Good day, ladies and gentlemen, and welcome to the II-VI Incorporated Fiscal Year 2013 Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Craig Creaturo, Chief Financial Officer and Treasurer. Sir, you may begin. Craig A. Creaturo: Thank you, Sam, and good morning, everyone. I am Craig Creaturo, Chief Financial Officer and Treasurer of II-VI Incorporated. Thank you for participating in the Fourth Quarter Fiscal Year 2013 II-VI Incorporated Investor Teleconference. As a reminder, this teleconference is being recorded on Thursday, August 1, 2013. The forward-looking statements we may make during this teleconference speak as of today, and we do not undertake any obligation to update these statements to reflect events or circumstances occurring after today. Francis J. Kramer: Thank you, Craig. I'm Francis Kramer, President and CEO of II-VI Incorporated. We recognize that today's earnings release contained a lot of information, including some unique items that relate to our PRM and HIGHYAG subsidiaries. All those items are important, we don't want our investors to miss the broader point that we had a very strong ending to our fiscal year '13. And with the steps we have taken to rightsize and refocus PRM, we are placing ourselves in a better position moving forward. When the EPS impact to PRM for the just-completed quarter is excluded, our financial results were in the range of the guidance we've previously provided, while we delivered record revenues for both the quarter and the full year, as we concluded our 41st consecutive year of profitability. I will now review each of our business segments starting with the IR Optics. During the fourth quarter, bookings were up 10% quarter-over-quarter to $57.4 million, which was the highest quarter this fiscal year. Our German business continues to be stable, driven by demand for diamond optics in EUV systems. Japan had their highest quarter of bookings for the year at $5.8 million. Scan lens bookings remained strong from customers in Taiwan. South Korea has had business shifts away from Japan. For our IR Optics business in the U.S., orders from the domestic OEMs decreased 6% quarter-over-quarter, due to the timing of blanket orders from some of our key OEM accounts that we received in the third quarter. Shipments to our domestic OEMs increased 5% from last quarter. Aftermarket bookings were flat quarter-over-quarter, as machine utilizations rates remain steady. Raw material shipments were down quarter-over-quarter. Military bookings increased 160% quarter-over-quarter, as a result of a follow-on award from a key defense contractor. European bookings for the fourth quarter were up 14% compared to the third. Our sales offices in Germany and United Kingdom both had record bookings. Our diamond optical windows for the EUV photolithography system business continues to grow as projected. Asian bookings increased 16% from the prior quarter, with both Japan and China showing good improvement. Japan grew 18%, as OEMs started to see an increase in sales outside of Japan due to the weakening yen. Sales of Variable Radius Mirrors and scan lenses at our China sales office remain strong. Other international bookings finished higher than projected, due to the active South Korean via hole drilling market for scan lenses and peripheral optics. At HIGHYAG, bookings of $8.2 million for the fourth quarter were up 33% over the third quarter. We continue to see long-term growth in 1-micron welding beam delivery and 1-micron laser-cutting machines. In July of 2013, we acquired the remaining 25% equity of HIGHYAG that we did not already own, which will move HIGHYAG from a majority-owned subsidiary to a wholly owned subsidiary. The price paid for the 25% equity of HIGHYAG will be $7.6 million. In addition, a dividend of $1 million were paid. Effective July 1, 2013, the company will record 100% of the operating results of HIGHYAG in the company's Infrared Optics segment. Bookings at our Near-Infrared Optics segment increased by 28% quarter-over-quarter to $42 million, while segment revenues were up 16% to $41.4 million. The bookings increase was mainly a result of volume orders of optical components and WDM modules for datacom and CATV and the annual blanket order for high-performance optics for a surgical laser application. During the quarter, we started to experience recovery in the overall telecom component business, while we continued the shift from 40G to 100G network market. We are doubling our new product development efforts and increasing our 100G portfolio of products. We also experienced continued growth in our high-performance micro-optics business, which is a key supplier into the data center and datacom markets. Year-over-year, overall Near-IR bookings were down 6%. This was mainly attributable to the softening demand of optical components for telecom, the accelerating technology shift from 40G to 100G network and the end of some large contracts in our Photop Laser business. Compared to the fourth quarter of FY '12, overall Near-Infrared revenues were up 4%, due mainly to the acquisition of Photop Advanced Coating Center, which we call PACC, in Santa Rosa, California. At Photop quarter 4 revenues were up 17% sequentially compared to the third quarter and up 10% year-over-year. Revenues were boosted by optic component sales for data center, CATV and the 100G network, growing demand for advanced optics for lasers, as well as the vendor managed inventory pool of 40G and the legacy components. During the fourth quarter, the telecom component business experienced a continued softening for 40G and legacy products, including amplifier components, PDC and polarization hybrids. In the 100G data center and CATV-related areas, Photop realized several product design and wins, including 100G integrated coherent receivers, polarization beam splitter assemblies, low-sloped DWDM modules and multicast switching. We realized an increase in volume orders to support the anticipated shipments during the first quarter of FY '14. We continue to increase our new product portfolio and technology road maps, including high-end optical components for the next-generation high-speed networks. Photop continued the integration efforts with Aegis Lightwave and AOFR on compact OCMs, tunable filters