10-Q

that 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2014

¨ 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: 0-16195

II-VI INCORPORATED

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

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)

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

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

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

At May 2, 2014, 61,939,724 shares of Common Stock, no par value, of the registrant were outstanding.

II-VI INCORPORATED

INDEX

		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets – March 31, 2014 and June 30, 2013 (Unaudited)	3
	Condensed Consolidated Statements of Earnings – Three and nine months ended March 31, 2014 and 2013 (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income – Three and nine months ended March 31, 2014 and 2013 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows – Nine months ended March 31, 2014 and 2013 (Unaudited)	7
	Condensed Consolidated Statement of Shareholders’ Equity – Nine months ended March 31, 2014 (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	35
PART II - OTHER INFORMATION
Item 1A.	Risk Factors	35
Item 2.	Issuer Purchases of Equity Securities	36
Item 6.	Exhibits	36

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

II-VI Incorporated and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

($000)

	March 31,			June 30,
	2014			2013
Assets
Current Assets
Cash and cash equivalents	$	185,691		$	185,433
Accounts receivable - less allowance for doubtful accounts of $1,147 at March 31, 2014 and $1,479 at June 30, 2013		126,228			107,173
Inventories		174,607			141,859
Deferred income taxes		9,192			10,794
Prepaid and refundable income taxes		4,456			4,543
Prepaid and other current assets		15,535			11,342
Total Current Assets		515,709			461,144
Property, plant & equipment, net		211,733			170,672
Goodwill		198,864			123,352
Other intangible assets, net		141,263			86,701
Investment		11,409			11,203
Deferred income taxes		1,995			2,696
Other assets		9,091			8,034
Total Assets	$	1,090,064		$	863,802
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of long-term debt	$	20,000		$	-
Accounts payable		47,885			23,617
Accrued compensation and benefits		29,789			28,315
Accrued income taxes payable		2,741			7,697
Deferred income taxes		147			110
Other accrued liabilities		34,527			34,695
Total Current Liabilities		135,089			94,434
Long-term debt		242,907			114,036
Deferred income taxes		10,790			4,095
Other liabilities		36,037			15,129
Total Liabilities		424,823			227,694
Shareholders' Equity
Preferred stock, no par value; authorized - 5,000,000 shares; none issued		-		-
Common stock, no par value; authorized - 300,000,000 shares; issued - 70,827,878 shares at March 31, 2014; 70,223,286 shares at June 30, 2013		209,970			194,284
Accumulated other comprehensive income		17,850			15,600
Retained earnings		508,672			482,878
		736,492			692,762
Treasury stock, at cost, 8,896,984 shares at March 31, 2014 and 8,011,733 shares at June 30, 2013		(71,251	)		(56,654	)
Total Shareholders' Equity		665,241			636,108
Total Liabilities and Shareholders' Equity	$	1,090,064		$	863,802

- See notes to condensed consolidated financial statements.

3

II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)

($000 except per share data)

	Three Months Ended
	March 31,
	2014			2013
Revenues
Domestic	$	54,424		$	65,176
International		119,131			78,764
Total Revenues		173,555			143,940
Costs, Expenses and Other Expense (Income)
Cost of goods sold		118,865			92,986
Internal research and development		12,099			5,781
Selling, general and administrative		33,848			27,004
Interest expense		1,412			449
Other expense (income), net		(1,694	)		(1,401	)
Total Costs, Expenses and Other Expense (Income)		164,530			124,819
Earnings from Continuing Operations Before Income Taxes		9,025			19,121
Income Taxes		494			2,861
Earnings from Continuing Operations		8,531			16,260
Loss from Discontinued Operation, net of income tax		-			(166	)
Net Earnings		8,531			16,094
Less:  Net Earnings Attributable to Redeemable Noncontrolling Interest		-			225
Net Earnings Attributable to II-VI Incorporated	$	8,531		$	15,869
Earnings (loss) Attributable to II-VI Incorporated: Basic Earnings (loss) Per Share:
Continuing Operations	$	0.14		$	0.26
Discontinued Operation	$	-		$	(0.00	)
Consolidated	$	0.14		$	0.26
Earnings (loss) Attributable to II-VI Incorporated: Diluted Earnings (loss) Per Share:
Continuing Operations	$	0.13		$	0.25
Discontinued Operation	$	-		$	(0.00	)
Consolidated	$	0.13		$	0.25

- See notes to condensed consolidated financial statements.

4

II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)

($000 except per share data)

	Nine Months Ended March 31,
	2014			2013
Revenues
Domestic	$	178,683		$	168,938
International		316,657			228,107
Total Revenues		495,340			397,045
Costs, Expenses and Other Expense (Income)
Cost of goods sold		330,945			248,424
Internal research and development		31,201			16,992
Selling, general and administrative		101,412			79,534
Interest expense		3,064			708
Other expense (income), net		(2,766	)		(6,713	)
Total Costs, Expenses and Other Expense (Income)		463,856			338,945
Earnings from Continuing Operations Before Income Taxes		31,484			58,100
Income Taxes		5,823			13,844
Earnings from Continuing Operations		25,661			44,256
Earnings (loss) from Discontinued Operation, net of income tax		133			(2,563	)
Net Earnings	$	25,794		$	41,693
Less:  Net Earnings Attributable to Redeemable Noncontrolling Interest		-			906
Net Earnings Attributable to II-VI Incorporated	$	25,794		$	40,787
Earnings (loss) Attributable to II-VI Incorporated: Basic Earnings (loss) Per Share:
Continuing Operations	$	0.41		$	0.69
Discontinued Operation	$	0.00		$	(0.04	)
Consolidated	$	0.41		$	0.65
Earnings (loss) Attributable to II-VI Incorporated: Diluted Earnings (loss) Per Share:
Continuing Operations	$	0.40		$	0.68
Discontinued Operation	$	0.00		$	(0.04	)
Consolidated	$	0.40		$	0.64

- See notes to condensed consolidated financial statements.

5

II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

($000)

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2014			2013			2014		2013
Net earnings	$	8,531		$	16,094		$	25,794	$	41,693
Other comprehensive income:
Foreign currency translation adjustments		(2,123	)		(1,622	)		2,250		1,500
Comprehensive income	$	6,408		$	14,472		$	28,044	$	43,193
Net earnings attributable to redeemable noncontrolling interest	$	-		$	225		$	-	$	906
Other comprehensive income (loss) attributable to redeemable noncontrolling interest:
Foreign currency translation adjustment attributable to redeemable noncontrolling interest		-			(138	)		-		(354	)
Comprehensive income attributable to redeemable noncontrolling interest	$	-		$	87		$	-	$	552
Comprehensive income attributable to II-VI Incorporated	$	6,408		$	14,385		$	28,044	$	42,641

- See notes to condensed consolidated financial statements.

6

II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

($000)

	Nine Months Ended
	March 31,
	2014			2013
Cash Flows from Operating Activities
Net earnings	$	25,794		$	41,693
Adjustments to reconcile net earnings to net cash provided by operating activities:
(Earnings) loss from discontinued operation, net of tax		(133	)		2,563
Depreciation		31,191			25,331
Amortization		8,234			4,561
Share-based compensation expense		9,732			9,232
Loss on foreign currency remeasurements and transactions		380			672
Earnings from equity investment		(517	)		(822	)
Deferred income taxes		(1,814	)		2,306
Excess tax benefits from share-based compensation expense		(522	)		(678	)
Increase (decrease) in cash from changes in:
Accounts receivable		(17,719	)		9,306
Inventories		3,886			(7,387	)
Accounts payable		21,943			(7,697	)
Income taxes		(7,810	)		565
Other operating net assets		(5,237	)		(11,690	)
Net cash provided by operating activities:
Continuing Operations		67,408			67,955
Discontinued Operation		1,197			164
Net cash provided by operating activities		68,605			68,119
Cash Flows from Investing Activities
Additions to property, plant & equipment		(20,767	)		(17,430	)
Purchases of businesses, net of cash acquired		(177,676	)		(126,165	)
Proceeds received on contractual settlement from Thailand flood		-			2,436
Other investing activities		226			1,452
Net cash used in investing activities:
Continuing Operations		(198,217	)		(139,707	)
Discontinued Operation		-			(68	)
Net cash used in investing activities		(198,217	)		(139,775	)
Cash Flows from Financing Activities
Proceeds from borrowings		183,000			113,000
Payments on borrowings		(34,000	)		(4,000	)
Payment on earnout arrangement		(2,200	)		-
Payments of redeemable noncontrolling interest		(8,789	)		(284	)
Proceeds from exercises of stock options		3,613			3,836
Purchases of treasury stock		(10,957	)		(19,978	)
Other financing activities		(1,375	)		(19	)
Net cash provided by financing activities		129,292			92,555
Effect of exchange rate changes on cash and cash equivalents		578			(249	)
Net increase in cash and cash equivalents		258			20,650
Cash and Cash Equivalents at Beginning of Period		185,433			134,944
Cash and Cash Equivalents at End of Period	$	185,691		$	155,594
Cash paid for interest	$	2,883		$	631
Cash paid for income taxes	$	12,545		$	10,040
Non cash transactions:
Purchase of business - holdback amount recorded in other accrued liabilities	$	10,000		$	-
Capital lease obligation incurred on facility lease	$	11,857		$	-
Purchase of business utilizing earnout arrangement recorded in other liabilities	$	-		$	3,400

- See notes to condensed consolidated financial statements.

7

II-VI Incorporated and Subsidiaries

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited)

(000)

					Accumulated
					Other
	Common Stock				Comprehensive		Retained		Treasury Stock
	Shares		Amount		Income		Earnings		Shares			Amount			Total
Balance-June 30, 2013		70,223	$	194,284	$	15,600	$	482,878		(8,012	)	$	(56,654	)	$	636,108
Shares issued under share-based compensation plans		605		3,623		-		-		-			-			3,623
Minimum tax withholding requirements		-		-		-		-		(42	)		(799	)		(799	)
Share-based compensation expense		-		9,732		-		-		-			-			9,732
Net earnings		-		-		-		25,794		-			-			25,794
Purchases of treasury stock		-		-		-		-		(750	)		(11,989	)		(11,989	)
Treasury stock under deferred compensation arrangements		-		1,809		-		-		(93	)		(1,809	)		-
Excess tax benefits from share-based compensation expense		-		522		-		-		-			-			522
Foreign currency translation adjustments		-		-		2,250		-		-			-			2,250
Balance-March 31, 2014		70,828	$	209,970	$	17,850	$	508,672		(8,897	)	$	(71,251	)	$	665,241

- See notes to condensed consolidated financial statements.

8

II-VI Incorporated and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. Basis of Presentation

The condensed consolidated financial statements of II-VI Incorporated (“II-VI” or the “Company”) for the three and nine months ended March 31, 2014 and 2013 are unaudited. In the opinion of management, all adjustments considered necessary for a fair presentation for the periods presented have been included. All adjustments are of a normal recurring nature unless disclosed otherwise. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013. The consolidated results of operations for the three and nine months ended March 31, 2014 are not necessarily indicative of the results to be expected for the full fiscal year. The June 30, 2013 Condensed Consolidated Balance Sheet information was derived from the Company’s audited financial statements.

In conjunction with the acquisitions of Oclaro, Inc.’s (“Oclaro”) fiber amplifier and micro-optics business on November 1, 2013, and, Oclaro’s Switzerland-based semiconductor laser business on September 12, 2013, the Company has established a new reporting segment “Active Optical Products” which reports the operating results of these two recently acquired businesses.

Note  2. Discontinued Operation

During December 2013, the Company completed the discontinuance of its tellurium product line by exiting all business activities associated with this product.  This product line was previously serviced by Pacific Rare Specialty Metals & Chemicals, Inc. (“PRM”) and was included as part of the Military & Materials segment.   Prior periods have been restated to present this product line on a discontinued operation basis.   The revenues and earnings (losses) of the tellurium product line have been reflected as a discontinued operation for the periods presented as follows: ($000):

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2014		2013			2014		2013
Revenues	$	-	$	1,230		$	1,849	$	6,306
Earnings (loss) from discontinued operation before income taxes		-		(166	)	133			(2,563	)
Income tax benefit (expense)		-		-			-		-
Earnings (loss) from discontinued operation, net of taxes	$	-	$	(166	)	$	133	$	(2,563	)

Note 3. Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (the "FASB") issued an Accounting Standards Update ("ASU") that changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and represents a strategic shift that has or will have a major effect on an entity's operations and financial results. The new standard will be effective for annual periods beginning on or after December 15, 2014 with early adoption permitted and will be effective for the Company beginning in the first quarter of fiscal year 2016. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

In July 2013, the FASB issued an ASU that changes how certain unrecognized tax benefits are to be presented on the consolidated balance sheet. This ASU clarified existing guidance to require that an unrecognized tax benefit or a portion thereof be presented in the consolidated balance sheet as a reduction to a deferred tax asset for a net operating loss ("NOL") carryforward, similar tax loss, or a tax credit carryforward except when an NOL carryforward, similar tax loss, or tax credit carryforward is not available under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. In such a case, the unrecognized tax benefit would be presented in the consolidated balance sheet as a liability. This update is effective prospectively for fiscal years beginning after December 15, 2013 and will be effective for the Company beginning in the first quarter of fiscal year 2015. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

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In March 2013, the FASB issued an ASU related to a parent’s accounting for the cumulative translation adjustment upon de-recognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. The update clarifies the applicable guidance under current U.S. GAAP for the release of the cumulative translation adjustment upon a reporting entity’s de-recognition of a subsidiary or group of assets within a foreign entity or part or all of its investment in a foreign entity. The update requires a reporting entity, which either sells a part or all of its investment in a foreign entity or ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity, to release any related cumulative translation adjustment into net income. This update is effective prospectively for fiscal years beginning after December 15, 2013 and will be effective for the Company beginning in the first quarter of fiscal year 2015. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

In February 2013, the FASB issued an ASU related to disclosure requirements of reclassifications out of accumulated other comprehensive income. The adoption of the guidance requires the Company to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, the Company is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification. This update was effective for the Company beginning in the first quarter of fiscal year 2014 and did not have a significant impact on the Company’s consolidated financial statements.

Note 4. Acquisitions

Oclaro’s Fiber Amplifier and Micro-Optics Business

In November 2013, the Company acquired certain assets of Oclaro used in the fiber amplifier and micro-optics business. The Company operates the business under the name Network Solutions and includes it with II-VI Laser Enterprise, GmbH (“Laser Enterprise”) in the Company’s new operating segment, Active Optical Products. Network Solutions is a manufacturer of fiber amplifiers and micro-optics used in the optical communications market. At closing, the Company paid $79.6 million in cash, plus a $4.0 million holdback amount for 14 months to address any post-closing adjustments or claims, and $5.0 million that was previously paid to Oclaro on September 12, 2013. The purchase price of the Network Solutions acquisition is summarized as follows ($000):

Net cash paid at acquisition date	$	79,600
Cash previously paid		5,000
Holdback amount recorded in Other liabilities		4,000
Purchase price	$	88,600

Due to the timing of the acquisition, the Company is still in the process of completing its fair market valuation, including the valuation of certain tangible and intangible assets as well as deferred income taxes. The following table presents the preliminary allocation of the purchase price of the assets acquired at the date of acquisition, as the Company intends to finalize its accounting for the acquisition of Network Solutions during fiscal year 2014 ($000):

Assets
Inventories	$	11,314
Property, plant & equipment		9,700
Intangible assets		32,900
Goodwill		34,686
Total assets acquired	$	88,600

The goodwill of $34.7 million is included in the Active Optical Products segment and is attributed to the expected synergies and the assembled workforce of Network Solutions. All of the goodwill is deductible for income tax purposes.

The amount of revenues and net loss from operations of Network Solutions included in the Company’s Condensed Consolidated Statement of Earnings were $19.4 million and $0.5 million, respectively, for the three months ended March 31, 2014 and were $32.6 million and $2.3 million, respectively, for the nine months ended March 31, 2014.

Oclaro’s Switzerland-Based Semiconductor Laser Business

In September 2013, the Company acquired all of the outstanding shares of Oclaro Switzerland GmbH, a limited liability company formed under the laws of the Swiss confederation, as well as certain additional assets of Oclaro used in the semiconductor laser

10

business. The Company operates the acquired business under the name Laser Enterprise and includes it in the Company’s new operating segment, Active Optical Products. Laser Enterprise is a manufacturer of high-power semiconductor laser components enabling fiber and direct diode laser systems for material processing, medical, consumer and printing applications. In addition, the segment manufactures pump lasers for optical amplifiers for both terrestrial and submarine applications and vertical cavity surface emitting lasers (VCSELS) for optical navigation, optical interconnects and optical sensing applications.  At closing, the Company paid $90.6 million of cash, net of cash acquired of $1.7 million, a $6.0 million holdback amount by the Company for 15 months to address any post-closing adjustments or claims, and a $2.0 million holdback amount for potential post-closing working capital adjustments.  During the three months ended March 2014, the Company paid an additional $2.5 million for a working capital adjustment in accordance with the purchase agreement. The purchase price of the Laser Enterprise acquisition is summarized as follows ($000):

Net cash paid at acquisition date	$	90,601
Additional cash paid for working capital adjustment		2,475
Holdback amount recorded in Other accrued liabilities		6,000
Purchase price	$	99,076

Due to the timing of the acquisition, the Company is still in the process of completing its fair market valuation, including the valuation of certain tangible and intangible assets as well as deferred income taxes. The following table presents the preliminary allocation of the purchase price of the assets acquired and liabilities assumed at the date of acquisition, as the Company intends to finalize its accounting for the acquisition of Laser Enterprise during fiscal year 2014 ($000):

Assets
Inventories	$	26,071
Prepaid and other assets		1,035
Deferred income taxes		2,376
Property, plant & equipment		30,200
Intangible assets		29,800
Goodwill		41,105
Total assets acquired	$	130,587
Liabilities
Accounts payable	$	2,214
Deferred income taxes		13,290
Accrued income taxes		2,714
Other accrued liabilities		13,293
Total liabilities assumed	$	31,511
Net assets acquired	$	99,076

The goodwill of Laser Enterprise of $41.1 million is included in the Active Optical Products segment and is attributed to the expected synergies and the assembled workforce of Laser Enterprise. None of the goodwill is deductible for income tax purposes.

The amount of revenues and net loss from operations of Laser Enterprise included in the Company’s Condensed Consolidated Statement of Earnings for the three months ended March 31, 2014 was $18.1 million and $5.0 million, respectively, and was $43.1 million and $12.3 million, respectively, for the nine months ended March 31, 2014.

In conjunction with the acquisitions of Network Solutions and Laser Enterprise, the Company expensed transactions costs of approximately $3.7 million, net of tax of $0.2 million, during the nine months ended March 31, 2014.  None of these costs were recorded during the three months ended March 31, 2014.  These costs were recorded within selling, general and administrative expenses in the Condensed Consolidated Statements of Earnings.

Pro Forma Information

The following unaudited pro forma consolidated results of operations for the three and nine months ended March 31, 2014 and 2013 have been prepared as if the acquisitions of Network Solutions and Laser Enterprise had occurred on July 1, 2012, the beginning of the Company’s fiscal year 2013, which is the fiscal year prior to the acquisitions. As a result, certain transaction related expenses of $3.7 million (net of tax) for the nine month period were only included in the earliest period presented below ($000 except per share data).

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	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2014		2013		2014		2013
Net revenues	$	173,555	$	189,471	$	546,991	$	489,527
Earnings from continuing operations attributable to II-VI Incorporated		8,531		14,166		34,377		31,095
Basic earnings per share from continuing operations attributable to II-VI Incorporated		0.14		0.23		0.55		0.50
Diluted earnings per share from continuing operations attributable to II-VI Incorporated		0.13		0.22		0.54		0.49

The pro forma results are not necessarily indicative of what actually would have occurred if the transactions had occurred as described above, are not intended to be a projection of future results and do not reflect any cost savings that might be achieved from the combined operations.

Note 5. Investment

The Company has an equity investment in Guangdong Fuxin Electronic Technology (“Fuxin”) based in Guangdong Province, China of 20.2%, which is accounted for under the equity method of accounting. The total carrying value of the investment recorded at March 31, 2014 and June 30, 2013 was $11.4 million and $11.2 million, respectively. During the three months ended March 31, 2014 and 2013, the Company’s pro-rata share of earnings from this investment was $0.1 million and $0.2 million, respectively, and was $0.5 million and $0.8 million during the nine months ended March 31, 2014 and 2013, respectively, and were recorded in Other expense (income), net in the Condensed Consolidated Statements of Earnings.

Note  6. Inventories

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

	March 31,		June 30,
	2014		2013
Raw materials	$	76,254	$	59,290
Work in progress		57,344		43,895
Finished goods		41,009		38,674
	$	174,607	$	141,859

Note 7. Property, Plant and Equipment

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

	March 31,			June 30,
	2014			2013
Land and land improvements	$	2,381		$	2,236
Buildings and improvements		96,404			87,189
Machinery and equipment		331,181			276,802
Construction in progress		14,579			10,831
		444,545			377,058
Less accumulated depreciation		(232,812	)		(206,386	)
	$	211,733		$	170,672

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Note  8. Goodwill and Other Intangible Assets

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

	Nine Months Ended March 31, 2014
			Near-		Military		Advanced			Active
	Infrared		Infrared		&		Products			Optical
	Optics		Optics		Materials		Group			Products		Total
Balance-beginning of period	$	9,677	$	60,269	$	30,712	$	22,694		$	-	$	123,352
Goodwill acquired		-		-		-		-			75,791		75,791
Goodwill adjustment		-		-		-		(516	)		-		(516	)
Foreign currency translation		94		143		-		-			-		237
Balance-end of period	$	9,771	$	60,412	$	30,712	$	22,178		$	75,791	$	198,864

The Company reviews the recoverability of goodwill at least annually and any time business conditions indicate a potential change in recoverability. The measurement of a potential impairment begins with comparing the current fair value of the Company’s reporting units to the recorded value (including goodwill). The Company uses a discounted cash flow model (“DCF model”) and a market analysis to determine the current fair value of its reporting units. A number of significant assumptions and estimates are involved in estimating the forecasted cash flows used in the DCF model, including markets and market shares, sales volume and pricing, costs to produce, working capital changes and income tax rates. Management considers historical experience and all available information at the time the fair values of the reporting units are estimated. However, actual fair values that could be realized could differ from those used to evaluate the impairment of goodwill.

In connection with the acquisitions of Laser Enterprise in September 2013 and Network Solutions in November 2013, the Company recorded the excess purchase price over the net assets of the businesses acquired as goodwill in the accompanying Condensed Consolidated Balance Sheet, based on preliminary purchase price allocations.

During the nine months ended March 31, 2014, the Company recorded an adjustment to goodwill of $0.5 million associated with the November 2012 acquisition of M Cubed Technologies, Inc (“M Cubed”). This adjustment related to a change in deferred income tax assets and was recorded in conjunction with the finalization and filing of the M Cubed final income tax return.

The gross carrying amount and accumulated amortization of the Company’s intangible assets other than goodwill as of March 31, 2014 and June 30, 2013 was as follows ($000):

	March 31, 2014							June 30, 2013
	Gross					Net		Gross					Net
	Carrying		Accumulated			Book		Carrying		Accumulated			Book
	Amount		Amortization			Value		Amount		Amortization			Value
Technology and Patents	$	50,506	$	(13,393	)	$	37,113	$	39,659	$	(10,455	)	$	29,204
Trademarks		17,870		(1,018	)		16,852		17,855		(963	)		16,892
Customer Lists		104,661		(17,521	)		87,140		52,614		(12,189	)		40,425
Other		1,588		(1,430	)		158		1,580		(1,400	)		180
Total	$	174,625	$	(33,362	)	$	141,263	$	111,708	$	(25,007	)	$	86,701

In conjunction with the acquisitions of Laser Enterprise and Network Solutions, the Company recorded $10.8 million of technology and patents and $51.9 million of customer lists. These intangible assets were recorded based on the Company’s preliminary purchase price allocations which are expected to be finalized during fiscal year 2014.

Amortization expense recorded on the Company’s intangible assets was $2.6 million and $8.2 million, respectively, for the three and nine months ended March 31, 2014 and was $2.2 million and $4.6 million, respectively, for the three and nine months ended March 31, 2013. The technology and patents are being amortized over a range of 120 to 240 months with a weighted average remaining life of approximately 120 months. The customer lists are being amortized over a range of approximately 120 months to 192 months with a weighted average remaining life of approximately 153 months. The gross carrying amount of trademarks includes $16.4 million of acquired trade names with indefinite lives that are not amortized but tested annually for impairment or more frequently if a triggering

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event occurs. Included in the gross carrying amount and accumulated amortization of the Company’s intangible assets is the effect of foreign currency translation on that portion of the intangible assets relating to the Company’s German subsidiaries as well as Photop Technologies, Inc. (“Photop”) and Photop AOFR Pty. Ltd. (“Photop AOFR”).

At March 31, 2014, the estimated amortization expense for existing intangible assets for each of the five succeeding fiscal years is as follows ($000):

Year Ending June 30,
Remaining 2014	$	3,096
2015		11,806
2016		11,739
2017		11,729
2018		11,254

Note 9. Debt

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

	March 31,			June 30,
	2014			2013
Line of credit, interest at LIBOR, as defined, plus 1.50% and 1.25%, respectively	$	170,000		$	111,000
Term loan, interest at LIBOR, as defined, plus 1.25%		90,000			-
Yen denominated line of credit, interest at LIBOR, as defined, plus 1.50% and 1.25%, respectively		2,907			3,036
Total debt		262,907			114,036
Current portion of long-term debt		(20,000	)		-
Long-term debt, less current portion	$	242,907		$	114,036

In September 2013, the Company amended and restated its existing credit agreement. The Second Amended and Restated Credit Agreement (the “Amended Credit Facility”) provides for a revolving credit facility of $225 million (increased from $140 million), as well as a $100 million Term Loan. The Term Loan shall be re-paid in consecutive quarterly principal payments on the first business day of each January, April, July and October, with the first payment commencing on October 1, 2013, as follows: (i) twenty consecutive quarterly installments of $5 million and (ii) a final installment of all remaining principal due and payable on the maturity date. The Amended Credit Facility is unsecured, but is guaranteed by each existing and subsequently acquired or organized wholly-owned domestic subsidiary of the Company. The Company has the option to request an increase to the size of the Amended Credit Facility in an aggregate additional amount not to exceed $100 million. The Amended Credit Facility has a five-year term through September 2018 and has an interest rate of LIBOR, as defined in the agreement, plus 0.75% to 1.75% based on the Company’s ratio of consolidated indebtedness to consolidated EBITDA. Additionally, the facility is subject to certain covenants, including those relating to minimum interest coverage and maximum leverage ratios. As of March 31, 2014, the Company was in compliance with all financial covenants under its Amended Credit Facility.

