10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 26, 2016

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-30684

OCLARO, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-1303994
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

225 Charcot Avenue, San Jose, California 95131

(Address of principal executive offices, zip code)

(408) 383-1400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes  ¨    No  x

112,147,088 shares of common stock outstanding as of April 28, 2016

OCLARO, INC.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of March 26, 2016 and June 27, 2015	3
	Condensed Consolidated Statements of Operations for the three and nine months ended March 26, 2016 and March 28, 2015	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended March 26, 2016 and March 28, 2015	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended March 26, 2016 and March 28, 2015	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 6.	Exhibits	52
Signatures		53

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

OCLARO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 26, 2016			June 27, 2015
	(Thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	106,081		$	111,840
Restricted cash	715			3,275
Accounts receivable, net of allowances for doubtful accounts of $2,296 and $2,815 as of March 26, 2016 and June 27, 2015, respectively; and including $757 and $709 due from related parties as of March 26, 2016 and June 27, 2015, respectively	84,704			74,815
Inventories	72,491			66,342
Prepaid expenses and other current assets	21,034			22,746
Total current assets	285,025			279,018
Property and equipment, net	54,376			41,766
Other intangible assets, net	1,770			2,579
Other non-current assets	2,205			2,521
Total assets	$	343,376		$	325,884
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, including $5,450 and $4,831 due to related parties at March 26, 2016 and June 27, 2015, respectively	$	63,526		$	53,133
Accrued expenses and other liabilities	42,308			35,648
Capital lease obligations, current	3,813			3,580
Total current liabilities	109,647			92,361
Deferred gain on sale-leaseback	7,442			8,978
Convertible notes payable	61,855			61,246
Capital lease obligations, non-current	2,017			1,167
Other non-current liabilities	9,475			9,132
Total liabilities	190,436			172,884
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock: 1,000 shares authorized; none issued and outstanding	—			—
Common stock: $0.01 par value per share; 275,000 shares authorized, 112,095shares issued and outstanding at March 26, 2016; and 175,000 shares authorized, 109,889 shares issued and outstanding at June 27, 2015	1,121			1,099
Additional paid-in capital	1,469,645			1,464,567
Accumulated other comprehensive income	39,630			41,526
Accumulated deficit	(1,357,456		)	(1,354,192		)
Total stockholders’ equity	152,940			153,000
Total liabilities and stockholders’ equity	$	343,376		$	325,884

The accompanying notes form an integral part of these condensed consolidated financial statements.

3

OCLARO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended
	March 26, 2016			March 28, 2015			March 26, 2016			March 28, 2015
	(Thousands, except per share amounts)
Revenues, including $719 and $2,618 from related parties for the three and nine months ended March 26, 2016, respectively, and $794 and $1,971 from related parties for the three and nine months ended March 28, 2015, respectively	$	101,050		$	83,023		$	282,729		$	259,084
Cost of revenues	74,114			70,323			206,488			218,209
Gross profit	26,936			12,700			76,241			40,875
Operating expenses:
Research and development	11,379			11,732			33,399			37,366
Selling, general and administrative	13,055			12,048			39,054			41,108
Amortization of other intangible assets	247			194			748			881
Restructuring, acquisition and related (income) expense, net	(59		)	2,246			(21		)	(4,062		)
(Gain) loss on sale of property and equipment	(145		)	(138		)	22			233
Total operating expenses	24,477			26,082			73,202			75,526
Operating income (loss)	2,459			(13,382		)	3,039			(34,651		)
Other income (expense):
Interest income (expense), net	(1,203		)	(599		)	(3,726		)	(792		)
Gain (loss) on foreign currency transactions, net	(865		)	2,892			(861		)	207
Other income (expense), net	174			366			644			1,250
Total other income (expense)	(1,894		)	2,659			(3,943		)	665
Income (loss) from continuing operations before income taxes	565			(10,723		)	(904		)	(33,986		)
Income tax (benefit) provision	476			(537		)	2,360			379
Income (loss) from continuing operations	89			(10,186		)	(3,264		)	(34,365		)
Loss from discontinued operations, net of tax	—			—			—			(8,458		)
Net income (loss)	$	89		$	(10,186	)	$	(3,264	)	$	(42,823	)
Basic net income (loss) per share:
Income (loss) per share from continuing operations	$	—		$	(0.09	)	$	(0.03	)	$	(0.32	)
Loss per share from discontinued operations	—			—			—			(0.08		)
Basic net income (loss) per share	$	—		$	(0.09	)	$	(0.03	)	$	(0.40	)
Diluted net income (loss) per share:
Income (loss) per share from continuing operations	$	—		$	(0.09	)	$	(0.03	)	$	(0.32	)
Loss per share from discontinued operations	—			—			—			(0.08		)
Diluted net income (loss) per share	$	—		$	(0.09	)	$	(0.03	)	$	(0.40	)
Shares used in computing net income (loss) per share:
Basic	110,882			108,357			110,212			107,818
Diluted	113,699			108,357			110,212			107,818

The accompanying notes form an integral part of these condensed consolidated financial statements.

4

OCLARO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended					Nine Months Ended
	March 26, 2016		March 28, 2015			March 26, 2016			March 28, 2015
	(Thousands)
Net income (loss)	$	89	$	(10,186	)	$	(3,264	)	$	(42,823	)
Other comprehensive income (loss):
Unrealized gain on marketable securities	—		224			—			209
Currency translation adjustments	593		(4,945		)	(1,886		)	(8,528		)
Pension adjustment, net of tax benefits	—		11			(10		)	590
Total comprehensive income (loss)	$	682	$	(14,896	)	$	(5,160	)	$	(50,552	)

The accompanying notes form an integral part of these condensed consolidated financial statements.

5

OCLARO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	March 26, 2016			March 28, 2015
	(Thousands)
Cash flows from operating activities:
Net loss	$	(3,264	)	$	(42,823	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Amortization of deferred gain on sale-leaseback	(648		)	(684		)
Amortization of debt discount and issuance costs in connection with convertible notes payable	609			99
Gain on sale of Komoro Business	—			(8,315		)
Adjustment to the hold-backs related to the sales of the Zurich and Amplifier Businesses	—			7,650
Gain on sale of assets	—			223
Depreciation and amortization	12,198			14,122
Stock-based compensation expense	6,440			4,617
Other non-cash adjustments	22			161
Changes in operating assets and liabilities:
Accounts receivable, net	(12,969		)	(7,887		)
Inventories	(7,553		)	(4,639		)
Prepaid expenses and other current assets	502			7,001
Other non-current assets	264			(925		)
Accounts payable	1,433			499
Accrued expenses and other liabilities	5,959			(8,370		)
Net cash (used in) provided by operating activities	2,993			(39,271		)
Cash flows from investing activities:
Purchases of property and equipment	(12,362		)	(13,809		)
Proceeds from sale of Komoro Business	—			12,335
Proceeds from sale of Amplifier Business	—			940
Proceeds from sale of Zurich Business	—			1,410
Proceeds from sale of short-term investments and other assets	—			141
Transfer from restricted cash	2,453			940
Net cash (used in) provided by investing activities	(9,909		)	1,957
Cash flows from financing activities:
Proceeds from issuance of common stock, net	179			21
Proceeds from the sale of convertible notes, net	—			61,587
Shares repurchased for tax withholdings on vesting of restricted stock units	(1,504		)	—
Payments on capital lease obligations	(2,303		)	(2,953		)
Net cash (used in) provided by financing activities	(3,628		)	58,655
Effect of exchange rate on cash and cash equivalents	4,785			(505		)
Net increase (decrease) in cash and cash equivalents	(5,759		)	20,836
Cash and cash equivalents at beginning of period	111,840			98,973
Cash and cash equivalents at end of period	$	106,081		$	119,809
Supplemental disclosures of non-cash transactions:
Capital lease obligations incurred for purchases of property and equipment	$	(2,392	)	$	—
Purchases of property and equipment funded by accounts payable	$	(9,567	)	$	—

The accompanying notes form an integral part of these condensed consolidated financial statements.

6

OCLARO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PREPARATION

Basis of Presentation

Oclaro, Inc., a Delaware corporation, is sometimes referred to in this Quarterly Report on Form 10-Q as “Oclaro,” “we,” “us” or “our.”

The accompanying unaudited condensed consolidated financial statements of Oclaro as of March 26, 2016 and for the three and nine months ended March 26, 2016 and March 28, 2015 have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Article 10 of Securities and Exchange Commission ("SEC") Regulation S-X, and include the accounts of Oclaro and all of our subsidiaries. Accordingly, they do not include all of the information and footnotes required by such accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our consolidated financial position and results of operations have been included. The condensed consolidated results of operations for the three and nine months ended March 26, 2016 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending July 2, 2016.

The condensed consolidated balance sheet as of June 27, 2015 has been derived from our audited financial statements as of such date, but does not include all disclosures required by U.S. GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended June 27, 2015 ("2015 Form 10-K").

On August 5, 2014, we entered into a separation agreement to sell our industrial and consumer business of Oclaro Japan located at our Komoro, Japan facility to Ushio Opto Semiconductors, Inc. ("Ushio Opto"). On October 27, 2014, the sale was completed. This transaction is more fully discussed in Note 5, Business Combinations and Dispositions.

On November 1, 2013, we sold our optical amplifier and micro-optics business (the “Amplifier Business”) to II-VI Incorporated ("II-VI"). On September 12, 2013, we sold our Oclaro Switzerland GmbH subsidiary and associated laser diodes and pump business (the “Zurich Business”) to II-VI. These sales are reported as discontinued operations, which require retrospective restatement of prior periods to classify the results of operations as discontinued operations. The notes to our condensed consolidated financial statements relate to our continuing operations only, unless otherwise indicated. These transactions are more fully discussed in Note 5, Business Combinations and Dispositions.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported periods. Examples of significant estimates and assumptions made by management involve the fair value of other intangible assets and long-lived assets, valuation allowances for deferred tax assets, the fair value of stock-based compensation, the fair value of embedded derivatives related to convertible debt, the fair value of pension liabilities, estimates used to determine facility lease loss liabilities, estimates for allowances for doubtful accounts and valuation of excess and obsolete inventories. These judgments can be subjective and complex and consequently actual results could differ materially from those estimates and assumptions. Descriptions of the key estimates and assumptions are included in our 2015 Form 10-K.

Out-of-Period Adjustment

In the quarter ended September 27, 2014, we recorded out-of-period adjustments of approximately $2.0 million in cost of goods sold in our condensed consolidated statements of operations. The adjustments, which increased cost of goods sold in fiscal year 2015, also increased accrued liabilities and decreased inventory, and were made to correct our inventory valuation and the value of our purchase commitment accrual from fiscal year 2014. We determined that the adjustments did not have a material impact to any of the prior period consolidated financial statements.

7

Fiscal Years

We operate on a 52/53 week year ending on the Saturday closest to June 30. Our fiscal year ending July 2, 2016 will be a 53 week year, with the quarter ended March 26, 2016 being a 13 week quarterly period. Our fiscal quarter ending July 2, 2016 will have 14 weeks. Our fiscal year ended June 27, 2015 was a 52 week year, with the quarter ended March 28, 2015 being a 13 week quarterly period.

Reclassifications

For presentation purposes, we have reclassified certain prior period amounts to conform to the current period financial statement presentation. These reclassifications did not affect our consolidated revenues, net income (loss), cash flows, cash and cash equivalents or stockholders’ equity as previously reported.

NOTE 2. RECENT ACCOUNTING STANDARDS

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09,  Compensation: Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards, and classification on the the statement of cash flows. This guidance will be effective for us in the first quarter of fiscal 2018, with early adoption permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This guidance will be effective for us in the first quarter of fiscal 2020, with early adoption permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes. This amendment eliminates the requirement to bifurcate deferred taxes between current and non-current on the balance sheet and requires that deferred tax liabilities and assets be classified as non-current on the balance sheet. We elected to early adopt this guidance in the second quarter of fiscal year 2016. The implementation of this guidance did not have a material impact on our financial statements and footnote disclosures.

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments. This amendment requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This guidance is effective for us prospectively in the first quarter of fiscal year 2017. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This update clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, deferring the effective date of ASU 2014-09 by one year, to annual periods, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted for periods beginning after December 15, 2016. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In July 2015, the FASB issued ASU No. 2015-11, Inventory: Simplifying the Measurement of Inventory. Under ASU 2015-11, we are required to measure inventory at the lower of cost and net realizable value. The new guidance clarifies that net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This guidance is effective for us prospectively in the first quarter of fiscal year 2017, with early application permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In June 2015, the FASB issued ASU No. 2015-10, Technical Corrections and Improvements. ASU 2015-10 covers a wide range of Topics in the Codification. The amendments in this ASU represent changes to make minor corrections or minor improvements

8

to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. This guidance is effective for us prospectively in the first quarter of fiscal year 2017, with early adoption permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In April 2015, the FASB issued ASU No. 2015-04, Compensation – Retirement Benefits: Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets. ASU 2015-04 provides a practical expedient for employers with fiscal year-ends that do not fall on a month-end by permitting those employers to measure defined benefit plan assets and obligations as of the month-end that is closest to the entity's fiscal year-end. This guidance is effective for us prospectively in the first quarter of fiscal year 2017, with early adoption permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement - Extraordinary and Unusual Items. This ASU eliminates from U.S. GAAP the concept of extraordinary items. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. This guidance is effective for us prospectively in the first quarter of fiscal year 2017. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern. The update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. This guidance is effective for us beginning with our annual financial statements for the fiscal year ended July 1, 2017, and interim periods thereafter. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

NOTE 3. BALANCE SHEET DETAILS

Cash and Cash Equivalents

The following table provides details regarding our cash and cash equivalents at the dates indicated:

	March 26, 2016		June 27, 2015
	(Thousands)
Cash and cash equivalents:
Cash-in-bank	$	81,080	$	110,196
Money market funds	25,001		1,644
	$	106,081	$	111,840

Restricted Cash

As of March 26, 2016, we had restricted cash of $1.0 million, including $0.2 million in other non-current assets, consisting of collateral for the performance of our obligations under certain lease facility agreements, collateral to secure certain of our credit card accounts and deposits for value-added taxes in foreign jurisdictions.

Inventories

The following table provides details regarding our inventories at the dates indicated:

	March 26, 2016		June 27, 2015
	(Thousands)
Inventories:
Raw materials	$	21,656	$	19,610
Work-in-process	30,317		19,812
Finished goods	20,518		26,920
	$	72,491	$	66,342

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Property and Equipment, Net

The following table provides details regarding our property and equipment, net at the dates indicated:

	March 26, 2016			June 27, 2015
	(Thousands)
Property and equipment, net:
Buildings and improvements	$	11,493		$	11,837
Plant and machinery	58,574			37,215
Fixtures, fittings and equipment	1,971			1,173
Computer equipment	10,798			12,401
	82,836			62,626
Less: Accumulated depreciation	(28,460		)	(20,860		)
	$	54,376		$	41,766

Property and equipment includes assets under capital leases of $5.8 million at March 26, 2016 and $4.7 million at June 27, 2015, respectively. Amortization associated with assets under capital leases is recorded in depreciation expense.

Other Intangibles Assets, Net

The following table summarizes the activity related to our other intangible assets for the nine months ended March 26, 2016:

	Core and Current Technology			Development and Supply Agreements			Customer Relationships			Patent Portfolio		Other Intangibles		Amortization			Total
	(Thousands)
Balance at June 27, 2015	$	6,249		$	4,595		$	2,402		$	915	$	3,338	$	(14,920	)	$	2,579
Amortization	—			—			—			—		—		(748		)	(748		)
Translations and adjustments	(5		)	(54		)	(2		)	—		—		—			(61		)
Balance at March 26, 2016	$	6,244		$	4,541		$	2,400		$	915	$	3,338	$	(15,668	)	$	1,770

We expect the amortization of intangible assets to be $0.3 million for the remainder of fiscal year 2016, $0.8 million for fiscal year 2017, $0.6 million for fiscal year 2018 and $0.1 million for fiscal year 2019, based on the current level of our other intangible assets as of March 26, 2016.

Accrued Expenses and Other Liabilities

The following table presents details regarding our accrued expenses and other liabilities at the dates indicated:

	March 26, 2016		June 27, 2015
	(Thousands)
Accrued expenses and other liabilities:
Trade payables	$	10,046	$	5,250
Compensation and benefits related accruals	13,991		11,298
Warranty accrual	3,127		2,932
Accrued restructuring, current	188		712
Purchase commitments in excess of future demand, current	3,101		3,162
Other accruals	11,855		12,294
	$	42,308	$	35,648

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Accrued Restructuring

The following table summarizes the activity related to our accrued restructuring charges for the nine months ended March 26, 2016:

	Lease Cancellations, Commitments and Other Charges			Termination Payments to Employees and Related Costs			Total Accrued Restructuring Charges
	(Thousands)
Balance at June 27, 2015	$	228		$	484		$	712
Charged to restructuring costs	—			324			324
Paid or other adjustments	(228		)	(620		)	(848		)
Balance at March 26, 2016	$	—		$	188		$	188
Current portion	—			188			188
Non-current portion	—			—			—

The current portion of accrued restructuring liabilities is included in the caption accrued expenses and other liabilities in the condensed consolidated balance sheet.

During the first quarter of fiscal year 2014, we initiated a restructuring plan to simplify our operating footprint, reduce our cost structure and focus our research and development investment in the optical communications market where we can leverage our core competencies. During the three months ended March 26, 2016, we recorded minimal restructuring charges. During the nine months ended March 26, 2016, we recorded restructuring charges of $0.3 million in connection with this restructuring plan, which related to workforce reductions. During the three months ended March 26, 2016, we made minimal scheduled payments. During the nine months ended March 26, 2016, we made scheduled payments of $0.5 million. As of March 26, 2016, we had $0.2 million in accrued restructuring liabilities related to this restructuring plan.

During fiscal year 2012, we initiated a restructuring plan in connection with the transfer of a portion of our Shenzhen, China manufacturing operations to Venture Corporation Limited ("Venture"). This transition occurred in a phased and gradual transfer of certain products and was completed in fiscal year 2015. In connection with this transition, we recorded restructuring charges related to employee separation charges of $0.8 million and $2.6 million during the three and nine months ended March 28, 2015, respectively and made scheduled payments of $0.2 million and $2.3 million, respectively, to settle a portion of these restructuring liabilities. As of March 26, 2016 and June 27, 2015, we had no remaining accrued restructuring liabilities related to this restructuring plan.

Common Stock

On November 10, 2015, our stockholders approved an amendment to our Restated Certificate of Incorporation, increasing the number of authorized shares of our common stock from 175.0 million shares to 275.0 million shares.

Accumulated Other Comprehensive Income

The following table presents the components of accumulated other comprehensive income at the dates indicated:

	March 26, 2016		June 27, 2015
	(Thousands)
Accumulated other comprehensive income:
Currency translation adjustments	$	39,465	$	41,351
Japan defined benefit plan	165		175
	$	39,630	$	41,526

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NOTE 4. FAIR VALUE

We define fair value as the estimated price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk. We apply the following fair value hierarchy, which ranks the quality and reliability of the information used to determine fair values:

Level 1- Quoted prices in active markets for identical assets or liabilities.

Level 2- Inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices of identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets), or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3- Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Our cash equivalents are generally classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most marketable securities and money market securities.

The contingent obligation related to the make-whole premium on our 6.00% Convertible Senior Notes was valued using a binomial lattice valuation model which estimated the value based on the probability and timing of conversion. As of February 19, 2015, the date of the debt issuance, and as of March 26, 2016, the fair value of this contingent obligation is estimated at zero. The contingent obligation will continue to be revalued each reporting period and classified within Level 3 of the fair value hierarchy.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are shown in the table below by their corresponding balance sheet caption and consisted of the following types of instruments at March 26, 2016 and June 27, 2015:

	Fair Value Measurement at March 26, 2016 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(Thousands)
Assets:
Cash and cash equivalents: (1)
Money market funds	$	25,001	$	—	$	—	$	25,001
Restricted cash:
Money market funds	712		—		—		712
Total assets measured at fair value	$	25,713	$	—	$	—	$	25,713

⁽¹⁾  Excludes $81.1 million in cash held in our bank accounts at March 26, 2016.

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	Fair Value Measurement at June 27, 2015 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:	(Thousands)
Cash and cash equivalents: (1)
Money market funds	$	1,644	$	—	$	—	$	1,644
Restricted cash:
Money market funds	1,215		—		—		1,215
Total assets measured at fair value	$	2,859	$	—	$	—	$	2,859

⁽¹⁾  Excludes $110.2 million in cash held in our bank accounts at June 27, 2015.

NOTE 5. 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”). On October 27, 2014, the sale was completed. In connection with the sale of the Komoro Business, we transferred net assets with a book value of $6.3 million to Ushio Opto. 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 were 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.

We completed the transfer of net assets in the second quarter of fiscal year 2015 and recognized a gain of $8.3 million within restructuring, acquisition and related (income) expense, net in the condensed consolidated statements of operations.

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).

This sale is more fully discussed in Note 3, Business Combinations and Dispositions, to our consolidated financial statements included in our 2015 Form 10-K.

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. 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.

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 an exclusive option to buy the assets, 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. 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.

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

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)
Revenues	$	—	$	—	$	—	$	—
Cost of revenues	—		—		—		—
Gross profit	—		—		—		—
Operating expenses	—		—		—		161
Other income (expense), net	—		—		—		(3,060		)
Loss from discontinued operations before income taxes	—		—		—		(3,221		)
Income tax provision	—		—		—		—
Loss from discontinued operations	$	—	$	—	$	—	$	(3,221	)

This sale is more fully discussed in Note 3, Business Combinations and Dispositions, to our consolidated financial statements included in our 2015 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, which included the 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. 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.

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 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 further 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. 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.

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

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)				(Thousands)
Revenues	$	—	$	—	$	—	$	—
Cost of revenues	—		—		—		163
Gross loss	—		—		—		(163		)
Operating expenses	—		—		—		484
Other income (expense), net	—		—		—		(4,590		)
Loss from discontinued operations before income taxes	—		—		—		(5,237		)
Income tax provision	—		—		—		—
Loss from discontinued operations	$	—	$	—	$	—	$	(5,237	)

This acquisition is more fully discussed in Note 3, Business Combinations and Dispositions, to our consolidated financial statements included in our 2015 Annual Report on Form 10-K.

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NOTE 6. CREDIT LINE AND NOTES

6.00% Convertible Senior Notes due 2020 ("6.00% Notes")

On February 12, 2015, we entered into a Purchase Agreement (the “Purchase Agreement”), with Jefferies LLC (the “Initial Purchaser”), pursuant to which we agreed to issue and sell to the Initial Purchaser up to $65.0 million in aggregate principal Convertible Senior Notes due 2020 (the “6.00% Notes”). On February 19, 2015, we closed the private placement of $65.0 million aggregate principal amount of the 6.00% Notes. The 6.00% Notes were sold at 100 percent of par, resulting in net proceeds of approximately $61.6 million, after deducting the Initial Purchaser’s discounts of $3.4 million. We also incurred offering expenses of $0.6 million. The net proceeds of this offering will be used for general corporate purposes, including working capital for, among other things, investing in development of new products and technologies.

The Notes will mature on February 15, 2020 and will bear interest at a fixed rate of 6.00 percent per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2015. During the three and nine months ended March 26, 2016, we recorded $1.2 million and $3.5 million, respectively, in interest expense, including the amortization of the debt discount and the issuance costs, and made interest payments of $3.9 million related to the 6.00% Notes during the nine months ended March 26, 2016.

The Purchase Agreement contains customary representations and warranties of the parties and indemnification and contribution provisions under which we, on the one hand, and the Initial Purchaser, on the other, have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).

The 6.00% Notes are governed by an Indenture, dated February 19, 2015 (the “Indenture”), entered into between us and U.S. Bank National Association, as trustee (the “Trustee”). The Indenture contains affirmative and negative covenants that, among other things, limits our ability to incur, assume or guarantee additional indebtedness; create liens; sell or otherwise dispose of substantially all of our assets; and enter into mergers and consolidations. The Indenture also contains customary events of default. Upon the occurrence of certain events of default, the Trustee or the holders of the 6.00% Notes may declare all of the outstanding 6.00% Notes to be due and payable immediately.

Prior to February 15, 2018, in the event that the last reported sale price of our common stock for 20 or more trading days (whether or not consecutive) in a period of 30 consecutive trading days ending within five trading days immediately prior to the date we receive a notice of conversion exceeds the conversion price in effect on each such trading day, we will, in addition to delivering shares upon conversion by the holder of 6.00% Notes, together with cash in lieu of fractional shares, make an interest make-whole payment in cash equal to the sum of the remaining scheduled payments of interest on the 6.00% Notes to be converted through February 15, 2018.

Prior to February 15, 2018, we may not redeem the 6.00% Notes. On or after February 15, 2018, we may redeem for cash all of the 6.00% Notes if the last reported sale price per share of our common stock has been at least 130 percent of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending within five trading days prior to the date on which we provide notice of redemption. The redemption price will equal (i) 100 percent of the principal amount of the Notes being redeemed, plus (ii) accrued and unpaid interest, including additional interest, if any, to, but excluding, the redemption date plus (iii) the sum of the present values of each of the remaining scheduled payments of interest that would have been made on the 6.00% Notes to be redeemed had such 6.00% Notes remained outstanding from the redemption date to the maturity date (excluding interest accrued to, but excluding, the redemption date that is otherwise paid pursuant to the immediately preceding clause (ii)). Once notified, the holders of the 6.00% Notes could elect to convert, at which point they would receive their shares of common stock based on the initial exchange rate plus up to an additional 11.2 million shares.

Upon the occurrence of a fundamental change, subject to certain conditions, each holder of the 6.00% Notes will have the option to require that we purchase all or a portion of such holder’s Notes in cash at a purchase price equal to 100 percent of the principal amount of the 6.00% Notes to be purchased plus any accrued and unpaid interest, including additional interest, if any, to, but excluding, the fundamental change purchase date. Any holder that converts its 6.00% Notes in connection with a make-whole fundamental change, as defined in the Indenture, will not receive the interest make-whole payment but will instead receive the additional shares set forth in the Indenture.

Our contingent obligation to make a make-whole payment in the event of an early conversion by the holders of the 6.00% Notes, or at our election to redeem the 6.00% Notes for cash, are both considered embedded derivatives. As of February 19, 2015, the date of the debt issuance, and as of March 26, 2016, the fair value of the embedded derivatives is estimated at zero. The estimated fair value of the embedded derivatives was determined by using a binomial lattice approach to determine the probability and timing of a conversion or redemption.

On February 19, 2015, we also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Initial Purchaser to provide the holders of the 6.00% Notes with registration rights with respect to shares of common stock that have been issued upon conversion of the 6.00% Notes and are then outstanding, but only if Rule 144 under the Securities Act is

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unavailable to holders of the 6.00% Notes who are not affiliates of ours on and following the date that is six months after the original issuance date of the 6.00% Notes.

On February 19, 2015, we entered into a Consent and First Loan Modification Agreement (the “Amendment”) with Silicon Valley Bank (“SVB”). The Amendment modifies the Loan and Security Agreement, dated as of March 28, 2014, by and among us, Oclaro Technology Limited and SVB to allow the cash payments provided for in the Indenture and the 6.00% Notes and include the 6.00% Notes as permitted indebtedness.

The following table sets forth balance sheet information related to the 6.00% Notes at March 26, 2016 and June 27, 2015:

	March 26, 2016			June 27, 2015
	(Thousands)
Principal value of the liability component	$	65,000		$	65,000
Unamortized value of the debt discount and issuance costs	(3,145		)	(3,754		)
Net carrying value of the liability component	$	61,855		$	61,246

At March 26, 2016, the $2.6 million debt discount and the $0.5 million issuance costs are recorded as a contra-liability in convertible notes payable within the condensed consolidated balance sheet.

Silicon Valley Bank Credit Facility

On March 28, 2014, we entered into a loan and security agreement (the “Loan Agreement”) with Silicon Valley Bank (the “Bank”) pursuant to which the Bank provided us with a three-year revolving credit facility of up to $40.0 million. Under the Loan Agreement, advances are available based on up to 80 percent of “eligible accounts” as defined in the Loan Agreement. The Loan Agreement has a $10.0 million sub-facility for letters of credit, foreign exchange contracts and cash management services.

Borrowings made under the Loan Agreement bear interest at a rate based on either the London Interbank Offered Rate plus 2.25 percent or Wall Street Journal’s prime rate plus 1.00 percent. If the sum of (a) our unrestricted cash and cash equivalents that are subject to the Bank’s liens less (b) the amount outstanding to the Bank under the Loan Agreement (such sum being “Net Cash”) is less than $15.0 million, then the interest rates are increased by 0.75 percent until Net Cash exceeds $15.0 million for a calendar month. If interest paid under the Loan Agreement is less than $45,000 in any fiscal quarter, we are required to pay the Bank an additional amount equal to the difference between $45,000 and the actual interest paid during such fiscal quarter. The minimum interest payment is in lieu of a stand-by charge.

If the Loan Agreement terminates prior to its maturity date, we will pay a termination fee equal to 1.00 percent of the total credit facility if such termination occurs in the first year after closing, 0.75 percent of the total credit facility if such termination occurs in the second year after closing and 0.50 percent of the total credit facility if such termination occurs in the third year after closing. The maturity date of the Loan Agreement is March 28, 2017. At March 26, 2016 and June 27, 2015, there were no amounts outstanding under the Loan Agreement.

On September 17, 2015, we entered into an amendment to the Loan Agreement with the Bank increasing from $5.0 million to $15.0 million the amount of equipment liens that may qualify as "Permitted Liens" thereunder.

The Loan Agreement is more fully discussed in Note 7, Credit Line and Notes, to our consolidated financial statements included in our 2015 Form 10-K.

NOTE 7. POST-RETIREMENT BENEFITS

Japan Defined Contribution Plan

In connection with our acquisition of Opnext, we assumed a defined contribution plan and a defined benefit plan that provides retirement benefits to our employees in Japan.

Under the defined contribution plan, contributions are provided based on grade level and totaled $0.1 million and $0.3 million for the three and nine months ended March 26, 2016, respectively, and $0.1 million and $0.4 million for the three and nine months ended March 28, 2015, respectively. Employees can elect to receive the benefit as additional salary or contribute the benefit to the plan on a tax-deferred basis.

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Japan Defined Benefit Plan

Under the defined benefit plan in Japan (the “Japan Plan”), we calculate benefits based on an employee’s individual grade level and expected years of service. Employees are entitled to a lump sum benefit upon retirement or upon certain instances of termination.

During the second quarter of fiscal year 2015, we sold our Komoro Business, and as part of the sale transferred a portion of our Japan Plan covering employees of the Komoro Business to Ushio Opto.