TWDM-PON transceivers in the expansion of high-power laser combiner products for the growing fiber laser market, by leveraging global design and engineering resources in sales and marketing channels. This is in conjunction with future manufacturing consolidation geared towards the most competitive cost structure. The Photop laser device business remained at high levels in the fourth quarter, driven by several applications in the life sciences, industrial and law enforcement markets, in addition to new products that were introduced for eye-safe Q-switched lasers and high-power microchip green lasers. We are encouraged that Photop is designed in at several top-tier global life science diagnostic and instrumentation OEMs, including those aimed at precision optical subassemblies. Our new product development efforts are aimed at increasing our content into existing platforms and enabling our customers to achieve increased functionality and lower cost on their next-generation platforms. Overall, Photop's optics business results were up in the fourth quarter, with increased demand for telecom, crystal products and advanced optics for non-telecom laser applications. In Photop's contract manufacturing, service business fourth quarter recovered from the third quarter, with higher bookings, mainly related to projection optics. Business related to the glass panel for tablets remained at a low level due to product changes. The thin-film filter coating business we acquired in December 2012, which I said are called -- is called PACC, in Santa Rosa, California continues to perform well in the top 2 markets: life sciences and telecom. We continue to work with key customers by increasing our capacity and adding high-end filter products and optical assembly capabilities. Now at Photop Aegis, the fourth quarter revenues were relatively flat quarter-over-quarter, but were down 33% relative to the same quarter one year ago. Year-over-year decline is the result of last year's fourth quarter BNA [ph] recovery spike from the Thailand flood and the broader telecom market downturn. Aegis continues to see strong global volume growth for its optical channel monitor products. New products offerings features, including high-channel density, flexible bandwidth, optical performance, monitors in an industry leading small form factor were released in the fourth quarter. Additional products based on Aegis's proprietary tunable platforms are planned for introduction in the first half of fiscal year '14, including offerings in tunable filters and TWDM-PON solutions for the metro and access networks. Now moving next to the Military & Materials segment. For the fourth quarter, our bookings were $26.8 million, which increased 22% from the third quarter and 23% from the same period in the prior year. Bookings increase from the previous quarter resulted from the renegotiation contract for our rare-earth element product, combined with bookings attributable to the acquisition of LightWorks Optics, which we completed in December of 2012. For FY '13, bookings of $94.1 million were off from a year ago by 11%. Our military bookings increased 11%, due to the acquisition of LightWorks Optics, but were offset by $20 million reduction in bookings in the PRM business. Revenues for the fourth quarter of $30.3 million increased 5% from the third quarter and 12% from the same period last year. The revenue increase from the previous quarter and Q4 of the last fiscal year was due to our acquisition of LightWorks Optics business. For fiscal year '13, revenue of $104.4 million was down 12% from a year ago. PRM revenue was down nearly $20 million, of which $12 million was offset by our military business from revenue attributable to the LightWorks Optics acquisition. Now our military business is comprised of LightWorks Optics, Exotic Electro-Optics, VLOC and MLA. LightWorks Optics and Exotic Electro-Optics were officially merged during the fourth quarter and will operate under the new name of LightWorks Optical Systems referred to as LWOS. Integration is progressing and the capabilities of LWOS continue to be well received by our customers. For LWOS, bookings were down 27% and revenue was up 9% compared to the prior quarter. Bookings were soft due to a reduced production forecast for sapphire windows for the Joint Strike Fighter program and slower bookings for optical components and assemblies. We are continuing to see the effects of a slowdown in defense spending and lower order quantities and the longer order cycle times. We received some good news during the quarter related to the IRST program, which is the acronym for infrared search and track system that is deployed on the F-18 fighter aircraft. The outlook for this program continues to gain strength. LWOS is on track to book a significant IRST order in FY '14 and FY '15, with production shipments extending into 2016. The full order was received in July and will be included in bookings in the first quarter of FY '14 and subsequent quarters based upon our policy to recognize bookings for shipments within a 12-month period. Overall, our military business remains solid. In spite of the lower defense spending. We expect this business will continue to see modest growth and good profitability through FY '14. In our military -- or in our materials business, we have decided to modify the business model at PRM as reported in the press release issued earlier today. The tellurium product line will be discontinued and the selenium product line will be significantly downsized. We will discontinue the production of selenium chemical products and devote all selenium production to high purity metal, with the primary focus of supplying our Infrared Optics business. We will also continue our rare-earth element business. Softer demand from the selenium and tellurium end markets has caused a progressive decline in the index prices for these minor metals. And although we have taken actions to mitigate the impact of these adverse market conditions, these actions have not been sufficient to reverse the significant and continuing losses associated with these 2 product lines. After careful evaluation, we've decided on the strategies, as it maintains a competitive advantage for our Infrared Optics business by securing