UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

________________________________________________________________


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

For the quarterly period ended ~~December 31, 2021~~September 30, 2022


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

for the transition period from to .

Commission File Number: 001-39375

~~II-VI INCORPORATED~~COHERENT CORP.

(Exact name of registrant as specified in its charter)

________________________________________________________________


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

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

Registrant’s telephone number, including area code: 724-352-4455

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	~~IIVI~~COHR	Nasdaq Global Select Market
Series A Mandatory Convertible Preferred Stock, no par value	IIVIP	Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Table of Contents

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

At ~~February~~November 7, 2022, ~~106,334,121~~138,690,024 shares of Common Stock, no par value, of the registrant were outstanding.

Table of Contents

~~II-VI INCORPORATED~~COHERENT CORP.

INDEX


		Page No.

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets – ~~December 31, 2021~~September 30, 2022 and June 30, ~~2021~~2022 (Unaudited)	3
	Condensed Consolidated Statements of Earnings (Loss)– Three a~~nd six months ended December 31,~~Months Ended September 30, 2022 and 2021 ~~and 2020~~ (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) – Three Months Ended September 30, 2022and ~~six months ended December 31,~~ 2021 ~~and 2020~~ (Unaudited)	65
	Condensed Consolidated Statements of Cash Flows – ~~Six months ended December 31,~~Three Months Ended September 30, 2022 and 2021 ~~and 2020~~ (Unaudited)	76
	Condensed Consolidated Statements of Shareholders’ Equity and Mezzanine Equity – Three Months Ended September 30, 2022and ~~six months ended December 31,~~ 2021 ~~and 2020~~ (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2526
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35

Item 6.	Exhibits	36

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

~~II-VI Incorporated~~Coherent Corp. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

($000)


		December 31, 2021		June 30, 2021			September 30, 2022		June 30, 2022
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash, cash equivalents, and restricted cash	Cash, cash equivalents, and restricted cash	$	2,649,716	$	1,591,892	Cash, cash equivalents, and restricted cash	$	898,501	$	2,582,371
Accounts receivable - less allowance for doubtful accounts of $2,169 at December 31, 2021 and $924 at June 30, 2021		604,206		658,962
Accounts receivable - less allowance for doubtful accounts of $4,506 at September 30, 2022 and $4,206 at June 30, 2022						Accounts receivable - less allowance for doubtful accounts of $4,506 at September 30, 2022 and $4,206 at June 30, 2022	975,437		700,331
Inventories	Inventories	819,091		695,828		Inventories	1,346,940		902,559
Prepaid and refundable income taxes	Prepaid and refundable income taxes	16,796		13,095		Prepaid and refundable income taxes	23,205		19,585
Prepaid and other current assets	Prepaid and other current assets	75,986		67,617		Prepaid and other current assets	150,547		100,346
Total Current Assets	Total Current Assets	4,165,795		3,027,394		Total Current Assets	3,394,630		4,305,192
Property, plant & equipment, net	Property, plant & equipment, net	1,272,377		1,242,906		Property, plant & equipment, net	1,803,646		1,363,195
Goodwill	Goodwill	1,293,167		1,296,727		Goodwill	5,284,591		1,285,759
Other intangible assets, net	Other intangible assets, net	676,465		718,460		Other intangible assets, net	2,984,979		635,404

Deferred income taxes	Deferred income taxes	36,600		33,498		Deferred income taxes	28,451		31,714
Other assets	Other assets	204,879		193,665		Other assets	334,262		223,582
Total Assets	Total Assets	$	7,649,283	$	6,512,650	Total Assets	$	13,830,559	$	7,844,846
Liabilities, Mezzanine Equity and Shareholders' Equity	Liabilities, Mezzanine Equity and Shareholders' Equity					Liabilities, Mezzanine Equity and Shareholders' Equity
Current Liabilities	Current Liabilities					Current Liabilities
Current portion of long-term debt	Current portion of long-term debt	$	1,378,118	$	62,050	Current portion of long-term debt	$	129,011	$	403,212
Accounts payable	Accounts payable	339,985		294,486		Accounts payable	479,385		434,917
Accrued compensation and benefits	Accrued compensation and benefits	146,203		181,491		Accrued compensation and benefits	187,764		172,109
Operating lease current liabilities	Operating lease current liabilities	28,015		25,358		Operating lease current liabilities	38,855		27,574
Accrued income taxes payable	Accrued income taxes payable	23,070		20,295		Accrued income taxes payable	43,578		29,317
Other accrued liabilities	Other accrued liabilities	167,849		145,909		Other accrued liabilities	304,491		199,830
Total Current Liabilities	Total Current Liabilities	2,083,240		729,589		Total Current Liabilities	1,183,084		1,266,959
Long-term debt	Long-term debt	942,579		1,313,091		Long-term debt	4,494,282		1,897,214
Deferred income taxes	Deferred income taxes	80,367		73,962		Deferred income taxes	618,565		77,259
Operating lease liabilities	Operating lease liabilities	120,449		125,541		Operating lease liabilities	141,542		110,214
Other liabilities	Other liabilities	139,072		138,119		Other liabilities	230,568		109,922
Total Liabilities	Total Liabilities	3,365,707		2,380,302		Total Liabilities	6,668,041		3,461,568
Mezzanine Equity	Mezzanine Equity					Mezzanine Equity
Series B redeemable convertible preferred stock, no par value, 5% cumulative; authorized - 215,000 shares; issued - 75,000 shares at December 31, 2021 and June 30, 2021; redemption value - $778,594 and $759,583, respectively		746,163		726,178
Series B redeemable convertible preferred stock, no par value, 5% cumulative; issued - 215,000 and 75,000 shares at September 30, 2022 and June 30, 2022, respectively; redemption value - $2,225,658 and $798,181, respectively						Series B redeemable convertible preferred stock, no par value, 5% cumulative; issued - 215,000 and 75,000 shares at September 30, 2022 and June 30, 2022, respectively; redemption value - $2,225,658 and $798,181, respectively	2,153,480		766,803
Shareholders' Equity	Shareholders' Equity					Shareholders' Equity
Series A preferred stock, no par value, 6% cumulative; authorized - 5,000,000 shares; issued - 2,300,000 shares at December 31, 2021 and June 30, 2021		445,319		445,319
Common stock, no par value; authorized - 300,000,000 shares; issued - 120,052,989 shares at December 31, 2021; 119,126,585 shares at June 30, 2021		2,019,306		2,028,273
Accumulated other comprehensive income		15,070		14,267
Series A preferred stock, no par value, 6% cumulative; issued - 2,300,000 shares at September 30, 2022 and June 30, 2022						Series A preferred stock, no par value, 6% cumulative; issued - 2,300,000 shares at September 30, 2022 and June 30, 2022	445,319		445,319
Common stock, no par value; authorized - 300,000,000 shares; issued - 153,089,681 shares at September 30, 2022; 120,923,171 shares at June 30, 2022						Common stock, no par value; authorized - 300,000,000 shares; issued - 153,089,681 shares at September 30, 2022; 120,923,171 shares at June 30, 2022	3,671,514		2,064,552
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(101,431)		(2,167)
Retained earnings	Retained earnings	1,289,925		1,136,777		Retained earnings	1,273,850		1,348,125
		3,769,620		3,624,636			5,289,252		3,855,829
Treasury stock, at cost; 13,853,088 shares at December 31, 2021 and 13,640,555 shares at June 30, 2021		(232,207)		(218,466)
Treasury stock, at cost; 14,802,661 shares at September 30, 2022 and 13,972,758 shares at June 30, 2022						Treasury stock, at cost; 14,802,661 shares at September 30, 2022 and 13,972,758 shares at June 30, 2022	(280,214)		(239,354)
Total Shareholders' Equity	Total Shareholders' Equity	3,537,413		3,406,170		Total Shareholders' Equity	5,009,038		3,616,475
Total Liabilities, Mezzanine Equity and Shareholders' Equity	Total Liabilities, Mezzanine Equity and Shareholders' Equity	$	7,649,283	$	6,512,650	Total Liabilities, Mezzanine Equity and Shareholders' Equity	$	13,830,559	$	7,844,846

- See notes to condensed consolidated financial statements.

~~Table of Contents~~

~~II-VI Incorporated~~Coherent Corp. and Subsidiaries

Condensed Consolidated Statements of Earnings (Loss) (Unaudited)

($000, except per share data)


		Three Months Ended December 31,					Three Months Ended September 30,
		2021		2020			2022		2021
Revenues	Revenues	$	806,819	$	786,569	Revenues	$	1,344,570	$	795,111

Costs, Expenses, and Other Expense (Income)	Costs, Expenses, and Other Expense (Income)					Costs, Expenses, and Other Expense (Income)
Cost of goods sold	Cost of goods sold	495,652		473,863		Cost of goods sold	900,996		488,487
Internal research and development	Internal research and development	95,328		84,858		Internal research and development	121,084		88,966
Selling, general and administrative	Selling, general and administrative	117,617		109,133		Selling, general and administrative	280,014		122,608
Interest expense	Interest expense	17,062		15,585		Interest expense	61,889		12,191
Other expense (income), net	Other expense (income), net	1,806		(3,153)		Other expense (income), net	31,605		(7,582)
Total Costs, Expenses, & Other Expense (Income)	Total Costs, Expenses, & Other Expense (Income)	727,465		680,286		Total Costs, Expenses, & Other Expense (Income)	1,395,588		704,670

Earnings Before Income Taxes		79,354		106,283
Earnings (Loss) Before Income Taxes						Earnings (Loss) Before Income Taxes	(51,018)		90,441

Income Tax Expense		11,697		18,383
Income Tax Expense (Benefit)						Income Tax Expense (Benefit)	(12,320)		15,977

Net Earnings		$	67,657	$	87,900
Net Earnings (Loss)						Net Earnings (Loss)	$	(38,698)	$	74,464

Less: Dividends on Preferred Stock	Less: Dividends on Preferred Stock	$	16,703	$	6,900	Less: Dividends on Preferred Stock	$	35,577	$	17,082
Net Earnings available to the Common Shareholders		$	50,954	$	81,000
Net Earnings (Loss) available to the Common Shareholders						Net Earnings (Loss) available to the Common Shareholders	$	(74,275)	$	57,382

Basic Earnings Per Share		$	0.48	$	0.78
Basic Earnings (Loss) Per Share						Basic Earnings (Loss) Per Share	$	(0.56)	$	0.54

Diluted Earnings Per Share		$	0.44	$	0.73
Diluted Earnings (Loss) Per Share						Diluted Earnings (Loss) Per Share	$	(0.56)	$	0.50

- See notes to condensed consolidated financial statements.

Table of Contents

~~II-VI Incorporated and Subsidiaries~~

~~Condensed Consolidated Statements of Earnings (Unaudited)~~

~~($000, except per share data)~~

Six Months Ended
December 31,
2021 2020
Revenues $ 1,601,930 $ 1,514,653
Costs, Expenses, and Other Expense (Income)
Cost of goods sold 984,139 924,977
Internal research and development 184,294 163,106
Selling, general and administrative 240,225 206,725
Interest expense 29,253 32,799
Other expense (income), net (5,776) 21,186
Total Costs, Expenses, & Other Expense (Income) 1,432,135 1,348,793
Earnings Before Income Taxes 169,795 165,860
Income Tax Expense 27,674 31,694
Net Earnings $ 142,121 $ 134,166
Less: Dividends on Preferred Stock $ 33,785 $ 13,340
Net Earnings available to the Common Shareholders $ 108,336 $ 120,826
Basic Earnings Per Share $ 1.02 $ 1.17
Diluted Earnings Per Share $ 0.94 $ 1.12

~~- See notes to condensed consolidated financial statements.~~

~~Table of Contents~~

~~II-VI Incorporated~~Coherent Corp. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

($000)

Three Months Ended
December 31, Six Months Ended
December 31,
2021 2020 2021 2020
Net earnings $ 67,657 $ 87,900 $ 142,121 $ 134,166
Other comprehensive income:
Foreign currency translation adjustments 2,593 64,067 (11,788) 99,591
Change in fair value of interest rate swap, net of taxes of $2,714 and $3,448 for the three and six months ended December 31, 2021, respectively and $782 and $630 for the three and six months ended December 31, 2020, respectively 9,910 2,854 12,591 2,299
Comprehensive income $ 80,160 $ 154,821 $ 142,924 $ 236,056


	Three Months Ended September 30,
	2022		2021
Net earnings (loss)	$	(38,698)	$	74,464
Other comprehensive income (loss):
Foreign currency translation adjustments	(132,371)		(14,381)
Change in fair value of interest rate swap, net of taxes of $3,452 and $734 for the three months ended September 30, 2022 and 2021, respectively	12,604		2,681
Change in fair value of interest rate cap, net of taxes of $9,258 for the three months ended September 30, 2022	20,464		—
Pension adjustment, net of taxes of $0 for the three months ended September 30, 2022	39		—
Comprehensive income (loss)	$	(137,962)	$	62,764

See notes to condensed consolidated financial statements.

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~~II-VI Incorporated~~Coherent Corp. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

($000)


		Six Months Ended December 31,					Three Months Ended September 30,
		2021		2020			2022		2021
Cash Flows from Operating Activities	Cash Flows from Operating Activities					Cash Flows from Operating Activities
Net earnings		$	142,121	$	134,166
Net earnings (loss)						Net earnings (loss)	$	(38,698)	$	74,464
Adjustments to reconcile net earnings to net cash provided by operating activities:	Adjustments to reconcile net earnings to net cash provided by operating activities:					Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	Depreciation	100,392		91,027		Depreciation	64,669		49,297
Amortization	Amortization	40,327		40,859		Amortization	82,617		20,395
Share-based compensation expense	Share-based compensation expense	40,709		38,018		Share-based compensation expense	54,185		23,796
Amortization of discount on convertible debt and debt issuance costs	Amortization of discount on convertible debt and debt issuance costs	4,557		10,376		Amortization of discount on convertible debt and debt issuance costs	4,466		2,227
Debt extinguishment costs		—		24,747
Unrealized losses (gains) on foreign currency remeasurements and transactions		(1,880)		12,178

Unrealized gains on foreign currency remeasurements and transactions						Unrealized gains on foreign currency remeasurements and transactions	(22,273)		(4,882)
Earnings from equity investments	Earnings from equity investments	(1,393)		(1,817)		Earnings from equity investments	(613)		(687)
Deferred income taxes	Deferred income taxes	3,218		8,518		Deferred income taxes	(14,479)		10,672

Loss on debt extinguishment						Loss on debt extinguishment	6,835		—
Increase (decrease) in cash from changes in (net of effect of acquisitions):	Increase (decrease) in cash from changes in (net of effect of acquisitions):					Increase (decrease) in cash from changes in (net of effect of acquisitions):
Accounts receivable	Accounts receivable	55,548		32,371		Accounts receivable	(1,326)		(1,821)
Inventories	Inventories	(123,748)		(1,714)		Inventories	7,514		(56,260)
Accounts payable	Accounts payable	12,752		(23,262)		Accounts payable	(42,865)		(4,248)

Contract liabilities						Contract liabilities	44,419		10,790
Income taxes	Income taxes	2,598		(12,013)		Income taxes	(8,633)		(6,826)
Accrued compensation and benefits	Accrued compensation and benefits	(35,288)		(13,965)		Accrued compensation and benefits	(44,910)		(56,273)

Other operating net assets (liabilities)	Other operating net assets (liabilities)	172		16,210		Other operating net assets (liabilities)	(11,330)		(8,308)
Net cash provided by operating activities	Net cash provided by operating activities	240,085		355,699		Net cash provided by operating activities	79,577		52,336
Cash Flows from Investing Activities	Cash Flows from Investing Activities					Cash Flows from Investing Activities
Additions to property, plant & equipment	Additions to property, plant & equipment	(101,689)		(79,329)		Additions to property, plant & equipment	(138,990)		(47,565)
Purchases of businesses, net of cash acquired	Purchases of businesses, net of cash acquired	—		(34,431)		Purchases of businesses, net of cash acquired	(5,488,556)		—

Other investing activities						Other investing activities	(711)		—
Net cash used in investing activities	Net cash used in investing activities	(101,689)		(113,760)		Net cash used in investing activities	(5,628,257)		(47,565)
Cash Flows from Financing Activities	Cash Flows from Financing Activities					Cash Flows from Financing Activities
Proceeds from issuance of common shares		—		460,000
Proceeds from issuance of Series A preferred shares		—		460,000
Proceeds from issuance of Senior Notes		990,000		—

Proceeds from borrowings of Term A Facility						Proceeds from borrowings of Term A Facility	850,000		—
Proceeds from borrowings of Term B Facility						Proceeds from borrowings of Term B Facility	2,800,000		—
Proceeds from Revolving Credit Facility						Proceeds from Revolving Credit Facility	65,000		—
Proceeds from issuance of Series B Preferred Shares						Proceeds from issuance of Series B Preferred Shares	1,400,000		—

Payments on Finisar Notes		(14,888)		—
Payments on existing debt						Payments on existing debt	(996,429)		(15,513)
Payments on convertible notes						Payments on convertible notes	(3,561)		—

Payments on borrowings under Term A Facility		(31,025)		(31,025)
Payments on borrowings under Term B Facility		—		(714,600)
Payments on borrowings under Revolving Credit Facility		—		(74,000)
Debt issuance costs	Debt issuance costs	(5,639)		—		Debt issuance costs	(126,516)		—
Equity issuance costs	Equity issuance costs	—		(36,092)		Equity issuance costs	(42,000)		—
Proceeds from exercises of stock options and purchases of stock under employee stock purchase plan	Proceeds from exercises of stock options and purchases of stock under employee stock purchase plan	8,370		22,355		Proceeds from exercises of stock options and purchases of stock under employee stock purchase plan	7,425		7,481

Payments in satisfaction of employees' minimum tax obligations	Payments in satisfaction of employees' minimum tax obligations	(13,823)		(6,941)		Payments in satisfaction of employees' minimum tax obligations	(40,885)		(13,017)
Payment of dividends	Payment of dividends	(20,708)		(6,519)		Payment of dividends	—		(13,808)
Other financing activities	Other financing activities	(1,415)		(366)		Other financing activities	(292)		(1,109)
Net cash provided by financing activities		910,872		72,812
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	3,912,742		(35,966)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	8,556		26,743		Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(42,273)		(522)
Net increase in cash, cash equivalents, and restricted cash		1,057,824		341,494
Net decrease in cash, cash equivalents, and restricted cash						Net decrease in cash, cash equivalents, and restricted cash	(1,678,211)		(31,717)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	1,591,892		493,046		Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	2,582,371		1,591,892
Cash, Cash Equivalents, and Restricted Cash at End of Period	Cash, Cash Equivalents, and Restricted Cash at End of Period	$	2,649,716	$	834,540	Cash, Cash Equivalents, and Restricted Cash at End of Period	$	904,160	$	1,560,175
Cash paid for interest	Cash paid for interest	$	16,104	$	13,898	Cash paid for interest	$	45,963	$	8,326
Cash paid for income taxes	Cash paid for income taxes	$	22,933	$	24,227	Cash paid for income taxes	$	14,920	$	12,417
Additions to property, plant & equipment included in accounts payable	Additions to property, plant & equipment included in accounts payable	$	64,098	$	10,497	Additions to property, plant & equipment included in accounts payable	$	71,035	$	38,400

See notes to condensed consolidated financial statements.