As of March 26, 2016, there were no plan assets associated with the Japan Plan. As of March 26, 2016, there was $0.1 million in accrued expenses and other liabilities and $5.5 million in other non-current liabilities in our condensed consolidated balance sheet to account for the projected benefit obligations under the Japan Plan. Net periodic pension costs for the Japan Plan included the following:

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)
Service cost	$	132	$	177	$	376	$	553
Interest cost	11		18		32		56
Net amortization	—		10		—		37
Net periodic pension costs	$	143	$	205	$	408	$	646

We made benefit payments under the Japan Plan of zero and $0.1 million during the three and nine months ended March 26, 2016, respectively, and $0.1 million and $0.2 million during the three and nine months ended March 28, 2015, respectively.

NOTE 8. COMMITMENTS AND CONTINGENCIES

Loss Contingencies

We are involved in various lawsuits, claims, and proceedings that arise in the ordinary course of business. We record a loss provision when we believe it is both probable that a liability has been incurred and the amount can be reasonably estimated.

Guarantees

We indemnify our directors and certain employees as permitted by law, and have entered into indemnification agreements with our directors and executive officers. We have not recorded a liability associated with these indemnification arrangements, as we historically have not incurred any material costs associated with such indemnification obligations. Costs associated with such indemnification obligations may be mitigated by insurance coverage that we maintain, however, such insurance may not cover any, or may cover only a portion of, the amounts we may be required to pay. In addition, we may not be able to maintain such insurance coverage in the future.

We also have indemnification clauses in various contracts that we enter into in the normal course of business, such as indemnifications in favor of customers in respect of liabilities they may incur as a result of purchasing our products should such products infringe the intellectual property rights of a third party. We have not historically paid out any material amounts related to these indemnifications; therefore, no accrual has been made for these indemnifications.

Warranty Accrual

We generally provide a warranty for our products for twelve months to thirty-six months from the date of sale, although warranties for certain of our products may be longer. We accrue for the estimated costs to provide warranty services at the time revenue is recognized. Our estimate of costs to service our warranty obligations is based on historical experience and expectation of future conditions. To the extent we experience increased warranty claim activity or increased costs associated with servicing those claims, our warranty costs would increase, resulting in a decrease in gross profit.

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The following table summarizes movements in the warranty accrual for the periods indicated:

	Three Months Ended						Nine Months Ended
	March 26, 2016			March 28, 2015			March 26, 2016			March 28, 2015
	(Thousands)
Warranty provision—beginning of period	$	3,097		$	3,474		$	2,932		$	4,672
Warranties issued	615			185			1,472			1,078
Warranties utilized or expired	(553		)	(377		)	(1,241		)	(2,236		)
Currency translation and other adjustments	(32		)	(12		)	(36		)	(244		)
Warranty provision—end of period	$	3,127		$	3,270		$	3,127		$	3,270

Capital Leases

In connection with our acquisition of Opnext, we assumed certain capital leases with Hitachi Capital Corporation, a related party, for certain equipment. The terms of the leases generally range from one to five years and the equipment can be purchased at the residual value upon expiration. We can terminate the leases at our discretion in return for a penalty payment as stated in the lease contracts.

In October 2015, we entered into a capital lease agreement with Hitachi High-Technologies Corporation, a related party, for certain capital equipment. The lease term is for 5 years, after which time the ownership of the equipment will transfer from Hitachi High-Technologies Corporation. During the lease term, we will make twenty equal installments of principal and interest, payable quarterly. Interest on the capital equipment will accrue at 1.15 percent per annum.

The following table shows the future minimum lease payments due under non-cancelable capital leases with Hitachi Capital Corporation and Hitachi High-Technologies Corporation at March 26, 2016:

	Capital Leases
	(Thousands)
Fiscal Year Ending:
2016 (remaining)	$	1,174
2017	3,027
2018	554
2019	532
2020	571
Thereafter	246
Total minimum lease payments	6,104
Less amount representing interest	(274		)
Present value of capitalized payments	5,830
Less: current portion	(3,813		)
Long-term portion	$	2,017

Purchase Commitments

We purchase components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with suppliers and contract manufacturers that either allow them to procure inventory based upon criteria as defined by us or establish the parameters defining our requirements. A significant portion of our reported purchase commitments arising from these agreements consist of firm, non-cancelable and unconditional commitments.

We record a liability for firm, non-cancelable and unconditional purchase commitments for quantities in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. As of March 26, 2016 and June 27, 2015, the liability for these purchase commitments was $3.1 million and $3.2 million, respectively, and was included in accrued expenses and other liabilities in our condensed consolidated balance sheets.

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Malaysian Goods and Services Tax (“GST”)

In February 2016, the Malaysian tax authorities preliminarily denied our Malaysia GST refund claims representing approximately $2.4 million. These claims were made in connection with the export of finished goods from our contract manufacturing partner’s Malaysian facilities. We are currently contesting the denial of these claims before a Malaysian administrative review panel, and believe that additional appeal options may be available to us if we do not obtain a favorable ruling. Although we have taken action to minimize the impact of the GST with respect to our ongoing operations, we believe it is reasonably possible that, ultimately, our refund claims may be partially or fully rejected. We have accounted for the $2.4 million GST claims as a receivable classified in prepaid expenses and other current assets in our condensed consolidated balance sheet at March 26, 2016.

Litigation

Overview

In the ordinary course of business, we are involved in various legal proceedings, and we anticipate that additional actions will be brought against us in the future. The most significant of these proceedings are described below. These legal proceedings, as well as other matters, involve various aspects of our business and a variety of claims in various jurisdictions. Complex legal proceedings frequently extend for several years, and a number of the matters pending against us are at very early stages of the legal process. As a result, some pending matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable us to determine whether the proceeding is material to us or to estimate a range of possible loss, if any. Unless otherwise disclosed, we are unable to estimate the possible loss or range of loss for the legal proceedings described below. While it is not possible to accurately predict or determine the eventual outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on our results of operations, financial position or cash flows.

Kunst Worker Compensation Matter

On June 18, 2015, Gerald Kunst, or Kunst, filed a civil suit against us and Travelers Property Casualty Company of America, or Travelers, in Massachusetts Superior Court, Civil Action No. SUCV2015-01818F. Travelers is our general liability insurance carrier. The complaint filed by Kunst, an employee of a third party service provider, alleges that he was injured while performing air conditioning repair services on the premises of our Acton, Massachusetts facility and seeks judgment in an amount to be determined by the court or jury, together with interest and costs. On July 24, 2015, we filed an answer to the complaint, which included our affirmative defenses. The parties continue to conduct initial discovery. As of May 5, 2016, no hearing has been scheduled in this matter. We intend to vigorously defend against this litigation.

NOTE 9. EMPLOYEE STOCK PLANS

Stock Incentive Plans

On November 10, 2015, our stockholders approved an amendment to the Fifth Amended and Restated 2001 Long-Term Stock Incentive Plan (the "Plan"), adding 8.0 million shares of our common stock to the share reserve under the Plan.

As of March 26, 2016, there were 12.9 million shares of our common stock available for grant under the Plan.

We generally grant stock options that vest over a two to four year service period, and restricted stock awards and restricted stock unit awards that vest over a one to four year service period, and in certain cases each may vest earlier based upon the achievement of specific performance-based objectives as set by our board of directors or the compensation committee of our board of directors.

Performance-Based Restricted Stock Units

In August 2014, our board of directors approved a grant of 0.5 million performance-based restricted stock units ("PSUs") to certain executive officers with an aggregate estimated grant date fair value of $0.9 million. These PSUs vest at 100 percent upon the achievement of two consecutive quarters with positive adjusted earnings before interest, taxes, depreciation and amortization ("AEBITDA") on or before the end of our fiscal year 2017. During the second quarter of fiscal year 2016, the performance condition related to these PSUs was achieved. On February 2, 2016, the compensation committee of our board of directors certified that the performance condition was achieved and the PSUs immediately vested at 100 percent.

In August 2015, our board of directors approved a grant of 0.9 million PSUs to certain executive officers with an aggregate estimated grant date fair value of $2.5 million. Subject to the achievement of positive free cash flow (defined as AEBITDA less capital expenditures) in any fiscal quarter ending prior to June 30, 2018, vesting of these PSUs is contingent upon service conditions being met through August 10, 2018. On October 29 2015, the compensation committee of our board of directors certified that this performance condition was achieved during the quarter ended September 26, 2015. As a result, these PSUs will cliff vest with

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respect to 33.4 percent of the underlying shares on August 10, 2016, and with respect to 8.325 percent of the underlying shares each subsequent quarter over the following two years, subject to continuous service.

Restricted Stock Units

In July 2015, our board of directors approved a retention grant of 0.9 million restricted stock units ("RSUs") to certain executive officers and 1.5 million RSUs to other employees, which vest over three years.

Stock Incentive Plan Activity

The following table summarizes the combined activity under all of our equity incentive plans for the nine months ended March 26, 2016:

	Shares Available For Grant		Stock Options / SARs Outstanding		Weighted- Average Exercise Price		Restricted Stock Awards / Units Outstanding		Weighted- Average Grant Date Fair Value
	(Thousands)		(Thousands)				(Thousands)
Balance at June 27, 2015	8,921		3,381		$	7.07	4,545		$	1.80
Increase in share reserve	8,000		—		—		—		—
Granted	(5,270	)	—		—		3,764		2.84
Exercised or released	605		(56	)	2.81		(2,789	)	2.12
Forfeited or expired	607		(220	)	10.91		(258	)	1.31
Balance at March 26, 2016	12,863		3,105		6.88		5,262		2.58

Supplemental disclosure information about our stock options and stock appreciation rights ("SARs") outstanding as of March 26, 2016 is as follows:

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
	(Thousands)			(Years)	(Thousands)
Options and SARs exercisable	2,832	$	7.34	3.7	$	1,907
Options and SARs outstanding	3,105	6.88		3.9	2,797

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the closing price of our common stock of $5.31 on March 24, 2016, which would have been received by the option holders had all option holders exercised their options as of that date. There were approximately 1.3 million shares of common stock subject to in-the-money options which were exercisable as of March 26, 2016. We settle employee stock option exercises with newly issued shares of common stock.

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NOTE 10. STOCK-BASED COMPENSATION

We recognize stock-based compensation expense in our condensed consolidated statement of operations related to all share-based awards, including grants of stock options, based on the grant date fair value of such share-based awards. Estimating the grant date fair value of such share-based awards requires us to make judgments in the determination of inputs into the Black-Scholes stock option pricing model which we use to arrive at an estimate of the grant date fair value for such awards. The assumptions used in this model to value stock option grants were as follows (assumptions are not applicable for the three and nine months ended March 26, 2016, as there were no stock options granted during those periods):

	Three Months Ended		Nine Months Ended
	March 26, 2016	March 28, 2015	March 26, 2016	March 28, 2015
Stock options:
Expected life	N/A	N/A	N/A	5.3 years
Risk-free interest rate	N/A	N/A	N/A	1.6%
Volatility	N/A	N/A	N/A	76.9%
Dividend yield	N/A	N/A	N/A	—

The amounts included in cost of revenues and operating expenses for stock-based compensation were as follows:

	Three Months Ended					Nine Months Ended
	March 26, 2016		March 28, 2015			March 26, 2016		March 28, 2015
	(Thousands)
Stock-based compensation by category of expense:
Cost of revenues	$	523	$	434		$	1,451	$	1,340
Research and development	455		396			1,370		1,138
Selling, general and administrative	1,095		745			3,619		2,139
	$	2,073	$	1,575		$	6,440	$	4,617
Stock-based compensation by type of award:
Stock options	$	52	$	87		$	167	$	317
Restricted stock awards	1,962		1,497			6,258		4,233
Inventory adjustment to cost of revenues	59		(9		)	15		67
	$	2,073	$	1,575		$	6,440	$	4,617

As of March 26, 2016 and June 27, 2015, we had capitalized approximately $0.4 million and $0.5 million, respectively, of stock-based compensation as inventory.

As of March 26, 2016, we had $0.3 million in unrecognized stock-based compensation expense related to unvested stock options, net of estimated forfeitures, that will be recognized over a weighted-average period of 2.1 years, and $7.9 million in unrecognized stock-based compensation expense related to unvested time-based restricted stock awards, net of estimated forfeitures, that will be recognized over a weighted-average period of 1.8 years.

The amount of stock-based compensation expense recognized in any one period related to PSUs can vary based on the achievement or anticipated achievement of the performance conditions. If the performance conditions are not met or not expected be met, no compensation cost would be recognized on the shares underlying the PSUs, and any previously recognized compensation expense related to those PSUs would be reversed. During the three and nine months ended March 26, 2016, we recorded $0.2 million and $1.2 million, respectively, in stock-based compensation in connection with the PSUs issued in July 2011, March 2014, August 2014 and August 2015, including approximately $0.5 million related to the acceleration of the stock-based compensation in connection with the PSUs issued in August 2014 upon the achievement of the performance conditions. During the three and nine months ended March 28, 2015, we recorded $0.1 million and $0.2 million, respectively, in stock-based compensation expense in connection with the PSUs issued in July 2011, March 2014 and August 2014.

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NOTE 11. INCOME TAXES

The income tax provision of $0.5 million and $2.4 million for the three and nine months ended March 26, 2016, respectively, and the income tax benefit of $0.5 million and the income tax provision of $0.4 million for the three and nine months endedMarch 28, 2015, respectively, relates primarily to our foreign operations.

The total amount of our unrecognized tax benefits as of March 26, 2016 and June 27, 2015 were approximately $4.1 million and $4.1 million, respectively. As of March 26, 2016, we had $2.4 million of unrecognized tax benefits that, if recognized, would affect our effective tax rate. While it is often difficult to predict the final outcome of any particular uncertain tax position, we believe that unrecognized tax benefits could decrease by approximately $0.9 million in the next twelve months.

NOTE 12. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed using only the weighted-average number of shares of common stock outstanding for the applicable period, while diluted net income (loss) per share is computed assuming conversion of all potentially dilutive securities, such as stock options, unvested restricted stock units and awards, warrants and convertible notes during such period.

The following table presents the calculation of basic and diluted net income (loss) per share:

	Three Months Ended					Nine Months Ended
	March 26, 2016		March 28, 2015			March 26, 2016			March 28, 2015
	(Thousands, except per share amounts)
Net income (loss)	$	89	$	(10,186	)	$	(3,264	)	$	(42,823	)
Weighted-average shares - Basic	110,882		108,357			110,212			107,818
Effect of dilutive potential common shares from:
Stock options and stock appreciation rights	280		—			—			—
Restricted stock units and awards	2,537		—			—			—
Weighted-average shares - Diluted	113,699		108,357			110,212			107,818
Basic net income (loss) per share	$	—	$	(0.09	)	$	(0.03	)	$	(0.40	)
Diluted net income (loss) per share	$	—	$	(0.09	)	$	(0.03	)	$	(0.40	)

For the three and nine months ended March 26, 2016, we excluded 35.5 million and 38.3 million, respectively, of outstanding stock options, stock appreciation rights, unvested restricted stock awards and units, and shares issuable in connection with convertible notes from the calculation of diluted net loss per share because their effect would have been anti-dilutive.

For the three and nine months ended March 28, 2015, we excluded 22.4 million and 13.5 million, respectively, of outstanding stock options, stock appreciation rights, unvested restricted stock awards and units, and shares issuable in connection with convertible notes from the calculation of diluted net loss per share because their effect would have been anti-dilutive.

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NOTE 13. GEOGRAPHIC INFORMATION, PRODUCT GROUPS AND CUSTOMER CONCENTRATION INFORMATION

Geographic Information

The following table shows revenues by geographic area based on the delivery locations of our products:

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)
China	$	43,935	$	29,433	$	112,170	$	75,686
United States	15,913		12,429		45,880		40,352
Mexico	10,015		8,139		36,549		31,029
Malaysia	7,986		10,845		24,146		40,306
Italy	6,353		6,429		20,242		17,332
Germany	5,686		5,781		14,638		20,168
Japan	2,167		2,189		5,133		7,637
Rest of world	8,995		7,778		23,971		26,574
	$	101,050	$	83,023	$	282,729	$	259,084

Product Groups

The following table sets forth revenues by product group:

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)
100 Gb/s transmission modules	$	58,569	$	30,221	$	148,951	$	85,221
40 Gb/s and lower transmission modules	42,481		52,802		133,778		164,499
Industrial and consumer	—		—		—		9,364
	$	101,050	$	83,023	$	282,729	$	259,084

During the second quarter of fiscal year 2015, we sold our Komoro Business, which included the industrial and consumer product group of Oclaro Japan.

Significant Customers and Concentration of Credit Risk

For the three months ended March 26, 2016, four customers accounted for 10 percent or more of our revenues, representing approximately 20 percent, 14 percent, 12 percent and 11 percent of our revenues, respectively. For the nine months ended March 26, 2016, three customers accounted for 10 percent or more of our revenues, representing approximately 19 percent, 14 percent and 10 percent of our revenues, respectively.

For the three months ended March 28, 2015, four customers accounted for 10 percent or more of our revenues, representing approximately 19 percent, 16 percent, 11 percent and 10 percent of our revenues, respectively. For the nine months ended March 28, 2015, three customers accounted for 10 percent or more of our revenues, representing approximately 22 percent, 14 percent and 10 percent of our revenues, respectively.

As of March 26, 2016, four customers accounted for 10 percent or more of our accounts receivable, representing approximately 21 percent, 19 percent, 13 percent and 11 percent of our accounts receivable, respectively. As of June 27, 2015, four customers accounted for 10 percent of our accounts receivable, representing approximately 24 percent, 13 percent, 11 percent and 11 percent of our accounts receivable, respectively.

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NOTE 14. RELATED PARTY TRANSACTIONS

As of March 26, 2016, Hitachi, Ltd. ("Hitachi") held slightly less than 5 percent of our outstanding common stock based on Hitachi’s Schedule 13G filed with the Securities and Exchange Commission on December 2, 2015. During the second quarter of fiscal year 2016, Hitachi sold approximately 6.6 million shares of our common stock. Hitachi initially acquired these shares as a result of our acquisition of Opnext on July 23, 2012.

We continue to enter into transactions with Hitachi in the normal course of business. Sales to Hitachi were $1.0 million and $2.9 million for the three and nine months ended March 26, 2016, respectively, and $1.2 million and $3.1 million for the three and nine months ended March 28, 2015, respectively. Purchases from Hitachi were $5.8 million and $16.2 million for the three and nine months ended March 26, 2016, respectively, and $4.2 million and $11.5 million for the three and nine months ended March 28, 2015, respectively. At March 26, 2016, we had $1.3 million accounts receivable due from Hitachi and $5.5 million accounts payable due to Hitachi. At June 27, 2015 we had $0.7 million accounts receivable due from Hitachi and $4.8 million accounts payable due to Hitachi. We also have certain capital equipment leases with Hitachi Capital Corporation as described in Note 8, Commitments and Contingencies.

We are party to a research and development agreement and intellectual property license agreements with Hitachi.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, about our future expectations, plans or prospects and our business. You can identify these statements by the fact that they do not relate strictly to historical or current events, and contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “will,” “plan,” “believe,” “should,” “outlook,” “could,” “target,” “model,” “may” and other words of similar meaning in connection with discussion of future operating or financial performance. We have based our forward looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. There are a number of important factors that could cause our actual results or events to differ materially from those indicated by such forward-looking statements, including (i) our ability to timely develop, commercialize and ramp the production of new products to customer required volumes, (ii) our ability to respond to evolving technologies, customer requirements and demands, and product design challenges, (iii) our dependence on a limited number of customers for a significant percentage of our revenues, (iv) our manufacturing yields, (v) our ability to effectively manage our inventory, (vi) the risks associated with delays, disruptions or quality control problems in manufacturing, (vii) our ability to obtain governmental licenses and approvals for international trading activities or technology transfers, including export licenses, (viii) competition and pricing pressure, (ix) our ability to meet or exceed our gross margin expectations, (x) our ability to continue increasing the percentage of sales associated with our new products, (xi) the absence of long-term purchase commitments from the majority of our long-term customers, (xii) the effects of fluctuations in foreign currency exchange rates, (xiii) our dependence on a limited number of suppliers and key contract manufacturers, (xiv) our ability to have our manufacturing lines qualified by our customers, (xv) our ability to attract and retain key personnel, (xvi) our ability to conclude agreements with our customers on favorable terms, (xvii) the impact of financial market and general economic conditions in the industries in which we operate and any resulting reduction in demand for our products, (xviii) our ability to maintain or increase our cash reserves and obtain debt or equity-based financing on acceptable terms or at all, (xix) our ability to effectively compete with companies that have greater name recognition, broader customer relationships and substantially greater financial, technical and marketing resources, (xx) our ability to service and repay our outstanding indebtedness pursuant to the terms of the applicable agreements, (xxi) our ability to further reduce costs and operating expenses, (xxii) the risks associated with our international operations, (xxiii) the outcome of tax audits or similar proceedings, (xxiv) the outcome of pending litigation against us, and (xxv) other factors described in other documents we periodically file with the SEC. We cannot guarantee any future results, levels of activity, performance or achievements. You should not place undue reliance on forward-looking statements. Moreover, we assume no obligation to update forward-looking statements or update the reasons actual results could differ materially from those anticipated in forward-looking statements. Several of the important factors that may cause our actual results to differ materially from the expectations we describe in forward-looking statements are identified in the sections captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and "Risk Factors" in this Quarterly Report on Form 10-Q and the documents incorporated herein by reference.

As used herein, “Oclaro,” “we,” “our,” and similar terms include Oclaro, Inc. and its subsidiaries, unless the context indicates otherwise.

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OVERVIEW

We are one of the leading providers of optical components, modules and subsystems for the core optical transport, service provider, enterprise and data center markets. Leveraging over three decades of laser technology innovation, photonic integration and subsystem design, we provide differentiated solutions for optical networks and high-speed interconnects driving the next wave of streaming video, cloud computing, application virtualization and other bandwidth-intensive and high-speed applications.

We have research and development ("R&D") and chip fabrication facilities in China, Italy, Japan, United Kingdom and the United States. We also have contract manufacturing sites in China, Japan, Malaysia, Taiwan and Thailand, with design, sales and service organizations in most of the major regions around the world.

Our customers include ADVA Optical Networking ("ADVA"); Ciena Corporation ("Ciena"); Cisco Systems, Inc. ("Cisco"); Coriant GmbH ("Coriant"); Huawei Technologies Co. Ltd ("Huawei"); InnoLight Technology Corporation ("InnoLight"); Juniper Networks, Inc. ("Juniper"); Nokia/Alcatel-Lucent; Telefonaktiebolaget LM Ericsson ("Ericsson") and ZTE Corporation ("ZTE").

RESULTS OF OPERATIONS

On September 12, 2013, we completed a Share and Asset Purchase Agreement with II-VI Incorporated ("II-VI") for the sale of our Zurich Business. On October 10, 2013, we entered into an Asset Purchase Agreement with II-VI for the sale of our Amplifier Business, which subsequently closed on November 1, 2013. We have classified the financial results of the Zurich and Amplifier Businesses as discontinued operations for all periods presented.

The following table sets forth our condensed consolidated results of operations for the periods indicated, along with amounts expressed as a percentage of revenues, and comparative information regarding the absolute and percentage changes in these amounts:

	Three Months Ended													Increase
	March 26, 2016					March 28, 2015					Change			(Decrease)
	(Thousands)			%		(Thousands)			%		(Thousands)			%
Revenues	$	101,050		100.0		$	83,023		100.0		$	18,027		21.7
Cost of revenues	74,114			73.3		70,323			84.7		3,791			5.4
Gross profit	26,936			26.7		12,700			15.3		14,236			112.1
Operating expenses:
Research and development	11,379			11.3		11,732			14.1		(353		)	(3.0	)
Selling, general and administrative	13,055			12.9		12,048			14.5		1,007			8.4
Amortization of other intangible assets	247			0.2		194			0.2		53			27.3
Restructuring, acquisition and related (income) expense, net	(59		)	(0.1	)	2,246			2.7		(2,305		)	n/m		(1)
Gain on sale of property and equipment	(145		)	(0.1	)	(138		)	(0.1	)	(7		)	5.1
Total operating expenses	24,477			24.2		26,082			31.4		(1,605		)	(6.2	)
Operating income (loss)	2,459			2.4		(13,382		)	(16.1	)	15,841			n/m		(1)
Other income (expense):
Interest income (expense), net	(1,203		)	(1.2	)	(599		)	(0.7	)	(604		)	100.8
Gain (loss) on foreign currency transactions, net	(865		)	(0.9	)	2,892			3.5		(3,757		)	n/m		(1)
Other income (expense), net	174			0.2		366			0.4		(192		)	(52.5	)
Total other income (expense)	(1,894		)	(1.9	)	2,659			3.2		(4,553		)	n/m		(1)
Income (loss) before income taxes	565			0.6		(10,723		)	(12.9	)	11,288			n/m		(1)
Income tax (benefit) provision	476			0.5		(537		)	(0.6	)	1,013			n/m		(1)
Net income (loss)	$	89		0.1		$	(10,186	)	(12.3	)	$	10,275		n/m		(1)

(1) Not meaningful.

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	Nine Months Ended													Increase
	March 26, 2016					March 28, 2015					Change			(Decrease)
	(Thousands)			%		(Thousands)			%		(Thousands)			%
Revenues	$	282,729		100.0		$	259,084		100.0		$	23,645		9.1
Cost of revenues	206,488			73.0		218,209			84.2		(11,721		)	(5.4	)
Gross profit	76,241			27.0		40,875			15.8		35,366			86.5
Operating expenses:
Research and development	33,399			11.8		37,366			14.4		(3,967		)	(10.6	)
Selling, general and administrative	39,054			13.8		41,108			15.9		(2,054		)	(5.0	)
Amortization of other intangible assets	748			0.3		881			0.3		(133		)	(15.1	)
Restructuring, acquisition and related (income) expense, net	(21		)	—		(4,062		)	(1.5	)	4,041			(99.5	)
(Gain) loss on sale of property and equipment	22			—		233			0.1		(211		)	(90.6	)
Total operating expenses	73,202			25.9		75,526			29.2		(2,324		)	(3.1	)
Operating income (loss)	3,039			1.1		(34,651		)	(13.4	)	37,690			n/m		(1)
Other income (expense):
Interest income (expense), net	(3,726		)	(1.3	)	(792		)	(0.3	)	(2,934		)	370.5
Gain (loss) on foreign currency transactions, net	(861		)	(0.3	)	207			0.1		(1,068		)	n/m		(1)
Other income (expense), net	644			0.2		1,250			0.5		(606		)	(48.5	)
Total other income (expense)	(3,943		)	(1.4	)	665			0.3		(4,608		)	n/m		(1)
Loss from continuing operations before income taxes	(904		)	(0.3	)	(33,986		)	(13.1	)	33,082			(97.3	)
Income tax provision	2,360			0.8		379			0.2		1,981			522.7
Loss from continuing operations	(3,264		)	(1.2	)	(34,365		)	(13.3	)	31,101			(90.5	)
Loss from discontinued operations, net of tax	—			—		(8,458		)	(3.2	)	8,458			(100.0	)
Net loss	$	(3,264	)	(1.2	)	$	(42,823	)	(16.5	)	$	39,559		(92.4	)

(1) Not meaningful.

Revenues

Revenues for the three months ended March 26, 2016 increased by $18.0 million, or 22 percent, compared to the three months ended March 28, 2015. Compared to the three months ended March 28, 2015, revenues from sales of our 100 Gb/s transmission modules increased by $28.3 million, or 94 percent, primarily due to growth in our 100 Gb/s client side transceivers and our line side discrete components; and revenues from sales of our 40 Gb/s transmission and lower modules decreased by $10.3 million, or 20 percent, primarily due to certain legacy 40 Gb/s and 10 Gb/s products being gradually replaced by our newer products. This product mix shift reflects our continued focus on the market for higher speed products that are smaller in size and have lower power consumption.

For the three months ended March 26, 2016, four customers accounted for 10 percent or more of our revenues, representing approximately 20 percent, 14 percent, 12 percent and 11 percent of our revenues, respectively. For the three months ended March 28, 2015, four customers accounted for 10 percent or more of our revenues, representing approximately 19 percent, 16 percent, 11 percent and 10 percent of our revenues, respectively.

Revenues for the nine months ended March 26, 2016 increased by $23.6 million, or 9 percent, compared to the nine months ended March 28, 2015. Compared to the nine months ended March 28, 2015, revenues from sales of our 100 Gb/s transmission modules increased by $63.7 million, or 75 percent, primarily due to growth in our 100 Gb/s client side transceivers and our line side discrete components; and revenues from sales of our 40 Gb/s and lower transmission modules decreased by $30.7 million, or 19 percent, primarily due to certain legacy 40 Gb/s and 10 Gb/s products being gradually replaced by our newer products; and revenues from sales of our industrial and consumer products decreased by $9.4 million, or 100 percent, due to our sale of the Komoro Business

26

in the second quarter of fiscal year 2015. This product mix shift reflects our continued focus on the market for higher speed products that are smaller in size and have lower power consumption.

For the nine months ended March 26, 2016, three customers accounted for 10 percent or more of our revenues, representing approximately 19 percent, 14 percent and 10 percent of our revenues, respectively. For the nine months ended March 28, 2015, three customers accounted for 10 percent or more of our revenues, representing approximately 22 percent, 14 percent and 10 percent of our revenues, respectively.

Gross Profit

Gross profit is calculated as revenues less cost of revenues. Gross margin rate is gross profit reflected as a percentage of revenues.

Our cost of revenues consists of the costs associated with manufacturing our products, and includes the purchase of raw materials, labor costs and related overhead, including stock-based compensation charges and the costs charged by our contract manufacturers for the products they manufacture for us. Charges for excess and obsolete inventory are also included in cost of revenues. Costs and expenses related to our manufacturing resources incurred in connection with the development of new products are included in research and development expenses.

Our gross margin rate increased to approximately 27 percent for the three months ended March 26, 2016, compared to 15 percent for the three months ended March 28, 2015. The improvement in the gross margin rate relates to 100 Gb/s product growth that contributed approximately 11 percentage points of improvement and economies of scale related to manufacturing overhead and inventory management that contributed approximately 4 percentage points of improvement. This was partially offset by a 4 percentage point decrease due to lower sales of our 40 Gb/s telecommunications products.

Our gross margin rate increased to approximately 27 percent for the nine months ended March 26, 2016, compared to 16 percent for the nine months ended March 28, 2015. The improvement in the gross margin rate relates to 100 Gb/s product growth that contributed approximately 9 percentage points of improvement, economies of scale related to manufacturing overhead and inventory management that contributed approximately 5 percentage points of improvement, and favorable mix within our 10 Gb/s product portfolio that contributed approximately 4 percentage points of improvement. This was partially offset by a 4 percentage point decrease due to lower sales of our 40 Gb/s telecommunications products, and a 2 percentage point decrease due to the absence of higher margin industrial and consumer products as a result of our sale of the Komoro Business in the second quarter of fiscal year 2015.

Research and Development Expenses

Research and development expenses consist primarily of salaries and related costs of employees engaged in research and design activities, including stock-based compensation charges related to those employees, costs of design tools and computer hardware, costs related to prototyping and facilities costs for certain research and development focused sites.

