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 April 1, 2017

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	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

167,284,390 shares of common stock outstanding as of May 1, 2017

OCLARO, INC.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of April 1, 2017 and July 2, 2016	3
	Condensed Consolidated Statements of Operations for the three and nine months ended April 1, 2017 and March 26, 2016	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended April 1, 2017 and March 26, 2016	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended April 1, 2017 and March 26, 2016	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 6.	Exhibits	49
Signatures		50

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

OCLARO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	April 1, 2017			July 2, 2016
	(Thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	214,063		$	95,929
Restricted cash	716			715
Short-term investments	40,005			—
Accounts receivable, net of allowances for doubtful accounts of $1,550 and $1,674 as of April 1, 2017 and July 2, 2016, respectively	123,695			93,571
Inventories	88,676			76,369
Prepaid expenses and other current assets	38,396			23,591
Total current assets	505,551			290,175
Property and equipment, net	100,459			65,045
Other intangible assets, net	840			1,498
Other non-current assets	2,474			2,331
Total assets	$	609,324		$	359,049
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	92,346		$	71,201
Accrued expenses and other liabilities	44,031			34,818
Capital lease obligations, current	2,431			3,753
Total current liabilities	138,808			109,772
Deferred gain on sale-leaseback	5,844			6,809
Convertible notes payable	—			62,058
Capital lease obligations, non-current	1,516			2,105
Other non-current liabilities	10,956			11,694
Total liabilities	157,124			192,438
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock: 1,000 shares authorized; none issued and outstanding	—			—
Common stock: $0.01 par value per share; 275,000 shares authorized; 167,281shares issued and outstanding at April 1, 2017 and 112,207 shares issued and outstanding at July 2, 2016	1,673			1,122
Additional paid-in capital	1,685,961			1,471,280
Accumulated other comprehensive income	38,346			39,821
Accumulated deficit	(1,273,780		)	(1,345,612		)
Total stockholders’ equity	452,200			166,611
Total liabilities and stockholders’ equity	$	609,324		$	359,049

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
	April 1, 2017			March 26, 2016			April 1, 2017			March 26, 2016
	(Thousands, except per share amounts)
Revenues	$	162,182		$	101,050		$	451,588		$	282,729
Cost of revenues	95,394			74,114			277,680			206,488
Gross profit	66,788			26,936			173,908			76,241
Operating expenses:
Research and development	14,479			11,379			41,344			33,399
Selling, general and administrative	14,736			13,055			42,883			39,054
Amortization of other intangible assets	150			247			635			748
Restructuring, acquisition and related (income) expense, net	(301		)	(59		)	92			(21		)
(Gain) loss on sale of property and equipment	(16		)	(145		)	(127		)	22
Total operating expenses	29,048			24,477			84,827			73,202
Operating income	37,740			2,459			89,081			3,039
Other income (expense):
Interest income (expense), net	175			(1,203		)	(13,613		)	(3,726		)
Gain (loss) on foreign currency transactions, net	687			(865		)	(3,155		)	(861		)
Other income (expense), net	233			174			583			644
Total other income (expense)	1,095			(1,894		)	(16,185		)	(3,943		)
Income (loss) before income taxes	38,835			565			72,896			(904		)
Income tax provision	621			476			1,064			2,360
Net income (loss)	$	38,214		$	89		$	71,832		$	(3,264	)
Net income (loss) per share:
Basic	$	0.23		$	0.00		$	0.46		$	(0.03	)
Diluted	$	0.22		$	0.00		$	0.44		$	(0.03	)
Shares used in computing net income (loss) per share:
Basic	166,808			110,882			155,037			110,212
Diluted	169,841			113,699			163,237			110,212

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
	April 1, 2017			March 26, 2016		April 1, 2017			March 26, 2016
	(Thousands)
Net income (loss)	$	38,214		$	89	$	71,832		$	(3,264	)
Other comprehensive income (loss):
Unrealized loss on marketable securities	(10		)	—		(5		)	—
Currency translation adjustments	1,775			593		(1,470		)	(1,886		)
Pension adjustments	—			—		—			(10		)
Total comprehensive income (loss)	$	39,979		$	682	$	70,357		$	(5,160	)

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
	April 1, 2017			March 26, 2016
	(Thousands)
Cash flows from operating activities:
Net income (loss)	$	71,832		$	(3,264	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of deferred gain on sale-leaseback	(553		)	(648		)
Amortization of debt discount and issuance costs in connection with convertible notes payable	102			609
Depreciation and amortization	15,360			12,198
Interest make-whole charge and induced conversion expense related to convertible notes	8,463			—
Stock-based compensation expense	7,922			6,440
Other non-cash adjustments	(128		)	22
Changes in operating assets and liabilities:
Accounts receivable, net	(32,402		)	(12,969		)
Inventories	(16,068		)	(7,553		)
Prepaid expenses and other current assets	(16,579		)	502
Other non-current assets	(275		)	264
Accounts payable	14,090			1,433
Accrued expenses and other liabilities	11,746			5,959
Net cash provided by operating activities	63,510			2,993
Cash flows from investing activities:
Purchases of property and equipment	(41,846		)	(12,362		)
Purchases of short-term investments	(40,001		)	—
Transfer (to) from restricted cash	(1		)	2,453
Net cash used in investing activities	(81,848		)	(9,909		)
Cash flows from financing activities:
Proceeds from the exercise of stock options	4,531			179
Shares repurchased for tax withholdings on vesting of restricted stock units	(3,675		)	(1,504		)
Proceeds from the sale of common stock in connection with public offering, net of expenses	135,153			—
Payments on capital lease obligations	(1,897		)	(2,303		)
Net cash provided by (used in) financing activities	134,112			(3,628		)
Effect of exchange rate on cash and cash equivalents	2,360			4,785
Net increase (decrease) in cash and cash equivalents	118,134			(5,759		)
Cash and cash equivalents at beginning of period	95,929			111,840
Cash and cash equivalents at end of period	$	214,063		$	106,081
Supplemental disclosures of cash flow information:
Cash paid for interest make-whole and induced conversion charges related to the exercise of convertible notes	$	4,700		$	—
Supplemental disclosures of non-cash transactions:
Issuance of common stock in exchange for the net carrying value of the liability component of convertible notes	$	62,125		$	—
Purchases of property and equipment funded by accounts payable	$	11,831		$	9,567
Capital lease obligations incurred for purchases of property and equipment	$	397		$	2,392