Table of Contents

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows. Restricted cash, non-current is included in the condensed consolidated balance sheets under 'Other Assets'. At September 30, 2022, we had $22 million of restricted cash.


	Three Months Ended September 30,
	2022		2021
Cash, cash equivalents, and restricted cash	$	898,501	$	1,560,175
Restricted cash, non-current	5,659		—
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	904,160	$	1,560,175

See notes to condensed consolidated financial statements.

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~~II-VI Incorporated~~Coherent Corp and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity and Mezzanine Equity (Unaudited)

($000, including share amounts)

Common Stock Preferred Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total Mezzanine Equity
Shares Amount Shares Amount Shares Amount Preferred Shares Amount
Balance - June 30, 2021 119,127 $ 2,028,273 2,300 $ 445,319 $ 14,267 $ 1,136,777 (13,640) $ (218,466) $ 3,406,170 75 $ 726,178
Share-based and deferred compensation activities 844 30,567 — — — — (200) (12,935) 17,632 — —
Net Earnings — — — — — 74,464 — — 74,464 — —
Foreign currency translation adjustments — — — — (14,381) — — — (14,381) — —
Change in fair value of interest rate swap, net of taxes of $734 — — — — 2,681 — — — 2,681 — —
Accretion to redemption value of Series B shares issued in March 2021 — — — — — (478) — — (478) — 478
Dividends — — — — — (16,604) — — (16,604) — 9,704
Adjustment for ASU 2020-06 — (56,388) — — — 44,916 — — (11,472) — —
Balance - September 30, 2021 119,971 $ 2,002,452 2,300 $ 445,319 $ 2,567 $ 1,239,075 (13,840) $ (231,401) $ 3,458,012 75 $ 736,360
Share-based and deferred compensation activities 82 16,854 — — — — (13) (806) 16,048 — —
Net Earnings — — — — — 67,657 — — 67,657 — —
Foreign currency translation adjustments — — — — 2,593 — — — 2,593 — —
Change in fair value of interest rate swap, net of taxes of $2,714 — — — — 9,910 — — — 9,910 — —
Accretion to redemption value of Series B shares issued in March 2021 — — — — — (496) — — (496) — 496
Dividends — — — — — (16,311) — — (16,311) — 9,307
Balance - December 31, 2021 120,053 $ 2,019,306 2,300 $ 445,319 $ 15,070 $ 1,289,925 (13,853) $ (232,207) $ 3,537,413 75 $ 746,163


	Common Stock			Preferred Stock			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total		Mezzanine Equity
	Shares	Amount		Shares	Amount						Shares	Amount				Preferred Shares	Amount
Balance - June 30, 2022	120,923	$	2,064,552	2,300	$	445,319	$	(2,167)	$	1,348,125	(13,973)	$	(239,354)	$	3,616,475	75	$	766,803
Share-based and deferred compensation activities	2,398	61,431		—	—		—		—		(830)	(40,860)		20,571		—	—
Coherent Acquisition	22,588	1,207,591		—	—		—		—		—	—		1,207,591		—	—
Convertible debt conversions	7,181	337,940		—	—		—		—		—	—		337,940		—	—
Net Loss	—	—		—	—		—		(38,698)		—	—		(38,698)		—	—
Foreign currency translation adjustments	—	—		—	—		(132,371)		—		—	—		(132,371)		—	—
Change in fair value of interest rate swap, net of taxes of $3,452	—	—		—	—		12,604		—		—	—		12,604		—	—
Change in fair value of interest rate cap, net of taxes of $9,258	—	—		—	—		20,464		—		—	—		20,464		—	—
Issuance of Series B shares	—	—		—	—		—		—		—	—		—		140	1,358,000
Pension adjustment, net of taxes of $0	—	—		—	—		39		—		—	—		39		—	—
Dividends	—	—		—	—		—		(35,577)		—	—		(35,577)		—	28,677
Balance - September 30, 2022	153,090	$	3,671,514	2,300	$	445,319	$	(101,431)	$	1,273,850	(14,803)	$	(280,214)	$	5,009,038	215	$	2,153,480


		Common Stock			Preferred Stock			Accumulated Other Comprehensive Income (Loss)				Retained Earnings				Treasury Stock						Total						Common Stock					Preferred Stock				Accumulated Other Comprehensive Income (Loss)				Retained Earnings				Treasury Stock						Total				Mezzanine Equity
		Shares	Amount		Shares	Amount								Shares			Amount										Shares		Amount			Shares		Amount					Shares						Amount				Preferred Shares						Amount
Balance - June 30, 2020		105,916	$	1,486,947	—	$	—			$	(87,383)			$	876,552		(13,356)			$	(199,313)			$	2,076,803
Balance - June 30, 2021																										Balance - June 30, 2021		119,127		$	2,028,273		2,300		$	445,319			$	14,267			$	1,136,777		(13,640)			$	(218,466)			$	3,406,170		75			$	726,178
Share-based and deferred compensation activities	Share-based and deferred compensation activities	575	16,764		—	—		—				—				(120)		(5,498)				11,266				Share-based and deferred compensation activities		844		30,567			—		—		—				—				(200)		(12,935)				17,632				—		—

Shares issued in underwritten public offering		10,698	438,589		2,300	445,319		—				—				—		—				883,908
Net Earnings		—	—		—	—		—				46,266				—		—				46,266
Foreign currency translation adjustments		—	—		—	—		35,524				—				—		—				35,524
Change in fair value of interest rate swap, net of taxes of $(152)		—	—		—	—		(555)				—				—		—				(555)

Dividends		—	—		—	—		—				(6,535)				—		—				(6,535)
Balance - September 30, 2020		117,189	$	1,942,300	2,300	$	445,319	$	(52,414)			$	916,283			(13,476)		$	(204,811)			$	3,046,677
Share-based and deferred compensation activities		854	43,533		—	—		—				—				(11)		(1,318)				42,215

Net Earnings	Net Earnings	—	—		—	—		—				87,900				—		—				87,900				Net Earnings		—		—			—		—		—				74,464				—		—				74,464				—		—
Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—	—		64,067				—				—		—				64,067				Foreign currency translation adjustments		—		—			—		—		(14,381)				—				—		—				(14,381)				—		—
Change in fair value of interest rate swap, net of taxes of $782		—	—		—	—		2,854				—				—		—				2,854
Change in fair value of interest rate swap, net of taxes of $734																										Change in fair value of interest rate swap, net of taxes of $734		—		—			—		—		2,681				—				—		—				2,681				—		—

Dividends	Dividends	—	—		—	—		—				(6,900)				—		—				(6,900)				Dividends		—		—			—		—		—				(17,082)				—		—				(17,082)				—		10,182
Balance - December 31, 2020		118,043	$	1,985,833	2,300	$	445,319	$	14,507			$	997,283			(13,487)		$	(206,129)			$	3,236,813
Adjustment for ASU 2020-06																										Adjustment for ASU 2020-06		—		(56,388)			—		—		—				44,916				—		—				(11,472)				—		—
Balance - September 30, 2021																										Balance - September 30, 2021		119,971		$	2,002,452		2,300		$	445,319	$	2,567			$	1,239,075			(13,840)		$	(231,401)			$	3,458,012			75		$	736,360

Table of Contents

~~II-VI Incorporated~~Coherent Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. Basis of Presentation

The condensed consolidated financial statements of ~~II-VI Incorporated~~Coherent Corp. (“~~II-VI”~~Coherent”, the “Company”, “we”, “us” or “our”) for the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and 2021 ~~and 2020~~ are unaudited. In the opinion of management, all adjustments considered necessary for a fair presentation for the periods presented have been included. All adjustments are of a normal recurring nature unless disclosed otherwise. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K dated August ~~20, 2021.~~29, 2022. The condensed consolidated results of operations for the three ~~and six~~ months ended ~~December 31, 2021~~September 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year. The Condensed Consolidated Balance Sheet information as of June 30, ~~2021~~2022 was derived from the Company’s audited consolidated financial statements.

~~In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, which continues to spread throughout the United States and world.~~ The Company is closely monitoring the ongoing impact of the COVID-19 pandemic and related factors on all aspects of our business, including the impact to our employees, suppliers and customers, as well as the impact to our supply chain and the countries and markets in which ~~II-VI~~Coherent operates.~~At the onset of the COVID-19 outbreak,~~ In particular, the Company ~~began focusing~~is continuing to focus intensely on mitigating ~~the~~any resulting adverse impacts ~~of COVID-19~~ on our foreign and domestic operations, starting by ~~protecting its~~prioritizing the safety of our employees, suppliers and customers.

We previously classified intangible asset amortization expense within Selling, general and administrative (“SG&A”) expenses in our Condensed Consolidated Statements of ~~Earnings.~~Earnings (Loss). Amortization expense on the developed technology intangible assets is now classified within Cost of goods sold, with amortization expense on customer lists and trade names remaining within SG&A expenses in our Condensed Consolidated Statements of ~~Earnings.~~Earnings (Loss). Prior period amounts have been conformed to the current period presentation, which resulted in an increase to Cost of goods sold and a decrease to SG&A expenses of $10 million ~~and $19 million~~ for the three ~~and six~~ months ended ~~December 31, 2020, respectively.~~September 30, 2021.

Note 2. Recently Issued Financial Accounting Standards

~~Debt - Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity's Own Equity~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In ~~August~~March 2020, theFinancial Accounting Standards Board (the "FASB") issued ~~ASC Update No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) ("~~ASU ~~2020-06"). The update simplifies~~2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients to ease the potential burden of accounting for ~~convertible instruments by eliminating two accounting models (i.e.,~~ the ~~cash conversion model~~effects of reference rate reform as it pertains to contract modifications of debt and ~~beneficial conversion feature model)~~lease contracts and ~~reducing the number of embedded conversion features that could~~derivative contracts identified in a hedging relationship. These amendments are effective immediately and may be ~~recognized separately from the host contract. ASU 2020-06 also enhances transparency~~applied prospectively to contract modifications made and ~~improves disclosures for convertible instruments and earnings per share guidance.~~hedging relationships entered into or evaluated on or before December 31, 2022. The Company is in the process of evaluating the impact of the pronouncement.

Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires an acquirer to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Accounting Standards Codification ASC 606, Revenue from Contracts with Customers, rather than adjust them to fair value at the acquisition date. We have adopted this accounting standard as of July 1, ~~2021.~~2022. The ~~Company elected~~acquisition of Coherent, Inc. has been accounted for in accordance with ASU 2021-08, as will any future acquisitions. Results of operations for quarterly periods prior to ~~use the modified retrospective method to report the effect~~adoption remain unchanged as a result of the ~~changes. Adoption~~adoption of ~~the standard affected the II-VI Convertible Notes.~~ASU No. 2021-08. Refer to Note ~~8. Debt~~3. Coherent Acquisition for ~~the impact of the adoption on the II-VI Convertible Notes.~~further information.

Note 3. ~~Pending~~ Coherent Acquisition

On ~~March 25, 2021, II-VI,~~July 1, 2022 (the "Closing Date"), the Company completed its acquisition of Coherent, Inc.~~, and Watson Merger Sub Inc.~~ (the “Merger”), a ~~wholly owned subsidiary~~global provider of ~~II-VI (“Merger Sub”), entered into an~~lasers and laser-based technology for scientific, commercial, and industrial customers, in a combined cash and stock transaction in accordance with the Agreement and Plan of Merger dated March 25, 2021 (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, and subject to the conditions set forth therein, ~~Merger Sub will be merged with and into Coherent, and Coherent will continue as the surviving corporation in the merger and a wholly owned subsidiary of II-VI (the “Merger”).~~

~~Pursuant to the terms of the Merger Agreement, and subject to the conditions set forth therein, at the effective time of the Merger (the “Effective Time”),~~ each share of common stock of legacy Coherent, Inc. (“Legacy Coherent”), par value $0.01 per share (the ~~“Coherent~~“Legacy Coherent Common

Stock”), issued and outstanding immediately prior to ~~the Effective Time will be~~July 1, 2022, was canceled and extinguished and automatically converted into the right to receive ~~the following consideration (collectively, the “Merger Consideration”):~~

~~(A)~~ $220.00 in cash ~~without interest (the "Cash Consideration"), and~~

~~(B) 0.91 of a validly issued, fully paid~~ and ~~nonassessable share of common stock of II-VI, no par value per share ("II-VI Common Stock").~~

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

On the Closing Date, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the lenders, and other parties thereto, and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, which provides for senior secured financing of $4.0 billion, consisting of a ~~10-trading day period ending prior~~new term loan A credit facility (the "Term A Facility") in an aggregate principal amount of $850 million a new term loan B credit facility (the "Term B Facility") (and, together with the Term A Facility, the “Term Facilities”) in an aggregate principal amount of $2.8 billion, and a new revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $350 million, including a letter of credit sub-facility of up to $50 million. For additional information on the credit facility refer to Note 8. Debt.

In order to complete the funding of the Merger, the Company had a net cash outflow of $2.1 billion on July 1, 2022. The Company recorded $62 million of acquisition related costs in the three months ended September 30, 2022, representing professional and other direct acquisition costs. These costs are recorded within SG&A expense in our Condensed Consolidated Statement of Earnings (Loss). Approximately 23 million shares of Coherent's common stock, no par value ("Coherent Common Stock") in the aggregate were issued in conjunction with the closing of the Merger. Total preliminary Merger ~~(the “Closing”). For~~consideration was $7.1 billion, including replacement equity awards attributable to pre-combination service for certain Legacy Coherent ~~RSUs subject to performance-based vesting conditions and metrics,~~restricted stock units.

The preliminary total fair value of consideration paid in connection with the ~~number~~acquisition of ~~shares~~Coherent, Inc. consisted of ~~II-VI Common Stock subject~~the following (in $000):


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

The Company allocated the fair value of the preliminary purchase price consideration to the ~~converted Coherent RSUs~~tangible assets, liabilities, and intangible assets acquired, generally based on estimated fair values. The excess preliminary purchase price over those fair values is recorded as goodwill. Our valuation assumptions of acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets, property, plant & equipment and deferred income taxes.

The purchase price allocation set forth herein is preliminary and will be ~~determined after giving effect~~revised as third party valuations are finalized or additional information becomes available during the measurement period, which could be up to the Coherent Board of Directors’ determination of the number of Coherent RSUs earned, based on the greater of the target or actual level of achievement of such goals or metrics immediately prior to the Effective Time.

The converted Coherent RSUs generally will be subject to the same terms and conditions that applied to the awards immediately prior to the Effective Time, provided that any Coherent RSUs subject to performance-based vesting conditions will be subject solely to time-and service-based vesting. Each Coherent RSU that is outstanding as of the date of the Merger Agreement and as of immediately prior to the Effective Time will be entitled to the following vesting acceleration benefits:

(A) for any holder of Coherent RSUs who is a participant under Coherent’s Change of Control and Leadership Change Severance Plan (the “CIC Plan”), the acceleration benefits under the CIC Plan upon such participant’s involuntary termination of employment in accordance with the terms and conditions set forth therein; and

(B) for any holder who is not a participant in the CIC Plan, upon his or her termination of employment by Coherent, II-VI or their respective subsidiaries without “cause” within the period beginning immediately following the date of12 months from the Closing ~~and ending on December 31, 2022 (a “Qualifying Termination”), 50% of~~Date. Any such revisions or changes may be material. The Company utilized market available benchmarking analysis to perform the total number of converted Coherent RSUs that otherwise would have vested during calendar year 2022 under the applicable vesting schedule in effect on the Closing had such holder remained employed with Coherent, II-VI or their respective subsidiaries through the last applicable vesting date for such award in calendar year 2022 (and reduced by the total number of converted Coherent RSUs that vested in calendar year 2022 prior to such Qualifying Termination).

Each Coherent RSU granted to a non-employee member of Coherent’s Board of Directors (“Director RSUs”) (whether or not vested) that is outstanding immediately prior to the Effective Time will automatically vest in full and be canceled and converted into the right to receive the Merger Consideration as if such Director RSU had been settled in shares of Coherent Common Stock immediately prior to the Effective Time.

The Boards of Directors of II-VI and Coherent unanimously approved the Merger and the Merger Agreement. II-VI filed with the SEC a registration statement on Form S-4 relating to the Merger, and the SEC declared that registration statement to be effective on May 6, 2021. Shareholders of II-VI and stockholders of Coherent voted to approve proposals related to the Merger at special meetings held on June 24, 2021 by the respective companies.

The completion of the Merger is subject to the satisfaction or waiver of certain additional customary closing conditions, including review and approval of the Merger by the State Administration for Market Regulation in China. Subject to the satisfaction or waiver of each of the closing conditions, II-VI anticipates that the Merger will be completed by the middle of the second calendar quarter of 2022. However, it is possible that factors outside the control of both companies could result in the Merger being completed later or not at all.

financing. II-VI and the Commitment Parties amended and restated the Commitment Letter on October 25, 2021 (the "Amended and Restated Commitment Letter") to effect certain amendments thereto, including to reduce the total amounts of commitments thereunder to $4.99 billion. The obligationOur preliminary allocation of the Commitment Parties to provide the debt financing provided for in the Amended and Restated Commitment Letter is subject to a number of customary conditions. Subject to the terms of the Amended and Restated Commitment Letter, the commitment parties thereto committed to provide a senior unsecured bridge loan facility in an aggregate principal amount of $990 million (the "Bridge Loan Commitment"). As a result of the issuance of the Senior Notes (defined in Note 8), the Bridge Loan Commitment was terminated, such that the total amounts of commitments under the Amended and Restated Commitment Letter are $4.0 billion.

On December 10, 2021, II-VI issued $990 million of the Senior Notes. The Senior Notes are guaranteed by each of the Company’s domestic subsidiaries that guarantee its obligations under its existing credit agreement. The Senior Notes were offered and sold either to persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), or to persons outside the United States under Regulation S of the Securities Act. Interest on the Senior Notes will be payable on December 15 and June 15 of each year, commencing on June 15, 2022, at a rate of 5.000% per annum. The Senior Notes will mature on December 15, 2029.

