Note 12.

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.

As discussed in Note 1, the Company realigned the composition of its operating segments. The Company moved Laser Systems Group from II-VI Laser Solutions to II-VI Photonics and moved IPI from II-VI Photonics to II-VI Performance Products. All applicable segment information has been restated to reflect this change.

In September 30, 2018, the Company completed its acquisition of CoAdna. See Note 3. Acquisitions and Investments. 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.

The accounting policies are consistent across each of the segments. 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 September 30, 2018
	II-VI				II-VI
	Laser		II-VI		Performance
	Solutions		Photonics		Products		Eliminations			Total
Revenues	$	106,175	$	135,156	$	73,102	$	-		$	314,433
Inter-segment revenues		13,553		2,896		5,662		(22,111	)		-
Operating income		12,310		15,912		8,991		-			37,213
Interest expense											(5,584	)
Other income (expense), net											713
Income taxes											(6,193	)
Net earnings											26,149
Depreciation and amortization		10,847		6,199		5,124		-			22,170
Segment assets		751,801		671,992		456,850		-			1,880,643
Expenditures for property, plant & equipment		11,593		12,051		11,274		-			34,918
Investments		-		13,373		61,916		-			75,289

	Three Months Ended September 30, 2017
	II-VI				II-VI
	Laser		II-VI		Performance
	Solutions		Photonics		Products		Eliminations			Total
Revenues	$	87,936	$	115,940	$	57,627	$	-		$	261,503
Inter-segment revenues		7,180		2,863		827		(10,870	)		-
Operating income		2,655		20,108		7,014		-			29,777
Interest expense											(3,645	)
Other income (expense), net											767
Income taxes											(5,758	)
Net earnings											21,141
Depreciation and amortization		8,224		5,507		5,085		-			18,816
Expenditures for property, plant & equipment		12,761		9,782		14,883		-			37,426