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 April 1, 2017 and for the three and nine months ended April 1, 2017 and March 26, 2016 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 April 1, 2017 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending July 1, 2017.

The condensed consolidated balance sheet as of July 2, 2016 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 July 2, 2016 ("2016 Form 10-K").

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 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 2016 Form 10-K.

Fiscal Years

We operate on a 52/53 week year ending on the Saturday closest to June 30. Our fiscal year ending July 1, 2017 will be a 52 week year, with the quarter ended April 1, 2017 being a 13 week quarterly period. Our fiscal year ended July 2, 2016 was a 53 week year, with the quarter ended March 26, 2016 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 loss, cash flows, cash and cash equivalents or stockholders’ equity as previously reported.

Recent Developments

In August 2016, we entered into multiple privately negotiated agreements, pursuant to which all of our 6.00% Notes were cancelled, and the indenture, by and between us and U.S. Bank National Association, pursuant to which the 6.00% Notes were issued, was satisfied and discharged. In connection with these privately negotiated agreements, we issued a total of 34,659,972 shares of our common stock and made total cash payments of $4.7 million. See Note 5, Credit Line and Notes, for additional information.

In September 2016, we entered into an underwriting agreement with Jefferies LLC, as representative of several underwriters, pursuant to which we sold 17,250,000 shares of our common stock in a public offering. The net proceeds to us after deducting underwriting discounts and commissions and offering expenses was approximately $135.2 million. See Note 3, Balance Sheet Details for additional information.

In November 2016, our stockholders approved an amendment to the Fifth Amended and Restated 2001 Long-Term Stock Incentive Plan, adding 6.0 million shares of common stock to the share reserve. See Note 8, Employee Stock Plans, for additional information.

7

NOTE 2. RECENT ACCOUNTING STANDARDS

In March 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, changing the presentation of net periodic benefit cost in the income statement. The guidance will be effective for us in the first quarter of fiscal 2019, with early adoption permitted. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations: Clarifying the Definition of a Business, providing guidance for evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. The guidance will be effective for us in the first quarter of fiscal 2019. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash to standardize the presentation of transfers between cash and restricted cash in the cash flow statement. Amounts described as restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance will be effective for us in the first quarter of fiscal 2019, with early adoption permitted. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory, to reduce the complexity related to the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. This guidance will be effective for us in the first quarter of fiscal 2019, with early adoption permitted. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments to reduce the diversity in practice related to the presentation and classification of various cash flow scenarios. This guidance will be effective for us in the first quarter of fiscal 2019, with early adoption permitted. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In May 2014 and May 2016, the FASB issued ASU 2014-09, Revenue from Contracts with Customers and ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, respectively. These updates clarify the principles for recognizing revenue and develop a common revenue standard for 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. The guidance permits two methods of adoption, the full retrospective method applying the standard to each prior reporting period presented, or the modified retrospective method with a cumulative effect of initially applying the guidance recognized at the date of initial application. We currently plan on adopting this guidance on July 1, 2018, the start to our first quarter of fiscal 2019, using the modified retrospective method with a cumulative catch up adjustment and providing additional disclosures comparing results to previous rules. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In March 2016, the FASB issued 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 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 likely impact 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 likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

8

NOTE 3. BALANCE SHEET DETAILS

Cash, Cash Equivalents and Short-Term Investments

The following table provides details regarding our cash, cash equivalents and short-term investments at the dates indicated:

	April 1, 2017		July 2, 2016
	(Thousands)
Cash and cash equivalents:
Cash-in-bank	$	67,803	$	70,925
Money market funds	95,825		25,004
Commercial paper	19,996		—
Corporate bonds	22,449		—
U.S. Treasury securities	3,995		—
U.S. agency securities	3,995		—
	$	214,063	$	95,929
Short-term investments:
Commercial paper	$	23,961	$	—
Corporate bonds	8,051		—
U.S. Treasury securities	3,998		—
U.S. agency securities	3,995		—
	$	40,005	$	—

We classify short-term investments, which consist primarily of securities purchased with original maturities at date of purchase of more than three months and less than one year, as “available for sale securities”. These short-term investments are reported at market value, with the aggregate unrealized holding gains and losses reported as a component of accumulated other comprehensive income in stockholders’ equity. All realized gains and losses and unrealized losses resulting from declines in fair value that are other than temporary and not involving credit losses are recorded in the consolidated statements of operations in the period they occur.