In conjunction with entering into the Amended Credit Facility, the Company incurred approximately $1.0 million of deferred financing costs which are being amortized over the term of the agreement. As a result of the overall increase in borrowing capacity, existing deferred financing costs at the time of the amendment of $0.5 million are also being amortized over the term of the Amended Credit Facility.

The Company’s Yen denominated line of credit is a 500 million Yen facility that has a five-year term through June 2016 and has an interest rate equal to LIBOR, as defined in the loan agreement, plus 0.625% to 1.50%. At March 31, 2014 and June 30, 2013, the Company had 300 million Yen borrowed. Additionally, the facility is subject to certain covenants, including those relating to minimum interest coverage and maximum leverage ratios. As of March 31, 2014, the Company was in compliance with all financial covenants under its Yen facility.

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The Company had aggregate availability of $55.4 million and $29.8 million under its lines of credit as of March 31, 2014 and June 30, 2013, respectively. The amounts available under the Company’s lines of credit are reduced by outstanding letters of credit. As of March 31, 2014 and June 30, 2013, total outstanding letters of credit supported by the credit facilities were $1.5 million and $1.3 million, respectively.

The weighted average interest rate of total borrowings was 1.7% and 1.2% for the nine months ended March 31, 2014 and 2013, respectively.

Remaining annual principal payments under the Company’s existing credit facilities as of March 31, 2014 were as follows:

					U.S.
					Dollar
	Term		Yen Line		Line of
Period	Loan		of Credit		Credit		Total
Year 1	$	20,000	$	-	$	-	$	20,000
Year 2		20,000		-		-		20,000
Year 3		20,000		2,907		-		22,907
Year 4		20,000		-		-		20,000
Year 5		10,000		-		170,000		180,000
Total	$	90,000	$	2,907	$	170,000	$	262,907

Note 10. Income Taxes

The Company’s year-to-date effective income tax rate from continuing operations at March 31, 2014 and 2013 was 18.5% and 23.8%, respectively. The variations between the Company’s effective tax rate from continuing operations and the U.S. statutory rate of 35.0% were primarily due to the consolidation of the Company’s foreign operations, which are subject to income taxes at lower statutory rates. In addition, the Company recorded $1.4 million of tax benefits during the three months ended March 31, 2014, as a result of statute of limitation expirations on previously filed income tax returns and higher income tax credits from qualifying research and development investment. A change in the mix of pre-tax income from these various tax jurisdictions could have a material impact on the Company’s effective tax rate.

U.S. GAAP clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes 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 March 31, 2014 and June 30, 2013, the Company’s gross unrecognized income tax benefit was $3.0 million and $3.3 million, respectively. The Company has classified the uncertain tax positions as noncurrent income tax liabilities, as the amounts are not expected to be paid within one year. If recognized, substantially all of the gross unrecognized tax benefits at March 31, 2014 would impact the effective tax rate. The Company recognizes interest and penalties related to uncertain tax positions in the income tax provision on the Condensed Consolidated Statements of Earnings. The amount of accrued interest and penalties included in the $3.0 million and $3.3 million of gross unrecognized income tax benefit at March 31, 2014 and June 30, 2013 was immaterial. Fiscal years 2011 to 2013 remain open to examination by the United States Internal Revenue Service, fiscal years 2008 to 2013 remain open to examination by certain state jurisdictions, and fiscal years 2005 to 2013 remain open to examination by certain foreign taxing jurisdictions.

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Note  11. Earnings Per Share

The following table sets forth the computation of earnings per share attributable to II-VI Incorporated for the periods indicated. Weighted average shares issuable upon the exercises of stock options and the release of performance and restricted shares that were not included in the calculation were approximately 542,000 and 433,000, respectively, for the three and nine months ended March 31, 2014, and 410,000 and 429,000, respectively, for the three and nine months ended March 31, 2013, because they were anti-dilutive ($000 except per share data):

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2014		2013			2014		2013
Earnings from continuing operations attributable to II-VI Incorporated	$	8,531	$	16,035		$	25,661	$	43,350
Earnings (loss) from discontinued operation		-		(166	)		133		(2,563	)
Net earnings attributable to II-VI Incorporated	$	8,531	$	15,869		$	25,794	$	40,787
Divided by:
Weighted average shares		62,355		62,130			62,426		62,482
Basic earnings (loss) attributable to II-VI Incorporated per common share:
Continuing operations	$	0.14	$	0.26		$	0.41	$	0.69
Discontinued operation	$	-	$	(0.00	)	$	-	$	(0.04	)
Consolidated	$	0.14	$	0.26		$	0.41	$	0.65
Earnings from continuing operations attributable to II-VI Incorporated	$	8,531	$	16,035		$	25,661	$	43,350
Earnings (loss) from discontinued operation		-		(166	)		133		(2,563	)
Net earnings attributable to II-VI Incorporated	$	8,531	$	15,869		$	25,794	$	40,787
Divided by:
Weighted average shares		62,355		62,130			62,426		62,482
Dilutive effect of common stock equivalents		1,391		1,594			1,444		1,483
Diluted weighted average common shares		63,746		63,724			63,870		63,965
Diluted earnings (loss) attributable to II-VI Incorporated per common share:
Continuing operations	$	0.13	$	0.25		$	0.40	$	0.68
Discontinued operation	$	-	$	(0.00	)	$	-	$	(0.04	)
Consolidated	$	0.13	$	0.25		$	0.40	$	0.64

Note 12. Segment 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.

In conjunction with the acquisitions of Laser Enterprise on September 12, 2013 and Network Solutions on November 1, 2013, the Company has established a new reporting segment “Active Optical Products” which reports the operating results of the Company’s recently acquired businesses.

The Company has five reportable segments as of March 31, 2014. 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 from continuing operations before income taxes, interest and other income or expense. The segments are managed separately due to the production requirements and facilities unique to each segment. The Company has the following reportable segments at March 31, 2014: (i) Infrared Optics, which consists of the Company’s infrared optics and material products businesses, HIGHYAG Lasertechnologies, GmbH (“HIGHYAG”) and certain remaining corporate activities, primarily corporate assets and capital expenditures; (ii) Near-Infrared Optics, which consists of Photop, Photop Aegis, Inc. (“Photop Aeigs”) and Photop AOFR; (iii) Military & Materials, which consists of the Company’s LightWorks Optical Systems (formerly the Company’s EEO and LightWorks Optical Systems subsidiaries, “LWOS”), VLOC Incorporated (“VLOC”), Max Levy Autograph, Inc. (“MLA”) and PRM; (iv) Advanced Products Group, which is comprised of the Company’s Marlow Industries, Inc. (“Marlow”),

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M Cubed, the Wide Bandgap Materials Group (“WBG”) and the Worldwide Materials Group (“WMG”), which is responsible for corporate research and development activities; and (v) Active Optical Products which consists of Laser Enterprise and Network Solutions.

During December 2013, the Company completed the discontinuance of its tellurium product line by exiting all business activities associated with this product.    This product line was previously serviced by PRM and was included as part of the Military & Materials segment.   Segment information for all periods presented has been adjusted to properly reflect the tellurium product as a discontinued operation.

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 the Corporate Chief Operating Officer 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 opto-electronic 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 Photop Aegis and Photop AOFR brand names, respectively.

The Military & Materials segment is located in the U.S. and the Philippines. The Military & Materials segment is directed by the Corporate Chief Operating Officer, 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 ultra-violet to infrared optical components and high-precision optical assemblies for military, medical and commercial laser and imaging applications under the LWOS and VLOC brand names and manufactures and markets micro-fine conductive mesh patterns for optical, mechanical, and ceramic components for applications under the MLA brand name. The segment also refines selenium metals for internal consumption and a rare earth element under the PRM brand name.

The Advanced Products Group is located in the U.S., Vietnam, Japan, China and Germany and is directed by the Corporate Chief Operating Officer. 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. M Cubed develops advanced ceramic materials and precision motion control products addressing the semiconductor, display, industrial and defense 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 Active Optical Products segment is located in Switzerland, China, the U.S., Italy, Japan, Thailand, Hong Kong and the U.K. The Active Optical Products segment is directed by the Corporate Chief Operating Officer. Laser Enterprise manufactures high-power semiconductor laser components enabling fiber and direct diode laser systems for material processing, medical, consumer and printing applications. In addition, Laser Enterprise manufactures pump lasers for optical amplifiers for both terrestrial and submarine applications and VCSELS for optical navigation, optical interconnects and optical sensing applications. Network Solutions manufactures optical amplifiers and micro-optics for both terrestrial and submarine applications within the optical communications market.

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 from continuing operations before income taxes, interest and other income or expense. Inter-segment sales and transfers have been eliminated.

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

	Three Months Ended March 31, 2014
			Near-		Military		Advanced		Active
	Infrared		Infrared		&		Products		Optical
	Optics		Optics		Materials		Group		Products			Eliminations			Total
Revenues	$	50,259	$	33,554	$	22,228	$	29,961	$	37,553		$	-		$	173,555
Inter-segment revenues		306		812		1,941		1,490		-			(4,549	)		-
Segment earnings (loss)		10,008		2,107		1,342		3,197		(7,911	)		-			8,743
Interest expense		-		-		-		-		-			-			(1,412	)
Other income, net		-		-		-		-		-			-			1,694
Income taxes		-		-		-		-		-			-			(494	)
Earnings from discontinued operation		-		-		-		-		-			-			-
Net earnings		-		-		-		-		-			-			8,531
Depreciation and amortization		2,281		4,026		1,940		2,462		2,483			-			13,192
Segment assets		232,658		303,284		119,438		178,543		256,141			-			1,090,064
Expenditures for property, plant and equipment		2,352		954		1,265		1,336		571			-			6,478
Investment		-		-		-		11,409		-			-			11,409
Goodwill		9,771		60,412		30,712		22,178		75,791			-			198,864

	Three Months Ended March 31, 2013
			Near-			Military			Advanced
	Infrared		Infrared			&			Products
	Optics		Optics			Materials			Group		Eliminations			Total
Revenues	$	52,886	$	35,821		$	27,639		$	27,594	$	-		$	143,940
Inter-segment revenues		730		(289	)		695			1,303		(2,439	)		-
Segment earnings (loss)		13,969		3,774			(384	)		810		-			18,169
Interest expense		-		-			-			-		-			(449	)
Other income, net		-		-			-			-		-			1,401
Income taxes		-		-			-			-		-			(2,861	)
Loss from discontinued operation		-		-			-			-		-			(166	)
Net earnings		-		-			-			-		-			16,094
Depreciation and amortization		2,032		4,228			1,984			2,481		-			10,725
Expenditures for property, plant and equipment		823		1,981			455			1,027		-			4,286

	Nine Months Ended March 31, 2014
			Near-		Military		Advanced		Active
	Infrared		Infrared		&		Products		Optical
	Optics		Optics		Materials		Group		Products			Eliminations			Total
Revenues	$	152,066	$	109,298	$	72,982	$	85,273	$	75,721					$	495,340
Inter-segment revenues		769		1,580		5,251		4,848		-			(12,448	)		-
Segment earnings (loss)		28,699		7,726		8,219		6,031		(18,893	)		-			31,782
Interest expense		-		-		-		-		-			-			(3,064	)
Other income, net		-		-		-		-		-			-			2,766
Income taxes		-		-		-		-		-			-			(5,823	)
Earnings from discontinued operation		-		-		-		-		-			-			133
Net earnings		-		-		-		-		-			-			25,794
Depreciation and amortization		6,627		12,774		6,105		7,461		6,458			-			39,425
Expenditures for property, plant and equipment		7,264		6,396		3,004		2,886		1,217			-			20,767

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	Nine Months Ended March 31, 2013
			Near-		Military			Advanced
	Infrared		Infrared		&			Products
	Optics		Optics		Materials			Group		Eliminations			Total
Revenues	$	149,852	$	113,463	$	67,858		$	65,872	$	-		$	397,045
Inter-segment revenues		1,881		679		3,033			3,863		(9,456	)		-
Segment earnings (loss)		36,343		16,637		(1,210	)		325		-			52,095
Interest expense		-		-		-			-		-			(708	)
Other income, net		-		-		-			-		-			6,713
Income taxes		-		-		-			-		-			(13,844	)
Loss from discontinued operation		-		-		-			-		-			(2,563	)
Net earnings		-		-		-			-		-			41,693
Depreciation and amortization		6,264		12,900		4,991			5,737		-			29,892
Expenditures for property, plant and equipment		3,411		6,184		2,428			5,407		-			17,430

Note 13. Share-Based Compensation

The Board of Directors adopted the II-VI Incorporated 2012 Omnibus Incentive Plan (the “Plan”) which was approved by the shareholders of the Company. The Plan provides for the grant of non-qualified stock options, stock appreciation rights, restricted share awards, restricted share units, deferred share awards, performance share awards and performance share units to employees, officers and directors of the Company. The Company records share-based compensation expense for these awards in accordance with U.S. GAAP, which requires the recognition of the fair value of share-based compensation in net earnings. The Company recognizes the share-based compensation expense over the requisite service period of the individual grantees, which generally equals the vesting period.  The Company accounts for cash-based stock appreciation rights, cash-based restricted share units awards and cash-based performance share unit awards as liability awards, in accordance with applicable accounting standards.

Share-based compensation expense is allocated approximately 20% to cost of goods sold and 80% to selling, general and administrative expense based on the employee classification of the grantees. Share-based compensation expense for the periods indicated was as follows ($000):

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	March 31, 2014		March 31, 2013		March 31, 2014		March 31, 2013
Stock Options and Cash-Based Stock Appreciation Rights	$	1,190	$	1,152	$	4,566	$	3,916
Restricted Share Awards and Cash-Based Restricted Share Unit Awards		930		1,144		3,539		3,240
Performance Share Awards and Cash-Based Performance Share Unit Awards		785		555		2,485		2,582
	$	2,905	$	2,851	$	10,590	$	9,738

Stock Options and Stock Appreciation Rights:

The Company utilizes the Black-Scholes valuation model for estimating the fair value of these awards. The weighted-average fair value of awards granted under the Plan were $6.63 and $8.57 per award, respectively, during the three and nine months ended March 31, 2014 and were $7.84 and $8.44 per award, respectively, during the three and nine months ended March 31, 2013, using the following assumptions:

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	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	March 31, 2014			March 31, 2013			March 31, 2014			March 31, 2013
Risk-free interest rate		1.82	%		1.10	%		1.75	%		0.94	%
Expected volatility		46	%		48	%		47	%		49	%
Expected life of options	5.5 years			4.7 years			5.7 years			5.7 years
Dividend yield	None			None			None			None

The risk-free interest rate is derived from the average U.S. Treasury Note rate during the period, which approximates the rate in effect at the time of grant related to the expected life of the awards. The risk-free interest rate shown above is the weighted average rate for all awards granted during each respective period. Expected volatility is based on the historical volatility of the Company’s Common Stock over the period commensurate with the expected life of the awards. The expected life calculation is based on the observed time to post-vesting exercise and/or forfeitures of awards by our employees. The dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no current intention to pay cash dividends in the future. The estimated annualized forfeitures are based on the Company’s historical experience of award cancellations pre-vesting and are estimated at a rate of 16%. The Company will record additional expense in future periods if the actual forfeiture rate is lower than estimated, and will adjust expense in future periods if the actual forfeitures are higher than estimated.

Restricted Share Awards and Restricted Share Units:

The restricted share awards and units compensation expense was calculated based on the number of shares or units expected to be earned by the grantees multiplied by the stock price at the date of grant and is being recognized over the vesting period. Generally, the restricted share awards and units have a three year cliff-vesting provision and an estimated forfeiture rate of 7.5%.

Performance Share Awards and Performance Share Units:

The Compensation Committee of the Board of Directors of the Company has granted certain named executive officers and employees performance share awards and units under the Plan. As of March 31, 2014, the Company had outstanding grants covering performance periods ranging from 24 to 48 months. These awards are intended to provide continuing emphasis on specified financial performance goals that the Company considers important contributors to long-term shareholder value. These awards are payable only if the Company achieves specified levels of financial performance during the performance periods. The performance share awards and units compensation expense is calculated based on the estimated number of shares or units expected to be earned multiplied by the stock price at the date of grant.

Note  14. 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. At March 31, 2014, 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. At March 31, 2014, the Company had a contingent earnout arrangement related to the acquisition of LightWorks recorded at fair value. The LightWorks earnout arrangement provided up to a maximum of $4.2 million of additional cash payments to the former shareholders based upon LightWorks achieving certain agreed upon financial targets for revenues and customer orders in calendar year 2013. As of March 31, 2014, the Company has made total earnout payments of $2.2 million for the customer order portion of the earnout arrangement which was achieved at 100%. The Company has recorded the fair value of the remaining revenue earnout

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arrangement of $0.8 million in Other accrued liabilities in the Condensed Consolidated Balance Sheets. The fair value of the earnout arrangement was based on significant inputs not observable in the market and represents a Level 3 measurement as defined by U.S. GAAP. The Company used the income approach in measuring the fair value of the earnout arrangement, estimating a probability of 40% for the revenue earnout. The impact on fair value of discounting the revenue earnout arrangement was not significant as the earnout period ended on December 31, 2013 and is expected to be paid no later than June 30, 2014. Included in Other expense (income), net for the three and nine months ended March 31, 2014 is a $0.3 million unrealized gain due to a fair value remeasurement that reduced the revenue earnout liability.  

The following table provides a summary by level of the fair value of financial instruments that are measured on a recurring basis for the periods presented ($000):

	Fair Value Measurements at March 31, 2014 Using:
			Quoted
			Prices in
			Active
			Markets		Significant
			for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	March 31, 2014		(Level 1)		(Level 2)		(Level 3)
Liabilities:
Foreign currency forward contracts	$	48	$	-	$	48	$	-
Contingent earnout arrangement	$	800	$	-	$	-	$	800

	Fair Value Measurements at June 30, 2013 Using:
			Quoted
			Prices in
			Active
			Markets		Significant
			for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	June 30, 2013		(Level 1)		(Level 2)		(Level 3)
Liabilities:
Foreign currency forward contracts	$	23	$	-	$	23	$	-
Contingent earnout arrangement	$	3,300	$	-	$	-	$	3,300

The Company’s policy is to report transfers into and out of Levels 1 and 2 of the fair value hierarchy at fair values as of the beginning of the period in which the transfers occur. There were no transfers in and out of Levels 1 and 2 of the fair value hierarchy during the three months ended March 31, 2014.

The following table presents a reconciliation of the beginning and ending fair value measurements of the Company’s Level 3 contingent earnout arrangement related to the acquisition of LightWorks ($000):

	Significant
	Unobservable Inputs
	(Level 3)
Balance at July 1, 2013	$	3,300
Payments		(2,200	)
Changes in fair value		(300	)
Balance at March 31, 2014	$	800

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The carrying value of Cash and cash equivalents, Accounts receivable and Accounts payable 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 are considered Level 2 among the fair value hierarchy and have variable interest rates and accordingly their carrying amounts approximate fair value.

Note 15. Derivative Instruments

The Company, from time to time, purchases foreign currency forward exchange contracts, primarily in Japanese Yen, that permit it to sell specified amounts of these foreign currencies expected to be received from its export sales for pre-established U.S. dollar amounts at specified dates. These contracts are entered into to limit transactional 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, on the basis of its aggregate net cash flows in respective currencies, to foreign currency risk.

The Company has recorded the fair market value of these contracts in the Company’s condensed consolidated financial statements. These contracts had a total notional amount of $7.5 million and $4.7 million at March 31, 2014 and June 30, 2013, respectively. As of March 31, 2014, these forward contracts had expiration dates ranging from April 2014 through June 2014, with Japanese Yen denominations individually ranging from 220 million Yen to 300 million Yen. The Company does not account for these contracts as hedges as defined by U.S. GAAP and records the change in the fair value of these contracts in Other expense (income), net in the Condensed Consolidated Statements of Earnings as they occur. The fair value measurement takes into consideration foreign currency rates and the current creditworthiness of the counterparties to these contracts, as applicable, and 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 and thus represents a Level 2 measurement. These contracts are recorded in Other accrued liabilities in the Company’s Condensed Consolidated Balance Sheets. The change in the fair value of these contracts for the three and nine months ended March 31, 2014 and 2013 was insignificant.

Note  16. Commitments and Contingencies

The Company records a warranty reserve as a charge against earnings based on a percentage of sales utilizing actual warranty claims over the last twelve months. The following table summarizes the change in the carrying value of the Company’s warranty reserve, which is a component of Other accrued liabilities in the Company’s Condensed Consolidated Balance Sheets, as of and for the nine months ended March 31, 2014 ($000):

	Nine Months Ended
	March 31, 2014
Balance-beginning of period	$	1,661
Payments made during the period		(1,263	)
Additional warranty liability recorded during the period		1,668
Warranty liability assumed through acquisition		1,173
Balance-end of period	$	3,239

Note 17. Post-Retirement Benefits

In connection with the Company’s acquisition of Laser Enterprise, the Company assumed the existing pension plan (the “Swiss Plan”) covering employees of the Zurich, Switzerland subsidiary which included an $8.9 million unfunded pension liability recorded as part of the preliminary purchase price allocation of Laser Enterprise. This unfunded pension liability is recorded in Other liabilities in the Condensed Consolidated Balance Sheet at March 31, 2014.   Net periodic pension costs associated with the Swiss Plan for the three and nine months ended March 31, 2014 included the following ($000):

	Three Months			Nine Months
	Ended			Ended
	March 31,			March 31,
	2014			2014
Service cost	$	835		$	1,837
Interest cost		201			443
Expected return on plan assets		(331	)		(728	)
Net amortization		-			-
Net periodic pension costs	$	705		$	1,552

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Since the acquisition of Laser Enterprise, the Company has contributed $1.1 million to the Swiss Plan.  The Company currently anticipates contributing an additional estimated amount of approximately $0.5 million to the Swiss Plan during the remainder of fiscal year 2014.

Note 18. Capital Lease

In December 2013, the Company's HIGHYAG subsidiary entered into a capital lease related to a building in Germany.   The following table shows the future minimum lease payments due under the non-cancelable capital lease ($000):

Fiscal Year Ending:	Amount
2014 (remaining)	$	270
2015		1,081
2016		1,081
2017		1,081
2018		1,081
Thereafter		13,426
Total minimum lease payments		18,020
Less amount representing interest		6,163
Present value of capitalized payments		11,857
Less: current portion		451
Long-term portion	$	11,406

The current and long-term portion of the capital lease obligation was recorded in Other accrued liabilities and Other liabilities, respectively, in the Company’s Condensed Consolidated Balance Sheets as of March 31, 2014.  The present value of the capitalized payments of $11.9 million was recorded in Property, plant & equipment, net, in the Company’s Condensed Consolidated Balance Sheets as of March 31, 2014, with associated depreciation expense being recorded over the 17 year life of the lease.   

Note  19. Share Repurchase Program

In February 2014, the Company’s Board of Directors authorized the Company to purchase up to $20 million of its Common Stock. The share repurchase program (the “Program”) 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.  As of March 31, 2014, the Company has purchased 750,000 shares of its common stock pursuant to the Program for approximately $12.0 million.

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Item  2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis, contains 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,” “plans,” “projects” or similar expressions.

Although our management considers these expectations and assumptions to be reasonable, actual results could materially differ from any such forward-looking statements included in this Quarterly Report on Form 10-Q or otherwise made by our management due to the following factors, among others; materially adverse changes in economic or industry conditions generally (including capital markets) or in the markets served by the Company, the development and use of new technology, the purchasing patterns of customers and end-users, the timely release of new products and acceptance of such new products by the market, the actions of competitors, our ability to devise and execute strategies to respond to market conditions, and our ability to assimilate recently acquired businesses. There are additional risk factors that could materially affect the Company’s business, results of operations or financial condition. Investors are encouraged to review the risk factors set forth in the Company’s most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission on August 28, 2013.

In addition, we operate in a highly competitive and rapidly changing environment; therefore, new risk factors can arise, and it is not possible for management to predict all such risk factors, nor 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, and we caution you not to rely on them unduly.

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 and investors should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report.

Introduction

II-VI Incorporated (“II-VI,” the “Company,” “we,” “us” or “our”), a worldwide leader in engineered materials and opto-electronic components, is a vertically-integrated manufacturing company that creates and markets products for diversified markets including industrial manufacturing, optical communications, military, semiconductor, high-power electronics, medical and thermoelectronics applications.

The Company generates revenues, earnings and cash flows from developing, manufacturing and marketing engineered materials and opto-electronic components for precision use in industrial, optical communications, military, semiconductor, medical and consumer applications. We also generate revenue, earnings and cash flows from government-funded research and development contracts relating to the development and manufacture of new technologies, materials and products.

Our customer base includes original equipment manufacturers (“OEMs”), laser end users, system integrators of high-power lasers, manufacturers of equipment and devices for industrial, optical communications, security and monitoring applications, U.S. government prime contractors, various U.S. government agencies and thermoelectric solutions suppliers.

In conjunction with the acquisitions of Laser Enterprise on September 12, 2013 and Network Solutions on November 1, 2013, the Company has established a new reporting segment “Active Optical Products” which reports the operating results of the Company’s newly acquired businesses.

During December 2013, the Company completed the discontinuance of its tellurium product line by exiting all business activities associated with this product.  This product line was previously serviced by PRM and was included as part of the Military & Materials segment.   Information included in Management’s Discussion and Analysis has been adjusted to properly reflect the tellurium product as a discontinued operation for all periods presented.

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Critical Accounting Estimates

The preparation of financial statements and related disclosures 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 most recent Annual Report on Form 10-K describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates.

Management believes the Company’s critical accounting estimates are those related to revenue recognition, allowance for doubtful accounts, warranty reserves, inventory valuation, valuation of long-lived assets including acquired intangibles and goodwill, accrual of bonus and profit sharing estimates, accrual of income tax liability estimates and accounting for share-based compensation. Management believes these estimates to be critical because they are both important to the portrayal of the Company’s financial condition and results of operations, and require management to make judgments and estimates about matters that are inherently uncertain.