Research and development expenses decreased to $11.4 million for the three months ended March 26, 2016, from $11.7 million for the three months ended March 28, 2015. The decline was primarily related to a decrease of $0.5 million as a result of our restructuring plan which was initiated during the first quarter of fiscal year 2014 and a decrease of $0.1 million mainly related to the impact of the British pound and Euro weakening relative to the U.S. dollar. These reductions were partially offset by an increase in variable compensation of $0.2 million.

Research and development expenses decreased to $33.4 million for the nine months ended March 26, 2016, from $37.4 million for the nine months ended March 28, 2015. The decline was primarily related to a decrease of $2.0 million from the sale of our Komoro Business in the second quarter of fiscal year 2015, a decrease of $2.0 million related to the impact of the Japanese yen, British pound and Euro weakening relative to the U.S. dollar, and a decrease of $2.0 million as a result of our restructuring plan which was initiated during the first quarter of fiscal year 2014. These reductions were partially offset by an increase in non-recurring engineering and material expenses of $1.4 million and increases in stock compensation and variable compensation totaling $0.6 million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of personnel-related expenses, including stock-based compensation charges related to employees engaged in sales, general and administrative functions, legal and professional fees, facilities expenses, insurance expenses and certain information technology costs.

27

Selling, general and administrative expenses increased to $13.1 million for the three months ended March 26, 2016, from $12.0 million for the three months ended March 28, 2015. The was primarily related to an increase in stock compensation and variable compensation totaling $1.0 millionand increased marketing expenses of$0.5 million. This was partially offset by a decrease of$0.3 million as a result of our restructuring plan which was initiated during the first quarter of fiscal year 2014 and a decrease of $0.2 million mainly related to the impact of the British pound and Euro weakening relative to the U.S. dollar.

Selling, general and administrative expenses decreased to $39.1 million for the nine months ended March 26, 2016, from $41.1 million for the nine months ended March 28, 2015. The decline was primarily related to a decrease of $1.4 million as a result of our restructuring plan which was initiated during the first quarter of fiscal year 2014, a decrease of $1.2 million related to the impact of the Japanese yen, British pound and Euro weakening relative to the U.S. dollar, a decrease of $1.0 million related to the sale of our Komoro Business in the second quarter of fiscal year 2015, a decrease of $1.0 million in building-related expenses, and a decrease of $0.8 million in audit and legal costs. These reductions were partially offset by higher stock compensation costs of $1.5 million related in part to the achievement of the performance conditions of the performance-based restricted stock units granted in August 2014, an increase in variable compensation of $1.4 million, and higher marketing costs of approximately $0.5 million.

Amortization of Other Intangible Assets

Amortization of other intangible assets declined during the three and nine months ended March 26, 2016 as compared to the three and nine months ended March 28, 2015, due to the sale of our Komoro business.

With the sale of our Komoro Business, we expect the amortization of intangible assets to be $0.3 million for the remainder of fiscal year 2016, $0.8 million for fiscal year 2017, $0.6 million for fiscal year 2018 and $0.1 million for fiscal year 2019, based on the current level of our other intangible assets as of March 26, 2016.

Restructuring, Acquisition and Related (Income) Expense, Net

During the first quarter of fiscal year 2014, we initiated a restructuring plan to simplify our operating footprint, reduce our cost structure and focus our research and development investment in the optical communications market where we can leverage our core competencies. During the three months ended March 26, 2016, we recorded minimal restructuring charges. During the nine months ended March 26, 2016, we recorded restructuring charges of $0.3 million in connection with this restructuring plan, which related to workforce reductions. During the three and nine months ended March 28, 2015, we recorded restructuring charges of $1.5 million and a restructuring charge of $1.7 million, respectively, in connection with this restructuring plan. The restructuring charges for the three months ended March 28, 2015 related to workforce reductions. The restructuring charges for the nine months ended March 28, 2015 include $1.8 million related to workforce reductions and a $0.1 million reversal of restructuring charges related to revised estimates for lease cancellations and commitments. During the three months ended March 26, 2016, we made minimal scheduled payments. During the nine months ended March 26, 2016, we made scheduled payments of $0.5 million. During the three and nine months ended March 28, 2015, we made scheduled payments of $0.3 million and $2.0 million, respectively. As of March 26, 2016, we had $0.2 million in accrued restructuring liabilities related to this restructuring plan.

During fiscal year 2012, we initiated a restructuring plan in connection with the transfer of a portion of our Shenzhen, China manufacturing operations to Venture Corporation Limited ("Venture"). This transition occurred in a phased and gradual transfer of certain products and was completed in fiscal year 2015. In connection with this transition, we recorded restructuring charges related to employee separation charges of $0.8 million and $2.6 million during the three and nine months ended March 28, 2015, respectively and made scheduled payments of $0.2 million and $2.3 million, respectively, to settle a portion of these restructuring liabilities. As of March 26, 2016 and June 27, 2015, we had no remaining accrued restructuring liabilities related to this restructuring plan.

Other Income (Expense)

Other income (expense) was $1.9 million in expense for the three months ended March 26, 2016 as compared to $2.7 million in income for the three months ended March 28, 2015. This change in other income (expense) primarily related to a $0.6 million increase in interest expense mainly related to the issuance of our convertible notes in the third quarter of fiscal year 2015, a $3.8 million increase in foreign currency transaction losses during the three months ended March 26, 2016, as compared to the three months ended March 28, 2015, related to (i) the revaluation of our U.S. dollar denominated balances in our U.K. and Japan subsidiaries, and (ii) a $0.9 million loss resulting from a capital distribution of an investment in a foreign subsidiary.

Other income (expense) was $3.9 million in expense for the nine months ended March 26, 2016 as compared to $0.7 million in income for the nine months ended March 28, 2015. This change in other income (expense) primarily related a $2.9 million increase

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in interest expense mainly related to the issuance of our convertible notes in the third quarter of fiscal year 2015, a $1.1 million increase in foreign currency transaction losses during the nine months ended March 26, 2016, as compared to the nine months ended March 28, 2015, related to (i) the revaluation of our U.S. dollar denominated balances in our U.K. and Japan subsidiaries, and (ii) a $0.9 million loss resulting from a capital distribution of an investment in a foreign subsidiary.

Income Tax (Benefit) Provision

The income tax provision of $0.5 million and $2.4 million for the three and nine months ended March 26, 2016, respectively, and the income tax benefit of $0.5 million and the income tax provision of $0.4 million for the three and nine months endedMarch 28, 2015, respectively, relates primarily to our foreign operations.

The total amount of our unrecognized tax benefits as of March 26, 2016 and June 27, 2015 were approximately $4.1 million and $4.1 million, respectively. As of March 26, 2016, we had $2.4 million of unrecognized tax benefits that, if recognized, would affect our effective tax rate. While it is often difficult to predict the final outcome of any particular uncertain tax position, we believe that unrecognized tax benefits could decrease by approximately $0.9 million in the next twelve months.

Loss from Discontinued Operations, Net of Tax

During the nine months ended March 28, 2015, we recorded a loss from discontinued operations of $8.5 million related to the sale of the Zurich and Amplifier Businesses.

RECENT ACCOUNTING STANDARDS

See Note 2, Recent Accounting Standards, to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information regarding the effect of new accounting pronouncements on our condensed consolidated financial statements.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements contained elsewhere in this Quarterly Report on Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of our financial statements requires us to make estimates and judgments that affect our reported assets and liabilities, revenues and expenses and other financial information. Actual results may differ significantly from those based on our estimates and judgments or could be materially different if we used different assumptions, estimates or conditions. In addition, our financial condition and results of operations could vary due to a change in the application of a particular accounting policy.

We identified our critical accounting policies in our Annual Report on Form 10-K for the year ended June 27, 2015 ("2015 Form 10-K") related to revenue recognition and sales returns, inventory valuation, business combinations, impairment of goodwill and other intangible assets, accounting for stock-based compensation and income taxes. It is important that the discussion of our operating results be read in conjunction with the critical accounting policies discussed in our 2015 Form 10-K.

LIQUIDITY AND CAPITAL RESOURCES

The condensed consolidated statement of cash flows and the discussion below on cash flows from operating, investing and financing activities have not been adjusted for the effects of the discontinued operations.

Cash Flows from Operating Activities

Net cash provided by operating activities for the nine months ended March 26, 2016 was $3.0 million, primarily resulting from non-cash adjustments of $18.6 million, partially offset by a $12.4 million decrease in cash due to changes in operating assets and liabilities and a net loss of $3.3 million. The $18.6 million increase in cash resulting from non-cash adjustments primarily consisted of $12.2 million in depreciation and amortization, $6.4 million of expense related to stock-based compensation and $0.6 million from the amortization of the debt discount and issuance costs in connection with the convertible notes payable, partially offset by $0.6 million from the amortization of a deferred gain from a sales-leaseback transaction in Caswell, U.K. The $12.4 million decrease in cash due to changes in operating assets and liabilities was comprised of a $13.0 million increase in accounts receivable attributable to an increase in revenues and timing of collections, a $7.6 million increase in inventories resulting from the receipt of inventory intended for sale in future quarters, partially offset by a $6.0 million increase in accrued expenses and other liabilities,

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a $1.4 million increase in accounts payable largely attributable to the timing of purchases and payments to vendors, and a $0.5 million decrease in prepaid expenses and other current assets.

Net cash used in operating activities for the nine months ended March 28, 2015 was $39.3 million, primarily resulting from a net loss of $42.8 million and a $14.3 million decrease in cash due to changes in operating assets and liabilities, partially offset by non-cash adjustments of $17.9 million. The $14.3 million decrease in cash due to changes in operating assets and liabilities was comprised of a $7.9 million increase in accounts receivable attributable to timing of payments from a significant customer, $8.4 million decrease in accrued expenses and other liabilities, a $4.6 million increase in inventories resulting from the receipt of inventory intended for sale in future quarters, and a $0.9 million increase in other non-current assets, partially offset by a $7.0 million decrease in prepaid expenses and other current assets and a $0.5 million increase in accounts payable largely attributable to the timing of purchases and payments to vendors. The $17.9 million increase in cash resulting from non-cash adjustments primarily consisted of $14.1 million in depreciation and amortization, a $7.7 million loss from discontinued operations related to a Settlement Agreement that releases II-VI and II-VI Holdings B.V. from making certain hold-back payments due in connection with the sale of the Zurich and Amplifier Businesses, $4.6 million of expense related to stock-based compensation, partially offset by an $8.3 million gain in connection with the sale of the Komoro Business in the second quarter of fiscal year 2015 and $0.7 million from the amortization of a deferred gain from a sales-leaseback transaction in Caswell, U.K.

Cash Flows from Investing Activities

Net cash used in investing activities for the nine months ended March 26, 2016 was $9.9 million, consisting of $12.4 million used in capital expenditures, partially offset by a $2.5 million reduction in restricted cash.

Net cash provided by investing activities for the nine months ended March 28, 2015 was $2.0 million, primarily consisting of proceeds from the sale of the Komoro Business of $12.3 million, net of deal related costs, $2.4 million related to the receipt of hold-back payments from II-VI in connection with the sale of the Amplifier and Zurich Businesses, $0.9 million reduction in restricted cash and $0.1 million related to the sale of short-term investments, partially offset by $13.8 million used in capital expenditures.

Cash Flows from Financing Activities

Net cash used in financing activities for the nine months ended March 26, 2016 was $3.6 million, primarily consisting of $2.3 million in payments on capital lease obligations and $1.5 million related to shares repurchased for tax withholdings on vesting of restricted stock units, partially offset by $0.2 million in cash proceeds from the exercise of stock options.

Net cash provided by financing activities for the nine months ended March 28, 2015 was $58.7 million, primarily consisting of $61.6 million proceeds from the sale of convertible notes, partially offset by $3.0 million in payments on capital lease obligations.

Credit Line and Notes

On February 19, 2015, we closed a private placement of $65.0 million in aggregate principal Convertible Senior Notes due 2020 (the “6.00% Notes”). The sale of the 6.00% Notes resulted in proceeds of approximately $61.6 million, after deducting the initial purchaser's discount of $3.4 million. We also incurred offering costs of $0.6 million in connection with the 6% Notes. As of March 26, 2016, the net carrying value of the liability component was $61.9 million and the unamortized value of the debt discount and issuance costs was $3.1 million. Interest on the 6.00% Notes is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2015. During the three and nine months ended March 26, 2016, we recorded $1.2 million and $3.5 million in interest expense, respectively, including the amortization of the debt discount and the issuance costs, and made interest payments of $3.9 million related to these 6.00% Notes during the nine months ended March 26, 2016. See Note 6, Credit Line and Notes, for additional information regarding the 6.00% Notes.

As of March 26, 2016, we had a $40.0 million revolving credit facility with Silicon Valley Bank. As of March 26, 2016, there were no amounts outstanding under this credit facility. See Note 6, Credit Line and Notes, for additional information regarding this credit facility.

Future Cash Requirements

As of March 26, 2016, we held $106.8 million in cash, cash equivalents and restricted cash, comprised of $106.1 million in cash and cash equivalents and $0.7 million in restricted cash (excluding $0.2 million of restricted cash in other non-current assets); and we had working capital of $175.4 million.

Based on our current cash and cash equivalent balances, together with our existing credit facility, we believe that we have sufficient funds to support our operations through the next 12 months, including approximately $6.0 million to $16.0 million of capital expenditures that we expect to incur through the remainder of the current fiscal year.

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In the event we need additional liquidity beyond our current expectations, such as to fund future growth or strengthen our balance sheet, we may find it necessary to lower our operating income break-even level and undertake additional cost cutting measures. We will continue to explore other sources of additional liquidity. These additional sources of liquidity could include one, or a combination, of the following: (i) issuing equity securities, (ii) incurring indebtedness secured by our assets, (iii) issuing debt and/or convertible debt securities, or (iv) selling product lines, other assets and/or portions of our business. There can be no guarantee that we will be able to raise additional funds on terms acceptable to us, or at all.

We have historically incurred operating losses from continuing operations and generated negative cash flows from operations. Recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon us having sufficient resources to operate our business. In addition to the availability of our cash resources as of March 26, 2016, the continued operation of our business is dependent upon our achieving cash flows expected to be generated from the execution of our current operating plan, together with amounts expected to be available under our Credit Agreement. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue in existence.

In addition, we have been operating in China for an extended period of time and have accumulated significant intercompany balances with our related entities. Our ability to repay or collect these balances may be restricted by Chinese laws and, as a result, we may be unable to successfully pay down or collect on these balances. As a consequence, we may be assessed additional taxes in China if we are unable to claim bad debt deductions or incur debt forgiveness income from the cancellation of these intercompany balances. Additionally, if we are found not to have complied with the various local laws surrounding cross border payments, we may incur penalties and fines for non-compliance. Any such taxes, penalties and/or fines could be significant in amount and, as a result, could have a material adverse effect on our financial condition, including our cash and cash equivalent balances.

For additional information on the risks we face related to future cash requirements, see Item 1A. Risk Factors under “— Risks Related to Our Business — We have a history of large operating losses and we may not be able to sustain profitability in the future and maintain sufficient levels of liquidity,” included elsewhere in this Quarterly Report on Form 10-Q.

As of March 26, 2016, $39.0 million of the $106.8 million of our cash, cash equivalents and restricted cash was held by our foreign subsidiaries. If these funds are needed for our operations in the United States, we could be required to accrue and pay foreign withholding taxes to repatriate these funds. However, our intent is to permanently reinvest these funds outside of the U.S., except for specific entities in Shanghai, China; Israel and Germany where closure follows our decision to exit certain businesses in fiscal year 2016.

Off-Balance Sheet Arrangements

We indemnify our directors and certain employees as permitted by law, and have entered into indemnification agreements with our directors and executive officers. We have not recorded a liability associated with these indemnification arrangements, as we historically have not incurred any material costs associated with such indemnification obligations. Costs associated with such indemnification obligations may be mitigated by insurance coverage that we maintain, however, such insurance may not cover any, or may cover only a portion of, the amounts we may be required to pay. In addition, we may not be able to maintain such insurance coverage in the future.

We also have indemnification clauses in various contracts that we enter into in the normal course of business, such as indemnification in favor of customers in respect of liabilities they may incur as a result of purchasing our products should such products infringe the intellectual property rights of a third party. We have not historically paid out any material amounts related to these indemnifications; therefore, no accrual has been made for these indemnifications.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risk affecting us, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended June 27, 2015, which is incorporated herein by reference. Our exposure to market risk has not changed materially since June 27, 2015.

INTEREST RATES

We finance our operations through a mixture of issuances of equity and debt securities, capital leases, working capital and by drawing on our credit facility. We have exposure to interest rate fluctuations on our cash deposits and for amounts borrowed under our credit facility, convertible notes and through our capital leases. At March 26, 2016, there were no amounts outstanding under our credit facility, $65.0 million outstanding of convertible notes with an interest rate of 6.0 percent and $5.8 million outstanding under capital leases. An increase in our average interest rate by 1.0 percent would increase our annual interest expense by approximately $0.7 million.

We monitor our interest rate risk on cash balances primarily through cash flow forecasting. We believe our current interest rate risk is immaterial.

FOREIGN CURRENCY

As our business is multinational in scope, we are subject to fluctuations based upon changes in the exchange rates between the currencies in which we collect revenues and pay expenses. We expect that a majority of our revenues will continue to be denominated in U.S. dollars, while a significant portion of our expenses will continue to be denominated in U.K. pounds sterling and the Japanese yen. Fluctuations in the exchange rate between the U.S. dollar, the U.K. pound sterling, the Japanese yen and, to a lesser extent, other currencies in which we collect revenues and pay expenses could affect our operating results. This includes the Chinese yuan and the Euro in which we pay expenses in connection with operating our facilities in Shenzhen and Shanghai, China; and San Donato, Italy. To the extent the exchange rate between the U.S. dollar and these currencies were to fluctuate more significantly than experienced to date, our exposure would increase.

As of March 26, 2016, our U.K. subsidiary had $75.0 million, net, in U.S. dollar denominated operating intercompany payables, $22.1 million in U.S. dollar denominated accounts receivable, net of accounts payable, related to sales to external customers and purchases from suppliers, and $8.0 million in U.S. dollar denominated cash accounts. It is estimated that a 10 percent fluctuation in the U.S. dollar relative to the U.K. pound sterling would lead to a profit of $4.5 million (U.S. dollar weakening), or loss of $4.5 million (U.S. dollar strengthening) on the translation of these balances, which would be recorded as gain (loss) on foreign currency transactions, net, in our condensed consolidated statement of operations.

As of March 26, 2016, our Japan subsidiary had $31.7 million, net, in U.S. dollar denominated operating intercompany payables, $9.5 million in U.S. dollar denominated accounts payable, net of accounts receivable, related to sales to external customers and purchases from suppliers, and $17.4 million in U.S. dollar denominated cash accounts. It is estimated that a 10 percent fluctuation in the U.S. dollar relative to the Japanese yen would lead to a profit of $2.4 million (U.S. dollar weakening), or loss of $2.4 million (U.S. dollar strengthening) on the translation of these balances, which would be recorded as gain (loss) on foreign currency transactions, net, in our condensed consolidated statement of operations.

BANK LIQUIDITY RISK

As of March 26, 2016, we have approximately $106.1 million in operating accounts that are held with domestic and international financial institutions. These cash balances could be lost or become inaccessible if the underlying financial institutions fail or if they are unable to meet the liquidity requirements of their depositors and they are not supported by the national government of the country in which such financial institution is located. Notwithstanding, to date, we have not incurred any losses and have had full access to our operating accounts. See Note 3, Balance Sheet Details. We believe any failures of domestic and international financial institutions could impact our ability to fund our operations in the short term.

HEDGING PROGRAM

From time to time, we enter into foreign currency forward contracts in an effort to mitigate a portion of our exposure to fluctuations between the U.S. dollar and the Japanese yen and between the U.S. dollar and the U.K. pound sterling. We do not currently hedge our exposure to the Chinese yuan or the Euro, but we may in the future if conditions warrant. We also do not currently hedge our exposure related to our U.S. dollar denominated intercompany payables and receivables. We may be required to convert currencies to meet our obligations. Under certain circumstances, foreign currency forward contracts can have an adverse effect on our financial condition.

During the three and nine months ended March 26, 2016, we entered into foreign currency forward exchange contracts, which expired in the same fiscal quarter in which they were opened. In connection with these hedges, during the three months ended

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March 26, 2016, we recorded a $0.1 million loss in gain (loss) on foreign currency transactions, net within our condensed consolidated statement of operations. During the nine months ended March 26, 2016, we recorded a $0.9 million loss in gain (loss) on foreign currency transactions, net within our condensed consolidated statement of operations. As of March 26, 2016, we did not have any outstanding foreign currency forward contracts.

ITEM 4. CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 26, 2016. The term “disclosure controls and procedures,” as defined in Rules13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 26, 2016, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

There was no change in our internal control over financial reporting during the three months ended March 26, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Overview

In the ordinary course of business, we are involved in various legal proceedings, and we anticipate that additional actions will be brought against us in the future. The most significant of these proceedings are described below. These legal proceedings, as well as other matters, involve various aspects of our business and a variety of claims in various jurisdictions. Complex legal proceedings frequently extend for several years, and a number of the matters pending against us are at very early stages of the legal process. As a result, some pending matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable us to determine whether the proceeding is material to us or to estimate a range of possible loss, if any. Unless otherwise disclosed, we are unable to estimate the possible loss or range of loss for the legal proceedings described below. While it is not possible to accurately predict or determine the eventual outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on our results of operations, financial position or cash flows.

Kunst Worker Compensation Matter

On June 18, 2015, Gerald Kunst, or Kunst, filed a civil suit against us and Travelers Property Casualty Company of America, or Travelers, in Massachusetts Superior Court, Civil Action No. SUCV2015-01818F. Travelers is our general liability insurance carrier. The complaint filed by Kunst, an employee of a third party service provider, alleges that he was injured while performing air conditioning repair services on the premises of our Acton, Massachusetts facility and seeks judgment in an amount to be determined by the court or jury, together with interest and costs. On July 24, 2015, we filed an answer to the complaint, which included our affirmative defenses. The parties continue to conduct initial discovery. As of May 5, 2016, no hearing has been scheduled in this matter. We intend to vigorously defend against this litigation.

ITEM 1A. RISK FACTORS

Investing in our securities involves a high degree of risk. The risks described below are not the only ones facing us. Additional risks not currently known to us or that we currently believe are immaterial also may impair our business, operations, liquidity and stock price materially and adversely. You should carefully consider the risks and uncertainties described below in addition to the other information included or incorporated by reference in this Quarterly Report on Form 10-Q. If any of the following risks actually occur, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our common stock could fall and you could lose all or part of your investment.

We may not be able to ramp the production of our new products to customer required volumes, which could result in delayed or lost revenue.

Many of our new product samples for metro, data center and long haul 100 and 200 gigahertz ("GHz") communication applications have been well received by potential customers of these products. As a result, we anticipate significant backlog for these new generation products. These newer generation products typically will have greater functionality and a smaller footprint, resulting in more complexity in the manufacturing process. This increased complexity will result in lower manufacturing yields or more difficult production to manufacture in volume. If we experience large demand for these products and are unable to manufacture them in sufficient volume, we would fall short of the planned output and revenue targets as we move from low volume sampling to manufacturing for commercial production. In addition, a production ramp for certain products can include a manufacturing transition between two or more locations which carries an inherent risk of delay. For example, we are currently in the process of transitioning the assembly and test processes for our 100 Gb/s CFP2 coherent transceiver from our Caswell, UK facility to our Shenzhen, China facility and to Venture Corporation Limited ("Venture"). Our failure to satisfy our customers' demand for these products could result in our customers postponing or canceling orders or seeking alternative suppliers for these products, which would adversely affect our results of operations.

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Customer requirements for new products are increasingly challenging, which could lead to significant executional risk in designing and manufacturing such products.

Across the entire network, our customers are demanding increased performance from our products, at lower prices and in smaller and lower power designs. These requirements stretch the capabilities of our optical chips, packages and electronics to the limit of technical feasibility. In addition these demands are often customer specific, leading to numerous product variations. We enter our new product introduction, or NPI, process with clear performance and cost goals. Because of the complexity of design requirements, executing on these goals is becoming increasingly difficult and less predictable. These difficulties could result in product sampling delays and/or missing targets on key specifications and customer requirements, leading to design losses. Our failure to meet our customers' technical and performance requirements for these products could result in our customers seeking alternative suppliers for these products, which would adversely affect our results of operations.

We depend on a limited number of customers for a significant percentage of our revenues and the loss of a major customer could have a materially adverse impact on our financial condition.

Historically, we have generated most of our revenues from a limited number of customers. Our dependence on a limited number of customers is due to the fact that the optical telecommunications systems industry is dominated by a small number of large companies. These companies in turn depend primarily on a limited number of major telecommunications carrier customers to purchase their products that incorporate our optical components. For example, during the nine months ended March 26, 2016 and during the fiscal years ended June 27, 2015 and June 28, 2014, our three largest customers accounted for 44 percent, 45 percent and 43 percent of our revenues, respectively. Because we rely on a limited number of customers for significant percentages of our revenues, a decrease in demand for our products from any of our major customers for any reason (including due to market conditions, catastrophic events or otherwise) could have a materially adverse impact on our financial conditions and results of operations. For example, during the second half of fiscal 2012, our revenues were adversely impacted by a significant change in demand expectations from a particular major customer. Further, the industry in which our customers operate is subject to a trend of consolidation. To the extent this trend continues, we may become dependent on even fewer customers to maintain and grow our revenues.

We may experience low manufacturing yields.

Manufacturing yields depend on a number of factors, including the volume of production due to customer demand and the nature and extent of changes in specifications required by customers for which we perform design-in work. Higher volumes due to demand for a fixed, rather than continually changing, design generally results in higher manufacturing yields, whereas lower volume production generally results in lower yields. In addition, lower yields may result, and have in the past resulted, from commercial shipments of products prior to full manufacturing qualification to the applicable specifications. Changes in manufacturing processes required as a result of changes in product specifications, changing customer needs, introduction of new product lines and changes in contract manufacturers have historically caused, and may in the future cause, significantly reduced manufacturing yields, resulting in low or negative margins on those products. Moreover, an increase in the rejection rate of products during the quality control process, before, during or after manufacture, results in lower yields and margins. Finally, manufacturing yields and margins can also be lower if we receive or inadvertently use defective or contaminated materials from our suppliers. Any reduction in our manufacturing yields will adversely affect our gross margins and could have a material impact on our operating results.

Our results of operations may suffer if we do not effectively manage our inventory, and we may continue to incur inventory-related charges.

We need to manage our inventory of component parts and finished goods effectively to meet changing customer requirements. Accurately forecasting customers’ product needs is difficult. Some of our products and supplies have in the past, and may in the future, become obsolete or be deemed excess while in inventory due to rapidly changing customer specifications or a decrease in customer demand. For example, following our acquisition of Opnext in July 2012, we reviewed the inventory we acquired from Opnext in the acquisition and, when we added that Opnext inventory to our preexisting inventory, we reduced the value of the Opnext inventory on our balance sheet by approximately $43.5 million (compared to its value on Opnext’s financial records as of the closing of the acquisition) to reflect our review. This reduced value was reflected in the inventory we reported in our financial statements for the quarter ended September 29, 2012. We also have exposure to contractual liabilities to our contract manufacturers for inventories purchased by them on our behalf, based on our forecasted requirements, which may become excess or obsolete. Our inventory balances also represent an investment of cash. To the extent our inventory turns are slower than we anticipate based on historical practice, our cash conversion cycle extends and more of our cash remains invested in working capital. If we are not able to manage our inventory effectively, we may need to write down the value of some of our existing inventory or write off non-saleable or obsolete inventory. We have from time to time incurred significant inventory-related charges. Any such charges we incur in future periods could materially and adversely affect our results of operations and our cash flow.

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Delays, disruptions or quality control problems in manufacturing could result in delays in product shipments to customers and could adversely affect our business.

We may experience delays, disruptions or quality control problems in our manufacturing operations or the manufacturing operations of our subcontractors. As a result, we could incur additional costs that would adversely affect our gross margins, and our product shipments to our customers could be delayed beyond the shipment schedules requested by our customers, which would negatively affect our revenues, competitive position and reputation. Furthermore, even if we are able to deliver products to our customers on a timely basis, we may be unable to recognize revenues at the time of delivery based on our revenue recognition policies.

The inability to obtain government licenses and approvals for desired international trading activities or technology transfers, including export licenses, may prevent the profitable operation of our business.

Many of our present and future business activities are subject to licensing by the United States government under the Export Administration Act, the Export Administration Regulations and other laws, regulations and requirements governing international trade and technology transfer. For example, in early March 2016, the U.S. Department of Commerce (the "DOC") amended the Export Administration Regulations ("EAR") and imposed additional licensing restrictions on exports of certain products to Zhongxing Telecommunications Equipment Corporation and its subsidiary, ZTE Kangxun Telecommunications Ltd. (collectively, "ZTE"), one of our significant customers. In response to the DOC's action, we temporarily ceased shipment of products to ZTE. In late March 2016, the DOC created a temporary general license applicable to exports to ZTE, in effect until June 30, 2016. Pursuant to this new temporary license,we subsequently resumed our shipment of products to ZTE. We do not know what export licensing rules will apply to ZTE after June 30, 2016, however, any action that precludes us from shipping product to ZTE, including the non-renewal of the temporary license, may have a material adverse impact on our revenues and results of operations.

We also presently manufacture products in China and Thailand that require licenses. The profitable operations of our business may require the continuity of these licenses and may require further licenses and approvals for future products in these and other countries. However, there is no certainty to the continuity of these licenses, nor that further desired licenses and approvals may be obtained.

The markets in which we operate are highly competitive, which could result in lost sales and lower revenues.

The market for optical components and modules is highly competitive and this competition could result in our existing customers moving their orders to our competitors. We are aware of a number of companies that have developed or are developing optical component products, including tunable lasers, pluggable components, modulators and subsystems, among others, that compete directly with our current and proposed product offerings.

Certain of our competitors may be able to more quickly and effectively:

• develop or respond to new technologies or technical standards;

• react to changing customer requirements and expectations;

• devote needed resources to the development, production, promotion and sale of products;

• attain high manufacturing yields on new product designs; and

• deliver competitive products at lower prices.

Some of our current competitors, as well as some of our potential competitors, have longer operating histories, greater name recognition, broader customer relationships and industry alliances and substantially greater financial, technical and marketing resources than we do. In addition, market leaders in industries such as semiconductor and data communications, who may also have significantly more resources than we do, may in the future enter our market with competing products. Our competitors and new Chinese companies are establishing manufacturing operations in China to take advantage of comparatively low manufacturing costs. All of these risks may be increased if the market were to further consolidate through mergers or other business combinations between our competitors.

We may not be able to compete successfully with our competitors and aggressive competition in the market may result in lower prices for our products and/or decreased gross margins. Any such development could have a material adverse effect on our business, financial condition and results of operations.

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We may not be able to maintain or improve gross margin levels.

