Coherent (COHR) 10-K risk factor changes: FY2020 vs FY2019

You should carefully consider these factors, as well as the other information contained in this Annual Report on Form [removed: 10-K] [added: 10-K,] when evaluating an investment in our securities.

[removed: Investments] [added: Investments] in future markets of potential significant growth may not result in the expected [removed: return.][added: return.]

We cannot be sure of the end market price, [removed: specification] [added: specification,] or yield for products incorporating our technologies.

Further, we may be unable to fulfill the terms of our contracts with our target customers, which could result in penalties of a material nature, including damages, loss of market [removed: share] [added: share,] and loss of reputation.

[removed: Our] [added: Our] competitive position depends on our ability to develop new products and [removed: processes.][added: processes.]

To meet our strategic objectives, we must develop, [removed: manufacture] [added: manufacture,] and market new products and continue to update our existing products and processes to keep pace with market developments to address increasingly sophisticated customer requirements.

Our success in developing and selling new and enhanced products and processes depends upon a variety of [removed: factors] [added: factors,] including strategic product selection, efficient completion of product design and development, timely implementation of manufacturing and assembly processes, effective sales and marketing, and high-quality and successful product performance in the market.

The introduction by our competitors of products or processes using new developments [added: that are] better or faster than ours could render our products or processes obsolete or unmarketable.

We intend to continue to make significant investments in [removed: RD&E] [added: research, development, and engineering] to achieve our goals.

[removed: Global] [added: Global] economic [removed: downturns] [added: downturns, including any downturn related to COVID-19,] may adversely affect our business, operating [removed: results] [added: results,] and financial [removed: condition.][added: condition.]

It is even more difficult to estimate growth or contraction in various parts, [removed: sectors] [added: sectors,] and regions of the economy, including the industrial, aerospace and defense, optical communications, telecommunications, semiconductor, [added: consumer,] and medical and life science markets in which we participate.

All aspects of our [removed: company] [added: Company’s] forecast depend on estimates of growth or contraction in the markets we serve.

Such conditions could have a material adverse effect on demand for our customers’ [removed: products, and] [added: products and,] in turn, on demand for our products.

Adverse changes may occur in the future as a result of declining or flat global or regional economic conditions, fluctuations in currency and commodity prices, wavering confidence, capital expenditure reductions, unemployment, decline in stock markets, contraction of credit [removed: availability] [added: availability,] or other factors affecting economic conditions.

For example, factors that may affect our operating results include disruption in the credit and financial markets in the United States, [removed: Europe] [added: Europe,] and elsewhere, adverse effects of slowdowns in the U.S., [removed: European] [added: European,] or Chinese economies, reductions or limited growth in consumer spending or consumer credit, global trade tariffs, and other adverse economic conditions that may be specific to the Internet, [removed: e-commerce] [added: e-commerce,] and payments industries.

Any economic [removed: downturn, or surge,] [added: downturn] could have a material adverse effect on our business, results of [removed: operations] [added: operations,] or financial condition.

[removed: Some] [added: Some] systems that use our products are complex in design, and our products may contain defects that are not detected until deployed, which could increase our costs, reduce our revenues, cause us to lose key [removed: customers] [added: customers,] and may expose us to litigation [removed: arising from lawsuits] related to our [removed: products.][added: products.]

The occurrence of any one or more of the foregoing factors could have a material adverse effect on our business, results of [removed: operations] [added: operations,] or financial condition.

[removed: Foreign] [added: Foreign] currency risk may negatively affect our revenues, cost of [removed: sales] [added: sales,] and operating [removed: margins] [added: margins,] and could result in foreign exchange [removed: losses.][added: losses.]

We incur currency transaction risk whenever one of our operating subsidiaries enters into either a purchase or a sales transaction using a different currency from the currency in which it [removed: operates] [added: operates,] or holds assets or liabilities in a currency different [removed: than] [added: from] its functional currency.

Further, given the volatility of exchange rates, we may not be able to effectively manage our currency risks, and any volatility in currency exchange rates may increase the price of our products in local currency to our foreign customers or increase the manufacturing cost of our products, either of which may have an adverse effect on our financial condition, cash [removed: flows] [added: flows,] and profitability.

[removed: Our] [added: Our] competitive position may still require significant [removed: investments.][added: investments.]

Consequently, we expect to continue to consider strategic acquisition of businesses, [removed: products] [added: products,] or technologies complementary to our business.

If market demand is outside our organic capabilities, if a strategic acquisition is required and we cannot identify one or execute on it, and/or if financial investments that we undertake distract management, do not result in the expected return on investment, expose us to unforeseen [removed: liabilities] [added: liabilities,] or jeopardize our ability to comply with our credit facility covenants due to any inability to integrate the business, adjust to operating a larger and more complex organization, adapt to additional political and other requirements associated with the acquired business, retain staff, or work with customers, we could suffer a material adverse effect on our business, results of [removed: operations] [added: operations,] or financial condition.

[removed: We] [added: We] may be unable to successfully implement our acquisitions strategy or integrate acquired companies and personnel with existing [removed: operations.][added: operations.]

We have in the past acquired several companies, [removed: and] [added: including the completion of] our [removed: announced] acquisition of Finisar [removed: is pending.][added: Corporation (“Finisar”) in September 2019.]

To the extent [added: that] we are successful in making acquisitions, we may be unsuccessful in integrating acquired companies or product lines with existing operations, or the integration may be more difficult or more costly than anticipated.

Some of the risks that may affect our ability to integrate or realize anticipated benefits from acquired companies, [removed: businesses] [added: businesses,] or assets include those associated with:

[removed: | | • |] [added: -] unexpected losses of key employees of the acquired company; [removed: |]

[removed: | | • |] [added: -] conforming the acquired company’s standards, processes, [removed: procedures] [added: procedures,] and controls with our operations, including integrating [removed: Enterprise Resource Planning (“ERP”)] [added: enterprise resource planning] systems and other key business applications; [removed: |]

[removed: | | • |] [added: -] coordinating new product and process development; [removed: |]

[removed: | | • |] [added: -] increasing complexity from combining operations; [removed: |]

[removed: | | • |] [added: -] increasing the scope, geographic [removed: diversity] [added: diversity,] and complexity of our operations; [removed: |]

[removed: | | • |] [added: -] difficulties in consolidating facilities and transferring processes and know-how; and [removed: |]

[removed: | | • |] [added: -] diversion of management’s attention from other business concerns. [removed: |]

[removed: | | • |] [added: -] use a signification portion of our available cash; [removed: |]

[removed: | | • |] [added: -] issue equity securities, which would dilute current shareholders’ percentage ownership; [removed: |]

[removed: | | • |] [added: -] incur significant debt; [removed: |]

[removed: | | • |] [added: -] incur or assume contingent liabilities, known or unknown, including potential lawsuits, infringement [removed: actions] [added: actions,] or similar liabilities; [removed: |]

[removed: | | • |] [added: -] incur impairment charges related to goodwill or other intangibles; and [removed: |]

The following are certain risk factors that could affect our business, results of operations, financial position or cash flows.

These risk factors should be considered along with the forward-looking statements contained in this Annual Report on Form 10-K, because these factors could cause our actual results or financial condition to differ materially from those projected in forward-looking statements.

The following discussion is not an all-inclusive listing of risks, although we believe these are the more material risks that we face.

If any of the following occur, our business, results of operations, financial position, or cash flows could be adversely affected.

Risks Relating to Our Business and Our Industry

Widespread health crises, including the global novel coronavirus (COVID-19) pandemic, could materially and adversely affect our business, financial condition, and results of operations.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which continues to spread throughout the United States and world.

We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including the impact to our suppliers, customers, and employees as well as the impact to the countries and markets in which we operate.

At the onset of the COVID-19 outbreak, we began focusing intensely on mitigating the adverse impacts of COVID-19 on our foreign and domestic operations, starting by protecting our employees, suppliers, and customers.

Significant reductions in demand for one or more of our products or a curtailment to one or more of our product lines may be caused by, among other things, the temporary inability of our customers to purchase and utilize our products in next-stage manufacturing due to shutdown orders or financial hardship.

Workforce constraints triggered by shutdown orders and stay-at-home polices may present challenges in meeting our obligations to our customers and achieving cost and operational targets.

For example, approximately 45% of our global facilities are subject to a government order, including approximately 10% that are currently closed, most of which are administrative facilities where employees are working remotely.

We expect facilities to continue to be subject to similar government orders for the foreseeable future.

We may face disruptions from our third-party manufacturing and raw materials supply arrangements caused by constraints over their workforce capacity or their own financial or operational difficulties.

There is also heightened risk and uncertainty regarding the loss or disruption of other essential third-party service providers, including transportation services, contract manufacturing, marketing, and distribution services.

Governmental and regulatory responses to the pandemic may include quarantines, import/export restrictions, price controls, or other governmental or regulatory actions, including closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our workforce’s ability to travel or perform necessary business functions, or otherwise impact our suppliers or customers, which could adversely impact our operating results.

Such efforts to ensure the safety of our workforce, customers, and suppliers may result in increased operating expenses and potentially jeopardize the efficiency of operations.

Such impacts may further increase the difficulty of planning for operations and may adversely impact our results.

We have made efforts to identify, manage, and mitigate the economic disruption impacts of the COVID-19 pandemic to the Company; however, there are factors beyond our knowledge or control, including the duration and severity of this outbreak or any such similar outbreak, as well as further governmental and regulatory actions.

Any inability to respond in an effective and timely manner

In certain circumstances, export control and economic sanctions regulations may prohibit the export of certain products, services, and technologies.

We may be required to obtain an export license before exporting a controlled item, and granting of a required license cannot be assured.

Compliance with the import laws that apply to our businesses may restrict our access to, and may increase the cost of obtaining, certain products and could interrupt our supply of imported inventory.

- Exported technologies necessary to develop and manufacture certain products are subject to U.S. export control laws and similar laws of other jurisdictions.

We may be subject to adverse regulatory consequences, including government oversight of facilities and export transactions, monetary penalties, and other sanctions for violations of these laws.

In certain instances, these regulations may prohibit us from developing or manufacturing certain of our products for specific applications outside the United States.

Failure to comply with any of these laws and regulations could result in civil and criminal, monetary, and nonmonetary penalties; disruptions to our business; limitations on our ability to import and export products and services; and damage to our reputation.

Changes in trade policies, such as increased import duties, could increase the costs of goods imported into the United States or China.

In March 2018, President Trump announced new steel and aluminum tariffs.

Then, in July 2018 the United States imposed increased tariffs on products of Chinese origin, and China responded by increasing tariffs on U.S.-origin goods.

On the export side, denial orders and placing companies on the U.S entity list could decrease our access to customers and markets and materially impact our revenues in the aggregate.

In April 2018, for example, the U.S. Department of Commerce issued a denial order against two companies in the telecommunications market.

In 2019 and 2020, the U.S. Department of Commerce placed a number of entities, including Huawei, on the U.S. Entity List.

Our association with customers that are or become subject to U.S. regulatory scrutiny or export restrictions could negatively impact our business, and create instability in our operations.

Governmental actions such as these could subject us to actual or perceived reputational harm among current or prospective investors, suppliers or customers, customers of our customers, other parties doing business with us, or the general public.

Any such reputational harm could result in the loss of investors, suppliers, or customers, which could harm our business, financial condition, operating results, or prospects.

Our credit agreement restricts our operations, particularly our ability to respond to changes or to take certain actions regarding our business.

The documents governing our amended and restated credit agreement, dated as of September 24, 2019, by and among us, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other lenders party thereto (the “Credit Agreement”) contain a number of restrictive covenants that may impose operating and financial restrictions on us and limit our ability to engage in acts that may be in our long-term best interest, including restrictions on the ability to incur indebtedness, grant liens, undergo certain fundamental changes, dispose of assets, make certain investments, enter into certain transactions with affiliates, and make certain restricted payments, in each case subject to limitations and exceptions set forth in the Credit Agreement.

