II-VI Incorporated Reports First Quarter Earnings; Bookings Set New Record

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II-VI Incorporated IIVI

(Numbers in Thousands, Except

Per Share Data)

1st quarter ended 1st quarter ended

9/30/2006 YTD 9/30/2005 YTD

Sales $60,797 $60,797 $54,391 $54,391

Net Income $7,498 $7,498 $6,749 $6,749

Average Shares 29,888 29,888 29,926 29,926

EPS $0.25 $0.25 $0.23 $0.23

II-VI Incorporated (Nasdaq: IIVI) today reported results for its first quarter ended September 30, 2006. Revenues for the quarter increased 12% to $60,797,000 from $54,391,000 in the first quarter of last fiscal year. Net earnings for the quarter were $7,498,000 or $0.25 per share-diluted. These results compare with net earnings of $6,749,000 or $0.23 per share-diluted in the first quarter of last fiscal year.

Bookings for the quarter increased 8% to a record $64,297,000 compared to $59,317,000 in the first quarter of last fiscal year. Bookings are defined as customer orders received that are expected to be converted into revenues during the next 12 months.

Francis J. Kramer, president and chief operating officer said, "We are pleased to report record bookings despite the normal seasonality of European business during our first fiscal quarter. Our businesses met the markets' added demands and produced a 12% increase in total revenues compared to the same quarter one year ago. Segment earnings in the infrared optics business were comparable with the year-ago quarter and carried with it higher levels of stock option and performance share expense, while the combined profit from our other business units increased nearly $1.4 million from the previous period."

In addition to reporting its financial results for the quarter the Company announced that, effective today, it has replaced its existing credit facility. The new credit facility is a $60.0 million unsecured line of credit which, under certain conditions, may be expanded to $100.0 million. The new credit facility has a five-year life and has interest rates ranging from LIBOR plus 0.50% to LIBOR plus 1.25%, an improvement from the prior facility. The new credit facility also contains fewer restrictions on its use for acquisitions and repurchases of Company stock than the prior facility. The new credit facility is agented by PNC Bank.

Segment Information

The following segment information includes segment earnings (defined as earnings before income taxes, interest expense and other income or expense, net). Management believes segment earnings are a useful performance measure because they reflect the results of segment performance over which management has direct control.

Three Months Ended

September 30,

%

Increase

2006 2005 (Decrease)

Bookings:

Infrared Optics $ 32,799 $ 26,553 24 %

Near-Infrared Optics 7,461 6,583 13 %

Military Infrared Optics 7,019 8,232 (15)%

Compound Semiconductor Group 17,018 17,949 (5)%

Total Bookings $ 64,297 $ 59,317 8 %

Revenues:

Infrared Optics $ 32,158 $ 28,897 11 %

Near-Infrared Optics 10,512 8,698 21 %

Military Infrared Optics 6,187 6,179 0 %

Compound Semiconductor Group 11,940 10,617 12 %

Total Revenues $ 60,797 $ 54,391 12 %

Segment Earnings (Loss):

Infrared Optics $ 8,803 $ 8,731 1 %

Near-Infrared Optics 1,199 833 44 %

Military Infrared Optics 241 (524) N/A

Compound Semiconductor Group (147) (362) (59)%

Total Segment Earnings $ 10,096 $ 8,678 16 %

Outlook

For the second fiscal quarter ending December 31, 2006, the Company currently forecasts revenues to range from $63 million to $65 million and earnings per share to range from $0.26 to $0.29. Results for the quarter ended December 31, 2005 were revenues of $53.8 million and earnings per share of $0.17. For the fiscal year ending June 30, 2007, the Company expects revenues to range from $261 million to $266 million and earnings per share to range from $1.10 to $1.18.

Webcast Information

The Company will host a conference call at 10:00 a.m. Eastern Time on Tuesday, October 24, 2006 to discuss these results. The conference call will be broadcast live over the internet and can be accessed by all interested parties from the Company's web site at http://www.ii-vi.com as well as at http://www.videonewswire.com/event.asp?id=36056. Please allow extra time prior to the call to visit the site and, if needed, download the media software required to listen to the internet broadcast. A replay of the webcast will be available for two weeks following the call.

About II-VI Incorporated

Headquartered in Saxonburg, Pennsylvania, II-VI Incorporated designs, manufactures and markets optical and opto-electronic components, devices and materials for infrared, near-infrared, visible light, x-ray and gamma ray instrumentation. The Company's infrared optics business manufactures optical and opto-electronic components sold under the II-VI brand name and used primarily in CO2 lasers. The Company's near-infrared optics business manufactures near-infrared and visible light products for industrial, scientific, military and medical instruments and laser gain materials and products for solid-state YAG and YLF lasers at the Company's VLOC subsidiary. The Company's military infrared optics business manufactures infrared products for military applications under the Exotic Electro-Optics (EEO) brand name. In the Company's Compound Semiconductor Group, the eV PRODUCTS division manufactures and markets solid-state x-ray and gamma-ray sensor products and materials for use in medical, industrial, environmental, scientific and homeland security applications; the Company's Wide Bandgap Materials (WBG) group manufactures and markets single crystal silicon carbide substrates for use in the solid-state lighting, wireless infrastructure, RF electronics and power switching industries; Marlow Industries, Inc. designs and manufactures thermoelectric cooling and power generation solutions for use in defense, space, photonics, telecommunications, medical, consumer and industrial markets.