The Company recognizes revenues in accordance with U.S. GAAP. Revenues for product shipments are realizable when the Company has persuasive evidence of a sales arrangement, the product has been shipped or delivered, the sale price is fixed or determinable and collectability is reasonably assured. Title and risk of loss passes from the Company to its customers at the time of shipment in most cases with the exception of certain customers, for whom title does not pass and revenue is not recognized until the customer has received the product at its physical location. The Company’s revenue recognition policy is consistently applied across the Company’s segments, product lines and geographical locations. Further, we do not have any significant post-shipment obligations such as training or installation, customer acceptance provisions, credits and discounts, rebates and price protection or other similar privileges. Our distributors and agents are not granted price protection. Our distributors and agents, who comprise less than 10% of consolidated revenue, have no additional product return rights beyond the right to return defective products covered by our warranty policy. Revenues generated from transactions other than product shipments are contract-related and have historically accounted for less than 5% of the Company’s consolidated revenues. We believe our revenue recognition practices have adequately considered the requirements under U.S. GAAP.

We establish an allowance for doubtful accounts and warranty reserves based on historical experience and believe the collection of revenues, net of these reserves, is reasonably assured. Our allowance for doubtful accounts and warranty reserve balances at March 31, 2014 were $1.1 million and $3.2 million, respectively. Our reserve estimates have historically been proven to be materially correct based upon actual charges incurred.

New Accounting Standards

See “Note 3. Recent Accounting Pronouncements,” to our unaudited 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.

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

The following tables set forth bookings and select items from our Condensed Consolidated Statements of Earnings for the three and nine months ended March 31, 2014 and 2013, respectively:

	Three Months Ended						Three Months Ended
	March 31, 2014						March 31, 2013
Bookings	$	187.5					$	138.6
				% of						% of
				Revenues						Revenues
Total Revenues	$	173.6			100.0	%	$	143.9			100.0	%
Cost of goods sold		118.9			68.5			93.0			64.6
Gross margin		54.7			31.5			51.0			35.4
Operating Expenses:
Internal research and development		12.1			7.0			5.8			4.0
Selling, general and administrative		33.8			19.5			27.0			18.8
Interest and other, net		(0.3	)		(0.2	)		(1.0	)		(0.7	)
Earnings before income tax		9.0			5.2			19.1			13.3
Income taxes		0.5			0.3			2.9			2.0
Earnings from Continuing Operations		8.5			4.9			16.3			11.3
Loss from Discontinued Operation, net of income tax		-			-			(0.2	)		(0.1	)
Net Earnings		8.5			4.9			16.1			11.2
Less:  Net Earnings Attributable to Redeemable Noncontrolling Interest		-			-			0.2			0.2
Net earnings attributable to II-VI Incorporated	$	8.5			4.9	%	$	15.9			11.0	%
Earnings Attributable to II-VI Incorporated from Continuing Operations
Diluted Earnings Per Share:	$	0.13					$	0.25

	Nine Months Ended					Nine Months Ended
	March 31, 2014					March 31, 2013
Bookings	$	498.0				$	375.9
			% of						% of
			Revenues						Revenues
Total Revenues	$	495.3		100.0	%	$	397.0			100.0	%
Cost of goods sold		330.9		66.8			248.4			62.6
Gross margin		164.4		33.2			148.6			37.4
Operating Expenses:
Internal research and development		31.2		6.3			17.0			4.3
Selling, general and administrative		101.4		20.5			79.5			20.0
Interest and other, net		0.3		0.1			(6.0	)		(1.5	)
Earnings before income tax		31.5		6.4			58.1			14.6
Income taxes		5.8		1.2			13.8			3.5
Earnings from Continuing Operations		25.7		5.2			44.3			11.1
Earnings (loss) from Discontinued Operation, net of income tax		0.1		-			(2.6	)		(0.6	)
Net Earnings	$	25.8		5.2		$	41.7			10.5
Less:  Net Earnings Attributable to Redeemable Noncontrolling Interest		-		-			0.9			0.2
Net earnings attributable to II-VI Incorporated	$	25.8		5.2	%	$	40.8			10.3	%
Earnings Attributable to II-VI Incorporated from Continuing Operations
Diluted Earnings Per Share:	$	0.40				$	0.68

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Executive Summary

Earnings from continuing operations attributable to II-VI Incorporated for the three months ended March 31, 2014 were $8.5 million ($0.13 per-share diluted), compared to $15.9 million ($0.25 per-share diluted) for the same period last fiscal year. Earnings from continuing operations attributable to II-VI Incorporated for the nine months ended March 31, 2014 were $25.8 million ($0.40 per-share diluted), compared to $40.8 million ($0.68 per-share diluted) for the same period last fiscal year.  During the three months ended March 31, 2014, the Company recorded total restructuring charges of $2.3 million (after-tax), mostly driven by the Company’s effort to align the cost structure of the Laser Enterprise and Network Solutions acquisitions that occurred in fiscal 2014 with current and future revenue and bookings levels.  Although these businesses have incurred segment operating losses during the three and nine months ended March 31, 2014 of $8.0 million and $18.9 million, respectively, planned synergies and cost saving actions have been implemented to strengthen the financial performance of these businesses in the future.  Included in this segment’s operating results for the nine months ended March 31, 2014 were transaction costs of $3.9 million, as well as purchase accounting adjustments related to the fair market value of inventory of $4.1 million.  In addition, as a result of the increased borrowings used to finance these acquisitions, the Company experienced higher levels of interest expense during the three and nine months ended March 31, 2014 of $1.0 million and $2.4 million, respectively, when compared to the same periods last fiscal year.

Consolidated

Bookings. Bookings for the three months ended March 31, 2014 increased 35.3% to $187.5 million, compared to $138.6 million for the same period last fiscal year. Bookings for the nine months ended March 31, 2014 increased 32.5% to $498.0 million, compared to $375.9 million for the same period last fiscal year. Bookings are defined as customer orders received that are expected to be converted to revenues over the next twelve months. For long-term customer orders, the Company does not include in bookings the portion of the customer order that is beyond twelve months, due to the inherent uncertainty of an order that far out in the future.  The increase in bookings during the three and nine months ended March 31, 2014 compared to the same periods last fiscal year is mostly attributable to the current year acquisitions of Laser Enterprise and Network Solutions as well as the incremental bookings from prior year acquisitions.  In addition, increased demand at the majority of the Company’s legacy business units for II-VI products serving the industrial and optical communication markets also helped contribute to the higher levels of bookings when compared to the three and nine months ended March 31, 2013.

Revenues. Revenues for the three months ended March 31, 2014 increased 20.6% to $173.6 million, compared to $143.9 million for the same period last fiscal year. Revenues for the nine months ended March 31, 2014 increased 24.8% to $495.3 million, compared to $397.0 million for the same period last fiscal year.  The increase in revenues during the current three and nine months ended March 31, 2014 compared to the same periods last fiscal year is mostly attributable to the current year acquisitions of Laser Enterprise and Network Solutions as well as the incremental revenues from prior year acquisitions.  

Gross margin. Gross margin for the three months ended March 31, 2014 was $54.7 million or 31.5% of total revenues, compared to $51.0 million or 35.4% of total revenues for the same period last fiscal year.  The decrease in gross margin during the three months ended March 31, 2014 compared to the same period last fiscal year was the result of current year restructuring charges of $2.2 million (pre-tax) related to inventory write-offs at VLOC as well as severance costs at Laser Enterprise and Network Solutions.  Exclusive of the restructuring charges, the operating gross margin profile of the two acquisitions that occurred in fiscal 2014 has put downward pressure on gross margin during fiscal year 2014 as the Company continues to align the operating costs of the new businesses with its existing and prospective revenue profile.  Gross margin for the nine months ended March 31, 2014 was $164.4 million or 33.2% of total revenues, compared to $148.6 million or 37.4% of total revenues for the same period last fiscal year.  The decrease in gross margin during the nine months ended March 31, 2014 compared to the same period last fiscal year were the result of current year purchase accounting fair market value inventory adjustments related to the acquisitions of Laser Enterprise and Network Solutions of $4.1 million.  As discussed above, restructuring charges at VLOC, Laser Enterprise and Network Solutions as well as operating performance of Laser Enterprise and Network Solutions, also contributed to the lower gross margin levels.  While consolidated gross margin was negatively impacted by the current year acquisitions and restructuring, the Company experienced gross margin improvements at several business units during the three and nine months ended March 31, 2014, including Marlow, PRM, WBG and M Cubed.

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Internal research and development. Company-funded internal research and development expenses for the three months ended March 31, 2014 were $12.1 million, or 7.0% of revenues, compared to $5.8 million, or 4.0% of revenues, for the same period last fiscal year. Company-funded internal research and development expenses for the nine months ended March 31, 2014 were $31.2 million, or 6.3% of revenues, compared to $17.0 million, or 4.3% of revenues, for the same period last fiscal year.  The increase in research and development expense as a percentage of revenues is due to increased research and development efforts within the Near Infrared Optics segment as Photop continues to invest in the development of optical component parts that support higher speed optical communication and data networks around the world.  In addition, the current year acquisitions of Laser Enterprise and Network Solutions invest in higher levels of research and development activity supporting ongoing product development of laser components, micro-optics and amplifiers.

Selling, general and administrative. Selling, general and administrative expenses for the three months ended March 31, 2014 were $33.8 million or 19.5% of revenues, compared to $27.0 million, or 18.8% of revenues for the same period last fiscal year.  The unfavorable change in selling, general and administrative expense from the prior fiscal year quarter is mostly due to restructuring charges of $0.6 million recorded in conjunction with the Company’s acquisitions of Laser Enterprise and Network Solutions. Selling, general and administrative expenses for the nine months ended March 31, 2014 were $101.4 million or 20.5% of revenue compared to $79.5 million, or 20.0% of revenues for the same period last fiscal year.  As a percentage of revenues, selling, general and administrative expenses were consistent with the prior year nine month period.  

Interest and other, net. Interest and other, net for the three months ended March 31, 2014 was income of $0.3 million compared to income of $1.0 million for the same period last year. Interest and other, net for the nine months ended March 31, 2014 was expense of $0.3 million compared to income of $6.0 million for the same period last fiscal year. Included in interest and other, net for the three and nine months ended March 31, 2014 were earnings from the Company’s equity investment in Fuxin, interest expense on borrowings, interest income on excess cash reserves, unrealized gains on the Company sponsored deferred compensation plan and foreign currency gains and losses.  The majority of the income included in the nine months ended March 31, 2013 was the result of a $4.4 million contractual settlement with a contract manufacturer related to the October 2011 Thailand flood, offset somewhat by foreign currency losses.

Income taxes. The Company’s year-to-date effective income tax rate from continuing operations at March 31, 2014 was 18.5%, compared to an effective tax rate from continuing operations of 23.8% for the same period last fiscal year. The variation between the Company’s effective tax rate from continuing operations and the U.S. statutory rate of 35% was primarily due to the Company’s foreign operations which are subject to income taxes at lower statutory rates. The lower year to date effective tax rate from continuing operations was primarily the result of improved profitability in lower taxing jurisdictions such as the Philippines as well as reduced profitability at the Company’s newly acquired businesses of Laser Enterprise and Network Solutions.  In addition, the Company recorded $1.4 million of tax benefits during the three months ended March 31, 2014, as a result of statute of limitation expirations on previously filed income tax returns and higher income tax credits from qualifying research and development investment.

Discontinued operation.  During December 2013, the Company completed the discontinuance of its tellurium product line by exiting all business activities associated with this product.  This product line was previously serviced by PRM and was included as part of the Military & Materials segment.   Financial information included in Management’s Discussion and Analysis of Financial Condition and Results of Operations has been adjusted to properly reflect the tellurium product line as a discontinued operation for all periods presented. The revenues and earnings (losses) of the tellurium product line reflected as a discontinued operation for the periods presented are as follows (in millions):

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2014		2013			2014		2013
Revenues	$	-	$	1.2		$	1.8	$	6.3
Earnings (loss) from discontinued operation before income taxes		-		(0.2	)		0.1		(2.6	)
Income tax benefit (expense)		-		-			-		-
Earnings (loss) from discontinued operation, net of taxes	$	-	$	(0.2	)	$	0.1	$	(2.6	)

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Segment Reporting

Bookings, revenues and segment earnings from continuing operations for the Company’s reportable segments are discussed below. Segment earnings from continuing operations differs from income from continuing operations in that segment earnings from continuing operations exclude certain operational expenses included in other expense (income) – net as reported. Management believes segment earnings from continuing operations to be a useful measure 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 12. Segment Reporting,” to our unaudited 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 segment earnings from continuing operations to net earnings.

Infrared Optics (in millions)

					%					%
	Three Months Ended				Increase	Nine Months Ended				Increase
	March 31,				(Decrease)	March 31,				(Decrease)
	2014		2013			2014		2013
Bookings	$	56.4	$	51.2	10%	$	156.2	$	143.3	9%
Revenues	$	50.3	$	52.8	(5)%	$	152.1	$	149.8	2%
Segment earnings	$	10.0	$	14.0	(29)%	$	28.7	$	36.4	(21)%

The Company’s Infrared Optics segment includes the combined operations of Infrared Optics and HIGHYAG.

Bookings for the three months ended March 31, 2014 for Infrared Optics increased 10% to $56.4 million, compared to $51.2 million for the same period last fiscal year.  Bookings for the nine months ended March 31, 2014 for Infrared Optics increased 9% to $156.2 million, compared to $143.3 million for the same period last fiscal year.   The increase in bookings for the three and nine months ended March 31, 2014 compared to the same periods last fiscal year was due to higher order levels from European customers specific to diamond windows and other products used in Extreme Ultra-Violet (“EUV”) lithography systems. At HIGHYAG, continued growth in the one-micron laser market drove stronger order patterns for fiber beam delivery systems and laser processing heads used in the automotive manufacturing industry.

Revenues for the three months ended March 31, 2014 for Infrared Optics decreased 5% to $50.3 million, compared to revenues of $52.8 million for the same period last fiscal year.  The decrease in revenues for the three months ended March 31, 2014 compared to the same period last fiscal year was due to shipment delays at HIGHYAG caused by their recent relocation to a new manufacturing facility, which resulted in unanticipated delays in manufacturing throughput.  Revenues for the nine months ended March 31, 2014 for Infrared Optics increased 2% to $152.1 million, compared to revenues of $149.8 million for the same period last fiscal year.  The increase in revenues for the nine months ended March 31, 2014 compared to the same period last fiscal year was the result of increased shipment volumes in Europe of replacement optics for CO₂ laser systems as well as diamond windows and other component parts used in EUV lithography systems.  This increase in revenues was somewhat offset by the shipment delays at HIGHYAG as noted above.

Segment earnings for the three months ended March 31, 2014 for Infrared Optics decreased 29% to $10.0 million, compared to $14.0 million for the same period last fiscal year. Segment earnings for the nine months ended March 31, 2014 for Infrared Optics decreased 21% to $28.7 million, compared to $36.4 million for the same period last fiscal year.  The decrease in segment earnings for each of the three and nine months ended March 31, 2014 compared to the same periods last fiscal year was the result of lower gross margin caused by higher material cost and unfavorable absorption of manufacturing overhead costs as well as higher levels of allocated corporate expenses including share-based compensation expense.

Near-Infrared Optics (in millions)

The Company’s Near-Infrared Optics segment includes the combined operations of Photop, Photop Aegis and PhotopAOFR.

					%					%
	Three Months Ended				Increase	Nine Months Ended				Increase
	March 31,				(Decrease)	March 31,				(Decrease)
	2014		2013			2014		2013
Bookings	$	34.8	$	32.8	6%	$	106.7	$	103.6	3%
Revenues	$	33.6	$	35.9	(6)%	$	109.3	$	113.5	(4)%
Segment earnings	$	2.1	$	3.7	(43)%	$	7.7	$	16.6	(54)%

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Bookings for the three months ended March 31, 2014 for Near-Infrared Optics increased 6% to $34.8 million, compared to $32.8 million for the same period last fiscal year.  Bookings for the nine months ended March 31, 2014 for Near-Infrared Optics increased 3% to $106.7 million, compared to $103.6 million for the same period last fiscal year.    The increase in bookings for the three and nine months ended March 31, 2014 compared to the same periods last fiscal year was due to increased orders for commercial and display optics used in the data communications market.

Revenues for the three months ended March 31, 2014 for Near-Infrared Optics decreased 6% to $33.6 million, compared to $35.9 million for the same period last fiscal year. Revenues for the nine months ended March 31, 2014 for Near-Infrared Optics decreased 4% to $109.3 million, compared to $113.5 million for the same period last fiscal year. The decrease in revenues for the three and nine months ended March 31, 2014 compared to the same periods last fiscal year was due to price erosion for legacy products serving 10G and 40G applications in the optical communications market.  In addition, certain product shipments to our recently acquired Network Solutions are now being classified as intercompany revenues subsequent to the November 2013 acquisition date.

Segment earnings for the three months ended March 31, 2014 for Near-Infrared Optics decreased 43% to $2.1 million, compared to $3.7 million for the same period last fiscal year. Segment earnings for the nine months ended March 31, 2014 for Near-Infrared Optics decreased 54% to $7.7 million, compared to $16.6 million for the same period last fiscal year.  The decrease in segment earnings for each of the three and nine months ended March 31, 2014 compared to the same periods last fiscal year was mostly due to a downward shift in gross margin as the technology shift to higher speed networks in the optical communications industry has resulted in price erosion on shipments of legacy products.  In addition, operating expenses increased when compared to the prior year periods primarily due to increased compensation costs in China.

Military & Materials (in millions)

						%
	Three Months Ended					Increase	Nine Months Ended					%
	March 31,					(Decrease)	March 31,					Increase
	2014		2013				2014		2013
Bookings	$	25.0	$	20.3		23%	$	70.0	$	61.3		14%
Revenues	$	22.2	$	27.7		(20)%	$	73.0	$	67.9		8%
Segment earnings (loss)	$	1.4	$	(0.4	)	475%	$	8.3	$	(1.2	)	800%

The Company’s Military & Materials segment includes the combined operations of LWOS, VLOC, MLA and PRM.  During December of 2013, the Company completed the discontinuance of PRM’s tellurium product line by exiting all business activities associated with this product.  Segment information for all periods presented has been adjusted to properly reflect the tellurium product line as a discontinued operation.  

Bookings for the three months ended March 31, 2014 for Military & Materials increased 23% to $25.0 million, compared to $20.3 million for the same period last fiscal year.  Bookings for the nine months ended March 31, 2014 for Military & Materials increased 14% to $70.0 million, compared to $61.3 million for the same period last fiscal year.  The increase in bookings for each of the three and nine months ended March 31, 2014 compared to the same periods last fiscal year was due to higher levels of bookings at PRM for its rare earth element product as well as increased bookings at LWOS due to the timing of receipt of certain military orders and incremental bookings from the December 2012 acquisition of LightWorks.

Revenues for the three months ended March 31, 2014 for Military & Materials decreased 20% to $22.2 million, compared to $27.7 million for the same period last fiscal year.  The decrease in revenues for the three months ended March 31, 2014 compared to the same period last fiscal year was the result of lower shipment volumes of military related products as a result of the lower overall defense spending and funding constraints specific to U.S. military programs. Revenues for the nine months ended March 31, 2014 for Military & Materials increased 8% to $73.0 million, compared to $67.9 million for the same period last fiscal year.   The increases in revenues for the nine months ended March 31, 2014 compared to the same period last fiscal year was primarily due to the incremental revenues from the December 2012 acquisition of LightWorks.

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Segment earnings (loss) for the three months ended March 31, 2014 for Military & Materials was segment earnings of $1.4 million, compared to a segment loss of $(0.4) million for the same period last fiscal year. Segment earnings (loss) for the nine months ended March 31, 2014 for Military & Materials was segment earnings of $8.3 million, compared to a segment loss of $(1.2) million for the same period last fiscal year.  The increase in segment earnings for each of the three and nine months ended March 31, 2014 compared to the same periods last fiscal year was a result of increased profitability at PRM as a result of their restructured business model which primarily focuses on supplying a rare earth element product line.  In addition, incremental revenues from the December 2012 acquisition of LightWorks carry higher gross margin profiles which also contributed to the increased profitability of the segment.

Advanced Products Group (in millions)

					%
	Three Months Ended				Increase	Nine Months Ended				%
	March 31,				(Decrease)	March 31,				Increase
	2014		2013			2014		2013
Bookings	$	32.2	$	34.3	(6)%	$	91.9	$	67.7	36%
Revenues	$	30.0	$	27.6	9%	$	85.3	$	65.9	29%
Segment earnings	$	3.2	$	0.9	256%	$	6.0	$	0.3	1,900%

The Company’s Advanced Products Group includes the combined operations of Marlow, M Cubed, WBG and WMG.

Bookings for the three months ended March 31, 2014 for the Advanced Products Group decreased 6% to $32.2 million, compared to $34.3 million for the same period last fiscal year. The decrease in bookings for the three months ended March 31, 2014 compared to the same period last fiscal year was attributable to reduced order volume for the personal comfort bedding products, as the prior year quarter received an initial large production order for this new product.  Somewhat offsetting this decrease was strong order placement from Japanese OEMs specific to WBG’s 150mm silicon carbide wafers used in commercial applications in the wireless infrastructure and power device markets as well as increased demand at M Cubed for semiconductor component parts used in chip processing.  Bookings for the nine months ended March 31, 2014 for the Advanced Products Group increased 36% to $91.9 million, compared to $67.7 million for the same period last fiscal year.  The increase in bookings for the nine months ended March 31, 2014 compared to the same period last fiscal year was due to the November 2012 acquisition of M Cubed, a $4.0 million research and development contract received from the Department of Defense for the ongoing development of 150mm silicon carbide wafers at WBG as well as an increase in overall demand for 150mm wafers in the U.S., Asia and Europe.

Revenues for the three months ended March 31, 2014 for the Advanced Products Group increased 9% to $30.0 million, compared to $27.6 million for the same period last fiscal year.  The increase in revenues for the three months ended March 31, 2014 compared to the same period last fiscal year was due to higher shipments at M Cubed of semiconductor component parts and sub-assemblies supporting the continued growth in the consumer market surrounding mobile devices.  In addition, strong product sales at WBG specific to 100mm and 150mm semi-insulating silicon carbide wafers used by Japanese OEMs to support the continued growth of 4G wireless stations in Asia also contributed to the overall increase in revenues.  Revenues for the nine months ended March 31, 2014 for the Advanced Products Group increased 29% to $85.3 million, compared to $65.9 million for the same period last fiscal year.  The increase in revenues for the nine months ended March 31, 2014 compared to the same period last fiscal year was primarily due to the November 2012 acquisition of M Cubed as well as increased revenues at WBG driven by strong demand for its semi-insulating silicon carbide wafers.

Segment earnings for the three months ended March 31, 2014 were $3.2 million, compared to $0.9 million for the same period last fiscal year. Segment earnings for the nine months ended March 31, 2014 were $6.0 million, compared to $0.3 million for the same period last fiscal year. The increase in segment earnings for the three and nine months ended March 31, 2014 compared to the same periods last fiscal year was largely driven by the increased revenues and profit contribution from M Cubed, increased revenues at WBG and higher gross margin at Marlow caused by a shift in product mix from lower margin automotive related products to higher margin personal comfort products.  

Active Optical Products

In September 2013, the Company acquired all of the outstanding shares of Oclaro Switzerland GmbH, a limited liability company formed under the laws of the Swiss confederation, as well as certain additional assets of Oclaro, Inc. used in the semiconductor laser business. The Company operates the acquired business as Laser Enterprise and has included it in the Company’s new operating segment Active Optical Products. In addition, in November 2013, the Company acquired certain assets of Oclaro, Inc. used in the fiber amplifier and micro-optics business. The Company operates the acquired business as Network Solutions and has included it in the Company’s new operating segment Active Optical Products.

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The amount of bookings, revenues and segment loss of Active Optical Products for the three months ended March 31, 2014 was $39.1 million, $37.5 million and ($8.0) million, respectively.  The amount of bookings, revenues and segment loss of Active Optical Products for the nine months ended March 31, 2014 was $73.2 million, $75.7 million and ($18.9) million, respectively.  During the three months ended March 31, 2014, segment earnings were negatively impacted by $2.0 million of severance costs associated with restructuring efforts at Laser Enterprise and Network Solutions as well as lower than expected operating performance.  During the nine months ended March 31, 2014, segment earnings were negatively impacted by $3.9 million of transaction expenses associated with these acquisitions as well as fair market value inventory adjustments of $4.1 million.

Liquidity and Capital Resources

Historically, our primary source of cash has been provided through operations. Other sources of cash include proceeds received from the exercises of stock options and long-term borrowings. Our historical uses of cash have been for capital expenditures, business acquisitions, payments of principal and interest on outstanding debt obligations and purchases of treasury stock. Supplemental information pertaining to our sources and uses of cash for the periods indicated is presented as follows (in millions):

	Nine Months Ended
	March 31,
	2014			2013
Net cash provided by operating activities	$	68.6		$	68.1
Net proceeds on long-term borrowings		149.0			109.0
Payment on earnout arrangement		(2.2	)		-
Proceeds received on contractual settlement		-			2.4
Proceeds from exercises of stock options		3.6			3.8
Proceeds from the collection of note receivable		-			1.5
Purchases of businesses, net of cash acquired		(177.7	)		(126.2	)
Additions to property, plant and equipment		(20.8	)		(17.4	)
Payments of redeemable noncontrolling interest		(8.8	)		(0.3	)
Purchases of treasury shares		(11.0	)		(20.0	)
Other		(0.4	)		(0.3	)

Net cash provided by operating activities:

Cash provided by operating activities was $68.6 million for the nine months ended March 31, 2014, compared to cash provided by operating activities of $68.1 million for the same period last fiscal year. The slight increase in cash provided by operating activities was mostly due to lower levels of net earnings more than offset by favorable overall working capital changes, specifically in the areas of inventory and accounts payable.