As of December 10, 2021, the New Term Facilities and the New Revolving Credit Facility (as defined in Note 8) contemplated by the Amended and Restated Commitment Letter have been fully priced and allocated. The Company intends to borrow under the New Term Facilities and to use the net proceeds from the issuance and sale of the Senior Notes in connection with the Merger. The New Revolving Credit Facility is expected to be available concurrently with the Closing.

In connection with entering into the Merger Agreement, II-VI entered into an Amended and Restated Investment Agreement, dated as of March 30, 2021, (the “Investment Agreement”), with BCPE Watson (DE) SPV, LP, an affiliate of Bain Capital Private Equity, LP (the “Investor”).Pursuant to the terms of the Investment Agreement, on March 31, 2021, II-VI issued, sold, and delivered to the Investor 75,000 shares of a new Series B-1 Convertible Preferred Stock of the Company, no par value per share (“II-VI Series B-1 Convertible Preferred Stock”), for $10,000 per share (the “Equity Per Share Price”), resulting in an aggregate purchase price of ~~$750 million. Subject to~~Legacy Coherent, based on the ~~terms and conditions~~estimated fair value of the ~~Investment Agreement, among other things, the Company~~assets acquired and ~~the Investor also agreed that the Company would issue, sell and deliver to the Investor:~~

•~~105,000 shares of a new Series B-2 Convertible Preferred Stock~~liabilities assumed as of the ~~Company, no par~~Closing Date, is as follows (in $000):



	Allocation as of 7/1/2022
Assets
Current Assets
Cash, cash equivalents, and restricted cash	$	393,324
Accounts receivable	270,928
Inventories (i)	497,345
Prepaid and refundable income taxes	8,869
Prepaid and other current assets	41,467
Total Current Assets	1,211,933
Property, plant & equipment, net (ii)	424,228
Deferred income taxes	1,115
Other assets	102,726
Other intangible assets, net (iii)	2,425,454
Goodwill	4,005,727
Total Assets	$	8,171,183
Liabilities
Current Liabilities
Current portion of long-term debt	$	4,504
Accounts payable	116,754
Accrued compensation and benefits	60,596
Operating lease current liabilities	13,002
Accrued income taxes payable	16,936
Other accrued liabilities	136,042
Total Current Liabilities	347,834
Long-term debt	22,991
Deferred income taxes	563,824
Operating lease liabilities	43,313
Other liabilities	97,438
Total Liabilities	$	1,075,400

Preliminary aggregate acquisition consideration	$	7,095,783

(i) The condensed combined balance sheet has been adjusted to record Legacy Coherent’s inventories at a preliminary fair value per share ("II-VI Series B-2 Convertible Preferred Stock," and together with the II-VI Series B-1 Convertible Preferred Stock, “New II-VI Convertible Preferred Stock”), for a purchase price per share equal to the Equity Per Share Price, resulting inof approximately $497 million, an ~~aggregate purchase price~~increase of ~~$1.05 billion, immediately prior to the Closing; and~~

•immediately prior to the Closing, if elected by the Company and agreed by the Investor, up to an additional 35,000 shares of II-VI Series B-2 Convertible Preferred Stock (the "Upsize Shares") for a purchase price per share equal to the Equity Per Share Price, resulting in an aggregate maximum purchase price for the Upsize Shares of $350 million.

Following the Company’s provision of notice to the Investor of its election to offer the Upsize Shares, the Investor informed the Company on June 8, 2021 of its agreement to purchase the Upsize Shares$91 million from the ~~Company immediately prior to the Closing, increasing the Investor’s total equity commitment to II-VI pursuant to the Investment Agreement to $2.15 billion.~~

carrying value. The ~~expenses associated with the Merger~~condensed combined statement of earnings (loss) for the three ~~and six~~ months ended ~~December 31, 2021 have not~~September 30, 2022 has been ~~allocated~~adjusted to ~~an Operating Segment,~~recognize additional cost of goods sold of approximately $45 million related to the increased basis. The additional costs will be amortized over the expected period during which the acquired inventory is sold and are ~~presented in~~not anticipated to affect the ~~Unallocated~~condensed combined statements of earnings (loss) beyond twelve months after the Closing Date.

(ii) The condensed combined balance sheet has been adjusted to record Legacy Coherent’s property, plant and ~~Other in Note 13. Segment Reporting.~~equipment (consisting of land, buildings and improvements, equipment, furniture and fixtures, and leasehold improvements) at a preliminary fair value of approximately $424 million, an increase of $128 million from the carrying value. The condensed combined statements of earnings (loss) have been adjusted to recognize additional depreciation expense related to the increased basis. The additional depreciation expense is computed with the assumption that the various categories of assets will be depreciated over their remaining useful lives on a straight-line basis.

(iii) Preliminary identifiable intangible assets in the unaudited condensed combined financial information consist of the following and are being amortized over their estimated useful lives in the condensed combined statements of earnings (loss) (in $000):


	Preliminary Fair Value		Estimated Useful Life
Trade names and trademarks	$	225,654	N/A
Customer relationships	979,324		10 years
Developed technology	1,220,476		8 years
Intangible assets acquired	$	2,425,454

Operating results, including goodwill and intangibles, of Legacy Coherent are reflected in the Company’s consolidated financial statements from the Closing Date, within the Lasers segment. Revenues and net loss for the Lasers segment for the three months ended September 30, 2022 were $392 million, and $128 million, respectively. Goodwill in the amount of $4.0 billion arising from the acquisition is attributed to the expected synergies, including future cost savings, and other benefits expected to be generated by combining Coherent and Legacy Coherent. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes.

Supplemental Pro Forma Information

The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the acquisition had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions that we believe are reasonable under the circumstances.

The following supplemental pro forma information presents the combined results of operations for the three months ended September 30, 2022, as if Legacy Coherent had been acquired as of July 1, 2021. The supplemental pro forma information includes adjustments to amortization and depreciation for acquired intangible assets, property, plant and equipment, adjustments to share-based compensation expense, fair value adjustments on the inventories acquired, transaction costs, interest expense and amortization of debt issuance costs related to the Senior Credit Facilities.

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


	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021
Revenue	$	1,344,570	$	1,186,785
Net Earnings (Loss)	79,770		(202,363)

Note 4. Revenue from Contracts with Customers

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

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

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

The following tables summarize disaggregated revenue for the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and 2021 ~~and 2020~~ ($000):


	Three Months Ended September 30, 2022
	Networking		Materials		Lasers		Total
Industrial	$	18,693	$	144,083	$	298,241	$	461,017
Communications	563,521		21,877		—		585,398
Electronics	3,822		176,622		—		180,444
Instrumentation	10,512		13,062		94,137		117,711
Total Revenues	$	596,548	$	355,644	$	392,378	$	1,344,570

Three Months Ended December 31, 2021 Six Months Ended December 31, 2021
Photonic
Solutions Compound
Semiconductors Total Photonic
Solutions Compound
Semiconductors Total
Industrial $ 16,548 $ 88,521 $ 105,069 $ 35,001 $ 169,299 $ 204,300
Communications 488,030 28,713 516,743 988,477 60,808 1,049,285
Aerospace & Defense — 47,195 47,195 — 91,308 91,308
Consumer 2,377 67,716 70,093 4,420 122,843 127,263
Other 18,014 49,705 67,719 33,094 96,680 129,774
Total Revenues $ 524,969 $ 281,850 $ 806,819 $ 1,060,992 $ 540,938 $ 1,601,930

Three Months Ended December 31, 2020 Six Months Ended December 31, 2020
Photonic
Solutions Compound
Semiconductors Total Photonic
Solutions Compound
Semiconductors Total
Industrial $ 10,160 $ 61,446 $ 71,606 $ 21,224 $ 115,347 $ 136,571
Communications 454,035 34,918 488,953 927,726 71,573 999,299
Aerospace & Defense — 46,366 46,366 — 95,631 95,631
Consumer 2,215 119,114 121,329 3,522 171,467 174,989
Other 16,469 41,846 58,315 28,134 80,029 108,163
Total Revenues $ 482,879 $ 303,690 $ 786,569 $ 980,606 $ 534,047 $ 1,514,653

~~"Other" revenue included in the tables above include revenue from the life science/medical, semiconductor and automotive end markets.~~


	Three Months Ended September 30, 2021
	Networking		Materials		Total
Industrial	$	21,729	$	154,884	$	176,613
Communications	498,632		19,875		518,507
Electronics	2,967		77,020		79,987
Instrumentation	7,685		12,319		20,004
Total Revenues	$	531,013	$	264,098	$	795,111

Contract Liabilities

Payments received from customers are based on invoices or billing schedules as established in contracts with customers. Contract liabilities relate to billings in advance of performance under the contract. Contract liabilities are recognized as revenue when the performance obligation has been performed. During the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, the Company recognized revenue of $7$6 million related to customer payments that were included as contract liabilities in the Condensed Consolidated Balance Sheet as of June 30, ~~2021.~~2022. The Company had ~~$67~~$191 million of contract liabilities recorded in the Condensed Consolidated Balance Sheet as of ~~December 31, 2021.~~September 30, 2022. Contract liabilities acquired from the Merger totaled $77 million. As of September 30, 2022, $108 million of deferred revenue is included other accrued liabilities and $83 million is included within other liabilities on the Condensed Consolidated Balance Sheet.

Note 5. Inventories

The components of inventories were as follows ($000):


		December 31, 2021		June 30, 2021			September 30, 2022		June 30, 2022
Raw materials	Raw materials	$	274,146	$	211,890	Raw materials	$	444,010	$	318,758
Work in progress	Work in progress	370,658		336,391		Work in progress	581,752		408,405
Finished goods	Finished goods	174,287		147,547		Finished goods	321,178		175,396
		$	819,091	$	695,828		$	1,346,940	$	902,559

During the three months ended September 30, 2022, as part of the Coherent, Inc. acquisition, a fair value inventory step-up in the amount of $91 million was recorded as part of the preliminary purchase price allocation. The inventory step-up will be amortized to cost of goods sold over the expected period during which the acquired inventory is sold. Refer to Note 3. Coherent Acquisition for additional information. These costs are non-recurring in nature and not anticipated to affect the condensed combined statements of earnings (loss) beyond twelve months after the Closing Date.

Note 6. Property, Plant and Equipment

Property, plant and equipment consists of the following ($000):


		December 31, 2021		June 30, 2021			September 30, 2022		June 30, 2022
Land and improvements	Land and improvements	$	20,235	$	20,454	Land and improvements	$	36,271	$	19,368
Buildings and improvements	Buildings and improvements	424,170		419,157		Buildings and improvements	609,839		415,530
Machinery and equipment	Machinery and equipment	1,589,976		1,483,183		Machinery and equipment	1,841,274		1,651,762
Construction in progress	Construction in progress	158,911		136,544		Construction in progress	354,341		271,605
Finance lease right-of-use asset	Finance lease right-of-use asset	25,000		25,000		Finance lease right-of-use asset	25,000		25,000
		2,218,292		2,084,338			2,866,725		2,383,265
Less accumulated depreciation	Less accumulated depreciation	(945,915)		(841,432)		Less accumulated depreciation	(1,063,079)		(1,020,070)
		$	1,272,377	$	1,242,906		$	1,803,646	$	1,363,195

During the three months ended September 30, 2022, as part of the Coherent, Inc. acquisition, a fair value step-up in the amount of $128 million was recorded to property, plant and equipment as part of the preliminary purchase price allocation. The step-up will be amortized over the useful lives of the related assets. Refer to Note 3. Coherent Acquisition for additional information.

Note 7. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill were as follows ($000):


	Three Months Ended September 30, 2022
	Networking		Materials		Lasers		Total
Balance-beginning of period	$	1,048,743	$	237,016	$	—	$	1,285,759
Transfer between segments1	(35,466)		35,466		—		—
Goodwill acquired	—		—		4,005,727		4,005,727

Foreign currency translation	(4,199)		(2,285)		(411)		(6,895)
Balance-end of period	$	1,009,078	$	270,197	$	4,005,316	$	5,284,591

1
Six Months Ended December 31, 2021
Photonic Solutions Compound Semiconductors Total
Balance-beginning of period $ 1,053,028 $ 243,699 $ 1,296,727
Foreign currency translation (990) (2,570) (3,560)
Balance-end of period $ 1,052,038 $ 241,129 $ 1,293,167
- Refer to Note 13. Segment Reporting for information regarding the segment transfer of goodwill between segments.

The gross carrying amount and accumulated amortization of the Company’s intangible assets other than goodwill as of ~~December 31, 2021~~September 30, 2022 and June 30, ~~2021~~2022 were as follows ($000):


		December 31, 2021						June 30, 2021							September 30, 2022						June 30, 2022
		Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value			Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Technology	Technology	$	475,274	$	(126,108)	$	349,166	$	476,200	$	(106,802)	$	369,398	Technology	$	1,701,446	$	(191,158)	$	1,510,288	$	473,845	$	(144,409)	$	329,436
Trade Names	Trade Names	22,704		(7,041)		15,663		22,660		(6,233)		16,427		Trade Names	248,014		(7,660)		240,354		22,536		(7,454)		15,082
Customer Lists	Customer Lists	467,468		(155,832)		311,636		469,154		(136,519)		332,635		Customer Lists	1,441,510		(207,173)		1,234,337		464,880		(173,994)		290,886
Other	Other	1,571		(1,571)		—		1,576		(1,576)		—		Other	1,557		(1,557)		—		1,563		(1,563)		—
Total	Total	$	967,017	$	(290,552)	$	676,465	$	969,590	$	(251,130)	$	718,460	Total	$	3,392,527	$	(407,548)	$	2,984,979	$	962,824	$	(327,420)	$	635,404

Refer to Note 3. Coherent Acquisition for additional information on intangibles acquired in the three months ended September 30, 2022.

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Note 8. Debt

The components of debt as of the dates indicated were as follows ($000):


		December 31, 2021		June 30, 2021			September 30, 2022		June 30, 2022
Term A Facility, interest at LIBOR, as defined, plus 1.375%		$	1,026,388	$	1,057,412
New Term A Facility, interest at LIBOR, as defined, plus 2.00%						New Term A Facility, interest at LIBOR, as defined, plus 2.00%	$	850,000	$	—
New Revolving Credit Facility, interest at LIBOR, as defined, plus 2.00%						New Revolving Credit Facility, interest at LIBOR, as defined, plus 2.00%	65,000		—
Debt issuance costs, New Term A Facility and New Revolving Credit Facility						Debt issuance costs, New Term A Facility and New Revolving Credit Facility	(22,251)		—
New Term B Facility, interest at LIBOR, as defined, plus 2.75%						New Term B Facility, interest at LIBOR, as defined, plus 2.75%	2,800,000		—
Debt issuance costs, New Term B Facility						Debt issuance costs, New Term B Facility	(76,581)		—
1.30% Term loan due 2024						1.30% Term loan due 2024	260		—
1.00% State of Connecticut term loan due 2023						1.00% State of Connecticut term loan due 2023	2,426		—
Facility construction loan in Germany due 2030						Facility construction loan in Germany due 2030	21,965		—
Existing Term A Facility, interest at LIBOR, as defined, plus 1.375%						Existing Term A Facility, interest at LIBOR, as defined, plus 1.375%	—		995,363

Debt issuance costs, Term A Facility and Revolving Credit Facility		(21,759)		(25,191)
Debt issuance costs, Existing Term A Facility and Existing Revolving Credit Facility						Debt issuance costs, Existing Term A Facility and Existing Revolving Credit Facility	—		(18,396)

5.000% Senior Notes	5.000% Senior Notes	990,000		—		5.000% Senior Notes	990,000		990,000
Debt issuance costs and discount, Senior Notes	Debt issuance costs and discount, Senior Notes	(17,532)		—		Debt issuance costs and discount, Senior Notes	(7,526)		(7,703)
0.50% convertible senior notes, assumed in the Finisar acquisition		—		14,888
0.25% convertible senior notes		344,967		344,969
Debt issuance costs and discount, 0.25% convertible senior notes		(1,367)		(16,937)
0.25% Convertible Senior Notes						0.25% Convertible Senior Notes	—		341,501
Debt issuance costs and discount, 0.25% Convertible Senior Notes						Debt issuance costs and discount, 0.25% Convertible Senior Notes	—		(339)

Total debt	Total debt	2,320,697		1,375,141		Total debt	4,623,293		2,300,426
Current portion of long-term debt	Current portion of long-term debt	(1,378,118)		(62,050)		Current portion of long-term debt	(129,011)		(403,212)
Long-term debt, less current portion	Long-term debt, less current portion	$	942,579	$	1,313,091	Long-term debt, less current portion	$	4,494,282	$	1,897,214

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 the Term A Facility, with an aggregate principal amount of $850 million, the Term B Facility, with an aggregate principal amount of $2,800 million, and the New Revolving Credit Facility, in an aggregate principal amount of $350 million, including a letter of credit sub-facility of up to $50 million. The New Term A Facility and the Revolving Credit Facility 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 Term A Facility and the Revolving Credit Facility borrowings are initially expected to bear interest at LIBOR plus 2.00%. The New Term B Facility bears interest at LIBOR (subject to a 0.50% floor) plus 2.75%. In relation to the Term Facilities, the Company incurred interest expense of $50 million in the three months ended September 30, 2022, which is included in interest expense in the Condensed Consolidated Statements of Earnings (Loss).

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

The Company ~~currently has~~capitalized approximately $90 million of debt issuance costs during the three months ended September 30, 2022. These capitalized costs are presented as contra-debt within the long-term debt caption in the Condensed Consolidated Balance Sheet. Amortization of debt issuance costs related to the New Term Facilities for the three months ended September 30, 2022 totaled $4 million and is included in interest expense in the Condensed Consolidated Statements of Earnings (Loss). As of September 30, 2022, the Company was in compliance with all covenants under the New Term Facilities.

Prior Senior Credit Facilities ~~(as defined below)~~

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

The credit agreement governing the Senior Credit Facilities (the ~~"Credit~~"Prior Credit Agreement") ~~provides~~provided for senior secured financing of ~~$2.425~~$2.4 billion in the aggregate, consisting of

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(i)Aggregate principal amount of $1,255 million for a five-year senior secured first-lien term A loan facility (the ~~“Term~~"Prior Term A Facility”),

(ii)Aggregate principal amount of $720 million for a seven-year senior secured term B loan facility (the ~~“Term~~“Prior Term B Facility” and together with the Prior Term A Facility, the ~~“Term~~“Prior Term Loan Facilities”), which was repaid in full during the quarter ended September 30, 2020, and

(iii)Aggregate principal amount of $450 million for a five-year senior secured first-lien revolving credit facility (the ~~“Revolving~~“Prior Revolving Credit Facility” and together with the Prior Term Loan Facilities, the ~~“Senior~~“Prior Senior Credit Facilities”).