This press release contains forward-looking statements based on certain assumptions and contingencies that involve risks and uncertainties. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and relate to the Company's performance on a going-forward basis. The forward-looking statements in this press release involve risks and uncertainties, which could cause actual results, performance or trends to differ materially from those expressed in the forward-looking statements herein or in previous disclosures. The Company believes that all forward-looking statements made by it have a reasonable basis, but 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 economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this press release include, but are not limited to: (i) the Company's ability to successfully continue to integrate Marlow's operations into the Company's organization and to realize synergies in material growth and utilization of our worldwide manufacturing and distribution networks; (ii) the failure of any one or more of the assumptions stated above to prove to be correct; (iii) the risks relating to forward-looking statements and other "Risk Factors" discussed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2006; (iv) purchasing patterns from customers and end-users; (v) timely release of new products, and acceptance of such new products by the market; (vi) the introduction of new products by competitors and other competitive responses; and/or (vii) the Company's ability to devise and execute strategies to respond to market conditions.

II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)

(000 except per share data)

Three Months Ended

September 30,

2006 2005

Revenues

Net sales $ 58,179 $ 52,206

Contract research and

development 2,618 2,185

Total Revenues 60,797 54,391

Costs, Expenses, Other (Income) Expense

Cost of goods sold $ 34,051 $ 30,788

Contract research and

development 1,987 1,515

Internal research and

development 1,301 1,911

Selling, general and

administrative 13,362 11,499

Interest expense 374 405

Other (income) expense, net (508) (1,297)

Total Costs, Expenses, Other

(Income) Expense 50,567 44,821

Earnings Before Income Taxes 10,230 9,570

Income Taxes 2,732 2,821

Net Earnings $ 7,498 $ 6,749

Diluted Earnings Per Share $ 0.25 $ 0.23

Average Shares Outstanding - Diluted 29,888 29,926

II-VI Incorporated and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(000)

September 30, June 30,

2006 2006

Assets

Current Assets

Cash and cash equivalents $ 25,793 $ 26,885

Accounts receivable, net 41,896 42,122

Inventories 50,501 48,454

Deferred income taxes 7,859 7,561

Other current assets 3,207 2,611

Total Current Assets 129,256 127,633

Property, Plant & Equipment, net 77,515 77,713

Goodwill 23,279 23,293

Other Intangible Assets, net 14,614 14,968

Investment 2,549 2,437

Other Assets 4,458 4,252

Total Assets $ 251,671 $ 250,296

Liabilities and Shareholders' Equity

Current Liabilities

Accounts payable $ 11,142 $ 9,540

Current portion of long-term debt 7,553 7,553

Other current liabilities 23,903 27,942

Total Current Liabilities 42,598 45,035

Long-Term Debt-less current portion 19,652 23,614

Other Liabilities, primarily deferred 9,092 11,056

income taxes

Shareholders' Equity 180,329 170,591

Total Liabilities and Shareholders'

Equity $ 251,671 $ 250,296

II-VI Incorporated and Subsidiaries

Other Selected Financial Information (Unaudited)

($000 except per share data)

The following other selected financial information includes earnings before interest, income taxes, depreciation and amortization (EBITDA). Management believes EBITDA is a useful performance measure because it reflects operating profitability before certain non-operating expenses and non-cash charges.

Other Selected Financial Information

Three Months Ended

September 30,

2006 2005

EBITDA $ 14,681 $ 13,676

Cash paid for capital

expenditures $ 3,064 $ 5,427

Net payments on

indebtedness $ 3,888 $ 1,413

Incentive stock option and

performance share compensation

expense, pre-tax $ 743 $ 669

Cash paid for shares repurchased

through the Company's stock

repurchase program $ 502 $ -

Shares repurchased through the

Company's stock repurchase program 19,500 -

Reconciliation of Segment

Earnings and EBITDA to Three Months Ended

Earnings Before Income September 30,

Taxes 2006 2005

Total Segment Earnings $ 10,096 $ 8,678

Interest expense 374 405

Other (income), net (508) (1,297)

Earnings before income

taxes $ 10,230 $ 9,570

EBITDA $ 14,681 $ 13,676

Interest expense 374 405

Depreciation and

amortization 4,077 3,701

Earnings before income

taxes $ 10,230 $ 9,570

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