Restricted Cash

As of April 1, 2017, we had restricted cash of $1.1 million, comprised of $0.7 million in current assets and $0.4 million in other non-current assets, representing 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:

	April 1, 2017		July 2, 2016
	(Thousands)
Inventories:
Raw materials	$	25,067	$	23,751
Work-in-process	35,061		32,819
Finished goods	28,548		19,799
	$	88,676	$	76,369

9

Property and Equipment, Net

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

	April 1, 2017			July 2, 2016
	(Thousands)
Property and equipment, net:
Buildings and improvements	$	9,691		$	10,389
Plant and machinery	83,367			59,696
Fixtures, fittings and equipment	2,875			3,005
Computer equipment	11,583			9,846
	107,516			82,936
Less: Accumulated depreciation	(7,057		)	(17,891		)
	$	100,459		$	65,045

Property and equipment includes assets under capital leases of $3.9 million and $5.9 million at April 1, 2017 and July 2, 2016, respectively. Amortization associated with assets under capital leases is recorded in depreciation expense. During the nine months ended April 1, 2017, we disposed and/or sold approximately $13.0 million of fully depreciated property and equipment related to our high-bit products.

Other Intangible Assets, Net

The following table summarizes the activity related to our other intangible assets for the nine months ended April 1, 2017:

	Core and Current Technology		Development and Supply Agreements			Customer Relationships		Patent Portfolio		Other Intangibles		Amortization			Total
	(Thousands)
Balance at July 2, 2016	$	6,249	$	4,509		$	2,402	$	915	$	3,338	$	(15,915	)	$	1,498
Amortization	—		—			—		—		—		(635		)	(635		)
Translations and adjustments	—		(23		)	—		—		—		—			(23		)
Balance at April 1, 2017	$	6,249	$	4,486		$	2,402	$	915	$	3,338	$	(16,550	)	$	840

We expect the amortization of intangible assets to be $0.2 million for the remainder of fiscal year 2017 and $0.6 million for fiscal year 2018, based on the current level of our other intangible assets as of April 1, 2017.

Accrued Expenses and Other Liabilities

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

	April 1, 2017		July 2, 2016
	(Thousands)
Accrued expenses and other liabilities:
Trade payables	$	11,208	$	6,429
Compensation and benefits related accruals	12,385		14,038
Warranty accrual	4,659		3,827
Accrued restructuring, current	—		204
Purchase commitments in excess of future demand, current	5,292		1,723
Other accruals	10,487		8,597
	$	44,031	$	34,818

Common Stock

In August 2016, we issued a total of 34,659,972 shares of our common stock in connection with the cancellation of our 6.00% Notes. See Note 5, Credit Line and Notes, for additional information.

On September 21, 2016, we entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, as representative of the several underwriters (the “Underwriters”), relating to the offering, issuance and sale (the “Offering”) of 15.0

10

million shares of our common stock, par value $0.01 per share (the “Common Stock”). The price to the public in the Offering was $8.35 per share. Under the terms of the Underwriting Agreement, we granted the Underwriters a 30-day option to purchase up to an additional 2,250,000 shares of Common Stock. The option was exercised in full by the Underwriters on September 23, 2016. All of the shares in the Offering were sold by us. The Offering closed on September 27, 2016, subject to customary closing conditions. The net proceeds to us after deducting underwriting discounts and commissions and offering expenses were approximately $135.2 million.

Accumulated Other Comprehensive Income

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

	April 1, 2017			July 2, 2016
	(Thousands)
Accumulated other comprehensive income:
Currency translation adjustments	$	38,714		$	40,184
Unrealized loss on marketable securities	(5		)	—
Japan defined benefit plan	(363		)	(363		)
	$	38,346		$	39,821

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 and short-term investment instruments are generally classified within Level 1 or Level 2 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 money market and marketable securities. Such instruments are generally classified within Level 1 of the fair value hierarchy. The types of instruments valued based on other observable inputs include investment-grade corporate bonds and commercial paper. Such instruments are generally classified within Level 2 of the fair value hierarchy.

11

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 April 1, 2017 and July 2, 2016:

	Fair Value Measurement at April 1, 2017 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	$	95,825	$	—	$	—	$	95,825
Commercial paper	—		19,996		—		19,996
Corporate bonds	—		22,449		—		22,449
U.S. Treasury securities	—		3,995		—		3,995
U.S. agency securities	—		3,995		—		3,995
Short-term investments:
Commercial paper	—		23,961		—		23,961
Corporate bonds	—		8,051		—		8,051
U.S. Treasury securities	—		3,998		—		3,998
U.S. agency securities	—		3,995		—		3,995
Restricted cash:
Money market funds	712		—		—		712
Total assets measured at fair value	$	96,537	$	90,440	$	—	$	186,977

⁽¹⁾  Excludes $67.8 million in cash held in our bank accounts at April 1, 2017.

	Fair Value Measurement at July 2, 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	$	25,004	$	—	$	—	$	25,004
Restricted cash:
Money market funds	712		—		—		712
Total assets measured at fair value	$	25,716	$	—	$	—	$	25,716

⁽¹⁾  Excludes $70.9 million in cash held in our bank accounts at July 2, 2016.

NOTE 5. 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 are being used for general corporate purposes, including working capital for, among other things, investing in development of new products and technologies.

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The Purchase Agreement contained 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, agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).

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 would have received a notice of conversion had exceeded the conversion price in effect on each such trading day, we would have, in addition to delivering shares upon conversion by the holder of 6.00% Notes, together with cash in lieu of fractional shares, made 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.

The 6.00% Notes were scheduled to mature on February 15, 2020 and bore 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. In August 2016, we entered into multiple privately negotiated agreements, pursuant to which all of our 6.00% Notes were canceled, and the indenture, by and between us and U.S. Bank National Association, pursuant to which the 6.00% Notes were issued, was satisfied and discharged. In connection with these privately negotiated agreements, we issued a total of 34,659,972 shares of our common stock and made total cash payments of $4.7 million.

