BUSINESS COMBINATIONS AND DISPOSITIONS

9 Months Ended

Mar. 28, 2015

Business Combinations and Dispositions [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. On October 27, 2014, the sale was completed. Initial consideration for this 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 $2.1 million based on the exchange rate on April 24, 2015) was paid into escrow and was released to Oclaro Japan on April 24, 2015. In addition, under the MSA, we are subject to a post-closing net asset valuation adjustment. We determined that based on the net assets transferred to Ushio Opto during the second quarter of fiscal year 2015, we owed Ushio Opto a post-closing net asset valuation adjustment of $1.4 million, which was paid to Ushio Opto in the third quarter of fiscal year 2015.

In connection with the sale of the Komoro Business, we transferred net assets with a book value of $6.3 million to Ushio Opto, consisting of $3.4 million in accounts receivable, $4.6 million in inventories, $0.9 million in prepaid expenses and other current assets, $3.7 million in property, plant and equipment, $4.4 million in other intangible assets, $5.9 million in accounts payable, $2.9 million in accrued expenses, other liabilities and capital lease obligations, and $1.9 million in other non-current liabilities. We also incurred $1.0 million in legal fees and other administrative costs related to this transaction. During the second quarter of fiscal year 2015, the transfer of net assets was complete and we recognized a gain of $8.3 million within restructuring, acquisition and related (income) expense, net in the condensed consolidated statements of operations.

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.

Income from continuing operations before income taxes attributable to the Komoro Business was $1.3 million for the nine months ended March 28, 2015 (up through October 27, 2014, the date the sale was completed), and $1.6 million and $4.4 million for the three and nine months ended March 29, 2014, 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 initially at $88.6 million, consisted of $79.6 million in cash, which was received on November 1, 2013, $4.0 million which was 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. On December 30, 2014, Oclaro Technology Limited entered into a Settlement Agreement with II-VI and II-VI Holdings B.V. regarding disposition of the amounts held back by the II-VI parties pursuant to the Asset Purchase Agreement. Of the $4.0 million subject to hold-back until December 31, 2014, we received $0.9 million in January 2015 and we released II-VI from the remaining $3.1 million. We recorded the $3.1 million release of the hold-back as a loss from discontinued operations within the condensed consolidated statement of operations during the second quarter of fiscal year 2015. In connection with the Settlement Agreement, we also agreed with the II-VI parties to a mutual release of certain claims related to the Asset Purchase Agreement, and certain related documents and transactions.

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.

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

	Three Months Ended					Nine Months Ended
	March 28, 2015		March 29, 2014			March 28, 2015			March 29, 2014
	(Thousands)
Revenues	$	—	$	—		$	—		$	35,185
Cost of revenues	—		—			—			26,243
Gross profit	—		—			—			8,942
Operating expenses	—		—			161			5,576
Other income (expense), net	—		(636		)	(3,060		)	69,069
Income (loss) from discontinued operations   before income taxes	—		(636		)	(3,221		)	72,435
Income tax provision	—		—			—			—
Income (loss) from discontinued operations	$	—	$	(636	)	$	(3,221	)	$	72,435

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. 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 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 were also scheduled to 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. On December 30, 2014, we entered into a Settlement Agreement with II-VI and II-VI Holdings B.V. regarding disposition of the amounts held back by the II-VI parties pursuant to the Share and Asset Purchase Agreement. Of the $6.0 million subject to hold-back until December 31, 2014, we received $1.4 million in January 2015 and we released II-VI from the remaining $4.6 million. We recorded the $4.6 million release of the hold-back as a loss from discontinued operations within the condensed consolidated statement of operations during the second quarter of fiscal year 2015. In connection with the Settlement Agreement, we also agreed with the II-VI parties to a mutual release of certain claims related to the Share and Asset Purchase Agreement, and certain related documents and transactions.

We classified the sale of our Zurich Business as a discontinued operation as of September 12, 2013.

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

	Three Months Ended				Nine Months Ended
	March 28, 2015		March 29, 2014		March 28, 2015			March 29, 2014
	(Thousands)				(Thousands)
Revenues	$	—	$	—	$	—		$	13,896
Cost of revenues	—		—		163			11,593
Gross profit	—		—		(163		)	2,303
Operating expenses	—		—		484			3,416
Other income (expense), net	—		884		(4,590		)	62,034
Income (loss) from discontinued operations   before income taxes	—		884		(5,237		)	60,921
Income tax provision	—		500		—			663
Income (loss) from discontinued operations	$	—	$	384	$	(5,237	)	$	60,258

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.