The Credit Agreement also contains customary events of default that include, among other things, certain payment defaults, covenant defaults, cross-defaults to other indebtedness, change of control defaults, judgment defaults, and bankruptcy and insolvency defaults.

Such events of default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies, which could have a material adverse effect on our business, operations, and financial results.

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We caution our investors that our performance is subject to risks and uncertainties.

The following material risk factors may cause our future results to differ materially from those projected in any forward-looking statement.

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Sales to customers in countries other than the United States accounted for approximately 70%, 68% and 69% of revenues during the years ended June 30, 2019, 2018 and 2017, respectively.

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| | • | Exported technologies necessary to develop and manufacture certain products are subject to U.S. export control laws and similar laws of other jurisdictions. We may be subject to adverse regulatory consequences, including government oversight of facilities and export transactions, monetary penalties and other sanctions for violations of these laws. In certain instances, these regulations may prohibit the Company from developing or manufacturing certain of its products for specific applications outside the United States. Failure to comply with any of these laws and regulations could result in civil and criminal, monetary and non-monetary penalties, disruptions to our business, limitations on our ability to import and export products and services and damage to our reputation. |

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Changes in U.S. trade policies could impact the Company’s international operations and the cost of goods imported into the United States, which may narrow the size of our markets, materially impact our revenues or increase our operating costs and expose us to contract litigation.

In March 2018, President Trump announced new steel and aluminum tariffs, in April 2018, the U.S. Department of Commerce issued a denial order against two companies in the telecommunications market, and in May 2019, the U.S. Department of Commerce placed Huawei and its affiliates on the U.S. Entity List.

Other international trade actions and initiatives also have been implemented, notably the imposition by the U.S. of additional tariffs on products of Chinese origin, and China’s imposition of additional tariffs on U.S.-origin goods.

We have previously been the subject of inquiries from the Department of State and the Department of Justice regarding compliance with ITAR.

Although these inquiries were closed with no action being taken, we expended significant time and resources to resolve them, and future inquiries of this type could also be costly to resolve.

We may encounter increased competition.

We expect that this volatility will continue.

Factors that could cause fluctuation in our stock price include, among other things, general economic and market conditions, actual or anticipated variations in operating results, changes in financial estimates by securities analysts, our inability to meet or exceed securities analysts’ estimates or expectations, conditions or trends in the industries in which our products are purchased, announcements by us or our competitors of significant acquisitions, strategic partnerships, divestitures, joint ventures or other strategic initiatives, capital commitments, additions or departures of key personnel, sales of our common stock or equity-linked securities and issuance of shares of our common stock in connection with conversions of our outstanding convertible senior notes.

Many of these factors are beyond our control.

However, these factors could cause the market price of our common stock to decline, regardless of our actual operating performance.

In addition, in recent years, the stock market in general, and The Nasdaq Stock Market and the securities of technology companies in particular, have experienced extreme price and volume fluctuations.

This volatility may affect the price at which our shareholders can sell our common stock.

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Risks Relating to the Merger

[removed: Forward-Looking Statements][added: Forward-Looking Statements]

[removed: Overview][added: Overview]

II-VI Incorporated (“II-VI,” the “Company,” “we,” “us” or “our”), a worldwide leader in engineered materials and [removed: optoelectronic] [added: opto-electronic] components, is a vertically integrated manufacturing company that develops innovative products for [removed: diversified applications in the] industrial materials processing, [removed: optical] communications, aerospace and defense, consumer electronics, semiconductor capital equipment, life [removed: science] [added: sciences] and automotive [removed: applications and] [added: end] markets.

We also generate revenue, earnings and cash flows from [removed: government funded] [added: government-funded] research and development contracts relating to the development and manufacture of new technologies, materials and products.

Our customer base includes [removed: OEMs,] [added: original equipment manufacturers,] laser [removed: end-users,] [added: end users,] system integrators of high-power lasers, manufacturers of equipment and devices for [removed: the] industrial, optical communications, [removed: aerospace and defense, semiconductor, medical] [added: consumer electronics, security] and [removed: life science markets, consumer,] [added: monitoring applications,] U.S. government prime contractors, [added: and] various U.S. [removed: Government agencies and thermoelectric integrators.][added: government agencies.]

[removed: See Note 3,] Acquisitions, to our Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K.

The Company may elect to change the way in which the Company operates or is organized in the future to enable the most efficient implementation of [removed: its] [added: our] strategy.

On [removed: March 4,] [added: September 24,] 2019, [removed: II-VI] [added: in connection with the Finisar acquisition, the Company] entered into a Credit [removed: Agreement, dated as of March 4, 2019 (as amended, the “New Credit Agreement”), by and among the Company,] [added: Agreement (the "Credit Agreement") with] Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other lenders party thereto.

[removed: Pursuant to the terms and subject to the conditions therein, the New Credit Agreement provides for senior secured financing of $1.705 billion in the aggregate, consisting of (i) a five-year senior secured first-lien term A loan facility in an aggregate] [added: (iii)Aggregate] principal amount of [removed: $1.255 billion (the “Term A Facility”) and (ii)] [added: $450 million for] a five-year senior secured first-lien revolving credit facility [removed: in an aggregate principal amount of $450.0 million] (the “Revolving Credit Facility” and together with the Term [removed: A Facility,] [added: Loan Facilities,] the [removed: “New Senior] [added: “Senior] Credit Facilities”).

The [removed: New] Credit Agreement also provides for a letter of credit sub-facility not to exceed $25.0 million and a swing loan sub-facility initially not to exceed $20.0 [removed: million, subject to adjustment in accordance with the terms of the New Credit Agreement.][added: million.]

[removed: Critical] [added: Critical] Accounting Policies and [removed: Estimates][added: Estimates]

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States [removed: (“U.S. GAAP”) and the Company’s discussion and analysis of its financial condition and results of operations] requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its Consolidated Financial Statements and accompanying notes.

[removed: Note 1] [added: Nature] of [added: Business and Summary of Significant Accounting Policies, of] the Notes to our Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K describes the significant accounting policies and accounting methods used in the preparation of the Company’s Consolidated Financial Statements.

Management has discussed the development and selection of [removed: these] [added: the] critical accounting policies and estimates [added: described below] with the Audit Committee of the Board of Directors and the Audit Committee has reviewed the related disclosure.

In addition, there are other items within our [removed: consolidated financial statements] [added: Consolidated Financial Statements] that require [removed: estimation,] [added: estimation] but are not deemed [removed: critical as described above.][added: critical.]

Changes in estimates used in these and other items could [removed: have a material] impact [removed: on] the [removed: consolidated financial statements.][added: Consolidated Financial Statements.]

[removed: Business Combinations][added: *Business Combinations*]

The Company accounts for business acquisitions under the acquisition method of accounting whereby the total purchase price [removed: was] [added: is] allocated to tangible and intangible assets acquired and liabilities assumed based on the respective fair values.

[removed: The Company believes that the accounting estimates related to business combinations are “critical accounting estimates” because the Company must, in] [added: In] determining the fair value of [added: intangible] assets acquired, [added: the Company must] make assumptions about the future performance of the acquired business, including among other things, the forecasted revenue [added: growth] attributable to the asset [removed: group.][added: group and projected operating expenses inclusive of expected synergies, including future cost savings, and other benefits expected to be achieved by combining the Company and Finisar.]

Different assumptions [added: for certain intangible assets] may result in materially different values for these assets, which would impact the Company’s financial position and future results of operations.

The Company’s intangible assets are comprised of customer [removed: relationships] [added: relationships, trade names] and developed technology.

The estimated fair value of the customer [removed: relationships] [added: relationships, trade names] and developed technology are determined using the multi-period excess earnings method and relief from royalty [removed: method, respectively.][added: methods.]

Both methods require forward looking estimates that are discounted to determine the fair value of the intangible asset using a risk-adjusted discount rate that is reflective of the level of risk associated with future estimates associated with the asset [removed: group.][added: group that could be affected by future economic and market conditions.]

The Company tests goodwill [removed: and indefinite-lived intangible assets] for impairment annually, and when events or changes in circumstances indicate that goodwill [removed: or indefinite-lived intangible assets] might be impaired.

The determination of [removed: the estimated useful lives of other intangible assets and] whether goodwill [removed: or indefinite-lived intangibles are] [added: is] impaired requires us to make judgments based on long-term projections of future performance.

[removed: The annual goodwill impairment analysis considers] [added: For fiscal year 2020,] the [removed: financial projections] [added: fair values] of the reporting [removed: unit] [added: units were determined using a discounted cash flow analysis with projected financial information] based on our most recently completed long-term strategic planning processes and also considers the current financial performance compared to our prior projections of the reporting unit.

If material adverse conditions occur that impact one or [removed: more] [added: both] of our reporting units, our determination of future fair value might not support the carrying amount of one or [removed: more] [added: both] of our reporting units, and the related goodwill would need to be impaired.

[removed: Income Taxes][added: *Income Taxes*]

However, if the Company experiences cumulative pretax losses in a particular jurisdiction in a [removed: three year] [added: three-year] period, management then considers a series [added: of factors in the determination of whether the deferred tax assets can be realized.]

In evaluating whether the Company would more likely than not recover these deferred tax assets, it has not assumed any future taxable income or tax planning strategies in the jurisdictions associated with these [removed: carry-forwards] [added: carryforwards] where history does not support such an assumption.

[removed: Fiscal] [added: Fiscal] Year 2019 Compared to Fiscal Year [removed: 2018][added: 2018]

The Company aligns its organizational structure into the following [removed: three] [added: two] reporting segments for the purpose of making operational decisions and assessing financial performance: (i) [removed: II-VI Laser Solutions, (ii) II-VI Photonics,] [added: Compound Semiconductors] and [removed: (iii) II-VI Performance Products.][added: (ii) Photonic Solutions.]

The Company is reporting financial information (revenue [removed: through] [added: and] operating income) for these reporting segments in this Annual Report on Form 10-K.

| | | [removed: Year] [added: | | | | Year] Ended [added: June 30,] | | | | | | | | [removed: Year Ended] | | | | | | | [added: | | | % Increase | | |]

| | | [removed: June 30, 2019] | | | | [added: 2019] | | | | [removed: June 30, 2018] | | [added: 2018] | | | | | [added: | | | | | | | | | |]

| | | | | | | [removed: Revenues] | | | | | | [added: % of Revenues] | | [removed: Revenues] | | | [added: | | | | | | | % of Revenues | | | | | | | | | | | | | | |]

| Total revenues | | [added: | | | |] $ | 1,362.4 | | | | [added: |] 100.0 | [added: |] % | | [added: | |] $ | 1,158.8 | | | | [added: |] 100.0 | [added: |] % | [added: | | | | | | | | | | | |]

| Cost of goods sold | | | [added: | | |] 841.1 | | | | [added: | |] 61.7 | | | | [added: | |] 696.6 | | | | [added: | |] 60.1 | | [added: | | | | | | | | | | | | |]

| Gross margin | | | [added: | | |] 521.3 | | | | [added: | |] 38.3 | | | | [added: | |] 462.2 | | | | [added: | |] 39.9 | | [added: | | | | | | | | | | | | |]

| Operating expenses: | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | |]

Certain statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations ("Management Discussion and Analysis") are forward-looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding projected growth rates, markets, product development, financial position, capital expenditures and foreign currency exposure.

Although our management considers these expectations and assumptions to have a reasonable basis, there can be no assurance that management’s expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct.

In addition to general industry and global economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this Annual Report on Form 10-K include, but are not limited to: (i) the failure of any one or more of the assumptions stated above to prove to be correct; and (ii) the risks relating to forward-looking statements and other “Risk Factors” discussed herein at Item 1A.

The Company disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events or developments, or otherwise.

