filings.toolsItem 1. FINANCIAL STATEMENTS
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Item 1. FINANCIAL STATEMENTS
Coherent Corp. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
($000)
| December 31, 2024 | June 30, 2024 | ||||||||||
| Assets | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 917,815 | $ | 926,033 | |||||||
| Restricted cash, current | 11,826 | 174,008 | |||||||||
| Accounts receivable - less allowance for doubtful accounts of $8,226 at December 31, 2024 and $9,511 at June 30, 2024 | 891,789 | 848,542 | |||||||||
| Inventories | 1,344,563 | 1,286,404 | |||||||||
| Prepaid and refundable income taxes | 24,180 | 26,909 | |||||||||
| Prepaid and other current assets | 307,269 | 398,203 | |||||||||
| Total Current Assets | 3,497,442 | 3,660,099 | |||||||||
| Property, plant & equipment, net | 1,889,578 | 1,817,259 | |||||||||
| Goodwill | 4,391,055 | 4,464,329 | |||||||||
| Other intangible assets, net | 3,313,680 | 3,503,247 | |||||||||
| Deferred income taxes | 53,550 | 40,966 | |||||||||
| Restricted cash, non-current | 739,001 | 689,645 | |||||||||
| Other assets | 313,028 | 313,089 | |||||||||
| Total Assets | $ | 14,197,334 | $ | 14,488,634 | |||||||
| Liabilities, Mezzanine Equity and Equity | |||||||||||
| Current Liabilities | |||||||||||
| Current portion of long-term debt | $ | 27,208 | $ | 73,770 | |||||||
| Accounts payable | 689,892 | 631,548 | |||||||||
| Accrued compensation and benefits | 213,534 | 212,458 | |||||||||
| Operating lease current liabilities | 41,008 | 40,580 | |||||||||
| Accrued income taxes payable | 99,029 | 90,705 | |||||||||
| Other accrued liabilities | 238,617 | 294,706 | |||||||||
| Total Current Liabilities | 1,309,288 | 1,343,767 | |||||||||
| Long-term debt | 3,832,694 | 4,026,448 | |||||||||
| Deferred income taxes | 712,798 | 784,374 | |||||||||
| Operating lease liabilities | 163,309 | 162,355 | |||||||||
| Other liabilities | 214,031 | 225,411 | |||||||||
| Total Liabilities | 6,232,120 | 6,542,355 | |||||||||
| Mezzanine Equity | |||||||||||
| Series B redeemable convertible preferred stock, no par value, 5% cumulative; issued - 215,000 shares at December 31, 2024 and June 30, 2024; redemption value - $2,488,935 and $2,427,860, respectively | 2,428,867 | 2,364,772 | |||||||||
| Shareholders' Equity | |||||||||||
| Common stock, no par value; authorized - 300,000,000 shares; issued - 171,115,185 shares at December 31, 2024; 168,406,323 shares at June 30, 2024 | 4,957,079 | 4,857,657 | |||||||||
| Accumulated other comprehensive income (loss) (AOCI) | (159,716) | 2,640 | |||||||||
| Retained earnings | 730,117 | 664,940 | |||||||||
| 5,527,480 | 5,525,237 | ||||||||||
| Treasury stock, at cost; 16,171,190 shares at December 31, 2024 and 15,626,740 shares at June 30, 2024 | (359,257) | (315,122) | |||||||||
| Total Coherent Corp. Shareholders’ Equity | 5,168,223 | 5,210,115 | |||||||||
| Noncontrolling interests (NCI) | 368,124 | 371,392 | |||||||||
| Total Equity | 5,536,347 | 5,581,507 | |||||||||
| Total Liabilities, Mezzanine Equity and Equity | $ | 14,197,334 | $ | 14,488,634 |
See Notes to Condensed Consolidated Financial Statements*.*
Coherent Corp. and Subsidiaries
Condensed Consolidated Statements of Earnings (Loss) (Unaudited)
($000, except per share data)
| Three Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenues | $ | 1,434,665 | $ | 1,131,434 | |||||||
| Costs, Expenses, and Other Expense (Income) | |||||||||||
| Cost of goods sold | 925,314 | 780,793 | |||||||||
| Research and development | 143,852 | 111,163 | |||||||||
| Selling, general and administrative | 220,612 | 209,163 | |||||||||
| Restructuring charges (recoveries) | 8,021 | (1,570) | |||||||||
| Interest expense | 64,278 | 74,678 | |||||||||
| Other income, net | (55,816) | (5,386) | |||||||||
| Total Costs, Expenses, & Other Expense | 1,306,261 | 1,168,841 | |||||||||
| Earnings (Loss) Before Income Taxes | 128,404 | (37,407) | |||||||||
| Income Tax Expense (Benefit) | 26,862 | (8,932) | |||||||||
| Net Earnings (Loss) | 101,542 | (28,475) | |||||||||
| Net Loss Attributable to Noncontrolling Interests | (1,843) | (1,484) | |||||||||
| Net Earnings (Loss) Attributable to Coherent Corp. | 103,385 | (26,991) | |||||||||
| Less: Dividends on Preferred Stock | 32,262 | 30,580 | |||||||||
| Net Earnings (Loss) Available to the Common Shareholders | $ | 71,123 | $ | (57,571) | |||||||
| Basic Earnings (Loss) Per Share | $ | 0.46 | $ | (0.38) | |||||||
| Diluted Earnings (Loss) Per Share | $ | 0.44 | $ | (0.38) |
See Notes to Condensed Consolidated Financial Statements.
Coherent Corp. and Subsidiaries
Condensed Consolidated Statements of Earnings (Loss) (Unaudited)
($000, except per share data)
| Six Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenues | $ | 2,782,800 | $ | 2,184,517 | |||||||
| Costs, Expenses, and Other Expense (Income) | |||||||||||
| Cost of goods sold | 1,813,317 | 1,526,981 | |||||||||
| Research and development | 275,454 | 224,651 | |||||||||
| Selling, general and administrative | 449,580 | 420,860 | |||||||||
| Restructuring charges | 32,385 | 1,448 | |||||||||
| Interest expense | 130,922 | 147,936 | |||||||||
| Other income, net | (66,565) | (11,655) | |||||||||
| Total Costs, Expenses, & Other Expense | 2,635,093 | 2,310,221 | |||||||||
| Earnings (Loss) Before Income Taxes | 147,707 | (125,704) | |||||||||
| Income Tax Expense (Benefit) | 21,304 | (29,695) | |||||||||
| Net Earnings (Loss) | 126,403 | (96,009) | |||||||||
| Net Loss Attributable to Noncontrolling Interests | (2,869) | (1,484) | |||||||||
| Net Earnings (Loss) Attributable to Coherent Corp. | 129,272 | (94,525) | |||||||||
| Less: Dividends on Preferred Stock | 64,095 | 60,753 | |||||||||
| Net Earnings (Loss) Available to the Common Shareholders | $ | 65,177 | $ | (155,278) | |||||||
| Basic Earnings (Loss) Per Share | $ | 0.42 | $ | (1.03) | |||||||
| Diluted Earnings (Loss) Per Share | $ | 0.41 | $ | (1.03) |
See Notes to Condensed Consolidated Financial Statements.
Coherent Corp. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
($000)
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net Earnings (Loss) | $ | 101,542 | $ | (28,475) | $ | 126,403 | $ | (96,009) | |||||||||||||||
| Other Comprehensive Income (Loss): | |||||||||||||||||||||||
| Foreign currency translation adjustments | (432,264) | 226,788 | (141,990) | 118,885 | |||||||||||||||||||
| Change in fair value of interest rate instruments, net of taxes of $2,199 and $(2,198) for the three and six months ended December 31, 2024, respectively; and $(7,484) and $(6,616) for the three and six months ended December 31, 2023, respectively | (1,426) | (27,329) | (20,181) | (24,391) | |||||||||||||||||||
| Pension adjustment, net of taxes of $0 for the three and six months ended December 31, 2024 and December 31, 2023 | (429) | 57 | (584) | 348 | |||||||||||||||||||
| Comprehensive Income (Loss) | (332,577) | 171,041 | (36,352) | (1,167) | |||||||||||||||||||
| Comprehensive Loss Attributable to Noncontrolling Interests | (1,843) | (1,484) | (2,869) | (1,484) | |||||||||||||||||||
| Foreign Currency Translation Adjustments Attributable to Noncontrolling Interests | (950) | 1,065 | (399) | 1,065 | |||||||||||||||||||
| Comprehensive Income (Loss) Attributable to Coherent Corp. | $ | (329,784) | $ | 171,460 | $ | (33,084) | $ | (748) |
See Notes to Condensed Consolidated Financial Statements.