We may not be able to maintain or improve our gross margins, due to slow introductions of new products, pricing pressure from increased competition, the failure to effectively reduce the cost of existing products, the failure to improve our product mix, the potential for future macroeconomic or market volatility reducing sales volumes, changes in customer demand (including a change in product mix between different areas of our business) or other factors. Our gross margins can also be adversely impacted for reasons including, but not limited to, fixed manufacturing costs that would not be expected to decrease in proportion to any decrease in revenues; unfavorable production yields or variances; increases in costs of input parts and materials; the timing of movements in our inventory balances; warranty costs and related returns; changes in foreign currency exchange rates; and possible exposure to inventory valuation reserves. Any failure to maintain, or improve, our gross margins will adversely affect our financial results, including our goals to achieve profitability and achieve sustainable cash flow from operations.

Sales of older legacy products continue to represent a significant percentage of our total revenues and, if we do not increase the percentage of sales associated with new products, our revenues may not grow in the future or could decline.

The markets for our products are characterized by changing technology and continuing process development. The future of our business will depend in large part upon the continuing relevance of our technological capabilities, and our ability to introduce new products that address our customers’ requirements for more cost-effective and higher bandwidth solutions. Our inability to successfully launch or sustain new or next generation programs or product features that anticipate or adequately address future market trends and market transitions in a timely manner could materially adversely affect our revenues and financial results. We may also encounter competition from new or revised technologies that render our products less profitable or obsolete in our chosen markets, and our operating results may suffer. Furthermore, we cannot assure you that we will introduce new or next generation products in a timely manner, that these products will gain market acceptance, or that new product revenues will increase at a rate sufficient to replace declining legacy product revenues, and failure to do so could materially affect our operating results.

The majority of our long-term customer contracts do not commit customers to specified buying levels, and our customers may decrease, cancel or delay their buying levels at any time with little or no advance notice to us.

The majority of our customers typically purchase our products pursuant to individual purchase orders or contracts that do not contain purchase commitments. Some customers provide us with their expected forecasts for our products several months in advance, but these customers may decrease, cancel or delay purchase orders already in place, and the impact of any such actions may be intensified given our dependence on a small number of large customers. If any of our major customers decrease, stop or delay purchasing our products for any reason, our business and results of operations would be harmed. Cancellation or delays of such orders may cause us to fail to achieve our short-term and long-term financial and operating goals and result in excess and obsolete inventory.

As a result of our global operations, our business is subject to currency fluctuations that may adversely affect our results of operations.

Our financial results have been and will continue to be materially impacted by foreign currency fluctuations. At certain times in our history, declines in the value of the U.S. dollar versus the U.K. pound sterling and the Japanese yen have had a major negative effect on our margins and our cash flow. A significant portion of our expenses are denominated in U.K. pounds sterling and Japanese yen and substantially all of our revenues are denominated in U.S. dollars.

Fluctuations in the exchange rate between these currencies and, to a lesser extent, other currencies in which we collect revenues and/or pay expenses could have a material effect on our future operating results. For example during fiscal 2015, the Japanese yen depreciated approximately 22 percent relative to the U.S. dollar, impacting our manufacturing overhead and operating expenses. If the U.S. dollar stays the same or depreciates relative to the U.K. pound sterling and/or Japanese yen in the future, our future operating results may be materially impacted. Additional exposure could also result should the exchange rate between the U.S. dollar and the Chinese yuan or the Euro vary more significantly than they have to date.

We periodically engage in currency hedging transactions in an effort to cover some of our exposure to U.S. dollar to U.K. pound sterling and Japanese Yen currency fluctuations, and we may be required to convert currencies to meet our obligations. These transactions may not operate to fully hedge our exposure to currency fluctuations, and under certain circumstances, these transactions could have an adverse effect on our financial condition.

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We depend on a limited number of suppliers and key contract manufacturers who could disrupt our business if they stopped, decreased, delayed or were unable to meet our demand for shipments of their products or manufacturing of our products.

We depend on a limited number of suppliers of raw materials and equipment used to manufacture our products. We currently also depend on a limited number of contract manufacturers, principally Fabrinet in Thailand and Venture in Malaysia, to manufacture certain of our products. Some of these suppliers are sole sources. We typically have not entered into long-term agreements with our suppliers other than Fabrinet and Venture. As a result, these suppliers generally may stop supplying us materials and equipment at any time. Our reliance on a sole supplier or limited number of suppliers could result in delivery problems, reduced control over product pricing and quality, and an inability to identify and qualify another supplier in a timely manner. Some of our suppliers that may be small or under-capitalized may experience financial difficulties that could prevent them from supplying us materials and equipment. In addition, our suppliers, including our sole source suppliers, may experience manufacturing delays or shut downs due to circumstances beyond their control such as earthquakes, floods, fires, labor unrest, political unrest or other natural disasters.

Fabrinet’s manufacturing operations are located in Thailand. In October 2011, due to flooding in Thailand, Fabrinet suspended operations at both of its factories that supply us with finished goods. Thailand has also been subject to political unrest in the past, including the temporary interruption of service at one of its international airports, and has again begun to experience political unrest. If Fabrinet is unable to supply us with materials or equipment, or if it is unable to ship our materials or equipment out of Thailand due to future flooding or political unrest, this could materially adversely affect our ability to fulfill customer orders and our results of operations.

Any supply deficiencies relating to the quality or quantities of materials or equipment we use to manufacture our products could materially and adversely affect our ability to fulfill customer orders and our results of operations. Lead times for the purchase of certain materials and equipment from suppliers have increased and in some cases have limited our ability to rapidly respond to increased demand, and may continue to do so in the future. To the extent we introduce additional contract manufacturing partners, introduce new products with new partners and/or move existing internal or external production lines to new partners, we could experience supply disruptions during the transition process. In addition, due to our customers’ requirements relating to the qualification of our suppliers and contract manufacturing facilities and operations, we cannot quickly enter into alternative supplier relationships, which prevents us from being able to respond immediately to adverse events affecting our suppliers.

If our customers do not qualify our manufacturing lines or the manufacturing lines of our subcontractors for volume shipments, our operating results could suffer.

Most of our customers do not purchase products, other than limited numbers of evaluation units, prior to qualification of the manufacturing line for volume production. Our existing manufacturing lines, as well as each new manufacturing line, must pass through varying levels of qualification with our customers. Our manufacturing lines have passed our qualification standards, as well as our technical standards. However, our customers also require that our manufacturing lines pass their specific qualification standards and that we, and any subcontractors that we may use, be registered under international quality standards. In addition, we have in the past, and may in the future, encounter quality control issues as a result of relocating our manufacturing lines or introducing new products to fill production. We may be unable to obtain customer qualification of our manufacturing lines or we may experience delays in obtaining customer qualification of our manufacturing lines. Such delays or failure to obtain qualifications would harm our operating results and customer relationships. If we introduce new contract manufacturing partners and move any production lines from existing internal or external facilities, the new production lines will likely need to be re-qualified with our customers.

If we fail to attract and retain key personnel, our business could suffer.

Our future success depends, in part, on our ability to attract and retain key personnel, including executive management. Competition for highly skilled technical personnel is extremely intense and we continue to face difficulty identifying and hiring qualified engineers in many areas of our business. We may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation and salary structure. Our future success also depends on the continued contributions of our executive management team and other key management and technical personnel, each of whom would be difficult to replace. The loss of services of these or other executive officers or key personnel or the inability to continue to attract qualified personnel could have a material adverse effect on our business.

In order to remain competitive, we have been in the past and may be in the future required to agree to customer terms and conditions that may have an adverse effect on our financial condition and operating results.

Many of our customers have significant purchasing power and, accordingly, have requested more favorable terms and conditions, including extended payment terms, than we typically provide.  In order for us to remain competitive, we may be required to accommodate these requests, which may include granting terms that affect the timing of our receipt of cash.  As a result, these more favorable customer terms may have a material adverse effect on our financial condition and results of operations.

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Our business and results of operations may be negatively impacted by financial market conditions and general economic conditions in the industries in which we operate, and such conditions may increase the other risks that affect our business.

Over the past few years, the world’s financial markets have experienced significant turmoil, resulting in reductions in available credit, increased costs of credit, extreme volatility in security prices, potential changes to existing credit terms, and rating downgrades of investments. In the past, due to these conditions, many of our customers reduced their spending plans, leading them to draw down their existing inventory and reduce orders for our products. It is possible that changes in current economic conditions could result in similar setbacks in the future, and that some of our customers could as a result reduce production levels of existing products, defer introduction of new products or place orders and accept delivery for products for which they do not pay us due to their economic difficulties or other reasons. In the past, financial market volatility has materially and adversely affected the market conditions in the industries in which we operate, and has had a material adverse impact on our revenues. Our suppliers may also be adversely affected by economic conditions that may impact their ability to provide important components used in our manufacturing processes on a timely basis, or at all. To a large degree, orders from our customers are dependent on demand from telecom carriers around the world. Telecom carrier capital expenditure plans and execution can also be adversely impacted, both in terms of total spend and in determination of areas of investment within network infrastructures, by global and regional macroeconomic conditions. We are unable to predict the likely occurrence, severity or duration of any potential future disruption in financial markets or adverse economic conditions in the U.S. and other countries, but the longer the duration the greater the risks we face in operating our business.

We have a history of large operating losses. We may not be able to sustain profitability in the future and as a result we may not be able to maintain sufficient levels of liquidity.

We have historically incurred losses and negative cash flows from operations since our inception. As of March 26, 2016, we had an accumulated deficit of $1,357.5 million. Although we achieved income from continuing operations during the three months ended March 26, 2016, we incurred a loss from continuing operations of $3.3 million during the nine months ended March 26, 2016, and we incurred losses from continuing operations for the years ended June 27, 2015 and June 28, 2014 of $48.2 million and $102.1 million, respectively.

As of March 26, 2016, we held $106.8 million in cash and restricted cash, comprised of $106.1 million in cash and cash equivalents and $0.7 million in short-term restricted cash; and we had working capital, including cash, of $175.4 million. At March 26, 2016, we had debt of $67.7 million, consisting of capital leases and convertible notes payable.

During fiscal years 2013, 2014 and 2015, we executed a number of asset sale and financing transactions in order to generate funds to help sustain our operations: we sold our interleaver and thin film filter business, executed two convertible debt transactions, and executed sales of product lines in order to generate additional capital. On May 6, 2013, we secured a short term loan from Providence Equity of $25.0 million (with net proceeds to us of $20.5 million after discounts and expenses) as a bridge to the conclusion of certain asset sales. In order to obtain the short term loan, we amended our credit agreement to add Providence as a term lender. In connection with this amendment, we agreed to complete certain asset sales and use the proceeds to repay amounts we have borrowed under the credit agreement by July 15, 2013. On August 21, 2013, we amended our credit agreement to extend the time frame within which we must complete such asset sales to make such repayments to September 2, 2013. The corresponding sale of our Zurich Business to II-VI Incorporated ("II-VI") was closed on September 12, 2013. We received proceeds of $90.6 million in cash on September 12, 2013 and an additional $2.9 million subject to a potential post-closing working capital adjustment, which was calculated based on the level of working capital in the Oclaro Switzerland GmbH subsidiary at the September 12, 2013 close versus a target based on working capital at June 29, 2013. We also received $1.4 million in January 2015 that had been held back from the purchase price by II-VI. We also received $5.0 million for a 30 day option to sell our Amplifier Business. On November 1, 2013, the sale of our Amplifier Business to II-VI and certain of its affiliates closed and we received $79.6 million in cash from II-VI. We also received $0.9 million in January 2015 that had been held back from the purchase price by II-VI.

Following the sale of the Zurich Business, we repaid all amounts outstanding under the Credit Agreement as required, and terminated the Credit Agreement on March 14, 2014. On March 28, 2014, we entered into a loan and security agreement (the “Loan Agreement”) with Silicon Valley Bank (the “Bank”) pursuant to which the Bank provided us with a three-year revolving credit facility of up to $40.0 million. Under the Loan Agreement, advances are available based on up to 80 percent of “eligible accounts” as defined in the Loan Agreement.

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The optical communications industry is subject to significant operational fluctuations. In order to remain competitive we incur substantial costs associated with research and development, qualification, production capacity and sales and marketing activities in connection with products that may be purchased, if at all, long after we have incurred such costs. In addition, the rapidly changing industry in which we operate, the length of time between developing and introducing a product to market, frequent changing customer specifications for products, customer cancellations of products and general down cycles in the industry, among other things, make our prospects difficult to evaluate. We are not generating positive cash flow from operations, and it is possible that we may not (i) generate sufficient positive cash flow from operations; (ii) raise funds through the issuance of equity, equity-linked or convertible debt securities; (iii) be able to draw advances under our loan agreement in the future or repay any such amounts; (iv) conclude additional strategic dispositions or similar transactions; or (v) otherwise have sufficient capital resources to meet our future capital or liquidity needs. There are no guarantees we will be able to generate additional financial resources beyond our existing balances.

We have a complex multinational tax structure, and changes in effective tax rates or adverse outcomes resulting from examination of our income tax returns could adversely affect our results.

We have a complex multinational tax structure with multiple types of intercompany transactions, and our allocation of profits and losses among us and our subsidiaries through our intercompany transfer pricing agreements is subject to review by the Internal Revenue Service and other tax authorities. Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations, accounting principles or interpretations thereof. In addition, we are also subject to periodic examination of our income tax returns and related transfer pricing documentation by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these examinations will not have an adverse effect on our operating results and financial condition.

We may incur significant changes in our deferred tax asset valuation allowances based on our current assessment of reaching and maintaining profitability.

We maintain full valuation allowances on our deferred tax assets in several jurisdictions where we conduct business and will continue to do so until there is sufficient evidence to support the reversal of these allowances. There is a reasonable possibility that, in the near term, sufficient evidence may exist to conclude that some, or all, of our valuation allowances are no longer needed and should be released against our deferred tax assets. This release of our valuation allowances may have a material impact on our deferred tax assets and results of operations.

In the future we may need to access the capital markets to raise additional equity, which could dilute our shareholder base.

We may need additional liquidity beyond our current expectations, such as to fund future growth, strengthen our balance sheet or to fund the cost of restructuring activities, and will continue to explore other sources of additional liquidity. These additional sources of liquidity could include one, or a combination, of the following: (i) issuing equity securities, (ii) incurring indebtedness secured by our assets, (iii) issuing debt and/or convertible debt securities, or (iv) selling product lines, other assets and/or portions of our business. There can be no guarantee that we will be able to raise additional funds on terms acceptable to us, or at all.

If we raise funds through the issuance of equity, equity-linked or convertible debt securities, our stockholders may be significantly diluted, and these newly-issued securities may have rights, preferences or privileges senior to those of securities held by existing stockholders. If we raise funds through the issuance of debt instruments, such as we did in February 2015 when we issued convertible notes and December 2012 when we issued exchangeable bonds, the agreements governing such debt instruments may contain covenant restrictions that limit our ability to, among other things: (i) incur additional debt, assume obligations in connection with letters of credit, or issue guarantees; (ii) create liens; (iii) make certain investments or acquisitions; (iv) enter into transactions with our affiliates; (v) sell certain assets; (vi) redeem capital stock or make other restricted payments; (vii) declare or pay dividends or make other distributions to stockholders; and (viii) merge or consolidate with any entity. (See Note 6, Credit Line and Notes, elsewhere in this Quarterly Report on Form 10-Q, for further details). The exchangeable bonds issued in 2012 were subsequently exchanged for common stock. We cannot assure you that additional financing will be available on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, if and when needed, our ability to fund our operations, develop or enhance our products, or otherwise respond to competitive pressures and operate effectively could be significantly limited.

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We may have to incur substantially more debt in the future, which may subject us to restrictive covenants that could limit our ability to operate our business.

In the future, we may incur additional indebtedness through arrangements such as credit agreements or term loans that may impose restrictions and covenants that limit our ability to respond appropriately to market conditions, make capital investments or take advantage of business opportunities. In addition, any debt arrangements we may enter into would likely require us to make regular interest payments, which would adversely affect our results of operations.

We may undertake acquisitions or mergers, that do not prove successful, which would materially and adversely affect our business, prospects, financial condition and results of operations.

From time to time, we consider acquisitions or mergers, collectively referred to as “acquisitions,” of other businesses, assets or companies that would complement our current product offerings, enhance our intellectual property rights or offer other competitive opportunities. For example, on March 26, 2012, we entered into an Agreement and Plan of Merger and Reorganization with Opnext, which was completed on July 23, 2012. However, in the future, we may not be able to identify suitable acquisition candidates at prices we consider appropriate. In addition, we are in an industry that is actively consolidating and, as a result, there is no guarantee that we will successfully and satisfactorily bid against third parties, including competitors, when we identify a critical target we want to acquire.

We cannot readily predict the timing or size of our future acquisitions, or the success of our recent or future acquisitions. Failure to successfully implement our future acquisition plans could have a material adverse effect on our business, prospects, financial condition and results of operations. Even successful acquisitions could have the effect of reducing our cash balances, diluting the ownership interests of existing stockholders or increasing our indebtedness. For example, in our acquisition of Opnext we issued approximately 38.4 million newly issued shares of our common stock to the former stockholders of Opnext.

In connection with the acquisition of Xtellus, Inc. ("Xtellus") in 2009, during the first quarter of fiscal year 2012, we issued 0.9 million shares of our common stock related to the settlement of our Xtellus escrow liability. In October 2011, we paid $0.5 million in cash and issued 0.8 million shares of our common stock to pay earnout obligations related to our acquisition of Mintera Corporation ("Mintera"). In the fourth quarter of fiscal year 2012, we paid $2.2 million to settle a portion of our Mintera earnout obligations, and settled the remaining $8.6 million obligation in cash in the first quarter of fiscal year 2013.

All acquisitions involve potential risks and uncertainties, including the following, any of which could harm our business and adversely affect our results of operations:

• failure to realize the potential financial or strategic benefits of the acquisition;

• increased costs associated with merged or acquired operations;

• increased indebtedness obligations;

• economic dilution to gross and operating profit (loss) and earnings (loss) per share;

• failure to successfully further develop the combined, acquired or remaining technology, which could, among other things, result in the impairment of amounts recorded as goodwill or other intangible assets;

• unanticipated costs and liabilities and unforeseen accounting charges;

• difficulty in integrating product offerings;

• difficulty in coordinating and rationalizing research and development activities to enhance introduction of new products and technologies with reduced cost;

• difficulty in coordinating and integrating the manufacturing activities, including with respect to third-party manufacturers, including coordination, integration or transfers of any manufacturing activities associated with our acquisition of Opnext in 2012;

• delays and difficulties in delivery of products and services;

• failure to effectively integrate or separate management information systems, personnel, research and development, marketing, sales and support operations;

• difficulty in maintaining internal control procedures and disclosure controls that comply with the requirements of the Sarbanes-Oxley Act of 2002, or poor integration of a target’s procedures and controls;

• difficulty in preserving important relationships of our acquired businesses and resolving potential conflicts between business cultures;

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• uncertainty on the part of our existing customers, or the customers of an acquired company, about our ability to operate effectively after a transaction, and the potential loss of such customers;

• loss of key employees;

• difficulty in coordinating the international activities of our acquired businesses, including Opnext, which has substantial operations in Japan as well as the United States, and which uses contract manufacturing suppliers in Southeast Asia;

• the effect of tax laws and other legal and regulatory regimes due to increasing complexities of our global operating structure;

• greater exposure to the impact of foreign currency changes on our business;

• the effect of employment law or regulations or other limitations in foreign jurisdictions that could have an impact on timing, amounts or costs of achieving expected synergies; and

• substantial demands on our management as a result of these transactions that may limit their time to attend to other operational, financial, business and strategic issues.

Our integration with acquired businesses has been and will continue to be a complex, time-consuming and expensive process. We cannot assure you that we will be able to successfully integrate these businesses in a timely manner, or at all, or that any of the anticipated benefits from our previous or future acquisitions will be realized. There are inherent challenges in integrating the operations of geographically diverse companies. We may have difficulty, and may incur unanticipated expenses related to, integrating management and personnel from our acquisitions. Our failure to achieve the strategic objectives of our past and future acquisitions could have a material adverse effect on our revenues, expenses and our other operating results and cash resources, and could result in us not achieving the anticipated potential benefits of these transactions. In addition, we cannot assure you that the growth rate of the combined company will equal the historical growth rate experienced by any of the companies that we have acquired. Comparable risks would accompany any divestiture of businesses or assets we might undertake.

In addition, even if we successfully integrate the operations of companies that we have acquired or may acquire in the future, we cannot predict with certainty which strategic, financial or operating synergies or other benefits, if any, will actually be achieved from our acquisition, the timing of any such benefits, or whether those benefits which have been achieved will be sustainable on a long-term basis. Our failure to successfully integrate the operations of companies that we acquire would likely have a material and adverse impact on our business, prospects, financial condition and results of operations.

We have a large amount of intercompany balances with our China entities which may be subject to taxes and penalties when we try to pay them down or collect them.

Payments for goods and services into and out of China are subject to numerous and over-lapping government regulation with respect to foreign exchange controls, banking controls, import and export controls, and taxes. We have been operating in China for an extended period of time and have accumulated significant intercompany balances with our related entities. Our ability to repay or collect these balances may be restricted by Chinese laws and, as a result, we may be unable to successfully pay down or collect on these balances. As a consequence, we may be assessed additional taxes in China if we are unable to claim bad debt deductions or incur debt forgiveness income from the cancellation of these intercompany balances. Additionally, if we are found not to have complied with the various local laws surrounding cross border payments, we may incur penalties and fines for non-compliance. Any such taxes, penalties and/or fines could be significant in amount and, as a result, could have a material adverse effect on our financial condition, including our cash and cash equivalent balances.

Our intellectual property rights may not be adequately protected.

Our future success will depend, in large part, upon our intellectual property rights, including patents, copyrights, design rights, trade secrets, trademarks and know-how. We maintain an active program of identifying technology appropriate for patent protection. Our practice is to require employees and consultants to execute non-disclosure and proprietary rights agreements upon commencement of employment or consulting arrangements. These agreements acknowledge our exclusive ownership of all intellectual property developed by the individuals during their work for us and require that all proprietary information disclosed will remain confidential. Although such agreements may be binding, they may not be enforceable in full or in part in all jurisdictions and any breach of a confidentiality obligation could have a negative effect on our business and our remedy for such breach may be limited.

Our intellectual property portfolio is an important corporate asset. The steps we have taken and may take in the future to protect our intellectual property may not adequately prevent misappropriation or ensure that others will not develop competitive technologies or products. We cannot assure you that our competitors will not successfully challenge the validity of our patents or design products that avoid infringement of our proprietary rights with respect to our technology. There can be no assurance that other companies are not investigating or developing other similar technologies, that any patents will be issued from any application pending or filed by us, or that, if patents are issued, that the claims allowed will be sufficiently broad to deter or prohibit others

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from marketing similar products. In addition, we cannot assure you that any patents issued to us will not be challenged, invalidated or circumvented, or that the rights under those patents will provide a competitive advantage to us or that our products and technology will be adequately covered by our patents and other intellectual property. Further, the laws of certain regions in which our products are or may be developed, manufactured or sold, including Asia-Pacific, Southeast Asia and Latin America, may not be enforceable to protect our products and intellectual property rights to the same extent as the laws of the United States, the United Kingdom and continental European countries. This is especially relevant since we have transferred our assembly and test operations and chip-on-carrier operations, including certain engineering-related functions, to Shenzhen, China, and have recently completed the transition of portions of these assembly and test operations to Venture in Malaysia.

Opnext historically relied on Hitachi, one of our major shareholders, for assistance with the research and development efforts related to Opnext’s product portfolio. Any failure of Hitachi to continue to provide these services could have a material adverse effect on our business. Opnext’s product expertise is based on the research ability developed within their Hitachi heritage and through joint research and development in lasers and optical technologies. A key factor to Opnext’s business success and strategy is fundamental laser research. Opnext relied on access to Hitachi’s research laboratories pursuant to a research and development agreement with Hitachi, which includes access to Hitachi’s research facilities and engineers, to conduct research and development activities that are important to the establishment of new technologies and products vital to their current and future business. Should access to Hitachi’s research laboratories become unavailable or available at less attractive terms in the future, this may impede development of new technologies and products, and our financial condition and operating results could be materially adversely affected.

Our revenues and operating results are likely to fluctuate significantly as a result of factors that are outside our control, which could adversely impact our operating results.

Our revenues and operating results are likely to fluctuate significantly in the future as a result of factors that are outside our control. The timing of order placement, size of orders and satisfaction of contractual customer acceptance criteria, changes in the pricing of our products due to competitive pressures as well as order or shipment delays or deferrals, with respect to our products, may cause material fluctuations in revenues. Our lengthy sales cycle, which may extend to more than one year, may cause our revenues and operating results to vary from period to period and it may be difficult to predict the timing and amount of any variation. Delays or deferrals in purchasing decisions by our customers may increase as we develop new or enhanced products for new markets, including data communications, industrial, research, consumer and biotechnology markets. Purchase decisions by our customers are also impacted by the capital expenditure plans of the global telecom carriers, which tend to be the primary customers of our customers. Our current and anticipated future dependence on a small number of customers increases the revenue impact of each such customer’s decision to delay or defer purchases from us, or decision not to purchase products from us. For example, during the second half of fiscal 2012, our revenues were adversely impacted by a significant change in demand expectations from a particular major customer. Our expense levels in the future will be based, in large part, on our expectations regarding future revenue sources and, as a result, operating results for any quarterly period in which material orders fail to occur, or are delayed or deferred, could vary significantly. Because our business is capital intensive, significant fluctuations in our revenues, without a corresponding decrease in expenses, can have a significant adverse impact on our operating results.

We have significant operations in China, which exposes us to risks inherent in doing business in China.

A significant portion of our assembly and test operations, chip-on-carrier operations and manufacturing and supply chain management operations are concentrated in our facility in Shenzhen, China. In addition, we have research and development related activities in Shenzhen, China. To be successful in China we will need to:

• qualify our manufacturing lines and the products we produce in Shenzhen, as required by our customers; and

• attract and retain qualified personnel to operate our Shenzhen facility.

We cannot assure you that we will be able to achieve these objectives.

Employee turnover in China is high due to the intensely competitive and fluid market for skilled labor. To operate our Shenzhen facility under these conditions, we need to continue to hire direct manufacturing personnel, administrative personnel and technical personnel; obtain and retain required legal authorization to hire such personnel; and incur the time and expense to hire and train such personnel. On March 28, 2012, shortly after announcing our agreement with Venture to transition certain manufacturing operations, certain of our employees in Shenzhen initiated a work stoppage. The work stoppage impacted our Shenzhen manufacturing capabilities temporarily up to and including April 4, 2012. Revenues for the three months ended March 31, 2012 were adversely impacted by approximately $4.0 million due to the work stoppage.

Inflation rates in China are higher than in most jurisdictions in which we operate. We believe that salary inflation rates for the skilled personnel we hire and seek to retain in Shenzhen are likely to be higher than overall inflation rates.

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Operations in China are subject to greater political, legal and economic risks than our operations in other countries. In particular, the political, legal and economic climate in China, both nationally and regionally, is fluid and unpredictable. For example, we have been subject to commercial litigation in China initiated by a former supplier. For a description of this lawsuit, see Part II, Item 1, Legal Proceedings, "Raysung Commercial Litigation," in this Quarterly Report on Form 10-Q. Our ability to operate in China may be adversely affected by changes in Chinese laws and regulations such as those related to, among other things, taxation, import and export tariffs, environmental regulations, land use rights, intellectual property, currency controls, employee benefits and other matters. In addition, we may not obtain or retain the requisite legal permits to continue to operate in China, and costs or operational limitations may be imposed in connection with obtaining and complying with such permits.

We intend to continue to export the products manufactured at our Shenzhen facility. Under current regulations, upon application and approval by the relevant governmental authorities, we will not be subject to certain Chinese taxes and will be exempt from certain duties on imported materials that are used in the manufacturing process and subsequently exported from China as finished products. However, Chinese trade regulations are in a state of flux, and we may become subject to other forms of taxation and duties in China or may be required to pay export fees in the future. In the event that we become subject to new forms of taxation or export fees in China, our business and results of operations could be materially adversely affected. We may also be required to expend greater amounts than we currently anticipate in connection with increasing production at our Shenzhen facility. Any one of the factors cited above, or a combination of them, could result in unanticipated costs or interruptions in production, which could materially and adversely affect our business.

Our products may infringe the intellectual property rights of others, which could result in expensive litigation or require us to obtain a license to use the technology from third parties, or we may be prohibited from selling certain products in the future.

Companies in the industry in which we operate frequently are sued or receive informal claims of patent infringement or infringement of other intellectual property rights. We have, from time to time, received such claims, including from competitors and from companies that have substantially more resources than us. For example, see Part I, Item 3, Legal Proceedings, "Furukawa Patent Litigation," in our 2014 Annual Report on Form 10-K.

Third parties may in the future assert claims against us concerning our existing products or with respect to future products under development, or with respect to products that we may acquire through acquisitions. We have entered into and may in the future enter into indemnification obligations in favor of some customers that could be triggered upon an allegation or finding that we are infringing other parties’ proprietary rights. If we do infringe a third party’s rights, we may need to negotiate with holders of those rights in order to obtain a license to those rights or otherwise settle any infringement claim. We have from time to time received notices from third parties alleging infringement of their intellectual property and where appropriate have entered into license agreements with those third parties with respect to that intellectual property. Any license agreements that we wish to enter into the future with respect to intellectual property rights may not be available to us on commercially reasonable terms, or at all. We may not in all cases be able to resolve allegations of infringement through licensing arrangements, settlement, alternative designs or otherwise. We may take legal action to determine the validity and scope of the third-party rights or to defend against any allegations of infringement. Holders of intellectual property rights could become more aggressive in alleging infringement of their intellectual property rights and we may be the subject of such claims asserted by a third party. In the course of pursuing any of these means or defending against any lawsuits filed against us, we could incur significant costs and diversion of our resources and our management’s attention. Due to the competitive nature of our industry, it is unlikely that we could increase our prices to cover such costs. In addition, such claims could result in significant penalties or injunctions that could prevent us from selling some of our products in certain markets or result in settlements or judgments that require payment of significant royalties or damages.

If we fail to obtain the right to use the intellectual property rights of others necessary to operate our business, our business and results of operations will be materially and adversely affected.

Certain companies in the telecommunications and optical components markets in which we sell our products have experienced frequent litigation regarding patent and other intellectual property rights. Numerous patents in these industries are held by others, including academic institutions and our competitors. Optical component suppliers may seek to gain a competitive advantage or other third parties, inside or outside our market, may seek an economic return on their intellectual property portfolios by making infringement claims against us. We currently in-license certain intellectual property of third parties, and in the future, we may need to obtain license rights to patents or other intellectual property held by others to the extent necessary for our business. Unless we are able to obtain such licenses on commercially reasonable terms, patents or other intellectual property held by others could be used to inhibit or prohibit our production and sale of existing products and our development of new products for our markets. Licenses granting us the right to use third-party technology may not be available on commercially reasonable terms, or at all. Generally, a license, if granted, would include payments of up-front fees, ongoing royalties or both. These payments or other terms could have a significant adverse impact on our operating results. In addition, in the event we are granted such a license, it is likely such license would be non-exclusive and other parties, including competitors, may be able to utilize such technology. Our larger competitors may be able to obtain licenses or cross-license their technology on better terms than we can, which could put us at a

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competitive disadvantage. In addition, our larger competitors may be able to buy such technology and preclude us from licensing or using such technology.