Net cash used in investing activities:

Net cash used in investing activities was $198.2 million for the nine months ended March 31, 2014, compared to net cash used of $139.8 million for the same period last fiscal year. The majority of net cash used in investing activities during the nine months ended Mach 31, 2014 was the result of the $93.1 million net cash paid for the acquisition of Laser Enterprise as well as the $84.6 million net cash paid for the acquisition of Network Solutions.  This compares to $126.2 million of net cash paid during the nine months ended March 31, 2013 for the acquisitions M Cubed, Photop’s Advanced Coating Center and LightWorks.  In addition, during the nine months ended March 31, 2014, the Company paid $20.8 million for capital expenditures, increasing its investment from the same period last fiscal year in an effort to support revenue growth and capacity expansion.

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Net cash provided by financing activities:

Net cash provided by financing activities for the nine months ended March 31, 2014 was $129.3 million compared to net cash provided by financing activities of $92.6 million for the same period last fiscal year. The change in net cash provided by financing activities was primarily due to additional borrowings used to finance the Company’s acquisitions of Laser Enterprise and Network Solutions, offset somewhat by a $2.2 million earnout payment to the former owners of LightWorks and an $8.8 million payment made to acquire the remaining ownership of HIGHYAG.  In addition, the Company used cash to purchased $11.0 million of treasury stock during the nine months ended March 31, 2014, compared to $20.0 million during the same period last fiscal year.  

In September 2013, the Company amended and restated its existing credit agreement. The Second Amended and Restated Credit Agreement (the “Amended Credit Facility”) provides for a revolving credit facility of $225 million (increased from $140 million), as well as a $100 million Term Loan. The Term Loan shall be re-paid in consecutive quarterly principal payments on the first business day of each January, April, July and October, with the first payment commencing on October 1, 2013, as follows: (i) twenty consecutive quarterly installments of $5 million and (ii) a final installment of all remaining principal due and payable on the maturity date. The Amended Credit Facility is unsecured, but is guaranteed by each existing and subsequently acquired or organized wholly-owned domestic subsidiary of the Company. The Company has the option to request an increase to the size of the Amended Credit Facility in an aggregate additional amount not to exceed $100 million. The Amended Credit Facility has a five-year term through September 2018 and has an interest rate of LIBOR, as defined in the agreement, plus 0.75% to 1.75% based on the Company’s ratio of consolidated indebtedness to consolidated EBITDA. Additionally, the facility is subject to certain covenants, including those relating to minimum interest coverage and maximum leverage ratios. As of March 31, 2014, the Company was in compliance with all financial covenants under its Amended Credit Facility.

In conjunction with entering into the Amended Credit Facility, the Company incurred approximately $1.0 million of deferred financing costs which are being amortized over the term of the agreement. As a result of the overall increase in borrowing capacity, existing deferred financing costs at the time of the amendment of $0.5 million are also being amortized over the term of the Amended Credit Facility.

The Company’s Yen denominated line of credit is a 500 million Yen facility that has a five-year term through June 2016 and has an interest rate equal to LIBOR, as defined in the loan agreement, plus 0.625% to 1.50%. At March 31, 2014 and June 30, 2013, the Company had 300 million Yen borrowed. Additionally, the facility is subject to certain covenants, including those relating to minimum interest coverage and maximum leverage ratios. As of March 31, 2014, the Company was in compliance with all financial covenants under its Yen facility.

The Company had aggregate availability of $55.4 million and $29.8 million under its lines of credit as of March 31, 2014 and June 30, 2013, respectively. The amounts available under the Company’s lines of credit are reduced by outstanding letters of credit. As of March 31, 2014 and June 30, 2013, total outstanding letters of credit supported by the credit facilities were $1.5 million and $1.3 million, respectively.

The weighted average interest rate of total borrowings was 1.7% and 1.2%, for the nine months ended March 31, 2014 and 2013, respectively.

In February 2014, the Company’s Board of Directors authorized the Company to purchase up to $20 million of its Common Stock. The share repurchase program (the “Program”) 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. As of March 31, 2014, the Company has purchased 750,000 shares of its common stock pursuant to the Program for approximately $12.0 million.

The Company’s cash position, borrowing capacity and debt obligations for the periods indicated were as follows (in millions):

	March 31,		June 30,
	2014		2013
Cash and cash equivalents	$	185.7	$	185.4
Available borrowing capacity		55.4		29.8
Total debt obligation		262.9		114.0

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The Company believes cash flow from operations, existing cash reserves and available borrowing capacity will be sufficient to fund its working capital needs, capital expenditures, share repurchases and growth objectives for the next twelve months. The Company’s cash and cash equivalent balances are generated and held in numerous locations throughout the world, including amounts held outside the United States. As of March 31, 2014 and June 30, 2013, the Company held approximately $140 million and $144 million, respectively, of cash and cash equivalents outside of the United States. Cash balances held outside the United States could be repatriated to the United States, but, under current law, would potentially be subject to United States federal income taxes, less applicable foreign tax credits. The Company has not recorded deferred income taxes related to undistributed earnings outside of the United States as the earnings of the Company’s foreign subsidiaries are indefinitely reinvested.

Contractual Obligations

The following table presents information about the Company’s contractual obligations and commitments as of March 31, 2014.

Tabular-Disclosure of Contractual Obligations

	Payments Due By Period
			Less Than 1		1-3		3-5		More Than 5
Contractual Obligations	Total		Year		Years		Years		Years
($000)
Long-term debt obligations	$	262,907	$	20,000	$	42,907	$	200,000	$	-
Interest payments(1)		23,780		5,183		9,210		6,113		3,274
Capital lease obligation		11,857		451		978		1,090		9,338
Operating lease obligations(2)		54,695		11,954		16,281		7,473		18,987
Purchase obligations(3)(4)		22,354		19,417		2,131		806		-
Other long-term liabilities reflected on the registrant's balance sheet		-		-		-		-		-
Total	$	375,593	$	57,005	$	71,507	$	215,482	$	31,599

(1) Variable rate interest obligations are based on the interest rate in place at March 31, 2014 and relates to both the Amended Credit Facility and its capital lease obligation.

(2) Includes an obligation for the use of two parcels of land related to PRM. The lease obligations extend through years 2039 and 2056.

(3) A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on the Company and that specifies all significant terms, including fixed or minimum quantities to be purchased; minimum or variable price provisions, and the approximate timing of the transaction. These amounts are primarily comprised of open purchase order commitments to vendors for the purchase of supplies and materials.

(4) Includes $10.0 million of holdback payments associated with the acquisitions of Laser Enterprise and Network Solutions, and $0.8 million of a contingent earnout liability associated with the acquisition of LightWorks.

The $3.0 million gross unrecognized income tax benefit at March 31, 2014 is excluded from the table above as the Company is not able to reasonably estimate the amount by which the liability will increase or decrease over time; however, at this time, the Company does not expect a significant payment related to these obligations within the next year.

Item  3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Exchange Risks

The Company is exposed to market risks arising from adverse changes in foreign currency exchange rates and interest 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 primarily focused on its exposure to the Japanese Yen. No significant changes have occurred in the techniques and instruments used other than those described below.

Changes in the foreign currency exchange rates used by the Company had an immaterial impact on the results of operations for all periods presented.

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In the normal course of business, the Company enters into foreign currency forward exchange contracts with its banks, the purpose of which is to hedge ordinary business risks regarding foreign currencies on product sales. Foreign currency exchange contracts are used to limit transactional exposure to changes in currency exchange rates. The Company enters into foreign currency forward contracts that permit it to sell specified amounts of foreign currencies expected to be received from its export sales for pre-established U.S. dollar amounts at specified dates. The forward contracts are denominated in the same foreign currencies in which export sales are denominated. These contracts provide the Company with an economic hedge in which settlement will occur in future periods and which otherwise would expose the Company to foreign currency risk. The Company monitors its positions and the credit ratings of the parties to these contracts. While the Company may be exposed to potential losses due to risk in the event of non-performance by the counterparties to these financial instruments, it does not currently anticipate such losses. The Company currently has a 500 million Yen revolving credit facility to help minimize the foreign currency exposure in Japan.

A 10% change in the Yen to dollar exchange rate would have changed revenues in the range from a decrease of $0.9 million to an increase of $1.0 million for the three months ended March 31, 2014. A 10% change in the Yen to dollar exchange rate would have changed revenues in the range from a decrease of $2.4 million to an increase of $2.9 million for the nine months ended March 31, 2014.

For II-VI Singapore Pte., Ltd. and its subsidiaries, II-VI Suisse S.a.r.l., PRM, AOFR, Laser Enterprise and Network Solutions, the functional currency is the U.S. dollar. Gains and losses on the remeasurement of the local currency financial statements are included in net earnings.

For all other foreign subsidiaries, the functional currency is the applicable local currency. Assets and liabilities of those operations are translated into U.S. dollars using period-end exchange rates, while income and expenses are translated using the average exchange rates for the reporting period. Translation adjustments are recorded as accumulated other comprehensive income within shareholders’ equity.

Interest Rate Risks

As of March 31, 2014, the Company’s total borrowings of $262.9 million were from a line of credit of $2.9 million denominated in Japanese Yen, borrowings under a term loan of $90 million denominated in U.S. dollars and a line of credit borrowing of $170 million denominated in U.S. dollars. As such, the Company is exposed to market risks arising from changes in interest rates. A change in the interest rate of these borrowings of 1% would have resulted in additional interest expense of $0.7 million and $1.6 million for the three and nine months ended March 31, 2014, respectively.

Item  4. CONTROLS AND PROCEDURES

The Company’s management evaluated, with the participation of Francis J. Kramer, the Company’s President and Chief Executive Officer, and Mary Jane Raymond, the Company’s 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, Mr. Kramer and Ms. Raymond concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level as of the end of the period covered by this Quarterly Report on Form 10-Q. No changes in the Company’s internal control over financial reporting 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.

Part II – Other Information

Item  1A. RISK FACTORS

In addition to the risk factors and 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, 2013, which could materially affect our business, financial condition or future results. Those risk factors included in our Annual Report on Form 10-K 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.

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Item  2. ISSUER PURCHASES OF EQUITY SECURITIES

The following table sets forth repurchases of our common stock during the quarter ended March 31, 2014:

					Total Number of		Dollar Value of
					Shares Purchased		Shares That May
					as Part of Publicly		Yet be Purchased
	Total Number of		Average Price Paid		Announced Plans or		Under the Plan or
Period	Shares Purchased		Per Share		Programs (a)		Program
January 1, 2014 to January 31, 2014		-	$	-		-	$	20,000,000
February 1, 2014 to February 28, 2014	508,283 (a)		$	16.02		508,100	$	11,860,238
March 1, 2014 to March 31, 2014		241,900	$	15.91		241,900	$	8,011,609

(a) Includes 183 shares of our common stock transferred to the Company from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted or performance stock awards.

Item 6. EXHIBITS

Exhibit Number	Description of Exhibit	Reference
10.01	Employment Agreement by and between II-VI Incorporated and     Mary Jane Raymond	Filed herewith.
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	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	Furnished herewith.
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	Furnished herewith.
101	Interactive Data File	Filed herewith.

The Registrant will furnish to the Commission upon request copies of any instruments not filed herewith which authorize the issuance of long-term obligations of the Registrant not in excess of 10% of the Registrants total assets on a consolidated basis.

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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
	(Registrant)
Date: May 12, 2014	By:	/s/    Francis J. Kramer
		Francis J. Kramer
		President and Chief Executive Officer
Date: May 12, 2014	By:	/s/    Mary Jane Raymond
		Mary Jane Raymond
		Chief Financial Officer and Treasurer

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EXHIBIT INDEX

Exhibit Number	Description of Exhibit	Reference
10.01	Employment Agreement by and between II-VI Incorporated and Mary Jane Raymond.	Filed herewith.
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	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	Furnished herewith.
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	Furnished herewith.
101	Interactive Data File	Filed herewith.

The Registrant will furnish to the Commission upon request copies of any instruments not filed herewith which authorize the issuance of long-term obligations of the Registrant not in excess of 10% of the Registrants total assets on a consolidated basis.

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EX-10

Exhibit 10.01

II-VI INCORPORATED, 375 Saxonburg Boulevard, Saxonburg, PA 16056

General Offices: 724-352-4455

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into this day of March, 2014, by and between II-VI INCORPORATED, a Pennsylvania corporation, having a principal place of business at 375 Saxonburg Boulevard, Saxonburg, Butler County, Pennsylvania 16056 (the “Employer”), and MARY JANE RAYMOND, of 3 Polo Club Road, Far Hills, NJ 07931 (the “Employee”).

PREAMBLE

Employer desires to employ Employee as its Chief Financial Officer. Employee will assume a position of confidentiality, trust and importance with Employer, and has and will acquire information, knowledge and experience with Employer that is proprietary, confidential, hard to replace and would also place Employee at an unfair advantage should Employee use this information, knowledge, and experience to further the interests of anyone other than the Employer. As a result, Employer desires to protect its rights in its proprietary, confidential and trade secret information and Employee is willing to and has agreed to abide by and faithfully observe the obligations of Employee set forth herein. As an express precondition to and as partial consideration for employment, Employer has required that Employee enter into this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree to the following:

1. Employer shall employ the Employee as Chief Financial Officer to perform such duties as may be determined and assigned to Employee by the Employer from time to time. Employee’s employment with Employer shall be at-will, meaning that either party can terminate the employment at any time, with or without cause, and job title, duties, compensation and benefits shall be subject to revision by Employer.

2. In consideration of the services to be performed by the Employee, the Employer agrees to pay the Employee a salary of $300,000.00 per annum in equal installments at the regularly scheduled pay dates of the Employer together with such cash bonuses as the Employer shall determine from time to time at Employer’s discretion. Employee’s salary may be adjusted from time to time in accordance with Employer’s performance review processes and policies. Employer also agrees to provide the Employee with fringe benefits and all other benefits from time to time provided to similarly situated executive employees including, without limitation, participation in Employer’s omnibus incentive plan and other bonus plans.

3. Employee covenants and agrees to devote all of Employee’s business time and efforts to the faithful performance of the duties assigned to Employee from time to time by the Employer, except to the extent that Employer expressly permits Employee to engage in outside activities during business hours. The Employer and Employee acknowledge that from time to time, Employee may either desire or be asked by Employer to engage in business activities or perform business services for the benefit of third parties, such as serving as an outside director or consultant for another company. In each case, Employee’s involvement in such business activities or services shall be subject to the mutual agreement and approval of both the Employer and Employee. Employee shall at all times conduct herself under the highest standards of ethics and shall take no action that will harm the reputation of the Employer. To the extent not inconsistent with the terms of this Agreement, the terms and conditions of Employee’s employment are also governed by Employer’s personnel policies and employee handbook, as they may be issued and amended from time to time.

4. Confidential Information.

(a) Nondisclosure and Non-use. Both during the term of Employee’s employment with Employer and thereafter, Employee covenants and agrees that Employee (i) shall exercise the utmost diligence to protect and safeguard the Confidential

Information of Employer and its Affiliates; (ii) shall not disclose to any third party any Confidential Information, except as may be required in the course of Employee’s employment by Employer or by law; and (iii) shall not use, directly or indirectly, for Employee’s own benefit or for the benefit of another, any Confidential Information. Employee acknowledges that Confidential Information has been and will be developed and acquired by Employer and its Affiliates by means of substantial expense and effort, that the Confidential Information is a valuable proprietary asset of Employer’s and its Affiliates’ business, and that its disclosure would cause substantial and irreparable injury to Employer’s and its Affiliates’ business. For purposes of this Agreement, “Affiliate” shall mean any entity controlling, controlled by, or under common control with Employer.

(b) Definition of Confidential Information. “Confidential Information” means all information of a confidential or proprietary nature, whether or not specifically labeled or identified as “confidential,” in any form or medium, that is or was disclosed to, or developed or learned by, Employee in connection with Employee’s past, present or future employment with Employer and that relates to the business, products, services, research or development of any of the Employer or its Affiliates or their suppliers, distributors or customers. Confidential Information includes, but is not limited to, the following: (i) internal business information (including, but not limited to, information relating to strategic plans and practices, business, training, marketing, promotional and sales plans and practices, cost, rate and pricing structures, accounting and business methods); (ii) identities of, individual requirements of, specific contractual arrangements with, and information about, any of Employer’s, or any of its Affiliates’, suppliers, distributors and customers and their confidential information; (iii) trade secrets, know-how, compilations of data and analyses, techniques, systems, formulae, research, records, reports, manuals, documentation, models, data and data bases relating thereto; (iv) inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information (whether or not patentable); and (v) other information or thing that has economic value, actual or potential, from not being generally known to or not being readily ascertainable by proper means by other persons.

(c) Not Confidential Information. Confidential Information shall not include information that Employee can demonstrate: (i) is publicly known through no wrongful act or breach of obligation of confidentiality; (ii) was rightfully received by Employee from a third party without a breach of any obligation of confidentiality by such third party; or (iii) was known to Employee on a non-confidential basis prior to the Employee’s employment with Employer.

(d) Presumption of Confidentiality. In any judicial proceeding, it will be presumed that the Confidential Information constitutes protectable trade secrets and Employee will bear the burden of proving that any Confidential Information is publicly or rightfully known by Employee.

(e) Return of Confidential Information and Materials. Employee agrees to return to Employer either before or immediately upon the termination of Employee’s employment with Employer any and all information, materials or equipment which constitutes, contains or in any way relates to the Confidential Information and any other document, equipment or materials of any kind relating in any way to the business of Employer in the possession, custody or control of Employee which was obtained by Employee during the course of or as a result of Employee’s employment with Employer whether confidential or not, including, but without limitation, any copies thereof which may have been made by or for Employee. Employee shall also provide Employer, if requested to do so, the name of the new employer of Employee and Employer shall have the right to advise any subsequent employer of Employee’s obligations hereunder.

5. Inventions.

(a) Ownership of Inventions. Any and all developments, discoveries, inventions, enhancements, modifications and improvements (collectively, “Inventions”) created or developed by Employee alone or with others during the term of Employee’s employment, whether or not during working hours and whether on Employer’s premises or elsewhere, shall be deemed works for hire and will be the sole and exclusive property of Employer if the Invention is:

(i) within the scope of Employee’s duties assigned or implied in accordance with Employee’s position; or

(ii) a product, service, or other item which would be in competition with Employer Products or which is related to Employer Products, whether presently existing, under development, or under active consideration; or

(iii) in whole or in part, the result of Employee’s use of Employer’s resources, including, without limitation, personnel, computers, equipment, facilities or otherwise.

(b) Assignment of Inventions. Employee shall promptly and fully disclose all Inventions to Employer and shall cooperate and perform all actions reasonably requested by Employer to establish, confirm and protect Employer’s right, title and interest in each such Invention. During the term of Employee’s employment with Employer and after termination of such employment, if Employer should then so request, Employee agrees to assign and does hereby assign to Employer all rights in the Inventions. Employee agrees to execute and deliver to Employer any instruments Employer deems necessary to vest in Employer the sole title to and all exclusive rights in the Inventions. Employee agrees to execute and deliver to Employer all proper papers for use in applying for, obtaining,

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maintaining, amending and enforcing any legal protections as Employer may desire. Employee further agrees to assist fully Employer or its nominees in the preparation and prosecution of any litigation connected with the Inventions. If Employer is unable because of Employee’s mental or physical incapacity or for any other reason (including, but without limitation, Employee’s refusal to do so after request therefor is made by Employer) to secure Employee’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions belonging to or assigned to Employer pursuant to this Agreement, then Employee hereby irrevocably designates and appoints Employer and its duly authorized officers and agents as Employee’s agent and attorney-in-fact to act for and in Employee’s behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of patents or copyright registrations thereon with the same legal force and effect as if executed by Employee.

6. Non-Competition. The Employee covenants and agrees that during the term of Employee’s employment with Employer and for a period of one (1) year after the date of termination of Employee’s employment hereunder for any reason (the “Restricted Period”), the Employee shall not, directly or indirectly, for the benefit of the Employee or others, either as an employee, principal, agent, stockholder, consultant or in any other capacity, engage in or have a financial interest in any Competitor within the Restricted Territory. Notwithstanding the foregoing, nothing herein shall prohibit Employee from being a passive owner of not more than 2% of the outstanding securities of any class of a corporation which is publicly traded, so long as Employee has no active participation in the business of any such corporation.

For purposes of this Agreement:

(i) “Competitor” shall mean any corporation, limited liability company, partnership, sole proprietorship or other person or entity who is involved or is engaged in the design, manufacture, purchasing, distribution, sale, assembly, provision or marketing of any products or services that are the same as or similar to Employer Products. Provided, however, Competitor does not mean any corporation, limited liability company, partnership, sole proprietorship or other person or entity who is involved or is engaged in the “Telecommunications Industry”.

(ii) “Employer Products” shall mean any products or services:

(a) designed, manufactured, purchased, distributed, sold, assembled, provided and/or marketed by Employer or its Affiliates; or

(b) that Employer has planned to design, manufacture, purchase, distribute, sell, assemble, provide or market, and for which Employee has provided services or over which Employee had direct or indirect managerial or supervisory authority or about which Employee received Confidential Information; and

(iii) “Restricted Territory” means anywhere in the world where Employer Products are designed, manufactured, assembled, marketed or sold.

This covenant on the part of Employee shall be construed as an agreement independent of any other provision of this Agreement; and the existence of any claim or cause of action of Employee against Employer, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Employer of this covenant. Employee expressly agrees that the restrictions of this Section 6 will not prevent Employee from otherwise obtaining gainful employment upon termination of Employee’s employment with Employer.

7. Non-Solicitation of Business Associates. During the Restricted Period, Employee shall not directly or indirectly induce, solicit or encourage any customer, supplier or other business associate of Employer or an Affiliate to terminate or alter its relationship with the Employer or Affiliate, or introduce, offer or sell to or for any customer or business associate any products or services that compete with the Employer Products. Provided however, the restrictions under this paragraph 7 shall not apply in the Restricted Period in the event Employee works for a business engaged in the Telecommunications Industry.

8. Non-Solicitation of Employees. During the Restricted Period, Employee shall not, directly or indirectly, induce, solicit or encourage any employee of Employer or its Affiliates to terminate or alter his, her or its relationship with Employer or its Affiliates.

9. Termination.

(a) Without Cause. If, other than in connection with a change of control, the employment of the Employee is terminated by Employer without Cause and the Employee has less than six (6) years of service with Employer at the date of termination, Employer agrees to pay the Employee severance pay in an amount equal to six (6) months of the salary which the Employee is receiving at the time of termination. If the Employee has at least six (6) years of service with Employer at the date of termination, Employer agrees to pay the Employee severance pay in an amount equal to one (1) month of the monthly salary which the Employee is receiving at the time of termination for each year of service Employee has with Employer at the date of termination, up to a maximum severance amount of nine (9) months of monthly salary. The severance pay will be paid to the Employee no later than sixty

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(60) days after the date of termination. The severance pay will not be considered compensation for the purpose of any other fringe benefit program of the Employer. No bonus or any other fringe benefits will be due the Employee except for his/her accrued vacation. To the extent the Employee elects to continue health insurance coverage under COBRA, the Company will pay the premiums for such coverage for a period equal to the months of severance actually earned up to nine (9) months under the terms specified in Section 10(b)(1) below.

(b) Termination after Change in Control. If the Employer terminates the Employee’s employment without Cause or the Employee terminates the Employee’s employment for Good Reason, and such termination is coincident with or within an eighteen (18) month period following the occurrence of a Change in Control, the Employer shall pay Employee severance pay in an amount equal to (a) 0.5, multiplied by (b) the Employee’s Average Annual Base Salary, multiplied by (c) each year of service Employee has with Employer at the date of termination, up to a maximum amount of four (4) years of service; provided, however, in no case shall the product of (a) multiplied by (b) multiplied by (c) be greater than two (2) times the Employee’s Average Annual Base Salary. For purposes of this subparagraph “Average Annual Base Salary” shall be calculated as the Employee’s Annual Base Pay for the preceding five (5) fiscal years of the Employer divided by five (5). Should the Employee have less than five (5) fiscal years of service with the Employer at the date of termination, the Average Annual Base Salary shall be calculated as the average of the Employee’s Annual Base Pay using the applicable fiscal years of service with the Employer. The severance pay will be paid to the Employee within the period specified in Section 9(b)(iii) below after the expiration of any applicable revocation periods set forth in the Release required under Section 9(d)(i) below. This severance payment will not be considered compensation for the purpose of any other fringe benefit plan of the Employer.

(i) To the extent permitted by applicable law and the Employer’s benefit plans, the Employer shall maintain the Employee’s paid coverage for health insurance through the payment of the Employee’s COBRA premiums until the earlier to occur of: (a) the date the Employee is provided by another employer benefits substantially comparable to the health insurance benefits provided by the Employer (which the Employee must provide prompt notice with respect thereto to the Employer), or (b) the expiration of the COBRA Continuation Period. During the applicable period of coverage described in the foregoing sentence, the Employee shall be entitled to benefits on substantially the same basis as would have otherwise been provided had the Employee not been terminated and the Employer will have no obligation to pay any benefits to or premiums on behalf of the Employee after such period ends. To the extent that such benefits are available under the Employer’s benefit plans and the Employee had such coverage immediately prior to termination of employment, such continuation of benefits for the Employee shall also cover the Employee’s dependents for so long as the Employee is receiving such benefits under this Section 9(b)(i). The COBRA Continuation Period for health insurance under this Section 9(b)(i) shall be deemed to run concurrent with the continuation period federally mandated by COBRA (generally 18 months), or any other legally mandated and applicable federal, state, or local coverage period for benefits provided to terminated employees under the health care plan(s).

(ii) In addition, the Employer shall pay the Employee a lump sum cash payment of One Thousand ($1,000.00) Dollars in order to cover expenses associated with seeking another employment position.

(iii) All payments to be made pursuant to this Section 9(b) shall be made, in lump sum, no later than sixty (60) days after the date of termination; provided, however, that all benefits due under Section 9(b)(i) shall be provided as specified thereunder.

(c) Reduction of Severance Payments. Notwithstanding anything to the contrary contained in Section 9(b) above, in the event the Employer determines that part or all of the consideration, compensation or benefits to be paid to the Employee under this Agreement constitute “parachute payments” under Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the “IRC”), then, if the aggregate present value of such parachute payments, together with the aggregate present value of any consideration, compensation or benefits to be paid to the Employee under any other plan, arrangement or agreement which constitute “parachute payments” (collectively, the “Parachute Amount”) exceeds 2.99 times the Employee’s “base amount”, as defined in Section 280G(b)(3) of the IRC (the “Employee’s Base Amount”), the amounts payable hereunder constituting “parachute payments” which would otherwise be payable to or for the benefit of the Employee shall be reduced to the extent necessary so that the Parachute Amount is equal to 2.99 times the Employee’s Base Amount.