Coherent Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
($000)
| Six Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash Flows from Operating Activities | |||||||||||
| Net earnings (loss) | $ | 126,403 | $ | (96,009) | |||||||
| Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | |||||||||||
| Depreciation | 128,627 | 132,210 | |||||||||
| Amortization | 143,578 | 144,168 | |||||||||
| Share-based compensation expense | 75,689 | 72,465 | |||||||||
| Amortization of debt issuance costs | 10,418 | 8,803 | |||||||||
| Non-cash restructuring charges | 18,370 | 2,639 | |||||||||
| Loss on disposal of property, plant and equipment | 67 | 238 | |||||||||
| Unrealized gains on foreign currency remeasurements and transactions | (9,529) | (1,835) | |||||||||
| Loss (earnings) from equity investments | (501) | 301 | |||||||||
| Deferred income taxes | (59,618) | (96,683) | |||||||||
| Increase (decrease) in cash from changes in (net of effect of acquisitions): | |||||||||||
| Accounts receivable | (38,849) | 53,428 | |||||||||
| Inventories | (66,521) | (3,164) | |||||||||
| Accounts payable | 48,020 | 62,998 | |||||||||
| Contract liabilities | (9,845) | (31,451) | |||||||||
| Income taxes | 8,821 | 26,877 | |||||||||
| Accrued compensation and benefits | 1,076 | 11,175 | |||||||||
| Other operating net assets (liabilities) | (35,847) | (20,189) | |||||||||
| Net cash provided by operating activities | 340,359 | 265,971 | |||||||||
| Cash Flows from Investing Activities | |||||||||||
| Additions to property, plant & equipment | (197,667) | (153,667) | |||||||||
| Proceeds from the sale of business | 27,000 | — | |||||||||
| Other investing activities | (1,126) | (1,978) | |||||||||
| Net cash used in investing activities | (171,793) | (155,645) | |||||||||
| Cash Flows from Financing Activities | |||||||||||
| Sale of shares to noncontrolling interests | — | 1,000,000 | |||||||||
| Payments on existing debt | (250,210) | (107,457) | |||||||||
| Equity issuance costs | — | (31,840) | |||||||||
| Proceeds from exercises of stock options and purchases of stock under employee stock purchase plan | 29,234 | 16,143 | |||||||||
| Payments in satisfaction of employees' minimum tax obligations | (45,042) | (17,566) | |||||||||
| Other financing activities | (455) | (531) | |||||||||
| Net cash provided by (used in) financing activities | (266,473) | 858,749 | |||||||||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (23,137) | 14,049 | |||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | (121,044) | 983,124 | |||||||||
| Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 1,789,686 | 837,566 | |||||||||
| Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 1,668,642 | $ | 1,820,690 | |||||||
| Supplemental Information | |||||||||||
| Cash paid for interest | $ | 142,485 | $ | 159,538 | |||||||
| Cash paid for income taxes | $ | 66,367 | $ | 38,142 | |||||||
| Additions to property, plant & equipment included in accounts payable | $ | 74,368 | $ | 71,806 | |||||||
| Non-Cash Investing and Financing Activities | |||||||||||
| Conversion of Series A preferred stock to common stock | $ | — | $ | 445,319 |
See Notes to Condensed Consolidated Financial Statements.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same amounts shown in the Condensed Consolidated Statements of Cash Flows.
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash and cash equivalents | $ | 917,815 | $ | 856,255 | |||||||
| Restricted cash, current | 11,826 | 177,077 | |||||||||
| Restricted cash, non-current | 739,001 | 787,358 | |||||||||
| Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows | $ | 1,668,642 | $ | 1,820,690 |
Coherent Corp and Subsidiaries
Condensed Consolidated Statements of Equity and Mezzanine Equity (Unaudited)
($000, including share amounts)
| Common Stock | Preferred Stock | AOCI | Retained Earnings | Treasury Stock | NCI | Total | Mezzanine Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Pref Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance - June 30, 2024 | 168,408 | $ | 4,857,657 | — | $ | — | $ | 2,640 | $ | 664,940 | (15,629) | $ | (315,122) | $ | 371,392 | $ | 5,581,507 | 215 | $ | 2,364,772 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based and deferred compensation | 2,136 | 56,015 | — | — | — | 3 | (399) | (29,923) | — | 26,095 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) | — | — | — | — | — | 25,887 | — | — | (1,026) | 24,861 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | 289,723 | — | — | — | 551 | 290,274 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in fair value of interest rate instruments, net of taxes of $(4,397) | — | — | — | — | (18,755) | — | — | — | — | (18,755) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pension adjustment, net of taxes of $0 | — | — | — | — | (155) | — | — | — | — | (155) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends | — | — | — | — | — | (31,833) | — | — | — | (31,833) | — | 31,833 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance - September 30, 2024 | 170,544 | $ | 4,913,672 | — | $ | — | $ | 273,453 | $ | 658,997 | (16,028) | $ | (345,045) | $ | 370,917 | $ | 5,871,994 | 215 | $ | 2,396,605 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based and deferred compensation | 571 | 43,407 | — | — | — | (3) | (143) | (14,212) | — | 29,192 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) | — | — | — | — | — | 103,385 | — | — | (1,843) | 101,542 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | (431,314) | — | — | — | (950) | (432,264) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in fair value of interest rate instruments, net of taxes of $2,199 | — | — | — | — | (1,426) | — | — | — | — | (1,426) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pension adjustment, net of taxes of $0 | — | — | — | — | (429) | — | — | — | — | (429) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends | — | — | — | — | — | (32,262) | — | — | — | (32,262) | — | 32,262 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance - December 31, 2024 | 171,115 | $ | 4,957,079 | — | $ | — | $ | (159,716) | $ | 730,117 | (16,171) | $ | (359,257) | $ | 368,124 | $ | 5,536,347 | 215 | $ | 2,428,867 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Preferred Stock | AOCI | Retained Earnings | Treasury Stock | Total | Mezzanine Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | NCI | Pref Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance - June 30, 2023 | 154,721 | $ | 3,781,211 | 2,300 | $ | 445,319 | $ | 109,726 | $ | 944,416 | (15,137) | $ | (293,121) | $ | — | $ | 4,987,551 | 215 | $ | 2,241,415 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based and deferred compensation | 1,804 | 60,748 | — | — | — | — | (366) | (13,932) | — | 46,816 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series A preferred stock | 10,240 | 445,319 | (2,300) | (445,319) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (67,534) | — | — | — | (67,534) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | (107,903) | — | — | — | — | (107,903) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in fair value of interest rate instruments, net of taxes of $868 | — | — | — | — | 2,938 | — | — | — | — | 2,938 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pension adjustment, net of taxes of $0 | — | — | — | — | 291 | — | — | — | — | 291 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends | — | — | — | — | — | (30,173) | — | — | — | (30,173) | — | 30,173 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance - September 30, 2023 | 166,765 | $ | 4,287,278 | — | $ | — | $ | 5,052 | $ | 846,709 | (15,503) | $ | (307,053) | $ | — | $ | 4,831,986 | 215 | $ | 2,271,588 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based and deferred compensation | 544 | 25,184 | — | — | — | — | (47) | (3,633) | — | 21,551 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (26,991) | — | — | (1,484) | (28,475) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | 225,723 | — | — | — | 1,065 | 226,788 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in fair value of interest rate instruments, net of taxes of $(7,484) | — | — | — | — | (27,329) | — | — | — | — | (27,329) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pension adjustment, net of taxes $0 | — | — | — | — | 57 | — | — | — | — | 57 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends | — | — | — | — | — | (30,580) | — | — | — | (30,580) | — | 30,580 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sale of shares to noncontrolling interests, net of issuance costs and taxes | — | 473,614 | — | — | 2,871 | — | — | — | 373,573 | 850,058 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance - December 31, 2023 | 167,309 | $ | 4,786,076 | — | $ | — | $ | 206,374 | $ | 789,138 | (15,550) | $ | (310,686) | $ | 373,154 | $ | 5,844,056 | 215 | $ | 2,302,168 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
Coherent Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1. Basis of Presentation
The condensed consolidated financial statements of Coherent Corp. (“Coherent”, the “Company”, “we”, “us” or “our”) for the three and six months ended December 31, 2024 and 2023 are unaudited. In the opinion of management, all adjustments considered necessary for a fair presentation for the periods presented have been included. All adjustments are of a normal recurring nature unless disclosed otherwise. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K dated August 16, 2024. The condensed consolidated results of operations for the three and six months ended December 31, 2024 are not necessarily indicative of the results to be expected for the full fiscal year. The Condensed Consolidated Balance Sheet information as of June 30, 2024 was derived from the Company’s audited consolidated financial statements.
Certain prior year amounts have been reclassified for consistency with the current year presentation.
Note 2. Recently Issued Financial Accounting Standards
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is evaluating the impact this will have on the Company’s consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, on either a prospective or retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures.