We generate a significant portion of our revenues internationally and therefore are subject to additional risks associated with the extent of our international operations.

For the nine months ended March 26, 2016 and the fiscal years ended June 27, 2015 and June 28, 2014, 16 percent, 16 percent and 11 percent of our revenues, respectively, were derived from sales to customers located in the United States and 84 percent, 84 percent and 89 percent of our revenues, respectively, were derived from sales to customers located outside the United States. We are subject to additional risks related to operating in foreign countries, including:

• currency fluctuations, which could result in increased operating expenses and reduced revenues;

• difficulty in enforcing or adequately protecting our intellectual property;

• ability to hire qualified candidates;

• trade restrictions, including restrictions imposed by the United States government on trading with parties in foreign countries;

• foreign income, value added and customs taxes;

• trade restrictions, including restrictions imposed by the United States government on trading with parties in foreign countries;

• greater difficulty in accounts receivable collection and longer collection periods;

• political, legal and economic instability in foreign markets;

• foreign regulations;

• changes in, or impositions of, legislative or regulatory requirements;

• transportation delays;

• epidemics and illnesses;

• terrorism and threats of terrorism;

• work stoppages and infrastructure problems due to adverse weather conditions or natural disasters;

• work stoppages related to employee dissatisfaction; and

• the effective protections of, and the ability to enforce, contractual arrangements.

Any of these risks, or any other risks related to our foreign operations, could materially adversely affect our business, financial condition and results of operations.

We may face product liability claims.

Despite quality assurance measures, defects may occur in our products. The occurrence of any defects in our products could give rise to liability for damages caused by such defects, including consequential damages. Such defects could, moreover, impair market acceptance of our products. Both could have a material adverse effect on our business and financial condition. In addition, we may assume product warranty liabilities related to companies we acquire, which could have a material adverse effect on our business and financial condition. In order to mitigate the risk of liability for damages, we carry product liability insurance with a $25.0 million aggregate annual limit and errors and omissions insurance with a $5.0 million annual limit. We cannot assure you that this insurance would adequately cover our costs arising from any defects in our products or otherwise.

At times, the market price of our common stock has fluctuated significantly.

The market price of our common stock has been, and is likely to continue to be, highly volatile. For example, between June 27, 2015 and March 26, 2016, the market price of our common stock ranged from a low of $2.06 per share to a high of $5.41 per share. Many factors could cause the market price of our common stock to rise and fall.

In addition to the matters discussed in other risk factors included in our public filings, some of the events that could impact our stock price are:

• fluctuations in our financial condition and results of operations, including our gross margins and cash flow;

• changes in our business, operations or prospects;

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• hiring or departure of key personnel;

• new contractual relationships with key suppliers or customers by us or our competitors;

• proposed acquisitions and dispositions by us or our competitors;

• financial results or projections that fail to meet public market analysts’ expectations and changes in stock market analysts’ recommendations regarding us, other optical technology companies or the telecommunication industry in general;

• future sales of common stock, or securities convertible into, exchangeable or exercisable for common stock;

• adverse judgments or settlements obligating us to pay damages;

• future issuances of common stock in connection with acquisitions or other transactions;

• acts of war, terrorism, or natural disasters;

• industry, domestic and international market and economic conditions, including sovereign debt issues in certain parts of the world and related global macroeconomic issues;

• low trading volume in our stock;

• developments relating to patents or property rights; and

• government regulatory changes.

In connection with our acquisition of Xtellus, during the first quarter of fiscal year 2012 we issued 0.9 million shares of our common stock to settle our escrow liability. In connection with our acquisition of Mintera, during the second quarter of fiscal year 2012, we issued 0.8 million shares of our common stock to pay portions of the 12 month earnout obligations. In connection with our acquisition of Opnext, during the first quarter of fiscal year 2013, we issued 38.4 million shares of our common stock. In addition, during the second quarter of fiscal year 2014, we issued 13.5 million shares of our common stock in connection with the conversion of the convertible notes issued in December, 2012. We also have $65 million of convertible notes outstanding, which if converted, would result in us issuing up to 44.5 million shares of our common stock. In May 2013, we also issued 1.8 million warrants to purchase our common stock at an exercise price of $1.50 per share in connection with the term loan we received in May 2013. On May 2, 2014, these warrants were exercised, resulting in the issuance of 978,457 shares of our common stock. The issuance of these shares and their subsequent sale will dilute our existing stockholders and could potentially have a negative impact on our stock price.

Our shares of common stock have experienced substantial price and volume fluctuations, in many cases without any direct relationship to our operating performance. An outgrowth of this market volatility is the significant vulnerability of our stock price to any actual or perceived fluctuation in the strength of the markets we serve, regardless of the actual consequence of such fluctuations. As a result, the market price for our stock is highly volatile. These broad market and industry factors have caused the market price of our common stock to fluctuate, and may in the future cause the market price of our common stock to fluctuate, regardless of our actual operating performance.

We are not restricted from issuing additional shares of our common stock, including securities that are convertible into or exchangeable for, or that represent the right to receive, shares of our common stock. Issuances of shares of our common stock or convertible securities, including outstanding options and warrants, will dilute the ownership interest of our stockholders.

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We have been named as a party to derivative action lawsuits in the past, and we may be named in additional litigation in the future, all of which would require significant management time and attention and result in significant legal expenses and could result in an unfavorable outcome which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

When the market price of a stock experiences a sharp decline, as has happened to us in the past, holders of that stock have often brought securities class action litigation against the company that issued the stock. Several securities class action lawsuits have been filed against us and certain of our current and former officers and directors. Other class action lawsuits have been initiated in the past against Opnext, us and certain of our respective current and former officers and directors as purported derivative actions. The securities class action complaints alleged violations of section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the Securities and Exchange Commission (the "SEC"). Each purported derivative complaint alleged, among other things, counts for breaches of fiduciary duty, waste, and unjust enrichment. The courts approved the settlement of these lawsuits and the settlements became final in December 2014. For a description of these lawsuits, see Part II, Item 1, Legal Proceedings, "Class Action and Derivative Litigation" in our Quarterly Report on Form 10-Q filed on February 5, 2015. If new litigation of this type were to be initiated in the future, such litigation would likely divert the time and attention of our management and could cause us to incur significant expense in defending against the litigation. In addition, if any such suits were resolved in a manner adverse to us, the damages we could be required to pay may be substantial and could have an adverse impact on our results of operations and our ability to operate our business.

Because we do not intend to pay dividends, stockholders will benefit from an investment in our common stock only if it appreciates in value.

We have never declared or paid any dividends on our common stock. We anticipate that we will retain any future earnings to support operations and to finance the development of our business and do not expect to pay cash dividends in the foreseeable future. As a result, the success of an investment in our common stock will depend entirely upon any future appreciation in its value. There is no guarantee that our common stock will appreciate in value or even maintain the price at which stockholders have purchased their shares.

We are subject to anti-corruption laws in the jurisdictions in which we operate, including the U.S. Foreign Corrupt Practices Act, or the FCPA. Our failure to comply with these laws could result in penalties which could harm our reputation and have a material adverse effect on our business, results of operations and financial condition.

We are subject to the FCPA, which generally prohibits companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits, along with various other anti-corruption laws. Although we have implemented policies and procedures designed to ensure that we, our employees and other intermediaries comply with the FCPA and other anti-corruption laws to which we are subject, there is no assurance that such policies or procedures will work effectively all of the time or protect us against liability under the FCPA or other laws for actions taken by our employees and other intermediaries with respect to our business or any businesses that we may acquire. We have manufacturing operations in China and other jurisdictions, many of which pose elevated risks of anti-corruption violations, and we export our products for sale internationally. This puts us in frequent contact with persons who may be considered “foreign officials” under the FCPA, resulting in an elevated risk of potential FCPA violations. If we are not in compliance with the FCPA and other laws governing the conduct of business with government entities (including local laws), we may be subject to criminal and civil penalties and other remedial measures, which could have an adverse impact on our business, financial condition, results of operations and liquidity. Any investigation of any potential violations of the FCPA or other anti-corruption laws by U.S. or foreign authorities could harm our reputation and have an adverse impact on our business, financial condition and results of operations.

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We sold our Komoro, Zurich and Amplifier Businesses and may pursue other strategic dispositions or a further reduction in the number of our locations which could be difficult to implement, disrupt our business or further change our business profile significantly.

The sale of our Komoro Business in 2014, the sale of our Zurich and Amplifier Businesses in 2013, and any future strategic disposition of assets or businesses or reduction in the number of our locations, each involve numerous risks. These risks include: (i) potential disruption of our ongoing business and distraction of management; (ii) difficulty segregating assets or businesses to be disposed of or consolidated; (iii) exposure to unknown, contingent or other liabilities, including litigation arising in connection with the disposition; (iv) changing our business profile in ways that could have unintended negative consequences; (v) the failure to achieve anticipated benefits; (vi) accounting charges that may affect our financial condition and results of operations; (vii) significant fluctuations in our revenues and operating results; (viii) our ability to support manufacturing services and transition services and the risk to the rest of our business resulting from resources focusing on those services. These asset sales contributed to a decrease in our total revenues during 2014 compared to 2013, and a further decrease of revenues during 2015 compared to 2014. These decreases have and may continue to adversely impact our operating results. Additional asset sales that we may consider in the future could cause us to face similar risks, which could weaken our financial condition and adversely impact our operating results.

In the future we may incur significant additional restructuring charges that could adversely affect our results of operations.

We have previously enacted a series of restructuring plans and cost reduction plans designed to reduce our manufacturing overhead and our operating expenses that have resulted in significant restructuring charges.

For instance, during fiscal years 2015 and 2014, we incurred $2.5 million and $3.5 million in restructuring charges, respectively, in connection with the transition of certain portions of our Shenzhen, China assembly and test operations to Venture. In addition, during the year ended June 27, 2015 and June 28, 2014, we also incurred $4.0 million and $13.2 million in restructuring charges in connection with the restructuring plan we initiated in the first quarter of fiscal year 2014 to simplify our operating footprint, reduce our cost structure and focus our research and development investment in the optical communications market where we can leverage our core competencies.

We cannot assure you that we will not incur additional restructuring charges. Significant additional restructuring charges could materially and adversely affect our operating results in the periods that they are incurred and recognized. In addition, such charges could require significant cash commitments that may adversely affect our cash balances.

We may undertake divestitures of portions of our business, such as the divestiture of our Komoro Business, Zurich Business and our Amplifier Business, that require us to continue providing substantial post-divestiture transition services and support, which may cause us to incur unanticipated costs and liabilities and adversely affect our financial condition and results of operations.

From time to time, we consider divestitures of product lines or portions of our assets in order to streamline our business, focus on our core operations and raise cash. For example, on October 27, 2014, we sold our Komoro Business to Ushio Opto Semiconductors, Inc. ("Ushio"). In addition, on September 12, 2013, we sold our Zurich Business to II-VI and on November 1, 2013, we sold our Amplifier Business to II-VI (See Note 5, Business Combinations and Dispositions, elsewhere in this Quarterly Report on Form 10-Q, for further details). In connection with these divestitures, we entered into transition service, manufacturing service and supply agreements with both Ushio and II-VI to facilitate the ownership transition, collectively referred to as “transition agreements.” Pursuant to these transition agreements, we continue to manufacture certain products for II-VI and perform limited administrative functions for Ushio. From time to time, substantial amounts of executive resources have been diverted from our core ongoing business to manage these transitions. For each of these divestitures, a material portion of the purchase price was held back to address post-closing claims, including claims related to our performance of the transition agreements. We received a portion of the hold-back from the sale of the Zurich Business during the third quarter of fiscal year 2014. We expected to receive an additional $10.0 million which was subject to hold-back by II-VI until December 31, 2014 to address any post-closing adjustments or claims related to the sale of the Zurich and Amplifier Businesses. 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. Of the $10.0 million subject to hold-back until December 31, 2014, we received $2.35 million in January 2015 and we released the remaining $7.65 million to II-VI Holdings B.V. In order to perform under these transition agreements, we have been required to continue operating certain facilities, dedicate certain manufacturing capacity and maintain certain supplier agreements that have added additional costs and delayed our ability to fully restructure our operations to efficiently focus on our core ongoing business. If we fail to perform under any of these transition agreements, or if we do not successfully execute the restructuring of our operations after our transition agreement obligations have been fulfilled, our financial condition and results of operations could be harmed.

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Litigation may substantially increase our costs and harm our business.

We are a party to a small number of lawsuits and will continue to incur legal fees and other costs related thereto, including potentially expenses for the reimbursement of legal fees of officers and directors under indemnification obligations. The expense of continuing to defend such litigation may be significant. In addition, there can be no assurance that we will be successful in any defense. Further, the amount of time that will be required to resolve these lawsuits is unpredictable and these actions may divert management’s attention from the day-to-day operations of our business, which could adversely affect our business, results of operations and cash flows. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters that may arise from time to time could have a material adverse effect on our business, results of operations and financial condition.

For a description of our current material litigation, see Part II, Item 1 – Legal Proceedings of this Quarterly Report on Form 10-Q.

In addition, from time to time, we have been a party to certain intellectual property infringement litigation as more fully described above under “Risks Related to Our Business — Our products may infringe the intellectual property rights of others, which could result in expensive litigation or require us to obtain a license to use the technology from third parties, or we may be prohibited from selling certain products in the future.”

A lack of effective internal controls over our financial reporting could result in an inability to report our financial results

accurately, which could lead to a loss of investor confidence in our financial reports and have an adverse effect on our stock

price.

In fiscal year 2013, in connection with establishing the fair values of certain assets and liabilities associated with our

acquisition of Opnext, we identified a material weakness over controls related to our recording of the purchase under

Accounting Standards Codification Topic 805, Business Combinations. In the fourth quarter of fiscal year 2013, we made

adjustments to the fair value of certain items, including property and equipment, capital leases and intangible assets. As a result

of these adjustments, management concluded that we did not maintain effective internal controls over financial reporting as of

June 29, 2013, because the potential impact of these adjustments could have been material to our financial position and results

of operations. During the year ended June 28, 2014, we hired new finance personnel and added oversight for the accounting of

acquisitions and dispositions. Our remediation efforts, including the testing of these controls, continued throughout fiscal year

2014. This material weakness was considered remediated in the fourth quarter of fiscal year 2014, once these controls were

shown to be operational for a sufficient period of time to allow management to conclude that these controls were operating

effectively.

In fiscal year 2014, we also identified control deficiencies relating to inventory and property and equipment, which in the

aggregate constituted a material weakness. We determined that our processes, procedures and controls related to the review and

analysis of inventory and property and equipment were not effective to ensure that certain amounts related to these financial

statement accounts were accurately reported in a timely manner. As a result of these adjustments, management concluded that

we did not maintain effective internal controls over financial reporting as of June 28, 2014. Our remediation efforts, including

the testing of these controls, continued throughout fiscal year 2015. This material weakness was considered remediated in the

fourth quarter of fiscal year 2015, once these controls were shown to be operational for a sufficient period of time to allow

management to conclude that these controls were operating effectively.

In addition, we have in the past, and may in the future, acquire companies that have either experienced material weaknesses in

their internal controls over financial reporting or have had no previous reporting obligations under Sarbanes-Oxley. Failure to

integrate acquired businesses into our internal controls over financial reporting could cause those controls to fail.

We cannot assure you that similar material weaknesses will not recur in the future. If additional material weaknesses or

significant deficiencies in our internal control are discovered or occur in the future, our consolidated financial statements may

contain material misstatements and we could be required to restate our financial results.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports. Our failure to

implement and maintain effective internal control over financial reporting could result in a material misstatement of our

financial statements or otherwise cause us to fail to meet our financial reporting obligations. This, in turn, could result in a loss

of investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our

business, financial condition, operating results and our stock price, and we could be subject to stockholder litigation and our

common stock may be delisted as a result. Even if we are able to implement and maintain effective internal control over

financial reporting, the costs of doing business may increase and our management may be required to dedicate greater time and

resources to that effort.

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Prior to our acquisition of Opnext, Opnext licensed its intellectual property to Hitachi and its wholly owned subsidiaries without restriction. In addition, Hitachi is free to license certain of Hitachi’s intellectual property that Opnext used in its business to any third party, including competitors, which could harm our business and operating results.

Opnext was initially created as a stand-alone entity by acquiring certain assets of Hitachi through various transactions. In connection with these transactions, Opnext acquired a number of patents and know-how from Hitachi, but also granted Hitachi and its wholly owned subsidiaries a perpetual right to continue to use those patents and know-how, as well as other patents and know-how that Opnext developed during a period which ended in July 2011 (or October 2012 in certain cases). This license back to Hitachi is broad and permits Hitachi to use this intellectual property for any products or services anywhere in the world, including licensing this intellectual property to our competitors.

Additionally, while significant intellectual property owned by Hitachi was assigned to Opnext when Opnext was formed, Hitachi retained and only licensed to Opnext the intellectual property rights to underlying technologies used in both Opnext products and the products of Hitachi. Under the agreement, Hitachi remains free to license these intellectual property rights to the underlying technologies to any party, including competitors. The intellectual property that has been retained by Hitachi and that can be licensed in this manner does not relate solely or primarily to one or more of Opnext’s products, or groups of products; rather, the intellectual property that is licensed to Opnext by Hitachi is generally used broadly across Opnext’s entire product portfolio. Competition by third parties using the underlying technologies retained by Hitachi could harm the Opnext business, financial condition and results of operations.

We may record additional impairment charges that will adversely impact our results of operations.

As of March 26, 2016, we had $1.8 million in other intangible assets and $54.4 million of property and equipment, net on our condensed consolidated balance sheet. If we make changes in our business strategy or if market or other conditions adversely affect our business operations, we may be forced to record an impairment charge related to these assets, which would adversely impact our results of operations. If impairment has occurred, we will be required to record an impairment charge for the difference between the carrying value of the other intangible assets and the implied fair value of the other intangible assets in the period in which such determination is made. The testing of other intangible assets for impairment requires us to make significant estimates about the future performance and cash flows of our business, as well as other assumptions. These estimates can be affected by numerous factors, including changes in economic, industry, or market conditions, changes in underlying business operations, future reporting unit operating performance, changes in competition, or changes in technologies. Any changes in key assumptions, or actual performance compared with those assumptions, about our business and its future prospects or other assumptions could affect the fair value of one or more reporting units, and result in an impairment charge.

During the fourth quarter of fiscal year 2013 we completed our annual analysis for potential impairment of our goodwill, which included examining, based on factors and conditions then existing, the impact of current general economic conditions on our future prospects and the current level of our market capitalization. Based on this analysis, we determined that the goodwill related to our Mintera reporting unit was fully impaired. This resulted in a $10.9 million impairment charge in our statement of operations for fiscal year 2013. In addition, during the first quarter of fiscal year 2013, we recorded $0.9 million in impairment charges related to the impairment of certain technology that is now considered redundant following the acquisition of Opnext. In the fourth quarter of fiscal year 2013, we recorded an additional $13.7 million impairment charge related to the impairment of intangible assets related to certain technologies and we recorded impairment charges of $1.7 million related to other long-lived assets.

Man-made problems such as computer viruses or terrorism may disrupt our operations and harm our operating results.

Despite our implementation of network security measures our servers are vulnerable to computer viruses, break-ins, and similar disruptions from unauthorized tampering with our computer systems. Any such event could have a material adverse effect on our business, operating results, and financial condition. Efforts to limit the ability of malicious third parties to disrupt the operations of the Internet or undermine our own security efforts may meet with resistance. In addition, the continued threat of terrorism and heightened security and military action in response to this threat, or any future acts of terrorism, may cause further disruptions to the economies of the United States and other countries and create further uncertainties or otherwise materially harm our business, operating results, and financial condition. Likewise, events such as widespread blackouts could have similar negative impacts. To the extent that such disruptions or uncertainties result in delays or cancellations of customer orders or the manufacture or shipment of our products, our business, operating results, and financial condition could be materially and adversely affected.

We may be subject to theft, loss, or misuse of personal data about our employees, customers, or other third parties, which could increase our expenses, damage our reputation, or result in legal or regulatory proceedings.

The theft, loss, or misuse of personal data collected, used, stored, or transferred by us to run our business could result in significantly increased security costs or costs related to defending legal claims. Global privacy legislation, enforcement, and policy activity in this area are rapidly expanding and creating a complex compliance regulatory environment. Costs to comply with and implement these privacy-related and data protection measures could be significant. In addition, our even inadvertent failure to comply with

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federal, state, or international privacy-related or data protection laws and regulations could result in proceedings against us by governmental entities or others.

Our business and operating results may be adversely affected by natural disasters or other catastrophic events beyond our control.

Our business and operating results are vulnerable to natural disasters, such as earthquakes, fires, tsunami, volcanic activity and floods, as well as other events beyond our control such as power loss, telecommunications failures and uncertainties arising out of terrorist attacks in the United States and armed conflicts overseas. For example, in the latter three quarters of fiscal year 2012, our results of operations were materially and adversely impacted by the flooding in Thailand. Additionally, our corporate headquarters and a portion of our research and development and manufacturing operations are located in Silicon Valley, California, and select manufacturing facilities are located in Japan. These regions in particular have been vulnerable to natural disasters, such as the 2011 earthquake and subsequent tsunami that occurred in Japan, and the April 2016 earthquakes that took place on the island of Kyushu in Japan. The occurrence of any of these events could pose physical risks to our property and personnel, which may adversely affect our ability to produce and deliver products to our customers. Although we presently maintain insurance against certain of these events, we cannot be certain that our insurance will be adequate to cover any damage sustained by us or by our customers.

Our business involves the use of hazardous materials, and we are subject to environmental and import/export laws and regulations that may expose us to liability and increase our costs.

We handle hazardous materials as part of our manufacturing activities. Consequently, our operations are subject to environmental laws and regulations governing, among other things, the use and handling of hazardous substances and waste disposal. We may incur costs to comply with current or future environmental laws. As with other companies engaged in manufacturing activities that involve hazardous materials, a risk of environmental liability is inherent in our manufacturing activities, as is the risk that our facilities will be shut down in the event of a release of hazardous waste, or that we would be subject to extensive monetary liabilities. The costs associated with environmental compliance or remediation efforts or other environmental liabilities could adversely affect our business. Under applicable European Union regulations, we, along with other electronics component manufacturers, are prohibited from using lead and certain other hazardous materials in our products. We could lose business or face product returns if we fail to maintain these requirements properly.

In addition, the sale and manufacture of certain of our products require on-going compliance with governmental security and import/export regulations. We may, in the future, be subject to investigation which may result in fines for violations of security and import/export regulations. Furthermore, any disruptions of our product shipments in the future, including disruptions as a result of efforts to comply with governmental regulations, could adversely affect our revenues, gross margins and results of operations.

The disclosure requirements related to the “conflict minerals” provision of the Dodd-Frank Act may limit our supply and increase our costs for certain metals used in our products and could affect our reputation with customers or shareholders.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), the SEC adopted a rule requiring public companies to disclose the use of specified minerals, known as conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured. The rule, which went into effect for calendar year 2013 and requires a disclosure report to be filed with the SEC generally by the end of May each year, requires companies to perform due diligence, disclose and report whether or not such minerals originate from the Democratic Republic of Congo (DRC) or an adjoining country. The rule could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals used in the manufacturing of our products. The number of suppliers who provide conflict-free minerals may be limited. In addition, there may be material costs associated with complying with the disclosure requirements, such as costs related to the due diligence process of determining the source of certain minerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a consequence of such verification activities. As our supply chain is complex and we use contract manufacturers for some of our products, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. If we cannot determine that our products exclude conflict minerals sourced from the DRC or adjoining countries, some of our customers may discontinue, or materially reduce, purchases of our products, which could negatively affect our results of operations.

We can issue shares of preferred stock that may adversely affect your rights as a stockholder of our common stock.

Our certificate of incorporation authorizes us to issue up to 1.0 million shares of preferred stock with designations, rights and preferences determined from time-to-time by our board of directors. Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights superior to those of holders of our common stock. For example, an issuance of shares of preferred stock could:

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• adversely affect the voting power of the holders of our common stock;

• make it more difficult for a third-party to gain control of us;

• discourage bids for our common stock at a premium;

• limit or eliminate any payments that the holders of our common stock could expect to receive upon our liquidation; or

• otherwise adversely affect the market price of our common stock.

We may in the future issue shares of authorized preferred stock at any time.

Delaware law and our charter documents contain provisions that could discourage or prevent a potential takeover, even if such a transaction would be beneficial to our stockholders.

Some provisions of our certificate of incorporation and bylaws, as well as provisions of Delaware law, may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable. These include provisions:

• authorizing the board of directors to issue preferred stock;

• prohibiting cumulative voting in the election of directors;

• limiting the persons who may call special meetings of stockholders;

• prohibiting stockholder actions by written consent;

• creating a classified board of directors pursuant to which our directors are elected for staggered three-year terms;

• permitting the board of directors to increase the size of the board and to fill vacancies;

• requiring a super-majority vote of our stockholders to amend our bylaws and certain provisions of our certificate of incorporation; and

• establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

We are subject to the provisions of Section 203 of the Delaware General Corporation Law which limit the right of a corporation to engage in a business combination with a holder of 15 percent or more of the corporation’s outstanding voting securities, or certain affiliated persons. We do not currently have a stockholder rights plan in place.

Although we believe that these charter and bylaw provisions, and provisions of Delaware law, provide an opportunity for the board to assure that our stockholders realize full value for their investment, they could have the effect of delaying or preventing a change of control, even under circumstances that some stockholders may consider beneficial.

ITEM 6. EXHIBITS

The exhibits filed as part of this Quarterly Report on Form 10-Q, or incorporated by reference, are listed on the Exhibit Index immediately preceding such exhibits, which Exhibit Index is incorporated herein by reference.

52

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorize

	OCLARO, INC. (Registrant)
May 5, 2016	By:	/s/ GREG DOUGHERTY
		Greg Dougherty Chief Executive Officer (Principal Executive Officer)
May 5, 2016	By:	/s/ PETE MANGAN
		Pete Mangan Chief Financial Officer (Principal Financial Officer)

53

EXHIBIT INDEX

Exhibit Number	Description of Exhibit
3.1	Certificate of Amendment to Restated Certificate of Incorporation (previously filed as Exhibit 3.1 to Registrant’s Current Report on Form 8-K, filed on November 10, 2015 and incorporated herein by reference).
31.1 (1)	Certification of Chief Executive Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
31.2 (1)	Certification of Chief Financial Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
32.1 (1)	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2 (1)	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

(1) Filed herewith.