a low-cost and reliable supply of selenium. It also maintains our capability and related benefit of recycling selenide. Generally speaking, only about 50% of the selenium used in the production of zinc selenide is ultimately contained in the finished optics. PRM provides the capability to recycle nearly all of the unused in selenide to extract and reuse the contained selenium. This synergy was a primary driver for the acquisition of PRM years ago, and it remains an important benefit today. Our rare-earth element product provides a good opportunity for growth. As previously reported, the original customer contract has been modified, and this product line is now generated -- generating a positive financial return. Equally important is the new customer contract, which outlines an operating model requiring close interaction and cooperation with our customer. We are working jointly to improve productivity and yields to drive down unit costs. We believe this product now has a solid foundation and represents good opportunity for long-term growth. Last groups to talk about is our Advanced Products Groups -- Group. And in this, our Marlow Industries business, bookings for the fourth quarter decreased quarter-over-quarter, due to the initial spike of our new product for the personal comfort market received in the third quarter and the reduction in orders for our automotive cooling product due to the program end of life. The decrease was offset somewhat by increases in the industrial market, with orders for new Climatherm products and some blanket orders in the medical marketplace. The personal comfort market continues developing, with shipments of our first production order and new prototype products. The Climatherm product line continues to sell well in Europe, where we had multiple design wins again this quarter. In the power generation market, we received our first development order for waste heat recovery applications. Customers continue to inquire about other potential applications and how they might be able to harvest otherwise wasted energy from temperature differences that exist in various environments. At our Wide Bandgap Materials group, bookings for the fourth quarter FY '13 were down from projected levels, due to a pushout in the 150-millimeter diameter semi-insulating demand into the first quarter of FY '14, a result of program funding delays at a large OEM customer. Despite this delay, we continue to see increased interest for the 150-millimeter semi insulating diameter products for OEMs focused on Gallium Nitride-based electronics for both RF and power applications. Semi -- the semi insulating product revenue was down slightly from Q3 to Q4. However, as projected in Q3, shipments of 100-millimeter diameter semi insulating substrates for RF applications increased during the end of Q4 FY '13 and will continue going forward throughout the first quarter of FY '14. This increase is being driven by commercial applications in the wireless infrastructure market. The demand for 100-millimeter and 150-millimeter diameter N-type substrates continues to grow, driven by the promise of more energy-efficient products for power applications. We are experiencing increased demand for our industry-leading 150-millimeter diameter substrates, as customers strive to lower their manufacturing cost, make the processing of silicon carbide more compatible with existing silicon device foundries. During the fourth quarter, we began shipments of both 100-millimeter and 150-millimeter diameter N-type product for qualification into the power market at OEMs in both Japan and Europe. Shipments in the first quarter of FY '14 are projected to increase. We continue to see the 150-millimeter diameter as the key to expanding the potential market for silicon carbide devices and we remain focused on utilizing our 150-millimeter diameter technology to grow our overall market share moving forward. During the fourth quarter, we added new 150-millimeter-capable polishing and fabrication tools to our Mississippi facility for manufacturing these substrates, enabling both capacity and quality improvements. Now at our M Cubed Technologies Inc. subsidiary. Bookings and revenues for the fourth quarter of FY '13 were $8 million and $11.2 million, respectively. Market conditions remain healthy in the semiconductor industry, with increasing demand in the memory sector offsetting weakness in the logic sector. We expect this trend to continue into FY '14 and are balancing the capacity we have at our Delaware and Connecticut manufacturing plants to respond to this anticipated change in mix. M Cubed also continued to benefit from investment in new product development efforts supporting OEMs and the process metrology and inspection areas at both 300-millimeter and 450-millimeter diameters. Bookings and revenue continued to be soft in the display sector, driven by the economic slowdown in consumer spending in Europe and the general slowdown in fabrication expansions in China. We believe that this situation will improve in FY '14 with a focus on G8 fabrications to support large-format high-resolution TV production. And in the defense side of our business, airborne armor remains stable, albeit at lower levels than in prior quarters, as the elimination and delay of new vehicle platforms due to sequestration was partially offset by platform upgrades and planned retrofits. We are investing our new plant in Newtown, Connecticut to be in a position to support the expected production increase of our existing wafer-handling products, as well as new product development to support the 10-nanometer node. A focus of this investment is to increase both our capability and capacity and the precision machining of silicon carbides. M Cubed is investing in the creation of new materials and processes, with our current emphasis on the optics sector to serve both the semiconductor and defense industries. Our initiative in this area is to develop new silicon carbide materials and metal matrix composites that can be fabricated into optical substrates that can be used to support our II-VI business in the high-energy laser application for the semiconductor defense and homeland security markets. So in summary or in conclusion, we continue to make very good progress in