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

~~The~~On July 1, 2022, the Company ~~is obligated~~terminated the Prior Credit Agreement and repaid all amounts outstanding thereunder.

Debt extinguishment costs related to ~~repay~~ the ~~outstanding principal amount~~termination of the ~~Term A Facility~~Prior Credit Agreement of $17 million were expensed in ~~quarterly installments equal~~other expense (income), net in the Condensed Consolidated Statement of Earnings (Loss) during the three months ended September 30, 2022.

Bridge Loan Commitment

Subject to ~~1.25%~~the terms of an amended and restated commitment letter entered into in connection with Coherent entering into the ~~initial aggregate principal amount of~~Merger Agreement, the commitment parties thereto committed to provide, in addition to the Term ~~A Facility, with the remaining outstanding balance due~~Facilities and ~~payable on the fifth anniversary of September 24, 2019 (the "Closing Date"). The Company is obligated to repay the outstanding principal amount of~~ the Revolving Credit Facility, if any, on the fifth anniversary of the Closing Date. Notwithstanding the foregoing, all amounts outstanding under the Senior Credit Facilities will become due and payable 120 days prior to the maturity of the Company’s currently outstanding 0.25% Convertible Senior Notes due 2022 (the “II-VI Convertible Notes”) if (i) the II-VI Convertible Notes remain outstanding and (ii) the Company has insufficient cash and borrowing availability under the Revolving Credit Facility to repay the principal amount of the II-VI Convertible Notes. The II-VI Convertible Notes are included in the current portion of long-term debt. The Company has sufficient cash to repay the principal amount of the II-VI Convertible Notes, therefore the Senior Credit Facilities remain classified as long-term obligations in the Condensed Consolidated Balance Sheet.

The Company’s obligations under the Senior Credit Facilities are guaranteed by the Company’s material existing or future direct and indirect domestic subsidiaries, including Finisar Corporation ("Finisar") and its domestic subsidiaries (collectively, the “Guarantors”), subject to certain exceptions. Borrowings under the Senior Credit Facilities are secured by a ~~first priority lien in substantially all of the assets of the Company and the Guarantors, subject to certain exceptions, including that no real property secures the Senior Credit Facilities.~~

Amounts outstanding under the Senior Credit Facilities will bear interest at a rate per annum equal to an applicable margin over a eurocurrency rate or an applicable margin over a base rate determined by reference to the highest of (a) the federal funds rate plus 0.50%, (b) Bank of America, N.A.’s prime rate and (c) a eurocurrency rate plus 1.00%, in each case as calculated in

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accordance with the terms of the Credit Agreement. The applicable interest rate would increase under certain circumstances relating to events of default. The Company has entered into an interest rate swap contract to hedge its exposure to interest rate risk on its variable rate borrowings under the Senior Credit Facilities. Refer to Note 15 for further information regarding this interest rate swap.

The Credit Agreement contains customary affirmative and negative covenants with respect to the Senior Credit Facilities, including limitations with respect to liens, investments, indebtedness, dividends, mergers and acquisitions, dispositions of assets and transactions with affiliates. The Company is obligated to maintain a consolidated interest coverage ratio (as calculated in accordance with the terms of the Credit Agreement) as of the end of each fiscal quarter of not less than 3.00 to 1.00. The Company is obligated to maintain a consolidated total net leverage ratio (as calculated in accordance with the terms of the Credit Agreement) of not greater than (i) 5.00 to 1.00 for the first four fiscal quarters after the Closing Date, commencing with the first full fiscal quarter after the Closing Date, (ii) 4.50 to 1.00 for the fifth fiscal quarter through and including the eighth fiscal quarter after the Closing Date, and (iii) 4.00 to 1.00 for each subsequent fiscal quarter. As of December 31, 2021, the Company was in compliance with all financial covenants under the Credit Agreement.

In addition, on December 2, 2021, the Company entered into an amendment to the Credit Agreement, by and among the Company, Bank of America, N.A., as administrative agent, and the lenders party thereto, related to the offering of the Senior Notes (as defined below).

~~Allocation and Pricing of New Senior Credit Facilities~~

~~As of December 10, 2021, a new term~~senior unsecured bridge loan ~~A credit~~ facility ~~(the "New Term A Facility")~~ in an aggregate principal amount of ~~$850~~$990 million (the "Bridge Loan Commitment"). As a ~~new term loan B credit facility (the "New Term B Facility"~~result of the issuance and ~~together with~~sale of the ~~New Term A Facility,~~Senior Notes, 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, in each case as contemplated under the Amended and RestatedBridge Loan Commitment Letter, have been fully priced and allocated. The New Term Facilities are expected be funded concurrently with the Closing. The New Revolving Credit Facility is expected to be available concurrently with the Closing. 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%. The New Term B Facility will bear interest at LIBOR (subject to a 0.50% floor) plus 2.75%. The definitive documentation for the New Term Facilities and the New Revolving Credit Facility is expected to include customary LIBOR replacement provisions.

~~The Company capitalized approximately $17 million of debt issuance costs during~~was terminated. During the three months ended ~~December 31, 2021. These capitalized costs are presented within~~September 30, 2022, the ~~prepaid and other current assets and other long-term assets captions in the Condensed Consolidated Balance Sheet. Amortization~~Company incurred expenses of ~~debt issuance costs for the three months ended December 31, 2021,~~$18 million related to the ~~New Term Facilities, was approximately $1 million~~termination of the Bridge Loan Commitment, which is included in ~~interest~~other expense (income) in the Condensed Consolidated Statements of ~~Earnings.~~Earnings (Loss). There will be no additional expense related to the Bridge Loan Commitment going forward.

Debt Assumed through Acquisition

The Company assumed the remaining balances of three term loans with the closing of the Merger. The aggregate principal amount outstanding is $25 million as of September 30, 2022. The terms loans assumed consisted of the following: (i) 1.3% Term Loan due 2024 (ii) 1.0% State of Connecticut Term Loan due 2023 and (iii) Facility construction loan in Germany due 2030. For the Facility construction loan, on December 21, 2020, Coherent LaserSystems GmbH & Co. KG entered into a loan agreement with Commerzbank for borrowings of up to 24 million Euros, which were to be and were drawn down by October 29, 2021, to finance a portion of the construction of a new facility in Germany. The term of the loan is 10 years and borrowings bear interest at 1.55% per annum. Payments are made quarterly.

5.000% Senior Notes due 2029

On December 10, 2021, the Company issued and sold $990 million aggregate principal amount of ~~5.000%~~ Senior Notes ~~due 2029 (the "Senior Notes")~~ pursuant to the indenture, dated as of December 10, 2021 (the "Indenture"), between the Company and U.S. Bank National Association, as ~~trustee (the "Trustee").~~trustee. The Senior Notes are guaranteed by each of the Company’s domestic subsidiaries that guarantee its obligations under the Senior Credit Facilities. Interest on the Senior Notes ~~will be~~is payable on December 15 and June 15 of each year, commencing on June 15, 2022, at a rate of 5.000% per annum. The Senior Notes will mature on December 15, 2029.

The Company intends to use the proceeds from the offering of the Senior Notes, together with other financing sources (including the New Term Facilities and cash on hand), to fund the cash consideration, the repayment of certain indebtedness and certain fees and expenses in connection with the Merger. If (i) the Merger has not been consummated on or prior to 11:59 p.m., Eastern Time, on December 15, 2022 or (ii) the Company informs U.S. Bank National Association, as trustee (the "Trustee"), in writing or otherwise announces in writing that the Merger is no longer being pursued and/or the Merger Agreement has been terminated, the Company will be required to redeem all of the outstanding Senior Notes at a redemption price equal to 100% of the principal amount of the Senior Notes, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date (the "Special Mandatory Redemption Date"). Pursuant to the terms of the Indenture, prior to the earlier of (i) the date of the consummation of the Merger and (ii) the Special Mandatory Redemption Date, the gross proceeds from the Senior Notes cannot be used for any purpose, and therefore $990 million of restricted cash is classified within cash, cash equivalents, and restricted cash on the Condensed Consolidated Balance Sheet at December 31, 2021.

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

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The Indenture contains customary covenants and events of default, including default relating to among other things, payment default, failure to comply with covenants or agreements contained in the Indenture or the Senior Notes and certain provisions related to bankruptcy events. As of ~~December 31, 2021,~~September 30, 2022, the Company was in compliance with all covenants under the Indenture.

~~Bridge Loan Commitment~~

Subject to the terms of the Amended and Restated Commitment Letter, the commitment parties thereto committed to provide, in addition to the New Term Facilities and the New Revolving Credit Facilities, a senior unsecured bridge loan facility in an aggregate principal amount of $990 million (the "Bridge Loan Commitment"). As a result of the issuance of the Senior Notes, the Bridge Loan Commitment was terminated, such that the total amounts of commitments under the Amended and Restated Commitment Letter are $4.0 billion. During the three months ended December 31, 2021, the Company incurred expenses of $3 million related to the Bridge Loan Commitment, which is included in interest expense in the Condensed Consolidated Statements of Earnings.

~~0.50% Finisar Convertible Notes~~

~~On November 1, 2021, Finisar delivered to holders of all outstanding 0.50%~~0.25% Convertible Senior Notes due ~~2036 issued by Finisar (the "Finisar Notes") a notice~~ of redemption pursuant to which Finisar provided notice that it would redeem on December 22, 2021 all of the Finisar Notes that were not repurchased by Finisar on December 15, 2021 pursuant to the terms of the Finisar Notes and that remained outstanding on December 22, 2021. On December 15, 2021, Finisar repurchased $15 million aggregate principal amount of Finisar Notes that were tendered for repurchase by holders of Finisar Notes. Each holder of Finisar Notes that remained outstanding after the repurchase on December 15, 2021 had the option to elect to receive (i) ~~a redemption price equal to 100% of the principal amount of the redeemed Finisar Notes, plus accrued and unpaid interest on the redeemed Finisar Notes~~ ~~or (ii)~~ ~~to convert all or any portion of the Finisar Notes held by such holder in accordance with the terms of the Finisar Notes until the close of business on December 21, 2021.~~ ~~Based on the elections of such holders, the Company issued 45 shares of common stock and paid approximately~~ ~~$0.3 million in the aggregate on December 22, 2021 to settle the conversion of the Finisar Notes that were converted and to redeem all remaining outstanding Finisar Notes.~~

~~0.25% Convertible Senior Notes~~2022

In August 2017, the Company issued and sold $345 million aggregate principal amount of ~~the II-VI~~its 0.25% Convertible Senior Notes due 2022 (the "Convertible Notes") in a private placement to qualified institutional buyers within the meaning of Rule 144A under the Securities Act of 1933, as amended.

~~Originally, the Company had separately accounted for the value of the conversion option as an equity component, and the resulting debt discount was amortized as additional non-cash interest expense.~~

~~With the adoption of ASU 2020-06~~Beginning on July 1, 2021, the Company reversed that accounting, electing to use the modified retrospective method. The adoption resulted in an increase of $15 million to the current portion of long-term debt, a decrease of $3 million to deferred income taxes, and a decrease of $11 million to shareholders' equity.

The initial conversion rate is 21.25 shares of II-VI Common Stock per $1,000 principal amount of II-VI Convertible Notes, which is equivalent to an initial conversion price of $47.06 per share of II-VI Common Stock. Throughout the term of the II-VI Convertible Notes, the conversion rate may be adjusted upon the occurrence of certain events. The if-converted value of the II-VI Convertible Notes amounted to $501 million as of December 31, 2021 and $532 million as of June 30, 2021 (based on the Company’s closing stock price on the last trading day of the fiscal periods then ended).

~~Prior to the close of business on the business day immediately preceding June 1, 2022, the II-VI Convertible Notes will be convertible only under the following circumstances:~~

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

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

~~(iii) upon the occurrence of certain specified corporate events.~~

~~On or after~~ June 1, 2022 until the close of business on the business day immediately preceding September 1, 2022 ( the ~~maturity date,~~"Maturity Date") holders ~~may~~were able to convert their ~~II-VI~~ Convertible Notes at any ~~time, regardless~~time. For the fiscal quarter ended September 30, 2022, the holders of the ~~foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash,~~Coherent Convertible Notes converted $332 million of principal and received approximately 7 million shares of ~~II-VI~~Coherent Common Stock ~~or a combination~~in settlement of the conversions.

On the Maturity Date, $4 million aggregate principal amount of Convertible Notes remained outstanding, and was repaid in cash, and ~~shares of II-VI Common Stock, at~~ the ~~Company’s election.~~

Holders of the II-VI Convertible Notes will not receive any cash payment representing accrued and unpaid interest upon conversion of a II-VI Convertible Note. Accrued but unpaid interest will be deemed to be paid in full upon conversion rather than cancelled, extinguished or forfeited. The II-VI Convertible Notes were not convertible during the quarter ended December 31, 2021. Because the last reported sale price of II-VI Common Stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the calendar quarter ended December 31, 2021 was equal to or greater than 130% of the applicable conversion price on each applicable trading day, the II-VI Convertible Notes are ~~convertible at~~no longer outstanding. At the ~~option of~~Maturity Date, the ~~holders thereof during~~accrued interest on the ~~fiscal quarter ending March 31, 2022.~~

Coherent Convertible Notes was immaterial. The ~~following tables set forth~~ total interest expense ~~recognized~~ related to the ~~II-VI~~ Convertible Notes was immaterial for both the three ~~and six~~ months ended ~~December 31, 2021~~September 30, 2022 and ~~December 31, 2020 ($000):~~

Three Months Ended December 31,
Six Months Ended
December 31,
2021 2020 2021 2020
0.25% contractual coupon $ 220 $ 220 $ 441 $ 441
Amortization of debt discount and debt issuance costs including initial purchaser discount 510 3,446 925 6,852
Interest expense $ 730 $ 3,666 $ 1,366 $ 7,293

~~The effective interest rates on the liability component for the three and six months ended December 31, 2021 and 2020 presented were 1% and 5%, respectively.~~September 30, 2021.

Aggregate Availability

The Company had aggregate availability of ~~$450~~$285 million under its Revolving Credit Facility as of ~~December 31, 2021.~~

~~Weighted Average Interest Rate~~

~~The weighted average interest rate of total borrowings was 1% and 2% for the six months ended December 31, 2021 and 2020, respectively.~~September 30, 2022.

Note 9. Income Taxes

The Company’s year-to-date effective income tax rate at ~~December 31, 2021~~September 30, 2022 was ~~16%~~24% compared to an effective tax rate of ~~19%~~18% for the same period in ~~2020.~~2021. The variations between the Company’s effective tax rate and the U.S. statutory rate of 21% were due to nondeductible expenses and tax rate differentials between U.S. and foreign ~~jurisdictions and deductions for intangible income.~~jurisdictions.

U.S. GAAP prescribes the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements which includes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of ~~December 31, 2021~~September 30, 2022 and June 30, ~~2021,~~2022, the Company’s gross

unrecognized income tax benefit, excluding interest and penalties, was ~~$38~~$72 million ~~for both periods.~~and $37 million, respectively. The Company has classified the uncertain tax positions as non-current income tax liabilities, as the amounts are not expected to be paid within one year. If recognized, ~~$33~~$32 million of the gross unrecognized tax benefits at ~~December 31, 2021~~September 30, 2022 would impact the effective tax rate. The Company recognizes interest and penalties related to uncertain tax positions in the income tax provision in the Condensed Consolidated Statements of ~~Earnings.~~Earnings (Loss). The amount of accrued interest and penalties included in the gross unrecognized income tax benefit was $6 million and $3 million at ~~both December 31, 2021~~September 30, 2022 and June 30, ~~2021.~~2022, respectively. Fiscal years ~~2018~~2019 to ~~2021~~2022 remain open to examination by the Internal Revenue Service, fiscal years ~~2017~~2018 to ~~2021~~2022 remain open to examination by certain state jurisdictions, and fiscal years 2011 to ~~2021~~2022 remain open to examination by certain foreign taxing jurisdictions. The Company is currently under examination for certain subsidiary companies in ~~New York~~California for the years ended ~~June~~September 30, 2018 through ~~June~~September 30, ~~2019 and under examination~~2019; Colorado for ~~certain subsidiary companies in~~the years ended September 30, 2018 through September 30, 2021; Minnesota for the years ended September 30, 2018 through September 30, 2021; Vietnam for the years ended September 30, 2018 through September 30, 2021; India for the year ended March 31, 2016; ~~Philippines for the years ended June 30, 2018 through June 30, 2019;~~ and Germany for the years ended June 30, 2012 through ~~June~~September 30, 2018. The Company believes its income tax reserves for these tax matters are adequate.

Note 10. Leases

We determine if an arrangement is a lease at inception for arrangements with an initial term of more than 12 months, and classify it as either finance or operating.

Finance leases are generally those that allow us to substantially utilize or pay for the entire asset over its estimated useful life. Finance leases assets are recorded in property, plant and equipment, net, and finance lease liabilities within other accrued liabilities and other liabilities on our Condensed Consolidated Balance Sheets. Finance lease assets are amortized in operating expenses on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term, with the interest component for lease liabilities included in interest expense and recognized using the effective interest method over the lease term.

Operating leases are recorded in other assets and operating lease liabilities, current and non-current on the Company’s Condensed Consolidated Balance Sheets. Operating lease assets are amortized on a straight-line basis in operating expenses over the lease term.

The Company’s lease liabilities are recognized based on the present value of the remaining fixed lease payments, over the lease term, using a discount rate of similarly secured borrowings available to the Company. For the purpose of lease liability measurement, the Company considers only payments that are fixed and determinable at the time of commencement. Any variable payments that depend on an index or rate are expensed as incurred. The Company accounts for non-lease components, such as common area maintenance, as a component of the lease, and includes it in the initial measurement of leased assets and corresponding liabilities. The Company’s lease terms and conditions may include options to extend or terminate. An option is recognized when it is reasonably certain that ~~II-VI~~Coherent will exercise that option.

The Company’s lease assets also include any lease payments made and exclude any lease incentives received prior to commencement. ~~Leased~~Our lease assets are tested for impairment in the same manner as long-lived assets used in operations.

