Note 11.

Segment and Geographic Reporting

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

The Company has four reportable segments. The Company’s chief operating decision maker receives and reviews financial information in this format. The Company evaluates business segment performance based upon reported business segment earnings, which is defined as earnings before income taxes, interest and other income or expense. The segments are managed separately due to the production requirements and facilities that are unique to each segment. The Company has the following reportable segments at June 30, 2012: (i) Infrared Optics, which consists of the Company’s infrared optics and material products businesses, HIGHYAG Lasertechnologie GmbH (“HIGHYAG”) and certain remaining corporate activities, primarily corporate assets and capital expenditures; (ii) Near-Infrared Optics, which consists of Photop China and Vietnam, Aegis, and VLOC Incorporated (“VLOC”); (iii) Military & Materials, which consists of the Company’s Exotic Electro-Optics, Inc. (“EEO”) subsidiary, PRM, and MLA; and (iv) Advanced Products Group (formerly the Compound Semiconductor Group), which is comprised of the Company’s Marlow Industries, Inc. (“Marlow”) subsidiary, the Wide Bandgap Materials Group (“WBG”) and the Worldwide Materials Group (“WMG”); WMG is responsible for the corporate research and development activities.

The Infrared Optics segment is divided into geographic locations in the U.S., Singapore, China, Germany, Switzerland, Japan, Belgium, the U.K. and Italy. The Infrared Optics segment is directed by a general manager, while each geographic location is also directed by a general manager, and is further divided into production and administrative units that are directed by managers. The Infrared Optics segment designs, manufactures and markets optical and electro-optical components and materials sold under the II-VI brand name and used primarily in high-power CO₂ lasers. The Infrared Optics segment also manufactures fiber-delivered beam delivery systems and processing tools for industrial lasers sold under the HIGHYAG brand name.

The Near-Infrared Optics segment is located in the U.S., China, Vietnam, Australia, Germany, Japan, the U.K., Italy and Hong Kong. The Near-Infrared Optics segment is directed by a Corporate Executive Vice President and is further divided into production and administrative units that are directed by managers. The Near-Infrared Optics segment manufactures crystal materials, optics, microchip lasers and optoelectronic modules for use in optical communication networks and other diverse consumer and commercial applications sold under the Photop brand name and manufactures tunable optical devices and couplers and combiners required for high speed optical networks sold under the Aegis and AOFR brand names, respectively. The Near-Infrared Optics segment also designs, manufactures and markets near-infrared and visible-light products for military applications and laser gain material and products for solid-state yttrium aluminum garnet (“YAG”) lasers, yttrium lithium fluoride (“YLF”) lasers and Ultra-Violet (“UV”) Filter components sold under the VLOC brand name.

The Military & Materials segment is located in the U.S. and the Philippines. The Military & Materials segment is directed by a Corporate Vice President, while each geographic location is directed by a general manager. The Military & Materials segment is further divided into production and administrative units that are directed by managers. The Military & Materials segment designs, manufactures and markets infrared products for military applications under the EEO brand name, refines specialty metals and rare earth elements, primarily selenium and tellurium, under the PRM brand name, and manufactures and markets micro-fine conductive mesh patterns for optical, mechanical, and ceramic components for applications under the MLA brand name. During the year ended June 30, 2012, the Military & Materials segment earnings were significantly impacted by an inventory lower of cost or market inventory adjustment at PRM of $8.3 million, driven by current photovoltaic market demand weakness which resulted in downward pressure on global tellurium index prices.

The Advanced Products Group is located in the U.S., Vietnam, Japan, China and Germany and is directed by a Corporate Executive Vice President. In the Advanced Products Group segment, Marlow designs and manufactures thermoelectric cooling and power generation solutions for use in defense and space, optical communications, medical, consumer and industrial markets. WBG manufactures and markets single crystal silicon carbide substrates for use in solid-state lighting, wireless infrastructure, radio frequency (“RF”) electronics and power switching industries. WMG directs the corporate research and development initiatives.