54

EX-31.1

Exhibit 31.1

SECTION 302(a) CERTIFICATION

I, Greg Dougherty, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Oclaro, Inc. for the period ended March 26, 2016;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 5, 2016	By:	/s/ GREG DOUGHERTY
		Greg Dougherty
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

SECTION 302(a) CERTIFICATION

I, Pete Mangan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Oclaro, Inc. for the period ended March 26, 2016;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 5, 2016	By:	/s/ PETE MANGAN
		Pete Mangan
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Oclaro, Inc. (the “Company”) for the period ended March 26, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Greg Dougherty, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that to his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 5, 2016	By:	/s/ GREG DOUGHERTY
		Greg Dougherty
		Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Oclaro, Inc. (the “Company”) for the period ended March 26, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Pete Mangan, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that to his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 5, 2016	By:	/s/ PETE MANGAN
		Pete Mangan
		Chief Financial Officer
		(Principal Financial Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Mar. 26, 2016	Apr. 28, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 26, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Trading Symbol	OCLR
Entity Registrant Name	OCLARO, INC.
Entity Central Index Key	0001110647
Current Fiscal Year End Date	--07-02
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		112,147,088

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Mar. 26, 2016	Jun. 27, 2015
Current assets:
Cash and cash equivalents	$ 106,081	$ 111,840
Restricted cash	715	3,275
Accounts receivable, net of allowances for doubtful accounts of $2,296 and $2,815 as of March 26, 2016 and June 27, 2015, respectively; and including $757 and $709 due from related parties as of March 26, 2016 and June 27, 2015, respectively	84,704	74,815
Inventories	72,491	66,342
Prepaid expenses and other current assets	21,034	22,746
Total current assets	285,025	279,018
Property and equipment, net	54,376	41,766
Other intangible assets, net	1,770	2,579
Other non-current assets	2,205	2,521
Total assets	343,376	325,884
Current liabilities:
Accounts payable, including $5,450 and $4,831 due to related parties at March 26, 2016 and June 27, 2015, respectively	63,526	53,133
Accrued expenses and other liabilities	42,308	35,648
Capital lease obligations, current	3,813	3,580
Total current liabilities	109,647	92,361
Deferred gain on sale-leaseback	7,442	8,978
Convertible notes payable	61,855	61,246
Capital lease obligations, non-current	2,017	1,167
Other non-current liabilities	9,475	9,132
Total liabilities	$ 190,436	$ 172,884
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock: 1,000 shares authorized; none issued and outstanding	$ 0	$ 0
Common stock: $0.01 par value per share; 275,000 shares authorized, 112,095 shares issued and outstanding at March 26, 2016; and 175,000 shares authorized, 109,889 shares issued and outstanding at June 27, 2015	1,121	1,099
Additional paid-in capital	1,469,645	1,464,567
Accumulated other comprehensive income	39,630	41,526
Accumulated deficit	(1,357,456)	(1,354,192)
Total stockholders’ equity	152,940	153,000
Total liabilities and stockholders’ equity	$ 343,376	$ 325,884

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 26, 2016	Jun. 27, 2015
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 2,296	$ 2,815
Accounts receivable, due from related parties	757	709
Accounts payable, due to related parties	$ 5,450	$ 4,831
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized	275,000,000	175,000,000
Common stock, shares issued	112,095,000	109,889,000
Common stock, shares outstanding	112,095,000	109,889,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015
Income Statement [Abstract]
Revenues, including $719 and $2,618 from related parties for the three and nine months ended March 26, 2016, respectively, and $794 and $1,971 from related parties for the three and nine months ended March 28, 2015, respectively	$ 101,050	$ 83,023	$ 282,729	$ 259,084
Cost of revenues	74,114	70,323	206,488	218,209
Gross profit	26,936	12,700	76,241	40,875
Operating expenses:
Research and development	11,379	11,732	33,399	37,366
Selling, general and administrative	13,055	12,048	39,054	41,108
Amortization of other intangible assets	247	194	748	881
Restructuring, acquisition and related (income) expense, net	(59)	2,246	(21)	(4,062)
(Gain) loss on sale of property and equipment	(145)	(138)	22	233
Total operating expenses	24,477	26,082	73,202	75,526
Operating income (loss)	2,459	(13,382)	3,039	(34,651)
Other income (expense):
Interest income (expense), net	(1,203)	(599)	(3,726)	(792)
Gain (loss) on foreign currency transactions, net	(865)	2,892	(861)	207
Other income (expense), net	174	366	644	1,250
Total other income (expense)	(1,894)	2,659	(3,943)	665
Income (loss) from continuing operations before income taxes	565	(10,723)	(904)	(33,986)
Income tax (benefit) provision	476	(537)	2,360	379
Income (loss) from continuing operations	89	(10,186)	(3,264)	(34,365)
Loss from discontinued operations, net of tax	0	0	0	(8,458)
Net income (loss)	$ 89	$ (10,186)	$ (3,264)	$ (42,823)
Basic net income (loss) per share:
Income (loss) per share from continuing operations (in usd per share)	$ 0.00	$ (0.09)	$ (0.03)	$ (0.32)
Loss per share from discontinued operations (in usd per share)	0.00	0.00	0.00	(0.08)
Basic net income (loss) per share (in usd per share)	0.00	(0.09)	(0.03)	(0.40)
Diluted net income (loss) per share:
Income (loss) per share from continuing operations (in usd per share)	0.00	(0.09)	(0.03)	(0.32)
Loss per share from discontinued operations (in usd per share)	0.00	0.00	0.00	(0.08)
Diluted net income (loss) per share (in usd per share)	$ 0.00	$ (0.09)	$ (0.03)	$ (0.40)
Shares used in computing net income (loss) per share:
Basic (in shares)	110,882	108,357	110,212	107,818
Diluted (in shares)	113,699	108,357	110,212	107,818

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015
Income Statement [Abstract]
Revenues from related parties	$ 719	$ 794	$ 2,618	$ 1,971

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 89	$ (10,186)	$ (3,264)	$ (42,823)
Other comprehensive income (loss):
Unrealized gain on marketable securities	0	224	0	209
Currency translation adjustments	593	(4,945)	(1,886)	(8,528)
Pension adjustment, net of tax benefits	0	11	(10)	590
Total comprehensive income (loss)	$ 682	$ (14,896)	$ (5,160)	$ (50,552)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015
Cash flows from operating activities:
Net loss	$ (3,264)	$ (42,823)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Amortization of deferred gain on sale-leaseback	(648)	(684)
Amortization of debt discount and issuance costs in connection with convertible notes payable	609	99
Gain on sale of Komoro Business	0	(8,315)
Adjustment to the hold-backs related to the sales of the Zurich and Amplifier Businesses	0	7,650
Gain on sale of assets	0	223
Depreciation and amortization	12,198	14,122
Stock-based compensation expense	6,440	4,617
Other non-cash adjustments	22	161
Changes in operating assets and liabilities:
Accounts receivable, net	(12,969)	(7,887)
Inventories	(7,553)	(4,639)
Prepaid expenses and other current assets	502	7,001
Other non-current assets	264	(925)
Accounts payable	1,433	499
Accrued expenses and other liabilities	5,959	(8,370)
Net cash (used in) provided by operating activities	2,993	(39,271)
Cash flows from investing activities:
Purchases of property and equipment	(12,362)	(13,809)
Proceeds from sale of short-term investments and other assets	0	141
Transfer from restricted cash	2,453	940
Net cash (used in) provided by investing activities	(9,909)	1,957
Cash flows from financing activities:
Proceeds from issuance of common stock, net	179	21
Proceeds from the sale of convertible notes, net	0	61,587
Shares repurchased for tax withholdings on vesting of restricted stock units	(1,504)	0
Payments on capital lease obligations	(2,303)	(2,953)
Net cash used in financing activities	(3,628)	58,655
Effect of exchange rate on cash and cash equivalents	4,785	(505)
Net increase (decrease) in cash and cash equivalents	(5,759)	20,836
Cash and cash equivalents at beginning of period	111,840	98,973
Cash and cash equivalents at end of period	106,081	119,809
Supplemental disclosures of non-cash transactions:
Capital lease obligations incurred for purchases of property and equipment	(2,392)	0
Purchases of property and equipment funded by accounts payable	(9,567)	0
Komoro Business
Cash flows from investing activities:
Proceeds from sale of business	0	12,335
Amplifier Business
Cash flows from investing activities:
Proceeds from sale of business	0	940
Zurich Business
Cash flows from investing activities:
Proceeds from sale of business	$ 0	$ 1,410

XML

BASIS OF PREPARATION

9 Months Ended

Mar. 26, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PREPARATION

BASIS OF PREPARATION

Basis of Presentation

Oclaro, Inc., a Delaware corporation, is sometimes referred to in this Quarterly Report on Form 10-Q as “Oclaro,” “we,” “us” or “our.”

The accompanying unaudited condensed consolidated financial statements of Oclaro as of March 26, 2016 and for the three and nine months ended March 26, 2016 and March 28, 2015 have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Article 10 of Securities and Exchange Commission ("SEC") Regulation S-X, and include the accounts of Oclaro and all of our subsidiaries. Accordingly, they do not include all of the information and footnotes required by such accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our consolidated financial position and results of operations have been included. The condensed consolidated results of operations for the three and nine months ended March 26, 2016 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending July 2, 2016.

The condensed consolidated balance sheet as of June 27, 2015 has been derived from our audited financial statements as of such date, but does not include all disclosures required by U.S. GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended June 27, 2015 ("2015 Form 10-K").

On August 5, 2014, we entered into a separation agreement to sell our industrial and consumer business of Oclaro Japan located at our Komoro, Japan facility to Ushio Opto Semiconductors, Inc. ("Ushio Opto"). On October 27, 2014, the sale was completed. This transaction is more fully discussed in Note 5, Business Combinations and Dispositions.

On November 1, 2013, we sold our optical amplifier and micro-optics business (the “Amplifier Business”) to II-VI Incorporated ("II-VI"). On September 12, 2013, we sold our Oclaro Switzerland GmbH subsidiary and associated laser diodes and pump business (the “Zurich Business”) to II-VI. These sales are reported as discontinued operations, which require retrospective restatement of prior periods to classify the results of operations as discontinued operations. The notes to our condensed consolidated financial statements relate to our continuing operations only, unless otherwise indicated. These transactions are more fully discussed in Note 5, Business Combinations and Dispositions.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported periods. Examples of significant estimates and assumptions made by management involve the fair value of other intangible assets and long-lived assets, valuation allowances for deferred tax assets, the fair value of stock-based compensation, the fair value of embedded derivatives related to convertible debt, the fair value of pension liabilities, estimates used to determine facility lease loss liabilities, estimates for allowances for doubtful accounts and valuation of excess and obsolete inventories. These judgments can be subjective and complex and consequently actual results could differ materially from those estimates and assumptions. Descriptions of the key estimates and assumptions are included in our 2015 Form 10-K.

Out-of-Period Adjustment

In the quarter ended September 27, 2014, we recorded out-of-period adjustments of approximately $2.0 million in cost of goods sold in our condensed consolidated statements of operations. The adjustments, which increased cost of goods sold in fiscal year 2015, also increased accrued liabilities and decreased inventory, and were made to correct our inventory valuation and the value of our purchase commitment accrual from fiscal year 2014. We determined that the adjustments did not have a material impact to any of the prior period consolidated financial statements.

Fiscal Years

We operate on a 52/53 week year ending on the Saturday closest to June 30. Our fiscal year ending July 2, 2016 will be a 53 week year, with the quarter ended March 26, 2016 being a 13 week quarterly period. Our fiscal quarter ending July 2, 2016 will have 14 weeks. Our fiscal year ended June 27, 2015 was a 52 week year, with the quarter ended March 28, 2015 being a 13 week quarterly period.

Reclassifications

For presentation purposes, we have reclassified certain prior period amounts to conform to the current period financial statement presentation. These reclassifications did not affect our consolidated revenues, net income (loss), cash flows, cash and cash equivalents or stockholders’ equity as previously reported.

XML

RECENT ACCOUNTING STANDARDS

9 Months Ended

Mar. 26, 2016

Accounting Policies [Abstract]

RECENT ACCOUNTING STANDARDS

RECENT ACCOUNTING STANDARDS

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09,  Compensation: Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards, and classification on the the statement of cash flows. This guidance will be effective for us in the first quarter of fiscal 2018, with early adoption permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This guidance will be effective for us in the first quarter of fiscal 2020, with early adoption permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes. This amendment eliminates the requirement to bifurcate deferred taxes between current and non-current on the balance sheet and requires that deferred tax liabilities and assets be classified as non-current on the balance sheet. We elected to early adopt this guidance in the second quarter of fiscal year 2016. The implementation of this guidance did not have a material impact on our financial statements and footnote disclosures.

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments. This amendment requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This guidance is effective for us prospectively in the first quarter of fiscal year 2017. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This update clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, deferring the effective date of ASU 2014-09 by one year, to annual periods, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted for periods beginning after December 15, 2016. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In July 2015, the FASB issued ASU No. 2015-11, Inventory: Simplifying the Measurement of Inventory. Under ASU 2015-11, we are required to measure inventory at the lower of cost and net realizable value. The new guidance clarifies that net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This guidance is effective for us prospectively in the first quarter of fiscal year 2017, with early application permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In June 2015, the FASB issued ASU No. 2015-10, Technical Corrections and Improvements. ASU 2015-10 covers a wide range of Topics in the Codification. The amendments in this ASU represent changes to make minor corrections or minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. This guidance is effective for us prospectively in the first quarter of fiscal year 2017, with early adoption permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In April 2015, the FASB issued ASU No. 2015-04, Compensation – Retirement Benefits: Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets. ASU 2015-04 provides a practical expedient for employers with fiscal year-ends that do not fall on a month-end by permitting those employers to measure defined benefit plan assets and obligations as of the month-end that is closest to the entity's fiscal year-end. This guidance is effective for us prospectively in the first quarter of fiscal year 2017, with early adoption permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement - Extraordinary and Unusual Items. This ASU eliminates from U.S. GAAP the concept of extraordinary items. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. This guidance is effective for us prospectively in the first quarter of fiscal year 2017. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern. The update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. This guidance is effective for us beginning with our annual financial statements for the fiscal year ended July 1, 2017, and interim periods thereafter. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

XML

BALANCE SHEET DETAILS

9 Months Ended

Mar. 26, 2016

Balance Sheet Details [Abstract]

BALANCE SHEET DETAILS

BALANCE SHEET DETAILS

Cash and Cash Equivalents

The following table provides details regarding our cash and cash equivalents at the dates indicated:

	March 26, 2016		June 27, 2015
	(Thousands)
Cash and cash equivalents:
Cash-in-bank	$	81,080	$	110,196
Money market funds	25,001		1,644
	$	106,081	$	111,840

Restricted Cash

As of March 26, 2016, we had restricted cash of $1.0 million, including $0.2 million in other non-current assets, consisting of collateral for the performance of our obligations under certain lease facility agreements, collateral to secure certain of our credit card accounts and deposits for value-added taxes in foreign jurisdictions.

Inventories

The following table provides details regarding our inventories at the dates indicated:

	March 26, 2016		June 27, 2015
	(Thousands)
Inventories:
Raw materials	$	21,656	$	19,610
Work-in-process	30,317		19,812
Finished goods	20,518		26,920
	$	72,491	$	66,342

Property and Equipment, Net

The following table provides details regarding our property and equipment, net at the dates indicated:

	March 26, 2016			June 27, 2015
	(Thousands)
Property and equipment, net:
Buildings and improvements	$	11,493		$	11,837
Plant and machinery	58,574			37,215
Fixtures, fittings and equipment	1,971			1,173
Computer equipment	10,798			12,401
	82,836			62,626
Less: Accumulated depreciation	(28,460		)	(20,860		)
	$	54,376		$	41,766

Property and equipment includes assets under capital leases of $5.8 million at March 26, 2016 and $4.7 million at June 27, 2015, respectively. Amortization associated with assets under capital leases is recorded in depreciation expense.

Other Intangibles Assets, Net

The following table summarizes the activity related to our other intangible assets for the nine months ended March 26, 2016:

	Core and Current Technology			Development and Supply Agreements			Customer Relationships			Patent Portfolio		Other Intangibles		Amortization			Total
	(Thousands)
Balance at June 27, 2015	$	6,249		$	4,595		$	2,402		$	915	$	3,338	$	(14,920	)	$	2,579
Amortization	—			—			—			—		—		(748		)	(748		)
Translations and adjustments	(5		)	(54		)	(2		)	—		—		—			(61		)
Balance at March 26, 2016	$	6,244		$	4,541		$	2,400		$	915	$	3,338	$	(15,668	)	$	1,770

We expect the amortization of intangible assets to be $0.3 million for the remainder of fiscal year 2016, $0.8 million for fiscal year 2017, $0.6 million for fiscal year 2018 and $0.1 million for fiscal year 2019, based on the current level of our other intangible assets as of March 26, 2016.

Accrued Expenses and Other Liabilities

The following table presents details regarding our accrued expenses and other liabilities at the dates indicated:

	March 26, 2016		June 27, 2015
	(Thousands)
Accrued expenses and other liabilities:
Trade payables	$	10,046	$	5,250
Compensation and benefits related accruals	13,991		11,298
Warranty accrual	3,127		2,932
Accrued restructuring, current	188		712
Purchase commitments in excess of future demand, current	3,101		3,162
Other accruals	11,855		12,294
	$	42,308	$	35,648

Accrued Restructuring

The following table summarizes the activity related to our accrued restructuring charges for the nine months ended March 26, 2016:

	Lease Cancellations, Commitments and Other Charges			Termination Payments to Employees and Related Costs			Total Accrued Restructuring Charges
	(Thousands)
Balance at June 27, 2015	$	228		$	484		$	712
Charged to restructuring costs	—			324			324
Paid or other adjustments	(228		)	(620		)	(848		)
Balance at March 26, 2016	$	—		$	188		$	188
Current portion	—			188			188
Non-current portion	—			—			—

The current portion of accrued restructuring liabilities is included in the caption accrued expenses and other liabilities in the condensed consolidated balance sheet.

During the first quarter of fiscal year 2014, we initiated a restructuring plan to simplify our operating footprint, reduce our cost structure and focus our research and development investment in the optical communications market where we can leverage our core competencies. During the three months ended March 26, 2016, we recorded minimal restructuring charges. During the nine months ended March 26, 2016, we recorded restructuring charges of $0.3 million in connection with this restructuring plan, which related to workforce reductions. During the three months ended March 26, 2016, we made minimal scheduled payments. During the nine months ended March 26, 2016, we made scheduled payments of $0.5 million. As of March 26, 2016, we had $0.2 million in accrued restructuring liabilities related to this restructuring plan.

During fiscal year 2012, we initiated a restructuring plan in connection with the transfer of a portion of our Shenzhen, China manufacturing operations to Venture Corporation Limited ("Venture"). This transition occurred in a phased and gradual transfer of certain products and was completed in fiscal year 2015. In connection with this transition, we recorded restructuring charges related to employee separation charges of $0.8 million and $2.6 million during the three and nine months ended March 28, 2015, respectively and made scheduled payments of $0.2 million and $2.3 million, respectively, to settle a portion of these restructuring liabilities. As of March 26, 2016 and June 27, 2015, we had no remaining accrued restructuring liabilities related to this restructuring plan.

Common Stock

On November 10, 2015, our stockholders approved an amendment to our Restated Certificate of Incorporation, increasing the number of authorized shares of our common stock from 175.0 million shares to 275.0 million shares.

Accumulated Other Comprehensive Income

The following table presents the components of accumulated other comprehensive income at the dates indicated:

	March 26, 2016		June 27, 2015
	(Thousands)
Accumulated other comprehensive income:
Currency translation adjustments	$	39,465	$	41,351
Japan defined benefit plan	165		175
	$	39,630	$	41,526

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FAIR VALUE

9 Months Ended

Mar. 26, 2016

Fair Value Disclosures [Abstract]

FAIR VALUE

FAIR VALUE

We define fair value as the estimated price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk. We apply the following fair value hierarchy, which ranks the quality and reliability of the information used to determine fair values:

Level 1- Quoted prices in active markets for identical assets or liabilities.

Level 2- Inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices of identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets), or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3- Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Our cash equivalents are generally classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most marketable securities and money market securities.

The contingent obligation related to the make-whole premium on our 6.00% Convertible Senior Notes was valued using a binomial lattice valuation model which estimated the value based on the probability and timing of conversion. As of February 19, 2015, the date of the debt issuance, and as of March 26, 2016, the fair value of this contingent obligation is estimated at zero. The contingent obligation will continue to be revalued each reporting period and classified within Level 3 of the fair value hierarchy.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are shown in the table below by their corresponding balance sheet caption and consisted of the following types of instruments at March 26, 2016 and June 27, 2015:

	Fair Value Measurement at March 26, 2016 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(Thousands)
Assets:
Cash and cash equivalents: (1)
Money market funds	$	25,001	$	—	$	—	$	25,001
Restricted cash:
Money market funds	712		—		—		712
Total assets measured at fair value	$	25,713	$	—	$	—	$	25,713

⁽¹⁾  Excludes $81.1 million in cash held in our bank accounts at March 26, 2016.

	Fair Value Measurement at June 27, 2015 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:	(Thousands)
Cash and cash equivalents: (1)
Money market funds	$	1,644	$	—	$	—	$	1,644
Restricted cash:
Money market funds	1,215		—		—		1,215
Total assets measured at fair value	$	2,859	$	—	$	—	$	2,859

⁽¹⁾  Excludes $110.2 million in cash held in our bank accounts at June 27, 2015.

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BUSINESS COMBINATIONS AND DISPOSITIONS

9 Months Ended

Mar. 26, 2016

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”). On October 27, 2014, the sale was completed. In connection with the sale of the Komoro Business, we transferred net assets with a book value of $6.3 million to Ushio Opto. 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 were 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.

We completed the transfer of net assets in the second quarter of fiscal year 2015 and recognized a gain of $8.3 million within restructuring, acquisition and related (income) expense, net in the condensed consolidated statements of operations.

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).

This sale is more fully discussed in Note 3, Business Combinations and Dispositions, to our consolidated financial statements included in our 2015 Form 10-K.

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. 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.

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 an exclusive option to buy the assets, 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. 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.

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

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)
Revenues	$	—	$	—	$	—	$	—
Cost of revenues	—		—		—		—
Gross profit	—		—		—		—
Operating expenses	—		—		—		161
Other income (expense), net	—		—		—		(3,060		)
Loss from discontinued operations before income taxes	—		—		—		(3,221		)
Income tax provision	—		—		—		—
Loss from discontinued operations	$	—	$	—	$	—	$	(3,221	)

This sale is more fully discussed in Note 3, Business Combinations and Dispositions, to our consolidated financial statements included in our 2015 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, which included the 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. 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.

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 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 further 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. 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.

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

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)				(Thousands)
Revenues	$	—	$	—	$	—	$	—
Cost of revenues	—		—		—		163
Gross loss	—		—		—		(163		)
Operating expenses	—		—		—		484
Other income (expense), net	—		—		—		(4,590		)
Loss from discontinued operations before income taxes	—		—		—		(5,237		)
Income tax provision	—		—		—		—
Loss from discontinued operations	$	—	$	—	$	—	$	(5,237	)

This acquisition is more fully discussed in Note 3, Business Combinations and Dispositions, to our consolidated financial statements included in our 2015 Annual Report on Form 10-K.

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CREDIT LINE AND NOTES

9 Months Ended

Mar. 26, 2016

Debt Disclosure [Abstract]

CREDIT LINE AND NOTES

CREDIT LINE AND NOTES

6.00% Convertible Senior Notes due 2020 ("6.00% Notes")

On February 12, 2015, we entered into a Purchase Agreement (the “Purchase Agreement”), with Jefferies LLC (the “Initial Purchaser”), pursuant to which we agreed to issue and sell to the Initial Purchaser up to $65.0 million in aggregate principal Convertible Senior Notes due 2020 (the “6.00% Notes”). On February 19, 2015, we closed the private placement of $65.0 million aggregate principal amount of the 6.00% Notes. The 6.00% Notes were sold at 100 percent of par, resulting in net proceeds of approximately $61.6 million, after deducting the Initial Purchaser’s discounts of $3.4 million. We also incurred offering expenses of $0.6 million. The net proceeds of this offering will be used for general corporate purposes, including working capital for, among other things, investing in development of new products and technologies.

The Notes will mature on February 15, 2020 and will bear interest at a fixed rate of 6.00 percent per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2015. During the three and nine months ended March 26, 2016, we recorded $1.2 million and $3.5 million, respectively, in interest expense, including the amortization of the debt discount and the issuance costs, and made interest payments of $3.9 million related to the 6.00% Notes during the nine months ended March 26, 2016.

The Purchase Agreement contains customary representations and warranties of the parties and indemnification and contribution provisions under which we, on the one hand, and the Initial Purchaser, on the other, have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).

The 6.00% Notes are governed by an Indenture, dated February 19, 2015 (the “Indenture”), entered into between us and U.S. Bank National Association, as trustee (the “Trustee”). The Indenture contains affirmative and negative covenants that, among other things, limits our ability to incur, assume or guarantee additional indebtedness; create liens; sell or otherwise dispose of substantially all of our assets; and enter into mergers and consolidations. The Indenture also contains customary events of default. Upon the occurrence of certain events of default, the Trustee or the holders of the 6.00% Notes may declare all of the outstanding 6.00% Notes to be due and payable immediately.

Prior to February 15, 2018, in the event that the last reported sale price of our common stock for 20 or more trading days (whether or not consecutive) in a period of 30 consecutive trading days ending within five trading days immediately prior to the date we receive a notice of conversion exceeds the conversion price in effect on each such trading day, we will, in addition to delivering shares upon conversion by the holder of 6.00% Notes, together with cash in lieu of fractional shares, make an interest make-whole payment in cash equal to the sum of the remaining scheduled payments of interest on the 6.00% Notes to be converted through February 15, 2018.

Prior to February 15, 2018, we may not redeem the 6.00% Notes. On or after February 15, 2018, we may redeem for cash all of the 6.00% Notes if the last reported sale price per share of our common stock has been at least 130 percent of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending within five trading days prior to the date on which we provide notice of redemption. The redemption price will equal (i) 100 percent of the principal amount of the Notes being redeemed, plus (ii) accrued and unpaid interest, including additional interest, if any, to, but excluding, the redemption date plus (iii) the sum of the present values of each of the remaining scheduled payments of interest that would have been made on the 6.00% Notes to be redeemed had such 6.00% Notes remained outstanding from the redemption date to the maturity date (excluding interest accrued to, but excluding, the redemption date that is otherwise paid pursuant to the immediately preceding clause (ii)). Once notified, the holders of the 6.00% Notes could elect to convert, at which point they would receive their shares of common stock based on the initial exchange rate plus up to an additional 11.2 million shares.

Upon the occurrence of a fundamental change, subject to certain conditions, each holder of the 6.00% Notes will have the option to require that we purchase all or a portion of such holder’s Notes in cash at a purchase price equal to 100 percent of the principal amount of the 6.00% Notes to be purchased plus any accrued and unpaid interest, including additional interest, if any, to, but excluding, the fundamental change purchase date. Any holder that converts its 6.00% Notes in connection with a make-whole fundamental change, as defined in the Indenture, will not receive the interest make-whole payment but will instead receive the additional shares set forth in the Indenture.

Our contingent obligation to make a make-whole payment in the event of an early conversion by the holders of the 6.00% Notes, or at our election to redeem the 6.00% Notes for cash, are both considered embedded derivatives. As of February 19, 2015, the date of the debt issuance, and as of March 26, 2016, the fair value of the embedded derivatives is estimated at zero. The estimated fair value of the embedded derivatives was determined by using a binomial lattice approach to determine the probability and timing of a conversion or redemption.

On February 19, 2015, we also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Initial Purchaser to provide the holders of the 6.00% Notes with registration rights with respect to shares of common stock that have been issued upon conversion of the 6.00% Notes and are then outstanding, but only if Rule 144 under the Securities Act is unavailable to holders of the 6.00% Notes who are not affiliates of ours on and following the date that is six months after the original issuance date of the 6.00% Notes.

On February 19, 2015, we entered into a Consent and First Loan Modification Agreement (the “Amendment”) with Silicon Valley Bank (“SVB”). The Amendment modifies the Loan and Security Agreement, dated as of March 28, 2014, by and among us, Oclaro Technology Limited and SVB to allow the cash payments provided for in the Indenture and the 6.00% Notes and include the 6.00% Notes as permitted indebtedness.

The following table sets forth balance sheet information related to the 6.00% Notes at March 26, 2016 and June 27, 2015:

	March 26, 2016			June 27, 2015
	(Thousands)
Principal value of the liability component	$	65,000		$	65,000
Unamortized value of the debt discount and issuance costs	(3,145		)	(3,754		)
Net carrying value of the liability component	$	61,855		$	61,246

At March 26, 2016, the $2.6 million debt discount and the $0.5 million issuance costs are recorded as a contra-liability in convertible notes payable within the condensed consolidated balance sheet.

Silicon Valley Bank Credit Facility

On March 28, 2014, we entered into a loan and security agreement (the “Loan Agreement”) with Silicon Valley Bank (the “Bank”) pursuant to which the Bank provided us with a three-year revolving credit facility of up to $40.0 million. Under the Loan Agreement, advances are available based on up to 80 percent of “eligible accounts” as defined in the Loan Agreement. The Loan Agreement has a $10.0 million sub-facility for letters of credit, foreign exchange contracts and cash management services.

Borrowings made under the Loan Agreement bear interest at a rate based on either the London Interbank Offered Rate plus 2.25 percent or Wall Street Journal’s prime rate plus 1.00 percent. If the sum of (a) our unrestricted cash and cash equivalents that are subject to the Bank’s liens less (b) the amount outstanding to the Bank under the Loan Agreement (such sum being “Net Cash”) is less than $15.0 million, then the interest rates are increased by 0.75 percent until Net Cash exceeds $15.0 million for a calendar month. If interest paid under the Loan Agreement is less than $45,000 in any fiscal quarter, we are required to pay the Bank an additional amount equal to the difference between $45,000 and the actual interest paid during such fiscal quarter. The minimum interest payment is in lieu of a stand-by charge.

If the Loan Agreement terminates prior to its maturity date, we will pay a termination fee equal to 1.00 percent of the total credit facility if such termination occurs in the first year after closing, 0.75 percent of the total credit facility if such termination occurs in the second year after closing and 0.50 percent of the total credit facility if such termination occurs in the third year after closing. The maturity date of the Loan Agreement is March 28, 2017. At March 26, 2016 and June 27, 2015, there were no amounts outstanding under the Loan Agreement.

On September 17, 2015, we entered into an amendment to the Loan Agreement with the Bank increasing from $5.0 million to $15.0 million the amount of equipment liens that may qualify as "Permitted Liens" thereunder.

The Loan Agreement is more fully discussed in Note 7, Credit Line and Notes, to our consolidated financial statements included in our 2015 Form 10-K.

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POST-RETIREMENT BENEFITS

9 Months Ended

Mar. 26, 2016

Compensation and Retirement Disclosure [Abstract]

POST-RETIREMENT BENEFITS

POST-RETIREMENT BENEFITS

Japan Defined Contribution Plan

In connection with our acquisition of Opnext, we assumed a defined contribution plan and a defined benefit plan that provides retirement benefits to our employees in Japan.

Under the defined contribution plan, contributions are provided based on grade level and totaled $0.1 million and $0.3 million for the three and nine months ended March 26, 2016, respectively, and $0.1 million and $0.4 million for the three and nine months ended March 28, 2015, respectively. Employees can elect to receive the benefit as additional salary or contribute the benefit to the plan on a tax-deferred basis.

Japan Defined Benefit Plan

Under the defined benefit plan in Japan (the “Japan Plan”), we calculate benefits based on an employee’s individual grade level and expected years of service. Employees are entitled to a lump sum benefit upon retirement or upon certain instances of termination.

During the second quarter of fiscal year 2015, we sold our Komoro Business, and as part of the sale transferred a portion of our Japan Plan covering employees of the Komoro Business to Ushio Opto.

As of March 26, 2016, there were no plan assets associated with the Japan Plan. As of March 26, 2016, there was $0.1 million in accrued expenses and other liabilities and $5.5 million in other non-current liabilities in our condensed consolidated balance sheet to account for the projected benefit obligations under the Japan Plan. Net periodic pension costs for the Japan Plan included the following:

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)
Service cost	$	132	$	177	$	376	$	553
Interest cost	11		18		32		56
Net amortization	—		10		—		37
Net periodic pension costs	$	143	$	205	$	408	$	646

We made benefit payments under the Japan Plan of zero and $0.1 million during the three and nine months ended March 26, 2016, respectively, and $0.1 million and $0.2 million during the three and nine months ended March 28, 2015, respectively.

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Mar. 26, 2016

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Loss Contingencies

We are involved in various lawsuits, claims, and proceedings that arise in the ordinary course of business. We record a loss provision when we believe it is both probable that a liability has been incurred and the amount can be reasonably estimated.

Guarantees

We indemnify our directors and certain employees as permitted by law, and have entered into indemnification agreements with our directors and executive officers. We have not recorded a liability associated with these indemnification arrangements, as we historically have not incurred any material costs associated with such indemnification obligations. Costs associated with such indemnification obligations may be mitigated by insurance coverage that we maintain, however, such insurance may not cover any, or may cover only a portion of, the amounts we may be required to pay. In addition, we may not be able to maintain such insurance coverage in the future.

We also have indemnification clauses in various contracts that we enter into in the normal course of business, such as indemnifications in favor of customers in respect of liabilities they may incur as a result of purchasing our products should such products infringe the intellectual property rights of a third party. We have not historically paid out any material amounts related to these indemnifications; therefore, no accrual has been made for these indemnifications.

Warranty Accrual

We generally provide a warranty for our products for twelve months to thirty-six months from the date of sale, although warranties for certain of our products may be longer. We accrue for the estimated costs to provide warranty services at the time revenue is recognized. Our estimate of costs to service our warranty obligations is based on historical experience and expectation of future conditions. To the extent we experience increased warranty claim activity or increased costs associated with servicing those claims, our warranty costs would increase, resulting in a decrease in gross profit.

The following table summarizes movements in the warranty accrual for the periods indicated:

	Three Months Ended						Nine Months Ended
	March 26, 2016			March 28, 2015			March 26, 2016			March 28, 2015
	(Thousands)
Warranty provision—beginning of period	$	3,097		$	3,474		$	2,932		$	4,672
Warranties issued	615			185			1,472			1,078
Warranties utilized or expired	(553		)	(377		)	(1,241		)	(2,236		)
Currency translation and other adjustments	(32		)	(12		)	(36		)	(244		)
Warranty provision—end of period	$	3,127		$	3,270		$	3,127		$	3,270

Capital Leases

In connection with our acquisition of Opnext, we assumed certain capital leases with Hitachi Capital Corporation, a related party, for certain equipment. The terms of the leases generally range from one to five years and the equipment can be purchased at the residual value upon expiration. We can terminate the leases at our discretion in return for a penalty payment as stated in the lease contracts.