integrating our 3 recent acquisitions. We anticipate each of the new business units to make positive contributions to our fiscal year '14 operating results. We dealt with strategic challenges and operating -- and opportunities during the fourth quarter by changing our PRM business model and increasing to 100% our ownership of HIGHYAG. We have positioned ourselves to capitalize on the strategic business decisions made during the just-completed fiscal year. We continue to focus on increasing shareholder value through growing organically and through acquisitions, and we look forward to a successful fiscal year '14. Craig that concludes my comments. Craig A. Creaturo: Thank you, Fran. The next portion of this call will be dedicated to some financial highlights from the quarter and fiscal year, and we will also discuss in an additional detail of the financial implications of the refocused PRM business and the acquisition of the remaining 25% of HIGHYAG, both of which were highlighted in today's press release. We will start the session with a review of our bookings and backlog. As described in today's press release, consolidated bookings for the quarter ended June 30, 2013, reached $145.4 million, which was 2% higher than the same quarter last fiscal year and marked the third consecutive quarter of increased bookings. The 3 acquisitions we completed in the December 2012 quarter added $18 million in bookings during the just-completed quarter and $22 million in revenues. Total company backlog at June 30, 2013, was $184 million. The components of the backlog at June 30, 2013 were: Infrared Optics at $46 million, Near-Infrared Optics at $34 million, Military & Materials at $68 million and Advanced Products Group at $36 million. The gross margin for the quarter was 32.8% and was 35.4% for the fiscal year. When the reported gross margin is adjusted for the items we highlighted on the last page of today's press release, namely the charges for refocusing PRM's business and the write-downs of tellurium and selenium, the quarterly gross margin would have been 36.5% and the full year gross margin would have been 36.7%. Our Infrared Optics and military businesses have been strong consistent performers at the gross margin level, and we expect that our recent acquisitions will continue to improve their gross margin performance as we move into fiscal year 2014. The effective income tax rate for the quarter was 32.5% and for the fiscal year was 26.5%. The higher rate for the quarter was driven by lower levels of income and low tax jurisdictions. Specifically, our PRM business in the Philippines generated pretax losses during fiscal 2013, for which no tax benefit was or will be received. In his prepared remarks, Fran described the significant changes that have occurred at our PRM business. Today's press release described the financial impact that was recognized during the quarter that related to our decision to exit the tellurium and selenium chemical businesses. Of the $4.4 million expense we incurred in the quarter for this activity, $2.6 million was a write-off of tellurium inventory, $900,000 was a write-off of fixed assets and improvements, $700,000 was a write-off of selenium inventory and $200,000 was a write-off of supplies and an accrual for disposal costs. In fiscal year 2014, once these product lines cease their sales and production activities, the company will present the tellurium and selenium chemicals business as a discontinued operation. The lower level of PRM business activity was factored into the guidance -- the initial guidance we gave in today's press release for the fiscal year 2014 and for the quarter ending September 30, 2013. As noted in today's press release, in July 2013, the company acquired the remaining 25% equity of HIGHYAG we did not already own for $7.6 million. In addition, a distribution of dividends to the former minority shareholder will be made in the amount of $1 million. The total of these 2 items was shown as a component of accruals and other current liabilities in the condensed consolidated balance sheet as of June 30, 2013. The purchase price and dividend distribution will be funded by cash reserves that are available outside of the United States, so we will not take on further indebtedness for these items. As of June 30, 2013, outstanding borrowings on our credit facility and yen loan totaled $114 million, down $7 million from March 31, 2013. The interest rate on our borrowings at June 30, 2013, was approximately 1.5%. Our cash flow generation for the fiscal year set a new record level at over $107 million, an increase of 22% over the prior year and previous record. Free cash flow for the year took a dramatic leap from the prior year, due to the combination of higher cash generation, stronger working capital management and lower capital spending. Overall, our cash balance increased by approximately $30 million during the quarter and was $185 million at June 30, 2013, the highest mark in the company's history. The final item I would like to highlight is a breakout of our fiscal year 2013 revenues by end market served. When you look across the 13 businesses of II-VI that comprise our 4 segments, our $558 million in revenues served the following markets: industrial, 46%; optical communication, 22%; military, 19%; medical and life science, 4%; semiconductor, 4%; photovoltaic, 1%; and all other markets served were the remaining 4%. In addition, the breakout of our fiscal year 2013 revenues between U.S. and non-U.S. customers was 43% and 57%, respectively. We anticipate a similar breakout for our fiscal 2014. Fran, this concludes my prepared remarks for today. Before we begin the question-and-answer session, I would like to mention that these comments and answers to certain questions contain forward-looking statements, which are based on current expectations. Actual results could differ materially. For information about factors that could cause the actual results to differ materially, please refer to the Risk Factor section of our Annual Report on Form 10-K for the fiscal year ended June 30, 2012, and quarterly reports on Form 10-Q for the quarters ended September 30, 2012, December 31, 2012, and March 31, 2013. Sam, we are ready to begin the question-and-answer session.