In addition, we operate in a highly competitive and rapidly changing environment; new risk factors can arise, and it is not possible for management to anticipate all such risk factors, or to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statement.

The forward-looking statements included in this Annual Report on Form 10-K are based only on information currently available to us and speak only as of the date of this Report.

We do not assume any obligation, and do not intend to, update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by the securities laws.

Investors should, however, consult any further disclosures of a forward-looking nature that the Company may make in its subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, or other disclosures filed with or furnished to the SEC.

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

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

The Company generates revenues, earnings and cash flows from developing, manufacturing and marketing a broad portfolio of products for our end markets.

In September 2019, the Company completed its acquisition Finisar Corporation (“Finisar”), See Note 3.

The operating results of this acquisition have been reflected in the selected financial information of the Company’s Photonic Solutions segment and Compound Semiconductors Segment beginning on October 1, 2019, with the results from September 24, 2019 to September 30, 2019 reflected in Unallocated and Other.

Finisar is a global technology leader in optical communications, providing components and subsystems to networking equipment manufacturers, data center operators, telecom service providers, consumer electronics and automotive companies.

Finisar, headquartered in Sunnyvale, California, designs products that meet the increasing demands for network bandwidth, data storage and 3D sensing subsystems.

As part of the Finisar acquisition, the Company entered into a new Amended and Restated Credit Agreement, dated as of September 24 2019.

This agreement secured $2.425 billion in aggregate principle amount of senior secured credit facilities.

See Note 9.

Debt, to our Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K.

On June 30, 2020, the Company announced its intention to offer, in concurrent underwritten public offerings, newly issued shares of its common stock and newly issued shares of its Series A Mandatory Convertible Preferred Stock, "Mandatory Convertible Preferred Stock").

In addition, the underwriters were granted a 30-day option to purchase additional shares of its common stock at the applicable public offering price, less underwriting discounts and commissions, and shares of Series A Mandatory Convertible Preferred Stock at the applicable public offering price, less underwriting discounts and commissions and solely to cover over-allotments with respect to the preferred stock offering.

See Note 21.

Subsequent Event, to our Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further details.

Note 1.

The estimated fair value of the developed technology is also dependent on the selection of the royalty rate used in the valuation method.

*Goodwill*

As of June 30, 2020, no reporting units are at risk for impairment.

COVID-19 Update

On March 11, 2020, the World Health Organization designated the novel coronavirus known as COVID-19 as a global pandemic.

In response to the global spread of COVID-19, governments at various levels have implemented unprecedented response measures.

Overall, the COVID-19 pandemic has significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets.

Certain of the measures taken in response to the COVID-19 pandemic have adversely affected, and could in the future materially adversely impact, our business, results of operations, financial condition and stock price.

In particular, the COVID-19 pandemic is having a significant impact on global markets due to resulting supply chain and production disruptions, workforce and travel restrictions, quarantines and shelter-in-place orders, reduced spending and other similar measures implemented by many companies and other factors.

Following the initial outbreak of COVID-19, we experienced temporary disruptions to our operations in China.

While these operations have returned to active service, approximately 45% of our global facilities are subject to a government order, including approximately 10% that are currently closed, most of which are administrative facilities where employees are working remotely.

Certain of our customers and suppliers currently are impacted by similar operational restrictions.

Our focus has been on the protection of the health and safety of our employees and business partners.

In our facilities, we have deployed new safety measures, including guidance to employees on matters such as effective hygiene and disinfection, social distancing, limited and remote access working where feasible and use of protective equipment.

We also are prioritizing efforts to understand and support the changing business needs of our customers and suppliers in light of restrictions that are applicable to them.

At this time, we believe that our existing balances of cash and cash equivalents, along with our existing committed borrowing availability and other short-term liquidity arrangements, will be sufficient to satisfy our working capital needs, make necessary capital asset purchases and debt repayments and meet other liquidity requirements associated with our existing operations.

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Certain statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are forward-looking statements.

Actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including those potential risks set forth in Item 1A, of this Annual Report on Form 10-K, which are incorporated herein by reference.

The Company generates revenues, earnings and cash flows from developing, manufacturing and marketing engineered materials and optoelectronic components and devices for precision use in industrial materials processing, optical communications, consumer electronics, semiconductor capital equipment, life sciences and automotive applications.

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In September 2018, November 2018, and March 2019, the Company completed its acquisitions of CoAdna Holdings, Inc. (“CoAdna”), an additional product line, and Redstone Aerospace Corporation (“Redstone”), respectively.

The operating results of these acquisitions have been reflected in the selected financial information of the Company’s II-VI Photonics segment since the respective dates of the acquisitions, with the exclusion of Redstone which is reflected in the II-VI Performance Products Segment.

Pending Acquisition of Finisar Corporation

II-VI and Finisar have entered into an Agreement and Plan of Merger, dated as of November 8, 2018 (the “Merger Agreement”).

Pursuant to the terms of the Merger Agreement, Mutation Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of II-VI, will be merged with and into Finisar, and Finisar will continue as the surviving corporation in the merger and a wholly owned subsidiary of II-VI (the “Merger”).

If the Merger is consummated, Finisar stockholders will be entitled to receive, at their election, consideration per share of common stock of Finisar (the “Finisar Common Stock”) consisting of (i) $26.00 in cash, without interest (the “Cash Consideration”), (ii) 0.5546 shares of II-VI common stock (the shares, the “II-VI Common Stock,” and the consideration, the “Stock Consideration”), or (iii) a combination of $15.60 in cash, without interest, and 0.2218 shares of II-VI Common Stock (the “Mixed Consideration,” and, together with the Cash Consideration and the Stock Consideration, the “Merger Consideration”).

The Cash Consideration and the Stock Consideration are subject to proration adjustment pursuant to the terms of the Merger Agreement such that the aggregate Merger Consideration will consist of approximately 60% cash and approximately 40% II-VI Common Stock assuming a per share price of II-VI common stock equal to the price when the Merger Agreement was signed on November 8, 2018, which was $46.88 per share.

At the effective time of the Merger (the “Effective Time”), each option granted pursuant to Finisar’s 2005 Stock Incentive Plan, as such plan has been further amended and restated (each, a “Finisar Stock Option”), or portion thereof, that is outstanding and unexercised as of immediately prior to the Effective Time (whether vested or unvested) will be cancelled, terminated and converted into the right to receive an amount of Mixed Consideration that would be payable to a holder of such number of shares of Finisar Common Stock equal to the quotient of (i) the product of (a) the excess, if any, of $26.00 over the exercise price per share of such Finisar Stock Option multiplied by (b) the number of shares of Finisar Common Stock subject to such Finisar Stock Option, divided by (ii) $26.00.

At the Effective Time, each restricted stock unit granted pursuant to Finisar’s 2005 Stock Incentive Plan, as such plan has been further amended and restated (each, a “Finisar Restricted Stock Unit”), or portion thereof , that is outstanding and subject to a performance-based vesting condition that relates solely to the value of Finisar Common Stock will, to the extent such Finisar Restricted Stock Unit vests in accordance with its terms in connection with the Merger (the “Participating RSUs”), be cancelled and extinguished and converted into the right to receive the Cash Consideration, the Stock Consideration or the Mixed Consideration at the election of the holder of such Participating RSUs, subject to proration adjustment.

At the Effective Time, each Finisar Restricted Stock Unit (or portion thereof) that is outstanding and unvested, does not vest in accordance with its terms in connection with the Merger and is either (x) subject to time-based vesting requirements only or (y) subject to a performance-based vesting condition other than the value of Finisar Common Stock will be assumed by II-VI (each, an “Assumed RSU”).

Each Assumed RSU will be subject to substantially the same terms and conditions as applied to the related Finisar Restricted Stock Unit immediately prior to the Effective Time, including the vesting schedule (and the applicable performance-vesting conditions in the case of a grant contemplated by clause (y) of the preceding sentence) and any provisions for accelerated vesting applicable thereto, except that the number of shares of II-VI Common Stock subject to each Assumed RSU will be equal to the product of (i) the number of shares of Finisar Common Stock underlying such unvested Finisar Restricted Stock Unit award as of immediately prior to the Effective Time multiplied by (ii) the sum of (a) 0.2218 plus (b) the quotient obtained by dividing (1) $15.60 by (2) the volume weighted average price per share of II-VI Common Stock (rounded to the nearest cent) on the Nasdaq Global Select Market for the ten consecutive trading days ending on (and including) the third trading day immediately prior to the Effective Time (with the resulting number rounded down to the nearest whole share).

II-VI filed with the SEC a registration statement on Form S-4 relating to the Merger, and that registration statement became effective in accordance with the provisions of Section 8(a) of the Securities Act of 1933, as amended, on February 7, 2019.

Shareholders of II-VI and stockholders of Finisar voted to approve proposals related to the Merger at special meetings held on March 26, 2019 by the respective companies.

The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the Merger has expired without a request for additional information.

Other regulatory approvals applicable to the Merger have been obtained in Germany, Mexico and Romania.

The completion of the Merger is subject to the satisfaction or waiver of certain additional customary closing conditions, including review and approval of the Merger by the State Administration for Market Regulation in China.

The Company is planning to refile with the State Administration for Market Regulation in China, extending the approval period.

Subject to the satisfaction or waiver of each of the closing conditions, II-VI and Finisar expect that the Merger will be completed in the second half of calendar 2019.

However, it is possible that factors outside the control of both companies could result in the Merger being completed at a different time or not at all.

On November 8, 2018, in connection with its entry into the Merger Agreement, II-VI entered into a commitment letter (together with a related fee letter) with Bank of America, N.A., which was subsequently amended and restated on December 7, 2018 and on December 14, 2018 (together with one or more related fee letters, the “Commitment Letter”).

Subject to the terms and conditions set forth in the Commitment Letter, the lender parties thereto severally committed to provide 100% of up to $2.425 billion in aggregate principal amount of senior secured credit facilities of II-VI.

II-VI also entered into Amendment No. 1 to Credit Agreement, dated as of May 24, 2019, by and among the Company, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto, which includes the final results of the syndication of the Term A Facility (as defined below).

II-VI anticipates using the proceeds from the Term A Facility, together with

a separately committed term B loan facility in an aggregate principal amount of up to $720.0 million (the “Term B Facility”) and cash and short-term investments of II-VI and Finisar, to pay the cash portion of the merger consideration payable in connection with the Merger and related fees and expenses.

II-VI currently does not intend to draw on the Revolving Credit Facility in order to fund the cash portion of the merger consideration payable in connection with the Merger.

The funding obligations of the lenders under the New Senior Credit Facilities are subject to certain currently unsatisfied conditions, including the consummation of the Merger.

Accordingly, no borrowings are currently outstanding under the New Senior Credit Facilities, and II-VI currently is not able to borrow under the New Senior Credit Facilities.

Further, II-VI expects that the New Credit Agreement will be amended prior to the consummation of the Merger to reflect syndication of the Term B Facility and to finalize certain other terms in the New Credit Agreement.

Upon the consummation of the Merger, the New Senior Credit Facilities, governed by the New Credit Agreement as it may be amended as of such time, will be used (i) to refinance in full the Amended Credit Facility (as defined in Note 9 to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K) and (ii) on or after the date of the consummation of the Merger, to repay amounts owed in connection with Finisar’s outstanding convertible notes, currently in an aggregate principal amount outstanding of $575.0 million, including with the proceeds of a portion of the Term A Facility which will be available to II-VI for a certain period after the initial funding under the New Senior Credit Facilities.

Unless and until the Merger is consummated and the other currently unsatisfied conditions to the funding obligations of the lenders under the New Senior Credit Facilities are satisfied or waived, the Amended Credit Facility remains in effect in accordance with its terms.

Management believes the Company’s critical accounting estimates are those related to business combinations, impairment of goodwill and indefinite-lived intangible assets, and income taxes.

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 they require management to make judgments and estimates about matters that are inherently uncertain.