In October 2015, we entered into a capital lease agreement with Hitachi High-Technologies Corporation, a related party, for certain capital equipment. The lease term is for 5 years, after which time the ownership of the equipment will transfer from Hitachi High-Technologies Corporation. During the lease term, we will make twenty equal installments of principal and interest, payable quarterly. Interest on the capital equipment will accrue at 1.15 percent per annum.

The following table shows the future minimum lease payments due under non-cancelable capital leases with Hitachi Capital Corporation and Hitachi High-Technologies Corporation at March 26, 2016:

	Capital Leases
	(Thousands)
Fiscal Year Ending:
2016 (remaining)	$	1,174
2017	3,027
2018	554
2019	532
2020	571
Thereafter	246
Total minimum lease payments	6,104
Less amount representing interest	(274		)
Present value of capitalized payments	5,830
Less: current portion	(3,813		)
Long-term portion	$	2,017

Purchase Commitments

We purchase components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with suppliers and contract manufacturers that either allow them to procure inventory based upon criteria as defined by us or establish the parameters defining our requirements. A significant portion of our reported purchase commitments arising from these agreements consist of firm, non-cancelable and unconditional commitments.

We record a liability for firm, non-cancelable and unconditional purchase commitments for quantities in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. As of March 26, 2016 and June 27, 2015, the liability for these purchase commitments was $3.1 million and $3.2 million, respectively, and was included in accrued expenses and other liabilities in our condensed consolidated balance sheets.

Malaysian Goods and Services Tax (“GST”)

In February 2016, the Malaysian tax authorities preliminarily denied our Malaysia GST refund claims representing approximately $2.4 million. These claims were made in connection with the export of finished goods from our contract manufacturing partner’s Malaysian facilities. We are currently contesting the denial of these claims before a Malaysian administrative review panel, and believe that additional appeal options may be available to us if we do not obtain a favorable ruling. Although we have taken action to minimize the impact of the GST with respect to our ongoing operations, we believe it is reasonably possible that, ultimately, our refund claims may be partially or fully rejected. We have accounted for the $2.4 million GST claims as a receivable classified in prepaid expenses and other current assets in our condensed consolidated balance sheet at March 26, 2016.

Litigation

Overview

In the ordinary course of business, we are involved in various legal proceedings, and we anticipate that additional actions will be brought against us in the future. The most significant of these proceedings are described below. These legal proceedings, as well as other matters, involve various aspects of our business and a variety of claims in various jurisdictions. Complex legal proceedings frequently extend for several years, and a number of the matters pending against us are at very early stages of the legal process. As a result, some pending matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable us to determine whether the proceeding is material to us or to estimate a range of possible loss, if any. Unless otherwise disclosed, we are unable to estimate the possible loss or range of loss for the legal proceedings described below. While it is not possible to accurately predict or determine the eventual outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on our results of operations, financial position or cash flows.

Kunst Worker Compensation Matter

On June 18, 2015, Gerald Kunst, or Kunst, filed a civil suit against us and Travelers Property Casualty Company of America, or Travelers, in Massachusetts Superior Court, Civil Action No. SUCV2015-01818F. Travelers is our general liability insurance carrier. The complaint filed by Kunst, an employee of a third party service provider, alleges that he was injured while performing air conditioning repair services on the premises of our Acton, Massachusetts facility and seeks judgment in an amount to be determined by the court or jury, together with interest and costs. On July 24, 2015, we filed an answer to the complaint, which included our affirmative defenses. The parties continue to conduct initial discovery. As of May 5, 2016, no hearing has been scheduled in this matter. We intend to vigorously defend against this litigation.

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EMPLOYEE STOCK PLANS

9 Months Ended

Mar. 26, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

EMPLOYEE STOCK PLANS

EMPLOYEE STOCK PLANS

Stock Incentive Plans

On November 10, 2015, our stockholders approved an amendment to the Fifth Amended and Restated 2001 Long-Term Stock Incentive Plan (the "Plan"), adding 8.0 million shares of our common stock to the share reserve under the Plan.

As of March 26, 2016, there were 12.9 million shares of our common stock available for grant under the Plan.

We generally grant stock options that vest over a two to four year service period, and restricted stock awards and restricted stock unit awards that vest over a one to four year service period, and in certain cases each may vest earlier based upon the achievement of specific performance-based objectives as set by our board of directors or the compensation committee of our board of directors.

Performance-Based Restricted Stock Units

In August 2014, our board of directors approved a grant of 0.5 million performance-based restricted stock units ("PSUs") to certain executive officers with an aggregate estimated grant date fair value of $0.9 million. These PSUs vest at 100 percent upon the achievement of two consecutive quarters with positive adjusted earnings before interest, taxes, depreciation and amortization ("AEBITDA") on or before the end of our fiscal year 2017. During the second quarter of fiscal year 2016, the performance condition related to these PSUs was achieved. On February 2, 2016, the compensation committee of our board of directors certified that the performance condition was achieved and the PSUs immediately vested at 100 percent.

In August 2015, our board of directors approved a grant of 0.9 million PSUs to certain executive officers with an aggregate estimated grant date fair value of $2.5 million. Subject to the achievement of positive free cash flow (defined as AEBITDA less capital expenditures) in any fiscal quarter ending prior to June 30, 2018, vesting of these PSUs is contingent upon service conditions being met through August 10, 2018. On October 29 2015, the compensation committee of our board of directors certified that this performance condition was achieved during the quarter ended September 26, 2015. As a result, these PSUs will cliff vest with respect to 33.4 percent of the underlying shares on August 10, 2016, and with respect to 8.325 percent of the underlying shares each subsequent quarter over the following two years, subject to continuous service.

Restricted Stock Units

In July 2015, our board of directors approved a retention grant of 0.9 million restricted stock units ("RSUs") to certain executive officers and 1.5 million RSUs to other employees, which vest over three years.

Stock Incentive Plan Activity

The following table summarizes the combined activity under all of our equity incentive plans for the nine months ended March 26, 2016:

	Shares Available For Grant		Stock Options / SARs Outstanding		Weighted- Average Exercise Price		Restricted Stock Awards / Units Outstanding		Weighted- Average Grant Date Fair Value
	(Thousands)		(Thousands)				(Thousands)
Balance at June 27, 2015	8,921		3,381		$	7.07	4,545		$	1.80
Increase in share reserve	8,000		—		—		—		—
Granted	(5,270	)	—		—		3,764		2.84
Exercised or released	605		(56	)	2.81		(2,789	)	2.12
Forfeited or expired	607		(220	)	10.91		(258	)	1.31
Balance at March 26, 2016	12,863		3,105		6.88		5,262		2.58

Supplemental disclosure information about our stock options and stock appreciation rights ("SARs") outstanding as of March 26, 2016 is as follows:

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
	(Thousands)			(Years)	(Thousands)
Options and SARs exercisable	2,832	$	7.34	3.7	$	1,907
Options and SARs outstanding	3,105	6.88		3.9	2,797

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the closing price of our common stock of $5.31 on March 24, 2016, which would have been received by the option holders had all option holders exercised their options as of that date. There were approximately 1.3 million shares of common stock subject to in-the-money options which were exercisable as of March 26, 2016. We settle employee stock option exercises with newly issued shares of common stock.

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STOCK-BASED COMPENSATION

9 Months Ended

Mar. 26, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

We recognize stock-based compensation expense in our condensed consolidated statement of operations related to all share-based awards, including grants of stock options, based on the grant date fair value of such share-based awards. Estimating the grant date fair value of such share-based awards requires us to make judgments in the determination of inputs into the Black-Scholes stock option pricing model which we use to arrive at an estimate of the grant date fair value for such awards. The assumptions used in this model to value stock option grants were as follows (assumptions are not applicable for the three and nine months ended March 26, 2016, as there were no stock options granted during those periods):

	Three Months Ended		Nine Months Ended
	March 26, 2016	March 28, 2015	March 26, 2016	March 28, 2015
Stock options:
Expected life	N/A	N/A	N/A	5.3 years
Risk-free interest rate	N/A	N/A	N/A	1.6%
Volatility	N/A	N/A	N/A	76.9%
Dividend yield	N/A	N/A	N/A	—

The amounts included in cost of revenues and operating expenses for stock-based compensation were as follows:

	Three Months Ended					Nine Months Ended
	March 26, 2016		March 28, 2015			March 26, 2016		March 28, 2015
	(Thousands)
Stock-based compensation by category of expense:
Cost of revenues	$	523	$	434		$	1,451	$	1,340
Research and development	455		396			1,370		1,138
Selling, general and administrative	1,095		745			3,619		2,139
	$	2,073	$	1,575		$	6,440	$	4,617
Stock-based compensation by type of award:
Stock options	$	52	$	87		$	167	$	317
Restricted stock awards	1,962		1,497			6,258		4,233
Inventory adjustment to cost of revenues	59		(9		)	15		67
	$	2,073	$	1,575		$	6,440	$	4,617

As of March 26, 2016 and June 27, 2015, we had capitalized approximately $0.4 million and $0.5 million, respectively, of stock-based compensation as inventory.

As of March 26, 2016, we had $0.3 million in unrecognized stock-based compensation expense related to unvested stock options, net of estimated forfeitures, that will be recognized over a weighted-average period of 2.1 years, and $7.9 million in unrecognized stock-based compensation expense related to unvested time-based restricted stock awards, net of estimated forfeitures, that will be recognized over a weighted-average period of 1.8 years.

The amount of stock-based compensation expense recognized in any one period related to PSUs can vary based on the achievement or anticipated achievement of the performance conditions. If the performance conditions are not met or not expected be met, no compensation cost would be recognized on the shares underlying the PSUs, and any previously recognized compensation expense related to those PSUs would be reversed. During the three and nine months ended March 26, 2016, we recorded $0.2 million and $1.2 million, respectively, in stock-based compensation in connection with the PSUs issued in July 2011, March 2014, August 2014 and August 2015, including approximately $0.5 million related to the acceleration of the stock-based compensation in connection with the PSUs issued in August 2014 upon the achievement of the performance conditions. During the three and nine months ended March 28, 2015, we recorded $0.1 million and $0.2 million, respectively, in stock-based compensation expense in connection with the PSUs issued in July 2011, March 2014 and August 2014.

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INCOME TAXES

9 Months Ended

Mar. 26, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The income tax provision of $0.5 million and $2.4 million for the three and nine months ended March 26, 2016, respectively, and the income tax benefit of $0.5 million and the income tax provision of $0.4 million for the three and nine months endedMarch 28, 2015, respectively, relates primarily to our foreign operations.

The total amount of our unrecognized tax benefits as of March 26, 2016 and June 27, 2015 were approximately $4.1 million and $4.1 million, respectively. As of March 26, 2016, we had $2.4 million of unrecognized tax benefits that, if recognized, would affect our effective tax rate. While it is often difficult to predict the final outcome of any particular uncertain tax position, we believe that unrecognized tax benefits could decrease by approximately $0.9 million in the next twelve months.

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NET INCOME (LOSS) PER SHARE

9 Months Ended

Mar. 26, 2016

Earnings Per Share [Abstract]

NET INCOME (LOSS) PER SHARE

NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed using only the weighted-average number of shares of common stock outstanding for the applicable period, while diluted net income (loss) per share is computed assuming conversion of all potentially dilutive securities, such as stock options, unvested restricted stock units and awards, warrants and convertible notes during such period.

The following table presents the calculation of basic and diluted net income (loss) per share:

	Three Months Ended					Nine Months Ended
	March 26, 2016		March 28, 2015			March 26, 2016			March 28, 2015
	(Thousands, except per share amounts)
Net income (loss)	$	89	$	(10,186	)	$	(3,264	)	$	(42,823	)
Weighted-average shares - Basic	110,882		108,357			110,212			107,818
Effect of dilutive potential common shares from:
Stock options and stock appreciation rights	280		—			—			—
Restricted stock units and awards	2,537		—			—			—
Weighted-average shares - Diluted	113,699		108,357			110,212			107,818
Basic net income (loss) per share	$	—	$	(0.09	)	$	(0.03	)	$	(0.40	)
Diluted net income (loss) per share	$	—	$	(0.09	)	$	(0.03	)	$	(0.40	)

For the three and nine months ended March 26, 2016, we excluded 35.5 million and 38.3 million, respectively, of outstanding stock options, stock appreciation rights, unvested restricted stock awards and units, and shares issuable in connection with convertible notes from the calculation of diluted net loss per share because their effect would have been anti-dilutive.

For the three and nine months ended March 28, 2015, we excluded 22.4 million and 13.5 million, respectively, of outstanding stock options, stock appreciation rights, unvested restricted stock awards and units, and shares issuable in connection with convertible notes from the calculation of diluted net loss per share because their effect would have been anti-dilutive.

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GEOGRAPHIC INFORMATION, PRODUCT GROUPS AND CUSTOMER CONCENTRATION INFORMATION

9 Months Ended

Mar. 26, 2016

Segment Reporting [Abstract]

GEOGRAPHIC INFORMATION, PRODUCT GROUPS AND CUSTOMER CONCENTRATION INFORMATION

GEOGRAPHIC INFORMATION, PRODUCT GROUPS AND CUSTOMER CONCENTRATION INFORMATION

Geographic Information

The following table shows revenues by geographic area based on the delivery locations of our products:

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)
China	$	43,935	$	29,433	$	112,170	$	75,686
United States	15,913		12,429		45,880		40,352
Mexico	10,015		8,139		36,549		31,029
Malaysia	7,986		10,845		24,146		40,306
Italy	6,353		6,429		20,242		17,332
Germany	5,686		5,781		14,638		20,168
Japan	2,167		2,189		5,133		7,637
Rest of world	8,995		7,778		23,971		26,574
	$	101,050	$	83,023	$	282,729	$	259,084

Product Groups

The following table sets forth revenues by product group:

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)
100 Gb/s transmission modules	$	58,569	$	30,221	$	148,951	$	85,221
40 Gb/s and lower transmission modules	42,481		52,802		133,778		164,499
Industrial and consumer	—		—		—		9,364
	$	101,050	$	83,023	$	282,729	$	259,084

During the second quarter of fiscal year 2015, we sold our Komoro Business, which included the industrial and consumer product group of Oclaro Japan.

Significant Customers and Concentration of Credit Risk

For the three months ended March 26, 2016, four customers accounted for 10 percent or more of our revenues, representing approximately 20 percent, 14 percent, 12 percent and 11 percent of our revenues, respectively. For the nine months ended March 26, 2016, three customers accounted for 10 percent or more of our revenues, representing approximately 19 percent, 14 percent and 10 percent of our revenues, respectively.

For the three months ended March 28, 2015, four customers accounted for 10 percent or more of our revenues, representing approximately 19 percent, 16 percent, 11 percent and 10 percent of our revenues, respectively. For the nine months ended March 28, 2015, three customers accounted for 10 percent or more of our revenues, representing approximately 22 percent, 14 percent and 10 percent of our revenues, respectively.

As of March 26, 2016, four customers accounted for 10 percent or more of our accounts receivable, representing approximately 21 percent, 19 percent, 13 percent and 11 percent of our accounts receivable, respectively. As of June 27, 2015, four customers accounted for 10 percent of our accounts receivable, representing approximately 24 percent, 13 percent, 11 percent and 11 percent of our accounts receivable, respectively.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Mar. 26, 2016

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

As of March 26, 2016, Hitachi, Ltd. ("Hitachi") held slightly less than 5 percent of our outstanding common stock based on Hitachi’s Schedule 13G filed with the Securities and Exchange Commission on December 2, 2015. During the second quarter of fiscal year 2016, Hitachi sold approximately 6.6 million shares of our common stock. Hitachi initially acquired these shares as a result of our acquisition of Opnext on July 23, 2012.

We continue to enter into transactions with Hitachi in the normal course of business. Sales to Hitachi were $1.0 million and $2.9 million for the three and nine months ended March 26, 2016, respectively, and $1.2 million and $3.1 million for the three and nine months ended March 28, 2015, respectively. Purchases from Hitachi were $5.8 million and $16.2 million for the three and nine months ended March 26, 2016, respectively, and $4.2 million and $11.5 million for the three and nine months ended March 28, 2015, respectively. At March 26, 2016, we had $1.3 million accounts receivable due from Hitachi and $5.5 million accounts payable due to Hitachi. At June 27, 2015 we had $0.7 million accounts receivable due from Hitachi and $4.8 million accounts payable due to Hitachi. We also have certain capital equipment leases with Hitachi Capital Corporation as described in Note 8, Commitments and Contingencies.

We are party to a research and development agreement and intellectual property license agreements with Hitachi.

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BASIS OF PREPARATION (Policies)

9 Months Ended

Mar. 26, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

Oclaro, Inc., a Delaware corporation, is sometimes referred to in this Quarterly Report on Form 10-Q as “Oclaro,” “we,” “us” or “our.”

The accompanying unaudited condensed consolidated financial statements of Oclaro as of March 26, 2016 and for the three and nine months ended March 26, 2016 and March 28, 2015 have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Article 10 of Securities and Exchange Commission ("SEC") Regulation S-X, and include the accounts of Oclaro and all of our subsidiaries. Accordingly, they do not include all of the information and footnotes required by such accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our consolidated financial position and results of operations have been included. The condensed consolidated results of operations for the three and nine months ended March 26, 2016 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending July 2, 2016.

The condensed consolidated balance sheet as of June 27, 2015 has been derived from our audited financial statements as of such date, but does not include all disclosures required by U.S. GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended June 27, 2015 ("2015 Form 10-K").

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported periods. Examples of significant estimates and assumptions made by management involve the fair value of other intangible assets and long-lived assets, valuation allowances for deferred tax assets, the fair value of stock-based compensation, the fair value of embedded derivatives related to convertible debt, the fair value of pension liabilities, estimates used to determine facility lease loss liabilities, estimates for allowances for doubtful accounts and valuation of excess and obsolete inventories. These judgments can be subjective and complex and consequently actual results could differ materially from those estimates and assumptions. Descriptions of the key estimates and assumptions are included in our 2015 Form 10-K.

Fiscal Years

Fiscal Years

We operate on a 52/53 week year ending on the Saturday closest to June 30. Our fiscal year ending July 2, 2016 will be a 53 week year, with the quarter ended March 26, 2016 being a 13 week quarterly period. Our fiscal quarter ending July 2, 2016 will have 14 weeks. Our fiscal year ended June 27, 2015 was a 52 week year, with the quarter ended March 28, 2015 being a 13 week quarterly period.

Reclassifications

Reclassifications

For presentation purposes, we have reclassified certain prior period amounts to conform to the current period financial statement presentation. These reclassifications did not affect our consolidated revenues, net income (loss), cash flows, cash and cash equivalents or stockholders’ equity as previously reported.

Recent Accounting Standards

RECENT ACCOUNTING STANDARDS

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09,  Compensation: Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards, and classification on the the statement of cash flows. This guidance will be effective for us in the first quarter of fiscal 2018, with early adoption permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This guidance will be effective for us in the first quarter of fiscal 2020, with early adoption permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes. This amendment eliminates the requirement to bifurcate deferred taxes between current and non-current on the balance sheet and requires that deferred tax liabilities and assets be classified as non-current on the balance sheet. We elected to early adopt this guidance in the second quarter of fiscal year 2016. The implementation of this guidance did not have a material impact on our financial statements and footnote disclosures.

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments. This amendment requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This guidance is effective for us prospectively in the first quarter of fiscal year 2017. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This update clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, deferring the effective date of ASU 2014-09 by one year, to annual periods, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted for periods beginning after December 15, 2016. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In July 2015, the FASB issued ASU No. 2015-11, Inventory: Simplifying the Measurement of Inventory. Under ASU 2015-11, we are required to measure inventory at the lower of cost and net realizable value. The new guidance clarifies that net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This guidance is effective for us prospectively in the first quarter of fiscal year 2017, with early application permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In June 2015, the FASB issued ASU No. 2015-10, Technical Corrections and Improvements. ASU 2015-10 covers a wide range of Topics in the Codification. The amendments in this ASU represent changes to make minor corrections or minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. This guidance is effective for us prospectively in the first quarter of fiscal year 2017, with early adoption permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In April 2015, the FASB issued ASU No. 2015-04, Compensation – Retirement Benefits: Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets. ASU 2015-04 provides a practical expedient for employers with fiscal year-ends that do not fall on a month-end by permitting those employers to measure defined benefit plan assets and obligations as of the month-end that is closest to the entity's fiscal year-end. This guidance is effective for us prospectively in the first quarter of fiscal year 2017, with early adoption permitted. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement - Extraordinary and Unusual Items. This ASU eliminates from U.S. GAAP the concept of extraordinary items. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. This guidance is effective for us prospectively in the first quarter of fiscal year 2017. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern. The update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. This guidance is effective for us beginning with our annual financial statements for the fiscal year ended July 1, 2017, and interim periods thereafter. We are currently evaluating the impact that the implementation of this standard will have on our financial statements and footnote disclosures.

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BALANCE SHEET DETAILS (Tables)

9 Months Ended

Mar. 26, 2016

Balance Sheet Details [Abstract]

Schedule of Cash and Cash Equivalents

The following table provides details regarding our cash and cash equivalents at the dates indicated:

	March 26, 2016		June 27, 2015
	(Thousands)
Cash and cash equivalents:
Cash-in-bank	$	81,080	$	110,196
Money market funds	25,001		1,644
	$	106,081	$	111,840

Schedule of Inventories

The following table provides details regarding our inventories at the dates indicated:

	March 26, 2016		June 27, 2015
	(Thousands)
Inventories:
Raw materials	$	21,656	$	19,610
Work-in-process	30,317		19,812
Finished goods	20,518		26,920
	$	72,491	$	66,342

Schedule of Property and Equipment, Net

The following table provides details regarding our property and equipment, net at the dates indicated:

	March 26, 2016			June 27, 2015
	(Thousands)
Property and equipment, net:
Buildings and improvements	$	11,493		$	11,837
Plant and machinery	58,574			37,215
Fixtures, fittings and equipment	1,971			1,173
Computer equipment	10,798			12,401
	82,836			62,626
Less: Accumulated depreciation	(28,460		)	(20,860		)
	$	54,376		$	41,766

Summary of Other Intangible Assets

The following table summarizes the activity related to our other intangible assets for the nine months ended March 26, 2016:

	Core and Current Technology			Development and Supply Agreements			Customer Relationships			Patent Portfolio		Other Intangibles		Amortization			Total
	(Thousands)
Balance at June 27, 2015	$	6,249		$	4,595		$	2,402		$	915	$	3,338	$	(14,920	)	$	2,579
Amortization	—			—			—			—		—		(748		)	(748		)
Translations and adjustments	(5		)	(54		)	(2		)	—		—		—			(61		)
Balance at March 26, 2016	$	6,244		$	4,541		$	2,400		$	915	$	3,338	$	(15,668	)	$	1,770

Schedule of Accrued Expenses and Other Liabilities

The following table presents details regarding our accrued expenses and other liabilities at the dates indicated:

	March 26, 2016		June 27, 2015
	(Thousands)
Accrued expenses and other liabilities:
Trade payables	$	10,046	$	5,250
Compensation and benefits related accruals	13,991		11,298
Warranty accrual	3,127		2,932
Accrued restructuring, current	188		712
Purchase commitments in excess of future demand, current	3,101		3,162
Other accruals	11,855		12,294
	$	42,308	$	35,648

Activity Related to Our Restructuring Liability

The following table summarizes the activity related to our accrued restructuring charges for the nine months ended March 26, 2016:

	Lease Cancellations, Commitments and Other Charges			Termination Payments to Employees and Related Costs			Total Accrued Restructuring Charges
	(Thousands)
Balance at June 27, 2015	$	228		$	484		$	712
Charged to restructuring costs	—			324			324
Paid or other adjustments	(228		)	(620		)	(848		)
Balance at March 26, 2016	$	—		$	188		$	188
Current portion	—			188			188
Non-current portion	—			—			—

Components of Accumulated Other Comprehensive Income

The following table presents the components of accumulated other comprehensive income at the dates indicated:

	March 26, 2016		June 27, 2015
	(Thousands)
Accumulated other comprehensive income:
Currency translation adjustments	$	39,465	$	41,351
Japan defined benefit plan	165		175
	$	39,630	$	41,526

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FAIR VALUE (Tables)

9 Months Ended

Mar. 26, 2016

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are shown in the table below by their corresponding balance sheet caption and consisted of the following types of instruments at March 26, 2016 and June 27, 2015:

	Fair Value Measurement at March 26, 2016 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(Thousands)
Assets:
Cash and cash equivalents: (1)
Money market funds	$	25,001	$	—	$	—	$	25,001
Restricted cash:
Money market funds	712		—		—		712
Total assets measured at fair value	$	25,713	$	—	$	—	$	25,713

⁽¹⁾  Excludes $81.1 million in cash held in our bank accounts at March 26, 2016.

	Fair Value Measurement at June 27, 2015 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:	(Thousands)
Cash and cash equivalents: (1)
Money market funds	$	1,644	$	—	$	—	$	1,644
Restricted cash:
Money market funds	1,215		—		—		1,215
Total assets measured at fair value	$	2,859	$	—	$	—	$	2,859

⁽¹⁾  Excludes $110.2 million in cash held in our bank accounts at June 27, 2015.

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BUSINESS COMBINATIONS AND DISPOSITIONS (Tables)

9 Months Ended

Mar. 26, 2016

Amplifier Business

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Statements of Operations for Discontinued Operations

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

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)
Revenues	$	—	$	—	$	—	$	—
Cost of revenues	—		—		—		—
Gross profit	—		—		—		—
Operating expenses	—		—		—		161
Other income (expense), net	—		—		—		(3,060		)
Loss from discontinued operations before income taxes	—		—		—		(3,221		)
Income tax provision	—		—		—		—
Loss from discontinued operations	$	—	$	—	$	—	$	(3,221	)

Zurich Business

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Statements of Operations for Discontinued Operations

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

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)				(Thousands)
Revenues	$	—	$	—	$	—	$	—
Cost of revenues	—		—		—		163
Gross loss	—		—		—		(163		)
Operating expenses	—		—		—		484
Other income (expense), net	—		—		—		(4,590		)
Loss from discontinued operations before income taxes	—		—		—		(5,237		)
Income tax provision	—		—		—		—
Loss from discontinued operations	$	—	$	—	$	—	$	(5,237	)

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CREDIT LINE AND NOTES (Tables)

9 Months Ended

Mar. 26, 2016

Debt Disclosure [Abstract]

Balance Sheet Information Related to 6.00% Notes

The following table sets forth balance sheet information related to the 6.00% Notes at March 26, 2016 and June 27, 2015:

	March 26, 2016			June 27, 2015
	(Thousands)
Principal value of the liability component	$	65,000		$	65,000
Unamortized value of the debt discount and issuance costs	(3,145		)	(3,754		)
Net carrying value of the liability component	$	61,855		$	61,246

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POST-RETIREMENT BENEFITS (Tables)

9 Months Ended

Mar. 26, 2016

Compensation and Retirement Disclosure [Abstract]

Schedule of Net Periodic Pension Costs

Net periodic pension costs for the Japan Plan included the following:

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)
Service cost	$	132	$	177	$	376	$	553
Interest cost	11		18		32		56
Net amortization	—		10		—		37
Net periodic pension costs	$	143	$	205	$	408	$	646

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COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Mar. 26, 2016

Commitments and Contingencies Disclosure [Abstract]

Movements in Warranty Accrual for Period

The following table summarizes movements in the warranty accrual for the periods indicated:

	Three Months Ended						Nine Months Ended
	March 26, 2016			March 28, 2015			March 26, 2016			March 28, 2015
	(Thousands)
Warranty provision—beginning of period	$	3,097		$	3,474		$	2,932		$	4,672
Warranties issued	615			185			1,472			1,078
Warranties utilized or expired	(553		)	(377		)	(1,241		)	(2,236		)
Currency translation and other adjustments	(32		)	(12		)	(36		)	(244		)
Warranty provision—end of period	$	3,127		$	3,270		$	3,127		$	3,270

Summary of Future Minimum Lease Payments Due under Non-cancelable Capital Leases

The following table shows the future minimum lease payments due under non-cancelable capital leases with Hitachi Capital Corporation and Hitachi High-Technologies Corporation at March 26, 2016:

	Capital Leases
	(Thousands)
Fiscal Year Ending:
2016 (remaining)	$	1,174
2017	3,027
2018	554
2019	532
2020	571
Thereafter	246
Total minimum lease payments	6,104
Less amount representing interest	(274		)
Present value of capitalized payments	5,830
Less: current portion	(3,813		)
Long-term portion	$	2,017

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EMPLOYEE STOCK PLANS (Tables)

9 Months Ended

Mar. 26, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Combined Activity Under All of Our Equity Incentive Plans

The following table summarizes the combined activity under all of our equity incentive plans for the nine months ended March 26, 2016:

	Shares Available For Grant		Stock Options / SARs Outstanding		Weighted- Average Exercise Price		Restricted Stock Awards / Units Outstanding		Weighted- Average Grant Date Fair Value
	(Thousands)		(Thousands)				(Thousands)
Balance at June 27, 2015	8,921		3,381		$	7.07	4,545		$	1.80
Increase in share reserve	8,000		—		—		—		—
Granted	(5,270	)	—		—		3,764		2.84
Exercised or released	605		(56	)	2.81		(2,789	)	2.12
Forfeited or expired	607		(220	)	10.91		(258	)	1.31
Balance at March 26, 2016	12,863		3,105		6.88		5,262		2.58

Supplemental Disclosure Information About Stock Options and SAR's Outstanding

Supplemental disclosure information about our stock options and stock appreciation rights ("SARs") outstanding as of March 26, 2016 is as follows:

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
	(Thousands)			(Years)	(Thousands)
Options and SARs exercisable	2,832	$	7.34	3.7	$	1,907
Options and SARs outstanding	3,105	6.88		3.9	2,797

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STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Mar. 26, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Assumptions Used to Value Stock Option Grants

The assumptions used in this model to value stock option grants were as follows (assumptions are not applicable for the three and nine months ended March 26, 2016, as there were no stock options granted during those periods):

	Three Months Ended		Nine Months Ended
	March 26, 2016	March 28, 2015	March 26, 2016	March 28, 2015
Stock options:
Expected life	N/A	N/A	N/A	5.3 years
Risk-free interest rate	N/A	N/A	N/A	1.6%
Volatility	N/A	N/A	N/A	76.9%
Dividend yield	N/A	N/A	N/A	—

Amounts Included in Cost of Revenues and Operating Expenses for Stock-Based Compensation

The amounts included in cost of revenues and operating expenses for stock-based compensation were as follows:

	Three Months Ended					Nine Months Ended
	March 26, 2016		March 28, 2015			March 26, 2016		March 28, 2015
	(Thousands)
Stock-based compensation by category of expense:
Cost of revenues	$	523	$	434		$	1,451	$	1,340
Research and development	455		396			1,370		1,138
Selling, general and administrative	1,095		745			3,619		2,139
	$	2,073	$	1,575		$	6,440	$	4,617
Stock-based compensation by type of award:
Stock options	$	52	$	87		$	167	$	317
Restricted stock awards	1,962		1,497			6,258		4,233
Inventory adjustment to cost of revenues	59		(9		)	15		67
	$	2,073	$	1,575		$	6,440	$	4,617