(d) Conditions to Receipt of Severance Benefits/Repayment of Severance Benefits.

(i) As a condition to receiving any severance benefits to which the Employee may otherwise be entitled under Sections 9(a) and 9(b) of this Agreement (the “Severance Benefits”), the Employee shall execute, deliver and not revoke a release and waiver (the “Release”), in a form provided by the Employer, of any claims, whether arising under Federal, state or local statute, common law or otherwise, against the Employer and its Affiliates. Unless otherwise required by applicable law, the Release must be executed by the Employee within thirty (30) days of the date of termination; provided, however, in all cases, the Release must become final, binding and irrevocable prior to the sixtieth (60^th) day following Employee’s date of termination. If the Employee fails or otherwise refuses to execute a Release within the time specified herein, or revokes the Release, the Employee will not be entitled to any such Severance Benefits and the Employer shall have no further obligations with respect to the payment of the Severance Benefits. In addition, if following a termination of employment that gives the Employee a right to the payment of Severance Benefits, the Employee engages in any activities that would have violated any of the covenants in

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Sections 4, 5, 6, 7 and 8 of this Agreement, the Employee shall have no further right or claim to any Severance Benefits from and after the date on which the Employee engages in such activities and the Employer shall have no further obligations with respect to the payment of the Severance Benefits.

(ii) If Employee violates any of the Employee’s obligations set forth in Sections 4, 5, 6, 7 and 8 of this Agreement, the Employer after becoming aware of such violation may provide written notice of such violation or breach to the Employee and request repayment of Severance Benefits. The Employee agrees that, in the event of such a violation, within thirty (30) days after the date the Employer provides notice to the Employee, the Employee shall pay to the Employer, in a form acceptable to the Employer, a dollar amount equal to any Severance Benefits paid to or on behalf of the Employee pursuant to this Agreement. The parties agree that during the thirty (30) day period to use their best efforts to resolve the issues. The Employee agrees that failure to make such timely payment to the Employer constitutes an independent and material breach of the terms and conditions of this Agreement, for which the Employer may seek recovery of the unpaid amount as liquidated damages, in addition to all other rights and remedies the Employer may have resulting from the Employee’s breach of the obligations set forth in Sections 4, 5, 6, 7 and 8 of this Agreement. The Employee agrees that timely payment to the Employer as set forth in this Section 9(d)(ii) is reasonable and necessary because the compensatory damages that will result from breaches of Sections 4, 5, 6, 7 and 8 of this Agreement cannot readily be ascertained. Further, the Employee agrees that timely payment to the Employer as set forth in this Section 9(d)(ii) is not a penalty, and it does not preclude the Employer from seeking all other remedies including injunctive relief that may be available to the Employer.

(e) Section 409A/Termination of Employment. The provisions of this Agreement will be administered, interpreted and construed in a manner intended to comply with Section 409A of the Internal Revenue Code (“Section 409A”), the regulations issued thereunder or any exception thereto (or disregarded to the extent such provision cannot be so administered, interpreted, or construed).

(i) For purposes of the Agreement, the Employee shall be considered to have experienced a termination of employment only if the Employee has terminated employment with the Employer and all of its controlled group members within the meaning of Section 409A of the Code. For purposes hereof, the determination of controlled group members shall be made pursuant to the provisions of Section 414(b) and 414(c) of the Code; provided that the language “at least 50 percent” shall be used instead of “at least 80 percent” in each place it appears in Section 1563(a)(1),(2) and (3) of the Code and Treas. Reg. § 1.414(c)-2; provided, further, where legitimate business reasons exist (within the meaning of Treas. Reg. § 1.409A-1(h)(3)), the language “at least 20 percent” shall be used instead of “at least 80 percent” in each place it appears. Whether the Employee has terminated employment will be determined based on all of the facts and circumstances and in accordance with the guidance issued under Section 409A of the Code.

(ii) For purposes of Section 409A, each severance benefit payment shall be treated as a separate payment. Each payment under this Agreement is intended to be excepted from Section 409A to the maximum extent provided under Section 409A as follows: (i) each payment that is scheduled to be made following the Employee’s termination date and within the applicable 2¹⁄₂ month period specified in Treas. Reg. § 1.409A-1(b)(4) is intended to be excepted under the short-term deferral exception as specified in Treas. Reg. § 1.409A-1(b)(4); (ii) post-termination medical benefits are intended to be excepted under the medical benefits exception as specified in Treas. Reg. § 1.409A-1(b)(9)(v)(B), and (iii) each payment that is not otherwise excepted under the short-term deferral exception or medical benefits exception is intended to be excepted under the involuntary pay exception as specified in Treas. Reg. § 1.409A-1(b)(9)(iii). The Employee shall have no right to designate the date of any payment under this Agreement.

(iii) With respect to payments subject to Section 409A of the Code (and not excepted therefrom), if any, it is intended that each payment is paid on permissible distribution event and at a specified time consistent with Section 409A of the Code. The Employer reserves the right to accelerate and/or defer any payment to the extent permitted and consistent with Section 409A. Notwithstanding any provision of this Agreement to the contrary, to the extent that a payment hereunder is subject to Section 409A of the Code (and not excepted therefrom) and payable on account or a termination of employment, such payment shall be delayed for a period of six months after the date of termination (or, if earlier, the death of the Employee) if the Employee is a “specified employee” (as defined in Section 409A of the Code and determined in accordance with the procedures established by the Employer). Any payment that would otherwise have been due or owing during such six-month period will be paid immediately following the end of the six-month period in the month following the month containing the six (6) month anniversary of the date of termination.

(f) Definitions. For purposes of this Agreement, the following definitions shall have the following meanings:

(i) “Cause” shall mean a determination by the Employer’s Board of Directors, in the exercise of its reasonable judgment, that any of the following has occurred:

(1) the willful and continued failure by the Employee to perform Employer’s duties and responsibilities with the Employer under the Agreement (other than any such failure resulting from incapacity due to physical or mental illness or disability) which is not cured within thirty (30) days of receiving written notice from the Employer specifying in reasonable detail the duties and responsibilities which the Employer believes are not being adequately performed;

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(2) the willful engaging by the Employee in any act which is materially damaging to the Employer;

(3) the conviction of the Employee of, or a plea of “guilty” or “no contest” to, (A) any felony or (B) a criminal offense involving fraud, dishonesty or other moral turpitude;

(4) any material breach by the Employee of the terms of the Agreement or any other written agreement between the Employee and the Employer relating to proprietary information, confidentiality, non-competition or non-solicitation; or

(5) the engaging by the Employee in any intentional act of dishonesty resulting or intended to result, directly or indirectly, in personal gain to the Employee at the Employer’s expense.

(ii) “Change in Control” shall be deemed to have occurred when:

(1) the Employer is merged or consolidated with another entity the result of which is that immediately following such transaction (A) the persons who were the shareholders of the Employer immediately prior to such transaction have less than a majority of the voting power of the Employer or the entity owing or controlling the Employer or (B) the individuals who comprised the Board of Directors of the Employer immediately prior to such transaction cease to be at least a majority of the members of the Board of Directors of the Employer or of the entity controlling the Employer, or

(2) a majority of the Employer’s assets are sold or otherwise transferred to another corporation not controlled by or under common control with the Employer or to a partnership, firm, entity or one or more individuals not so controlled, or

(3) a majority of the members of the Employer’s Board of Directors consists of persons who were not nominated for election as directors by or on behalf of the Employer’s Board of Directors or with the express concurrence of the Employer’s Board of Directors, or

(4) a single person, or a group of persons acting in concert, obtains voting control over a majority of the Employer’s outstanding voting shares; provided, however, that a Change in Control shall not have occurred as of result of any transaction in which Carl J. Johnson, and/or his affiliates, including the II-VI Foundation, directly or indirectly, acquire more than a majority of the assets or stock of the Employer or of the entity controlling the Employer.

(iii) “Good Reason” means, without the Employee’s express written consent:

(1) a material reduction of Employee’s employment responsibilities;

(2) a material reduction by the Employer of the Employee’s eligibility for Total Target Compensation as in effect immediately prior to such reduction. “Total Target Compensation” shall mean the Employee’s annual base salary plus the cash and stock compensation the Employee is eligible to receive at 100% performance, whether sales incentive, bonus or otherwise;

(3) a material increase in the amount of Employee’s business travel which produces a constructive relocation of Employee;

(4) a material reduction by the Employer in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee’s overall benefits package is significantly reduced; or

(5) the relocation of the Employee to a facility or a location more than fifty (50) miles from Saxonburg, Pennsylvania, unless such relocation results in the Employee’s primary work location being closer to the Employee’s then primary residence or does not substantially increase the average commuting time of the Employee.

In order for the Employee to terminate for Good Reason, (A) the Employer must be notified by the Employee in writing within ninety (90) days of the event constituting Good Reason, (B) the event must remain uncorrected by the Employer for thirty (30) days following such notice (the “Notice Period”), and (C) such termination must occur within sixty (60) days after the expiration of the Notice Period. Notwithstanding anything in this Section 9(f)(iii) to the contrary, the definition of “Good Reason” shall not include any reduction in Employee’s employment responsibilities or eligibility for Total Target Compensation due to Employee being restricted from performing certain of his expected job duties as a result of Employee’s failure to obtain United States citizenship.

10. Remedies.

(a) Injunctive Relief. It is agreed by the parties hereto that any violation by Employee of any of the covenants contained herein would cause immediate, material and irreparable harm to Employer and/or its Affiliates which may not adequately be compensated for by money damages and, therefore, Employer and/or its Affiliates shall be entitled to injunctive relief (including, without limitation, one or more preliminary injunctions and/or ex parte restraining orders) in addition to, and not in derogation of, any other remedies provided by law, in equity or otherwise for such a violation including, but not limited to, the right to have such covenants specifically enforced by any court of competent jurisdiction and the right to require Employee to account for and pay over to Employer and/or its Affiliates all benefits derived or received by Employee as a result of any such breach of covenant together with

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interest thereon, from the date of such initial violation until such sums are received by Employer and/or its Affiliates. Any restricted period set forth herein shall be extended by any period of time in which Employee is in breach of this Agreement and for any period of time which may be necessary to secure an order of court or injunction, either temporary or permanent, to enforce any provision of this Agreement.

(b) Employee Acknowledgment. Employee acknowledges and agrees that the periods of restriction and geographical areas of restriction imposed by the confidentiality and non-competition covenants of this Agreement are fair and reasonably required for the protection of Employer and its Affiliates.

11. Severability. In the event that, and if for any reason, any portion of this Agreement shall be held to be invalid or unenforceable, it is agreed that the remaining covenants and restrictions or portions thereof shall remain in full force and effect, and that if the validity or unenforceability is due to the unreasonableness of the time or geographical area covered by said covenants and restrictions, said covenants and restrictions of this Agreement shall nevertheless be effective for such period of time and for such area as may be determined to be reasonable by a Court of competent jurisdiction.

12. Disparaging Statements. Both parties agree not to make any disparaging statements that reflect negatively on the reputation or good name of the other.

13. Entire Agreement; Amendments; No Waiver. This Agreement and the Offer Letter dated February 21, 2014 supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the employment of the Employee by the Employer and contains all of the covenants and agreements between the parties with respect to such employment in any manner whatsoever. No alterations, amendments, changes or additions to this Agreement will be binding upon either Employer or Employee unless in writing and signed by both parties. No waiver of any right arising under this Agreement made by either party will be valid unless set forth in writing signed by both parties. Notwithstanding the foregoing or any provision of this Agreement to the contrary, the Employer may at any time (after consultation with the Employee) modify, amend or terminate any or all of the provisions of this Agreement or take any other action, to the extent necessary or advisable to conform the provisions of this Agreement or the benefits provided thereunder with Section 409A of the Code, the regulations issued thereunder or an exception thereto.

14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without resort to its conflict of laws provisions.

15. Employee’s Representations. Employee warrants and represents that Employee has provided the Employer with copies of all agreements with previous employers that might still be applicable and that Employee’s performance under this Agreement will not violate any agreement to which Employee is a party and that Employee will not bring any materials which are proprietary to a third party to Employer without the prior written consent of such third party.

16. Binding Effect. This Agreement is binding upon the parties hereto and their respective heirs, personal representatives, successors and assigns. Employee agrees that the obligations of Sections 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 and 18 of this Agreement will survive the termination of this Agreement.

17. Assignment. Employee’s rights and obligations under this Agreement shall not be transferable by Employee, by assignment or otherwise, and any purported assignment, transfer or delegation thereof by Employee shall be void. Employer may assign/delegate all or any portion of this Agreement whereupon Employee shall continue to be bound hereby with respect to such assignee/delegatee, without prior notice to Employee and without need of Employee’s consent thereto. In addition to and without limiting the Employer’s right to assign, transfer, or convey this Agreement or any portion of it, Employee recognizes that Employer may assign the Employee temporarily or permanently to one or more Affiliates of Employer. In such event, all of Employee’s duties under this Agreement shall apply with equal force to the Affiliate(s), and the Affiliate(s) shall be empowered to stand in the shoes of the Employer for purposes of enforcing this Agreement.

18. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[SIGNATURES ON FOLLOWING PAGE.]

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IN WITNESS WHEREOF, the parties hereto intending to be legally bound have set their hands and seals the day and year first above written.

ATTEST:	II-VI INCORPORATED
	By:
		Francis J. Kramer
WITNESS:	EMPLOYEE:
	By:
		Mary Jane Raymond

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EX-31

Exhibit 31.01

CERTIFICATIONS

I, Francis J. Kramer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of II-VI Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2014	By:	/s/     Francis J. Kramer
		Francis J. Kramer
		President and Chief Executive Officer

EX-31

Exhibit 31.02

I, Mary Jane Raymond, certify that:

1. I have reviewed this quarterly report on Form 10-Q of II-VI Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2014	By:	/s/     Mary Jane Raymond
		Mary Jane Raymond
		Chief Financial Officer and Treasurer

EX-32

Exhibit 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of II-VI Incorporated (the “Corporation”) on Form 10-Q for the period ended March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Corporation certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: May 12, 2014	By:	/s/     Francis J. Kramer
		Francis J. Kramer
		President and Chief Executive Officer

* This certification is made solely for purposes of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

EX-32

Exhibit 32.02

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of II-VI Incorporated (the “Corporation”) on Form 10-Q for the period ended March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Corporation certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: May 12, 2014	By:	/s/    Mary Jane Raymond
		Mary Jane Raymond
		Chief Financial Officer and Treasurer

* This certification is made solely for purposes of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

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Capital Lease (Tables)

9 Months Ended

Mar. 31, 2014

Schedule of Future Minimum Lease Payments Due Under Non-Cancelable Capital Lease

In December 2013, the Company's HIGHYAG subsidiary entered into a capital lease related to a building in Germany.   The following table shows the future minimum lease payments due under the non-cancelable capital lease ($000):

Fiscal Year Ending:	Amount
2014 (remaining)	$	270
2015		1,081
2016		1,081
2017		1,081
2018		1,081
Thereafter		13,426
Total minimum lease payments		18,020
Less amount representing interest		6,163
Present value of capitalized payments		11,857
Less: current portion		451
Long-term portion	$	11,406

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Debt - Additional Information (Detail)	1 Months Ended	9 Months Ended				1 Months Ended				1 Months Ended		6 Months Ended	9 Months Ended
	Sep. 30, 2013 USD ($)	Mar. 31, 2014 USD ($)	Mar. 31, 2013	Jun. 30, 2013 USD ($)	Jun. 30, 2013 JPY (¥)	Sep. 30, 2013 Revolving Credit Facility USD ($)	Sep. 30, 2013 Revolving Credit Facility Maximum USD ($)	Mar. 31, 2014 Yen denominated line of credit JPY (¥)	Mar. 31, 2014 Yen Loan JPY (¥)	Sep. 30, 2013 London Interbank Offered Rate (LIBOR) Revolving Credit Facility Maximum	Sep. 30, 2013 London Interbank Offered Rate (LIBOR) Revolving Credit Facility Minimum	Jun. 30, 2013 London Interbank Offered Rate (LIBOR) Yen denominated line of credit	Mar. 31, 2014 London Interbank Offered Rate (LIBOR) Yen denominated line of credit	Mar. 31, 2014 London Interbank Offered Rate (LIBOR) Yen denominated line of credit Maximum	Mar. 31, 2014 London Interbank Offered Rate (LIBOR) Yen denominated line of credit Minimum
Debt Instrument [Line Items]
Line of credit, maximum borrowing capacity						$ 225,000,000
Line of credit facility, prior borrowing capacity						140,000,000
Term loan	100,000,000	90,000,000
Term loan, quarterly principal Payment	5,000,000
Term loan, first quarterly principal payment commencement date	Oct. 01, 2013
Credit facility, optional additional borrowing amount							100,000,000
Credit facility, term						5 years
Debt instrument, month and year of maturity						2018-09		2016-06
Debt instrument, rate added on variable rate										1.75%	0.75%	1.25%	1.50%	1.50%	0.625%
Financing cost incurred		1,000,000
Deferred financing costs		500,000
Credit facility								500,000,000
Amount borrowed					300,000,000				300,000,000
Available credit under lines of credit		55,400,000		29,800,000
Total outstanding letters of credit		$ 1,500,000		$ 1,300,000
Weighted average interest rate of total borrowings		1.70%	1.20%

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Changes in Carrying Amount of Goodwill (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended					9 Months Ended
	Mar. 31, 2014	Mar. 31, 2014 Infrared Optics Operating Segments	Mar. 31, 2014 Near-Infrared Optics Operating Segments	Mar. 31, 2014 Military & Materials Operating Segments	Jun. 30, 2013 Military & Materials Operating Segments	Mar. 31, 2014 Advanced Products Group Operating Segments	Mar. 31, 2014 Active Optical Products Operating Segments
Goodwill [Line Items]
Balance-beginning of period	$ 123,352	$ 9,677	$ 60,269	$ 30,712	$ 30,712	$ 22,694
Goodwill acquired	75,791						75,791
Goodwill adjustment	(516)					(516)
Foreign currency translation	237	94	143
Balance-end of period	$ 198,864	$ 9,771	$ 60,412	$ 30,712	$ 30,712	$ 22,178	$ 75,791

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Schedule of Future Minimum Lease Payments Due Under Non-Cancelable Capital Lease (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Capital Leased Assets [Line Items]
2014 (remaining)		$ 270
2015		1,081
2016		1,081
2017		1,081
2018		1,081
Thereafter		13,426
Total minimum lease payments		18,020
Less amount representing interest		6,163
Present value of capitalized payments	11,857	11,857
Less: current portion		451
Long-term portion		$ 11,406

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Remaining Annual Amounts of Principal Payments of Credit Facility (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Jun. 30, 2013
Debt Instrument [Line Items]
Year 1	$ 20,000
Year 2	20,000
Year 3	22,907
Year 4	20,000
Year 5	180,000
Total debt	262,907	114,036
Term Loans
Debt Instrument [Line Items]
Year 1	20,000
Year 2	20,000
Year 3	20,000
Year 4	20,000
Year 5	10,000
Total debt	90,000
Yen denominated line of credit
Debt Instrument [Line Items]
Year 3	2,907
Total debt	2,907
Line of credit
Debt Instrument [Line Items]
Year 5	170,000
Total debt	$ 170,000

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Components of Inventories (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Jun. 30, 2013
Inventory [Line Items]
Raw materials	$ 76,254	$ 59,290
Work in progress	57,344	43,895
Finished goods	41,009	38,674
Inventories, Total	$ 174,607	$ 141,859

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Earnings Per Share (Tables)

9 Months Ended

Mar. 31, 2014

Computation of Earnings Per Share

The following table sets forth the computation of earnings per share attributable to II-VI Incorporated for the periods indicated. Weighted average shares issuable upon the exercises of stock options and the release of performance and restricted shares that were not included in the calculation were approximately 542,000 and 433,000, respectively, for the three and nine months ended March 31, 2014, and 410,000 and 429,000, respectively, for the three and nine months ended March 31, 2013, because they were anti-dilutive ($000 except per share data):

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2014		2013			2014		2013
Earnings from continuing operations attributable to II-VI Incorporated	$	8,531	$	16,035		$	25,661	$	43,350
Earnings (loss) from discontinued operation		-		(166	)		133		(2,563	)
Net earnings attributable to II-VI Incorporated	$	8,531	$	15,869		$	25,794	$	40,787
Divided by:
Weighted average shares		62,355		62,130			62,426		62,482
Basic earnings (loss) attributable to II-VI Incorporated per common share:
Continuing operations	$	0.14	$	0.26		$	0.41	$	0.69
Discontinued operation	$	-	$	(0.00	)	$	-	$	(0.04	)
Consolidated	$	0.14	$	0.26		$	0.41	$	0.65
Earnings from continuing operations attributable to II-VI Incorporated	$	8,531	$	16,035		$	25,661	$	43,350
Earnings (loss) from discontinued operation		-		(166	)		133		(2,563	)
Net earnings attributable to II-VI Incorporated	$	8,531	$	15,869		$	25,794	$	40,787
Divided by:
Weighted average shares		62,355		62,130			62,426		62,482
Dilutive effect of common stock equivalents		1,391		1,594			1,444		1,483
Diluted weighted average common shares		63,746		63,724			63,870		63,965
Diluted earnings (loss) attributable to II-VI Incorporated per common share:
Continuing operations	$	0.13	$	0.25		$	0.40	$	0.68
Discontinued operation	$	-	$	(0.00	)	$	-	$	(0.04	)
Consolidated	$	0.13	$	0.25		$	0.40	$	0.64

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Earnings Per Share - Additional Information (Detail)	3 Months Ended		9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014	Mar. 31, 2013
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Weighted average Shares issuable upon the exercises of stock options excluded from the dilutive share calculation	542,000	410,000	433,000	429,000

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Capital Lease - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Capital Leased Assets [Line Items]
Capitalized payments property plant and equipment	$ 11,857	$ 11,857
Property plant and equipment depreciation expenses useful life of leases	17 years

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Capital Lease

9 Months Ended

Mar. 31, 2014

Capital Lease

Note 18. Capital Lease

In December 2013, the Company's HIGHYAG subsidiary entered into a capital lease related to a building in Germany.   The following table shows the future minimum lease payments due under the non-cancelable capital lease ($000):

Fiscal Year Ending:	Amount
2014 (remaining)	$	270
2015		1,081
2016		1,081
2017		1,081
2018		1,081
Thereafter		13,426
Total minimum lease payments		18,020
Less amount representing interest		6,163
Present value of capitalized payments		11,857
Less: current portion		451
Long-term portion	$	11,406

The current and long-term portion of the capital lease obligation was recorded in Other accrued liabilities and Other liabilities, respectively, in the Company’s Condensed Consolidated Balance Sheets as of March 31, 2014.  The present value of the capitalized payments of $11.9 million was recorded in Property, plant & equipment, net, in the Company’s Condensed Consolidated Balance Sheets as of March 31, 2014, with associated depreciation expense being recorded over the 17 year life of the lease.   