• On August 8, 2016, we entered into a privately negotiated agreement pursuant to which we (i) issued 12,051,282 shares of our common stock, and (ii) made a cash payment equal to $4.7 million during August 2016 in exchange for approximately $23.5 million aggregate principal amount of our 6.00% Notes.

• On August 9, 2016, we entered into privately negotiated agreements pursuant to which we agreed to issue (i) an aggregate of 20,564,101 shares of our common stock, plus (ii) a to be determined number of additional shares of our common stock based on certain formulaic consideration in exchange for $40.1 million aggregate principal amount of our 6.00% Notes. On August 12, 2016, including the additional shares of common stock, we issued an aggregate of 21,852,477 shares of our common stock.

• On August 18, 2016, we entered into privately negotiated agreements, pursuant to which, on August 22, 2016, we issued an aggregate of 756,213 shares of our common stock, in exchange for $1.4 million aggregate principal amount of our 6.00% Notes.

Pursuant to the terms of the indenture governing the 6.00% Notes, we recorded an interest make-whole charge of $5.9 million in interest (income) expense, net, in the condensed consolidated statements of operations for the nine months ended April 1, 2017, which was settled with a combination of common stock issuances and cash payments. We also recorded an induced conversion expense of $7.4 million, which we recorded in interest (income) expense, net, in the condensed consolidated statements of operations for the nine months ended April 1, 2017.

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 we are required to pay a minimum interest payment of $45,000 each fiscal quarter. The minimum interest payment is in lieu of a stand-by charge.

On March 28, 2017, the Loan Agreement expired, and was not renewed. There are no amounts outstanding under the Loan Agreement.

NOTE 6. POST-RETIREMENT BENEFITS

We maintain a defined contribution plan and a defined benefit plan that provide retirement benefits to our employees in Japan. We also contribute to a U.K. based defined contribution pension scheme for employees.

Japan Defined Contribution Plan

Under the defined contribution plan in Japan, contributions are provided based on grade level and totaled $0.1 million and $0.4 million for the three and nine months ended April 1, 2017, respectively and $0.1 million and $0.3 million for the three and nine months ended March 26, 2016, 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 years of service. Employees are entitled to a lump sum benefit upon retirement or upon certain instances of termination.

As of April 1, 2017, there were no plan assets associated with the Japan Plan. As of April 1, 2017, there was $0.2 million in accrued expenses and other liabilities and $6.6 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
	April 1, 2017		March 26, 2016		April 1, 2017		March 26, 2016
	(Thousands)
Service cost	$	172	$	132	$	480	$	376
Interest cost	1		11		3		32
Net periodic pension costs	$	173	$	143	$	483	$	408

We made minimal benefit payments under the Japan Plan during the three months ended April 1, 2017 and $0.2 million during the nine months ended April 1, 2017. We made zero and $0.1 million in benefit payments during the three and nine months ended March 26, 2016, respectively.

U.K. Defined Contribution Pension Scheme

Under the defined contribution pension scheme, contributions totaled $0.3 million and $0.8 million for the three and nine months ended April 1, 2017, respectively, and $0.3 million and $0.9 million for the three and nine months ended March 26, 2016, respectively.

NOTE 7. 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
	April 1, 2017			March 26, 2016			April 1, 2017			March 26, 2016
	(Thousands)
Warranty provision—beginning of period	$	4,560		$	3,097		$	3,827		$	2,932
Warranties issued	991			615			2,533			1,472
Warranties utilized or expired	(901		)	(553		)	(1,505		)	(1,241		)
Foreign currency translation and other adjustments	9			(32		)	(196		)	(36		)
Warranty provision—end of period	$	4,659		$	3,127		$	4,659		$	3,127

Capital Leases

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

The following table shows the future minimum lease payments due under non-cancelable capital leases at April 1, 2017:

	Capital Leases
	(Thousands)
Fiscal Year Ending:
2017 (remaining)	$	926
2018	1,748
2019	591
2020	629
2021	286
Thereafter	12
Total minimum lease payments	4,192
Less amount representing interest	(245		)
Present value of capitalized payments	3,947
Less: current portion	(2,431		)
Long-term portion	$	1,516

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 April 1, 2017 and July 2, 2016, the liability for these purchase commitments was $4.5 million and $1.7 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 through an administrative appeal, and believe that additional appeal options may be available to us if we do not obtain a favorable resolution. 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, we may not be able to recover some of these GST amounts. Of the $2.4 million in GST claims, we recorded $1.9 million net of

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reserves, as a receivable classified in prepaid expenses and other current assets in our condensed consolidated balance sheet at April 1, 2017.

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 is described below. This legal proceeding, 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 proceeding described below. While it is not possible to accurately predict or determine the eventual outcome of this item, an adverse determination in the item 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. A final pretrial conference is scheduled for June 14, 2017. We intend to vigorously defend against this litigation.

NOTE 8. EMPLOYEE STOCK PLANS

Stock Incentive Plans

On November 18, 2016, our stockholders approved an amendment to the Fifth Amended and Restated 2001 Long-Term Stock Incentive Plan (the "Plan"), adding 6.0 million shares of common stock to the share reserve under the Plan. As of April 1, 2017, there were approximately 13.7 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 ("RSU") 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 Stock Units

In August 2015, our board of directors approved a grant of 0.9 million performance-based restricted stock units ("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 adjusted EBITDA 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 first quarter of fiscal year 2016. As a result, these PSUs cliff vested with respect to 33.4 percent of the underlying shares on August 10, 2016, and will vest with respect to 8.325 percent of the underlying shares each subsequent quarter over the following two years, subject to continuous service.

