Note 10.

Segment Reporting

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

The Company reports its financial results in the following three segments: (i) II-VI Laser Solutions, (ii) II-VI Photonics, and (iii) II-VI Performance Products, and the Company’s chief operating decision maker receives and reviews financial information based on these segments. The Company evaluates business segment performance based upon segment operating income, which is defined as earnings before income taxes, interest and other income or expense. The segments are managed separately due to the market, production requirements and facilities unique to each segment.

In June 2017, the Company completed its acquisition of IPI. See Note 3. Acquisitions and Investment. The operating results of this acquisition have been reflected in the selected financial information of the Company’s II-VI Photonics segment since the date of acquisition.

In August 2017, the Company completed its acquisition of II-VI Compound Semiconductor Ltd. See Note 3. Acquisitions and Investment. The operating results of this acquisition have been reflected in the selected financial information of the Company’s II-VI Laser Solutions segment since the date of acquisition.

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

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

	Three Months Ended December 31, 2017
	II-VI				II-VI
	Laser		II-VI		Performance
	Solutions		Photonics		Products		Eliminations			Total
Revenues	$	109,817	$	110,520	$	61,133	$	-		$	281,470
Inter-segment revenues		6,830		6,914		1,157		(14,901	)		-
Operating income		9,493		16,930		6,124		-			32,547
Interest expense		-		-		-		-			(4,644	)
Other income (expense), net		-		-		-		-			1,965
Income taxes		-		-		-		-			(20,272	)
Net earnings		-		-		-		-			9,596
Depreciation and amortization		8,948		6,568		3,893		-			19,409
Segment assets		721,491		584,771		381,612		-			1,687,874
Expenditures for property, plant & equipment		23,920		9,038		6,439		-			39,397
Investments		-		-		67,068		-			67,068

	Three Months Ended December 31, 2016
	II-VI				II-VI
	Laser		II-VI		Performance
	Solutions		Photonics		Products		Eliminations			Total
Revenues	$	81,483	$	100,906	$	49,433	$	-		$	231,822
Inter-segment revenues		8,760		3,161		2,645		(14,566	)		-
Operating income		7,593		15,901		3,642		-			27,136
Interest expense		-		-		-		-			(1,365	)
Other income (expense), net		-		-		-		-			6,045
Income taxes		-		-		-		-			(7,913	)
Net earnings		-		-		-		-			23,903
Depreciation and amortization		5,662		4,976		4,278		-			14,916
Expenditures for property, plant & equipment		15,737		5,900		6,191		-			27,828

	Six Months Ended December 31, 2017
	II-VI				II-VI
	Laser		II-VI		Performance
	Solutions		Photonics		Products		Eliminations			Total
Revenues	$	203,079	$	221,134	$	118,760	$	-		$	542,973
Inter-segment revenues		14,014		11,492		1,984		(27,490	)		-
Operating income		12,757		36,429		13,138		-			62,324
Interest expense		-		-		-		-			(8,289	)
Other income (expense), net		-		-		-		-			2,732
Income taxes		-		-		-		-			(26,030	)
Net earnings		-		-		-		-			30,737
Depreciation and amortization		17,254		12,731		8,240		-			38,225
Expenditures for property, plant & equipment		37,176		19,616		20,031		-			76,823

	Six Months Ended December 31, 2016
	II-VI				II-VI
	Laser		II-VI		Performance
	Solutions		Photonics		Products		Eliminations			Total
Revenues	$	160,773	$	196,725	$	95,844	$	-		$	453,342
Inter-segment revenues		14,700		6,599		4,378		(25,677	)		-
Operating income		14,291		29,791		6,745		-			50,827
Interest expense		-		-		-		-			(2,611	)
Other income (expense), net		-		-		-		-			7,447
Income taxes		-		-		-		-			(15,466	)
Net earnings		-		-		-		-			40,197
Depreciation and amortization		11,312		9,824		8,662		-			29,798
Expenditures for property, plant & equipment		35,862		12,497		9,463		-			57,822