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Gross Carrying Amount and Accumulated Amortization (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Jun. 30, 2013
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 174,625	$ 111,708
Accumulated Amortization	(33,362)	(25,007)
Net Book Value	141,263	86,701
Technology and Patents
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	50,506	39,659
Accumulated Amortization	(13,393)	(10,455)
Net Book Value	37,113	29,204
Trademarks
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	17,870	17,855
Accumulated Amortization	(1,018)	(963)
Net Book Value	16,852	16,892
Customer Lists
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	104,661	52,614
Accumulated Amortization	(17,521)	(12,189)
Net Book Value	87,140	40,425
Other
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,588	1,580
Accumulated Amortization	(1,430)	(1,400)
Net Book Value	$ 158	$ 180

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Summary of Purchase Price (Detail) (USD $)	9 Months Ended		1 Months Ended			9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Nov. 30, 2013 Oclaro's Fiber Amplifier and Micro Optics Business	Sep. 12, 2013 Oclaro's Fiber Amplifier and Micro Optics Business	Sep. 30, 2013 Oclaro Incorporated	Mar. 31, 2014 Oclaro Incorporated
Business Acquisition [Line Items]
Net cash paid at acquisition date	$ 177,676,000	$ 126,165,000	$ 79,600,000	$ 5,000,000	$ 90,601,000
Purchase of business - holdback amount recorded in other liabilities			4,000,000		6,000,000	2,000,000
Purchase price			88,600,000		99,076,000
Additional cash paid for working capital adjustment					$ 2,475,000	$ 2,500,000

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Commitments and Contingencies (Tables)

9 Months Ended

Mar. 31, 2014

Schedule of Change in Carrying Value of Warranty Reserve

The Company records a warranty reserve as a charge against earnings based on a percentage of sales utilizing actual warranty claims over the last twelve months. The following table summarizes the change in the carrying value of the Company’s warranty reserve, which is a component of Other accrued liabilities in the Company’s Condensed Consolidated Balance Sheets, as of and for the nine months ended March 31, 2014 ($000):

	Nine Months Ended
	March 31, 2014
Balance-beginning of period	$	1,661
Payments made during the period		(1,263	)
Additional warranty liability recorded during the period		1,668
Warranty liability assumed through acquisition		1,173
Balance-end of period	$	3,239

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Components of Debt (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Sep. 30, 2013	Jun. 30, 2013
Debt Instrument [Line Items]
Line of credit, interest at LIBOR, as defined, plus 1.50% and 1.25%, respectively	$ 170,000		$ 111,000
Term loan, interest at LIBOR, as defined, plus 1.25%	90,000	100,000
Yen denominated line of credit, interest at LIBOR, as defined, plus 1.50% and 1.25%, respectively	2,907		3,036
Total debt	262,907		114,036
Current portion of long-term debt	(20,000)
Long-term debt, less current portion	$ 242,907		$ 114,036

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Change in Caring Value of Warranty Reserve (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Mar. 31, 2014
Contingencies And Commitments [Line Items]
Balance-beginning of period	$ 1,661
Payments made during the period	(1,263)
Additional warranty liability recorded during the period	1,668
Warranty liability assumed through acquisition	1,173
Balance-end of period	$ 3,239

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Share-Based Compensation Expense by Award Type (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014	Mar. 31, 2013
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	$ 2,905	$ 2,851	$ 10,590	$ 9,738
Stock Options and Cash-Based Stock Appreciation Rights
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	1,190	1,152	4,566	3,916
Restricted Share Awards and Cash-Based Restricted Share Unit Awards
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	930	1,144	3,539	3,240
Performance Share Awards and Cash-Based Performance Share Unit Awards
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	$ 785	$ 555	$ 2,485	$ 2,582

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Property Plant and Equipment (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Jun. 30, 2013
Property Plant And Equipment [Line Items]
Land and land improvements	$ 2,381	$ 2,236
Buildings and improvements	96,404	87,189
Machinery and equipment	331,181	276,802
Construction in progress	14,579	10,831
Property, Plant and Equipment, gross	444,545	377,058
Less accumulated depreciation	(232,812)	(206,386)
Property, Plant and Equipment, net	$ 211,733	$ 170,672

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Discontinued Operation

9 Months Ended

Mar. 31, 2014

Discontinued Operation

Note  2. Discontinued Operation

During December 2013, the Company completed the discontinuance of its tellurium product line by exiting all business activities associated with this product.  This product line was previously serviced by Pacific Rare Specialty Metals & Chemicals, Inc. (“PRM”) and was included as part of the Military & Materials segment.   Prior periods have been restated to present this product line on a discontinued operation basis.   The revenues and earnings (losses) of the tellurium product line have been reflected as a discontinued operation for the periods presented as follows: ($000):

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2014		2013			2014		2013
Revenues	$	-	$	1,230		$	1,849	$	6,306
Earnings (loss) from discontinued operation before income taxes		-		(166	)	133			(2,563	)
Income tax benefit (expense)		-		-			-		-
Earnings (loss) from discontinued operation, net of taxes	$	-	$	(166	)	$	133	$	(2,563	)

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Fair Value Assumptions for Stock Option and Stock Appreciation Rights (Detail)	3 Months Ended		9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014	Mar. 31, 2013
Fair Value Option [Line Items]
Risk-free interest rate	1.82%	1.10%	1.75%	0.94%
Expected volatility	46.00%	48.00%	47.00%	49.00%
Expected life of options	5 years 6 months	4 years 8 months 12 days	5 years 8 months 12 days	5 years 8 months 12 days
Dividend yield

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Allocation of Purchase Price of Assets Acquired and Liabilities Assumed at Date of Acquisition (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Jun. 30, 2013	Nov. 30, 2013 Oclaro's Fiber Amplifier and Micro Optics Business	Sep. 30, 2013 Oclaro Incorporated
Assets
Inventories			$ 11,314	$ 26,071
Prepaid and other assets				1,035
Deferred income taxes				2,376
Property, plant & equipment			9,700	30,200
Intangible assets			32,900	29,800
Goodwill	198,864	123,352	34,686	41,105
Total assets acquired			88,600	130,587
Liabilities
Accounts payable				2,214
Deferred income taxes				13,290
Accrued income taxes				2,714
Other accrued liabilities				13,293
Total liabilities assumed				31,511
Net assets acquired				$ 99,076

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Inventories (Tables)

9 Months Ended

Mar. 31, 2014

Components of Inventories

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

	March 31,		June 30,
	2014		2013
Raw materials	$	76,254	$	59,290
Work in progress		57,344		43,895
Finished goods		41,009		38,674
	$	174,607	$	141,859

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Acquisitions (Tables)

9 Months Ended

Mar. 31, 2014

Pro-forma Consolidated Results of Operations

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2014		2013		2014		2013
Net revenues	$	173,555	$	189,471	$	546,991	$	489,527
Earnings from continuing operations attributable to II-VI Incorporated		8,531		14,166		34,377		31,095
Basic earnings per share from continuing operations attributable to II-VI Incorporated		0.14		0.23		0.55		0.50
Diluted earnings per share from continuing operations attributable to II-VI Incorporated		0.13		0.22		0.54		0.49

Oclaro's Fiber Amplifier and Micro Optics Business

Summary of Purchase Price

Net cash paid at acquisition date	$	79,600
Cash previously paid		5,000
Holdback amount recorded in Other liabilities		4,000
Purchase price	$	88,600

Allocation of Purchase Price of Assets Acquired and Liabilities Assumed at Date of Acquisition

The following table presents the preliminary allocation of the purchase price of the assets acquired at the date of acquisition, as the Company intends to finalize its accounting for the acquisition of Network Solutions during fiscal year 2014 ($000):

Assets
Inventories	$	11,314
Property, plant & equipment		9,700
Intangible assets		32,900
Goodwill		34,686
Total assets acquired	$	88,600

Oclaro Incorporated

Summary of Purchase Price

Net cash paid at acquisition date	$	90,601
Additional cash paid for working capital adjustment		2,475
Holdback amount recorded in Other accrued liabilities		6,000
Purchase price	$	99,076

Allocation of Purchase Price of Assets Acquired and Liabilities Assumed at Date of Acquisition

The following table presents the preliminary allocation of the purchase price of the assets acquired and liabilities assumed at the date of acquisition, as the Company intends to finalize its accounting for the acquisition of Laser Enterprise during fiscal year 2014 ($000):

Assets
Inventories	$	26,071
Prepaid and other assets		1,035
Deferred income taxes		2,376
Property, plant & equipment		30,200
Intangible assets		29,800
Goodwill		41,105
Total assets acquired	$	130,587
Liabilities
Accounts payable	$	2,214
Deferred income taxes		13,290
Accrued income taxes		2,714
Other accrued liabilities		13,293
Total liabilities assumed	$	31,511
Net assets acquired	$	99,076

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Income Taxes - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Jun. 30, 2013
Income Taxes [Line Items]
Effective income tax rate	18.50%	23.80%
U.S. statutory rate	35.00%
Unrecognized tax benefits, reduction resulting from statute of limitation	$ 1.4
Unrecognized tax benefits that would impact effective tax rate	$ 3.0		$ 3.3

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Pro-forma Consolidated Results of Operations (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014	Mar. 31, 2013
Business Acquisition Pro Forma Information Nonrecurring Adjustment [Line Items]
Net revenues	$ 173,555	$ 189,471	$ 546,991	$ 489,527
Earnings from continuing operations attributable to II-VI Incorporated	$ 8,531	$ 14,166	$ 34,377	$ 31,095
Basic earnings per share from continuing operations attributable to II-VI Incorporated	$ 0.14	$ 0.23	$ 0.55	$ 0.50
Diluted earnings per share from continuing operations attributable to II-VI Incorporated	$ 0.13	$ 0.22	$ 0.54	$ 0.49

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Property, Plant and Equipment (Tables)

9 Months Ended

Mar. 31, 2014

Property, Plant and Equipment

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

	March 31,			June 30,
	2014			2013
Land and land improvements	$	2,381		$	2,236
Buildings and improvements		96,404			87,189
Machinery and equipment		331,181			276,802
Construction in progress		14,579			10,831
		444,545			377,058
Less accumulated depreciation		(232,812	)		(206,386	)
	$	211,733		$	170,672

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Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Mar. 31, 2014

Changes in Carrying Amount of Goodwill

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

	Nine Months Ended March 31, 2014
			Near-		Military		Advanced			Active
	Infrared		Infrared		&		Products			Optical
	Optics		Optics		Materials		Group			Products		Total
Balance-beginning of period	$	9,677	$	60,269	$	30,712	$	22,694		$	-	$	123,352
Goodwill acquired		-		-		-		-			75,791		75,791
Goodwill adjustment		-		-		-		(516	)		-		(516	)
Foreign currency translation		94		143		-		-			-		237
Balance-end of period	$	9,771	$	60,412	$	30,712	$	22,178		$	75,791	$	198,864

Gross Carrying Amount and Accumulated Amortization

The gross carrying amount and accumulated amortization of the Company’s intangible assets other than goodwill as of March 31, 2014 and June 30, 2013 was as follows ($000):

	March 31, 2014							June 30, 2013
	Gross					Net		Gross					Net
	Carrying		Accumulated			Book		Carrying		Accumulated			Book
	Amount		Amortization			Value		Amount		Amortization			Value
Technology and Patents	$	50,506	$	(13,393	)	$	37,113	$	39,659	$	(10,455	)	$	29,204
Trademarks		17,870		(1,018	)		16,852		17,855		(963	)		16,892
Customer Lists		104,661		(17,521	)		87,140		52,614		(12,189	)		40,425
Other		1,588		(1,430	)		158		1,580		(1,400	)		180
Total	$	174,625	$	(33,362	)	$	141,263	$	111,708	$	(25,007	)	$	86,701

Estimated Amortization Expense for Existing Intangible Assets for Each of Five Succeeding Years

At March 31, 2014, the estimated amortization expense for existing intangible assets for each of the five succeeding fiscal years is as follows ($000):

Year Ending June 30,
Remaining 2014	$	3,096
2015		11,806
2016		11,739
2017		11,729
2018		11,254

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Basis of Presentation

9 Months Ended

Mar. 31, 2014

Basis of Presentation

Note1. Basis of Presentation

The condensed consolidated financial statements of II-VI Incorporated (“II-VI” or the “Company”) for the three and nine months ended March 31, 2014 and 2013 are unaudited. In the opinion of management, all adjustments considered necessary for a fair presentation for the periods presented have been included. All adjustments are of a normal recurring nature unless disclosed otherwise. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013. The consolidated results of operations for the three and nine months ended March 31, 2014 are not necessarily indicative of the results to be expected for the full fiscal year. The June 30, 2013 Condensed Consolidated Balance Sheet information was derived from the Company’s audited financial statements.

In conjunction with the acquisitions of Oclaro, Inc.’s (“Oclaro”) fiber amplifier and micro-optics business on November 1, 2013, and, Oclaro’s Switzerland-based semiconductor laser business on September 12, 2013, the Company has established a new reporting segment “Active Optical Products” which reports the operating results of these two recently acquired businesses.

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Debt (Tables)

9 Months Ended

Mar. 31, 2014

Components of Debt

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

	March 31,			June 30,
	2014			2013
Line of credit, interest at LIBOR, as defined, plus 1.50% and 1.25%, respectively	$	170,000		$	111,000
Term loan, interest at LIBOR, as defined, plus 1.25%		90,000			-
Yen denominated line of credit, interest at LIBOR, as defined, plus 1.50% and 1.25%, respectively		2,907			3,036
Total debt		262,907			114,036
Current portion of long-term debt		(20,000	)		-
Long-term debt, less current portion	$	242,907		$	114,036

Remaining Annual Amounts of Principal Payments

Remaining annual principal payments under the Company’s existing credit facilities as of March 31, 2014 were as follows:

					U.S.
					Dollar
	Term		Yen Line		Line of
Period	Loan		of Credit		Credit		Total
Year 1	$	20,000	$	-	$	-	$	20,000
Year 2		20,000		-		-		20,000
Year 3		20,000		2,907		-		22,907
Year 4		20,000		-		-		20,000
Year 5		10,000		-		170,000		180,000
Total	$	90,000	$	2,907	$	170,000	$	262,907

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Summary of Revenues and Earnings (Losses) of Discontinued Operation (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014	Mar. 31, 2013
Disposal Group, Including Discontinued Operation, Income Statement Disclosures
Earnings (loss) from discontinued operation, net of taxes		$ (166)	$ 133	$ (2,563)
Tellurium product line
Disposal Group, Including Discontinued Operation, Income Statement Disclosures
Revenues		1,230	1,849	6,306
Earnings (loss) from discontinued operation before income taxes		(166)	133	(2,563)
Income tax benefit (expense)
Earnings (loss) from discontinued operation, net of taxes		$ (166)	$ 133	$ (2,563)

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Components of Debt (Parenthetical) (Detail) (London Interbank Offered Rate (LIBOR))	6 Months Ended	9 Months Ended
	Jun. 30, 2013	Mar. 31, 2014
Line of credit
Debt Instrument [Line Items]
Debt instrument, rate added on variable rate	1.25%	1.50%
Term Loans
Debt Instrument [Line Items]
Debt instrument, rate added on variable rate		1.25%
Yen denominated line of credit
Debt Instrument [Line Items]
Debt instrument, rate added on variable rate	1.25%	1.50%

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Share Repurchase Program (Detail) (USD $)	1 Months Ended	3 Months Ended	9 Months Ended
	Feb. 28, 2014	Mar. 31, 2014	Mar. 31, 2014
Equity Class Of Treasury Stock [Line Items]
Stock repurchase program, authorized amount	$ 20,000,000
Treasury stock, shares		750,000
Purchase of Treasury Stock		$ 11,989,000	$ 11,989,000

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Jun. 30, 2013
Current Assets
Cash and cash equivalents	$ 185,691	$ 185,433
Accounts receivable - less allowance for doubtful accounts of $1,147 at March 31, 2014 and $1,479 at June 30, 2013	126,228	107,173
Inventories	174,607	141,859
Deferred income taxes	9,192	10,794
Prepaid and refundable income taxes	4,456	4,543
Prepaid and other current assets	15,535	11,342
Total Current Assets	515,709	461,144
Property, plant & equipment, net	211,733	170,672
Goodwill	198,864	123,352
Other intangible assets, net	141,263	86,701
Investment	11,409	11,203
Deferred income taxes	1,995	2,696
Other assets	9,091	8,034
Total Assets	1,090,064	863,802
Current Liabilities
Current portion of long-term debt	20,000
Accounts payable	47,885	23,617
Accrued compensation and benefits	29,789	28,315
Accrued income taxes payable	2,741	7,697
Deferred income taxes	147	110
Other accrued liabilities	34,527	34,695
Total Current Liabilities	135,089	94,434
Long-term debt	242,907	114,036
Deferred income taxes	10,790	4,095
Other liabilities	36,037	15,129
Total Liabilities	424,823	227,694
Shareholders' Equity
Preferred stock, no par value; authorized - 5,000,000 shares; none issued
Common stock, no par value; authorized - 300,000,000 shares; issued - 70,827,878 shares at March 31, 2014; 70,223,286 shares at June 30, 2013	209,970	194,284
Accumulated other comprehensive income	17,850	15,600
Retained earnings	508,672	482,878
Shareholders' equity excluding treasury stock	736,492	692,762
Treasury stock, at cost, 8,896,984 shares at March 31, 2014 and 8,011,733 shares at June 30, 2013	(71,251)	(56,654)
Total Shareholders' Equity	665,241	636,108
Total Liabilities and Shareholders' Equity	$ 1,090,064	$ 863,802

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Investment - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014	Mar. 31, 2013	Jun. 30, 2013
Schedule Of Equity Method Investments [Line Items]
Equity method investment, ownership percentage	20.20%		20.20%
Total carrying value of investment	$ 11,409		$ 11,409		$ 11,200
Pro-rata share of earnings	$ 100	$ 200	$ 517	$ 822

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash Flows from Operating Activities
Net earnings	$ 25,794	$ 41,693
Adjustments to reconcile net earnings to net cash provided by operating activities:
(Earnings) loss from discontinued operation, net of tax	(133)	2,563
Depreciation	31,191	25,331
Amortization	8,234	4,561
Share-based compensation expense	9,732	9,232
Loss on foreign currency remeasurements and transactions	380	672
Earnings from equity investment	(517)	(822)
Deferred income taxes	(1,814)	2,306
Excess tax benefits from share-based compensation expense	(522)	(678)
Increase (decrease) in cash from changes in:
Accounts receivable	(17,719)	9,306
Inventories	3,886	(7,387)
Accounts payable	21,943	(7,697)
Income taxes	(7,810)	565
Other operating net assets	(5,237)	(11,690)
Continuing Operations	67,408	67,955
Discontinued Operation	1,197	164
Net cash provided by operating activities	68,605	68,119
Cash Flows from Investing Activities
Additions to property, plant & equipment	(20,767)	(17,430)
Purchases of businesses, net of cash acquired	(177,676)	(126,165)
Proceeds received on contractual settlement from Thailand flood		2,436
Other investing activities	226	1,452
Continuing Operations	(198,217)	(139,707)
Discontinued Operation		(68)
Net cash used in investing activities	(198,217)	(139,775)
Cash Flows from Financing Activities
Proceeds from borrowings	183,000	113,000
Payments on borrowings	(34,000)	(4,000)
Payment on earnout arrangement	(2,200)
Payments of redeemable noncontrolling interest	(8,789)	(284)
Proceeds from exercises of stock options	3,613	3,836
Purchases of treasury stock	(10,957)	(19,978)
Other financing activities	(1,375)	(19)
Net cash provided by financing activities	129,292	92,555
Effect of exchange rate changes on cash and cash equivalents	578	(249)
Net increase in cash and cash equivalents	258	20,650
Cash and Cash Equivalents at Beginning of Period	185,433	134,944
Cash and Cash Equivalents at End of Period	185,691	155,594
Cash paid for interest	2,883	631
Cash paid for income taxes	12,545	10,040
Non cash transactions:
Purchase of business - holdback amount recorded in other accrued liabilities	10,000
Capital lease obligation incurred on facility lease	11,857
Purchase of business utilizing earnout arrangement recorded in other liabilities		$ 3,400

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Financial Information of Company's Operation by Segment (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014	Mar. 31, 2013	Jun. 30, 2013
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items]
Revenues	$ 173,555	$ 143,940	$ 495,340	$ 397,045
Segment earnings (loss)	8,743	18,169	31,782	52,095
Interest expense	(1,412)	(449)	(3,064)	(708)
Other income, net	1,694	1,401	2,766	6,713
Income taxes	(494)	(2,861)	(5,823)	(13,844)
Earnings (loss) from discontinued operation		(166)	133	(2,563)
Net earnings	8,531	16,094	25,794	41,693
Depreciation and amortization	13,192	10,725	39,425	29,892
Segment assets	1,090,064		1,090,064		863,802
Expenditures for property, plant and equipment	6,478	4,286	20,767	17,430
Investment	11,409		11,409		11,200
Goodwill	198,864		198,864		123,352
Eliminations
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items]
Inter-segment revenues	(4,549)	(2,439)	(12,448)	(9,456)
Earnings (loss) from discontinued operation
Infrared Optics | Operating Segments
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items]
Revenues	50,259	52,886	152,066	149,852
Inter-segment revenues	306	730	769	1,881
Segment earnings (loss)	10,008	13,969	28,699	36,343
Earnings (loss) from discontinued operation
Depreciation and amortization	2,281	2,032	6,627	6,264
Segment assets	232,658		232,658
Expenditures for property, plant and equipment	2,352	823	7,264	3,411
Goodwill	9,771		9,771		9,677
Near-Infrared Optics | Operating Segments
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items]
Revenues	33,554	35,821	109,298	113,463
Inter-segment revenues	812	(289)	1,580	679
Segment earnings (loss)	2,107	3,774	7,726	16,637
Earnings (loss) from discontinued operation
Depreciation and amortization	4,026	4,228	12,774	12,900
Segment assets	303,284		303,284
Expenditures for property, plant and equipment	954	1,981	6,396	6,184
Goodwill	60,412		60,412		60,269
Military & Materials | Operating Segments
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items]
Revenues	22,228	27,639	72,982	67,858
Inter-segment revenues	1,941	695	5,251	3,033
Segment earnings (loss)	1,342	(384)	8,219	(1,210)
Earnings (loss) from discontinued operation
Depreciation and amortization	1,940	1,984	6,105	4,991
Segment assets	119,438		119,438
Expenditures for property, plant and equipment	1,265	455	3,004	2,428
Goodwill	30,712		30,712		30,712
Advanced Products Group | Operating Segments
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items]
Revenues	29,961	27,594	85,273	65,872
Inter-segment revenues	1,490	1,303	4,848	3,863
Segment earnings (loss)	3,197	810	6,031	325
Earnings (loss) from discontinued operation
Depreciation and amortization	2,462	2,481	7,461	5,737
Segment assets	178,543		178,543
Expenditures for property, plant and equipment	1,336	1,027	2,886	5,407
Investment	11,409		11,409
Goodwill	22,178		22,178		22,694
Active Optical Products | Operating Segments
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items]
Revenues	37,553		75,721
Segment earnings (loss)	(7,911)		(18,893)
Earnings (loss) from discontinued operation
Depreciation and amortization	2,483		6,458
Segment assets	256,141		256,141
Expenditures for property, plant and equipment	571		1,217
Goodwill	$ 75,791		$ 75,791

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Share-Based Compensation (Tables)

9 Months Ended

Mar. 31, 2014

Share-Based Compensation Expense by Award Type

Share-based compensation expense is allocated approximately 20% to cost of goods sold and 80% to selling, general and administrative expense based on the employee classification of the grantees. Share-based compensation expense for the periods indicated was as follows ($000):

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	March 31, 2014		March 31, 2013		March 31, 2014		March 31, 2013
Stock Options and Cash-Based Stock Appreciation Rights	$	1,190	$	1,152	$	4,566	$	3,916
Restricted Share Awards and Cash-Based Restricted Share Unit Awards		930		1,144		3,539		3,240
Performance Share Awards and Cash-Based Performance Share Unit Awards		785		555		2,485		2,582
	$	2,905	$	2,851	$	10,590	$	9,738

Schedule of Fair Value Assumptions under Stock Option Plan

The Company utilizes the Black-Scholes valuation model for estimating the fair value of these awards. The weighted-average fair value of awards granted under the Plan were $6.63 and $8.57 per award, respectively, during the three and nine months ended March 31, 2014 and were $7.84 and $8.44 per award, respectively, during the three and nine months ended March 31, 2013, using the following assumptions:

	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	March 31, 2014			March 31, 2013			March 31, 2014			March 31, 2013
Risk-free interest rate		1.82	%		1.10	%		1.75	%		0.94	%
Expected volatility		46	%		48	%		47	%		49	%
Expected life of options	5.5 years			4.7 years			5.7 years			5.7 years
Dividend yield	None			None			None			None

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Reconciliation of Beginning and Ending Fair-Value Measurements of Level Three Contingent Earnout Arrangement Related to Acquisition of LightWorks (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended			9 Months Ended
	Mar. 31, 2014	Mar. 31, 2014	Mar. 31, 2014 Fair Value, Measurements, Recurring	Jun. 30, 2013 Fair Value, Measurements, Recurring	Mar. 31, 2014 Fair Value, Inputs, Level 3 Fair Value, Measurements, Recurring
Business Acquisition Contingent Consideration [Line Items]
Balance - beginning of period			$ 800	$ 3,300	$ 3,300
Payments					(2,200)
Changes in fair value	(300)	(300)			(300)
Balance - end of period			$ 800	$ 3,300	$ 800

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Derivative Instruments

9 Months Ended

Mar. 31, 2014

Derivative Instruments

Note 15. Derivative Instruments

The Company, from time to time, purchases foreign currency forward exchange contracts, primarily in Japanese Yen, that permit it to sell specified amounts of these foreign currencies expected to be received from its export sales for pre-established U.S. dollar amounts at specified dates. These contracts are entered into to limit transactional 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, on the basis of its aggregate net cash flows in respective currencies, to foreign currency risk.

The Company has recorded the fair market value of these contracts in the Company’s condensed consolidated financial statements. These contracts had a total notional amount of $7.5 million and $4.7 million at March 31, 2014 and June 30, 2013, respectively. As of March 31, 2014, these forward contracts had expiration dates ranging from April 2014 through June 2014, with Japanese Yen denominations individually ranging from 220 million Yen to 300 million Yen. The Company does not account for these contracts as hedges as defined by U.S. GAAP and records the change in the fair value of these contracts in Other expense (income), net in the Condensed Consolidated Statements of Earnings as they occur. The fair value measurement takes into consideration foreign currency rates and the current creditworthiness of the counterparties to these contracts, as applicable, and 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 and thus represents a Level 2 measurement. These contracts are recorded in Other accrued liabilities in the Company’s Condensed Consolidated Balance Sheets. The change in the fair value of these contracts for the three and nine months ended March 31, 2014 and 2013 was insignificant.

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Mar. 31, 2014

Summary by Level of Fair Value of Financial Instruments Measured on Recurring Basis

The following table provides a summary by level of the fair value of financial instruments that are measured on a recurring basis for the periods presented ($000):

	Fair Value Measurements at March 31, 2014 Using:
			Quoted
			Prices in
			Active
			Markets		Significant
			for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	March 31, 2014		(Level 1)		(Level 2)		(Level 3)
Liabilities:
Foreign currency forward contracts	$	48	$	-	$	48	$	-
Contingent earnout arrangement	$	800	$	-	$	-	$	800

	Fair Value Measurements at June 30, 2013 Using:
			Quoted
			Prices in
			Active
			Markets		Significant
			for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	June 30, 2013		(Level 1)		(Level 2)		(Level 3)
Liabilities:
Foreign currency forward contracts	$	23	$	-	$	23	$	-
Contingent earnout arrangement	$	3,300	$	-	$	-	$	3,300

Reconciliation of Beginning and Ending Fair-Value Measurements of Level Three Contingent Earnout Arrangement Related to Acquisition of LightWorks

The following table presents a reconciliation of the beginning and ending fair value measurements of the Company’s Level 3 contingent earnout arrangement related to the acquisition of LightWorks ($000):

	Significant
	Unobservable Inputs
	(Level 3)
Balance at July 1, 2013	$	3,300
Payments		(2,200	)
Changes in fair value		(300	)
Balance at March 31, 2014	$	800

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Post-Retirement Benefits

9 Months Ended

Mar. 31, 2014

Post-Retirement Benefits

Note 17. Post-Retirement Benefits

In connection with the Company’s acquisition of Laser Enterprise, the Company assumed the existing pension plan (the “Swiss Plan”) covering employees of the Zurich, Switzerland subsidiary which included an $8.9 million unfunded pension liability recorded as part of the preliminary purchase price allocation of Laser Enterprise. This unfunded pension liability is recorded in Other liabilities in the Condensed Consolidated Balance Sheet at March 31, 2014.   Net periodic pension costs associated with the Swiss Plan for the three and nine months ended March 31, 2014 included the following ($000):

	Three Months			Nine Months
	Ended			Ended
	March 31,			March 31,
	2014			2014
Service cost	$	835		$	1,837
Interest cost		201			443
Expected return on plan assets		(331	)		(728	)
Net amortization		-			-
Net periodic pension costs	$	705		$	1,552

Since the acquisition of Laser Enterprise, the Company has contributed $1.1 million to the Swiss Plan.  The Company currently anticipates contributing an additional estimated amount of approximately $0.5 million to the Swiss Plan during the remainder of fiscal year 2014.

