BUSINESS COMBINATIONS AND DISPOSITIONS

3 Months Ended

Sep. 27, 2014

Business Combinations [Abstract]

BUSINESS COMBINATIONS AND DISPOSITIONS

BUSINESS COMBINATIONS AND DISPOSITIONS

Sale of Komoro, Japan Industrial and Consumer Business ("Komoro Business")

On August 5, 2014, Oclaro Japan, Inc., our wholly-owned subsidiary (“Oclaro Japan”), entered into a Master Separation Agreement (“MSA”) with Ushio Opto and Ushio, Inc. (“Ushio”), whereby Ushio Opto agreed to acquire the industrial and consumer business of Oclaro Japan located at its Komoro, Japan facility (the “Komoro Business”), by means of an absorption-type demerger under the Japanese Companies Act (such transaction, the “Transaction”). On October 27, 2014, the sale was completed. Consideration for the Transaction consisted of 1.85 billion Japanese yen (approximately $17.1 million based on the exchange rate on October 27, 2014) in cash, of which 1.6 billion Japanese yen (approximately $14.8 million based on the exchange rate on October 27, 2014) was paid at the closing and 250 million Japanese yen (approximately $2.3 million) was paid into escrow and will be released to Oclaro Japan upon the earlier of six months after the closing or the completion by Oclaro Japan of certain transition services, subject to a net asset valuation adjustment post-closing and after deduction for any indemnification amounts determined to be owed to Ushio Opto prior to release of the funds from escrow.

At the closing of the Transaction, Oclaro Japan and Ushio Opto entered into certain transition services and reciprocal services agreements to allow the Komoro Business to continue operations during the ownership transition, as well as an intellectual property agreement. Ushio has guaranteed the performance of Ushio Opto’s obligations under the MSA. Oclaro Japan, Ushio Opto and Ushio each provided customary and reciprocal representations, warranties and covenants in the MSA.

We have recorded the assets and liabilities that we are transferring to Ushio Opto in connection with our sale of the Komoro Business as assets held for sale and liabilities in connection with the sale at September 27, 2014, and consist of the following:

	September 27, 2014
Assets Held for Sale	(Thousands)
Accounts receivable, net	$	3,503
Inventories	4,314
Prepaid expenses and other current assets	1,254
Property and equipment, net	3,371
Other intangible assets	4,485
	$	16,927

	September 27, 2014
Liabilities in Connection with the Sale	(Thousands)
Accounts payable	$	5,866
Accrued expenses, other liabilities and capital lease obligations, current	2,119
Other non-current liabilities	2,243
	$	10,228

The income from continuing operations before income taxes attributable to the Komoro Business was $1.6 million and $1.7 million for the three months ended September 27, 2014 and September 28, 2013, respectively.

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 classified the sale of our Amplifier Business as a discontinued operation as of September 12, 2013, the date we committed to sell the business. As of September 27, 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 following table presents the statements of operations for the discontinued operations of the Amplifier Business:

	Three Months Ended
	September 27, 2014			September 28, 2013
	(Thousands)
Revenues	$	—		$	28,316
Cost of revenues	—			20,715
Gross profit	—			7,601
Operating expenses	215			4,068
Other income (expense), net	—			—
Income (loss) from discontinued operations   before income taxes	(215		)	3,533
Income tax provision	—			—
Income (loss) from discontinued operations	$	(215	)	$	3,533

This acquisition is more fully discussed in Note 3, Business Combinations and Dispositions, to our consolidated financial statements included in our 2014 Form 10-K.

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. Also, as part of the agreement, II-VI purchased certain pieces of equipment which are located in our Caswell facility. We continue to operate this equipment on behalf of II-VI, and provide certain wafer processing services in Caswell as part of an ongoing manufacturing services agreement.

We classified the sale of our Zurich Business as a discontinued operation as of September 12, 2013. In connection with this transaction, we transferred $31.4 million in net assets to II-VI and incurred approximately $4.9 million in legal fees, commissions and other administrative costs. During the three months ended September 28, 2013, we initially recognized a gain of $62.8 million. In the third quarter of fiscal year 2014, we recorded an additional $0.4 million primarily related to the final settlement of the post-closing working capital adjustment.

In connection with the sale of our Zurich Business, during the first quarter of fiscal year 2014, we 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 September 27, 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 following table presents the statements of operations for the discontinued operations of the Zurich Business:

	Three Months Ended
	September 27, 2014			September 28, 2013
	(Thousands)
Revenues	$	—		$	13,896
Cost of revenues	163			11,593
Gross profit	(163		)	2,303
Operating expenses	—			3,416
Other income (expense), net	—			61,150
Income (loss) from discontinued operations before   income taxes	(163		)	60,037
Income tax provision	—			163
Income (loss) from discontinued operations	$	(163	)	$	59,874

This acquisition is more fully discussed in Note 3, Business Combinations and Dispositions, to our consolidated financial statements included in our 2014 Annual Report on Form 10-K.