The valuation methodologies applied require the Company to determine a risk-adjusted discount rate that is reflective of the level of risk associated with these estimates to discount the forward-looking estimates to present value.

Goodwill and Indefinite-Lived Intangibles

Other intangible assets are amortized over their estimated useful lives.

[removed: MARKET RISKS][added: MARKET RISKS]

In the normal course of business, the Company uses [removed: certain] [added: a variety of] techniques and derivative financial instruments as part of its overall risk management strategy, [added: which is] primarily focused on its exposure [added: in relation] to the Japanese Yen, Chinese Renminbi, [removed: and the] Swiss [removed: Franc.][added: Franc, Euro.]

No significant changes have occurred in the techniques and instruments [removed: used other than those described below.][added: used.]

[removed: Interest] [added: *Interest] Rate [removed: Risks][added: Risk*]

[removed: A] [added: If the Company had not hedged its variable rate debt, a] change in the interest rate of 100 basis points on these variable rate borrowings would have resulted in additional interest expense of [removed: $1.8] [added: $15.8] million for the [removed: fiscal] year ended June 30, [removed: 2019.][added: 2020.]

and the Malaysian Ringgit.

As of June 30, 2020, the Company’s total borrowings include variable rate borrowings, which exposes the Company to changes in interest rates.

In November 2019, the Company entered into an interest rate swap contract to limit the exposure of its variable interest rate debt by effectively converting a portion of interest payments to fixed interest rate debt.

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Foreign Exchange Risks

In the normal course of business, the Company enters into foreign currency forward exchange contracts with its financial institutions.

The purpose of these contracts is to hedge ordinary business risks regarding foreign currencies on product sales and other transactions denominated in currencies other than the U.S. dollar.

Foreign currency forward exchange contracts are used to limit transactional exposure to changes in currency rates.

Japanese Yen

The Company enters into foreign currency forward contracts that permit it to sell specified amounts of Japanese Yen 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, thereby limiting the Company’s exposure.

These contracts had a total notional amount of $17.0 million and $12.0 million at June 30, 2019 and 2018, respectively.

A 10% change in the yen to U.S. dollar exchange rate would have changed revenues in the range from a decrease of approximately $10.0 million to an increase of approximately $12.2 million for the year ended June 30, 2019.

Chinese Renminbi

The Company enters into month-to-month forward contracts to limit exposure to the Chinese Renminbi.

During the year ended June 30, 2019, the Company recorded a loss of $2.0 million with respect to these forward contracts.

Swiss Franc

The Company enters into month-to-month forward contracts to limit exposure to the Swiss Franc.

During the year ended June 30, 2019, the Company recorded an immaterial loss with respect to these forward contracts.

As of June 30, 2019, the Company’s total borrowings of $467 million consisted of $162.8 million variable rate debt borrowings from a line of credit of $115.0 million denominated in U.S. dollars, a term loan denominated in U.S. dollars of $45.0 million, and a line of credit borrowing of $2.8 million denominated in Japanese yen.

As such, the Company is exposed to changes in interest rates.

[removed: Definitions][added: Definitions]

The Company’s name is pronounced “Two Six Incorporated.” The name II-VI refers to Groups II and VI [removed: on] [added: of] the periodic table of elements from which II-VI originally designed and produced infrared optics for high-power CO2 lasers used in materials processing.

The majority of our revenues are attributable to the sale of engineered materials and optoelectronic components, devices, and subsystems for the [added: optical communications,] industrial materials processing, [removed: optical communications, and] aerospace and [removed: defense] [added: defense, and consumer electronics] markets.

[removed: In connection with the refinement of our business strategy, the Company has, effective] [added: Effective] July 1, [removed: 2019] [added: 2019, the Company] realigned its organizational structure into two reporting segments for the purpose of making operational decisions and assessing financial performance: (i) [removed: Compound Semiconductors] [added: Photonic Solutions] and (ii) [removed: Photonic Solutions.][added: Compound Semiconductors.]

The following terms are defined for reference: bismuth telluride (“Bi2Te3”); cadmium telluride (“CdTe”); carbon dioxide (“CO2”); carbon monoxide (“CO”); chemical vapor [removed: deposited] [added: deposition] (“CVD”) [added: of] materials including diamond; [added: deep ultraviolet (“DUV”) lithography;] dense wavelength division multiplexing (“DWDM”); extreme-ultraviolet (“EUV”) lithography; 5th-generation (“5G”) wireless; 4th-generation (“4G”) wireless; gallium arsenide (“GaAs”); gallium nitride (“GaN”); gigabit Ethernet (“GbE”); gigabit per second [removed: (“Gb/s”);] [added: (“Gbps”);] high-definition multimedia interface (“HDMI”); [added: high-electron-mobility transistor (“HEMT”);] indium phosphide (“InP”); infrared (“IR”); intellectual property (“IP”); light detection and ranging (“LiDAR”); liquid crystal (“LC”); liquid crystal on silicon (“LCOS”); nanometers (“nm”); near-infrared (“NIR”); [added: optical channel monitor (“OCM”);] organic light-emitting diode (“OLED”); original equipment manufacturer (“OEM”); optical [removed: time domain] [added: time-domain] reflectometer (“OTDR”); [added: polymerase chain reaction (“PCR”);] radio frequency (“RF”); reconfigurable optical add/drop multiplexer (“ROADM”); [added: research and development (“R&D”);] research, development, and engineering (“RD&E”); silicon carbide (“SiC”); [added: terabit per second (“Tbps”);] three-dimensional (“3D”); ultraviolet (“UV”); vertical cavity surface-emitting laser (“VCSEL”); wavelength division multiplexing (“WDM”); wavelength selective switching (“WSS”); zinc selenide (“ZnSe”); and zinc sulfide (“ZnS”).

[removed: Pending Acquisition] [added: Acquisition] of Finisar [removed: Corporation][added: Corporation]

[removed: General] [added: General] Description of [removed: Business][added: Business]

We develop, manufacture, and market engineered materials, optoelectronic components, and devices for [removed: precision] use in [added: optical communications,] industrial materials processing, [removed: optical communications,] aerospace and defense, consumer electronics, semiconductor capital equipment, life sciences, and automotive applications and markets.

We use advanced engineered materials growth technologies [removed: coupled with] [added: and] proprietary high-precision fabrication, microassembly, optical thin-film coating, and electronic integration to manufacture complex optoelectronic devices and modules.

Our products are deployed in a variety of applications, including (i) [added: optical, data, and wireless communications products; (ii)] laser cutting, welding, and marking operations; [removed: (ii)] [added: (iii)] 3D sensing consumer applications; [removed: (iii) optical, data, and wireless communications products;] (iv) [removed: strategic] aerospace and defense applications including intelligence, surveillance, and reconnaissance; (v) semiconductor processing [removed: and tooling;] [added: tools;] and (vi) thermoelectric cooling and power-generation solutions.

Through RD&E [added: investments] and [added: its strategic] acquisitions, II-VI has expanded its portfolio of [removed: materials.][added: materials and product platforms.]

Optical coatings also provide the desired spectral [removed: characteristics] [added: characteristics,] ranging from the ultraviolet to the far-infrared.

II-VI also offers a broad portfolio of compound semiconductor lasers that are used in a variety of applications in [removed: most of] our end markets.

These compound semiconductor lasers enable [removed: high-power lasers for materials processing;] optical signal [added: transmission, reception, and] amplification in terrestrial and submarine communications networks; high-bit-rate server connectivity between and within datacenters; [added: optical communications network monitoring; materials processing;] and fast and accurate measurements in biomedical [removed: instruments, consumer electronics,] [added: instruments] and [removed: optical communications network monitoring.][added: consumer electronics.]

II-VI continues to [removed: work to perfect] [added: improve] its operational capabilities, develop next-generation products, and invest in new technology [removed: platforms.][added: platforms to drive our growth in the short term while keeping the long term in mind.]

With a strategic focus on fast-growing and sustainable markets, II-VI pursues its [removed: vision] [added: mission] of enabling the world to be safer, healthier, closer, and more [removed: efficient.][added: efficient, and strives to attain its vision of a world transformed through innovative materials vital to a better life today and the sustainability of future generations.]

[removed: Information] [added: Information] Regarding Market Segments and Foreign [removed: Operations][added: Operations]

Financial data regarding our revenues, results of operations, industry segments, and international sales for the three years ended June 30, [removed: 2019,] [added: 2020,] are set forth in the Consolidated Statements of Earnings [added: (Loss)] and in Note [removed: 14 to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K and are incorporated herein by reference.][added: 14.]

[removed: Bookings] [added: Bookings] and [removed: Backlog][added: Backlog]

The Company [removed: records] [added: reports as bookings] only those orders [removed: which] [added: that] are expected to be converted into revenues within 12 months from the end of the reporting period.

For the fiscal year ended June 30, [removed: 2019,] [added: 2020,] our bookings were approximately [removed: $1.4] [added: $2.7] billion, compared with bookings of approximately [removed: $1.2] [added: $1.4] billion for the fiscal year ended June 30, [removed: 2018.][added: 2019.]

As of June 30, [removed: 2019,] [added: 2020,] our backlog was approximately [removed: $500] [added: $957] million, compared with approximately [removed: $450] [added: $500] million as of June 30, [removed: 2018.][added: 2019.]

[removed: Global Operations][added: Global Operations]

II-VI is headquartered in Saxonburg, [removed: PA,] [added: Pennsylvania,] with RD&E, manufacturing, and sales facilities worldwide.

Our U.S. production and [removed: research and development] [added: RD&E] operations are located in [removed: Pennsylvania,] [added: Arizona,] California, [removed: New Jersey, Texas, Mississippi, Massachusetts,] [added: Colorado,] Connecticut, Delaware, [added: Florida, Illinois, Massachusetts, Michigan, Mississippi,] New [added: Jersey, New] York, [removed: Florida,] Ohio, [removed: Arizona, Colorado,] [added: Oregon, Pennsylvania,] and [removed: Illinois,] [added: Texas,] and our non-U.S. production [added: and RD&E] operations are based in [added: Australia,] China, [removed: Singapore, Vietnam,] [added: Germany, Malaysia,] the Philippines, [removed: Germany,] [added: Singapore, Sweden,] Switzerland, [removed: and] the United [removed: Kingdom.][added: Kingdom, and Vietnam.]

In addition to sales offices [added: co-located] at most of our manufacturing sites, we have sales and marketing subsidiaries in [added: Belgium, Canada, China, Germany,] Hong Kong, [removed: Japan, Germany, China, Switzerland, Belgium, the United Kingdom,] Italy, [added: Japan,] South Korea, [added: Switzerland, Taiwan,] and [removed: Taiwan.][added: the United Kingdom.]

[removed: Employees][added: Employees]

The table below summarizes the number of our employees as of June 30, [removed: 2019,] [added: 2020,] in the main functions.

We reward substantially all [added: of] our employees with some form of variable compensation based on achievement of performance goals.

There are approximately [removed: 236] [added: 161] employees located in the United States and the Philippines who are covered under collective bargaining agreements.

There are [removed: 735] [added: 450] employees of II-VI [removed: Photop] in China who work under contract manufacturing arrangements for [removed: customers] [added: a customer] of the [removed: Company.][added: Company, Corning Incorporated.]

| | [removed: Number] [added: | | | | | Number] of [removed: employees] [added: employees] | [removed: Percent] [added: | | | | | Percent] of [removed: total] [added: total] | [added: | |]

[removed: | Research, development,] [added: Research, Development,] and [removed: engineering | 1,707 | 14% |][added: Engineering]

| [removed: Total:] [added: Total:] | [removed: 12,487] | [removed: 100%] | [added: | | | 22,969 | | | | | | 100% | | |]

[removed: Manufacturing Processes][added: Manufacturing Processes]

In the markets we serve, there [removed: are] [added: is] a limited number of high-quality suppliers of many of the components we manufacture, and there are very few industry-standard products.

