BUSINESS COMBINATIONS AND DISPOSITIONS

Sale of Amplifier Business

On October 10, 2013, Oclaro Technology Limited entered into an Asset Purchase Agreement with II-VI, whereby Oclaro Technology Limited agreed to sell to II-VI and certain of its affiliates its Amplifier Business for $88.6 million in cash. The transaction closed on November 1, 2013.

Consideration, valued at $88.6 million consists of $79.6 million in cash, which was received on November 1, 2013, $4.0 million subject to hold-back by II-VI until December 31, 2014 to address any post-closing claims and $5.0 million related to the exclusive option, which was received on September 12, 2013 and was credited against the purchase price upon closing of the sale.

We entered into certain transition service and manufacturing service agreements to allow the Amplifier Business to continue operations during the ownership transition. Both parties provided customary and reciprocal representations, warranties and covenants in the Asset Purchase Agreement.

We classified the sale of our Amplifier Business as a discontinued operation as of September 12, 2013, the date management committed to sell the business. In connection with this transaction, we transferred $16.2 million in net assets to II-VI. We also incurred approximately $2.9 million in legal fees, commissions and other administrative costs related to this transaction. We recognized a gain of $69.1 million on the sale of the Amplifier Business, which is recorded within discontinued operations in the condensed consolidated statements of operations for the nine months ended March 29, 2014. As of March 29, 2014, we had a $4.0 million receivable in prepaid expenses and other current assets from II-VI related to the hold-back for potential post-closing adjustments or claims.

The assets of the discontinued operation are presented as current assets under the caption assets of discontinued operations held for sale in the accompanying condensed consolidated balance sheets at March 29, 2014 and June 29, 2013, and consist of the following:



	March 29, 2014		June 29, 2013
	(Thousands)
Assets of Discontinued Operations Held for Sale
Inventories	—		8,308
Prepaid expenses and other current assets	—		303
Property and equipment, net	—		6,555
	$	—	$	15,166

The following table presents the statements of operations for the discontinued operations of the Amplifier Business:



	Three Months Ended						Nine Months Ended
	March 29, 2014			March 30, 2013			March 29, 2014		March 30, 2013
	(Thousands)
Revenues	$	—		$	19,593		$	35,185	$	73,330
Cost of revenues	—			15,479			26,243		57,014
Gross profit	—			4,114			8,942		16,316
Operating expenses	—			5,377			5,576		14,123
Other income (expense), net	(636		)	—			69,069		—
Income (loss) from discontinued operations before income taxes	(636		)	(1,263		)	72,435		2,193
Income tax provision	—			—			—		—
Income (loss) from discontinued operations	$	(636	)	$	(1,263	)	$	72,435	$	2,193

Sale of Zurich Business

On September 12, 2013, we completed a share and asset purchase agreement with II-VI, pursuant to which we sold our Oclaro Switzerland GmbH subsidiary and associated laser diodes and pump business to II-VI. We received proceeds of $90.6 million in cash on September 12, 2013, and $2.9 million in cash during the third quarter of fiscal year 2014 which related to a final settlement of the post-closing working capital adjustment. We will also receive an additional $6.0 million subject to hold-back by II-VI until December 31, 2014 to address any post-closing adjustments or claims. In addition, we retained approximately $14.7 million in accounts receivable related to the Zurich Business and approximately $9.6 million of supplier and employee related payables related to the Zurich Business which were not included in the Zurich subsidiary.

As part of the agreement, II-VI purchased our Swiss subsidiary, which includes its GaAs fabrication facility, and also the corresponding high power laser diodes, VCSEL and 980 nm pump laser product lines, including intellectual property, inventory, equipment and a related research and development facility in Tucson, all of which are associated with the business.

We will continue the back-end manufacturing of the 980 nm pump and some high power laser diode products at our Shenzhen, China manufacturing facility and supply them to II-VI under a manufacturing services agreement. In addition, various supply and transition service agreements have been established between the companies to ensure a smooth transition.