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In August 2016, our board of directors approved a grant of 0.8 million PSUs to certain executive officers with an aggregate estimated grant date fair value of $4.8 million. Subject to the achievement of an aggregate of $25.0 million or more of free cash flow (defined as adjusted EBITDA less capital expenditures delivered) over any consecutive four fiscal quarters ending on or before June 27, 2020, as determined by our board of directors, these PSUs will vest with respect to 25 percent of the shares subject to the PSUs on August 10, 2017, and with respect to 6.25 percent of the underlying shares each subsequent quarter over the following three years, subject to continuous service.

Restricted Stock Units

In July 2015, our board of directors approved a long term incentive grant of 0.9 million RSUs to certain executive officers and 1.5 million RSUs to other employees, which vest over three years.

In August 2016, our board of directors approved a long term incentive grant of 0.8 million RSUs to certain executive officers and 2.0 million RSUs to other employees, which vest over four years.

Stock Incentive Plan Activity

The following table summarizes the combined activity under all of our equity incentive plans for the nine months ended April 1, 2017:

	Shares Available For Grant		Stock Options / SARs Outstanding		Weighted- Average Exercise Price		Time and Performance-based Restricted Stock Awards / Units Outstanding		Weighted- Average Grant Date Fair Value
	(Thousands)		(Thousands)				(Thousands)
Balance at July 2, 2016	12,824		2,975		$	7.03	5,022		$	2.67
Increase in share reserve	6,000		—		—		—		—
Granted	(5,460	)	—		—		3,900		6.45
Exercised or released	140		(960	)	4.84		(2,873	)	2.54
Forfeited or expired	208		(69	)	16.30		(102	)	4.69
Balance at April 1, 2017	13,712		1,946		$	7.78	5,947		$	5.17

Supplemental disclosure information about our stock options and stock appreciation rights ("SARs") outstanding as of April 1, 2017 is as follows:

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
	(Thousands)			(Years)	(Thousands)
Options and SARs exercisable	1,837	$	8.12	2.9	$	6,039
Options and SARs outstanding	1,946	$	7.78	3.1	$	6,891

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 $9.82 on March 31, 2017, which would have been received by the option holders had all option holders exercised their options as of that date. There were approximately 1.2 million shares of common stock subject to in-the-money options which were exercisable as of April 1, 2017. We settle employee stock option exercises with newly issued shares of common stock.

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NOTE 9. 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.

As there were no stock options granted during the three and nine months ended April 1, 2017 and March 26, 2016, the Black-Scholes assumptions used to value stock option grants is not applicable.

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

	Three Months Ended				Nine Months Ended
	April 1, 2017		March 26, 2016		April 1, 2017			March 26, 2016
	(Thousands)
Stock-based compensation by category of expense:
Cost of revenues	$	630	$	523	$	1,381		$	1,451
Research and development	590		455		1,573			1,370
Selling, general and administrative	1,670		1,095		4,968			3,619
	$	2,890	$	2,073	$	7,922		$	6,440
Stock-based compensation by type of award:
Stock options	$	32	$	52	$	102		$	167
Restricted stock awards	2,747		1,962		7,950			6,258
Inventory adjustment to cost of revenues	111		59		(130		)	15
	$	2,890	$	2,073	$	7,922		$	6,440

As of April 1, 2017 and July 2, 2016, we had capitalized approximately $0.5 million and $0.3 million, respectively, of stock-based compensation as inventory.

As of April 1, 2017, we had capitalized approximately $0.2 million of stock-based compensation in connection with the development of internal use software.

As of April 1, 2017, we had $0.1 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 1.2 years, and $18.0 million in unrecognized stock-based compensation expense related to unvested time-based restricted stock awards and restricted stock units, net of estimated forfeitures, that will be recognized over a weighted-average period of 2.4 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 to 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. As of April 1, 2017, we determined that the achievement of the performance conditions associated with the PSUs issued in August 2016 is probable at 100 percent of the target level.

During the three and nine months ended April 1, 2017, we recorded $0.7 million and $1.9 million, respectively, in stock-based compensation in connection with the PSUs issued in August 2015 and August 2016. During the three and nine months ended March 26, 2016, we recorded $0.2 million and $1.2 million, respectively in stock-based compensation expense in connection with the issuance of PSUs.

NOTE 10. INCOME TAXES

The income tax provision of $0.6 million and $1.1 million for the three and nine months ended April 1, 2017, respectively, relates primarily to our foreign operations. The income tax provision of $0.5 million and $2.4 million for the three and nine months endedMarch 26, 2016, respectively, relates primarily to our foreign operations.

The total amount of our unrecognized tax benefits as of April 1, 2017 and July 2, 2016 was approximately $3.5 million and $3.8 million, respectively. As of April 1, 2017, we had $2.9 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 $1.3 million in the next twelve months.

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NOTE 11. 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
	April 1, 2017		March 26, 2016		April 1, 2017		March 26, 2016
	(Thousands, except per share amounts)
Net income (loss)	$	38,214	$	89	$	71,832	$	(3,264	)
Weighted-average shares - Basic	166,808		110,882		155,037		110,212
Effect of dilutive potential common shares from:
Stock options and stock appreciation rights	651		280		712		—
Restricted stock units and awards	2,382		2,537		2,484		—
Convertible notes	—		—		5,004		—
Weighted-average shares - Diluted	169,841		113,699		163,237		110,212
Basic net income (loss) per share	$	0.23	$	0.00	$	0.46	$	(0.03	)
Diluted net income (loss) per share	$	0.22	$	0.00	$	0.44	$	(0.03	)

For the three and nine months ended April 1, 2017, we excluded 0.6 million and 0.8 million, respectively, of outstanding stock options, stock appreciation rights and unvested restricted stock awards from the calculation of diluted net income (loss) per share because their effect would have been anti-dilutive.

