FLOOD-RELATED (INCOME) EXPENSE, NET

In October 2011, certain areas in Thailand suffered major flooding as a result of monsoons. This flooding had a material impact on our business and results of operations in fiscal years 2012 and 2013. Our primary contract manufacturer, Fabrinet, suspended operations at two factories located in Chokchai, Thailand and Pinehurst, Thailand. The Chokchai factory suffered extensive flood damage and became inaccessible due to high water levels inside and surrounding the manufacturing facility. As a result of this flooding, we experienced a significant decline in product sales due to our inability or limited ability to manufacture certain of our products and we incurred significant damage to our inventory and property and equipment located at the Chokchai facility.

During the year ended June 28, 2014, we recorded $1.8 million in net flood-related income in our consolidated statement of operations, primarily consisting of $3.7 million in insurance settlement proceeds received in the second and third quarters of fiscal year 2014 and adjustments to retainers for professional services of $0.1 million, partially offset by an out-of-period adjustment of $2.0 million related to the impairment of leased assets assumed pursuant to the Opnext merger that had been damaged by the flooding. Approximately $1.5 million of the $3.7 million received in fiscal year 2014 represents payments against insurance claims filed under the former Opnext entity.

During the year ended June 29, 2013, we recorded net flood-related income of $29.5 million comprised of $30.8 million in settlement payments, offset in part by $1.3 million in professional fees and related expenses incurred in connection with our recovery efforts. Approximately $14.0 million of the $30.8 million received in fiscal year 2013 represents payments against insurance claims filed under the former Opnext entity.

During the year ended June 30, 2012, we recorded net flood-related expense of $2.5 million, including impairment charges of $8.2 million related to the write-off of the net book value of damaged inventory and property and equipment based on estimates of the damage caused by the flooding and $5.3 million of personnel-related costs, professional fees and related expenses incurred in connection with our recovery efforts, partially offset by $11.0 million in settlement payments relating to losses we incurred due to the flooding in Thailand.

The flood-related benefits and charges are recorded within the operating expense caption flood-related (income) expense, net in our consolidated statements of operations.

Flood-related (income) expense, net for the year ended June 28, 2014, June 29, 2013 and June 30, 2012 included the following:



	Year Ended
	June 28, 2014			June 29, 2013			June 30, 2012
	(Thousands)
Adjustment to net book value for damaged inventory	$	—		$	—		$	4,246
Write-off of net book value of damaged property and equipment	2,009			—			3,927
Personnel-related costs, professional fees and related expenses	(143		)	1,287			5,274
Settlement payments	(3,663		)	(30,797		)	(10,989		)
	$	(1,797	)	$	(29,510	)	$	2,458

While we maintain both property and business interruption insurance coverage, there can be no assurance as to the amount or timing of future insurance recoveries. Insurance recoveries related to impairment losses previously recorded and other recoverable expenses will be recognized to the extent of the related loss or expense in the period that recoveries become probable and realizable. Insurance recoveries under business interruption coverage and insurance recovery gains in excess of amounts previously written-off related to impaired inventory and equipment or in excess of other recoverable expenses previously recognized will be recognized when they become realizable and all contingencies have been resolved. The evaluation of insurance recoveries requires estimates and judgments about future results which affect reported amounts and certain disclosures. Actual results could differ from those estimates.