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Post-Retirement Benefits - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Mar. 31, 2014
Defined Benefit Plan Disclosure [Line Items]
Post-Retirement benefits contributions	$ 1.1
Post-Retirement benefits expected contributions for next year	0.5
Unfunded Pension Plan
Defined Benefit Plan Disclosure [Line Items]
Pension liability	$ 8.9

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Condensed Consolidated Statement of Shareholders' Equity (USD $) In Thousands, except Share data	Total	Common Stock	Accumulated Other Comprehensive Income	Retained Earnings	Treasury Stock
Beginning Balance at Jun. 30, 2013	$ 636,108	$ 194,284	$ 15,600	$ 482,878	$ (56,654)
Beginning Balance, shares at Jun. 30, 2013		70,223,000			(8,012,000)
Shares issued under share-based compensation plans (in shares)		605,000
Shares issued under share-based compensation plans	3,623	3,623
Minimum tax withholding requirements, (in shares)					(42,000)
Minimum tax withholding requirements	(799)				(799)
Share-based compensation expense	9,732	9,732
Net earnings	25,794			25,794
Purchases of treasury stock	(11,989)				(11,989)
Purchases of treasury stock, shares					(750,000)
Treasury stock under deferred compensation arrangements		1,809			(1,809)
Treasury stock in deferred compensation plan, (in shares)					(93,000)
Excess tax benefits from share-based compensation expense	522	522
Foreign currency translation adjustments	2,250		2,250
Ending Balance at Mar. 31, 2014	$ 665,241	$ 209,970	$ 17,850	$ 508,672	$ (71,251)
Ending Balance, shares at Mar. 31, 2014		70,828,000			(8,897,000)

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2014	Jun. 30, 2013
Accounts receivable, allowance for doubtful accounts	$ 1,147	$ 1,479
Preferred stock, par value	$ 0	$ 0
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0	$ 0
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	70,827,878	70,223,286
Treasury stock, shares	8,896,984	8,011,733

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Income Taxes

9 Months Ended

Mar. 31, 2014

Income Taxes

Note10. Income Taxes

The Company’s year-to-date effective income tax rate from continuing operations at March 31, 2014 and 2013 was 18.5% and 23.8%, respectively. The variations between the Company’s effective tax rate from continuing operations and the U.S. statutory rate of 35.0% were primarily due to the consolidation of the Company’s foreign operations, which are subject to income taxes at lower statutory rates. In addition, the Company recorded $1.4 million of tax benefits during the three months ended March 31, 2014, as a result of statute of limitation expirations on previously filed income tax returns and higher income tax credits from qualifying research and development investment. A change in the mix of pre-tax income from these various tax jurisdictions could have a material impact on the Company’s effective tax rate.

U.S. GAAP clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes 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 March 31, 2014 and June 30, 2013, the Company’s gross unrecognized income tax benefit was $3.0 million and $3.3 million, respectively. The Company has classified the uncertain tax positions as noncurrent income tax liabilities, as the amounts are not expected to be paid within one year. If recognized, substantially all of the gross unrecognized tax benefits at March 31, 2014 would impact the effective tax rate. The Company recognizes interest and penalties related to uncertain tax positions in the income tax provision on the Condensed Consolidated Statements of Earnings. The amount of accrued interest and penalties included in the $3.0 million and $3.3 million of gross unrecognized income tax benefit at March 31, 2014 and June 30, 2013 was immaterial. Fiscal years 2011 to 2013 remain open to examination by the United States Internal Revenue Service, fiscal years 2008 to 2013 remain open to examination by certain state jurisdictions, and fiscal years 2005 to 2013 remain open to examination by certain foreign taxing jurisdictions.

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Document and Entity Information	9 Months Ended
	Mar. 31, 2014	May 02, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Trading Symbol	IIVI
Entity Registrant Name	II-VI INC
Entity Central Index Key	0000820318
Current Fiscal Year End Date	--06-30
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		61,939,724

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Earnings Per Share

9 Months Ended

Mar. 31, 2014

Earnings Per Share

Note  11. Earnings Per Share

The following table sets forth the computation of earnings per share attributable to II-VI Incorporated for the periods indicated. Weighted average shares issuable upon the exercises of stock options and the release of performance and restricted shares that were not included in the calculation were approximately 542,000 and 433,000, respectively, for the three and nine months ended March 31, 2014, and 410,000 and 429,000, respectively, for the three and nine months ended March 31, 2013, because they were anti-dilutive ($000 except per share data):

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2014		2013			2014		2013
Earnings from continuing operations attributable to II-VI Incorporated	$	8,531	$	16,035		$	25,661	$	43,350
Earnings (loss) from discontinued operation		-		(166	)		133		(2,563	)
Net earnings attributable to II-VI Incorporated	$	8,531	$	15,869		$	25,794	$	40,787
Divided by:
Weighted average shares		62,355		62,130			62,426		62,482
Basic earnings (loss) attributable to II-VI Incorporated per common share:
Continuing operations	$	0.14	$	0.26		$	0.41	$	0.69
Discontinued operation	$	-	$	(0.00	)	$	-	$	(0.04	)
Consolidated	$	0.14	$	0.26		$	0.41	$	0.65
Earnings from continuing operations attributable to II-VI Incorporated	$	8,531	$	16,035		$	25,661	$	43,350
Earnings (loss) from discontinued operation		-		(166	)		133		(2,563	)
Net earnings attributable to II-VI Incorporated	$	8,531	$	15,869		$	25,794	$	40,787
Divided by:
Weighted average shares		62,355		62,130			62,426		62,482
Dilutive effect of common stock equivalents		1,391		1,594			1,444		1,483
Diluted weighted average common shares		63,746		63,724			63,870		63,965
Diluted earnings (loss) attributable to II-VI Incorporated per common share:
Continuing operations	$	0.13	$	0.25		$	0.40	$	0.68
Discontinued operation	$	-	$	(0.00	)	$	-	$	(0.04	)
Consolidated	$	0.13	$	0.25		$	0.40	$	0.64

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Condensed Consolidated Statements of Earnings (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014	Mar. 31, 2013
Revenues
Domestic	$ 54,424	$ 65,176	$ 178,683	$ 168,938
International	119,131	78,764	316,657	228,107
Total Revenues	173,555	143,940	495,340	397,045
Costs, Expenses and Other Expense (Income)
Cost of goods sold	118,865	92,986	330,945	248,424
Internal research and development	12,099	5,781	31,201	16,992
Selling, general and administrative	33,848	27,004	101,412	79,534
Interest expense	1,412	449	3,064	708
Other expense (income), net	(1,694)	(1,401)	(2,766)	(6,713)
Total Costs, Expenses and Other Expense (Income)	164,530	124,819	463,856	338,945
Earnings from Continuing Operations Before Income Taxes	9,025	19,121	31,484	58,100
Income Taxes	494	2,861	5,823	13,844
Earnings from Continuing Operations	8,531	16,260	25,661	44,256
Earnings (loss) from Discontinued Operation, net of income tax		(166)	133	(2,563)
Net Earnings	8,531	16,094	25,794	41,693
Less: Net Earnings Attributable to Redeemable Noncontrolling Interest		225		906
Net Earnings Attributable to II-VI Incorporated	$ 8,531	$ 15,869	$ 25,794	$ 40,787
Earnings (loss) Attributable to II-VI Incorporated: Basic Earnings (loss) Per Share:
Continuing Operations	$ 0.14	$ 0.26	$ 0.41	$ 0.69
Discontinued Operation		$ 0.00	$ 0.00	$ (0.04)
Consolidated	$ 0.14	$ 0.26	$ 0.41	$ 0.65
Earnings (loss) Attributable to II-VI Incorporated: Diluted Earnings (loss) Per Share:
Continuing Operations	$ 0.13	$ 0.25	$ 0.40	$ 0.68
Discontinued Operation		$ 0.00	$ 0.00	$ (0.04)
Consolidated	$ 0.13	$ 0.25	$ 0.40	$ 0.64

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Investment

9 Months Ended

Mar. 31, 2014

Investment

Note5. Investment

The Company has an equity investment in Guangdong Fuxin Electronic Technology (“Fuxin”) based in Guangdong Province, China of 20.2%, which is accounted for under the equity method of accounting. The total carrying value of the investment recorded at March 31, 2014 and June 30, 2013 was $11.4 million and $11.2 million, respectively. During the three months ended March 31, 2014 and 2013, the Company’s pro-rata share of earnings from this investment was $0.1 million and $0.2 million, respectively, and was $0.5 million and $0.8 million during the nine months ended March 31, 2014 and 2013, respectively, and were recorded in Other expense (income), net in the Condensed Consolidated Statements of Earnings.

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Acquisitions

9 Months Ended

Mar. 31, 2014

Acquisitions

Note4. Acquisitions

Oclaro’s Fiber Amplifier and Micro-Optics Business

In November 2013, the Company acquired certain assets of Oclaro used in the fiber amplifier and micro-optics business. The Company operates the business under the name Network Solutions and includes it with II-VI Laser Enterprise, GmbH (“Laser Enterprise”) in the Company’s new operating segment, Active Optical Products. Network Solutions is a manufacturer of fiber amplifiers and micro-optics used in the optical communications market. At closing, the Company paid $79.6 million in cash, plus a $4.0 million holdback amount for 14 months to address any post-closing adjustments or claims, and $5.0 million that was previously paid to Oclaro on September 12, 2013. The purchase price of the Network Solutions acquisition is summarized as follows ($000):

Net cash paid at acquisition date	$	79,600
Cash previously paid		5,000
Holdback amount recorded in Other liabilities		4,000
Purchase price	$	88,600

Due to the timing of the acquisition, the Company is still in the process of completing its fair market valuation, including the valuation of certain tangible and intangible assets as well as deferred income taxes. The following table presents the preliminary allocation of the purchase price of the assets acquired at the date of acquisition, as the Company intends to finalize its accounting for the acquisition of Network Solutions during fiscal year 2014 ($000):

Assets
Inventories	$	11,314
Property, plant & equipment		9,700
Intangible assets		32,900
Goodwill		34,686
Total assets acquired	$	88,600

The goodwill of $34.7 million is included in the Active Optical Products segment and is attributed to the expected synergies and the assembled workforce of Network Solutions. All of the goodwill is deductible for income tax purposes.

The amount of revenues and net loss from operations of Network Solutions included in the Company’s Condensed Consolidated Statement of Earnings were $19.4 million and $0.5 million, respectively, for the three months ended March 31, 2014 and were $32.6 million and $2.3 million, respectively, for the nine months ended March 31, 2014.

Oclaro’s Switzerland-Based Semiconductor Laser Business

In September 2013, the Company acquired all of the outstanding shares of Oclaro Switzerland GmbH, a limited liability company formed under the laws of the Swiss confederation, as well as certain additional assets of Oclaro used in the semiconductor laser business. The Company operates the acquired business under the name Laser Enterprise and includes it in the Company’s new operating segment, Active Optical Products. Laser Enterprise is a manufacturer of high-power semiconductor laser components enabling fiber and direct diode laser systems for material processing, medical, consumer and printing applications. In addition, the segment manufactures pump lasers for optical amplifiers for both terrestrial and submarine applications and vertical cavity surface emitting lasers (VCSELS) for optical navigation, optical interconnects and optical sensing applications.  At closing, the Company paid $90.6 million of cash, net of cash acquired of $1.7 million, a $6.0 million holdback amount by the Company for 15 months to address any post-closing adjustments or claims, and a $2.0 million holdback amount for potential post-closing working capital adjustments.  During the three months ended March 2014, the Company paid an additional $2.5 million for a working capital adjustment in accordance with the purchase agreement. The purchase price of the Laser Enterprise acquisition is summarized as follows ($000):

Net cash paid at acquisition date	$	90,601
Additional cash paid for working capital adjustment		2,475
Holdback amount recorded in Other accrued liabilities		6,000
Purchase price	$	99,076

Due to the timing of the acquisition, the Company is still in the process of completing its fair market valuation, including the valuation of certain tangible and intangible assets as well as deferred income taxes. The following table presents the preliminary allocation of the purchase price of the assets acquired and liabilities assumed at the date of acquisition, as the Company intends to finalize its accounting for the acquisition of Laser Enterprise during fiscal year 2014 ($000):

Assets
Inventories	$	26,071
Prepaid and other assets		1,035
Deferred income taxes		2,376
Property, plant & equipment		30,200
Intangible assets		29,800
Goodwill		41,105
Total assets acquired	$	130,587
Liabilities
Accounts payable	$	2,214
Deferred income taxes		13,290
Accrued income taxes		2,714
Other accrued liabilities		13,293
Total liabilities assumed	$	31,511
Net assets acquired	$	99,076

The goodwill of Laser Enterprise of $41.1 million is included in the Active Optical Products segment and is attributed to the expected synergies and the assembled workforce of Laser Enterprise. None of the goodwill is deductible for income tax purposes.

The amount of revenues and net loss from operations of Laser Enterprise included in the Company’s Condensed Consolidated Statement of Earnings for the three months ended March 31, 2014 was $18.1 million and $5.0 million, respectively, and was $43.1 million and $12.3 million, respectively, for the nine months ended March 31, 2014.

In conjunction with the acquisitions of Network Solutions and Laser Enterprise, the Company expensed transactions costs of approximately $3.7 million, net of tax of $0.2 million, during the nine months ended March 31, 2014.  None of these costs were recorded during the three months ended March 31, 2014.  These costs were recorded within selling, general and administrative expenses in the Condensed Consolidated Statements of Earnings.

Pro Forma Information

The following unaudited pro forma consolidated results of operations for the three and nine months ended March 31, 2014 and 2013 have been prepared as if the acquisitions of Network Solutions and Laser Enterprise had occurred on July 1, 2012, the beginning of the Company’s fiscal year 2013, which is the fiscal year prior to the acquisitions. As a result, certain transaction related expenses of $3.7 million (net of tax) for the nine month period were only included in the earliest period presented below ($000 except per share data).

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2014		2013		2014		2013
Net revenues	$	173,555	$	189,471	$	546,991	$	489,527
Earnings from continuing operations attributable to II-VI Incorporated		8,531		14,166		34,377		31,095
Basic earnings per share from continuing operations attributable to II-VI Incorporated		0.14		0.23		0.55		0.50
Diluted earnings per share from continuing operations attributable to II-VI Incorporated		0.13		0.22		0.54		0.49

The pro forma results are not necessarily indicative of what actually would have occurred if the transactions had occurred as described above, are not intended to be a projection of future results and do not reflect any cost savings that might be achieved from the combined operations.

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Commitments and Contingencies

9 Months Ended

Mar. 31, 2014

Commitments and Contingencies

Note  16. Commitments and Contingencies

The Company records a warranty reserve as a charge against earnings based on a percentage of sales utilizing actual warranty claims over the last twelve months. The following table summarizes the change in the carrying value of the Company’s warranty reserve, which is a component of Other accrued liabilities in the Company’s Condensed Consolidated Balance Sheets, as of and for the nine months ended March 31, 2014 ($000):

	Nine Months Ended
	March 31, 2014
Balance-beginning of period	$	1,661
Payments made during the period		(1,263	)
Additional warranty liability recorded during the period		1,668
Warranty liability assumed through acquisition		1,173
Balance-end of period	$	3,239

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Segment Reporting

9 Months Ended

Mar. 31, 2014

Segment Reporting

Note12. Segment 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.

In conjunction with the acquisitions of Laser Enterprise on September 12, 2013 and Network Solutions on November 1, 2013, the Company has established a new reporting segment “Active Optical Products” which reports the operating results of the Company’s recently acquired businesses.

The Company has five reportable segments as of March 31, 2014. 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 from continuing operations before income taxes, interest and other income or expense. The segments are managed separately due to the production requirements and facilities unique to each segment. The Company has the following reportable segments at March 31, 2014: (i) Infrared Optics, which consists of the Company’s infrared optics and material products businesses, HIGHYAG Lasertechnologies, GmbH (“HIGHYAG”) and certain remaining corporate activities, primarily corporate assets and capital expenditures; (ii) Near-Infrared Optics, which consists of Photop, Photop Aegis, Inc. (“Photop Aeigs”) and Photop AOFR; (iii) Military & Materials, which consists of the Company’s LightWorks Optical Systems (formerly the Company’s EEO and LightWorks Optical Systems subsidiaries, “LWOS”), VLOC Incorporated (“VLOC”), Max Levy Autograph, Inc. (“MLA”) and PRM; (iv) Advanced Products Group, which is comprised of the Company’s Marlow Industries, Inc. (“Marlow”), M Cubed, the Wide Bandgap Materials Group (“WBG”) and the Worldwide Materials Group (“WMG”), which is responsible for corporate research and development activities; and (v) Active Optical Products which consists of Laser Enterprise and Network Solutions.

During December 2013, the Company completed the discontinuance of its tellurium product line by exiting all business activities associated with this product.    This product line was previously serviced by PRM and was included as part of the Military & Materials segment.   Segment information for all periods presented has been adjusted to properly reflect the tellurium product as a discontinued operation.

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 the Corporate Chief Operating Officer 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 opto-electronic 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 Photop Aegis and Photop AOFR brand names, respectively.

The Military & Materials segment is located in the U.S. and the Philippines. The Military & Materials segment is directed by the Corporate Chief Operating Officer, 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 ultra-violet to infrared optical components and high-precision optical assemblies for military, medical and commercial laser and imaging applications under the LWOS and VLOC brand names and manufactures and markets micro-fine conductive mesh patterns for optical, mechanical, and ceramic components for applications under the MLA brand name. The segment also refines selenium metals for internal consumption and a rare earth element under the PRM brand name.

The Advanced Products Group is located in the U.S., Vietnam, Japan, China and Germany and is directed by the Corporate Chief Operating Officer. 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. M Cubed develops advanced ceramic materials and precision motion control products addressing the semiconductor, display, industrial and defense 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 Active Optical Products segment is located in Switzerland, China, the U.S., Italy, Japan, Thailand, Hong Kong and the U.K. The Active Optical Products segment is directed by the Corporate Chief Operating Officer. Laser Enterprise manufactures high-power semiconductor laser components enabling fiber and direct diode laser systems for material processing, medical, consumer and printing applications. In addition, Laser Enterprise manufactures pump lasers for optical amplifiers for both terrestrial and submarine applications and VCSELS for optical navigation, optical interconnects and optical sensing applications. Network Solutions manufactures optical amplifiers and micro-optics for both terrestrial and submarine applications within the optical communications market.

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 from continuing operations 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 ($000):

	Three Months Ended March 31, 2014
			Near-		Military		Advanced		Active
	Infrared		Infrared		&		Products		Optical
	Optics		Optics		Materials		Group		Products			Eliminations			Total
Revenues	$	50,259	$	33,554	$	22,228	$	29,961	$	37,553		$	-		$	173,555
Inter-segment revenues		306		812		1,941		1,490		-			(4,549	)		-
Segment earnings (loss)		10,008		2,107		1,342		3,197		(7,911	)		-			8,743
Interest expense		-		-		-		-		-			-			(1,412	)
Other income, net		-		-		-		-		-			-			1,694
Income taxes		-		-		-		-		-			-			(494	)
Earnings from discontinued operation		-		-		-		-		-			-			-
Net earnings		-		-		-		-		-			-			8,531
Depreciation and amortization		2,281		4,026		1,940		2,462		2,483			-			13,192
Segment assets		232,658		303,284		119,438		178,543		256,141			-			1,090,064
Expenditures for property, plant and equipment		2,352		954		1,265		1,336		571			-			6,478
Investment		-		-		-		11,409		-			-			11,409
Goodwill		9,771		60,412		30,712		22,178		75,791			-			198,864

	Three Months Ended March 31, 2013
			Near-			Military			Advanced
	Infrared		Infrared			&			Products
	Optics		Optics			Materials			Group		Eliminations			Total
Revenues	$	52,886	$	35,821		$	27,639		$	27,594	$	-		$	143,940
Inter-segment revenues		730		(289	)		695			1,303		(2,439	)		-
Segment earnings (loss)		13,969		3,774			(384	)		810		-			18,169
Interest expense		-		-			-			-		-			(449	)
Other income, net		-		-			-			-		-			1,401
Income taxes		-		-			-			-		-			(2,861	)
Loss from discontinued operation		-		-			-			-		-			(166	)
Net earnings		-		-			-			-		-			16,094
Depreciation and amortization		2,032		4,228			1,984			2,481		-			10,725
Expenditures for property, plant and equipment		823		1,981			455			1,027		-			4,286

	Nine Months Ended March 31, 2014
			Near-		Military		Advanced		Active
	Infrared		Infrared		&		Products		Optical
	Optics		Optics		Materials		Group		Products			Eliminations			Total
Revenues	$	152,066	$	109,298	$	72,982	$	85,273	$	75,721					$	495,340
Inter-segment revenues		769		1,580		5,251		4,848		-			(12,448	)		-
Segment earnings (loss)		28,699		7,726		8,219		6,031		(18,893	)		-			31,782
Interest expense		-		-		-		-		-			-			(3,064	)
Other income, net		-		-		-		-		-			-			2,766
Income taxes		-		-		-		-		-			-			(5,823	)
Earnings from discontinued operation		-		-		-		-		-			-			133
Net earnings		-		-		-		-		-			-			25,794
Depreciation and amortization		6,627		12,774		6,105		7,461		6,458			-			39,425
Expenditures for property, plant and equipment		7,264		6,396		3,004		2,886		1,217			-			20,767

	Nine Months Ended March 31, 2013
			Near-		Military			Advanced
	Infrared		Infrared		&			Products
	Optics		Optics		Materials			Group		Eliminations			Total
Revenues	$	149,852	$	113,463	$	67,858		$	65,872	$	-		$	397,045
Inter-segment revenues		1,881		679		3,033			3,863		(9,456	)		-
Segment earnings (loss)		36,343		16,637		(1,210	)		325		-			52,095
Interest expense		-		-		-			-		-			(708	)
Other income, net		-		-		-			-		-			6,713
Income taxes		-		-		-			-		-			(13,844	)
Loss from discontinued operation		-		-		-			-		-			(2,563	)
Net earnings		-		-		-			-		-			41,693
Depreciation and amortization		6,264		12,900		4,991			5,737		-			29,892
Expenditures for property, plant and equipment		3,411		6,184		2,428			5,407		-			17,430

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Goodwill and Other Intangible Assets

9 Months Ended

Mar. 31, 2014

Goodwill and Other Intangible Assets

Note  8. Goodwill and Other Intangible Assets

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

	Nine Months Ended March 31, 2014
			Near-		Military		Advanced			Active
	Infrared		Infrared		&		Products			Optical
	Optics		Optics		Materials		Group			Products		Total
Balance-beginning of period	$	9,677	$	60,269	$	30,712	$	22,694		$	-	$	123,352
Goodwill acquired		-		-		-		-			75,791		75,791
Goodwill adjustment		-		-		-		(516	)		-		(516	)
Foreign currency translation		94		143		-		-			-		237
Balance-end of period	$	9,771	$	60,412	$	30,712	$	22,178		$	75,791	$	198,864

The Company reviews the recoverability of goodwill at least annually and any time business conditions indicate a potential change in recoverability. The measurement of a potential impairment begins with comparing the current fair value of the Company’s reporting units to the recorded value (including goodwill). The Company uses a discounted cash flow model (“DCF model”) and a market analysis to determine the current fair value of its reporting units. A number of significant assumptions and estimates are involved in estimating the forecasted cash flows used in the DCF model, including markets and market shares, sales volume and pricing, costs to produce, working capital changes and income tax rates. Management considers historical experience and all available information at the time the fair values of the reporting units are estimated. However, actual fair values that could be realized could differ from those used to evaluate the impairment of goodwill.

In connection with the acquisitions of Laser Enterprise in September 2013 and Network Solutions in November 2013, the Company recorded the excess purchase price over the net assets of the businesses acquired as goodwill in the accompanying Condensed Consolidated Balance Sheet, based on preliminary purchase price allocations.

During the nine months ended March 31, 2014, the Company recorded an adjustment to goodwill of $0.5 million associated with the November 2012 acquisition of M Cubed Technologies, Inc (“M Cubed”). This adjustment related to a change in deferred income tax assets and was recorded in conjunction with the finalization and filing of the M Cubed final income tax return.

The gross carrying amount and accumulated amortization of the Company’s intangible assets other than goodwill as of March 31, 2014 and June 30, 2013 was as follows ($000):

	March 31, 2014							June 30, 2013
	Gross					Net		Gross					Net
	Carrying		Accumulated			Book		Carrying		Accumulated			Book
	Amount		Amortization			Value		Amount		Amortization			Value
Technology and Patents	$	50,506	$	(13,393	)	$	37,113	$	39,659	$	(10,455	)	$	29,204
Trademarks		17,870		(1,018	)		16,852		17,855		(963	)		16,892
Customer Lists		104,661		(17,521	)		87,140		52,614		(12,189	)		40,425
Other		1,588		(1,430	)		158		1,580		(1,400	)		180
Total	$	174,625	$	(33,362	)	$	141,263	$	111,708	$	(25,007	)	$	86,701

In conjunction with the acquisitions of Laser Enterprise and Network Solutions, the Company recorded $10.8 million of technology and patents and $51.9 million of customer lists. These intangible assets were recorded based on the Company’s preliminary purchase price allocations which are expected to be finalized during fiscal year 2014.

Amortization expense recorded on the Company’s intangible assets was $2.6 million and $8.2 million, respectively, for the three and nine months ended March 31, 2014 and was $2.2 million and $4.6 million, respectively, for the three and nine months ended March 31, 2013. The technology and patents are being amortized over a range of 120 to 240 months with a weighted average remaining life of approximately 120 months. The customer lists are being amortized over a range of approximately 120 months to 192 months with a weighted average remaining life of approximately 153 months. The gross carrying amount of trademarks includes $16.4 million of acquired trade names with indefinite lives that are not amortized but tested annually for impairment or more frequently if a triggering event occurs. Included in the gross carrying amount and accumulated amortization of the Company’s intangible assets is the effect of foreign currency translation on that portion of the intangible assets relating to the Company’s German subsidiaries as well as Photop Technologies, Inc. (“Photop”) and Photop AOFR Pty. Ltd. (“Photop AOFR”).