We have classified the sale of our Zurich Business as a discontinued operation. In connection with this transaction, in the first quarter of fiscal year 2014, we transferred $32.5 million in net assets to II-VI and incurred approximately $4.9 million in legal fees, commissions and other administrative costs. We initially recognized a gain of $62.8 million on the sale of the Zurich Business. In the third quarter of fiscal year 2014, we recorded an additional gain of $0.4 million primarily related to the final settlement of the post-closing working capital adjustment. During the three and nine months ended March 29, 2014, we recorded $0.4 million and $63.2 million, respectively, within discontinued operations in the condensed consolidated statements of operations related to the sale of the Zurich Business. During the first quarter of fiscal year 2014, we also recorded $3.1 million in income from discontinued operations within the condensed consolidated statement of operations related to the cumulative translation adjustment from deconsolidating our Swiss subsidiary. As of March 29, 2014, we recorded a $6.0 million receivable in prepaid expenses and other current assets from II-VI related to the hold-back for potential post-closing adjustments or claims.

The assets and liabilities of the discontinued operation are presented as current assets and current liabilities, separately under the captions assets of discontinued operations held for sale and liabilities of discontinued operations held for sale in the accompanying condensed consolidated balance sheets at March 29, 2014 and June 29, 2013, and consist of the following:



	March 29, 2014		June 29, 2013
	(Thousands)
Assets of Discontinued Operations Held for Sale
Accounts receivable, net	—		79
Inventories	—		23,762
Prepaid expenses and other current assets	—		1,294
Property and equipment, net	—		12,749
Deferred tax asset, non-current	—		2,283
	$	—	$	40,167



	March 29, 2014		June 29, 2013
	(Thousands)
Liabilities of Discontinued Operations Held for Sale
Accounts payable	—		2,315
Accrued expenses and other liabilities	—		6,788
Other non-current liabilities	—		8,367
	$	—	$	17,470

The following table presents the statements of operations for the discontinued operations of the Zurich Business:



	Three Months Ended					Nine Months Ended
	March 29, 2014		March 30, 2013			March 29, 2014		March 30, 2013
	(Thousands)					(Thousands)
Revenues	$	—	$	20,510		$	13,896	$	67,345
Cost of revenues	—		17,057			11,593		55,015
Gross profit	—		3,453			2,303		12,330
Operating expenses	—		4,358			3,416		12,727
Other income (expense), net	884		(565		)	62,034		202
Income (loss) from discontinued operations before income taxes	884		(1,470		)	60,921		(195		)
Income tax provision	500		238			663		693
Income (loss) from discontinued operations	$	384	$	(1,708	)	$	60,258	$	(888	)

Sale of Thin Film Filter Business and Interleaver Product Line

On November 19, 2012, we entered into an asset purchase agreement with II-VI Incorporated, Photop Technologies, Inc. and Photop Koncent, Inc. (FuZhou), both wholly owned subsidiaries of II-VI Incorporated, pursuant to which we sold substantially all of the assets of our thin film filter business and our interleaver product line. The transactions closed on December 3, 2012. The total purchase price under the asset purchase agreement was $27.0 million in cash. We received $26.0 million in cash proceeds during the second quarter of fiscal year 2013 and the remaining $1.0 million during the third quarter of fiscal year 2014.

In connection with this transaction, during the second quarter of fiscal year 2013, we recognized a gain of $25.0 million within restructuring, acquisition and related costs in the condensed consolidated statements of operations.

Acquisition of Opnext

On March 26, 2012, we entered into an Agreement and Plan of Merger and Reorganization, by and among Opnext, Tahoe Acquisition Sub, Inc., a newly formed wholly-owned subsidiary of Oclaro (“Merger Sub”), and Oclaro, pursuant to which we acquired Opnext through a merger of Merger Sub with and into Opnext. On July 23, 2012, we consummated the acquisition following approval by the stockholders of both companies.

Any excess of the fair value of assets acquired and liabilities assumed over the aggregate consideration given for such acquisition results in a gain on bargain purchase. In the first quarter of fiscal year 2013, we initially recorded a gain on bargain purchase of $39.5 million in connection with the acquisition of Opnext, which was subsequently adjusted to $24.9 million, upon completing our purchase price allocation and finalizing our fair value estimates of assets acquired and liabilities assumed in the fourth quarter of fiscal year 2013.

Acquisition of Mintera

In July 2010, we acquired Mintera Corporation (“Mintera”). Under the terms of this acquisition, we agreed to pay certain revenue-based consideration, whereby former security holders of Mintera were entitled to receive earnouts up to $20.0 million, determined based on revenue from Mintera products following the acquisition. In the first quarter of fiscal year 2013, we settled the remaining earnout obligations of $8.6 million in cash.