[Operator Instructions] Our first question comes from Avinash Kant of Davidson & Co.

So a few questions. Could you give us some idea about how big was HIGHYAG in fiscal year '13? And also the 2 discontinued businesses, tellurium and selenium, how many did they contribute to fiscal year '13, maybe both in revenue and earnings terms if you have that? Craig A. Creaturo: I would say that we can give you that -- a perspective of that from a revenue perspective. Roughly, HIGHYAG has been roughly about 10%, a little bit more than 10% of the total Infrared Optics segment in terms of both revenues, and the profitability levels are comparable to the Infrared Optics business. So that should give you a perspective a little bit more than $25 million or so in sales is the general range that they have been tracking. For the businesses that we are exiting, PRM, as a whole for fiscal year 2013, PRM as a whole was about a $25 million business. And the businesses -- those 2 businesses that were exiting or those 2 business lines that were exiting represent roughly about half of what the total business is. So that should give you some perspective.

And I was a little bit confused about one of the charges that you mentioned in your press release. The last bullet, when you talked about the after-tax income of $3.7 million, which is the $0.06 per share diluted. That's from the flooding in Thailand. Did that come into the quarter? It was in the fiscal year before hand? Craig A. Creaturo: That was in the fiscal year before hand, Avinash. That actually came in during the December quarter. So in the -- we mentioned in that bullet, we're saying that, that was something that impacted the whole year but not any of the quarters for which we were reporting. So that -- if you go back, that was part of the second quarter.