In March 2024, the Securities and Exchange Commission (the “SEC”) issued the final rule under SEC Release No. 33-11275 and 34-99678, “The Enhancement and Standardization of Climate-Related Disclosures for Investors,” requiring public companies to provide certain climate-related information in their registration statements and annual reports. The final rules will require information about a company’s climate-related risks that have materially impacted or are reasonably likely to have a material impact on its business strategy, results of operations, or financial condition, and the actual and potential material impacts of any identified climate-related risks on the company’s strategy, business model and outlook, as well as relating to assessment, management, oversight and mitigation of such material risks, material climate-related targets and goals, and material greenhouse gas emissions. Additionally, certain disclosures related to severe weather events and other natural conditions will be required in the audited financial statements. The first phase of the final rule is effective for fiscal years beginning in 2025. Disclosure for prior periods is only required if it was previously disclosed in an SEC filing. On April 4, 2024, the SEC voluntarily stayed implementation of the final rule to facilitate the orderly judicial resolution of pending legal challenges to the rule. We are currently evaluating the impact on our disclosures of adopting this new pronouncement.
In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses.” This ASU requires disclosure about specific types of expenses included in expense captions including purchases of inventory, employee compensation, depreciation, amortization, and depletion. This ASU is effective for our annual disclosures starting in fiscal year 2028 and interim periods starting in fiscal year 2029. Early adoption is permitted. A public entity should apply the amendments in this ASU on a prospective basis with the option to apply the standard retrospectively. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.
Note 3. Revenue from Contracts with Customers
We believe that disaggregating revenue by end market provides the most relevant information regarding the nature, amount, timing, and uncertainty of revenues and cash flows.
The following tables summarize disaggregated revenue by market ($000):
| Three Months Ended December 31, 2024 | Six Months Ended December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Networking | Materials | Lasers | Total | Networking | Materials | Lasers | Total | ||||||||||||||||||||||||||||||||||||||||
| Industrial | $ | 13,851 | $ | 126,381 | $ | 297,213 | $ | 437,445 | $ | 28,231 | $ | 246,027 | $ | 570,127 | $ | 844,385 | |||||||||||||||||||||||||||||||
| Communications | 792,862 | 30,237 | — | 823,099 | 1,532,018 | 65,372 | — | 1,597,390 | |||||||||||||||||||||||||||||||||||||||
| Electronics | 1,793 | 76,424 | 18 | 78,235 | 3,964 | 150,481 | 18 | 154,463 | |||||||||||||||||||||||||||||||||||||||
| Instrumentation | 7,407 | 10,433 | 78,046 | 95,886 | 14,572 | 19,022 | 152,968 | 186,562 | |||||||||||||||||||||||||||||||||||||||
| Total Revenues | $ | 815,913 | $ | 243,475 | $ | 375,277 | $ | 1,434,665 | $ | 1,578,785 | $ | 480,902 | $ | 723,113 | $ | 2,782,800 |
| Three Months Ended December 31, 2023 | Six Months Ended December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Networking | Materials | Lasers | Total | Networking | Materials | Lasers | Total | ||||||||||||||||||||||||||||||||||||||||
| Industrial | $ | 14,746 | $ | 137,128 | $ | 271,494 | $ | 423,368 | $ | 30,711 | $ | 270,331 | $ | 526,660 | $ | 827,702 | |||||||||||||||||||||||||||||||
| Communications | 499,350 | 20,984 | — | 520,334 | 945,624 | 34,236 | — | 979,860 | |||||||||||||||||||||||||||||||||||||||
| Electronics | 1,453 | 87,279 | — | 88,732 | 3,177 | 175,344 | — | 178,521 | |||||||||||||||||||||||||||||||||||||||
| Instrumentation | 8,686 | 8,287 | 82,027 | 99,000 | 17,572 | 18,407 | 162,455 | 198,434 | |||||||||||||||||||||||||||||||||||||||
| Total Revenues | $ | 524,235 | $ | 253,678 | $ | 353,521 | $ | 1,131,434 | $ | 997,084 | $ | 498,318 | $ | 689,115 | $ | 2,184,517 |
Contract Liabilities
Payments received from customers are based on invoices or billing schedules as established in contracts with customers. Contract liabilities generally relate to payments received in advance of performance under the contract. Contract liabilities are recognized as revenue when the performance obligations have been satisfied. During the six months ended December 31, 2024, we recognized revenue of $41 million related to customer payments that were included as contract liabilities in the Condensed Consolidated Balance Sheet as of June 30, 2024. We had $65 million of contract liabilities recorded in the Condensed Consolidated Balance Sheet as of December 31, 2024. As of December 31, 2024, $52 million of contract liabilities is included within Other accrued liabilities, and $13 million is included within Other liabilities on the Condensed Consolidated Balance Sheet.
Note 4. Inventories
The components of inventories were as follows ($000):
| December 31, 2024 | June 30, 2024 | ||||||||||
| Raw materials | $ | 386,472 | $ | 429,888 | |||||||
| Work in progress | 730,085 | 620,575 | |||||||||
| Finished goods | 228,006 | 235,941 | |||||||||
| Total inventories | $ | 1,344,563 | $ | 1,286,404 |
Note 5. Property, Plant and Equipment
Property, plant and equipment consists of the following ($000):
| December 31, 2024 | June 30, 2024 | ||||||||||
| Land and improvements | $ | 65,482 | $ | 66,156 | |||||||
| Buildings and improvements | 783,840 | 774,991 | |||||||||
| Machinery and equipment | 2,127,757 | 2,034,310 | |||||||||
| Construction in progress | 482,502 | 398,884 | |||||||||
| Finance lease right-of-use asset | 25,000 | 25,000 | |||||||||
| 3,484,581 | 3,299,341 | ||||||||||
| Less accumulated depreciation and amortization | (1,595,003) | (1,482,082) | |||||||||
| Property, plant, and equipment, net | $ | 1,889,578 | $ | 1,817,259 |
Note 6. Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill were as follows ($000):
| Six Months Ended December 31, 2024 | |||||||||||||||||||||||
| Networking | Materials | Lasers | Total | ||||||||||||||||||||
| Balance-beginning of period | $ | 1,036,592 | $ | 245,983 | $ | 3,181,754 | $ | 4,464,329 | |||||||||||||||
| Foreign currency translation | (460) | 992 | (73,806) | (73,274) | |||||||||||||||||||
| Balance-end of period | $ | 1,036,132 | $ | 246,975 | $ | 3,107,948 | $ | 4,391,055 |
We test goodwill for impairment annually during the fourth quarter, or more frequently when events or changes in circumstances indicate that fair value is below carrying value.