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 shares issuable in connection with convertible notes from the calculation of diluted net income (loss) per share because their effect would have been anti-dilutive.

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NOTE 12. 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
	April 1, 2017		March 26, 2016		April 1, 2017		March 26, 2016
	(Thousands)
Asia-Pacific:
China	$	57,882	$	43,935	$	180,551	$	112,170
Thailand	24,722		1,964		78,852		2,727
Malaysia	4,000		7,986		15,703		24,146
Other Asia-Pacific	6,329		1,378		12,693		3,294
Total Asia-Pacific	$	92,933	$	55,263	$	287,799	$	142,337
Americas:
United States	22,832		15,913		54,574		45,880
Mexico	8,930		10,015		26,290		36,549
Other Americas	14,115		2,338		22,327		5,312
Total Americas	$	45,877	$	28,266	$	103,191	$	87,741
EMEA:
Italy	7,577		6,353		23,601		20,242
Germany	5,116		5,686		11,493		14,638
Other EMEA	6,836		3,315		18,182		12,638
Total EMEA	$	19,529	$	15,354	$	53,276	$	47,518
Japan	$	3,843	$	2,167	$	7,322	$	5,133
Total revenues	$	162,182	$	101,050	$	451,588	$	282,729

Product Groups

The following table sets forth revenues by product group:

	Three Months Ended				Nine Months Ended
	April 1, 2017		March 26, 2016		April 1, 2017		March 26, 2016
	(Thousands)
100 Gb/s transmission modules	$	125,818	$	58,569	$	337,424	$	148,951
40 Gb/s and lower transmission modules	36,364		42,481		114,164		133,778
	$	162,182	$	101,050	$	451,588	$	282,729

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Significant Customers and Concentration of Credit Risk

For the three months ended April 1, 2017, four customers accounted for 10 percent or more of our revenues, representing approximately 18 percent, 17 percent, 12 percent and 12 percent of our revenues, respectively. For the nine months ended April 1, 2017four customers accounted for 10 percent of more of our revenues, representing 19 percent, 18 percent, 16 percent and 11 percent of our revenues, respectively.

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.

As of April 1, 2017, three customers accounted for 10 percent or more of our accounts receivable, representing approximately 21 percent, 13 percent and 11 percent of our accounts receivable, respectively. As of July 2, 2016, four customers accounted for 10 percent or more of our accounts receivable, representing approximately 23 percent, 16 percent, 13 percent and 10 percent of our accounts receivable, respectively.

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,” “forecast,” “project,” “intend,” “plan,” “believe,” “will,” “should,” “outlook,” “could,” “target,” “model,” "objective," 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) the absence of long-term purchase commitments from many of our long-term customers, (iii) our dependence on a limited number of customers for a significant percentage of our revenues, (iv) competition and pricing pressure, (v) our ability to meet or exceed our gross margin expectations, (vi) the effects of fluctuations in foreign currency exchange rates, (vii) our manufacturing yields, (viii) the risks associated with delays, disruptions or quality control problems in manufacturing, (ix) our ability to conclude agreements with our customers on favorable terms, (x) our ability to obtain governmental licenses and approvals for international trading activities or technology transfers, including export licenses, (xi) our ability to respond to evolving technologies, customer requirements and demands, and product design challenges, (xii) 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, (xiii) our ability to effectively manage our inventory, (xiv) our dependence on a limited number of suppliers and key contract manufacturers, (xv) our ability to have our manufacturing lines qualified by our customers, (xvi) our ability to protect our intellectual property rights, (xvii) the outcome of tax audits or similar proceedings, (xviii) the risks associated with our international operations, (xix) the outcome of pending litigation against us, and (xx) other factors described in our most recent annual report on Form 10-K and 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 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; Ciena Corporation; Cisco Systems, Inc.; Coriant GmbH; Huawei Technologies Co. Ltd; InnoLight Technology Corporation; Juniper Networks, Inc.; Kaiam Corp.; Nokia/Alcatel-Lucent and ZTE Corporation.

RECENT DEVELOPMENTS

6.00% Convertible Senior Notes

In August 2016, we entered into multiple privately negotiated agreements, pursuant to which all $65.0 million of our 6.00% Convertible Senior Notes Due 2020 ("6.00% Notes") were canceled, and the indenture, dated as of February 19, 2015, by and between us and U.S. Bank National Association, pursuant to which the 6.00% Notes were issued, was satisfied and discharged.

• On August 8, 2016, we entered into a privately negotiated agreement pursuant to which we (i) issued 12,051,282 shares of our common stock, par value $0.01 per share, and (ii) made a cash payment equal to $4.7 million during August 2016 in exchange for approximately $23.5 million aggregate principal amount of our 6.00% Notes.

• On August 9, 2016, we entered into privately negotiated agreements pursuant to which we agreed to issue (i) an aggregate of 20,564,101 shares of our common stock, plus (ii) a to be determined number of additional shares of our common stock based on certain formulaic consideration in exchange for $40.1 million aggregate principal amount of our 6.00% Notes. On August 12, 2016, including the additional shares of common stock, we issued an aggregate of 21,852,477 shares of our common stock.