The following table presents lease costs, which include ~~short-term~~ leases for arrangements with an initial term of more than 12 months, lease term, and discount rates ($000):
Three Months Ended December 31, 2021 Six Months Ended December 31, 2021
Finance Lease Cost
Amortization of right-of-use assets $ 418 $ 838
Interest on lease liabilities 302 609
Total finance lease cost $ 720 $ 1,447
Operating lease cost 9,176 18,395
Sublease income 143 507
Total lease cost $ 9,753 $ 19,335
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating cash flows from finance leases $ 302 $ 609
Operating cash flows from operating leases 8,850 17,665
Financing cash flows from finance leases 312 622
Weighted-Average Remaining Lease Term (in Years)
Finance leases 10.0
Operating leases 6.9
Weighted-Average Discount Rate
Finance leases 5.6 %
Operating leases 5.9 %

Three Months Ended December 31, 2020 Six Months Ended December 31, 2020
Finance Lease Cost
Amortization of right-of-use assets $ 417 $ 833
Interest on lease liabilities 319 642
Total finance lease cost $ 736 $ 1,475
Operating lease cost 9,547 18,600
Sublease income 368 735
Total lease cost $ 9,915 $ 19,340
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating cash flows from finance leases $ 319 $ 642
Operating cash flows from operating leases 9,229 17,692
Financing cash flows from finance leases 278 551


	Three Months Ended September 30, 2022			Three Months Ended September 30, 2021
Finance lease cost
Amortization of right-of-use assets	$	417		$	417
Interest on lease liabilities	288			307
Total finance lease cost	705			724
Operating lease cost	12,848			9,134
Sublease income	—			368
Total lease cost	$	13,553		$	9,490

Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating cash flows from finance leases	$	288		$	307
Operating cash flows from operating leases	12,679			8,726
Financing cash flows from finance leases	341			306

Weighted-Average Remaining Lease Term (in Years)
Finance leases	9.3			10.3
Operating leases	6.2			7.0

Weighted-Average Discount Rate
Finance leases	5.6		%	5.6 %
Operating leases	5.3		%	5.9 %

Note 11. Equity and Redeemable Preferred Stock

Mandatory Convertible Preferred Stock

In July 2020, the Company issued ~~2,300,000~~2.3 million shares of 6.00% Series A Mandatory Convertible Preferred, no par value per share (“Mandatory Convertible Preferred Stock”).

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

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

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

The Company recognized $7 million ~~and $14 million~~ of preferred stock dividends for both the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and September 30, 2021 ~~respectively,~~ associated with the Mandatory Convertible Preferred Stock, which were presented as a reduction to retained earnings on the Condensed Consolidated Balance Sheet as of ~~December 31, 2021.~~September 30, 2022.

The following table presents dividends per share and dividends recognized for the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and September 30, 2021:


		Three Months Ended December 31, 2021		Six Months Ended December 31, 2021			Three Months Ended September 30, 2022		Three Months Ended September 30, 2021
Dividends per share	Dividends per share	$	3.00	$	6.00	Dividends per share	$	3.00	$	3.00
Mandatory Convertible Preferred Stock dividends ($000)	Mandatory Convertible Preferred Stock dividends ($000)	$	6,900	$	13,800	Mandatory Convertible Preferred Stock dividends ($000)	6,900		6,900

~~Redeemable~~Series B-1 Convertible Preferred Stock

In March 2021, the Company issued 75,000 shares of ~~II-VI~~ Series B-1 Convertible Preferred Stock, no par value per ~~share. Refer to Note 3. Pending Coherent Acquisition for additional information.~~share ("Series B-1 Preferred Stock").

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

•at the election of the holder, at aan initial conversion price of $85 per share ~~(“Conversion~~(as it may be adjusted from time to time, the “Conversion Price”) ~~after the earliest to occur of (i) the issuance of shares of II-VI Series B-2 Convertible Preferred Stock~~ upon ~~the Closing, (ii) the termination of the Merger Agreement or (iii)~~ the delivery by ~~II-VI~~Coherent to the ~~Investor~~holders of the Series B-1 Preferred Stock of an offer to repurchase the ~~II-VI~~ Series B-1 ~~Convertible~~ Preferred Stock upon the occurrence of a Fundamental Change (as defined in the Statement with Respect to Shares establishing the ~~New II-VI Convertible~~Series B Preferred ~~Stock)~~Stock as defined below); and

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

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

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

•each holder has the right to require the Company to redeem all of their ~~II-VI~~Coherent Series B-1 Convertible Preferred Stock, for cash, at a redemption price per share equal to the sum of the Stated Value ~~for such shares~~ (as defined in the Statement with Respect to Shares establishing the ~~New II-VI Convertible~~Series B Preferred Stock) for such shares plus an amount equal to all accrued or declared and unpaid dividends on such shares that had not previously been added to the Stated Value (such price the “Redemption Price,” and such right the “Put Right”); and

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

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

If the Company defaults on a payment obligation with respect to the ~~II-VI~~ Series B-1 ~~Convertible~~ Preferred Stock and such default is not cured within 30 days, the dividend rate will increase to 8% per annum and will be increased by an additional 2% per annum each quarter the Company remains in default, not to exceed 14% per annum.

The ~~II-VI~~ Series B-1 ~~Convertible~~ Preferred Stock is redeemable for cash outside of the control of the Company upon the exercise of the Put Right, and upon a Fundamental Change, and is therefore classified as mezzanine equity.

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

Series B-2 Convertible Preferred Stock

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

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

•at the election of the holder the Conversion Price upon the delivery by Coherent to the holders of the Series B-2 Preferred Stock of an offer to repurchase the Coherent Series B-2 Convertible Preferred Stock upon the occurrence of a Fundamental Change (as defined in the Statement with Respect to Shares establishing the Series B Preferred Stock); and

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

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

On or at any time after July 1, 2032:

•each holder has the right to require the Company to redeem all of their Series B-2 Preferred Stock, for cash, at a redemption price per share equal to the sum of the Stated Value for such shares (as defined in the Statement with Respect to Shares establishing the Series B Preferred Stock) plus an amount equal to all accrued or declared and unpaid dividends on such shares that had not previously been added to the Stated Value (such price the “Redemption Price,” and such right the “Put Right”); and

•the Company has the right to redeem, in whole or in part, on a pro rata basis from all holders based on the aggregate number of shares of Series B-2 Preferred Stock outstanding, for cash, at the Redemption Price.

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

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

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

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

The Company recognized ~~$10~~$29 million and ~~$20~~$10 million of preferred stock dividends related to the Series B Preferred Stock for the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and September 30, 2021, respectively, which were presented as a reduction to retained earnings on the Condensed Consolidated Balance Sheet as of ~~December 31, 2021.~~September 30, 2022.

The following table presents dividends per share and dividends recognized for the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and September 30, 2021:


		Three Months Ended December 31, 2021		Six Months Ended December 31, 2021			Three Months Ended September 30, 2022		Three Months Ended September 30, 2021
Dividends per share	Dividends per share	$	131	$	266	Dividends per share	$	133.38	$	135.77
Dividends ($000)	Dividends ($000)	9,307		19,011		Dividends ($000)	27,477		9,704
Deemed dividends ($000)	Deemed dividends ($000)	496		974		Deemed dividends ($000)	1,200		478

Note 12. Earnings (Loss) Per Share

Basic earnings (loss) per common share is computed by dividing net earnings (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period.

Diluted earnings (loss) per common share is computed by dividing the diluted earnings (loss) available to common shareholders by the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period. ~~The dilutive effect of equity awards is calculated based on the average stock price for each fiscal period, using the treasury stock method.~~ For the three ~~and six~~ months ended ~~December 31, 2021, diluted shares outstanding include the dilutive effect of the potential shares II-VI Common Stock issuable from stock options, performance and restricted shares, as well~~September 30, 2022, as the ~~shares~~Company was in a net loss position, no dilution was included in the calculation of ~~II-VI Common Stock issuable upon conversion of outstanding convertible debt.~~earnings (loss) per share.

Potentially dilutive shares whose effect would have been anti-dilutive are excluded from the computation of diluted earnings (loss) per common share. For the three ~~and six~~ months ended ~~December 31, 2021,~~September 30, 2022, diluted earnings (loss) per share excluded the potentially dilutive effect of the performance and restricted shares, calculated based on the average stock price for each fiscal period, using the treasury stock method, as well as the shares of Coherent Common Stock issuable upon conversion of outstanding convertible debt, the Series A Mandatory Convertible Preferred Stock and the Series B Convertible Preferred Stock (under the If-Converted method), as their effects were anti-dilutive.

Table of Contents

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings (loss) per share computations for the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and September 30, 2021 ($000):

Three Months Ended
December 31, Six Months Ended December 31,
2021 2020 2021 2020
Numerator
Net earnings $ 67,657 $ 87,900 $ 142,121 $ 134,166
Deduct Series A preferred stock dividends (6,900) (6,900) (13,800) (13,340)
Deduct Series B dividends and deemed dividends (9,803) — (19,985) —
Basic earnings available to common shareholders $ 50,954 $ 81,000 $ 108,336 $ 120,826
Effect of dilutive securities:
Add back interest on II-VI Convertible Notes (net of tax) $ 577 $ 3,066 $ 1,079 $ 6,132
Diluted earnings available to common shareholders $ 51,531 $ 84,066 $ 109,415 $ 126,958
Denominator
Weighted average shares 106,158 104,092 105,960 103,450
Effect of dilutive securities:
Common stock equivalents 2,952 3,630 2,854 3,034
II-VI Convertible Notes 7,330 7,331 7,330 7,331
Diluted weighted average common shares 116,440 115,053 116,144 113,815
Basic earnings per common share $ 0.48 $ 0.78 $ 1.02 $ 1.17
Diluted earnings per common share $ 0.44 $ 0.73 $ 0.94 $ 1.12

~~Table of~~ ~~Contents~~


	Three Months Ended September 30,
	2022		2021
Numerator
Net earnings (loss)	$	(38,698)	$	74,464
Deduct Series A preferred stock dividends	(6,900)		(6,900)
Deduct Series B dividends and deemed dividends	(28,677)		(10,182)
Basic earnings (loss) available to common shareholders	$	(74,275)	$	57,382

Effect of dilutive securities:
Add back interest on Convertible Notes (net of tax)	$	—	$	502

Diluted earnings (loss) available to common shareholders	$	(74,275)	$	57,884

Denominator
Weighted average shares	133,280		105,761
Effect of dilutive securities:
Common stock equivalents	—		2,758
Convertible Notes	—		7,330


Diluted weighted average common shares	133,280		115,849

Basic earnings (loss) per common share	$	(0.56)	$	0.54

Diluted earnings (loss) per common share	$	(0.56)	$	0.50

The following table presents potential shares of ~~II-VI~~Coherent Common Stock excluded from the calculation of diluted earnings (loss) per share as their effect would have been anti-dilutive for the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and September 30, 2021 ~~(000)~~($000):


		Three Months Ended December 31,		Six Months Ended December 31,			Three Months Ended September 30,
		2021	2020	2021	2020		2022	2021
Common stock equivalents	Common stock equivalents	2	21	16	225	Common stock equivalents	1,762	30
Convertible Notes						Convertible Notes	4,474	—
Series A Mandatory Convertible Preferred Stock	Series A Mandatory Convertible Preferred Stock	8,915	8,915	8,915	8,922	Series A Mandatory Convertible Preferred Stock	9,604	8,915

Series B Redeemable Preferred Stock		9,105	—	9,049	—
Series B Convertible Preferred Stock						Series B Convertible Preferred Stock	25,861	8,993
Total anti-dilutive shares	Total anti-dilutive shares	18,022	8,936	17,980	9,147	Total anti-dilutive shares	41,701	17,938

Note 13. Segment Reporting

The Company reports its business segments using the “management approach” model for segment reporting. This means that the Company determines its reportable business segments based on the way the chief operating decision-maker organizes business segments within the Company for making operating decisions and assessing financial performance.

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

Table of Contents

Effective July 1, 2022 the Company reports its financial results in the following 2three newly designated segments: (i) ~~Compound Semiconductors,~~Networking, (ii) Materials, and ~~(ii)~~(iii) Lasers. Previously, financial results had been reported in the following two segments: (i) Photonic Solutions, and (ii) Compound Semiconductors. The Networking segment represents the former Photonic Solutions segment and the Materials segment represents the former Compound Semiconductors segment

The Company’s chief operating ~~decision-maker~~decision maker receives and reviews financial information based on these three segments. The Company evaluates business segment performance based upon segment operating income, which is defined as earnings before income taxes, interest and other income or expense. The segments are managed separately due to the market, production requirements and facilities unique to each segment.

The accounting policies are consistent across each segment. To the extent possible, the Company’s corporate expenses and assets are allocated to the segments. The expenses associated with the Coherent acquisition for the three months ended September 30, 2022 are wholly allocated to the Lasers segment. For the three months ended Sept 30, 2021, the expenses associated with the pending acquisition of Coherent ~~for the three and six months ended December 31, 2021 have~~were not ~~been~~ allocated to an ~~Operating Segment,~~operating segment, and ~~are~~were presented in Unallocated and Other. In addition, prior year numbers were recast to reflect the transfer of two entities between the Networking and Materials segments.

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


		Three Months Ended December 31, 2021									Three Months Ended September 30, 2022
		Photonic Solutions		Compound Semiconductors		Unallocated & Other		Total			Networking		Materials		Lasers		Unallocated & Other		Total
Revenues	Revenues	$	524,969	$	281,850	$	—	$	806,819	Revenues	$	596,548	$	355,644	$	392,378	$	—	$	1,344,570
Inter-segment revenues	Inter-segment revenues	9,377		92,269		(101,646)		—		Inter-segment revenues	18,740		95,054		166		(113,960)		—
Operating income		49,713		57,249		(8,740)		98,222
Operating income (loss)										Operating income (loss)	90,982		75,335		(123,841)		—		42,476
Interest expense	Interest expense	—		—		—		(17,062)		Interest expense	—		—		—		—		(61,889)
Other income, net		—		—		—		(1,806)
Other income (expense), net										Other income (expense), net	—		—		—		—		(31,605)
Income taxes	Income taxes	—		—		—		(11,697)		Income taxes	—		—		—		—		12,320
Net earnings		—		—		—		67,657
Net loss										Net loss	—		—		—		—		(38,698)
Depreciation and amortization	Depreciation and amortization	42,850		28,176		—		71,026		Depreciation and amortization	42,774		26,527		77,985		—		147,286
Expenditures for property, plant & equipment	Expenditures for property, plant & equipment	11,885		42,237		—		54,122		Expenditures for property, plant & equipment	43,830		74,898		20,262		—		138,990
Segment assets	Segment assets	4,981,065		2,668,218		—		7,649,283		Segment assets	3,491,637		2,251,544		8,087,378		—		13,830,559
Goodwill	Goodwill	1,052,038		241,129		—		1,293,167		Goodwill	1,009,078		270,197		4,005,316		—		5,284,591


	Three Months Ended September 30, 2021
	Networking		Materials		Unallocated & Other		Total
Revenues	$	531,013	$	264,098	$	—	$	795,111
Inter-segment revenues	32,169		62,763		(94,932)		—
Operating income (loss)	59,439		46,778		(11,167)		95,050
Interest expense	—		—		—		(12,191)
Other income (expense), net	—		—		—		7,582
Income taxes	—		—		—		(15,977)
Net earnings	—		—		—		74,464
Depreciation and amortization	41,833		27,859		—		69,692
Expenditures for property, plant & equipment	24,796		22,770		—		47,565

Table of Contents

Three Months Ended December 31, 2020
Photonic
Solutions Compound
Semiconductors Unallocated
& Other Total
Revenues $ 482,879 $ 303,690 $ — $ 786,569
Inter-segment revenues 8,441 64,812 (73,253) —
Operating income 48,439 70,277 — 118,716
Interest expense — — — (15,585)
Other expense, net — — — 3,153
Income taxes — — — (18,383)
Net earnings — — — 87,900
Depreciation and amortization 39,764 27,437 — 67,200
Expenditures for property, plant & equipment 24,853 20,684 — 45,537

Six Months Ended December 31, 2021
Photonic
Solutions Compound
Semiconductors Unallocated
& Other Total
Revenues $ 1,060,992 $ 540,938 $ — $ 1,601,930
Inter-segment revenues 25,940 170,638 (196,578) —
Operating income (loss) 106,259 106,920 (19,907) 193,272
Interest expense — — — (29,253)
Other income (expense), net — — — 5,776
Income taxes — — — (27,674)
Net earnings — — — 142,121
Depreciation and amortization 84,986 55,732 — 140,718
Expenditures for property, plant & equipment 36,862 64,827 — 101,689

Six Months Ended December 31, 2020
Photonic
Solutions Compound
Semiconductors Unallocated
& Other Total
Revenues $ 980,606 $ 534,047 $ — $ 1,514,653
Inter-segment revenues 15,657 131,899 (147,556) —
Operating income (loss) 98,873 120,972 — 219,845
Interest expense — — — (32,799)
Other income, net — — — (21,186)
Income taxes — — — (31,694)
Net earnings — — — 134,166
Depreciation and amortization 78,451 53,435 — 131,886
Expenditures for property, plant & equipment 46,087 33,242 — 79,329

Note 14. Share-Based Compensation

Stock Award Plans

The Company’s Board of Directors amended and restated the ~~II-VI Incorporated~~Coherent Corp. 2018 Omnibus Incentive Plan, which was approved by the shareholders at the Annual Meeting in November ~~2018.~~2018 (the "Plan"). The ~~II-VI Incorporated Amended and Restated 2018 Omnibus Incentive~~ Plan ~~(the “Plan”)~~ was approved by the shareholders at the Annual Meeting in November 2020. The Plan provides for the grant of non-qualified stock options, stock appreciation rights, restricted shares, restricted share units, deferred shares, performance shares and performance share units to employees, officers and directors of the Company. The maximum number of shares of ~~II-VI~~Coherent Common Stock authorized for issuance under the Plan is limited to 9,550,000 shares of ~~II-VI~~Coherent Common Stock, not including any remaining shares forfeited under the predecessor plans that may be rolled into the Plan. The Plan has vesting provisions predicated upon the death, retirement or disability of the grantee.

~~Table~~On the Closing Date the Company assumed 403,675 Legacy Coherent restricted stock units ("Converted RSUs"). The Converted RSUs are generally subject to the same terms and conditions that applied to the RSUs immediately prior to the Closing Date. Other than the assumed Converted RSUs, Coherent did not assume any other awards outstanding under Legacy Coherent equity incentive plans. On the Closing Date, Coherent assumed the unused capacity under Legacy Coherent equity incentive plan, which totaled 10,959,354 shares of ~~Contents~~

issuable Coherent Common Stock.