The gross carrying amount and accumulated amortization of our intangible assets other than goodwill were as follows ($000):
| December 31, 2024 | June 30, 2024 | ||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | ||||||||||||||||||||||||||||||
| Technology | $ | 1,635,502 | $ | (452,308) | $ | 1,183,194 | $ | 1,653,289 | $ | (394,040) | $ | 1,259,249 | |||||||||||||||||||||||
| Trade Names | 438,470 | (8,470) | 430,000 | 438,470 | (8,470) | 430,000 | |||||||||||||||||||||||||||||
| Customer Lists | 2,270,524 | (572,069) | 1,698,455 | 2,310,550 | (498,252) | 1,812,298 | |||||||||||||||||||||||||||||
| Backlog and Other | 87,459 | (85,428) | 2,031 | 88,792 | (87,092) | 1,700 | |||||||||||||||||||||||||||||
| Total | $ | 4,431,955 | $ | (1,118,275) | $ | 3,313,680 | $ | 4,491,101 | $ | (987,854) | $ | 3,503,247 |
Note 7. Debt
The components of debt as of the dates indicated were as follows ($000):
| December 31, 2024 | June 30, 2024 | ||||||||||
| Term A Facility, interest at adjusted SOFR, as defined, plus 1.850% | $ | 679,375 | $ | 775,625 | |||||||
| Debt issuance costs, Term A Facility and Revolving Credit Facility | (10,600) | (13,586) | |||||||||
| Term B Facility, interest at adjusted SOFR, as defined, plus 2.500% | 2,232,358 | 2,384,536 | |||||||||
| Debt issuance costs, Term B Facility | (42,882) | (49,835) | |||||||||
| 1.30% Term loan | — | 335 | |||||||||
| Facility construction loan in Germany | 17,110 | 19,082 | |||||||||
| 5.000% Senior Notes | 990,000 | 990,000 | |||||||||
| Debt issuance costs and discount, Senior Notes | (5,459) | (5,939) | |||||||||
| Total debt | 3,859,902 | 4,100,218 | |||||||||
| Current portion of long-term debt | (27,208) | (73,770) | |||||||||
| Long-term debt, less current portion | $ | 3,832,694 | $ | 4,026,448 |
Senior Credit Facilities
On July 1, 2022 (the “Closing Date”), Coherent entered into a Credit Agreement by and among the Company, as borrower (in such capacity, the “Borrower”), the lenders, and other parties thereto, and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, which provides for senior secured financing of $4.0 billion, consisting of a term loan A credit facility (the “Term A Facility”) maturing July 1, 2027, with an aggregate principal amount of $850 million, a term loan B credit facility (the “Term B Facility” maturing July 1, 2029 and, together with the Term A Facility, the “Term Facilities”), with an aggregate principal amount of $2,800 million, and a revolving credit facility (the “Revolving Credit Facility”) maturing July 1, 2027, in an aggregate available amount of $350 million, including a letter of credit sub-facility of up to $50 million. On March 31, 2023, Coherent entered into Amendment No. 1 to the Credit Agreement, which replaced the adjusted LIBOR-based rate of interest therein with an adjusted SOFR-based rate of interest. As amended, the Term A Facility and the Revolving Credit Facility each bear interest at an adjusted SOFR rate subject to a 0.10% floor plus a range of 1.75% to 2.50%, based on the Company’s total net leverage ratio. The Term A Facility and the Revolving Credit Facility borrowings bear interest at adjusted SOFR plus 1.85% as of December 31, 2024. On April 2, 2024, Coherent entered into Amendment No. 2 to the Credit Agreement, under
which the principal amount of term B loans outstanding under the Credit Agreement (the “Existing Term B Loans”) were replaced with an equal amount of new term loans (the “New Term B Loans”) having substantially similar terms as the Existing Term B Loans, except with respect to the interest rate applicable to the New Term B Loans and certain other provisions. As further amended, the New Term B Loans bear interest at a SOFR rate (subject to a 0.50% floor) plus 2.50% as of December 31, 2024. The maturity of the New Term Loans and revolving credit facility remains unchanged. Debt extinguishment costs related to the replacement of the Existing Term B Loans of $2 million were expensed in Other income, net in the Condensed Consolidated Statement of Earnings (Loss) during the quarter ended June 30, 2024. On January 2, 2025, Coherent entered into Amendment No. 3 to the Credit Agreement, under which the principal amount of term B loans outstanding under the Credit Agreement (the “New Term B Loans”) were replaced with an equal amount of new term loans (the “New Term B-2 Loans”) having substantially similar terms as the New Term B Loans, except with respect to the interest rate applicable to the New Term B-2 Loans and certain other provisions. As further amended, the New Term B-2 Loans will bear interest at a SOFR rate (subject to a 0.50% floor) plus 2.00% as of January 2, 2025. The maturity of the New Term B-2 Loans and revolving credit facility remains unchanged.
In relation to the Term Facilities, the Company incurred interest expense, including amortization of debt issuance costs and the benefit of the interest rate cap and swap, of $52 million and $106 million in the three and six months ended December 31, 2024, respectively, and $62 million and $122 million in the three and six months ended December 31, 2023, respectively, which is included in Interest expense in the Condensed Consolidated Statements of Earnings (Loss). On July 1, 2023, our interest rate cap became effective, which together with our interest rate swap (through September 30, 2024), reduced interest expense by $7 million and $21 million during the three and six months ended December 31, 2024, respectively, and $12 million and $23 million in the three and six months ended December 31, 2023, respectively. The amortization of debt issuance costs included in interest expense was $4 million and $9 million in the three and six months ended December 31, 2024, respectively, and $5 million and $8 million in the three and six months ended December 31, 2023, respectively. Debt issuance costs are presented as a reduction to debt within the Long-term debt caption in the Condensed Consolidated Balance Sheets.
On the Closing Date, the Borrower and certain of its direct and indirect subsidiaries provided a guaranty of all obligations of the Borrower and the other loan parties under the Credit Agreement and the other loan documents, secured cash management agreements and secured hedge agreements with the lenders and/or their affiliates (subject to certain exceptions). The Borrower and the other guarantors have also granted a security interest in substantially all of their assets to secure such obligations.
As of December 31, 2024, the Company was in compliance with all covenants under the Term Facilities.
Debt Assumed through Acquisition
We assumed the remaining balances of three term loans with the closing of the acquisition of Coherent, Inc. The aggregate principal amount outstanding is $17 million as of December 31, 2024. The term loans assumed consisted of the following: (i) 1.3% Term Loan (repaid prior to December 31, 2024), (ii) 1.0% State of Connecticut Term Loan due 2023 (repaid in fiscal 2023), and (iii) Facility construction loan in Germany. For the Facility construction loan, on December 21, 2020, Coherent LaserSystems GmbH & Co. KG entered into a loan agreement with Commerzbank for borrowings of up to 24 million Euros, which were drawn down by October 29, 2021, to finance a portion of the construction of a new facility in Germany. The term of the loan is 10 years, and borrowings bear interest at 1.55% per annum. Payments are made quarterly.
5.000% Senior Notes due 2029
On December 10, 2021, the Company issued $990 million aggregate principal amount of Senior Notes pursuant to the indenture, dated as of December 10, 2021 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee. The Senior Notes are guaranteed by each of the Company’s domestic subsidiaries that guarantee its obligations under the Senior Credit Facilities. Interest on the Senior Notes is payable on December 15 and June 15 of each year, commencing on June 15, 2022, at a rate of 5.000% per annum. The Senior Notes will mature on December 15, 2029*.*
On or after December 15, 2024, the Company may redeem the Senior Notes, in whole at any time or in part from time to time, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. In addition, at any time prior to December 15, 2024, the Company had the ability to (but did not) redeem the Senior Notes, at its option, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the Senior Notes redeemed, plus a “make-whole” premium set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. Notwithstanding the foregoing, at any time and from time to time prior to December 15, 2024, the Company had the ability to (but did not) redeem up to 40% of the aggregate principal amount of the Senior Notes using the proceeds of certain equity offerings as set forth in the Indenture, at a redemption price equal to 105.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.
In relation to the Senior Notes, the Company incurred interest expense of $13 million and $25 million in the three and six months ended December 31, 2024, respectively, and $13 million and $25 million in the three and six months ended December 31, 2023, respectively, which is included in Interest expense in the Condensed Consolidated Statements of Earnings (Loss).
The Indenture contains customary covenants and events of default, including default relating to, among other things, payment default, failure to comply with covenants or agreements contained in the Indenture or the Senior Notes and certain provisions related to bankruptcy events. As of December 31, 2024, the Company was in compliance with all covenants under the Indenture.
Aggregate Availability
The Company had aggregate availability of $319 million under its Revolving Credit Facility as of December 31, 2024.
Note 8. Income Taxes
The Company’s year-to-date effective income tax rate was 14% at December 31, 2024 compared to 24% for the period ending December 31, 2023. The difference between the Company’s effective tax rate and the U.S. statutory rate of 21% is primarily due to a discrete benefit relating to share-based compensation and tax rate differentials between U.S. and foreign jurisdictions.
U.S. GAAP prescribes the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements which includes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of December 31, 2024 and June 30, 2024, the Company’s gross unrecognized tax benefit, excluding interest and penalties, was $115 million and $117 million, respectively. The Company has classified the uncertain tax positions as non-current income tax liabilities, as the amounts are not expected to be paid within one year. Due to the U.S. valuation allowance, a large portion of the gross unrecognized tax benefit will not impact the tax rate if recognized. As of December 31, 2024, $19 million of the gross unrecognized tax benefit would impact the effective tax rate if recognized. The Company recognizes interest and penalties related to uncertain tax positions in the income tax provision in the Condensed Consolidated Statements of Earnings (Loss). The amount of accrued interest and penalties included in the gross unrecognized income tax benefit was $9 million and $7 million at December 31, 2024 and June 30, 2024, respectively.
Fiscal years 2018 and 2020 to 2023 remain open to examination by the Internal Revenue Service, fiscal years 2019 to 2023 remain open to examination by certain state jurisdictions, and fiscal years 2012 to 2023 remain open to examination by certain foreign taxing jurisdictions. The Company is currently under examination for certain subsidiary companies in Vietnam for the years ended June 30, 2017 through September 30, 2021; Singapore for the year ended September 30, 2020; Spain for the years ended September 30, 2020 through September 30, 2022; Malaysia for the years ended June 30, 2021 through June 30, 2023; and Germany for the years ended June 30, 2012 through June 30, 2021. The Company believes its income tax reserves for these tax matters are adequate.
Note 9. Leases
We determine if an arrangement is a lease at inception for arrangements with an initial term of more than 12 months, and classify it as either finance or operating.