These include [removed: metal–organic] [added: metal-organic] chemical vapor deposition and molecular beam epitaxy reactors, automated computer numeric control optical fabrication, high-throughput thin-film coaters, nanoprecision metrology, and custom-engineered automated furnace controls for crystal growth processes.

Manufacturing products for use across the electromagnetic spectrum requires the capability to repeatedly [removed: produce] [added: manufacture] products with high yields to atomic tolerances.

[removed: Sources] [added: Sources] of [removed: Supply][added: Supply]

Among the [removed: major feed stock and] raw materials we use are zinc, selenium, [removed: ZnSe, ZnS,] [added: zinc selenide, zinc sulfide,] hydrogen selenide, hydrogen sulfide, arsine, phosphine, hydrogen, [removed: silon,] [added: silane,] tellurium, yttrium oxide, aluminum oxide, iridium, platinum, bismuth, silicon, thorium fluoride, antimony, [removed: carbon,] graphite, [removed: GaAs, InP,] [added: gallium arsenide, gallium nitride, indium phosphide,] copper, [added: gold, nickel,] germanium, molybdenum, quartz, optical glass, [added: silicon carbide,] and [removed: diamond.][added: carbon in its diamond form.]

On September 24, 2019 (the “Closing Date”), the Company completed its acquisition of Finisar Corporation ("Finisar"), a global technology leader for subsystems and components for fiber-optic communications.

Additional information regarding the Company’s acquisition of Finisar is set forth below and in Note 3.

Acquisitions to our Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

Due to timing of the acquisition, the results of Finisar for the three months ended September 30, 2019, have not been allocated to an Operating Segment, and are presented in Unallocated and Other within Note 14.

Segment and Geographic Reporting to our Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

Beginning on October 1, 2019, the results of Finisar have been allocated to the Photonic Solutions and Compound Semiconductors Segments.

Segment and Geographic Reporting to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K and are incorporated herein by reference.

Refer to Note 14.

Segment and Geographic Reporting for further information on reporting segments.

The Company’s five-year collective bargaining agreement in the United States is up for renewal in January 2021, and the Company's two-year collective bargaining agreement in the Philippines is up for renewal in June 2021.

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| Direct production | | | | | | 15,101 | | | | | | 66% | | |

| General administration | | | | | | 3,810 | | | | | | 18% | | |

We utilize numerous optical, electrical, and mechanical parts in our processes that we often also commonly refer to as raw materials, including integrated circuits, mechanical housings, and optical components from third-party suppliers.

As a result of COVID-19, we have experienced some production delays due to shortages of raw materials, and we are driving the development of strategic second sources as part of our overall business continuity Planning.

The Photonic Solutions Segment leverages II-VI’s compound semiconductor technology platforms to deliver components and subsystems that are differentiated based on deep knowledge of end-user applications for our key end markets.

The Compound Semiconductors Segment is a market leader in differentiated materials and devices such as those based on GaAs, InP, GaN, and SiC by independently driving investments that advance its technology roadmaps.

We may from time to time reorganize parts of a given segment or corporate center to drive the focus of certain priorities as identified by the CEO.

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| | | | Coherent Optics | | | •High-speed optoelectronics and modules for optical communications in telecom networks, including for datacenter interconnects and for metro, regional, long-haul, and ultralong-haul networks | | |

| | | | Transceivers | | | •Pluggable transceivers for Ethernet and fiber channel applications in cloud and enterprise datacenter applications | | |

| | | | | | | | | |

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| | | | | | | | | |

| Segment | | | Business Unit | | | Our Products | | |

| Compound Semiconductors | | | Engineered Materials & Laser Optics | | | •Laser optics and accessories for CO2 lasers used in materials processing, semiconductors, and life sciences •High-power fiber and direct-diode laser optics •Infrared thermal imaging optics and assemblies •Polycrystalline materials production including ZnSe, ZnS, and CVD diamond •Thermoelectric components, subassemblies, and systems for heating, cooling, temperature tuning, thermal cycling, and power generation in aerospace and defense, medical, industrial, automotive, consumer, telecommunications, and energy-production markets •Specialty refining, recycling, and materials recovery services for high-purity rare metals such as selenium and tellurium, as well as related chemical products such as tellurium dioxide for optics, photovoltaics, semiconductors, thermoelectric coolers, metallurgy, agriculture, and industrial applications •Advanced ceramic and metal-matrix composite products for semiconductor capital equipment, flat-panel displays, industrial and optical equipment, and defense applications | | |

| | | | InP Devices | | | •Semiconductor lasers and detectors for optical interconnects and sensing applications | | |

As we grow, we may add new primary markets.

Demand for our products is largely driven by the continually growing need for additional network bandwidth created by the ongoing proliferation of data and video traffic from video downloads and streaming, live TV, social networking, on-line gaming, file sharing, enterprise IP/internet traffic, cloud computing, and datacenter virtualization that must be handled by both wireline and wireless networks.

Mobile traffic is increasing as a result of the proliferation of smartphones, tablet computers, and other mobile devices.

We are a global technology leader in optical communications, providing materials, components, modules, and subsystems to optical component and module manufacturers, networking equipment manufacturers, datacenter operators, and telecom service providers.

We design products that meet the increasing demands for network bandwidth and data storage.

Our optical communications products can be divided into two main groups, optical transmission and optical transport.

Our optical transmission products consist primarily of transmitters, receivers, transceivers, transponders, and active optical cables, which provide the fundamental optical-electrical, or optoelectronic, interface for interconnecting the electronic equipment used in these networks.

This equipment includes switches, routers, and servers used in wireline networks as well as antennas and base stations used in wireless networks.

These products rely on advanced components such as semiconductor lasers and photodetectors in conjunction with integrated circuits and novel optoelectronic packaging to provide a cost-effective means for transmitting and receiving digital signals over fiber-optic cable at speeds ranging from less than 1 Gbps to more than 400 Gbps, over distances of less than 10 meters to more than 5,000 kilometers, using a wide range of network protocols and physical configurations.

Together with our OCM solutions, which monitor the optical power of the channels transmitted in an fiber-optic link, they enable real-time intelligence to perform preventive maintenance so as to preserve data transmission.

In addition, we offer a portfolio of WSS products, which we also incorporate into ROADM line cards and subsystems.

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We address seven major markets.

As of June 30, 2019, the Company’s operations were organized into three reporting segments: (i) II-VI Laser Solutions, (ii) II-VI Photonics, and (iii) II-VI Performance Products.

See below for a more detailed description of each of these segments.

The Company will report financial information for these new reporting segments in fiscal 2020 which should provide enhanced visibility and transparency into the operations, business drivers and the value of our enterprise.

This change in reporting is to occur beginning with periods commencing July 1, 2019.

II-VI and Finisar have entered into an Agreement and Plan of Merger, dated as of November 8, 2018 (the “Merger Agreement”).

Pursuant to the terms of the Merger Agreement, Mutation Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of II-VI, will be merged with and into Finisar, and Finisar will continue as the surviving corporation in the merger and a wholly owned subsidiary of II-VI (the “Merger”).

If the Merger is consummated, Finisar stockholders will be entitled to receive, at their election, consideration per share of common stock of Finisar (the “Finisar Common Stock”) consisting of (i) $26.00 in cash, without interest (the “Cash Consideration”), (ii) 0.5546 shares of II-VI common stock (the shares, the “II-VI Common Stock,” and the consideration, the “Stock Consideration”), or (iii) a combination of $15.60 in cash, without interest, and 0.2218 shares of II-VI Common Stock (the “Mixed Consideration,” and, together with the Cash Consideration and the Stock Consideration, the “Merger Consideration”).

The Cash Consideration and the Stock Consideration are subject to proration adjustment pursuant to the terms of the Merger Agreement such that the aggregate Merger Consideration will consist of approximately 60% cash and approximately 40% II-VI Common Stock assuming a per share price of II-VI common stock equal to the price when the Merger Agreement was signed on November 8, 2018, which was $46.88 per share.

At the effective time of the Merger (the “Effective Time”), each option granted pursuant to Finisar’s 2005 Stock Incentive Plan, as such plan has been further amended and restated (each, a “Finisar Stock Option”), or portion thereof, that is outstanding and unexercised as of immediately prior to the Effective Time (whether vested or unvested) will be cancelled, terminated and converted into the right to receive an amount of Mixed Consideration that would be payable to a holder of such number of shares of Finisar Common Stock equal to the quotient of (i) the product of (a) the excess, if any, of $26.00 over the exercise price per share of such Finisar Stock Option multiplied by (b) the number of shares of Finisar Common Stock subject to such Finisar Stock Option, divided by (ii) $26.00.

At the Effective Time, each restricted stock unit granted pursuant to Finisar’s 2005 Stock Incentive Plan, as such plan has been further amended and restated (each, a “Finisar Restricted Stock Unit”), or portion thereof , that is outstanding and subject to a performance-based vesting condition that relates solely to the value of Finisar Common Stock will, to the extent such Finisar Restricted Stock Unit vests in accordance with its terms in connection with the Merger (the “Participating RSUs”), be cancelled and extinguished and converted into the right to receive the Cash Consideration, the Stock Consideration or the Mixed Consideration at the election of the holder of such Participating RSUs, subject to proration adjustment.

At the Effective Time, each Finisar Restricted Stock Unit (or portion thereof) that is outstanding and unvested, does not vest in accordance with its terms in connection with the Merger and is either (x) subject to time-based vesting requirements only or (y) subject to a performance-based vesting condition other than the value of Finisar Common Stock will be assumed by II-VI (each, an “Assumed RSU”).

Each Assumed RSU will be subject to substantially the same terms and conditions as applied to the related Finisar Restricted Stock Unit immediately prior to the Effective Time, including the vesting schedule (and the applicable performance-vesting conditions in the case of a grant contemplated by clause (y) of the preceding sentence) and any provisions for accelerated vesting applicable thereto, except that the number of shares of II-VI Common Stock subject to each Assumed RSU will be equal to the product of (i) the number of shares of Finisar Common Stock underlying such unvested Finisar Restricted Stock Unit award as of immediately prior to the Effective Time multiplied by (ii) the sum of (a) 0.2218 plus (b) the quotient obtained by dividing (1) $15.60 by (2) the volume weighted average price per share of II-VI Common Stock (rounded to the nearest cent) on the Nasdaq Global Select Market for the ten consecutive trading days ending on (and including) the third trading day immediately prior to the Effective Time (with the resulting number rounded down to the nearest whole share).

II-VI filed with the SEC a registration statement on Form S-4 relating to the Merger, and that registration statement became effective in accordance with the provisions of Section 8(a) of the Securities Act of 1933, as amended, on February 7, 2019.

Shareholders of II-VI and stockholders of Finisar voted to approve proposals related to the Merger at special meetings held on March 26, 2019 by the respective companies.

The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the Merger has expired without a request for additional information.

Other regulatory approvals applicable to the Merger have been obtained in Germany, Mexico and Romania.

The completion of the Merger is subject to the satisfaction or waiver of certain additional customary closing conditions, including review and approval of the Merger by the State Administration for Market Regulation in China.

The Company is planning to refile with the State Administration for Market Regulation in China, extending the approval period.

Subject to the satisfaction or waiver of each of the closing conditions, II-VI and Finisar expect that the Merger will be completed in the second half of calendar 2019.

However, it is possible that factors outside the control of both companies could result in the Merger being completed at a different time or not at all.

On November 8, 2018, in connection with its entry into the Merger Agreement, II-VI entered into a commitment letter (together with a related fee letter) with Bank of America, N.A., which was subsequently amended and restated on December 7, 2018 and on December 14, 2018 (together with one or more related fee letters, the “Commitment Letter”).

Subject to the terms and conditions set forth in the Commitment Letter, the lender parties thereto severally committed to provide 100% of up to $2.425 billion in aggregate principal amount of senior secured credit facilities of II-VI.