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


		Three Months Ended December 31,				Six Months Ended December 31,					Three Months Ended September 30,
		2021		2020		2021		2020			2022		2021
Stock Options and Cash-Based Stock Appreciation Rights	Stock Options and Cash-Based Stock Appreciation Rights	$	1,924	$	5,414	$	2,472	$	7,334	Stock Options and Cash-Based Stock Appreciation Rights	$	(441)	$	548
Restricted Share Awards and Cash-Based Restricted Share Unit Awards	Restricted Share Awards and Cash-Based Restricted Share Unit Awards	13,760		15,773		31,132		25,883		Restricted Share Awards and Cash-Based Restricted Share Unit Awards	44,652		17,372
Performance Share Awards and Cash-Based Performance Share Unit Awards	Performance Share Awards and Cash-Based Performance Share Unit Awards	2,058		6,892		5,766		10,364		Performance Share Awards and Cash-Based Performance Share Unit Awards	7,089		3,708

		$	17,742	$	28,079	$	39,370	$	43,581		$	51,300	$	21,628

Note 15. Fair Value of Financial Instruments

The FASB defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous markets for the asset and liability in an orderly transaction between market participants at the measurement date. The Company estimates fair value of its financial instruments utilizing an established three-level hierarchy in accordance with U.S. GAAP. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date as follows:

•Level 1 –Valuation is based upon unadjusted quoted prices for identical assets or liabilities in active markets.

•Level 2 –Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instruments.

•Level 3 –Valuation is based upon other unobservable inputs that are significant to the fair value measurements.

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

Table of Contents

The Company entered into an interest rate swap with a notional amount of $1,075 million to limit the exposure to its variable interest rate debt by effectively converting it to a fixed interest rate. The Company receives payments based on the one-month LIBOR and makes payments based on a fixed rate of 1.52%. The Company receives payments with a floor of 0.00%. The interest rate swap agreement has an effective date of November 24, 2019, with an expiration date of September 24, 2024. The initial notional amount of the interest rate swap ~~is scheduled to decrease~~was decreased to $825 million in June 2022 and will remain at that amount through the expiration date. The Company designated this instrument as a cash flow hedge and deemed the hedge relationship effective at inception of the contract. The fair value of the interest rate swap of ~~$19~~$43 million is recognized in the Condensed Consolidated Balance Sheet within prepaid and other ~~liabilities~~current assets and other assets as of ~~December 31, 2021.~~September 30, 2022. Changes in fair value are recorded within accumulated other comprehensive ~~income~~loss on the Condensed Consolidated Balance Sheet and reclassified into the Condensed Consolidated Statement of Earnings (Loss) as interest expense in the period in which the underlying transaction affects earnings. Cash flows from hedging activities are reported in the Condensed Consolidated Statements of Cash Flows in the same classification as the hedged item, generally as a component of cash flows from operations. The fair value of the interest rate swap is determined using widely accepted valuation techniques and reflects the contractual terms of the interest rate swap including the period to maturity, and while there are no quoted prices in active markets, it uses observable market-based inputs, including interest rate curves. The fair value analysis also considers a credit valuation adjustment to reflect nonperformance risk of both the Company and the single counterparty. The interest rate swap is classified as a Level 2 item within the fair value hierarchy.

On February 23, 2022, the Company entered into an interest rate cap ("the Cap") with an effective date of July 1, 2023. The Cap manages the Company's exposure to interest rate movements on a portion of the Company's floating rate debt. The Cap provides the Company with the right to receive payment if one-month LIBOR exceeds 1.85%. Beginning in July 2023, the Company will begin to pay a fixed monthly premium based on an annual rate of 0.853% for the Cap. The Cap will carry a notional amount ranging from $500 million to $1,500 million. The fair value of the interest rate cap of $44 million is recognized in the Condensed Consolidated Balance Sheet within other assets as of September 30, 2022.

The Cap is designed to mirror the terms of the Credit Agreement as of the effective date, or its direct replacement. The Company designated the Cap as a cash flow hedge of the variability of the LIBOR-based interest payments on the Term Loan Facilities. Every period over the life of the hedging relationship, the entire change in fair value related to the hedging instrument will first be recorded within accumulated other comprehensive income (loss). Amounts accumulated in accumulated other comprehensive income (loss) will be reclassified into interest expense in the same period or periods in which interest expense is recognized on the Credit Agreement, or its direct replacement. The fair value of the Cap is determined using widely accepted valuation techniques and reflects the contractual terms of the Cap including the period to maturity, and while there are no quoted prices in active markets, it uses observable market-based inputs, including interest rate curves. The Cap is classified as a Level 2 item within the fair value hierarchy.

The Company estimated the fair value of the ~~II-VI Convertible~~Senior Notes based on quoted market prices as of the last trading day prior to ~~December 31, 2021;~~September 30, 2022; however, the ~~II-VI Convertible~~Senior Notes have only a limited trading volume and as such this fair value estimate is not necessarily the value at which the ~~II-VI Convertible~~Senior Notes could be retired or transferred. The Company concluded that this fair value measurement should be categorized within Level 2. The carrying value of the ~~II-VI Convertible~~Senior Notes is net of unamortized discount and issuance costs. See Note 8. Debt for details on the Company’s debt facilities.

~~Table of~~ ~~Contents~~

The fair value and carrying value of the ~~II-VI~~ Convertible Notes and Senior Notes were as ~~follows at December 31, 2021~~followed ($000):
Fair Value Carrying Value
II-VI Convertible Notes $ 513,632 $ 343,600


	September 30, 2022				June 30, 2022
	Fair Value		Carrying Value		Fair Value		Carrying Value
Convertible Notes	$	—	$	—	$	382,601	$	341,162
Senior Notes	$	821,324	$	982,474	$	865,527	$	982,297

The fair values of cash and cash equivalents are considered Level 1 among the fair value hierarchy and approximate fair value because of the short-term maturity of those instruments. The Company’s borrowings including its lease obligations and the Senior Notes, ~~excluding the II-VI Convertible Notes~~ are considered Level 2 among the fair value hierarchy and their principal amounts approximate fair value. ~~Due to the proximity~~

Table of ~~the issuance date to the quarter end December 31, 2021, the Company assumes that the principal amount of the Senior Notes approximates fair value.~~Contents

The Company, from time to time, purchases foreign currency forward exchange contracts, that permit it to ~~sell~~transact specified amounts of these foreign currencies ~~expected to be received from its export sales,~~ for pre-established U.S. dollar amounts at specified ~~dates.~~dates that represent assets or liabilities on the balance sheets of certain subsidiaries. These contracts are entered into ~~to limit transactional~~for the purpose of limiting translational exposure to changes in currency exchange rates ~~of export sales transactions in which settlement will occur in future periods~~ and which otherwise would expose the ~~Company,~~Company's earnings, on the ~~basis~~revaluation of its aggregate net ~~cash flows~~assets or liabilities in respective currencies, to foreign currency risk. At ~~December 31, 2021,~~September 30, 2022, the Company had foreign currency forward contracts recorded at fair value. The fair values of these instruments were measured using valuations based upon quoted prices for similar assets and liabilities in active markets (Level 2) and are valued by reference to similar financial instruments, adjusted for credit risk and restrictions and other terms specific to the contracts. ~~There were no material realized gains or~~Realized losses related to these contracts for the three ~~and six~~ months ended ~~December 31, 2021.~~September 30, 2022 were $23 million, and were included in other expense (income), net in the Condensed Consolidated Statements of Earnings (Loss).

Note 16. Share Repurchase Programs

In August 2014, the Company’s Board of Directors authorized the Company to purchase up to $50 million of ~~II-VI~~Coherent Common Stock through a share repurchase program (the “Program”) that calls for shares to be purchased in the open market or in private transactions from time to time. The Program has no expiration and may be suspended or discontinued at any time. Shares purchased by the Company are retained as treasury stock and available for general corporate purposes. The Company did not repurchase any shares pursuant to this Program during the quarter ended ~~December 31, 2021.~~September 30, 2022. As of ~~December 31, 2021,~~September 30, 2022, the Company has cumulatively purchased 1,416,587 shares of ~~II-VI~~Coherent Common Stock pursuant to the Program for approximately $22 million. The dollar value of shares as of ~~December 31, 2021~~September 30, 2022 that may yet be purchased under the Program is approximately $28 million.

Note 17. Accumulated Other Comprehensive Income

The changes in accumulated other comprehensive income (loss) (“AOCI”) by component, net of tax, for the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 were as follows ($000):
Foreign
Currency
Translation
Adjustment Interest
Rate
Swap Defined
Benefit
Pension Plan Total
Accumulated Other
Comprehensive
Income
AOCI - June 30, 2021 $ 55,395 $ (31,773) $ (9,355) $ 14,267
Other comprehensive income before reclassifications (11,788) 4,783 — (7,005)
Amounts reclassified from AOCI — 7,808 — 7,808
Net current-period other comprehensive income (11,788) 12,591 — 803
AOCI - December 31, 2021 $ 43,607 $ (19,182) $ (9,355) $ 15,070


	Foreign Currency Translation Adjustment		Interest Rate Swap		Interest Rate Cap		Defined Benefit Pension Plan		Total Accumulated Other Comprehensive Income
AOCI - June 30, 2022	$	(34,572)	$	11,735	$	14,306	$	6,364	$	(2,167)
Other comprehensive income (loss) before reclassifications	(132,371)		13,884		20,464		39		(97,984)
Amounts reclassified from AOCI	—		(1,280)		—		—		(1,280)
Net current-period other comprehensive income (loss)	(132,371)		12,604		20,464		39		(99,264)
AOCI - September 30, 2022	$	(166,943)	$	24,339	$	34,770	$	6,403	$	(101,431)

Item 2. 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. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related notes included under Item 1 of this quarterly report. Coherent’s MD&A is presented in seven sections:

•Forward-Looking Statements

•Overview

•Acquisition and Background of Coherent, Inc.

•Critical Accounting Estimates

•COVID-19 Update

•Results of Operations

•Liquidity and Capital Resources

Forward-looking statements in Item 2 may involve risks and uncertainties that could cause results to differ materially from those projected (refer to Part II Item 1A for discussion of these risks and uncertainties).

Table of Contents

Forward-Looking Statements

Certain statements contained in the Management's Discussion and Analysis of Financial Condition and Results of Operations 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,” “intends,” “believes,” “plans,” “projects” or similar expressions.

~~Table of Contents~~

Although our management considers the expectations and assumptions on which the forward-looking statements in this Quarterly Report on Form 10-Q are based 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. In addition to general industry and global economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to: (i) the failure of any one or more of the expectations or assumptions on which such forward-looking statements are based to prove to be correct; and (ii) the risks relating to forward-looking statements and other “Risk Factors” discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021~~2022 and in the Company's other reports filed with the Securities and Exchange Commission. The Company disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events or developments, or otherwise.

In addition, we operate in a highly competitive and rapidly changing environment; new risk factors can arise, and it is not possible for management to anticipate all such risk factors, or to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statement. The forward-looking statements included in this Quarterly Report on Form 10-Q are based only on information currently available to us and speak only as of the date of this Report. We do not assume any obligation, and do not intend, to update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by the securities laws. Investors should, however, consult any further disclosures of a forward-looking nature that the Company may make in its subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, or other disclosures filed with or furnished to the SEC.

Investors should also be aware that, while the Company does communicate with securities analysts from time to time, such communications are conducted in accordance with applicable securities laws. 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.

Overview

~~II-VI Incorporated~~Coherent Corp. (“~~II-VI,”~~Coherent”, the “Company,” “we,” “us” or “our”), a ~~worldwide~~global leader in ~~engineered~~ materials, networking and ~~opto-electronic components,~~lasers, is a vertically integrated manufacturing company that develops, ~~innovative products~~manufactures and markets engineered materials, optoelectronic components and devices, and lasers for use in industrial materials processing, optical communications, ~~industrial,~~ aerospace and defense, consumer electronics, semiconductor capital equipment, medical diagnostics and life sciences, automotive applications, machine tools, consumer goods and ~~automotive end markets. The Company~~medical device manufacturing. Headquartered in Saxonburg, Pennsylvania, Coherent has research and development, manufacturing, sales, service, and distribution facilities worldwide. Coherent produces a wide variety of lasers, along with application-specific photonic and electronic materials and components, and deploys them in various forms, including ~~integration~~integrated with advanced ~~software.~~software to enable its customers.

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 and customer-funded~~government-funded research and development contracts relating to the development and manufacture of new technologies, materials and products.

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.

As we grow, we are focused on scaling our ~~company~~Company and deriving the continued benefits of vertical integration as we strive to be a ~~best-in-class~~best in class competitor in all of our highly competitive markets. 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.

~~Pending Coherent Acquisition~~

On March 25, 2021, II-VI, Coherent, Inc. (“Coherent”) and Watson Merger Sub Inc., a wholly owned subsidiary of II-VI (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, and subject to the conditions set forth therein, Merger Sub will be merged with and into Coherent, and Coherent will continue as the surviving corporation in the merger and wholly owned subsidiary of II-VI (the “Merger”).

Pursuant to the terms of the Merger Agreement, and subject to the conditions set forth therein, at the effective time of the Merger (the “Effective Time”), each share of common stock of Coherent (the “Coherent Common Stock”) issued and outstanding immediately prior to the Effective Time will be canceled and extinguished and automatically converted into the right to receive the following consideration (collectively, the “Merger Consideration”): (A) $220.00 in cash, without interest

~~(the “Cash Consideration”), and (B) 0.91 of a validly issued, fully paid and nonassessable share of common stock of II-VI, no par value per share ("II-VI Common Stock").~~

Pursuant to the terms of the Merger Agreement, each Coherent restricted stock unit award (a “Coherent RSU”), other than Director RSUs (as defined below), outstanding immediately prior to the Effective Time will be automatically converted into time-based restricted stock units denominated in shares of II-VI Common Stock entitling the holder to receive, upon settlement, a number of shares of II-VI Common Stock equal to the number of shares of Coherent Common Stock subject to the Coherent RSU multiplied by the sum of (A) 0.91, and (B) the quotient obtained by dividing the Cash Consideration by the volume weighted average price of a share of II-VI Common Stock for a 10 trading day period ending prior to the closing of the Merger (the “Closing”). For Coherent RSUs subject to performance-based vesting conditions and metrics, the number of shares of II-VI Common Stock subject to the converted Coherent RSUs will be determined after giving effect to the Coherent Board of Directors’ determination of the number of Coherent RSUs earned, based on the greater of the target or actual level of achievement of such goals or metrics immediately prior to the Effective Time.

In connection with entering into the Merger Agreement, II-VI has obtained a fully underwritten financing commitment pursuant to a commitment letter (the “Commitment Letter”), dated as of March 25, 2021, as further amended and restated on April 21, 2021, with JPMorgan Chase Bank, N.A., Citigroup Global Markets Inc., MUFG Bank, Ltd., MUFG Securities Americas Inc., PNC Capital Markets LLC, PNC Bank, National Association, HSBC Securities (USA) Inc., HSBC Bank USA, National Association, Citizens Bank, N.A., Mizuho Bank, Ltd., BMO Capital Markets Corp., Bank of Montreal, TD Securities (USA) LLC, The Toronto-Dominion Bank, New York Branch, TD Bank, N.A. and First National Bank of Pennsylvania (collectively, the “Commitment Parties”) pursuant to which the Commitment Parties have committed to provide up to $5.125 billion in debt financing. II-VI and the Commitment Parties amended and restated the Commitment Letter on October 25, 2021 (the “Amended and Restated Commitment Letter”) to effect certain amendments thereto, including to reduce the total amounts of commitments thereunder to $4.99 billion. The obligation of the Commitment Parties to provide the debt financing provided for in the Amended and Restated Commitment Letter is subject to a number of customary conditions. Subject to the terms of the Amended and Restated Debt Commitment Letter, the commitment parties thereto committed to provide a senior unsecured bridge loan facility in an aggregate principal amount of $990 million (the "Bridge Loan Commitment"). As a result of the issuance of the Senior Notes (defined in Note 8), the Bridge Loan Commitment was terminated, such that the total amounts of commitments under the Amended and Restated Commitment Letter are $4.0 billion.

On December 10, 2021, II-VI issued $990 million aggregate principal amount of the Senior Notes. The Senior Notes are guaranteed by each of the Company’s domestic subsidiaries that guarantee its obligations under its existing credit agreement. The Senior Notes were offered and sold either to persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), or to persons outside the United States under Regulation S of the Securities Act. Interest on the Senior Notes will be payable on December 15 and June 15 of each year, commencing on June 15, 2022, at a rate of 5.00% per annum. The Senior Notes will mature on December 15, 2029.

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 will be included in the combined company and rebranded as the Lasers Segment. Legacy Coherent’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. 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.

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 know, as well usually being highly monochromatic at a precise wavelength (color). 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. Lasers also have the ability to 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.

As a result of ~~December 10, 2021,~~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. The laser's high spatial resolution is also useful for microscopic imaging and inspection applications, where the laser light is essentially a highly precise illumination source. These applications typically operate at lower powers, so as not to alter the physical property of the target material.

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. Legacy Coherent manufactures all of these laser types, in various options such as continuous wave, pulse duration, output power, and beam dimensions. Each application has its own specific requirements in terms of laser performance.

Legacy Coherent'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. 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.

Legacy Coherent's products are manufactured at sites in California, Oregon, Michigan, New ~~Term Facilities~~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, Legacy Coherent uses contract manufacturers in southeast Asia, Eastern Europe and the ~~New Revolving Credit Facility (as defined in Note 8) contemplated by~~United States for the Amended and Restated Commitment Letter have been fully priced and allocated. The Company intends to borrow under the New Term Facilities and to use the net proceeds from the issuance and sale of the Senior Notes in connection with the Merger. The New Revolving Credit Facility is expected to be available concurrently with the Closing.