• On August 18, 2016, we entered into privately negotiated agreements, pursuant to which, on August 22, 2016, we issued an aggregate of 756,213 shares of our common stock, in exchange for $1.4 million aggregate principal amount of our 6.00% Notes.

Common Stock Offering

On September 21, 2016, we entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, as representative of the several underwriters (the “Underwriters”), relating to the offering, issuance and sale (the “Offering”) of 15,000,000 shares of our common stock, par value $0.01 per share (the “Common Stock”). The price to the public in the Offering was $8.35 per share. Under the terms of the Underwriting Agreement, we granted the Underwriters a 30-day option to purchase up to an additional 2,250,000 shares of Common Stock. The option was exercised in full by the Underwriters on September 23, 2016. All of the shares in the Offering were sold by us. The Offering closed on September 27, 2016, subject to customary closing conditions. The net proceeds to us after deducting underwriting discounts and commissions and offering expenses was approximately $135.2 million.

Stock Incentive Plans

On November 18, 2016, our stockholders approved an amendment to the Fifth Amended and Restated 2001 Long-Term Stock Incentive Plan (the "Plan"), adding 6.0 million shares of common stock to the share reserve under the Plan.

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RESULTS OF OPERATIONS

The following tables set 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
	April 1, 2017					March 26, 2016					Change			(Decrease)
	(Thousands)			%		(Thousands)			%		(Thousands)			%
Revenues	$	162,182		100.0		$	101,050		100.0		$	61,132		60.5
Cost of revenues	95,394			58.8		74,114			73.3		21,280			28.7
Gross profit	66,788			41.2		26,936			26.7		39,852			148.0
Operating expenses:
Research and development	14,479			8.9		11,379			11.3		3,100			27.2
Selling, general and administrative	14,736			9.1		13,055			12.9		1,681			12.9
Amortization of other intangible assets	150			0.1		247			0.2		(97		)	(39.3	)
Restructuring, acquisition and related (income) expense, net	(301		)	(0.2	)	(59		)	(0.1	)	(242		)	410.2
Gain on sale of property and equipment	(16		)	—		(145		)	(0.1	)	129			(89.0	)
Total operating expenses	29,048			17.9		24,477			24.2		4,571			18.7
Operating income	37,740			23.3		2,459			2.4		35,281			1,434.8
Other income (expense):
Interest income (expense), net	175			0.1		(1,203		)	(1.2	)	1,378			n/m		(1)
Gain (loss) on foreign currency transactions, net	687			0.4		(865		)	(0.9	)	1,552			n/m		(1)
Other income (expense), net	233			0.1		174			0.2		59			33.9
Total other income (expense)	1,095			0.7		(1,894		)	(1.9	)	2,989			n/m		(1)
Income before income taxes	38,835			23.9		565			0.6		38,270			6,773.5
Income tax provision	621			0.4		476			0.5		145			30.5
Net income	$	38,214		23.6		$	89		0.1		$	38,125		42,837.1

(1) Not meaningful.

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	Nine Months Ended													Increase
	April 1, 2017					March 26, 2016					Change			(Decrease)
	(Thousands)			%		(Thousands)			%		(Thousands)			%
Revenues	$	451,588		100.0		$	282,729		100.0		$	168,859		59.7
Cost of revenues	277,680			61.5		206,488			73.0		71,192			34.5
Gross profit	173,908			38.5		76,241			27.0		97,667			128.1
Operating expenses:
Research and development	41,344			9.2		33,399			11.8		7,945			23.8
Selling, general and administrative	42,883			9.5		39,054			13.8		3,829			9.8
Amortization of other intangible assets	635			0.1		748			0.3		(113		)	(15.1	)
Restructuring, acquisition and related (income) expense, net	92			—		(21		)	—		113			n/m		(1)
(Gain) loss on sale of property and equipment	(127		)	—		22			—		(149		)	n/m		(1)
Total operating expenses	84,827			18.8		73,202			25.9		11,625			15.9
Operating income	89,081			19.7		3,039			1.1		86,042			2,831.3
Other income (expense):
Interest income (expense), net	(13,613		)	(3.0	)	(3,726		)	(1.3	)	(9,887		)	265.4
Loss on foreign currency transactions, net	(3,155		)	(0.7	)	(861		)	(0.3	)	(2,294		)	266.4
Other income (expense), net	583			0.1		644			0.2		(61		)	(9.5	)
Total other income (expense)	(16,185		)	(3.6	)	(3,943		)	(1.4	)	(12,242		)	310.5
Income (loss) before income taxes	72,896			16.1		(904		)	(0.3	)	73,800			n/m		(1)
Income tax provision	1,064			0.2		2,360			0.8		(1,296		)	(54.9	)
Net income (loss)	$	71,832		15.9		$	(3,264	)	(1.2	)	$	75,096		n/m		(1)

(1) Not meaningful.

Revenues

Revenues for the three months ended April 1, 2017 increased by $61.1 million, or 60 percent, compared to the three months ended March 26, 2016. Compared to the three months ended March 26, 2016, revenues from sales of our 100 Gb/s transmission modules increased by $67.2 million, or 115 percent, primarily due to growth in our 100 Gb/s line side modules and components and our client side transceivers; and revenues from sales of our 40 Gb/s and lower transmission modules decreased by $6.1 million, or 14 percent, primarily due to certain legacy 40 Gb/s and 10 Gb/s products being gradually replaced by our newer higher speed 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 April 1, 2017, four customers accounted for 10 percent or more of our revenues, representing approximately 18 percent,17 percent, 12 percent and 12 percent of our revenues, respectively. 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.