Finance leases are generally those that allow us to substantially utilize or pay for the entire asset over its estimated useful life. Finance lease assets are recorded in Property, plant and equipment, net, and finance lease liabilities within Other accrued liabilities and Other liabilities on our Condensed Consolidated Balance Sheets. Finance lease assets are amortized in operating expenses on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term, with the interest component for lease liabilities included in interest expense and recognized using the effective interest method over the lease term.
Operating leases are leases that do not qualify as finance leases and are recorded in Other assets and Operating lease liabilities, current and non-current on our Condensed Consolidated Balance Sheets. Operating lease assets are amortized on a straight-line basis in operating expenses over the lease term.
Our lease liabilities are recognized based on the present value of the remaining fixed lease payments, over the lease term, using a discount rate of similarly secured borrowings available to the Company. For the purpose of lease liability measurement, we consider only payments that are fixed and determinable at the time of commencement. Any variable payments that depend on an index or rate are expensed as incurred. We account for non-lease components, such as common area maintenance, as a component of the lease, and include it in the initial measurement of our leased assets and corresponding liabilities. Our lease terms and conditions may include options to extend or terminate. An option is recognized when it is reasonably certain that we will exercise that option.
Our lease assets also include any lease payments made, and exclude any lease incentives received prior to commencement. Our lease assets are tested for impairment in the same manner as long-lived assets used in operations.
The following table presents lease costs, which include leases for arrangements with an initial term of more than 12 months, lease term, and discount rates ($000):
| Three Months Ended December 31, 2024 | Six Months Ended December 31, 2024 | ||||||||||||||||
| Finance lease cost | |||||||||||||||||
| Amortization of right-of-use assets | $ | 417 | $ | 833 | |||||||||||||
| Interest on lease liabilities | 240 | 486 | |||||||||||||||
| Total finance lease cost | 657 | 1,319 | |||||||||||||||
| Operating lease cost | 14,095 | 28,354 | |||||||||||||||
| Total lease cost | $ | 14,752 | $ | 29,673 | |||||||||||||
| Cash Paid for Amounts Included in the Measurement of Lease Liabilities | |||||||||||||||||
| Operating cash flows from finance leases | $ | 240 | $ | 246 | |||||||||||||
| Operating cash flows from operating leases | 13,918 | 27,572 | |||||||||||||||
| Financing cash flows from finance leases | 425 | 462 | |||||||||||||||
| Weighted-Average Remaining Lease Term (in Years) | |||||||||||||||||
| Finance leases | 7.0 | ||||||||||||||||
| Operating leases | 6.7 | ||||||||||||||||
| Weighted-Average Discount Rate | |||||||||||||||||
| Finance leases | 5.6 | % | |||||||||||||||
| Operating leases | 7.0 | % |
| Three Months Ended December 31, 2023 | Six Months Ended December 31, 2023 | ||||||||||
| Finance Lease Cost | |||||||||||
| Amortization of right-of-use assets | $ | 417 | $ | 833 | |||||||
| Interest on lease liabilities | 263 | 531 | |||||||||
| Total finance lease cost | $ | 680 | $ | 1,364 | |||||||
| Operating lease cost | 12,764 | 25,707 | |||||||||
| Total lease cost | $ | 13,444 | $ | 27,071 | |||||||
| Cash Paid for Amounts Included in the Measurement of Lease Liabilities | |||||||||||
| Operating cash flows from finance leases | $ | 263 | $ | 531 | |||||||
| Operating cash flows from operating leases | 12,264 | 24,539 | |||||||||
| Financing cash flows from finance leases | 384 | 763 |
Note 10. Equity and Redeemable Preferred Stock
As of December 31, 2024, the Company’s amended and restated articles of incorporation authorize our board of directors, without the approval of our shareholders, to issue 5 million shares of our preferred stock. As of December 31, 2024, 2.3 million shares of mandatory preferred convertible shares have been authorized, none are outstanding; 75,000 shares of Series B-1 convertible preferred stock, no par value, have been issued and are outstanding; and 140,000 shares of Series B-2 convertible preferred stock, no par value, have been issued and are outstanding.
Mandatory Convertible Preferred Stock
In July 2020, the Company issued 2.3 million shares of Mandatory Convertible Preferred Stock.
All outstanding shares of Mandatory Convertible Preferred Stock were converted to 10,240,290 shares of Company Common Stock on July 3, 2023, at a conversion ratio of 4.4523, and no shares of Mandatory Convertible Preferred Stock are currently issued and outstanding.
Series B Convertible Preferred Stock
In March 2021, the Company issued 75,000 shares of Series B-1 Convertible Preferred Stock, no par value per share (“Series B-1 Preferred Stock”), for $10,000 per share, resulting in an aggregate purchase price of $750 million. On July 1, 2022, the Company issued 140,000 shares of Series B-2 Convertible Preferred Stock, no par value per share (“Series B-2 Preferred Stock” and, together with the Series B-1 Preferred Stock, the “Series B Preferred Stock”), for $10,000 per share and an aggregate purchase price of $1.4 billion.
The shares of Series B Preferred Stock are convertible into shares of Coherent Common Stock as follows:
-
at the election of the holder, at an initial conversion price of $85 per share (as it may be adjusted from time to time, the “Conversion Price”) upon the delivery by Coherent to the holders of the Series B Preferred Stock of an offer to repurchase the Series B-1 Preferred Stock upon the occurrence of a Fundamental Change (as defined in the Statement with Respect to Shares establishing the Series B Preferred Stock as defined below); and
-
at the election of the Company, any time following March 31, 2024 and July 1, 2025 for the Series B-1 and B-2 Preferred Stock, respectively, at the then-applicable Conversion Price if the volume-weighted average price of Coherent Common Stock exceeds 150% of the then-applicable Conversion Price for 20 trading days out of any 30 consecutive trading days.
The issued shares of Series B Preferred Stock currently have voting rights, voting as one class with the Coherent Common Stock, on an as-converted basis, subject to limited exceptions.
On or at any time after March 31, 2031 and July 1, 2032 for the Series B-1 and B-2 Preferred Stock, respectively:
-
each holder has the right to require the Company to redeem all of their Coherent Series B Preferred Stock, for cash, at a redemption price per share equal to the sum of the Stated Value (as defined in the Statement with Respect to Shares establishing the Series B Preferred Stock) for such shares plus an amount equal to all accrued or declared and unpaid dividends on such shares that had not previously been added to the Stated Value (such price the “Redemption Price,” and such right the “Put Right”); and
-
the Company has the right to redeem, in whole or in part, on a pro rata basis from all holders based on the aggregate number of shares of Series B Preferred Stock outstanding, for cash, at the Redemption Price.
In connection with any Fundamental Change (as defined in the Statement with Respect to Shares establishing the Series B Preferred Stock), and subject to the procedures set forth in the Statement with Respect to Shares establishing the Series B Preferred Stock, the Company must, or will cause the survivor of a Fundamental Change to, make an offer to repurchase, at the option and election of the holder thereof, each share of Series B Preferred Stock then-outstanding at a purchase price per share in cash equal to (i) the Stated Value for such shares plus an amount equal to all accrued or declared and unpaid dividends on such shares that had not previously been added to the Stated Value as of the date of repurchase plus (ii) if prior to March 31, 2026 and July 1, 2027, for the Series B-1 and B-2 Preferred Stock, respectively, the aggregate amount of all dividends that would have been paid (subject to certain exceptions), from the date of repurchase through March 31, 2026 and July 1, 2027, for the Series B-1 and B-2 Preferred Stock, respectively.
If the Company defaults on a payment obligation with respect to the Series B Preferred Stock and such default is not cured within 30 days, the dividend rate will increase to 8% per annum and will be increased by an additional 2% per annum each quarter the Company remains in default, not to exceed 14% per annum.
The Series B Preferred Stock is redeemable for cash outside of the control of the Company upon the exercise of the Put Right, and upon a Fundamental Change, and is therefore classified as mezzanine equity.
The Series B Preferred Stock is initially measured at fair value less issuance costs, accreted to its redemption value over a 10-year period (using the effective interest method) with such accretion accounted for as deemed dividends and reductions to Net Earnings (Loss) Available to Common Shareholders.
Preferred stock dividends are presented as a reduction to Retained earnings on the Condensed Consolidated Balance Sheets.
The following table presents dividends per share and dividends recognized:
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Dividends per share | $ | 150 | $ | 142 | $ | 298 | $ | 283 | |||||||||||||||
| Dividends ($000) | 30,727 | 29,235 | 61,075 | 58,109 | |||||||||||||||||||
| Deemed dividends ($000) | 1,535 | 1,345 | 3,020 | 2,644 |
Note 11. Noncontrolling Interests
On December 4, 2023, Silicon Carbide LLC (“Silicon Carbide”), one of the Company’s subsidiaries, completed (i) the sale of 16,666,667 Class A Common Units to Denso Corporation (“Denso”) for $500,000,000 pursuant to an Investment Agreement, dated as of October 10, 2023, by and between Silicon Carbide and Denso and (ii) the sale of 16,666,667 Class A Common units to Mitsubishi Electric Corporation (“MELCO”) for $500,000,000 pursuant to an Investment Agreement, dated as of October 10, 2023, by and between Silicon Carbide and MELCO (collectively, the “Equity Investments”).