The Company intends to use the net proceeds from the offering of the Senior Notes, together with other financing sources (including the New Term Facilities described further under Note 3. Pending Coherent Acquisition in Part I, Item 1 of this Quarterly Report on Form 10-Q) ~~and cash on hand, to fund the Cash Consideration, the repayment~~production of certain ~~indebtedness~~assemblies and ~~certain fees and expenses in connection with the Merger.~~

If (i) the Merger has not been consummated on or prior to 11:59 p.m., Eastern Time, on December 15, 2022 or (ii) the Company informs the Trustee in writing or otherwise announces in writing that the Merger is no longer being pursued and/or the Merger Agreement has been terminated, the Company will be required to redeem all of the outstanding Senior Notes at a redemption price equal to 100% of the principal amount of the Senior Notes, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

In connection with entering into the Merger Agreement, II-VI entered into an Amended and Restated Investment Agreement, dated as of as of March 30, 2021, (the "Investment Agreement"), with BCPE Watson (DE) SPV, LP, an affiliate of Bain Capital Private Equity, LP (the “Investor”).Pursuant to the terms of the Investment Agreement, on March 31, 2021, II-VI issued, sold, and delivered to the Investor 75,000 shares of a new Series B-1 Convertible Preferred Stock of the Company (“II-VI Series B-1 Convertible Preferred Stock”) for $10,000 per share (the “Equity Per Share Price”), resulting in an aggregate purchase price of $750 million.~~Subject to the terms and conditions of the Investment Agreement, among other things, the Company and the Investor also agreed that the Company would issue, sell and deliver to the Investor:~~

•105,000 shares of a new Series B-2 Convertible Preferred Stock of the Company (“II-VI Series B-2 Convertible Preferred Stock”) for a purchase price per share equal to the Equity Per Share Price, resulting in an aggregate purchase price of $1.05 billion, immediately prior to the Closing; and

Following the Company’s provision of notice to the Investor of its election to offer the Upsize Shares, the Investor informed the Company on June 8, 2021 of its agreement to purchase the Upsize Shares from the Company immediately prior to the Closing, increasing the Investor’s total equity commitment to II-VI pursuant to the Investment Agreement to $2.15 billion.

The expenses associated with the Merger for the six months ended December 31, 2021, have not been allocated to an Operating Segment, and are presented in the Unallocated and Other within this Quarterly Report.turnkey solutions.

Critical Accounting Estimates

The preparation of financial statements and related disclosures are in conformity with accounting principles generally accepted in the United States of America and the Company’s discussion and analysis of its financial condition and results of operations require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its condensed consolidated financial statements and accompanying notes.

Note 1 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K dated August ~~20, 2021~~29, 2022 describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. Starting in the three months ended September 30, 2022, we assessed business combinations to be one of our critical accounting policies.

Business Combinations. Business combinations are accounted for using the purchase method of accounting. As such, assets acquired, including identified intangible assets, and liabilities assumed are recorded at their fair value, which often involves estimates based on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques, all of which are inherently subjective.

New Accounting Standards

See Note 2. Recently Issued Financial Accounting Standards to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements.

COVID-19 Update

On March 11, 2020, the World Health Organization designated the novel coronavirus disease known as COVID-19 as a global pandemic. In response to the global spread of COVID-19, governments at various levels have implemented unprecedented

response measures. Overall, the COVID-19 pandemic has significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. Certain of the measures taken in response to the COVID-19 pandemic have adversely affected, and could in the future materially adversely impact, our business, results of operations, financial condition and stock price. In particular, the COVID-19 pandemicOur supply chain continues to ~~have a significant impact on global trade, which has resulted in supply chain and production disruptions impacting our business.~~

Our focus has been on the protection of the health and safety of our employees and business partners. In our facilities, we have deployed new safety measures, including guidance to employees on matters such as effective hygiene and disinfection, social distancing, limited and remote-access working where feasible and use of protective equipment. We also are prioritizing efforts to understand and support the changing business needs of our customers and suppliers in light of restrictions that are applicable to them.

~~In addition, our supply chain has been~~be affected by various measures implemented in response to the ~~pandemic and in~~Covid-19 pandemic. In certain cases, our suppliers have not had the materials, capacity or capability to supply us with the components necessary for continuing our manufacturing operations or development efforts at our normal ~~levels. There are also~~levels or on predictable timing. We continue to experience restrictions and delays onwith logistics ~~such as air cargo carriers, as well as~~and shipping. As a result of these factors, we have increased ~~logistics costs due~~our inventory of certain items to ~~limited capacity and high demands for freight forwarders.~~mitigate these logistical uncertainties. Similarly, our customers have also experienced, and could continue to experience, disruptions in their operations, which may result in reduced, delayed, or canceled orders, and have increased collection risks, which may adversely affect our results of operations.

The full extent of the impact of the COVID-19 pandemic and the related responses on our operational and financial performance ~~remains~~continues to remain uncertain and will depend on many factors outside our control, including, without limitation, the duration and severity of the pandemic, the imposition of new and additional protective public safety measures, and the impact of the pandemic and related factors on the global economy as a whole and, in particular, demand for our products. Due to these uncertainties, we cannot reasonably estimate the related impact on us at this time.

For additional information regarding the risks that we face as a result of the COVID-19 pandemic, please see Item ~~1A,~~1A. Risk Factors in Part I of the Annual Report on Form 10-K ~~for the year ended June 30, 2021.~~filed on August 29, 2022. Further, to the extent that the COVID-19 pandemic adversely affects our business and financial results, it also may have the effect of heightening many of the other risks described in the risk factors in Item 1A of the Annual Report on Form 10-K ~~for the year ended June 30, 2021 and in our subsequent filings with the Securities and Exchange Commission.~~filed on August 29, 2022.

Results of Operations ($ in millions, except per share data)

We previously classified intangible asset amortization expense within Selling, general and administrative (“SG&A”) expenses in our Condensed Consolidated Statements of Earnings (Loss). Amortization expense on the developed technology intangible assets is now classified within Cost of goods sold, with amortization expense on customer lists and trade names remaining within SG&A expenses in our Condensed Consolidated Statements of Earnings (Loss). The following tables set forth select items from our Condensed Consolidated Statements of Earnings (Loss) for the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and 2021 ~~and 2020~~ ($ in millions):
Three Months Ended
December 31, 2021 Three Months Ended
December 31, 2020
% of
Revenues % of
Revenues
Total revenues $ 807 100 % $ 787 100 %
Cost of goods sold 496 61 474 60
Gross margin 311 39 313 40
Operating expenses:
Internal research and development 95 12 85 11
Selling, general and administrative 118 15 109 14
Interest and other, net 19 2 12 2
Earnings before income taxes 79 10 106 14
Income taxes 12 1 18 2
Net earnings $ 68 8 % $ 88 11 %
Diluted earnings per share $ 0.44 $ 0.73


	Three Months Ended September 30, 2022				Three Months Ended September 30, 2021
			% of Revenues				% of Revenues
Total revenues	$	1,345	100	%	$	795	100	%
Cost of goods sold	901		67		489		61
Gross margin	444		33		307		39
Operating expenses:
Internal research and development	121		9		89		11
Selling, general and administrative	280		21		123		15
Interest and other, net	93		7		5		1
Earnings (loss) before income taxes	(51)		(4)	%	90		11
Income taxes	(12)		(1)	%	16		2
Net earnings (loss)	$	(39)	(3)	%	$	74	9	%

Diluted earnings (loss) per share	$	(0.56)			$	0.50

Six Months Ended
December 31, 2021 Six Months Ended
December 31, 2020
% of
Revenues % of
Revenues
Total revenues $ 1,602 100 % $ 1,515 100 %
Cost of goods sold 984 61 925 61
Gross margin 618 39 590 39
Operating expenses:
Internal research and development 184 12 163 11
Selling, general and administrative 240 15 207 14
Interest and other, net 24 1 54 4
Earnings (loss) before income taxes 170 11 166 11
Income taxes 28 2 32 2
Net earnings (loss) $ 142 9 % $ 134 9 %
Diluted earnings (loss) per share $ 0.94 $ 1.12

Consolidated

Revenues. Revenues for the three months ended ~~December 31, 2021~~September 30, 2022 increased 3%69% to ~~$807~~$1,345 million, compared to ~~$787~~$795 million for the same period last fiscal year. ~~Revenues for the six months ended December 31, 2021 increased 6% to $1,602 million, compared to $1,515 million for the same period last fiscal year~~.The increase in revenue for ~~both~~ the three ~~and six~~ months ended ~~December 31, 2021~~September 30, 2022 is driven by ~~increased sales~~the additional revenue from the Lasers segment. Lasers revenue for the quarter was $392 million, of which 76% was in the industrial end market and ~~communications product lines, especially 200, 400,~~24% in the instrumentation end market.

Organic revenue growth was $157 million, or 20% year-over-year. Networking increased $67 million year-over-year, driven largely by datacom and ~~800G products.~~telecom. Materials contributed an additional $92 million year-over-year, with $103 million growth in the electronics end market due to the introduction of new products and growth in semiconductor capital equipment. The growth was partially offset by softer sales in aerospace and defense in the U.S. and slower sales in industrial China.

Gross margin. Gross margin for the three months ended ~~December 31, 2021~~September 30, 2022 was ~~$311~~$444 million, or ~~39%~~33% of total revenues, compared to ~~$313~~$307 million, or ~~40%~~39% of total revenues, for the same period last fiscal year, a decrease of 120 basis points. Gross margin for the six months ended December 31, 2021 increased 5% to $618 million, compared to $590 million for the same period last fiscal year, and decreased as a percent of revenue year-over-year by 30560 basis points. The decrease as a percent of revenue for ~~both~~ the three ~~and six~~ months ended ~~December 31, 2021,~~September 30, 2022, was driven by ~~higher costs~~$45 million of additional expense related to ~~secure components affected by supply chain shortages,~~the preliminary fair value adjustment on acquired inventory from the acquisition of Legacy Coherent (“Merger”), as well as ~~additional costs incurred~~$38 million of incremental amortization expense related to ~~COVID-19.~~technology acquired as a result of the Merger.

Internal research and development. Internal research and development (“IR&D”) expenses for the three months ended ~~December 31, 2021~~September 30, 2022 were ~~$95~~$121 million, or ~~12%~~9% of revenues, compared to ~~$85~~$89 million, or 11% of revenues, for the same period last fiscal year. ~~IR&D for the six months ended December 31, 2021 increased 13% to $184 million, compared to $163 million for the same period last fiscal year.~~ The increase for ~~both~~ the three ~~and six~~ months ended ~~December 31, 2021~~September 30, 2022 was driven by an additional ~~operating~~$30 million of R&D expenses from the Lasers segment. As a percent of ~~$10 million related~~sales, R&D spend decreased 5% in the Materials segment year-over-year due to the ~~start-up~~launch of new ~~devices for new customer applications.~~products.

Selling, general and administrative. Selling, general and administrative (“SG&A”) expenses for the three months ended ~~December 31, 2021~~September 30, 2022 were ~~$118~~$280 million, or ~~15%~~21% of revenues, compared to ~~$109~~$123 million, or ~~14% of revenues, for the same period last fiscal year. SG&A expenses for the six months ended December 31, 2021 were $240 million, or~~ 15% ~~of revenues, compared to $207 million, or 14%~~ of revenues, for the same period last fiscal year. The increase in SG&A as a percentage of revenue for the three ~~and six~~ months ended ~~December 31, 2021~~September 30, 2022 compared to the same period last fiscal year was ~~primarily~~ the result of ~~transaction costs incurred in the current year~~one time-charges related to the Merger, including $39 million in transaction fees and financing, an incremental $11 million in integration and restructuring, incremental amortization expense of ~~$20~~$25 million, ~~as compared~~and a one-time expense of $18 million related to ~~$3 million during~~share-based compensation resulting from the ~~same period last fiscal year.~~Merger.

Interest and other, net. Interest and other, net for the three months ended ~~December 31, 2021~~September 30, 2022 was expense of ~~$19~~$93 million, compared to expense of ~~$12~~$5 million for the same period last fiscal year. Included in interest and other, net, was interest expense on borrowings, equity ~~earnings~~losses from unconsolidated investments, foreign currency gains and losses, amortization of debt issuance costs, and interest income on excess cash balances. For the three months ended ~~December 31, 2021,~~September 30, 2022, interest and other, net increased by $6$89 million in comparison to the same period last fiscal year, driven by ~~additional expense~~$35 million incurred in the current year related to financing of the Merger. For the six months ended December 31, 2021, interest and other, net decreased by $31 million in comparison to the same period last fiscal year, driven by $25 million of debt extinguishment expense recognized in the prior year, andThere was a ~~favorable~~ foreign currency ~~fluctuation year-over-year of approximately $17 million. There~~

~~were foreign currency gains~~gain of $5 million for the ~~current six-month period,~~three months ended September 30, 2021 as compared to ~~$12~~a foreign currency gain of $3 million ~~of losses~~ for the ~~six months ended December 31, 2020.~~current three-month period. Interest expense increased $48 million year-over-year due to the new debt assumed in the financing of the Merger.

Income taxes. The Company’s year-to-date effective income tax rate at ~~December 31, 2021~~September 30, 2022 was ~~16%~~a benefit of 24%, compared to an effective tax rate of ~~19%~~18% for the same period last fiscal year. The variations between the Company’s effective tax rate and the U.S. statutory rate of 21% were due to nondeductible expenses and tax rate differentials between U.S. and foreign ~~jurisdictions and deductions for intangible income.~~jurisdictions.

Segment Reporting

Revenues and operating income for the Company’s reportable segments are discussed below. Operating income differs from net earnings in that operating income excludes certain operational expenses included in other expense (income) – net as reported. Management believes operating income to be a useful measure for investors, as it reflects the results of segment performance over which management has direct control and is used by management in its evaluation of segment performance. See Note 13. Segment Reporting, to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on the Company’s reportable segments and for the reconciliation of the Company’s operating income to net earnings, which is incorporated herein by reference.

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

Networking ($ in millions)


		Three Months Ended December 31,				% Increase	Six Months Ended December 31,				% Increase		Three Months Ended September 30,				% Increase
		2021		2020			2021		2020				2022		2021
Revenues	Revenues	$	525	$	483	9%	$	1,061	$	981	8%	Revenues	$	597	$	531	12%
Operating income		$	50	$	48	3%	$	106	$	99	7%
Operating loss												Operating loss	$	91	$	59	53%

Revenues for the three months ended ~~December 31, 2021~~September 30, 2022 increased 9%12% to ~~$525~~$597 million, compared to ~~$483 million for the same period last fiscal year. Revenues for the six months ended December 31, 2021 increased 8% to $1,061 million, compared to $981~~$531 million for the same period last fiscal year. The increase in revenue during the three ~~and six~~ months ended ~~December 31, 2021~~September 30, 2022 was primarily due to ~~sustained demand for products~~increased revenue in the ~~optical~~ communications market of $65 million year-over-year, driven by increased revenue in ~~particular datacom~~both telecom and ~~telecom products.~~datacom.

Operating income for the three months ended ~~December 31, 2021~~September 30, 2022 increased 3%53% to ~~$50~~$91 million, compared to operating income of ~~$48 million for the same period last fiscal year. Operating income for the six months ended December 31, 2021 increased 7% to $106 million, compared to operating income of $99~~$59 million for the same period last fiscal year. The increase in operating income for ~~both~~ the three ~~and six~~ months ended ~~December 31, 2021~~September 30, 2022 was driven by strong sales, the ~~increase in revenue,~~favorable impact of foreign currency, and ~~remained consistent as a percentage~~the efficient use of ~~sales.~~the Corporate Center of Excellence, with existing corporate resources leveraged across each of our three segments.

~~Compound Semiconductors~~Materials ($ in millions)


		Three Months Ended December 31,				% Increase	Six Months Ended December 31,				% Increase		Three Months Ended September 30,				% Increase (Decrease)
		2021		2020			2021		2020				2022		2021
Revenues	Revenues	$	282	$	304	(7)%	$	541	$	534	1%	Revenues	$	356	$	264	35%
Operating income	Operating income	$	57	$	70	(19)%	$	107	$	121	(12)%	Operating income	$	75	$	47	61%

Revenues for the three months ended ~~December 31, 2021 decreased 7%~~September 30, 2022 increased 35% to ~~$282~~$356 million, compared to revenues of ~~$304~~$264 million for the same period last fiscal year. Compared to the three months ended ~~December 31, 2020, 3D sensing revenue was lower~~September 30, 2021, Materials contributed an additional $92 million year-over-year, with $100 million growth in the electronics end market due to ~~two factors,~~ the ~~first being a design change that comes with a lower unit price, accompanied by a shift~~introduction of new products and growth in ~~timing of revenues into our first fiscal quarter this year. This decrease~~semiconductor capital equipment. The growth was partially offset by ~~growth~~softer sales in aerospace and defense in the U.S. and slower sales in industrial and semiconductor capital equipment markets. Revenues for the six months ended December 31, 2021 increased 1% to $541 million, compared to revenues of $534 million for the same period last fiscal year. The increase in revenues during the six months ended December 31, 2021 primarily related to the increase in demand in the industrial market and the semiconductor capital equipment market. Shipments for 3D sensing were similar to the prior year with strong outlook despite changes in designs.China.

Operating income for the three months ended ~~December 31, 2021 decreased 19%~~September 30, 2022 increased 61% to ~~$57~~$75 million, compared to operating income of ~~$70~~$47 million for the same period last fiscal ~~year. Operating income for~~year, primarily driven by strong sales, and the ~~six months ended December 31, 2021 decreased~~launch of a new product in the Consumer market, thereby reducing R&D expense year-over-year. Further, the Company has efficiently used the Corporate Center of Excellence, with corporate resources leveraged across each of our three segments.

~~12% to $107 million, compared to operating income~~Lasers ($ in millions)


	Three Months Ended September 30,
	2022
Revenues	$	392
Operating loss	$	(124)

Revenues for the ~~same period last fiscal year.~~three months ended September 30, 2022 were $392 million. The ~~decrease in operating income~~revenues from the Lasers segment were split between the Industrial and Instrumentation end markets, at 76% and 24%, respectively.

Operating loss for ~~both~~ the three ~~and six~~ months ended ~~December 31, 2021~~September 30, 2022 was $124 million. The loss was driven by ~~increased~~$45 million of amortization of the preliminary fair value step-up on acquired inventory, one-time charges of $39 million for transaction fees and financing, $23 million of integration costs, and $18 million of nonrecurring share based compensation. In addition, $62 million of amortization expense was recorded operating ~~expense of $11 million~~income (loss) related to the ~~start-up~~preliminary fair value of ~~new devices for new customer applications.~~intangible assets acquired.