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NET INCOME (LOSS) PER SHARE (Tables)

9 Months Ended

Mar. 26, 2016

Earnings Per Share [Abstract]

Calculation of Basic and Diluted Net Income (Loss) Per Share

The following table presents the calculation of basic and diluted net income (loss) per share:

	Three Months Ended					Nine Months Ended
	March 26, 2016		March 28, 2015			March 26, 2016			March 28, 2015
	(Thousands, except per share amounts)
Net income (loss)	$	89	$	(10,186	)	$	(3,264	)	$	(42,823	)
Weighted-average shares - Basic	110,882		108,357			110,212			107,818
Effect of dilutive potential common shares from:
Stock options and stock appreciation rights	280		—			—			—
Restricted stock units and awards	2,537		—			—			—
Weighted-average shares - Diluted	113,699		108,357			110,212			107,818
Basic net income (loss) per share	$	—	$	(0.09	)	$	(0.03	)	$	(0.40	)
Diluted net income (loss) per share	$	—	$	(0.09	)	$	(0.03	)	$	(0.40	)

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GEOGRAPHIC INFORMATION, PRODUCT GROUPS AND CUSTOMER CONCENTRATION INFORMATION (Tables)

9 Months Ended

Mar. 26, 2016

Segment Reporting [Abstract]

Revenues by Geographic Area

The following table shows revenues by geographic area based on the delivery locations of our products:

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)
China	$	43,935	$	29,433	$	112,170	$	75,686
United States	15,913		12,429		45,880		40,352
Mexico	10,015		8,139		36,549		31,029
Malaysia	7,986		10,845		24,146		40,306
Italy	6,353		6,429		20,242		17,332
Germany	5,686		5,781		14,638		20,168
Japan	2,167		2,189		5,133		7,637
Rest of world	8,995		7,778		23,971		26,574
	$	101,050	$	83,023	$	282,729	$	259,084

Revenues by Product Group

The following table sets forth revenues by product group:

	Three Months Ended				Nine Months Ended
	March 26, 2016		March 28, 2015		March 26, 2016		March 28, 2015
	(Thousands)
100 Gb/s transmission modules	$	58,569	$	30,221	$	148,951	$	85,221
40 Gb/s and lower transmission modules	42,481		52,802		133,778		164,499
Industrial and consumer	—		—		—		9,364
	$	101,050	$	83,023	$	282,729	$	259,084

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BASIS OF PREPARATION (Details) $ in Millions	3 Months Ended
	Sep. 27, 2014 USD ($)
Cost of revenues
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Prior period reclassification adjustment	$ 2.0

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BALANCE SHEET DETAILS - Schedule of Cash and Cash Equivalents (Details) - USD ($) $ in Thousands	Mar. 26, 2016	Jun. 27, 2015	Mar. 28, 2015	Jun. 28, 2014
Cash and cash equivalents:
Cash-in-bank	$ 81,080	$ 110,196
Money market funds	25,001	1,644
Total Cash and cash equivalents	$ 106,081	$ 111,840	$ 119,809	$ 98,973

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BALANCE SHEET DETAILS - Additional Information (Details) - USD ($)	3 Months Ended	9 Months Ended
	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015	Jun. 27, 2015
Balance Sheet Components [Line Items]
Restricted cash and cash equivalents		$ 1,000,000
Assets under capital lease		5,800,000		$ 4,700,000
Expected amortization of intangible assets in fiscal year 2016		300,000
Expected amortization of intangible assets in fiscal year 2017		800,000
Expected amortization of intangible assets in fiscal year 2018		600,000
Expected amortization of intangible assets in fiscal year 2019		100,000
Restructuring charges		324,000
Payment for restructuring liabilities		500,000
Accrued restructuring liabilities		$ 188,000		$ 712,000
Common stock, shares authorized		275,000,000		175,000,000
Shenzhen
Balance Sheet Components [Line Items]
Payment for restructuring liabilities	$ 200,000		$ 2,300,000
Accrued restructuring liabilities		$ 0		$ 0
Employee Separation Charges | Shenzhen
Balance Sheet Components [Line Items]
Restructuring charges	$ 800,000		$ 2,600,000
Other non-current assets
Balance Sheet Components [Line Items]
Restricted cash and cash equivalents included in other non-current assets		$ 200,000

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BALANCE SHEET DETAILS - Schedule of Inventories (Details) - USD ($) $ in Thousands	Mar. 26, 2016	Jun. 27, 2015
Inventories:
Raw materials	$ 21,656	$ 19,610
Work-in-process	30,317	19,812
Finished goods	20,518	26,920
Total Inventories	$ 72,491	$ 66,342

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BALANCE SHEET DETAILS - Schedule of Property and Equipment, Net (Details) - USD ($) $ in Thousands	Mar. 26, 2016	Jun. 27, 2015
Property and equipment, net:
Buildings and improvements	$ 11,493	$ 11,837
Plant and machinery	58,574	37,215
Fixtures, fittings and equipment	1,971	1,173
Computer equipment	10,798	12,401
Property and equipment, gross	82,836	62,626
Less: Accumulated depreciation	(28,460)	(20,860)
Total Property and equipment, net	$ 54,376	$ 41,766

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BALANCE SHEET DETAILS - Summary of Other Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015
Other Intangible Assets, Gross:
Translations and adjustments			$ (61)
Other Intangible Assets, Accumulated Amortization:
Beginning balance, Accumulated amortization			(14,920)
Amortization	$ (247)	$ (194)	(748)	$ (881)
Ending balance, Accumulated amortization	(15,668)		(15,668)
Other Intangible Assets, Net:
Beginning balance			2,579
Amortization	(247)	$ (194)	(748)	$ (881)
Translations and adjustments			(61)
Beginning balance	1,770		1,770
Core and Current Technology
Other Intangible Assets, Gross:
Beginning balance			6,249
Translations and adjustments			(5)
Ending balance	6,244		6,244
Other Intangible Assets, Net:
Translations and adjustments			(5)
Development and Supply Agreements
Other Intangible Assets, Gross:
Beginning balance			4,595
Translations and adjustments			(54)
Ending balance	4,541		4,541
Other Intangible Assets, Net:
Translations and adjustments			(54)
Customer Relationships
Other Intangible Assets, Gross:
Beginning balance			2,402
Translations and adjustments			(2)
Ending balance	2,400		2,400
Other Intangible Assets, Net:
Translations and adjustments			(2)
Patent Portfolio
Other Intangible Assets, Gross:
Beginning balance			915
Translations and adjustments			0
Ending balance	915		915
Other Intangible Assets, Net:
Translations and adjustments			0
Other Intangibles
Other Intangible Assets, Gross:
Beginning balance			3,338
Translations and adjustments			0
Ending balance	$ 3,338		3,338
Other Intangible Assets, Net:
Translations and adjustments			$ 0

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BALANCE SHEET DETAILS - Schedule of Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands	Mar. 26, 2016	Jun. 27, 2015
Accrued expenses and other liabilities:
Trade payables	$ 10,046	$ 5,250
Compensation and benefits related accruals	13,991	11,298
Warranty accrual	3,127	2,932
Accrued restructuring, current	188	712
Purchase commitments in excess of future demand, current	3,101	3,162
Other accruals	11,855	12,294
Total Accrued expenses and other liabilities	$ 42,308	$ 35,648

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BALANCE SHEET DETAILS - Summary of Accrued Restructuring Charges (Details) - USD ($) $ in Thousands	9 Months Ended
	Mar. 26, 2016	Jun. 27, 2015
Restructuring Reserve [Roll Forward]
Beginning balance	$ 712
Charged to restructuring costs	324
Paid or other adjustments	(848)
Ending balance	188
Current portion	188	$ 712
Non-current portion	0
Lease Cancellations, Commitments and Other Charges
Restructuring Reserve [Roll Forward]
Beginning balance	228
Charged to restructuring costs	0
Paid or other adjustments	(228)
Ending balance	0
Current portion	0
Non-current portion	0
Termination Payments to Employees and Related Costs
Restructuring Reserve [Roll Forward]
Beginning balance	484
Charged to restructuring costs	324
Paid or other adjustments	(620)
Ending balance	188
Current portion	188
Non-current portion	$ 0

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BALANCE SHEET DETAILS - Components of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	Mar. 26, 2016	Jun. 27, 2015
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income	$ 152,940	$ 153,000
Currency translation adjustments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income	39,465	41,351
Japan defined benefit plan
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income	(165)	(175)
Accumulated other comprehensive income
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income	$ 39,630	$ 41,526

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FAIR VALUE - Additional Information (Details) - Convertible Notes - 6.00% Convertible Senior Notes due 2020 - USD ($)	Mar. 26, 2016	Feb. 19, 2015
Debt Instrument [Line Items]
Fixed interest rate	6.00%	6.00%
Contingent obligation for the make-whole premiums	$ 0	$ 0

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FAIR VALUE - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 26, 2016	Jun. 27, 2015
Cash and cash equivalents:
Money market funds	$ 25,001	$ 1,644
Restricted cash:
Money market funds	712	1,215
Total assets measured at fair value	25,713	2,859
Cash held in bank accounts	81,080	110,196
Quoted Prices in Active Markets for Identical Assets (Level 1)
Cash and cash equivalents:
Money market funds	25,001	1,644
Restricted cash:
Money market funds	712	1,215
Total assets measured at fair value	25,713	2,859
Significant Other Observable Inputs (Level 2)
Cash and cash equivalents:
Money market funds	0	0
Restricted cash:
Money market funds	0	0
Total assets measured at fair value	0	0
Significant Unobservable Inputs (Level 3)
Cash and cash equivalents:
Money market funds	0	0
Restricted cash:
Money market funds	0	0
Total assets measured at fair value	$ 0	$ 0

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BUSINESS COMBINATIONS AND DISPOSITIONS - Additional Information (Details) $ in Thousands, ¥ in Millions					1 Months Ended	3 Months Ended			9 Months Ended
	Oct. 27, 2014 USD ($)	Oct. 27, 2014 JPY (¥)	Nov. 01, 2013 USD ($)	Sep. 12, 2013 USD ($)	Jan. 31, 2015 USD ($)	Mar. 26, 2016 USD ($)	Mar. 28, 2015 USD ($)	Dec. 27, 2014 USD ($)	Mar. 26, 2016 USD ($)	Mar. 28, 2015 USD ($)	Mar. 29, 2014 USD ($)
Business Acquisition Actual Revenue And Pre Tax Income Loss [Line Items]
Adjustment to the hold-backs related to the sales of the Zurich and Amplifier Businesses									$ 0	$ 7,650
Komoro Business
Business Acquisition Actual Revenue And Pre Tax Income Loss [Line Items]
Net assets transferred	$ 6,300
Proceeds from sale of Komoro Business	17,100	¥ 1,850
Proceeds from sale of business paid upon closing	14,800	1,600
Proceeds from sale of business paid into escrow	$ 2,100	¥ 250
Post-closing net asset valuation adjustment								$ 1,400
Income (loss) from continuing operations before income taxes										1,300
Komoro Business | Restructuring, Acquisition and Related (Income) Expense, Net
Business Acquisition Actual Revenue And Pre Tax Income Loss [Line Items]
Gain from transfer of net assets								$ 8,300
Amplifier Business
Business Acquisition Actual Revenue And Pre Tax Income Loss [Line Items]
Proceeds from sale of Komoro Business			$ 79,600
Income (loss) from continuing operations before income taxes						$ 0	$ 0		0	(3,221)
Cost to sell amplifier business including option price			88,600
Post closing adjustment receivable			$ 4,000
Cash received from exercise of options				$ 5,000
Proceeds from holdback on sale of business					$ 900
Adjustment to the hold-backs related to the sales of the Zurich and Amplifier Businesses					3,100
Zurich Business
Business Acquisition Actual Revenue And Pre Tax Income Loss [Line Items]
Proceeds from sale of Komoro Business				90,600
Income (loss) from continuing operations before income taxes						$ 0	$ 0		$ 0	$ (5,237)
Post closing adjustment receivable				$ 6,000
Proceeds from holdback on sale of business					1,400
Adjustment to the hold-backs related to the sales of the Zurich and Amplifier Businesses					$ 4,600
Post closing working capital adjustment											$ 2,900

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BUSINESS COMBINATIONS AND DISPOSITIONS - Statements of Operations for Discontinued Operations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015
Amplifier Business
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenues	$ 0	$ 0	$ 0	$ 0
Cost of revenues	0	0	0	0
Gross profit	0	0	0	0
Operating expenses	0	0	0	161
Other income (expense), net	0	0	0	(3,060)
Loss from discontinued operations before income taxes	0	0	0	(3,221)
Income tax provision	0	0	0	0
Loss from discontinued operations	0	0	0	(3,221)
Zurich Business
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenues	0	0	0	0
Cost of revenues	0	0	0	163
Gross profit	0	0	0	(163)
Operating expenses	0	0	0	484
Other income (expense), net	0	0	0	(4,590)
Loss from discontinued operations before income taxes	0	0	0	(5,237)
Income tax provision	0	0	0	0
Loss from discontinued operations	$ 0	$ 0	$ 0	$ (5,237)

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CREDIT LINE AND NOTES - 6.00% Convertible Senior Notes (Details) shares in Millions		3 Months Ended	9 Months Ended
	Feb. 19, 2015 USD ($) d shares	Mar. 26, 2016 USD ($)	Mar. 26, 2016 USD ($)	Mar. 28, 2015 USD ($)	Jun. 27, 2015 USD ($)
Debt Instrument [Line Items]
Proceeds from the sale of convertible notes, net			$ 0	$ 61,587,000
Net carrying value of the liability component		$ 61,855,000	$ 61,855,000		$ 61,246,000
Convertible Notes | 6.00% Convertible Senior Notes due 2020
Debt Instrument [Line Items]
Fixed interest rate	6.00%	6.00%	6.00%
Percentage of stock price the Notes were sold	100.00%
Proceeds from the sale of convertible notes, net	$ 61,600,000
Offering expenses	$ 600,000
Interest expense		$ 1,200,000	$ 3,500,000
Interest payments			3,900,000
Number of threshold trading days | d	20
Consecutive trading days	30 days
Threshold trading days	5 days
Threshold percentage of stock price trigger	130.00%
Redemption price, percentage	100.00%
Number of additional shares that can be converted (up to) | shares	11.2
Contingent obligation for the make-whole premiums	$ 0	0	0
Principal value of the liability component	65,000,000	65,000,000	65,000,000		65,000,000
Unamortized value of the debt discount and issuance costs	$ (3,400,000)	(3,145,000)	(3,145,000)		(3,754,000)
Net carrying value of the liability component		61,855,000	61,855,000		$ 61,246,000
Convertible Notes | 6.00% Convertible Senior Notes due 2020 | Convertible Notes
Debt Instrument [Line Items]
Unamortized value of the debt discount and issuance costs		(2,600,000)	(2,600,000)
Debt issuance costs		$ 500,000	$ 500,000

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CREDIT LINE AND NOTES - Silicon Valley Bank Credit Facility (Details) - Oclaro Technology Limited - Silicon Valley Bank - USD ($)	Mar. 28, 2014	Mar. 26, 2016	Sep. 17, 2015	Sep. 16, 2015	Jun. 27, 2015
Ceded Credit Risk [Line Items]
Minimum net cash required	$ 15,000,000
Increase in interest rate (as a percent)	0.75%
Minimum
Ceded Credit Risk [Line Items]
Interest paid	$ 45,000
LIBOR
Ceded Credit Risk [Line Items]
Basis spread on variable rate	2.25%
Prime Rate
Ceded Credit Risk [Line Items]
Basis spread on variable rate	1.00%
Loan Agreement
Ceded Credit Risk [Line Items]
Percentage of eligible accounts for advances (up to)	80.00%
Loan Agreement | First Year after Closing
Ceded Credit Risk [Line Items]
Termination fee, percent	1.00%
Loan Agreement | Second Year after Closing
Ceded Credit Risk [Line Items]
Termination fee, percent	0.75%
Loan Agreement | Third Year after Closing
Ceded Credit Risk [Line Items]
Termination fee, percent	0.50%
Loan Agreement | Revolving Credit Facility
Ceded Credit Risk [Line Items]
Debt term	3 years
Line of credit, maximum borrowing capacity	$ 40,000,000
Amounts outstanding under credit agreement		$ 0			$ 0
Equipment liens that may qualify as Permitted Liens			$ 15,000,000	$ 5,000,000.0
Loan Agreement | Letters of Credit, Foreign Exchange Contracts and Cash Management Services
Ceded Credit Risk [Line Items]
Line of credit, maximum borrowing capacity	$ 10,000,000

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POST-RETIREMENT BENEFITS - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015
Compensation and Retirement Disclosure [Abstract]
Total contribution provided	$ 100,000	$ 100,000	$ 300,000	$ 400,000
Japan Plan
Defined Benefit Plan Disclosure [Line Items]
Plan assets			0
Accrued expenses and other liabilities	100,000		100,000
Other non current liabilities	5,500,000		5,500,000
Defined benefit plan, benefits paid	$ 0	$ 100,000	$ 100,000	$ 200,000

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POST-RETIREMENT BENEFITS - Net Periodic Pension Costs (Details) - Japan Plan - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 132	$ 177	$ 376	$ 553
Interest cost	11	18	32	56
Net amortization	0	10	0	37
Net periodic pension costs	$ 143	$ 205	$ 408	$ 646

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COMMITMENTS AND CONTINGENCIES - Additional Information (Details) $ in Millions	1 Months Ended	9 Months Ended
	Oct. 31, 2015 installment	Mar. 26, 2016 USD ($)	Feb. 29, 2016 USD ($)	Jun. 27, 2015 USD ($)
Prepaid Expenses and Other Current Assets | Internal Revenue Board of Malaysia
Contingencies And Commitments [Line Items]
Refund claims receivable			$ 2.4
Inventory in Excess of Future Demand Forecasts | Accrued Expenses and Other Liabilities
Contingencies And Commitments [Line Items]
Purchase commitments		$ 3.1		$ 3.2
Affiliated Entity | Hitachi High-Technologies Corporation
Contingencies And Commitments [Line Items]
Capital lease term	5 years
Number of equal installments of principal and interest | installment	20
Interest rate on capital equipment	1.15%
Minimum
Contingencies And Commitments [Line Items]
Warranty for products from date of sale		12 months
Minimum | Affiliated Entity | Hitachi Capital Corporation
Contingencies And Commitments [Line Items]
Capital lease term		1 year
Maximum
Contingencies And Commitments [Line Items]
Warranty for products from date of sale		36 months
Maximum | Affiliated Entity | Hitachi Capital Corporation
Contingencies And Commitments [Line Items]
Capital lease term		5 years

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COMMITMENTS AND CONTINGENCIES - Movements in Warranty Accrual for Period (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015
Warranty Provision Roll Forward:
Warranty provision—beginning of period	$ 3,097	$ 3,474	$ 2,932	$ 4,672
Warranties issued	615	185	1,472	1,078
Warranties utilized or expired	(553)	(377)	(1,241)	(2,236)
Currency translation and other adjustments	(32)	(12)	(36)	(244)
Warranty provision—end of period	$ 3,127	$ 3,270	$ 3,127	$ 3,270

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COMMITMENTS AND CONTINGENCIES - Summary of Future Minimum Lease Payments Due Under Non-Cancelable Capital Leases (Details) $ in Thousands	Mar. 26, 2016 USD ($)
Fiscal Year Ending:
2016 (remaining)	$ 1,174
2017	3,027
2018	554
2019	532
2020	571
Thereafter	246
Total minimum lease payments	6,104
Less amount representing interest	(274)
Present value of capitalized payments	5,830
Less: current portion	(3,813)
Long-term portion	$ 2,017

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EMPLOYEE STOCK PLANS - Additional Information (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions		1 Months Ended			9 Months Ended
	Nov. 10, 2015	Aug. 31, 2015	Jul. 31, 2015	Aug. 31, 2014	Mar. 26, 2016	Mar. 24, 2016	Jun. 27, 2015
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Number of additional shares authorized under the ESPP	8,000				8,000
Number of shares available for grant under the ESPP					12,863		8,921
Closing price of common stock (in usd per share)						$ 5.31
Number of shares of common stock subject to in-the-money options (in shares)					1,300
Stock Options | Minimum
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Award vesting period					2 years
Stock Options | Maximum
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Award vesting period					4 years
Restricted Stock Awards / Units Outstanding | Minimum
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Award vesting period					1 year
Restricted Stock Awards / Units Outstanding | Maximum
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Award vesting period					4 years
PSUs | Certain Executive Officers
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Award vesting period					2 years
Number of granted shares		900		500
Aggregate estimated grant date fair value of PSU		$ 2.5		$ 0.9
PSUs | Certain Executive Officers | August 10, 2016
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Percentage of shares that will vest					33.40%
PSUs | Certain Executive Officers | Subsequent Quarter Over the Next Two Years
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Percentage of shares that will vest					8.325%
PSUs | Maximum | Certain Executive Officers
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Performance stock units, vesting percentage				100.00%
RSUs
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Award vesting period			3 years
RSUs | Certain Executive Officers
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Number of granted shares			900
RSUs | Employees
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Number of granted shares			1,500

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EMPLOYEE STOCK PLANS - Summarizes Combined Activity Under All of Our Equity Incentive Plans (Details) - $ / shares		3 Months Ended	9 Months Ended
	Nov. 10, 2015	Mar. 26, 2016	Mar. 26, 2016
Shares Available For Grant
Balance at beginning of period (in shares)			8,921,000
Increase in share reserve (in shares)	8,000,000		8,000,000
Granted (in shares)			(5,270,000)
Exercised or released (in shares)			605,000
Forfeited or expired (in shares)			607,000
Balance at end of period (in shares)		12,863,000	12,863,000
Stock Options / SARs Outstanding
Balance at beginning of period (in shares)			3,381,000
Increase in share reserve (in shares)			0
Granted (in shares)		0	0
Exercised or released (in shares)			(56,000)
Forfeited or expired (in shares)			(220,000)
Balance at end of period (in shares)		3,105,000	3,105,000
Weighted- Average Exercise Price
Balance at beginning of period (in usd per share)			$ 7.07
Increase in share reserve (in usd per share)			0.00
Granted (in usd per share)			0.00
Exercised or released (in usd per share)			2.81
Forfeited or expired (in usd per share)			10.91
Balance at end of period (in usd per share)		$ 6.88	$ 6.88
Restricted Stock Awards / Units Outstanding
Restricted Stock Awards / Units Outstanding
Balance at beginning of period (in shares)			4,545,000
Increase in share reserve (in shares)			0
Granted (in shares)			3,764,000
Exercised or released (in shares)			(2,789,000)
Forfeited or expired (in shares)			(258,000)
Balance at end of period (in shares)		5,262,000	5,262,000
Weighted- Average Grant Date Fair Value
Balance at beginning of period (in usd per share)			$ 1.80
Increase in share reserve (in usd per share)			0.00
Granted (in usd per share)			2.84
Exercised or released (in usd per share)			2.12
Forfeited or expired (in usd per share)			1.31
Balance at end of period (in usd per share)		$ 2.58	$ 2.58

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EMPLOYEE STOCK PLANS - Supplemental Disclosure Information About Our Stock Options and SAR's Outstanding (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Mar. 26, 2016	Jun. 27, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, Options and SARs exercisable	1,300
Shares, Options and SARs outstanding	3,105	3,381
Weighted-Average Exercise Price, Options and SARs outstanding (in usd per share)	$ 6.88	$ 7.07
Stock options and SARs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, Options and SARs exercisable	2,832
Shares, Options and SARs outstanding	3,105
Weighted-Average Exercise Price, Options and SARs exercisable (in usd per share)	$ 7.34
Weighted-Average Exercise Price, Options and SARs outstanding (in usd per share)	$ 6.88
Weighted-Average Remaining Contractual Life, Options and SARs exercisable	3 years 7 months 25 days
Weighted-Average Remaining Contractual Life, Options and SARs outstanding	3 years 10 months 10 days
Aggregate Intrinsic Value, Options and SARs exercisable	$ 1,907
Aggregate Intrinsic Value, Options and SARs outstanding	$ 2,797

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STOCK-BASED COMPENSATION - Assumptions Used to Value Stock Option Grants (Details) - Stock options	9 Months Ended
	Mar. 28, 2015
Stock options:
Expected life	5 years 3 months
Risk-free interest rate	1.60%
Volatility	76.90%
Dividend yield	0.00%

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STOCK-BASED COMPENSATION - Amounts Included in Cost of Revenues and Operating Expenses for Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation	$ 2,073	$ 1,575	$ 6,440	$ 4,617
Stock options
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation	52	87	167	317
Restricted stock awards
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation	1,962	1,497	6,258	4,233
Inventory adjustment to cost of revenues
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation	59	(9)	15	67
Cost of revenues
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation	523	434	1,451	1,340
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation	455	396	1,370	1,138
Selling, general and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation	$ 1,095	$ 745	$ 3,619	$ 2,139

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STOCK-BASED COMPENSATION - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015	Jun. 27, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted (in shares)	0		0
Stock-based compensation capitalized as inventory			$ 400		$ 500
Unrecognized stock-based compensation expense	$ 300		300
Allocated share-based compensation expense	2,073	$ 1,575	$ 6,440	$ 4,617
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized stock-based compensation expense, weighted-average period for recognition			2 years 1 month
Allocated share-based compensation expense	52	87	$ 167	317
Restricted stock awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized stock-based compensation expense, weighted-average period for recognition			1 year 9 months
Unrecognized stock-based compensation expense other than options	7,900		$ 7,900
Allocated share-based compensation expense	1,962	1,497	6,258	4,233
PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated share-based compensation expense	$ 200	$ 100	1,200	$ 200
Acceleration of stock-based compensation			$ 500

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INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015	Jun. 27, 2015
Income Tax Disclosure [Abstract]
Income tax (benefit) provision	$ 476	$ (537)	$ 2,360	$ 379
Unrecognized tax benefits	4,100		4,100		$ 4,100
Unrecognized tax benefits that would affect effective tax rate	2,400		2,400
Estimated decrease in unrecognized tax benefits	$ 900		$ 900

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NET INCOME (LOSS) PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Net income (loss)	$ 89	$ (10,186)	$ (3,264)	$ (42,823)
Weighted-average shares - Basic (in shares)	110,882	108,357	110,212	107,818
Effect of dilutive potential common shares from:
Weighted-average shares - Diluted (in shares)	113,699	108,357	110,212	107,818
Basic net income (loss) per share (in usd per share)	$ 0.00	$ (0.09)	$ (0.03)	$ (0.40)
Diluted net income (loss) per share (in usd per share)	$ 0.00	$ (0.09)	$ (0.03)	$ (0.40)
Antidilutive securities excluded from computation of earnings per share (in shares)	35,500	22,400	38,300	13,500
Stock options and stock appreciation rights
Effect of dilutive potential common shares from:
Stock awards (in shares)	280	0	0	0
Restricted stock awards
Effect of dilutive potential common shares from:
Stock awards (in shares)	2,537	0	0	0

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GEOGRAPHIC INFORMATION, PRODUCT GROUPS AND CUSTOMER CONCENTRATION INFORMATION - Revenues by Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015
Geographic Information [Line Items]
Revenues	$ 101,050	$ 83,023	$ 282,729	$ 259,084
China
Geographic Information [Line Items]
Revenues	43,935	29,433	112,170	75,686
United States
Geographic Information [Line Items]
Revenues	15,913	12,429	45,880	40,352
Mexico
Geographic Information [Line Items]
Revenues	10,015	8,139	36,549	31,029
Malaysia
Geographic Information [Line Items]
Revenues	7,986	10,845	24,146	40,306
Italy
Geographic Information [Line Items]
Revenues	6,353	6,429	20,242	17,332
Germany
Geographic Information [Line Items]
Revenues	5,686	5,781	14,638	20,168
Japan
Geographic Information [Line Items]
Revenues	2,167	2,189	5,133	7,637
Rest of world
Geographic Information [Line Items]
Revenues	$ 8,995	$ 7,778	$ 23,971	$ 26,574

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GEOGRAPHIC INFORMATION, PRODUCT GROUPS AND CUSTOMER CONCENTRATION INFORMATION - Revenues by Product Group (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015
Segment Information [Line Items]
Revenues	$ 101,050	$ 83,023	$ 282,729	$ 259,084
100 Gb/s transmission modules
Segment Information [Line Items]
Revenues	58,569	30,221	148,951	85,221
40 Gb/s and lower transmission modules
Segment Information [Line Items]
Revenues	42,481	52,802	133,778	164,499
Industrial and consumer
Segment Information [Line Items]
Revenues	$ 0	$ 0	$ 0	$ 9,364

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GEOGRAPHIC INFORMATION, PRODUCT GROUPS AND CUSTOMER CONCENTRATION INFORMATION - Additional Information (Details) - customer	3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 26, 2016	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015	Jun. 27, 2015
Revenues
Revenue, Major Customer [Line Items]
Number of major customers	4	4	3	3
Revenues | Customer A
Revenue, Major Customer [Line Items]
Percentage of revenues	20.00%	19.00%	19.00%	22.00%
Revenues | Customer B
Revenue, Major Customer [Line Items]
Percentage of revenues	14.00%	16.00%	14.00%	14.00%
Revenues | Customer C
Revenue, Major Customer [Line Items]
Percentage of revenues	12.00%	11.00%	10.00%	10.00%
Revenues | Customer D
Revenue, Major Customer [Line Items]
Percentage of revenues	11.00%	10.00%
Accounts Receivable
Revenue, Major Customer [Line Items]
Number of major customers			4		4
Accounts Receivable | Customer A
Revenue, Major Customer [Line Items]
Percentage of accounts receivable	21.00%		21.00%		24.00%
Accounts Receivable | Customer B
Revenue, Major Customer [Line Items]
Percentage of accounts receivable	19.00%		19.00%		13.00%
Accounts Receivable | Customer C
Revenue, Major Customer [Line Items]
Percentage of accounts receivable	13.00%		13.00%		11.00%
Accounts Receivable | Customer D
Revenue, Major Customer [Line Items]
Percentage of accounts receivable	11.00%		11.00%		11.00%

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RELATED PARTY TRANSACTIONS (Details) - Affiliated Entity - Hitachi Ltd - USD ($) shares in Millions, $ in Millions	3 Months Ended			9 Months Ended
	Mar. 26, 2016	Dec. 26, 2015	Mar. 28, 2015	Mar. 26, 2016	Mar. 28, 2015	Jun. 27, 2015
Related Party Transaction [Line Items]
Percentage of outstanding common stock (less than)	5.00%			5.00%
Number of shares sold by Hitachi		6.6
Sales to Hitachi	$ 1.0		$ 1.2	$ 2.9	$ 3.1
Purchases from Hitachi	5.8		$ 4.2	16.2	$ 11.5
Accounts receivable due from Hitachi	1.3			1.3		$ 0.7
Accounts payable due to Hitachi	$ 5.5			$ 5.5		$ 4.8