As a consequence of the Equity Investments, the Company’s ownership interest in the Class A Common Units of Silicon Carbide LLC was reduced to approximately 75%. Denso and MELCO each, individually, own approximately 12.5% of the Class A Common Units of Silicon Carbide.
The Equity Investments in Silicon Carbide enables Coherent to increase its available free cash flow to provide greater financial and operational flexibility to execute its capital allocation priorities, as the aggregate $1 billion investment, net of transaction costs, will be used to fund future capital expansion of Silicon Carbide.
The following table presents the activity in noncontrolling interests in Silicon Carbide ($000s):
| Six Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Balance-beginning of period | $ | 371,392 | $ | — | |||||||
| Sale of shares to noncontrolling interests | — | 373,573 | |||||||||
| Share of foreign currency translation adjustments | (399) | 1,065 | |||||||||
| Net loss | (2,869) | (1,484) | |||||||||
| Balance-end of period | $ | 368,124 | $ | 373,154 |
Note 12. Earnings (Loss) Per Share
Basic earnings (loss) per common share is computed by dividing net earnings (loss) available to the common shareholders by the weighted-average number of shares of common stock outstanding during the period.
Diluted earnings (loss) per common share is computed by dividing the diluted earnings (loss) available to the common shareholders by the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period. The dilutive effect of equity awards is calculated based on the average stock price for each fiscal period, using the treasury stock method. For the three and six months ended December 31, 2024, diluted shares outstanding include the dilutive effect of the potential shares of Coherent Common Stock issuable from performance and restricted shares. For the three and six months ended December 31, 2023, as the Company was in a net loss position, there were no dilutive shares.
Potentially dilutive shares whose effect would have been anti-dilutive are excluded from the computation of diluted earnings (loss) per common share. For the three and six months ended December 31, 2024, diluted earnings per share excluded the potentially dilutive effect of the shares of Coherent Common Stock issuable upon conversion of the Series B Convertible Preferred Stock (under the If-Converted method), as their effects were anti-dilutive. For the three and six months ended December 31, 2023, diluted earnings (loss) per share excluded the potentially dilutive effect of the performance and restricted shares, calculated based on the average stock price for each fiscal period, using the treasury stock method, as well as the shares of Coherent Common Stock issuable upon conversion of the Series B Convertible Preferred Stock (under the If-Converted method), as their effects were anti-dilutive.
The following is a reconciliation of the numerators and denominators of the basic and diluted earnings (loss) per share computations (000, except per share data):
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Numerator | |||||||||||||||||||||||
| Net earnings (loss) attributable to Coherent Corp. | $ | 103,385 | $ | (26,991) | $ | 129,272 | $ | (94,525) | |||||||||||||||
| Deduct Series B dividends and deemed dividends | (32,262) | (30,580) | (64,095) | (60,753) | |||||||||||||||||||
| Basic earnings (loss) available to common shareholders | $ | 71,123 | $ | (57,571) | $ | 65,177 | $ | (155,278) | |||||||||||||||
| Diluted earnings (loss) available to common shareholders | $ | 71,123 | $ | (57,571) | $ | 65,177 | $ | (155,278) | |||||||||||||||
| Denominator | |||||||||||||||||||||||
| Weighted average shares | 154,767 | 151,564 | 154,197 | 150,946 | |||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Common stock equivalents | 5,222 | — | 5,078 | — | |||||||||||||||||||
| Diluted weighted average common shares | 159,989 | 151,564 | 159,275 | 150,946 | |||||||||||||||||||
| Basic earnings (loss) per common share | $ | 0.46 | $ | (0.38) | $ | 0.42 | $ | (1.03) | |||||||||||||||
| Diluted earnings (loss) per common share | $ | 0.44 | $ | (0.38) | $ | 0.41 | $ | (1.03) |
The following table presents potential shares of common stock excluded from the calculation of diluted net earnings (loss) per share, as their effect would have been anti-dilutive (000):
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Common stock equivalents | — | 1,956 | 5 | 2,146 | |||||||||||||||||||
| Series B Convertible Preferred Stock | 28,920 | 27,516 | 28,741 | 27,346 | |||||||||||||||||||
| Total anti-dilutive shares | 28,920 | 29,472 | 28,746 | 29,492 |
Note 13. Segment Reporting
The Company reports its business segments using the “management approach” model for segment reporting. This means that we determine our reportable business segments based on the way the chief operating decision-maker (“CODM”) analyzes business segments within the Company for making operating decisions and assessing financial performance.
We report our financial results in the following three segments: (i) Networking, (ii) Materials, and (iii) Lasers. Our CODM receives and reviews financial information based on these three segments. During the first quarter of fiscal 2025 as a result of a new CEO joining the Company in the fourth quarter of fiscal 2024, our CODM implemented changes in the measure he uses to allocate resources and assess performance. Our CODM now evaluates each segment’s performance and allocates resources based on segment revenue and segment profit, instead of operating income, as our CODM believes segment profit is a more comprehensive profitability measure for each operating segment. Segment profit includes operating expenses directly managed by operating segments, including research and development, direct sales, marketing and administrative expenses. Segment profit does not include share-based compensation, acquisition or integration related costs, amortization and impairment of acquisition-related intangible assets, restructuring charges, and certain other charges. Additionally, effective the first quarter of fiscal 2025, we no longer allocate Corporate strategic research and development, strategic marketing and sales expenses and shared general and administrative expenses, as these expenses are not directly attributable to our operating segments. The segments are managed separately due to the market, production requirements and facilities unique to each segment. The accounting policies are consistent across each segment. Effective the first quarter of fiscal 2025, we no longer allocate corporate assets to the segments.
Comparative prior period segment information has been recast to conform to the new segment profitability measure. The change in our operating segment measure had no impact on our previously reported consolidated results of operations, financial condition, or cash flows.
The following table summarizes selected financial information of our operations by segment and reconciles segment profit to consolidated earnings (loss) before income taxes for the periods presented ($000):
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Segment revenue | |||||||||||||||||||||||
| Networking | $ | 815,913 | $ | 524,235 | 1,578,785 | 997,084 | |||||||||||||||||
| Materials | 243,475 | 253,678 | 480,902 | 498,318 | |||||||||||||||||||
| Lasers | 375,277 | 353,521 | 723,113 | 689,115 | |||||||||||||||||||
| Total segment revenue | 1,434,665 | 1,131,434 | 2,782,800 | 2,184,517 | |||||||||||||||||||
| Intersegment revenue | |||||||||||||||||||||||
| Networking | 12,584 | 9,979 | 27,011 | 22,866 | |||||||||||||||||||
| Materials | 119,122 | 96,042 | 251,290 | 183,784 | |||||||||||||||||||
| Lasers | 2,318 | 1,205 | 3,882 | 1,844 | |||||||||||||||||||
| Unallocated | (134,024) | (107,226) | (282,183) | (208,494) | |||||||||||||||||||
| Total intersegment revenue | — | — | — | — | |||||||||||||||||||
| Segment profit | |||||||||||||||||||||||
| Networking | 153,269 | 95,350 | 289,175 | 156,063 | |||||||||||||||||||
| Materials | 74,117 | 56,220 | 165,225 | 106,322 | |||||||||||||||||||
| Lasers | 87,520 | 62,548 | 151,259 | 108,241 | |||||||||||||||||||
| Total segment profit | 314,906 | 214,118 | 605,659 | 370,626 | |||||||||||||||||||
| Unallocated Corporate items | |||||||||||||||||||||||
| Corporate and centralized function costs (1) | (49,959) | (61,669) | (123,061) | (107,204) | |||||||||||||||||||
| Share-based compensation | (41,012) | (27,252) | (76,490) | (71,776) | |||||||||||||||||||
| Restructuring costs (2) | (8,021) | 1,570 | (32,385) | (1,448) | |||||||||||||||||||
| Integration, site consolidated and other costs (3) | (7,332) | (23,376) | (18,081) | (35,454) | |||||||||||||||||||
| Amortization of intangibles | (71,716) | (71,507) | (143,578) | (144,168) | |||||||||||||||||||
| Interest expense | (64,278) | (74,678) | (130,922) | (147,936) | |||||||||||||||||||
| Other (income) expense, net | 55,816 | 5,387 | 66,565 | 11,656 | |||||||||||||||||||
| Earnings (loss) before income taxes | $ | 128,404 | $ | (37,407) | $ | 147,707 | $ | (125,704) | |||||||||||||||
| Expenditures for property, plant, and equipment | |||||||||||||||||||||||
| Networking | $ | 70,211 | $ | 36,374 | $ | 118,897 | $ | 53,867 | |||||||||||||||
| Materials | 30,703 | 54,511 | 64,499 | 95,023 | |||||||||||||||||||
| Lasers | 4,769 | 585 | 14,271 | 4,777 | |||||||||||||||||||
| Total expenditures for property, plant, and equipment | $ | 105,683 | $ | 91,470 | $ | 197,667 | $ | 153,667 |
(1)We do not allocate corporate and centralized function costs that are not directly attributable to our operating segments.