On March 4, 2019, II-VI entered into a Credit Agreement, dated as of March 4, 2019 (as amended, the “New Credit Agreement”), by and among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other lenders party thereto.

II-VI also entered into Amendment No. 1 to Credit Agreement, dated as of May 24, 2019, by and among the Company, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto, which includes the final results of the syndication of the Term A Facility (as defined below).

Pursuant to the terms and subject to the conditions therein, the New Credit Agreement provides for senior secured financing of $1.705 billion in the aggregate, consisting of (i) a five-year senior secured first-lien term A loan facility in an aggregate principal amount of $1.255 billion (the “Term A Facility”) and (ii) a five-year senior secured first-lien revolving credit facility in an aggregate principal amount of $450.0 million (the “Revolving Credit Facility” and together with the Term A Facility, the “New Senior Credit Facilities”).

The New Credit Agreement also provides for a letter of credit sub-facility not to exceed $25.0 million and a swing loan sub-facility initially not to exceed $20.0 million, subject to adjustment in accordance with the terms of the New Credit Agreement.

II-VI anticipates using the proceeds from the Term A Facility, together with a separately committed term B loan facility in an aggregate principal amount of up to $720.0 million (the “Term B Facility”) and cash and short-term investments of II-VI and Finisar, to pay the cash portion of the merger consideration payable in connection with the Merger and related fees and expenses.

II-VI currently does not intend to draw on the Revolving Credit Facility in order to fund the cash portion of the merger consideration payable in connection with the Merger.

The funding obligations of the lenders under the New Senior Credit Facilities are subject to certain currently unsatisfied conditions, including the consummation of the Merger.

Accordingly, no borrowings are currently outstanding under the New Senior Credit Facilities, and II-VI currently is not able to borrow under the New Senior Credit Facilities.

Further, II-VI expects that the New Credit Agreement will be amended prior to the consummation of the Merger to reflect syndication of the Term B Facility and to finalize certain other terms in the New Credit Agreement.

Upon the consummation of the Merger, the New Senior Credit Facilities, governed by the New Credit Agreement as it may be amended as of such time, will be used (i) to refinance in full the Amended Credit Facility (as defined in Note 9 to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K) and (ii) on or after the date of the consummation of the Merger, to repay amounts owed in connection with Finisar’s outstanding convertible notes, currently in an aggregate principal amount outstanding of $575.0 million, including with the proceeds of a portion of the Term A Facility which will be available to II-VI for a certain period after the initial funding under the New Senior Credit Facilities.

Unless and until the Merger is consummated and the other currently unsatisfied conditions to the funding obligations of the lenders under the New Senior Credit Facilities are satisfied or waived, the Amended Credit Facility remains in effect in accordance with its terms.

Approximately 70% of our revenues for the fiscal year ended June 30, 2019, were generated from sales to customers outside of the United States.

The Company’s collective bargaining agreement in the Philippines expired in June 2019, and the Company is in the process of negotiating a new collective bargaining agreement.

The collective bargaining agreement covering certain U.S.-based employees expires in January 2021.

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Management believes, after consulting with legal counsel, that the ultimate liabilities, if any, resulting from such legal proceedings will not materially affect the Company’s financial condition, [removed: liquidity] [added: liquidity,] or results of operations.

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[removed: United States][added: United States]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

[removed: |] ☒ [removed: | Annual] [added: Annual] Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of [removed: 1934 |][added: 1934]

[removed: for] [added: for] the fiscal year ended June 30, [removed: 2019][added: 2020]

[removed: |] ☐ [removed: | Transition] [added: Transition] report pursuant to Section 13 or 15(d) of the Securities Exchange Act of [removed: 1934 |][added: 1934]

[removed: for] [added: for] the transition period [removed: from to] [added: from to] .

Commission File Number: [removed: 0-16195][added: 001-39375]

[removed: II-VI INCORPORATED][added: II-VI INCORPORATED]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| [removed: PENNSYLVANIA] [added: Pennsylvania] | | [removed: 25-1214948] | [added: | | | 25-1214948 | | | | | |]

| [removed: (State] [added: (State] or other jurisdiction of incorporation or [removed: organization)] [added: organization)] | | [removed: (I.R.S.] [added: | | | | (I.R.S.] Employer Identification [removed: No.)] [added: No.)] | [added: | | | | |]

| [removed: 375 Saxonburg Boulevard] Saxonburg, PA | | [removed: 16056] | [added: | | | 16056 | | | | | |]

| [removed: (Address] [added: (Address] of principal executive [removed: offices)] [added: offices)] | | [removed: (Zip code)] | [added: | | | (Zip code) | | | | | |]

[removed: Registrant’s] [added: Registrant’s] telephone number, including area code: [removed: 724-352-4455][added: 724-352-4455]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| Title of each class | [added: | |] Trading Symbol(s) | [added: | |] Name of each exchange on which registered | [added: | |]

| [removed: Common] [added: Common] Stock, no par [removed: value] [added: value] | [removed: IIVI] | [removed: Nasdaq] [added: | IIVI | | | Nasdaq] Global Select [removed: Market] [added: Market] | [added: | |]

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the Act: [removed: None][added: None]

| Large [removed: accelerated filer] [added: Accelerated Filer] | [added: | |] ☒ | | | [added: | | | | | |] Accelerated filer | | [added: | | | |] ☐ | [added: | |]

| Non-accelerated filer | [added: | |] ☐ | | | [added: | | | | | |] Smaller reporting company | | [added: | | | |] ☐ | [added: | |]

| | | | | [added: | | | | | | | |] Emerging growth company | | [added: | | | |] ☐ | [added: | |]

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

Aggregate market value of outstanding Common Stock, no par value, held by non-affiliates of the Registrant at December 31, [removed: 2018,] [added: 2019,] was approximately [removed: $2,023,369,000] [added: $3,031,733,938] based on the closing sale price reported on the Nasdaq Global Select Market.

Number of outstanding shares of Common Stock, no par value, at August [removed: 12, 2019,] [added: 20, 2020,] was [removed: 63,610,824.][added: 103,668,355.]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the registrant’s definitive proxy statement, which will be issued in connection with the [removed: 2019] [added: 2020] Annual Meeting of Shareholders of II-VI Incorporated, are incorporated by reference into Part III of this Annual Report on Form 10-K.

[removed: Forward-Looking Statements][added: Forward-Looking Statements]

The following [added: risk] factors, among others, in some cases have affected and in the future could affect our financial performance and actual results, and could cause actual results for fiscal [removed: 2020] [added: 2021] and beyond to differ materially from those expressed or implied in any forward-looking statements included in this Annual Report on Form 10-K or otherwise made by our management:

[removed: | | • |] [added: -] Investments in future markets of potential significant growth may not result in the expected return. [removed: |]

[removed: | | • |] [added: -] Our competitive position depends on our ability to develop new products and processes. [removed: |]

[removed: | | • |] [added: -] Global economic [removed: downturns] [added: downturns, including any downturn related to COVID-19,] may adversely affect our business, operating results and financial condition. [removed: |]

[removed: | | • |] [added: -] Some systems that use our products are complex in design, and our products may contain defects that are not detected until deployed, which could increase our costs, reduce our revenues, cause us to lose key [removed: customers] [added: customers,] and may expose us to litigation [removed: arising from derivative lawsuits] related to [removed: consumer] [added: our] products. [removed: |]

[removed: | | • |] [added: -] Foreign currency risk may negatively affect our revenues, cost of sales and operating [removed: margins] [added: margins,] and could result in foreign exchange losses. [removed: |]

[removed: | | • | To retain our] [added: - Our] competitive position may [added: still] require significant investments. [removed: |]

[removed: | | • |] [added: -] We may be unable to successfully implement our acquisitions strategy or integrate acquired companies and personnel with existing operations. [removed: |]

[removed: | | • |] [added: -] Our future success depends on continued international sales, and our global operations are complex and present multiple challenges to manage. [removed: |]

[removed: | | • |] [added: -] We are subject to complex and rapidly changing [removed: governmental] import and export [removed: regulations. |][added: regulations which could limit our sales and decrease our profitability.]

[removed: | | • |] [added: -] Any inability to access financial markets from time to time to raise required capital, finance our working capital requirements or our acquisition strategies, or otherwise to support our liquidity [removed: needs could negatively impact our ability to finance our operations, meet certain obligations or implement our growth strategy. |]

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| 375 Saxonburg Blvd. | | | | | | | | | | | |

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| Series A Mandatory Convertible Preferred Stock, no par value | | | IIVIP | | | Nasdaq Global Select Market | | |

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Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

- Widespread health crises, including the global novel coronavirus (COVID-19) pandemic, could materially and adversely affect our business, financial condition and results of operations.

- Changes in trade policies, such as increased import duties, could increase the cost of goods imported into the United States or China.

The inclusion of companies, such as Huawei, on the U.S. Entity List, could decrease our access to customers and markets and materially impact our revenues in the aggregate.

needs could negatively impact our ability to finance our operations, meet certain obligations or implement our growth strategy.

- Our credit agreement restricts our operations, particularly our ability to respond to changes or to take certain actions regarding our business.

- We may encounter increased competition and we may fail to accurately estimate our competitors’ or our customers’ willingness and capability to backward integrate into our competencies and thereby displace us.

- We have a substantial amount of debt, which could adversely affect our business, financial condition, or results of operations and prevent us from fulfilling its debt-related obligations.

- Our ability to declare and pay dividends on our capital stock may be limited, including by the terms of our existing Credit Agreement.

- Our common stock is subordinate to our existing and future indebtedness; the Mandatory Convertible Preferred Stock, when issued; and any other preferred stock we may issue in the future.

Our Mandatory Convertible Preferred Stock ranks junior to all of our and our subsidiaries’ consolidated liabilities.

- Our board of directors can issue, without approval of the holders of our common stock, preferred stock with voting and conversion rights that could adversely affect the voting power of the holders of our common stock, the rights of holders of shares of our capital stock or the market price of our capital stock.

- Reports published by securities or industry analysts, freelance bloggers and credit rating agencies, including projections in those reports that exceed our actual results, could adversely affect our share price and trading volume.

- Regulatory actions may adversely affect the trading price and liquidity of the Mandatory Convertible Preferred Stock.

- Holders of Mandatory Convertible Preferred Stock have no voting rights with respect to the Mandatory Convertible Preferred Stock, except under limited circumstances.

- We depend on our subsidiaries for cash to fund our operations and expenses, including future dividend payments with respect to the Mandatory Convertible Preferred Stock.

It is not possible for management to predict all such risk factors, assess the impact of all such risk factors on our business or estimate the extent to which any individual risk factor, or combination of risk factors, may impact our business.