Liquidity and Capital Resources

Historically, our primary sources of cash have been from operations, long-term ~~borrowing,~~borrowings, and advance funding from customers. Other sources of cash include proceeds from the issuance of equity, proceeds received from the exercises of stock options, and sale of equity investments and businesses. Our historic uses of cash have been for capital expenditures, investment in research and development, business acquisitions, 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. Supplemental information pertaining to our sources and uses of cash for the periods indicated is presented as follows:

Sources (uses) of cash (millions):


		Six Months Ended December 31,					Three Months Ended September 30,
		2021		2020			2022		2021
Net cash provided by operating activities	Net cash provided by operating activities	$	240	$	356	Net cash provided by operating activities	$	80	$	52
Net proceeds from debt and equity issuances		990		884
Effect of exchange rate changes on cash and cash equivalents and other items		9		26
Proceeds on long-term borrowings						Proceeds on long-term borrowings	3,715		—
Net proceeds from equity issuances						Net proceeds from equity issuances	1,358		—
Proceeds from exercises of stock options and purchases of stock under employee stock purchase plan	Proceeds from exercises of stock options and purchases of stock under employee stock purchase plan	8		22		Proceeds from exercises of stock options and purchases of stock under employee stock purchase plan	7		8
Purchases of businesses, net of cash acquired		—		(34)
Payment of dividends						Payment of dividends	—		(14)
Other items						Other items	(1)		(1)

Other items		(2)		—
Payments on Convertible Debt						Payments on Convertible Debt	(4)		—
Payments in satisfaction of employees' minimum tax obligations						Payments in satisfaction of employees' minimum tax obligations	(41)		(13)
Effect of exchange rate changes on cash and cash equivalents and other items						Effect of exchange rate changes on cash and cash equivalents and other items	(42)		(1)
Debt issuance costs	Debt issuance costs	(6)		—		Debt issuance costs	(127)		—
Payments in satisfaction of employees' minimum tax obligations		(14)		(7)
Payments on Finisar Notes		(15)		—
Payment of dividends		(21)		(7)
Payments under long-term borrowings and credit facility		(31)		(820)
Additions to property, plant & equipment	Additions to property, plant & equipment	(102)		(79)		Additions to property, plant & equipment	(139)		(48)
Payments on existing debt						Payments on existing debt	(996)		(16)
Purchases of businesses, net of cash acquired						Purchases of businesses, net of cash acquired	(5,489)		—

Operating activities:

Net cash provided by operating activities was ~~$240~~$80 million for the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 compared to ~~$356~~$52 million of net cash provided by operating activities for the same period last fiscal year. The ~~decrease~~increase in cash flows provided by operating activities during the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 compared to the same period last fiscal year was primarily due to ~~increased~~improved management of working capital ~~requirements to mitigate the impact of our supply chain challenges.~~accounts; spend on inventory decreased $64 million year-over-year.

Investing activities:

Net cash used inby investing activities was ~~$102~~$5,628 million for the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, compared to net cash used of ~~$114~~$48 million for the same period last fiscal year. In the three months ended September 30, 2022, $5.5 billion was used to fund the Merger. Cash used to fund capital expenditures increased by ~~$22~~$91 million year over year, to continue to increase capacity to meet the growing demand for the Company’s product portfolio. ~~Net cash used in investing activities for the six months ended December 31, 2020 was used to fund the acquisitions of Ascatron AB and Innovion Corporation.~~

Financing activities:

Net cash provided by financing activities was ~~$911~~$3,913 million for the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, compared to net cash ~~provided~~used by financing activities of ~~$73~~$36 million for the same period last fiscal year. Cash ~~outflow~~inflow for the current period was primarily comprised of ~~payments on~~borrowings under the New Term ~~A facility (as~~Facilities, defined below), payment to repurchase, redeem and settle conversions of Finisar Corporation's 0.50% Convertible Senior Notes due 2036 and payment of cash dividends on II-VI's outstanding preferred stock, no par value. Net cash provided by financing activities in the current year primarily consisted of receipt ofbelow, as well the net proceeds from the ~~offering~~issuance of Coherent's Series B-2 Convertible Preferred Stock. Financing outflows included payments to settle the Company's existing senior credit facilities.

Senior ~~Notes.~~Credit Facilities as of June 30, 2022

~~The Company intends to use~~On July 1, 2022, the amounts outstanding under the Company's prior senior credit facilities were repaid in full using proceeds from ~~the offering of the Senior Notes, together with other financing sources (including~~ the New Term Facilities ~~and cash on hand), to fund the cash consideration, the repayment of certain indebtedness and certain fees and expenses in connection with the Merger.~~(defined below).

New Senior Credit Facilities

~~The~~On July 1, 2022, Coherent entered into a Credit Agreement by and among the Company, ~~currently has Senior Credit Facilities with~~the lenders, and other parties thereto, and JP Morgan Chase Bank, ~~of America,~~ N.A., as ~~Administrative Agent, Swing Line Lender~~administrative agent and ~~an L/C Issuer, and the other lenders party thereto.~~

~~The credit agreement governing the Senior Credit Facilities (the "Credit Agreement")~~collateral agent, which provides for senior secured financing of ~~$2.425~~$4.0 billion, ~~in the aggregate,~~ consisting of

~~(i)Aggregate principal amount of $1,255 million for~~ a ~~five-year senior secured first-lien~~new term loan A ~~loan~~credit facility (the “Term A Facility”),

~~(ii)Aggregate~~ with an aggregate principal amount of ~~$720~~$850 million, ~~for~~ a ~~seven-year senior secured~~new term loan B ~~loan~~credit facility (the “Term B Facility” and, together with the Term A Facility, the “Term ~~Loan~~ Facilities”), ~~which was repaid in full during the quarter ended September 30, 2020, and~~

~~(iii)Aggregate~~with an aggregate principal amount of ~~$450~~$2,800 million, ~~for~~and a ~~five-year senior secured first-lien~~new revolving credit facility (the ~~“Revolving~~“New Revolving Credit Facility” and, together with the Term ~~Loan~~ Facilities, the “Senior Credit Facilities”).

~~The Credit Agreement also provides for~~, in an aggregate principal amount of $350 million, including a letter of credit sub-facility ~~not~~of up to ~~exceed $25 million and a swing loan sub-facility initially not to exceed $20~~$50 million.

The ~~Company is obligated to repay the outstanding principal amount of the~~ Term A Facility ~~in quarterly installments equal to 1.25% of the initial aggregate principal amount of the Term A Facility, with the remaining outstanding balance due~~ and ~~payable on the fifth anniversary of September 24, 2019 (the "Closing Date"). The Company is obligated to repay the outstanding principal amount of~~ the Revolving Credit Facility ~~if any,~~each bear interest at LIBOR subject to a 0.00% floor plus a range of 1.75% to 2.50%, based on the ~~fifth anniversary~~Company’s total net leverage ratio. The Term A Facility and the Revolving Credit Facility borrowings are initially expected to bear interest at LIBOR plus 2.00%. The Term B Facility will bear interest at LIBOR (subject to a 0.50% floor) plus 2.75%. In relation to the Term Facilities, the Company incurred expense of $50 million for the ~~Closing Date. Notwithstanding~~quarter ended September 30, 2022, which is included in interest expense in the ~~foregoing, all amounts outstanding under~~Consolidated Statements of Earnings (Loss). The definitive documentation for the Senior Credit Facilities ~~will become due and payable 120 days prior to the maturity~~includes customary LIBOR replacement provisions.

As of ~~the Company’s currently outstanding 0.25% Convertible Senior Notes due~~September 30, 2022, ~~(the “II-VI Convertible Notes”) if (i) the II-VI Convertible Notes remain outstanding, and (ii)~~ the Company ~~has insufficient cash and borrowing availability~~had $65 million outstanding under the Revolving Credit ~~Facility to repay~~Facility.

Our cash position, borrowing capacity and debt obligations are as follows (in millions):


	September 30, 2022		June 30, 2022
Cash, cash equivalents, and restricted cash	$	899	$	2,582
Available borrowing capacity under New Revolving Credit Facility	285		450
Total debt obligations	4,623		2,300

On July 1, 2022 the ~~principal amount~~Company utilized $2.1 billion of cash, cash equivalents, and restricted cash as part of the ~~II-VI Convertible Notes. The II-VI Convertible Notes are included in~~funding required to complete the ~~current portion of long-term debt.~~Coherent acquisition. The Company ~~has sufficient~~believes existing cash, ~~to repay the principal amount of the II-VI Convertible Notes, therefore the Senior Credit facilities remain classified as long-term obligations in the Condensed Consolidated Balance Sheet.~~

~~The Company’s obligations under the~~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 internal research and development, and internal and external growth objectives at least through fiscal year 2023.

The Company’s cash and cash equivalent balances are ~~guaranteed by each~~generated and held in numerous locations throughout the world, including amounts held outside the United States. As of September 30, 2022, the Company held approximately $644 million of cash and cash equivalents outside of the ~~Company’s material existing or future direct and indirect domestic subsidiaries (collectively,~~United States. Cash balances held outside the “Guarantors”), subject to certain exceptions. Borrowings under the Senior Credit Facilities are secured by a first priority lien in substantially all of the assets of the Company and the Guarantors, subject to certain exception, including that no real property secures the Senior Credit Facilities.

~~All amounts outstanding under the Senior Credit Facilities become due and payable 120 days prior~~United States could be repatriated to the ~~maturity~~United States.

At September 30, 2022, we had $22 million of the Company’s currently outstanding II-VI Convertible Notes if (i) the II-VI Convertible Notes remain outstanding, and (ii) the Company has insufficient cash and borrowing availability to repay the principal amount of the II-VI Convertible Notes.

Amounts outstanding under the Senior Credit Facilities bear interest at a rate per annum equal to an applicable margin over a eurocurrency rate or an applicable margin over a base rate determined by reference to the highest of (a) the federal funds rate plus 0.50%, (b) Bank of America, N.A.’s prime rate and (c) a eurocurrency rate plus 1.00%, in each case as calculated in accordance with the terms of the Credit Agreement. The applicable interest rate would increase under certain circumstances relating to events of default. The Company has entered into an interest rate swap contract to hedge its exposure to interest rate risk on its variable rate borrowings under the Senior Credit Facilities. Refer to Note 15 for further information regarding this interest rate swap.

commencing with the first full fiscal quarter after the Finisar Closing Date, (ii) 4.50 to 1.00 for the fifth fiscal quarter through and including the eighth fiscal quarter after the Finisar Closing Date, and (iii) 4.00 to 1.00 for each subsequent fiscal quarter. As of December 31, 2021 the Company was in compliance with all financial covenants under the Credit Agreement.

Additional information regarding the Senior Credit Facilities and certain of the Company's other indebtedness is set forth in Note 8. Debt to our unaudited condensed consolidated financial statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Item 3. 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. In 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, Euro, Swiss Franc, Japanese Yen, Singapore Dollar and ~~Japanese Yen.~~Korean Won. No significant changes have occurred in the techniques and instruments used.

Interest Rate Risks

As of ~~December 31, 2021,~~September 30, 2022, the Company’s total borrowings include variable rate borrowings, which expose the Company to changes in interest rates. On November 24, 2019, the Company entered into an interest rate swap contract to limit the exposure of its variable interest rate debt by effectively converting it 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 ~~$11~~$12 million for the three ~~and six~~ months ended ~~December 31, 2021.~~September 30, 2022.

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 three months ended September 30, 2022.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer and Treasurer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. The Company’s disclosure controls were designed to provide reasonable assurance that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. However, the controls have been designed to provide reasonable assurance of achieving the controls’ stated goals. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial Reporting

NoIn July 2022, we completed the acquisition of Legacy Coherent. We are in the process of integrating Legacy Coherent into our systems and control environment as of September 30, 2022. We believe that we have taken the necessary steps to monitor and maintain appropriate internal control over financial reporting during this integration. Other than the impact of this business acquisition, no changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) were implemented during the Company’s most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Legacy Coherent’s operations are included in the Company’s unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for the entire period from July 1, 2022 to September 30, 2022 and represented 58% of the Company’s consolidated total assets as of September 30, 2022 and 29% of the Company’s consolidated total revenues for the three months ended September 30, 2022.

Part II – Other Information

Item 1. LEGAL PROCEEDINGS

The Company and its subsidiaries are involved from time to time in various claims, lawsuits, and regulatory proceedings incidental to its business. The resolution of each of these matters is subject to various uncertainties, and it is possible that these matters may be resolved unfavorably to the Company. Management believes, after consulting with legal counsel, that the ultimate liabilities, if any, resulting from these legal and regulatory proceedings will not materially affect the Company’s financial condition, liquidity or results of operations.

Item 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, ~~2021,~~2022, any of which could materially affect our business, financial condition or future results. Those risk factors are not the only risks facing the Company. Additional risks and uncertainties not currently known or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Table of Contents

Item 6. EXHIBITS

Incorporated by reference herein

Exhibit Numbers

Form

Exhibit No.

Filing Date

File No.

3.01

Amended and Restated Articles of Incorporation of II-VI Incorporated.

8-K

3.01

November 8, 2011

000-16195

3.02

Amended and Restated Bylaws, effective September 8, 2022.

8-K

3.02

September 8, 2022

001-39375

3.03

Statement with Respect to Shares, filed with the Pennsylvania Department of State Corporations Bureau and effective July 6, 2020.

10-K

3.03

June 30, 2020

001-39375

3.04

Statement with Respect to Shares, filed with the Pennsylvania Department of State Corporations Bureau and effective March 30, 2021.

8-K

3.04

March 31, 2021

001-39375

3.05

Articles of Amendment, effective September 8, 2022.

8-K

3.05

September 8, 2022

001-38375

10.01

Credit Agreement, dated as of July 1, 2022, by and among II-VI Incorporated, the lenders and other parties from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent.

8-K

10.01

July 1, 2022

001-39375

10.02

Amended and Restated Employment Agreement, effective August 23, 2022, by and between II-VI Incorporated and Vincent D. Mattera, Jr.

8-K

10.02

August 23, 2023

001-39375

31.01*

Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002

31.02*

Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002

32.01*

Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.02*

Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document - the instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

Table of Contents

Exhibit
Number

~~Description of Exhibit~~

~~Reference~~

~~3.01~~

~~Amended and Restated Bylaws of II-VI Incorporated, as amended and restated effective November 19, 2021.~~

~~Incorporated herein by reference to Exhibit 3.1 to II-VI's Current Report on Form 8-K (File No. 001-39375) filed on November 24, 2021.~~

~~4.01~~

~~Indenture, dated as of December 10, 2021, among the Company, the guarantors party thereto and U.S. Bank National Association, as trustee.~~

~~Incorporated herein by reference to Exhibit 4.1 to II-VI's Current Report on Form 8-K (File No. 001-39375) filed on December 10, 2021.~~

~~4.02~~

~~Form of 5.000% Senior Notes due 2029.~~

~~Included in Exhibit 4.01.~~

~~10.01~~

~~Amendment No. 1 to Amended and Restate~~d ~~Credit Agreement, dated as of December 2, 2021, by and among the Company, Bank of America, N.A., as administrative agent, and the lenders party thereto.~~

~~Incorporated herein by reference to Exhibit 10.1 to II-VI's Current Report on Form 8-K (File No. 001-39375) filed on December 2, 2021.~~

~~31.01~~

~~Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002~~

~~Filed herewith.~~

~~31.02~~

~~Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002~~

~~Filed herewith.~~

~~32.01~~

~~Furnished herewith.~~

~~32.02~~

~~Furnished herewith.~~

~~101.INS~~

~~Inline XBRL Instance Document - the instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document~~

~~101.SCH~~

~~Inline XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~

~~Inline XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.LAB~~

~~Inline XBRL Taxonomy Extension Label Linkbase Document~~

~~101.DEF~~

~~Inline XBRL Taxonomy Extension Definition Linkbase Document~~

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

* Filed herewith

~~Table of Contents~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	~~II-VI INCORPORATED~~Coherent Corp.
	(Registrant)

Date: ~~February~~November 9, 2022	By:	/s/ Vincent D. Mattera, Jr.
		Vincent D. Mattera, Jr Chief Executive Officer

Date: ~~February~~November 9, 2022	By:	/s/ Mary Jane Raymond
		Mary Jane Raymond Chief Financial Officer and Treasurer


	Three Months Ended December 31, 2021				Six Months Ended December 31, 2021
	Photonic Solutions		Compound Semiconductors			Total		Photonic Solutions		Compound Semiconductors		Total

Industrial	$	16,548	$	88,521		$	105,069	$	35,001	$	169,299	$	204,300
Communications	488,030		28,713			516,743		988,477		60,808		1,049,285
Aerospace & Defense	—		47,195			47,195		—		91,308		91,308
Consumer	2,377		67,716			70,093		4,420		122,843		127,263
Other	18,014		49,705			67,719		33,094		96,680		129,774
Total Revenues	$	524,969	$	281,850		$	806,819	$	1,060,992	$	540,938	$	1,601,930


	Three Months Ended December 31, 2020				Six Months Ended December 31, 2020
	Photonic Solutions		Compound Semiconductors			Total		Photonic Solutions		Compound Semiconductors		Total

Industrial	$	10,160	$	61,446		$	71,606	$	21,224	$	115,347	$	136,571
Communications	454,035		34,918			488,953		927,726		71,573		999,299
Aerospace & Defense	—		46,366			46,366		—		95,631		95,631
Consumer	2,215		119,114			121,329		3,522		171,467		174,989
Other	16,469		41,846			58,315		28,134		80,029		108,163
Total Revenues	$	482,879	$	303,690		$	786,569	$	980,606	$	534,047	$	1,514,653


	Six Months Ended December 31, 2021
	Photonic Solutions		Compound Semiconductors		Total
Balance-beginning of period	$	1,053,028	$	243,699	$	1,296,727


Foreign currency translation	(990)		(2,570)		(3,560)
Balance-end of period	$	1,052,038	$	241,129	$	1,293,167


	Fair Value		Carrying Value
II-VI Convertible Notes	$	513,632	$	343,600


	Three Months Ended December 31, 2021				Three Months Ended December 31, 2020
			% of Revenues				% of Revenues
Total revenues	$	807	100	%	$	787	100	%
Cost of goods sold	496		61		474		60
Gross margin	311		39		313		40
Operating expenses:
Internal research and development	95		12		85		11
Selling, general and administrative	118		15		109		14
Interest and other, net	19		2		12		2
Earnings before income taxes	79		10		106		14
Income taxes	12		1		18		2
Net earnings	$	68	8	%	$	88	11	%

Diluted earnings per share	$	0.44			$	0.73


	Six Months Ended December 31, 2021				Six Months Ended December 31, 2020
			% of Revenues				% of Revenues
Total revenues	$	1,602	100	%	$	1,515	100	%
Cost of goods sold	984		61		925		61
Gross margin	618		39		590		39
Operating expenses:
Internal research and development	184		12		163		11
Selling, general and administrative	240		15		207		14
Interest and other, net	24		1		54		4
Earnings (loss) before income taxes	170		11		166		11
Income taxes	28		2		32		2
Net earnings (loss)	$	142	9	%	$	134	9	%

Diluted earnings (loss) per share	$	0.94			$	1.12