(2)See Note 17. Restructuring Plan for further information.
(3)Integration and site consolidation costs in the three and six months ended December 31, 2024 includes $4 million and $15 million, respectively, in consulting costs related to projects to integrate recent acquisitions into common technology systems and simplify legal entity structure, and $3 million and $2 million, respectively, of employee severance and retention costs related to sites being shut down as part of our 2023 Restructuring Plan or Synergy and Site Consolidation Plan. Integration and site consolidation costs in the three and six months ended December 31, 2023
primarily include $16 million and $23 million, respectively, in consulting costs related to projects to integrate recent acquisitions into common technology systems and simplify legal entity structure, and $4 million and $6 million, respectively, of employee severance and retention costs related to sites being shut down as part of our 2023 Restructuring Plan or Synergy and Site Consolidation Plan.
The following table summarizes segment assets ($000):
| Segment assets and reconciliation to total assets | December 31, 2024 | June 30, 2024 | |||||||||
| Networking | $ | 3,545,700 | $ | 3,472,866 | |||||||
| Materials | 2,862,533 | 3,017,858 | |||||||||
| Lasers | 7,062,988 | 7,361,731 | |||||||||
| Corporate and shared services | 726,113 | 636,179 | |||||||||
| Total assets | $ | 14,197,334 | $ | 14,488,634 |
Note 14. Share-Based Compensation
Stock Award Plans
The Company’s Board of Directors amended and restated the Coherent Corp. Omnibus Incentive Plan and the Company’s shareholders approved such amendment and restatement at the Annual Meeting in November 2024 (as amended and restated, the “Plan”). The Plan was originally approved by the Company's shareholders at the Annual Meeting in November 2018, and was subsequently amended, restated and approved by the Company’s shareholders at the Annual Meetings held in November 2020 and November 2023. The Plan provides for the grant of stock options, stock appreciation rights, restricted shares, restricted share units, deferred shares, performance shares and performance units to employees (including officers), consultants and directors of the Company.
On June 3, 2024, the Board of Directors granted 147,214 restricted stock units vesting over three years from date of grant and 694,007 performance stock units vesting over the approximate three-year period ending June 30, 2027, to the new CEO. The grants were non-Plan “employment inducement awards” as contemplated by the New York Stock Exchange Listing Rule 303A.08 and therefore were not made pursuant to the Plan.
On October 11, 2024, the Board of Directors granted 15,902 and 63,154 restricted stock units vesting over three years and two years, respectively, from date of grant and 118,853 performance stock units vesting over the approximate three-year period ending June 30, 2027, to the new CFO. The grants were non-Plan “employment inducement awards” as contemplated by the New York Stock Exchange Listing Rule 303A.08 and therefore were not made pursuant to the Plan.
The Company has an Employee Stock Purchase Plan whereby eligible employees may authorize payroll deductions (subject to certain limitations) of up to 15% (or such lesser amount as may be determined by the plan administrator) of their wages and base salary to purchase shares at an amount which will not be less than 85% of the lower of (i) the fair market value of the common stock on the first trading day of the offering period and (ii) the fair market value of the common stock on the last trading day of the approximately six-month offering period.
Share-based compensation expense for the periods indicated was as follows ($000):
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Stock Options and Cash-Based Stock Appreciation Rights | $ | 166 | $ | 803 | $ | 583 | $ | (254) | ||||||||||||||||||
| Restricted Share Awards and Cash-Based Restricted Share Unit Awards | 23,881 | 20,923 | 47,650 | 51,988 | ||||||||||||||||||||||
| Performance Share Awards and Cash-Based Performance Share Unit Awards | 14,757 | 2,985 | 23,749 | 13,830 | ||||||||||||||||||||||
| Employee Stock Purchase Plan | 2,208 | 2,541 | 4,508 | 6,212 | ||||||||||||||||||||||
| $ | 41,012 | $ | 27,252 | $ | 76,490 | $ | 71,776 |
Note 15. Fair Value of Financial Instruments
The FASB defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous markets for the asset and liability in an orderly transaction between market participants at the measurement date. We estimate fair value of our financial instruments utilizing an established three-level hierarchy in accordance with U.S. GAAP. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date as follows:
-
Level 1 – Valuation is based upon unadjusted quoted prices for identical assets or liabilities in active markets.
-
Level 2 – Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instruments.
-
Level 3 – Valuation is based upon other unobservable inputs that are significant to the fair value measurements.
The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement.
We had entered into an interest rate swap agreement, effective November 24, 2019, with a notional amount of $1,075 million to limit the exposure to our variable interest rate debt by effectively converting it to a fixed interest rate. Through February 28, 2023, we received payments based on the one-month LIBOR and made payments based on a fixed rate of 1.52%. We received payments with a floor of 0.00%. The initial notional amount of the interest rate swap decreased to $825 million in June 2022, and remained at that amount through its expiration on September 24, 2024. On March 20, 2023, we amended our $825 million interest rate swap (“Amended Swap”), effective as of February 28, 2023, to replace the current reference rate (LIBOR) with SOFR, to be consistent with Amendment No. 1 to the Credit Agreement. See Note 7. Debt for further information. Under the Amended Swap, we received payments based on the one-month SOFR and made payments based on a fixed rate of 1.42%. Through its expiration on September 24, 2024, we received payments with a floor of 0.10%. We designated this instrument as a cash flow hedge, and deemed the hedge relationship effective at inception of the contract and the amended contract.
The interest rate swap expired on September 30, 2024. The fair value of the interest rate swap of $8 million is recognized in the Condensed Consolidated Balance Sheet within Prepaid and other current assets as of June 30, 2024. Changes in fair value were recorded within AOCI on the Condensed Consolidated Balance Sheets and reclassified into the Condensed Consolidated Statements of Earnings (Loss) as interest expense in the period in which the underlying transaction affected earnings. Cash flows from hedging activities were reported in the Condensed Consolidated Statements of Cash Flows in the same classification as the hedged item, as a component of cash flows from operations. The fair value of the interest rate swap was determined using widely accepted valuation techniques and reflected the contractual terms of the interest rate swap including the period to maturity, and while there were no quoted prices in active markets, it used observable market-based inputs, including interest rate curves. The fair value analysis also considered a credit valuation adjustment to reflect nonperformance risk of both the Company and the single counterparty. The interest rate swap was classified as a Level 2 item within the fair value hierarchy.
On February 23, 2022, we entered into an interest rate cap (the “Cap”) with an effective date of July 1, 2023. On March 20, 2023, we amended the Cap to replace the current reference rate (LIBOR) with SOFR, to be consistent with Amendment No. 1 to the Credit Agreement. See Note 7. Debt for further information. The Cap manages our exposure to interest rate movements on a portion of our floating rate debt. The Cap provides us with the right to receive payment if one-month SOFR exceeds 1.92%. Beginning in July 2023, we began to pay a fixed monthly premium based on an annual rate of 0.853% for the Cap. The Cap will carry a notional amount ranging from $500 million to $1,500 million. On September 1, 2024, we increased the notional amount from $500 million to $1,500 million. The fair value of the interest rate cap of $32 million and $50 million is recognized in the Condensed Consolidated Balance Sheet within Prepaid and other current assets and Other assets as of December 31, 2024 and June 30, 2024, respectively.
The Cap, as amended, is designed to mirror the terms of the Credit Agreement as amended on March 31, 2023. We designated the Cap as a cash flow hedge of the variability of the SOFR based interest payments on the Term Facilities. Every period over the life of the hedging relationship, the entire change in fair value related to the hedging instrument will first be recorded within Accumulated other comprehensive income (loss). Amounts accumulated in accumulated other comprehensive income (loss) are reclassified into interest expense in the same period or periods in which interest expense is recognized on the Credit Agreement, or its direct replacement. The fair value of the Cap is determined using widely accepted valuation techniques and reflects the contractual terms of the Cap including the period to maturity, and while there are no quoted prices in active markets, it uses observable market-based inputs, including interest rate curves. The fair value analysis also considers a credit valuation adjustment to reflect nonperformance risk of both the Company and the single counterparty. The Cap is classified as a Level 2 item within the fair value hierarchy.