10-K 1 iivi-10k_20190630.htm 10-K

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| | • | Changes in U.S. trade policies could impact our international operations and the cost of goods imported into the United States, which may narrow the size of our markets, materially impact our revenues or increase our operating costs and expose us to contract litigation. |

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| | • | We may encounter increased competition. |

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Information regarding our principal U.S. properties at June 30, [removed: 2019] [added: 2020,] is set forth below:

| [removed: Location] [added: Location] | | [removed: Primary Use(s)] | | [removed: Primary] [added: | | Primary Use(s) | | | | | | Primary] Business [removed: Segment(s)] [added: Segment(s)] | | [removed: Approximate] [added: | | | | Approximate] Square [added: Footage] | | | | [removed: Ownership] | [added: | Ownership | | |]

| Saxonburg, PA | | [added: | | | |] Manufacturing and Research and Development | | [removed: II-VI Laser Solutions and II-VI Performance Products] | | [added: | | Compound Semiconductors | | | | | |] 235,000 | | | | [added: | |] Owned and Leased | [added: | |]

| Warren, NJ | | [added: | | | |] Manufacturing and [added: Research and Development] | | [removed: II-VI Laser Solutions] | | [added: | | Compound Semiconductors | | | | | |] 159,000 | | | | [added: | |] Leased | [added: | |]

| Newark, DE | | [added: | | | |] Manufacturing and [added: Research and Development] | | [removed: II-VI Performance Products] | | [added: | | Compound Semiconductors | | | | | |] 135,000 | | | | [added: | |] Leased | [added: | |]

| Murrieta, CA | | [added: | | | |] Manufacturing and [added: Research and Development] | | [removed: II-VI Performance Products] | | [added: | | Compound Semiconductors | | | | | |] 108,000 | | | | [added: | |] Leased | [added: | |]

| [removed: Dallas, TX] [added: Easton, PA*] | | [added: | | | |] Manufacturing and Research and Development | | [removed: II-VI Performance Products] | | [removed: 68,000] | | [added: Compound Semiconductors] | | [removed: Owned and] [added: | | | | 281,000 | | | | | |] Leased | [added: | |]

Information regarding our principal foreign properties at June 30, [removed: 2019] [added: 2020,] is set forth below:

| [removed: Location] [added: Location] | | [removed: Primary Use(s)] | | [removed: Primary] [added: | | Primary Use(s) | | | | | | Primary] Business [removed: Segment(s)] [added: Segment(s)] | | [removed: Footage] | | | | [removed: Ownership] [added: Approximate Square Footage] | [added: | | | | | Ownership | | |]

| China | | [added: | | | |] Manufacturing, Research and Development, and Distribution | | [removed: II-VI Laser Solutions, II-VI Photonics] [added: | | | | Compound Semiconductors] and [removed: II-VI Performance Products] [added: Photonic Solutions] | | | [removed: 1,694,000] | | | [added: 3,232,363 | | | | | | Owned and] Leased | [added: | |]

| United Kingdom | | [added: | | | |] Manufacturing, Research and Development | | [removed: II-VI Laser Solutions] [added: | | | | Compound Semiconductors] and [removed: II-VI Photonics] [added: Photonic Solutions] | | | [added: | | |] 319,000 | | | [added: | | |] Owned and Leased | [added: | |]

| Philippines | | [added: | | | |] Manufacturing | | [removed: II-VI Laser Solutions and II-VI Performance Products] | | | [added: | Compound Semiconductors | | | | | |] 318,000 | | | [added: | | |] Leased | [added: | |]

| Vietnam | | [added: | | | |] Manufacturing | | [removed: II-VI Photonics] [added: | | | | Compound Semiconductors] and [removed: II-VI Performance Products] [added: Photonic Solutions] | | | [removed: 192,000] | | | [added: 189,000 | | | | | |] Owned and Leased | [added: | |]

| Switzerland | | [added: | | | |] Manufacturing, Research and Development, and Distribution | | [removed: II-VI Laser Solutions] | | | [added: | Compound Semiconductors | | | | | |] 118,000 | | | [added: | | |] Leased | [added: | |]

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| Sherman, TX | | | | | | Manufacturing | | | | | | Compound Semiconductors | | | | | | 700,000 | | | | | | Owned | | |

| Sunnyvale, CA | | | | | | Manufacturing, Research and Development, and Corporate Administrative Offices | | | | | | Photonic Solutions | | | | | | 112,000 | | | | | | Leased | | |

| Fremont, CA | | | | | | Manufacturing and Research and Development | | | | | | Compound Semiconductors | | | | | | 107,000 | | | | | | Leased | | |

Approximately 48,000 square feet are currently used in connection with the Company’s manufacturing operations.

The remainder is subleased to a third party.*

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| Malaysia | | | | | | Manufacturing | | | | | | Photonic Solutions | | | | | | 640,000 | | | | | | Owned | | |

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| | | | | | | Footage | | | | |

| | | | | | | | | | | |

| | | Research and Development | | | | | | | | |

| | | Research and Development | | | | | | | | |

| | | Research and Development | | | | | | | | |

| Champaign, IL | | Manufacturing and | | II-VI Laser Solutions | | 69,000 | | | | Leased |

| | | Research and Development | | | | | | | | |

| Warrendale, PA | | Corporate Administrative Offices | | N/A | | | 63,000 | | | Leased |

| Monroe, CT | | Manufacturing and | | II-VI Performance Products | | 48,000 | | | | Leased |

| | | Research and Development | | | | | | | | |

| Easton, PA | | Manufacturing and | | II-VI Laser Solutions and II-VI Performance Products | | 48,000 | | | | Leased |

| | | Research and Development | | | | | | | | |

| Pine Brook, NJ | | Manufacturing and | | II-VI Performance Products | | 47,000 | | | | Leased |

| | | Research and Development | | | | | | | | |

| Santa Rosa, CA | | Manufacturing and | | II-VI Photonics | | 39,000 | | | | Leased |

| | | Research and Development | | | | | | | | |

| Starkville, MS | | Manufacturing | | II-VI Performance Products | | | 35,000 | | | Leased |

| Tustin, CA | | Manufacturing and | | II-VI Performance Products | | 31,000 | | | | Leased |

| | | Research and Development | | | | | | | | |

| Philadelphia, PA | | Manufacturing and | | II-VI Performance Products | | 30,000 | | | | Leased |

| | | Research and Development | | | | | | | | |

| Hillsborough, NJ | | Manufacturing and | | II-VI Performance Products | | 23,000 | | | | Leased |

| | | Research and Development | | | | | | | | |

We also maintain some additional small research and development, distribution, and administrative facilities in leased space in the United States.

| | | | | | | Approximate Square | | | | |

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| Germany | | Manufacturing and Distribution | | II-VI Laser Solutions, II-VI Photonics and II-VI Performance Products | | | 81,000 | | | Owned and Leased |

| Singapore | | Manufacturing | | II-VI Laser Solutions and II-VI Performance Products | | | 38,000 | | | Leased |

We also maintain some additional small distribution facilities in leased space in Belgium, Italy, Japan, South Korea, Taiwan, and the United Kingdom.

[removed: PART II][added: PART II]

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The Company’s common stock is traded on the Nasdaq Global Select Market [removed: (“Nasdaq”)] under the symbol “IIVI.” As of August [removed: 12, 2019,] [added: 20, 2020,] there were approximately [removed: 824] [added: 839] holders of record of our common stock.

The Company historically has not paid cash dividends [added: on its common stock] and does not presently anticipate paying cash dividends [added: on its common stock] in the future.

[removed: ISSUER] [added: ISSUER] PURCHASES OF EQUITY [removed: SECURITIES][added: SECURITIES]

In August 2017, in conjunction with the Company’s offering and sale of our [added: 0.25%] outstanding convertible [added: senior] notes, the Company’s Board of Directors authorized the Company to purchase up to $50 million of its common stock with a portion of the net proceeds received from the offering and sale of [removed: the] [added: those] convertible notes.

During [added: each of] the fiscal [removed: year] [added: years] ended June 30, [added: 2020 and June 30,] 2019, the Company purchased 50,000 shares of its common stock for $1.6 million under this program.

As of June 30, [removed: 2019,] [added: 2020,] the Company has cumulatively purchased [removed: 1,366,587] [added: 1,416,587] shares of its common stock pursuant to the Program for approximately [removed: $20.7] [added: $22.3] million.

The dollar value of shares as of June 30, [removed: 2019] [added: 2020] that may yet be purchased under the Program is approximately [removed: $29.3 million][added: $27.7 million.]

[removed: PERFORMANCE GRAPH][added: PERFORMANCE GRAPH]

The following graph compares cumulative total shareholder return on the Company’s common stock with the cumulative total shareholder return of the Nasdaq Composite Index and with a peer group of companies constructed by the Company for the period from June 30, [removed: 2014,] [added: 2015,] through June 30, [removed: 2019.][added: 2020.]

The Company’s current fiscal year peer group includes Cabot Microelectronics Corporation, Franklin Electric Co. Inc., MKS Instruments, Inc., Silicon Laboratories Inc., Lumentum Holdings Inc., [removed: Finisar Corporation,] Coherent, Inc. and Corning Incorporated.

[removed: ][added: ]

Dividends on the Company’s Mandatory Convertible Preferred Stock will be payable on a cumulative basis when, as and if declared by our board of directors, or an authorized committee of our board of directors, at an annual rate of 6.00% of the liquidation preference of $200.00 per share.

The Company may pay declared dividends on the Mandatory Convertible Preferred Stock in cash or, subject to certain limitations, in shares of our common stock or in any combination of cash and shares of our common stock on January 1, April 1, July 1 and October 1 of each year, commencing on October 1, 2020 and ending on, and including, July 1, 2023.

In our Annual Report on Form 10-K for our fiscal year ended June 30, 2019, our fiscal year peer group included Finisar.

Finisar has been excluded from the current fiscal year peer group as a result of our acquisition of Finisar in September 2019.

| --- | --- |

The Company did not repurchase shares pursuant to this Program during the fiscal years ended June 30, 2018 and 2017.

The following table provides information with respect to purchases of the Company’s equity securities during the quarter ended June 30, 2019.

| | | | | | | | | | | 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 | | | | Under the | | |

| Period | | Shares Purchased | | | | Per Share | | | | Programs | | | | Program | | |

| April 1, 2019 to April 30, 2019 | | | \- | | | $ | \- | | | | \- | | | $ | 30,906,904 | |

| May 1, 2019 to May 31, 2019 | 2,594 | | | | (1) | $ | 32.86 | | | | \- | | | $ | 30,906,904 | |

| June 1, 2019 to June 30, 2019 | | | \- | | | $ | 32.32 | | | | 50,000 | | | $ | 29,290,759 | |

| (1) | Includes 2,594 shares of our common stock transferred to the Company from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted share awards. |

| --- | --- |

The information incorporated by reference in Item 12 of this Annual Report on Form 10-K, from our 2019 Proxy Statement under the heading “Equity Compensation Plan Information,” is hereby also incorporated by reference into this Item 5.

[removed: Five-Year] [added: Five-Year] Financial [removed: Summary][added: Summary]

| [removed: Year] [added: Year] Ended June [removed: 30,] [added: 30,] | | [removed: 2019] | | | | [added: 2020] | [removed: 2018] | | | | | [removed: 2017] [added: 2019] | | | | | [removed: 2016] | [added: 2018] | | | | [removed: 2015] | | [added: 2017] | | [added: | | | | 2016 | | |]

| [removed: ($000] [added: *($000] except per share [removed: data)] [added: data)*] | | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | |]

| [removed: Statement] [added: Statement] of [removed: Earnings] [added: Earnings] | | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | |]

| Net revenues | | [added: | | | |] $ | [added: 2,380,071] | [removed: 1,362,496] | | | [added: |] $ | [added: 1,362,496] | [removed: 1,158,794] | | | [added: |] $ | [added: 1,158,794] | [removed: 972,046] | | | [added: |] $ | [added: 972,046] | [removed: 827,216] | | | [removed: $] | [added: $] | [removed: 741,961] [added: 827,216] | |

| Net earnings [added: (loss)] | | | | [removed: 107,517] | | [added: (67,029)] | | | [removed: 88,002] | | | [added: 107,517] | | [removed: 95,274] | | | | [added: 88,002] | [removed: 65,486] | | | | | [removed: 65,975] [added: 95,274] | | [added: | | | | 65,486 | | |]

| Basic earnings [added: (loss)] per share | | | | [removed: 1.69] | | [added: (0.79)] | | | [removed: 1.41] | | | [added: 1.69] | | [removed: 1.52] | | | | [added: 1.41] | [removed: 1.07] | | | | | [removed: 1.08] [added: 1.52] | | [added: | | | | 1.07 | | |]

| Diluted earnings [added: (loss)] per share | | | | [removed: 1.63] | | [added: (0.79)] | | | [removed: 1.35] | | | [added: 1.63] | | [removed: 1.48] | | | | [added: 1.35] | [removed: 1.04] | | | | | [removed: 1.05] [added: 1.48] | | [added: | | | | 1.04 | | |]

