023 was expense of $318 million compared to expense of $132 million last fiscal year, an increase of $186 million.
Company-funded IR&D expenses for the fiscal year ended June 30, 2021 were $330 million, or 11% of revenues, compared to $339 million, or 14% of revenues, fiscal year 2020.
Internal research and development. IR&D expenses for the fiscal year ended June 30, 2023 were $500 million, or 10% of revenues, compared to $377 million, or 11% of revenues, last fiscal year. The increase of $122 million for fiscal 2023 was driven by an additional $132 million of IR&D expenses from the Lasers segment.
Coherent serves important end markets like microelectronics, precision manufacturing, and instrumentation, as well as applications in aerospace and defense. The word "laser" is an acronym for "light amplification by stimulated emission of radiation." A laser emits an intense coherent beam of light with some unique and highly useful properties.
The word “laser” is an acronym for “light amplification by stimulated emission of radiation.” Lasers emit an intense output of light with unique and highly useful properties, of which its near perfect collimation (beam like property) is the most commonly known, as well usually being highly monochromatic at a precise wavelength (color).
The net cash outflow on July 1, 2022 to complete the funding of the Merger was $2.1 billion. 56 New Senior Credit Facilities As of December 10, 2021, a new term loan A credit facility (the "New Term A Facility") in an aggregate principal amount of $850 million a new term loan B credit facility (the "New Term B Facility") and, together with the New Term A Facility, the “New Term Facilities”) in an aggregate principal amount of $2,800 million, and a new revolving credit facility (the “New Revolving Credit Facility”) in an aggregate principal amount of $350 million, were fully priced and allocated.
New Senior Credit Facilities On July 1, 2022, Coherent entered into a 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 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” and, together with the Term Facilities, the “Senior Credit Facilities”), in an aggregate available amount of $350 million, including a letter of credit sub-facility of up to $50 million.
Investors should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. 47 Overview II-VI Incorporated (“II-VI,” the “Company,” “we,” “us” or “our”), a global leader in materials, networking and lasers, is a vertically integrated manufacturing company that develops, manufactures and markets engineered materials, optoelectronic components and devices, and lasers for use in industrial materials processing, optical communications, aerospace and defense, consumer electronics, semiconductor capital equipment, medical diagnostics and life sciences, automotive applications, machine tools, consumer goods and medical device manufacturing.
(“Coherent”, the “Company,” “we,” “us” or “our”), a global leader in materials, networking, and lasers, is a vertically integrated manufacturing company that develops, manufactures, and markets engineered materials, optoelectronic components and devices, and lasers for use in the industrial, communications, electronics and instrumentation markets. Headquartered in Saxonburg, Pennsylvania, Coherent has research and development, manufacturing, sales, service, and distribution facilities worldwide.
Removed
The Company may elect to change the way in which the Company operates or is organized in the future to enable the most efficient implementation of our strategy. Acquisition and Background of Coherent, Inc. Coherent, Inc.
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Investors should not assume that the Company agrees with any statement, conclusion of any analysis, or report issued by any analyst irrespective of the content of the statement or report. 50 Overview Coherent Corp.
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Most importantly, a laser is orders of magnitude brighter than any lamp. As a result of its coherence, the beam can be focused to a very small and intense spot, useful for applications requiring very high power densities including welding and other materials processing procedures. The laser's high spatial resolution is also useful for microscopic imaging and inspection applications.
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The Lasers segment’s lasers and optics products serve industrial customers in semiconductor and display capital equipment, precision manufacturing and aerospace & defense, as well as instrumentation customers in life science and scientific instrumentation. Legacy Coherent delivers systems to the world’s leading brands, innovators, and researchers, all backed with a global service and support network.
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Coherent manufactures all of these laser types, in various options such as continuous wave, pulse duration, output power, beam dimensions, etc. Each application has its own specific requirements in terms of laser performance.
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The name Coherent originates from another key property which is related to the synchronization of the phase of the light oscillations, which is known as coherence. Therefore, lasers are many orders of magnitude brighter than any other optical source.
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Changes in estimates used in these and other items could impact the Consolidated Financial Statements. Accounting for Commercial Agreements From time-to-time, the Company enters into commercial agreements with our customers that include advance payments from our customers, the cash flow from which the Company uses to fund our capital expansion.
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Lasers also can be pulsed at almost any repetition rate, even beyond a billion times per second, and are the technology which underpin the global fiber optic communications network, as well as producing the shortest man-made pulses of any technology known.
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The Company determines at the inception or modification of the contract if the arrangement is, or contains, a lease, which exists when the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration.
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As a result of their highly collimated beams, the light can be focused to a very small and intense spot or line, useful for applications requiring enough power to modify the target material, with very high precision through processes such as heat treating (annealing), welding or cutting almost any material.
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In determining if a contract contains a lease, the Company uses judgment to evaluate whether the contract, either explicitly or implicitly, is for the use of an identified asset and whether the customer has the right to direct the use of, and obtain substantially all of the economic benefit from, the identified asset.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn the normal course of business, the Company uses a variety of techniques and derivative financial instruments as part of its overall risk management strategy, which is primarily focused on its exposure in relation to the Malaysian Ringgit, Chinese Renminbi, Swiss Franc and Japanese Yen. No significant changes have occurred in the techniques and instruments used.
Biggest changeIn the normal course of business, we use a variety of techniques and derivative financial instruments as part of our overall risk management strategy, which is primarily focused on our exposure in relation to the Chinese Renminbi, Euro, Swiss Franc, Japanese Yen, Singapore Dollar, Korean Won and Malaysian Ringgit. No significant changes have occurred in the techniques and instruments used.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK MARKET RISKS The Company is exposed to market risks arising from adverse changes in foreign currency exchange rates and interest rates.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK MARKET RISKS We are exposed to market risks arising from adverse changes in foreign currency exchange rates and interest rates.
On February 23, 2022, the Company entered into an interest rate cap (the "Cap"), with an effective date of July 1, 2023. As the Cap is not effective until July 2023, there is no impact on variable rate borrowings from the Cap for the year ended June 30, 2022. 60
On February 23, 2022, we entered into an interest rate cap (the “Cap”, with an effective date of July 1, 2023. On March 20, 2023, we amended the Cap contract. As the Cap is not effective until July 2023, there is no impact on variable rate borrowings from the Cap for the year ended June 30, 2023. 62
Interest Rate Risk As of June 30, 2022, the Company’s total borrowings include variable rate borrowings, which exposes the Company to changes in interest rates. In November 2019, the Company entered into an interest rate swap contract to limit the exposure of its variable interest rate debt by effectively converting a portion of interest payments to fixed interest rate debt.
Interest Rate Risk As of June 30, 2023, our total borrowings include variable rate borrowings, which expose us to changes in interest rates. In November 2019, we entered into an interest rate swap contract to limit the exposure of our variable interest rate debt by effectively converting a portion of interest payments to fixed interest rate debt.
If the Company had not effectively hedged its variable rate debt, a change in the interest rate of 100 basis points on these variable rate borrowings would have resulted in additional interest expense of $19 million for the year ended June 30, 2022.
On March 20, 2023, we amended the swap contract. If we had not effectively hedged our variable rate debt, a change in the interest rate of 100 basis points on these variable rate borrowings would have resulted in additional interest expense of $47 million for the year ended June 30, 2023.

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