Right. So it's not this quarter. I think only the first 2 were the ones who impacted this quarter? Craig A. Creaturo: That is exactly correct. That's right.

Okay. So one other final question maybe. In terms of the guidance that you're providing for fiscal year '14, you were already assuming the discontinuation of these business and you're assuming the full contribution from HIGHYAG, right? Craig A. Creaturo: That is correct. Both of those have been factored into our initial guidance that's right.

Our next question comes from Jim Ricchiuti of Needham & Company.

A question I have is on the Infrared Optics business, as well as the Near-Infrared Optics business. It looks like you've shown the strongest bookings in both of those areas in some time and positive book to bill in both. We haven't seen that in several quarters. And so the question is, is that sustainable? Are you -- do you feel confident that we're seeing the pickup in those markets and that the momentum is sustainable? Francis J. Kramer: Yes. I think -- we think it is sustainable as far as we can put our judgment to what we see. IR is stronger, no doubt about the infrared business. And the diamond business for UV helps that. But a lot of it has to do with how laser utilization is a little better right now around the world, and we do monitor that. So I think IR has a sustainable -- again our visibility might be out only a couple quarters. Then you go to our Near-Infrared, and we've had some better work in our optical communications, and that has picked up and it seems to run on kind of an up-and-down pattern. And we might be on the up part of the pattern right now. And whether that's sustainable for a couple of quarters, I think that might be what we think. So it's a better, stronger position than we've been in on both of our bigger businesses.

Okay, that's helpful. And just one final question. Marlow clearly benefited from the initial shipments, I guess, into the personal comfort market. Are you seeing -- can you give us any flavor for how the products are being received and whether we might see some order uptick after the initial spike that you saw? Francis J. Kramer: I think the products are doing well is what -- we're way back in the food chain there. But what we hear is it's going well and it will have a nice period here right in the first quarter and maybe stronger toward the later part of the first than early here in July. But -- and we've got a good runway. Looks like it's going to be a nice product. Initial reaction seems good. And we really don't know about the follow-on orders for, shall we say, the second quarter, the third quarter, the fourth. The talk is real good, but it really depends on how the product sells. So we're optimistic. And so far, no complaints according to the customer.

Our next question comes from Jiwon Lee of Sidoti & Company.

Can we talk a little bit more about the order trends so far in July compared to the fourth quarter first, please? Francis J. Kramer: Yes. Really, I don't have the complete picture for all 4 of our business segments. But one of our 2 big ones is well on track, maybe a little better than well on track, and that's related to the IR Optics business is having a very, very good July. It's a -- the usual summer doldrums issue happens in Europe sometimes, but this year it does not appear to be happening. So I think we're upbeat there. And what I heard on our optical communications for Near-IR, good so far.

And Fran, on that front, there's been a lot of concerns about the slowness in China. What kind of an assumption did you sort of kind of put in for fiscal 2014 outlook from that front? Francis J. Kramer: Yes. I think we're in there modestly, maybe not as strong as what we'd have in North America and Europe. But there are many lasers deployed there, even if production is down. So laser optic utilization is still good. And that's why we're really -- we're not gaining as much business off the new assembly line builds, as you might think, it really comes in that aftermarket. And so we're not tempering it down a lot. But down a little because the economy is slowing in China, but it's really -- whatever goods they make, a lot of them consume optics on the laser. So we're down a little bit, not as much as the projections for GDP being down in China might suggest.

Okay. I think that's very fair. And if I missed the comment, I do apologize. But could you talk once again about the high-power versus the mid- to low-power IR Optics sort of... Francis J. Kramer: Okay. I didn't really make any comments about high versus -- well, I really was talking all about high power. The low power business still remains a very nice business. It's -- the low power CO2 are very competitive and fibers are coming in the low power. But the CO2s are very cost effective. I think it's going to be a dogfight there for quite a while. So we're in good to very good shape on the low power optics business. And that's -- that right now, I cannot tell you in the last 60 days, whether it's up or down, but it just goes up and down as the economy -- because it's both. The machines for labeling, for scribing, for all the little punching holes and so on, those lower-end lasers, they're up and down. So I can't tell you if it's up or down right now, but it's not -- the high-power laser business is what swings our IR business. The low-power optics are -- they're also in there.

And maybe more questions for Fran. But the acquisitions that you made, as well as the steps you took on the PRM side, what type of margin expectations or the earnings expectations did you build in for '14 outlook? Craig A. Creaturo: Yes. We expect some continued margin improvement from all 3 of the acquisitions. We've seen -- we've now made it past all the acquisitions-related costs and purchase accounting and things like that. And we're really now starting to see the true picture of the gross margin profile, the businesses that we have, and we do think that there are some things we're working on from a synergy perspective that will continue to improve those gross margins. And I think we're -- our general expectation is that they will collectively get up to the collective gross margin of the overall II-VI business really quickly, a couple -- 1 or 2 of them may be here pretty soon and definitely before the end of fiscal year 2014. That was what was factored into our guidance. From a PRM perspective, we did factor in what our current expectation was for finishing out the 2 business lines that we have exited. Again, the tellurium and selenium chemical businesses, and what we think we will do here in the very near term as we wind those 2 product lines down. And then again, the remaining PRM business will be, from an external reporting standpoint, most focused on our rare-earth element production, but it would definitely be -- continue to be a critical and larger supplier to our zinc selenide businesses, as Fran was mentioning in his comments.