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

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


	Infrared Optics		Near- Infrared Optics		Military & Materials		Advanced Products Group		Eliminations			Total
($000)
2012
Revenues	$	201,611	$	161,078	$	97,385	$	74,556	$	—		$	534,630
Inter-segment revenues		3,174		1,053		5,498		4,295		(14,020	)		—
Segment earnings		51,095		10,511		1,891		8,442		—			71,939
Interest expense		—		—		—		—		—			(212	)
Other income, net		—		—		—		—		—			7,168
Income taxes		—		—		—		—		—			(17,620	)
Net earnings		—		—		—		—		—			61,275
Depreciation and amortization		8,480		17,993		3,937		4,283		—			34,693
Segment assets		220,550		289,991		91,113		104,832		—			706,486
Expenditures for property, plant and equipment		8,072		15,759		8,516		10,493		—			42,840
Equity investment		—		—		—		10,661		—			10,661
Goodwill		9,612		50,423		10,399		10,314		—			80,748


	Infrared Optics		Near- Infrared Optics		Military & Materials		Advanced Products Group		Eliminations			Total
($000)
2011
Revenues	$	180,827	$	159,803	$	83,426	$	78,745	$	—		$	502,801
Inter-segment revenues		3,282		299		6,520		5,015		(15,116	)		—
Segment earnings		46,187		24,113		15,255		13,220		—			98,775
Interest expense		—		—		—		—		—			(103	)
Other income, net		—		—		—		—		—			3,090
Income taxes		—		—		—		—		—			(18,744	)
Net earnings		—		—		—		—		—			83,018
Depreciation and amortization		8,268		13,710		3,079		3,389		—			28,446
Segment assets		264,052		205,897		84,371		92,882		—			647,202
Expenditures for property, plant and equipment		9,065		16,795		5,414		9,585		—			40,859
Equity investments		—		—		—		15,458		—			15,458
Goodwill		10,038		33,511		10,399		10,314		—			64,262


	Infrared Optics		Near- Infrared Optics		Military & Materials		Advanced Products Group		Eliminations			Total
($000)
2010
Revenues	$	135,063	$	88,499	$	65,674	$	55,855	$	—		$	345,091
Inter-segment revenues		2,021		303		2,137		4,209		(8,670	)		—
Segment earnings		24,582		12,304		9,307		5,488					51,681
Interest expense		—		—		—		—		—			(87	)
Other expense, net		—		—		—		—		—			(277	)
Income taxes		—		—		—		—		—			(12,582	)
Net earnings		—		—		—		—		—			38,735
Depreciation and amortization		8,337		7,684		2,007		3,011		—			21,039
Expenditures for property, plant and equipment		1,817		4,115		4,706		3,199		—			13,837

Geographic information for revenues from the country of origin, and long-lived assets from the country of origin, which include property, plant and equipment, goodwill and other intangibles, net of related depreciation and amortization, investments and other assets, is as follows:


	Revenues
Year Ended June 30,	2012		2011		2010
($000)
United States	$	204,706	$	193,344	$	172,466
Non-United States
China		123,348		128,101		53,821
Germany		51,962		41,373		31,227
Philippines		44,412		34,799		24,940
Japan		35,915		33,561		19,543
Vietnam		31,500		35,675		15,402
Switzerland		11,714		10,699		7,425
Singapore		7,238		7,542		5,751
Italy		7,214		7,421		5,277
United Kingdom		6,026		5,167		4,827
Belgium		6,010		5,119		4,412
Australia		4,585		—		—
Total Non-United States		329,924		309,457		172,625
	$	534,630	$	502,801	$	345,091


	Long-Lived Assets
June 30,	2012		2011
($000)
United States	$	172,020	$	128,733
Non-United States
China		90,543		91,181
Vietnam		10,278		7,990
Philippines		8,692		4,420
Germany		4,944		5,391
Netherlands		3,355		8,935
Singapore		3,212		3,012
Other		3,069		2,000
Total Non - United States		124,093		122,929
	$	296,113	$	251,662