We estimated the fair value of the Senior Notes, Term A Facility and Term B Facility (“Debt Facilities”) based on quoted market prices as of the last trading day prior to December 31, 2024; however, the Debt Facilities have only a limited trading volume and as such this fair value estimate is not necessarily the value at which the Debt Facilities could be retired or transferred. We concluded that this fair value measurement should be categorized within Level 2. The carrying values of the Debt Facilities are net of unamortized discount and issuance costs. See Note 7. Debt for details on the Company’s debt facilities.
The fair value and carrying value of the Debt Facilities were as follows ($000):
| December 31, 2024 | June 30, 2024 | ||||||||||||||||||||||
| Fair Value | Carrying Value | Fair Value | Carrying Value | ||||||||||||||||||||
| Senior Notes | $ | 947,093 | $ | 984,541 | $ | 938,193 | $ | 984,061 | |||||||||||||||
| Term A Facility | 682,772 | 672,923 | 777,564 | 762,039 | |||||||||||||||||||
| Term B Facility | 2,249,101 | 2,189,476 | 2,390,497 | 2,334,701 |
Our borrowings, including our lease obligations and the Debt Facilities, are considered Level 2 among the fair value hierarchy.
Cash and cash equivalents are considered Level 1 among the fair value hierarchy and approximate fair value because of the short-term maturity of those investments.
At December 31, 2024, total restricted cash of $751 million includes $748 million of cash in Silicon Carbide LLC that is restricted for use only by that subsidiary and $3 million of cash restricted for other purposes in other entities. At June 30, 2024, total restricted cash of $864 million includes $858 million of cash in Silicon Carbide LLC that is restricted for use only by that subsidiary and $5 million of cash restricted for other purposes in other entities. The restricted cash is invested in money market accounts and time deposits, with maturities of one year or less, that are held-to-maturity, are considered Level 1 among the fair value hierarchy and approximate fair value. Restricted cash that is expected to be spent and released from restriction after 12 months is classified as non-current on the Condensed Consolidated Balance Sheets.
We, from time to time, purchase foreign currency forward exchange contracts that permit us to sell specified amounts of these foreign currencies for pre-established U.S. dollar amounts at specified dates that represent assets or liabilities on the balance sheets of certain subsidiaries. These contracts are entered into for the purpose of limiting translational exposure to changes in currency exchange rates and which otherwise would expose our earnings, on the revaluation of our aggregate net assets or liabilities in respective currencies, to foreign currency risk. At December 31, 2024, we had no foreign currency forward contracts. The fair values of these instruments, when outstanding, are measured using valuations based upon quoted prices for similar assets and liabilities in active markets (Level 2) and are valued by reference to similar financial instruments, adjusted for credit risk and restrictions and other terms specific to the contracts. Realized gains related to these contracts for the three and six months ended December 31, 2024 were zero and $16 million, respectively, and realized gains related to these contracts for the three and six months ended December 31, 2023 were $14 million and $3 million, respectively, were included in Other income, net in the Condensed Consolidated Statements of Earnings (Loss).
Note 16. Accumulated Other Comprehensive Income (Loss)
The changes in AOCI by component, net of tax, for the six months ended December 31, 2024 were as follows ($000):
| Foreign Currency Translation Adjustment | Interest Rate Instruments | Defined Benefit Pension Plan | Total Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||
| AOCI - June 30, 2024 | $ | (26,092) | $ | 35,916 | $ | (7,184) | $ | 2,640 | |||||||||||||||||||||
| Other comprehensive loss before reclassifications | (141,591) | (1,695) | (584) | (143,870) | |||||||||||||||||||||||||
| Amounts reclassified from AOCI | — | (18,486) | — | (18,486) | |||||||||||||||||||||||||
| Net current-period other comprehensive loss | (141,591) | (20,181) | (584) | (162,356) | |||||||||||||||||||||||||
| AOCI - December 31, 2024 | $ | (167,683) | $ | 15,735 | $ | (7,768) | $ | (159,716) |
Note 17. Restructuring Plan
Restructuring Plan
On May 23, 2023, the Board of Directors approved the Company’s May 2023 Restructuring Plan which includes site consolidations, facilities moves and closures, as well as the relocation and requalification of certain manufacturing facilities.
These restructuring actions are expected to be accompanied by other cost reductions, and are intended to realign our cost structure as part of a transformation to a simpler, more streamlined, resilient and sustainable business model. We evaluate restructuring charges in accordance with ASC 420, Exit or Disposal Cost Obligations (ASC 420), and ASC 712, Compensation-Nonretirement Post-Employment Benefits (ASC 712).
In the three months ended December 31, 2024, these activities resulted in $8 million of charges primarily for site move costs, employee termination costs and accelerated depreciation. In the six months ended December 31, 2024, these activities resulted in $32 million of charges primarily for impairment losses associated with the sale of our Newton Aycliffe business, accelerated depreciation, employee termination and site move costs. In the three months ended December 31, 2023, these activities resulted in $2 million of net recoveries primarily for adjustments to employee termination costs partially offset by acceleration of depreciation and site move costs. In the six months ended December 31, 2023, these activities resulted in $1 million of charges primarily for employee termination costs as well as site move costs, write-off of property and equipment and acceleration of depreciation. We expect the restructuring actions to be substantially completed by the end of fiscal 2025. However, the actual timing and costs associated with these restructuring actions may differ from our current expectations and estimates and such differences may be material.
Activity and accrual balances for the Restructuring Plan were as follows for the first two quarters of fiscal 2024 and 2023 ($000):
| Severance | Asset Write-Offs | Other | Total Accrual | ||||||||||||||||||||
| Balance - June 30, 2024 | $ | 51,061 | $ | — | $ | — | $ | 51,061 | |||||||||||||||
| Restructuring charges (recoveries) | (455) | 15,970 | 8,850 | 24,365 | |||||||||||||||||||
| Payments | (6,796) | — | — | (6,796) | |||||||||||||||||||
| Asset write-offs and other | — | (15,970) | (8,850) | (24,820) | |||||||||||||||||||
| Balance - September 30, 2024 | 43,810 | $ | — | $ | — | $ | 43,810 | ||||||||||||||||
| Restructuring charges | 2,882 | — | 5,139 | 8,021 | |||||||||||||||||||
| Payments | (752) | — | — | (752) | |||||||||||||||||||
| Asset write-offs and other | (1,609) | — | (5,139) | (6,748) | |||||||||||||||||||
| Balance - December 31, 2024 | $ | 44,331 | $ | — | $ | — | $ | 44,331 | |||||||||||||||
| Severance | Asset Write-Offs | Other | Total Accrual | ||||||||||||||||||||
| Balance - June 30, 2023 | $ | 64,379 | $ | — | $ | — | $ | 64,379 | |||||||||||||||
| Restructuring charges | 2,050 | 269 | 699 | 3,018 | |||||||||||||||||||
| Payments | (7,930) | — | — | (7,930) | |||||||||||||||||||
| Asset write-offs and other | — | (269) | (699) | (968) | |||||||||||||||||||
| Balance - September 30, 2023 | 58,499 | — | — | 58,499 | |||||||||||||||||||
| Restructuring charges (recoveries) | (4,848) | 54 | 3,224 | (1,570) | |||||||||||||||||||
| Payments | (2,103) | — | — | (2,103) | |||||||||||||||||||
| Asset write-offs and other | — | (54) | (3,224) | (3,278) | |||||||||||||||||||
| Balance - December 31, 2023 | $ | 51,548 | $ | — | $ | — | $ | 51,548 |
At December 31, 2024, $12 million and $32 million of accrued severance related costs were included in other accrued liabilities and other liabilities, respectively, and are expected to result in cash expenditures through fiscal 2028. The current and prior year severance related net charges are primarily comprised of accruals for severance and pay for employees being terminated due to the consolidation of certain manufacturing sites, with severance recorded in accordance with ASC 712. The prior year severance related net recoveries are primarily comprised of adjustments to accruals for severance pay for employees being terminated due to the consolidation of certain manufacturing sites, with severance recorded in accordance with ASC 712.
By segment, for the three and six months ended December 31, 2024, $3 million and $26 million, respectively, of restructuring costs were incurred in the Materials segment, $3 million and $4 million, respectively, of restructuring costs were incurred in the Networking segment, and $2 million of restructuring costs were incurred in both periods in the Lasers segment. By segment, for the three and six months ended December 31, 2023, $2 million and $7 million, respectively, of restructuring costs were incurred in the Materials segment, partially offset by $3 million and $5 million, respectively, of restructuring recoveries in the
Networking segment. Restructuring charges and recoveries are recorded in Restructuring Charges (Recoveries) in our Condensed Consolidated Statements of Earnings (Loss).
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