And lastly for me, what kind of an expectations -- with that -- the program timing and all that budget pressure going on, what kind of an expectation should we have for the military business? Francis J. Kramer: I think we'll have a gentle climb up, where it won't be a large rate, but it's nicely profitable the way we have it positioned right now. And so we think we'll grow that modest 3% to 5% rate in our forecast that way, maybe I gave you a number there, and we might have a little stronger than that in our forecast, but I think you should think 3% to 5%. And the part that's -- and I mentioned haven't received the order for this IRST program, which is a foreign military sales, that was one of the drivers when we bought the business. We've received the order. But it's a nice, big order, spreads over 3 years. But with our 12-month recording of bookings, most all -- well it's all past our 12-month window. So it's not going to this -- that order I mentioned. It won't impact FY '14. But I think it's a nice -- we do it -- we do that product well. We've produced quite a few for the U.S. So it will be a good product. It's out there for the next year.

[Operator Instructions] Our next question comes from Dave Kang of B. Riley.

First of all, I just wanted to clarify that did I hear Photop sales increasing 17%, is that right? Craig A. Creaturo: Sorry, Dave, they increased 17% sequentially compared to Q3 that is correct, Q4 over Q3.

And then do you have orders number for Photop? Craig A. Creaturo: We didn't describe that in detail too much, Dave. Again, they really make up the lion's share of our Near-Infrared Optics segment, so I think you can look at that and get a feel for -- again it's really them and the Aegis business together. So I think you can get a perspective that way. So...

Okay. And then from Fran's comments, it sounds like there were certain products that did well, whereas certain products that's on the way down. Can you just go over and provide a little bit more color on that? Francis J. Kramer: We've been really reluctant at times, Dave, to go into the details on the optical communications business. Although I put it in my prepared comments to put more detail out there, I really wouldn't want to do it. We've given as much because it's a very competitive field. My comments were -- and you know the business well. So I tried to give some smattering, datacom, CATV, what was there, we're trying to get more in 100G, 40G is down. I think what I've described is probably pretty much what you see from the other people in the space.

Sure. So it sounds like 100G is cannibalizing 40G especially in China, is that kind of what's happening? Francis J. Kramer: I don't want to say cannibalizing, but it's coming on faster than anybody expected, and I think you know that. So yes, it's -- and there's -- it's a cannibalization, but there are still 40G sales that are going on, obviously.

And can you just provide a little more color region-by-region, North America, China and Europe? Francis J. Kramer: No, I'm not prepared to do that. That -- and again, it becomes the same issue for us that -- and you know that market. I know you do. And so much of it is bought by multinationals in China who are dispersed around the rest of the world. So we're, at times, back in the food chain. So we don't know. But some of our people certainly do.

Got it. And then last question is regarding your September quarter guidance. What kind of expectations are you assuming for whether Photop or NIR? Any color there? Is it going to be up sequentially or down due to seasonality? Or... Francis J. Kramer: I think it's a general -- I think we have the performance for that segment -- or as a whole, Dave, is kind of similar from a revenue perspective, maybe up a little bit from the quarter we just completed. Profitability-wise, I think we have them in a little bit higher of a rate of profitability than we just exited this most recent quarter. So I think comparable sales is up a little bit and profits, again, comparable, maybe up a little bit as well.

Thank you. And at this time, I'm not showing any further questions. I'd like to turn the call back to management for any further comments. Francis J. Kramer: Thank you, Sam. If there are no more questions, I would like to thank everyone for participating today. Our next earnings release for the quarter ending September 30, 2013, is currently scheduled for Tuesday, October 22, 2013, before the market opens with a conference call to follow that same day at 9 a.m. Eastern Time. Thank you for participating in today's conference call.

Ladies and gentlemen, thank you for participation in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a wonderful day.