At March 31, 2014, the estimated amortization expense for existing intangible assets for each of the five succeeding fiscal years is as follows ($000):

Year Ending June 30,
Remaining 2014	$	3,096
2015		11,806
2016		11,739
2017		11,729
2018		11,254

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Share-Based Compensation - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014	Mar. 31, 2013
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Percentage of share based compensation expense allocated to cost of sales	20.00%
Percentage of share based compensation expense allocated to selling, general and administrative expense	80.00%
Stock Options and Cash-Based Stock Appreciation Rights
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Weighted-average fair values of stock options granted under the stock option Plan	$ 6.63	$ 7.84	$ 8.57	$ 8.44
Share based compensation, estimated forfeiture percentage			16.00%
Restricted Share Awards and Cash-Based Restricted Share Unit Awards
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Share based compensation, estimated forfeiture percentage			7.50%
Share based compensation, vesting period years			3 years
Performance Stock and Performance Stock Unit | Minimum
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Performance share grant, period			24 months
Performance Stock and Performance Stock Unit | Maximum
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Performance share grant, period			48 months

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Inventories

9 Months Ended

Mar. 31, 2014

Inventories

Note  6. Inventories

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

	March 31,		June 30,
	2014		2013
Raw materials	$	76,254	$	59,290
Work in progress		57,344		43,895
Finished goods		41,009		38,674
	$	174,607	$	141,859

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Property, Plant and Equipment

9 Months Ended

Mar. 31, 2014

Property, Plant and Equipment

Note7. Property, Plant and Equipment

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

	March 31,			June 30,
	2014			2013
Land and land improvements	$	2,381		$	2,236
Buildings and improvements		96,404			87,189
Machinery and equipment		331,181			276,802
Construction in progress		14,579			10,831
		444,545			377,058
Less accumulated depreciation		(232,812	)		(206,386	)
	$	211,733		$	170,672

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Debt

9 Months Ended

Mar. 31, 2014

Debt

Note9. Debt

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

	March 31,			June 30,
	2014			2013
Line of credit, interest at LIBOR, as defined, plus 1.50% and 1.25%, respectively	$	170,000		$	111,000
Term loan, interest at LIBOR, as defined, plus 1.25%		90,000			-
Yen denominated line of credit, interest at LIBOR, as defined, plus 1.50% and 1.25%, respectively		2,907			3,036
Total debt		262,907			114,036
Current portion of long-term debt		(20,000	)		-
Long-term debt, less current portion	$	242,907		$	114,036

In September 2013, the Company amended and restated its existing credit agreement. The Second Amended and Restated Credit Agreement (the “Amended Credit Facility”) provides for a revolving credit facility of $225 million (increased from $140 million), as well as a $100 million Term Loan. The Term Loan shall be re-paid in consecutive quarterly principal payments on the first business day of each January, April, July and October, with the first payment commencing on October 1, 2013, as follows: (i) twenty consecutive quarterly installments of $5 million and (ii) a final installment of all remaining principal due and payable on the maturity date. The Amended Credit Facility is unsecured, but is guaranteed by each existing and subsequently acquired or organized wholly-owned domestic subsidiary of the Company. The Company has the option to request an increase to the size of the Amended Credit Facility in an aggregate additional amount not to exceed $100 million. The Amended Credit Facility has a five-year term through September 2018 and has an interest rate of LIBOR, as defined in the agreement, plus 0.75% to 1.75% based on the Company’s ratio of consolidated indebtedness to consolidated EBITDA. Additionally, the facility is subject to certain covenants, including those relating to minimum interest coverage and maximum leverage ratios. As of March 31, 2014, the Company was in compliance with all financial covenants under its Amended Credit Facility.

In conjunction with entering into the Amended Credit Facility, the Company incurred approximately $1.0 million of deferred financing costs which are being amortized over the term of the agreement. As a result of the overall increase in borrowing capacity, existing deferred financing costs at the time of the amendment of $0.5 million are also being amortized over the term of the Amended Credit Facility.

The Company’s Yen denominated line of credit is a 500 million Yen facility that has a five-year term through June 2016 and has an interest rate equal to LIBOR, as defined in the loan agreement, plus 0.625% to 1.50%. At March 31, 2014 and June 30, 2013, the Company had 300 million Yen borrowed. Additionally, the facility is subject to certain covenants, including those relating to minimum interest coverage and maximum leverage ratios. As of March 31, 2014, the Company was in compliance with all financial covenants under its Yen facility.

The Company had aggregate availability of $55.4 million and $29.8 million under its lines of credit as of March 31, 2014 and June 30, 2013, respectively. The amounts available under the Company’s lines of credit are reduced by outstanding letters of credit. As of March 31, 2014 and June 30, 2013, total outstanding letters of credit supported by the credit facilities were $1.5 million and $1.3 million, respectively.

The weighted average interest rate of total borrowings was 1.7% and 1.2% for the nine months ended March 31, 2014 and 2013, respectively.

Remaining annual principal payments under the Company’s existing credit facilities as of March 31, 2014 were as follows:

					U.S.
					Dollar
	Term		Yen Line		Line of
Period	Loan		of Credit		Credit		Total
Year 1	$	20,000	$	-	$	-	$	20,000
Year 2		20,000		-		-		20,000
Year 3		20,000		2,907		-		22,907
Year 4		20,000		-		-		20,000
Year 5		10,000		-		170,000		180,000
Total	$	90,000	$	2,907	$	170,000	$	262,907

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Summary by Level of Fair Value of Financial Instruments Measured on Recurring Basis (Detail) (Fair Value, Measurements, Recurring, USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Jun. 30, 2013
Liabilities:
Foreign currency forward contracts	$ 48
Contingent earnout arrangement	800	3,300
Foreign currency forward contracts		23
Fair Value, Inputs, Level 2
Liabilities:
Foreign currency forward contracts	48
Foreign currency forward contracts		23
Fair Value, Inputs, Level 3
Liabilities:
Contingent earnout arrangement	$ 800	$ 3,300

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Derivative Instruments - Additional Information (Detail) In Millions, unless otherwise specified			9 Months Ended
	Mar. 31, 2014 USD ($)	Jun. 30, 2013 USD ($)	Mar. 31, 2014 Minimum JPY (¥)	Mar. 31, 2014 Maximum JPY (¥)
Derivative [Line Items]
Foreign currency forward exchange contracts, notional amount	$ 7.5	$ 4.7
Foreign currency forward exchange contracts maturity amount			¥ 220	¥ 300

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Fair Value of Financial Instruments - Additional Information (Detail) (USD $)	3 Months Ended	9 Months Ended
	Mar. 31, 2014	Mar. 31, 2014
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Business acquisition, additional cash earnout opportunities	$ 4,200,000	$ 4,200,000
Fair value of earnout arrangement, probability	40.00%	40.00%
Business acquisition, total earnout payments		2,200,000
Business acquisition, percentage of earnout arrangement achieved	100.00%	100.00%
Business acquisition, fair value of remaining revenue earnout arrangement recorded in other accrued liabilities	800,000	800,000
Unrealized gain due to fair value re-measurement	$ 300,000	$ 300,000

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Segment Reporting (Tables)

9 Months Ended

Mar. 31, 2014

Financial Information of Company's Operation by Segment

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

	Three Months Ended March 31, 2014
			Near-		Military		Advanced		Active
	Infrared		Infrared		&		Products		Optical
	Optics		Optics		Materials		Group		Products			Eliminations			Total
Revenues	$	50,259	$	33,554	$	22,228	$	29,961	$	37,553		$	-		$	173,555
Inter-segment revenues		306		812		1,941		1,490		-			(4,549	)		-
Segment earnings (loss)		10,008		2,107		1,342		3,197		(7,911	)		-			8,743
Interest expense		-		-		-		-		-			-			(1,412	)
Other income, net		-		-		-		-		-			-			1,694
Income taxes		-		-		-		-		-			-			(494	)
Earnings from discontinued operation		-		-		-		-		-			-			-
Net earnings		-		-		-		-		-			-			8,531
Depreciation and amortization		2,281		4,026		1,940		2,462		2,483			-			13,192
Segment assets		232,658		303,284		119,438		178,543		256,141			-			1,090,064
Expenditures for property, plant and equipment		2,352		954		1,265		1,336		571			-			6,478
Investment		-		-		-		11,409		-			-			11,409
Goodwill		9,771		60,412		30,712		22,178		75,791			-			198,864

	Three Months Ended March 31, 2013
			Near-			Military			Advanced
	Infrared		Infrared			&			Products
	Optics		Optics			Materials			Group		Eliminations			Total
Revenues	$	52,886	$	35,821		$	27,639		$	27,594	$	-		$	143,940
Inter-segment revenues		730		(289	)		695			1,303		(2,439	)		-
Segment earnings (loss)		13,969		3,774			(384	)		810		-			18,169
Interest expense		-		-			-			-		-			(449	)
Other income, net		-		-			-			-		-			1,401
Income taxes		-		-			-			-		-			(2,861	)
Loss from discontinued operation		-		-			-			-		-			(166	)
Net earnings		-		-			-			-		-			16,094
Depreciation and amortization		2,032		4,228			1,984			2,481		-			10,725
Expenditures for property, plant and equipment		823		1,981			455			1,027		-			4,286

	Nine Months Ended March 31, 2014
			Near-		Military		Advanced		Active
	Infrared		Infrared		&		Products		Optical
	Optics		Optics		Materials		Group		Products			Eliminations			Total
Revenues	$	152,066	$	109,298	$	72,982	$	85,273	$	75,721					$	495,340
Inter-segment revenues		769		1,580		5,251		4,848		-			(12,448	)		-
Segment earnings (loss)		28,699		7,726		8,219		6,031		(18,893	)		-			31,782
Interest expense		-		-		-		-		-			-			(3,064	)
Other income, net		-		-		-		-		-			-			2,766
Income taxes		-		-		-		-		-			-			(5,823	)
Earnings from discontinued operation		-		-		-		-		-			-			133
Net earnings		-		-		-		-		-			-			25,794
Depreciation and amortization		6,627		12,774		6,105		7,461		6,458			-			39,425
Expenditures for property, plant and equipment		7,264		6,396		3,004		2,886		1,217			-			20,767

	Nine Months Ended March 31, 2013
			Near-		Military			Advanced
	Infrared		Infrared		&			Products
	Optics		Optics		Materials			Group		Eliminations			Total
Revenues	$	149,852	$	113,463	$	67,858		$	65,872	$	-		$	397,045
Inter-segment revenues		1,881		679		3,033			3,863		(9,456	)		-
Segment earnings (loss)		36,343		16,637		(1,210	)		325		-			52,095
Interest expense		-		-		-			-		-			(708	)
Other income, net		-		-		-			-		-			6,713
Income taxes		-		-		-			-		-			(13,844	)
Loss from discontinued operation		-		-		-			-		-			(2,563	)
Net earnings		-		-		-			-		-			41,693
Depreciation and amortization		6,264		12,900		4,991			5,737		-			29,892
Expenditures for property, plant and equipment		3,411		6,184		2,428			5,407		-			17,430

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Estimated Amortization Expense for Existing Intangible Assets for Each of Five Succeeding Years (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014
Finite Lived Intangible Assets [Line Items]
Remaining 2014	$ 3,096
2015	11,806
2016	11,739
2017	11,729
2018	$ 11,254

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Fair Value of Financial Instruments

9 Months Ended

Mar. 31, 2014

Fair Value of Financial Instruments

Note  14. 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. At March 31, 2014, 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. At March 31, 2014, the Company had a contingent earnout arrangement related to the acquisition of LightWorks recorded at fair value. The LightWorks earnout arrangement provided up to a maximum of $4.2 million of additional cash payments to the former shareholders based upon LightWorks achieving certain agreed upon financial targets for revenues and customer orders in calendar year 2013. As of March 31, 2014, the Company has made total earnout payments of $2.2 million for the customer order portion of the earnout arrangement which was achieved at 100%. The Company has recorded the fair value of the remaining revenue earnout arrangement of $0.8 million in Other accrued liabilities in the Condensed Consolidated Balance Sheets. The fair value of the earnout arrangement was based on significant inputs not observable in the market and represents a Level 3 measurement as defined by U.S. GAAP. The Company used the income approach in measuring the fair value of the earnout arrangement, estimating a probability of 40% for the revenue earnout. The impact on fair value of discounting the revenue earnout arrangement was not significant as the earnout period ended on December 31, 2013 and is expected to be paid no later than June 30, 2014. Included in Other expense (income), net for the three and nine months ended March 31, 2014 is a $0.3 million unrealized gain due to a fair value remeasurement that reduced the revenue earnout liability.  

The following table provides a summary by level of the fair value of financial instruments that are measured on a recurring basis for the periods presented ($000):

	Fair Value Measurements at March 31, 2014 Using:
			Quoted
			Prices in
			Active
			Markets		Significant
			for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	March 31, 2014		(Level 1)		(Level 2)		(Level 3)
Liabilities:
Foreign currency forward contracts	$	48	$	-	$	48	$	-
Contingent earnout arrangement	$	800	$	-	$	-	$	800

	Fair Value Measurements at June 30, 2013 Using:
			Quoted
			Prices in
			Active
			Markets		Significant
			for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	June 30, 2013		(Level 1)		(Level 2)		(Level 3)
Liabilities:
Foreign currency forward contracts	$	23	$	-	$	23	$	-
Contingent earnout arrangement	$	3,300	$	-	$	-	$	3,300

The Company’s policy is to report transfers into and out of Levels 1 and 2 of the fair value hierarchy at fair values as of the beginning of the period in which the transfers occur. There were no transfers in and out of Levels 1 and 2 of the fair value hierarchy during the three months ended March 31, 2014.

The following table presents a reconciliation of the beginning and ending fair value measurements of the Company’s Level 3 contingent earnout arrangement related to the acquisition of LightWorks ($000):

	Significant
	Unobservable Inputs
	(Level 3)
Balance at July 1, 2013	$	3,300
Payments		(2,200	)
Changes in fair value		(300	)
Balance at March 31, 2014	$	800

The carrying value of Cash and cash equivalents, Accounts receivable and Accounts payable 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 are considered Level 2 among the fair value hierarchy and have variable interest rates and accordingly their carrying amounts approximate fair value.

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Share Repurchase Program

9 Months Ended

Mar. 31, 2014

Share Repurchase Program

Note  19. Share Repurchase Program

In February 2014, the Company’s Board of Directors authorized the Company to purchase up to $20 million of its Common Stock. The share repurchase program (the “Program”) 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.  As of March 31, 2014, the Company has purchased 750,000 shares of its common stock pursuant to the Program for approximately $12.0 million.

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Goodwill and Other Intangible Assets - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended									9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014 Customer Lists	Mar. 31, 2014 Customer Lists Minimum	Mar. 31, 2014 Customer Lists Maximum	Mar. 31, 2014 Patents	Mar. 31, 2014 Patents Minimum	Mar. 31, 2014 Patents Maximum	Mar. 31, 2014 Trade Names	Mar. 31, 2014 M Cubed	Sep. 30, 2013 Oclaro Incorporated	Mar. 31, 2014 Oclaro Incorporated Technology and Patents	Mar. 31, 2014 Oclaro Incorporated Customer Lists
Goodwill And Other Intangible Assets [Line Items]
Goodwill adjustment			$ (516,000)									$ 500,000
Business acquisition, intangible assets recorded													29,800,000	10,800,000	51,900,000
Amortization expense recorded on intangible assets	2,600,000	2,200,000	8,200,000	4,600,000
Amortization period of patents and customer lists, in months					153 months	120 months	192 months	120 months	120 months	240 months
Carrying amount of trade names acquired											$ 16,400,000

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Acquisitions - Additional Information (Detail) (USD $)	9 Months Ended			1 Months Ended		3 Months Ended	9 Months Ended	1 Months Ended	3 Months Ended	9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Jun. 30, 2013	Nov. 30, 2013 Oclaro's Fiber Amplifier and Micro Optics Business	Sep. 12, 2013 Oclaro's Fiber Amplifier and Micro Optics Business	Mar. 31, 2014 Oclaro's Fiber Amplifier and Micro Optics Business	Mar. 31, 2014 Oclaro's Fiber Amplifier and Micro Optics Business	Sep. 30, 2013 Oclaro Incorporated	Mar. 31, 2014 Oclaro Incorporated	Mar. 31, 2014 Oclaro Incorporated	Mar. 31, 2014 Acquisitions of Two Oclaro
Business Acquisition [Line Items]
Net cash paid at acquisition date	$ 177,676,000	$ 126,165,000		$ 79,600,000	$ 5,000,000			$ 90,601,000
Purchase of business - holdback amount recorded in other liabilities				4,000,000				6,000,000		2,000,000
Goodwill	198,864,000		123,352,000	34,686,000				41,105,000
Business acquisition, revenue of acquired entity						19,400,000	32,600,000		18,100,000	43,100,000
Business acquisition, earnings of acquired entity						500,000	2,300,000		5,000,000	12,300,000
Business acquisition, cash acquired								1,700,000
Payment of additional amount for working capital adjustment								2,475,000		2,500,000
Business acquisition, transaction costs										3,700,000	3,700,000
Business acquisition, transaction costs, tax amount										$ 200,000

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Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014	Mar. 31, 2013
Net earnings	$ 8,531	$ 16,094	$ 25,794	$ 41,693
Other comprehensive income:
Foreign currency translation adjustments	(2,123)	(1,622)	2,250	1,500
Comprehensive income	6,408	14,472	28,044	43,193
Net earnings attributable to redeemable noncontrolling interest		225		906
Other comprehensive income (loss) attributable to redeemable noncontrolling interest:
Foreign currency translation adjustment attributable to redeemable noncontrolling interest		(138)		(354)
Comprehensive income attributable to redeemable noncontrolling interest		87		552
Comprehensive income attributable to II-VI Incorporated	$ 6,408	$ 14,385	$ 28,044	$ 42,641

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Recent Accounting Pronouncements

9 Months Ended

Mar. 31, 2014

Recent Accounting Pronouncements

Note3. Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (the "FASB") issued an Accounting Standards Update ("ASU") that changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and represents a strategic shift that has or will have a major effect on an entity's operations and financial results. The new standard will be effective for annual periods beginning on or after December 15, 2014 with early adoption permitted and will be effective for the Company beginning in the first quarter of fiscal year 2016. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

In July 2013, the FASB issued an ASU that changes how certain unrecognized tax benefits are to be presented on the consolidated balance sheet. This ASU clarified existing guidance to require that an unrecognized tax benefit or a portion thereof be presented in the consolidated balance sheet as a reduction to a deferred tax asset for a net operating loss ("NOL") carryforward, similar tax loss, or a tax credit carryforward except when an NOL carryforward, similar tax loss, or tax credit carryforward is not available under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. In such a case, the unrecognized tax benefit would be presented in the consolidated balance sheet as a liability. This update is effective prospectively for fiscal years beginning after December 15, 2013 and will be effective for the Company beginning in the first quarter of fiscal year 2015. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

In March 2013, the FASB issued an ASU related to a parent’s accounting for the cumulative translation adjustment upon de-recognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. The update clarifies the applicable guidance under current U.S. GAAP for the release of the cumulative translation adjustment upon a reporting entity’s de-recognition of a subsidiary or group of assets within a foreign entity or part or all of its investment in a foreign entity. The update requires a reporting entity, which either sells a part or all of its investment in a foreign entity or ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity, to release any related cumulative translation adjustment into net income. This update is effective prospectively for fiscal years beginning after December 15, 2013 and will be effective for the Company beginning in the first quarter of fiscal year 2015. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

In February 2013, the FASB issued an ASU related to disclosure requirements of reclassifications out of accumulated other comprehensive income. The adoption of the guidance requires the Company to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, the Company is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification. This update was effective for the Company beginning in the first quarter of fiscal year 2014 and did not have a significant impact on the Company’s consolidated financial statements.

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Computation of Earnings Per Share (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Share [Line Items]
Earnings from continuing operations attributable to II-VI Incorporated	$ 8,531	$ 16,035	$ 25,661	$ 43,350
Earnings (loss) from discontinued operation		(166)	133	(2,563)
Net Earnings Attributable to II-VI Incorporated	$ 8,531	$ 15,869	$ 25,794	$ 40,787
Weighted average shares	62,355	62,130	62,426	62,482
Basic earnings (loss) attributable to II-VI Incorporated per common share:
Continuing Operations	$ 0.14	$ 0.26	$ 0.41	$ 0.69
Discontinued Operation		$ 0.00	$ 0.00	$ (0.04)
Consolidated	$ 0.14	$ 0.26	$ 0.41	$ 0.65
Dilutive effect of common stock equivalents	1,391	1,594	1,444	1,483
Diluted weighted average common shares	63,746	63,724	63,870	63,965
Diluted earnings (loss) attributable to II-VI Incorporated per common share:
Continuing Operations	$ 0.13	$ 0.25	$ 0.40	$ 0.68
Discontinued Operation		$ 0.00	$ 0.00	$ (0.04)
Consolidated	$ 0.13	$ 0.25	$ 0.40	$ 0.64

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Schedule of Net Periodic Pension Costs (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Mar. 31, 2014	Mar. 31, 2014
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 835	$ 1,837
Interest cost	201	443
Expected return on plan assets	(331)	(728)
Net amortization
Net periodic pension costs	$ 705	$ 1,552

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Discontinued Operation (Tables)

9 Months Ended

Mar. 31, 2014

Summary of Revenues and Earnings (Losses) of Discontinued Operation

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2014		2013			2014		2013
Revenues	$	-	$	1,230		$	1,849	$	6,306
Earnings (loss) from discontinued operation before income taxes		-		(166	)	133			(2,563	)
Income tax benefit (expense)		-		-			-		-
Earnings (loss) from discontinued operation, net of taxes	$	-	$	(166	)	$	133	$	(2,563	)

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Post-Retirement Benefits (Tables)

9 Months Ended

Mar. 31, 2014

Schedule of Net Periodic Pension Costs

In connection with the Company’s acquisition of Laser Enterprise, the Company assumed the existing pension plan (the “Swiss Plan”) covering employees of the Zurich, Switzerland subsidiary which included an $8.9 million unfunded pension liability recorded as part of the preliminary purchase price allocation of Laser Enterprise. This unfunded pension liability is recorded in Other liabilities in the Condensed Consolidated Balance Sheet at March 31, 2014.   Net periodic pension costs associated with the Swiss Plan for the three and nine months ended March 31, 2014 included the following ($000):

	Three Months			Nine Months
	Ended			Ended
	March 31,			March 31,
	2014			2014
Service cost	$	835		$	1,837
Interest cost		201			443
Expected return on plan assets		(331	)		(728	)
Net amortization		-			-
Net periodic pension costs	$	705		$	1,552

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Share-Based Compensation

9 Months Ended

Mar. 31, 2014

Share-Based Compensation

Note 13. Share-Based Compensation

The Board of Directors adopted the II-VI Incorporated 2012 Omnibus Incentive Plan (the “Plan”) which was approved by the shareholders of the Company. The Plan provides for the grant of non-qualified stock options, stock appreciation rights, restricted share awards, restricted share units, deferred share awards, performance share awards and performance share units to employees, officers and directors of the Company. The Company records share-based compensation expense for these awards in accordance with U.S. GAAP, which requires the recognition of the fair value of share-based compensation in net earnings. The Company recognizes the share-based compensation expense over the requisite service period of the individual grantees, which generally equals the vesting period.  The Company accounts for cash-based stock appreciation rights, cash-based restricted share units awards and cash-based performance share unit awards as liability awards, in accordance with applicable accounting standards.

Share-based compensation expense is allocated approximately 20% to cost of goods sold and 80% to selling, general and administrative expense based on the employee classification of the grantees. Share-based compensation expense for the periods indicated was as follows ($000):

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	March 31, 2014		March 31, 2013		March 31, 2014		March 31, 2013
Stock Options and Cash-Based Stock Appreciation Rights	$	1,190	$	1,152	$	4,566	$	3,916
Restricted Share Awards and Cash-Based Restricted Share Unit Awards		930		1,144		3,539		3,240
Performance Share Awards and Cash-Based Performance Share Unit Awards		785		555		2,485		2,582
	$	2,905	$	2,851	$	10,590	$	9,738

Stock Options and Stock Appreciation Rights:

The Company utilizes the Black-Scholes valuation model for estimating the fair value of these awards. The weighted-average fair value of awards granted under the Plan were $6.63 and $8.57 per award, respectively, during the three and nine months ended March 31, 2014 and were $7.84 and $8.44 per award, respectively, during the three and nine months ended March 31, 2013, using the following assumptions:

	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	March 31, 2014			March 31, 2013			March 31, 2014			March 31, 2013
Risk-free interest rate		1.82	%		1.10	%		1.75	%		0.94	%
Expected volatility		46	%		48	%		47	%		49	%
Expected life of options	5.5 years			4.7 years			5.7 years			5.7 years
Dividend yield	None			None			None			None

The risk-free interest rate is derived from the average U.S. Treasury Note rate during the period, which approximates the rate in effect at the time of grant related to the expected life of the awards. The risk-free interest rate shown above is the weighted average rate for all awards granted during each respective period. Expected volatility is based on the historical volatility of the Company’s Common Stock over the period commensurate with the expected life of the awards. The expected life calculation is based on the observed time to post-vesting exercise and/or forfeitures of awards by our employees. The dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no current intention to pay cash dividends in the future. The estimated annualized forfeitures are based on the Company’s historical experience of award cancellations pre-vesting and are estimated at a rate of 16%. The Company will record additional expense in future periods if the actual forfeiture rate is lower than estimated, and will adjust expense in future periods if the actual forfeitures are higher than estimated.

Restricted Share Awards and Restricted Share Units:

The restricted share awards and units compensation expense was calculated based on the number of shares or units expected to be earned by the grantees multiplied by the stock price at the date of grant and is being recognized over the vesting period. Generally, the restricted share awards and units have a three year cliff-vesting provision and an estimated forfeiture rate of 7.5%.

Performance Share Awards and Performance Share Units:

The Compensation Committee of the Board of Directors of the Company has granted certain named executive officers and employees performance share awards and units under the Plan. As of March 31, 2014, the Company had outstanding grants covering performance periods ranging from 24 to 48 months. These awards are intended to provide continuing emphasis on specified financial performance goals that the Company considers important contributors to long-term shareholder value. These awards are payable only if the Company achieves specified levels of financial performance during the performance periods. The performance share awards and units compensation expense is calculated based on the estimated number of shares or units expected to be earned multiplied by the stock price at the date of grant.