| Diluted weighted average shares outstanding | | | | [removed: 65,804] | | [added: 84,828] | | | [removed: 65,133] | | | [added: 65,804] | | [removed: 64,507] | | | | [added: 65,133] | [removed: 62,909] | | | | | [removed: 62,586] [added: 64,507] | | [added: | | | | 62,909 | | |]

| [removed: June 30,] [added: June 30,] | | [removed: 2019] | | | | [added: 2020] | [removed: 2018] | | | | | [removed: 2017] [added: 2019] | | | | | [removed: 2016] | [added: 2018] | | | | [removed: 2015] | | [added: 2017] | | [added: | | | | 2016 | | |]

| [removed: ($000)] [added: *($000)*] | | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | |]

| [removed: Balance Sheet] [added: Balance Sheet] | | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | |]

| Working capital | | [added: | | | |] $ | [added: 1,116,076] | [removed: 542,348] | | | [added: |] $ | [added: 542,348] | [removed: 525,370] | | | [added: |] $ | [added: 525,370] | [removed: 517,344] | | | [added: |] $ | [added: 517,344] | [removed: 411,721] | | | [removed: $] | [added: $] | [removed: 373,812] [added: 411,721] | |

| Total assets | | | | [removed: 1,953,773] | | [added: 5,234,714] | | | [removed: 1,761,661] | | | [added: 1,953,773] | | [removed: 1,477,297] | | | | [added: 1,761,661] | [removed: 1,211,981] | | | | | [removed: 1,057,273] [added: 1,477,297] | | [added: | | | | 1,211,981 | | |]

| Long-term debt | | | | [removed: 443,163] | | [added: 2,186,092] | | | [removed: 419,013] | | | [added: 443,163] | | [removed: 322,022] | | | | [added: 419,013] | [removed: 215,307] | | | | | [removed: 155,066] [added: 322,022] | | [added: | | | | 215,307 | | |]

| Total debt | | | | [removed: 466,997] | | [added: 2,255,342] | | | [removed: 439,013] | | | [added: 466,997] | | [removed: 342,022] | | | | [added: 439,013] | [removed: 235,307] | | | | | [removed: 175,066] [added: 342,022] | | [added: | | | | 235,307 | | |]

| Retained earnings | | | | [removed: 943,581] | | [added: 876,552] | | | [removed: 836,064] | | | [added: 943,581] | | [removed: 748,062] | | | | [added: 836,064] | [removed: 652,788] | | | | | [removed: 587,302] [added: 748,062] | | [added: | | | | 652,788 | | |]

| Shareholders' equity | | | | [removed: 1,133,209] | | [added: 2,076,803] | | | [removed: 1,024,311] | | | [added: 1,133,209] | | [removed: 900,563] | | | | [added: 1,024,311] | [removed: 782,338] | | | | | [removed: 729,081] [added: 900,563] | | [added: | | | | 782,338 | | |]

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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| | | | | | | | | | | | | | | | | | | | | | | | | | |

[removed: MANAGEMENT’S] [added: MANAGEMENT’S] REPORT ON INTERNAL CONTROL OVER FINANCIAL [removed: REPORTING][added: REPORTING]

[removed: Management’s] [added: Management’s] Responsibility for Preparation of the Financial [removed: Statements][added: Statements]

[removed: Management’s] [added: Management’s] Report on Internal Control Over Financial [removed: Reporting][added: Reporting]

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of June 30, [removed: 2019.][added: 2020.]

In making this evaluation, management used the criteria set forth by the [removed: Committee] [added: *Committee] of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework [removed: (2013).][added: (2013)*.]

Management excluded from the scope of its assessment of internal control over financial reporting the internal controls of [removed: CoAdna Holdings, Inc., which was acquired in September 2018, and Redstone Aerospace] [added: Finisar] Corporation, which was acquired in [removed: March] [added: September] 2019.

The recent [removed: acquisitions] [added: acquisition] excluded from management’s assessment of internal controls over financial reporting represented approximately [removed: $98.1 million] [added: $3.1 billion] and [removed: $84.1 million] [added: $2.8 billion] of total assets and net assets, respectively, as of June 30, [removed: 2019] [added: 2020,] and approximately [removed: $15.5] [added: $938.4] million and [removed: $1.2] [added: $94.6] million of total revenues and net loss, respectively, for the fiscal year then ended.

Based on the evaluation, management concluded that as of June 30, [removed: 2019,] [added: 2020,] the Company’s internal controls over financial reporting were effective.

Ernst & Young LLP, an independent registered public accounting firm, has issued its report on the effectiveness of our internal control over financial reporting as of June 30, [removed: 2019.][added: 2020.]

[removed: Report] [added: Report] of Independent Registered Public Accounting [removed: Firm][added: Firm]

To the [added: Shareholders and the] Board of Directors [removed: and Shareholders] of II-VI Incorporated [removed: and Subsidiaries]

[removed: Opinion] [added: Opinion] on the Financial [removed: Statements][added: Statements]

We have audited the accompanying consolidated balance sheets of II-VI Incorporated and Subsidiaries (the Company) as of June 30, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] the related consolidated statements of [removed: earnings,] [added: earnings (loss),] comprehensive [removed: income,] [added: income (loss),] shareholders’ equity and cash flows for each of the three years in the period ended June 30, [removed: 2019,] [added: 2020,] and the related notes and the financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the results of its operations and its cash flows for each of the three years in the period ended June 30, [removed: 2019,] [added: 2020,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, [removed: 2019,] [added: 2020,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated August [removed: 16, 2019] [added: 26, 2020] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: Critical] [added: Critical] Audit [removed: Matters][added: Matter]

The critical audit [removed: matters] [added: matter] communicated below [removed: are matters] [added: is a matter] arising from the current period audit of the financial statements that [removed: were] [added: was] communicated or required to be communicated to the audit committee and that: (1) [removed: relate] [added: relates] to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, [removed: subjective,] [added: subjective] or complex judgments.

The communication of [added: the] critical audit [removed: matters] [added: matter] does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit [removed: matters] [added: matter] below, providing [added: a] separate [removed: opinions] [added: opinion] on the critical audit [removed: matters] [added: matter] or on the accounts or disclosures to which [removed: they relate.][added: it relates.]

| [removed: Description] [added: *Description] of the [removed: Matter] [added: Matter*] | [added: | |] As discussed in Note 3 to the consolidated financial statements, during the year ended June 30, [removed: 2019,] [added: 2020,] the Company completed the acquisition of [removed: CoAdna Holdings, Inc (“CoAdna”)] [added: Finisar Corporation ("Finisar")] for a total purchase price of approximately [removed: $42.8 million, net of cash acquired.] [added: $2,908.5 million.] The acquisition was accounted for [removed: under] [added: as a business combination. The consideration paid in] the acquisition [removed: method of accounting whereby the total purchase price was] [added: must be] allocated to [removed: tangible and intangible assets] [added: the] acquired [added: assets] and liabilities assumed [added: generally] based on [added: their fair value with] the [removed: respective] [added: excess of the purchase price over those] fair [removed: values.] [added: values allocated to goodwill.] Auditing the Company’s accounting for its acquisition of [removed: CoAdna] [added: Finisar] was complex due to the significant estimation uncertainty [added: involved] in [removed: determining] [added: estimating] the fair value of [removed: identified intangible assets, which principally consisted of] [added: certain] customer [removed: relationships] [added: relationship] and [removed: developed technology.] [added: technology intangible assets.] The [removed: significant estimation uncertainty was primarily due to the sensitivity of the respective] [added: total] fair [removed: values] [added: value ascribed] to [removed: underlying assumptions about the future performance of the acquired business which rely upon innovation and growth within the optical communications market] [added: customer relationship] and [removed: applicability of the existing offerings] [added: technology intangible assets amounted] to [removed: future technologies.] [added: $323.8 million and $334.7 million, respectively.] The Company used the multi-period excess earnings method and the relief from royalty method to value the customer [removed: relationships] [added: relationship] and [removed: developed technology,] [added: technology intangible assets,] respectively. The significant assumptions used to estimate the fair value of [removed: the] customer relationships included the forecasted revenue [removed: and earnings generated by the customer relationships] [added: growth] and [removed: a discount rate that reflected the level] [added: projected operating expenses inclusive] of [removed: risk associated with the] [added: expected synergies, including] future [removed: cash flows attributable] [added: cost savings, and other benefits expected] to [added: be achieved by combining] the [removed: customer relationships.] [added: Company and Finisar.] The significant assumptions used to estimate the fair value of [removed: the developed] technology included the forecasted revenue [removed: generated by the asset group] [added: growth] and [removed: a discount rate that reflected the level of risk associated with the future revenue attributable to the developed technology.] [added: an estimated royalty rate.] These significant assumptions are forward-looking and could be affected by future economic and market conditions. | [added: | |]

| [removed: How] [added: *How] We Addressed the Matter in Our [removed: Audit] [added: Audit*] | [added: | |] We [added: obtained an understanding, evaluated the design and] tested [added: the operating effectiveness of the Company’s] controls [added: over its accounting for the acquisition of Finisar. For example, we tested controls] that address the risks of material misstatement relating to the valuation of the customer [removed: relationships] [added: relationship] and [removed: developed technology. For example, we tested controls over] [added: technology intangible assets, including] management’s review of the [removed: significant assumptions, such as the acquired business’s forecasted revenue and earnings] [added: methods] and [removed: the discount rates] [added: significant assumptions] used [removed: in the valuation.] [added: to develop such estimates.] To test the estimated fair value of the acquired customer [removed: relationships] [added: relationship] and [removed: developed technology,] [added: technology intangible assets,] our audit procedures included, among others, assessing the appropriateness of the valuation methodologies [removed: and testing] [added: used, evaluating] the significant assumptions discussed [removed: above] [added: above,] and [added: evaluating] the [added: completeness and accuracy of the] underlying data [removed: used by] [added: supporting] the [removed: Company.] [added: significant assumptions and estimates.] For [removed: example, we compared] the forecasted revenue [added: growth] and [removed: earnings] [added: projected operating expenses inclusive of expected synergies, including future cost savings, and other benefits expected] to [added: be achieved by combining the Company and Finisar, we compared the financial projections to] current industry and economic [removed: trends as well as] [added: trends,] the historic financial performance of the acquired [removed: business and its primary customers, and compared the projected revenue growth to the assumptions used in the valuation of] [added: business,] the Company’s [removed: Photonics reporting unit.] [added: history with other acquisitions, and forecasted performance of guideline public companies.] We also performed sensitivity analyses to evaluate the changes in the fair value of the intangible assets that would result from changes in the significant assumptions. We involved our valuation specialist to assist in evaluating the [removed: valuation techniques and discount rate] [added: methodologies] used to [added: estimate the fair] value [added: of] the customer [removed: relationships] [added: relationship] and [removed: developed technology,] [added: technology intangible assets and to test certain significant assumptions, including the royalty rate,] which included [added: a] comparison of the selected [removed: discount] [added: royalty] rate to [removed: the acquired business’s weighted average cost of capital, an evaluation of the relationship of the weighted average cost of capital, internal rate of return and weighted-average return on assets, and consideration] [added: a range] of [removed: implied deal multiples exhibited] [added: royalty rates we identified] by [removed: recent transactions] [added: performing an independent search] of [removed: guideline public companies.] [added: comparable licensing agreements.] | [added: | |]

[removed: Report] [added: Report] of Independent Registered Public Accounting [removed: Firm][added: Firm]

To the [added: Shareholders and the] Board of Directors [removed: and Shareholders] of II-VI Incorporated [removed: and Subsidiaries]

[removed: Opinion] [added: Opinion] on Internal Control over Financial [removed: Reporting][added: Reporting]

We have audited II-VI Incorporated and Subsidiaries’ internal control over financial reporting as of June 30, [removed: 2019,] [added: 2020,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).