Revenues for the nine months ended April 1, 2017 increased by $168.9 million, or 60 percent, compared to the nine months ended March 26, 2016. Compared to the nine months ended March 26, 2016, revenues from sales of our 100 Gb/s transmission modules increased by $188.5 million, or 127 percent, primarily due to growth in our 100 Gb/s line side modules and components and our client side transceivers; and revenues from sales of our 40 Gb/s and lower transmission modules decreased by $19.6 million, or 15 percent, primarily due to certain legacy 40 Gb/s and 10 Gb/s products being gradually replaced by our newer higher speed 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.

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For the nine months ended April 1, 2017, four customers accounted for 10 percent or more of our revenues, representing approximately 19 percent, 18 percent, 16 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.

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 gross margin rate increased to approximately 41 percent for the three months ended April 1, 2017, compared to 27 percent for the three months ended March 26, 2016. The improvement in the gross margin rate was primarily related to the product mix of our sales, with a higher mix of higher margin 100 Gb/s products contributing approximately 7 percentage points of improvement; and economies of scale related to manufacturing overhead and inventory management that contributed approximately 7 percentage points of improvement.

Our gross margin rate increased to approximately 39 percent for the nine months ended April 1, 2017, compared to 27 percent for the nine months ended March 26, 2016. The improvement in the gross margin rate was primarily related to the product mix of our sales, with a higher mix of higher margin 100 Gb/s products contributing approximately 7 percentage points of improvement; and economies of scale related to manufacturing overhead and inventory management that contributed approximately 4 percentage points of improvement.

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.

Research and Development Expenses

Research and development expenses increased to $14.5 million for the three months ended April 1, 2017, from $11.4 million for the three months ended March 26, 2016. The increase was primarily related to an investment of $1.9 million in research and development resources, primarily personnel-related; and an increase of $1.9 million in non-recurring engineering and material expenses; partially offset by a decrease of $0.6 million related to the impact of the British pound, Euro and other currencies weakening relative to the U.S. dollar.

Research and development expenses increased to $41.3 million for the nine months ended April 1, 2017, from $33.4 million for the nine months ended March 26, 2016. The increase was primarily related to an investment of $4.8 million in research and development resources, primarily personnel-related; and an increase of $2.9 million in non-recurring engineering and material expenses; partially offset by a decrease of $0.4 million related to the impact of the British pound, Euro and other currencies weakening relative to the U.S. dollar.

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.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $14.7 million for the three months ended April 1, 2017, from $13.1 million for the three months ended March 26, 2016. The increase was primarily related to an increase of $1.4 million in personnel-related costs and an increase of $0.6 million in outside professional fees; partially offset by a decrease of $0.2 million related to the impact of the British pound, Euro and other currencies weakening relative to the U.S. dollar.

Selling, general and administrative expenses increased to $42.9 million for the nine months ended April 1, 2017, from $39.1 million for the nine months ended March 26, 2016. The increase was primarily related to an increase of $3.5 million in personnel-related costs, which included an increase in stock compensation related charges of $1.4 million, and an increase of $0.6 million in outside professional fees; partially offset by a decrease of $0.4 million related to the impact of the British pound, Euro and other currencies weakening relative to the U.S. dollar.

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.

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Amortization of Other Intangible Assets

Amortization of other intangible assets remained relatively flat during the three and nine months ended April 1, 2017 as compared to the three and nine months ended March 26, 2016. We expect the amortization of other intangible assets to be $0.2 million for the remainder of fiscal year 2017 and $0.6 million for fiscal year 2018, based on the current level of our other intangible assets as of April 1, 2017.

Restructuring, Acquisition and Related (Income) Expense, Net

During the three and nine months ended April 1, 2017, we incurred $0.3 million in restructuring and related income and $0.1 million in restructuring and related expense primarily related to the consolidation and closure of a facility for an end-of-life product.

During the three and nine months ended March 26, 2016, we incurred minimal restructuring, acquisition and related charges.

Other Income (Expense), Net

Other income (expense) was $1.1 million in income for the three months ended April 1, 2017 as compared to $1.9 million in expense for the three months ended March 26, 2016. This change in other income (expense) primarily related to a $1.6 million increase in foreign currency transaction gains during the three months ended April 1, 2017, as compared to the three months ended March 26, 2016, related to the revaluation of our U.S. dollar denominated balances in our U.K. and Japan subsidiaries, and from a decrease in interest expense of $1.4 million as a result of the conversion of $65.0 million of our 6.00% Notes during the first quarter of fiscal year 2017.

Other income (expense) was $16.2 million in expense for the nine months ended April 1, 2017 as compared to $3.9 million in expense for the three months ended March 26, 2016. This change in other income (expense) primarily related to the conversion of $65.0 million of our 6.00% Notes during the first quarter of fiscal year 2017, resulting in an induced conversion expense of $7.4 million and an interest make-whole charge of $5.9 million, which were both recorded in interest (income) expense, net. We also recorded a $2.3 million increase in foreign currency transaction losses during the nine months ended April 1, 2017, as compared to the nine months ended March 26, 2016, related to the revaluation of our U.S. dollar denominated balances in our U.K. and Japan subsidiaries.

Income Tax Provision

The income tax provision of $0.6 million and $1.1 million for the three and nine months ended April 1, 2017, respectively, andthe income tax provision of $0.5 million and $2.4 million for the three and nine months ended March 26, 2016, respectively, relates primarily to our foreign operations.

The total amount of our unrecognized tax benefits as of April 1, 2017 and July 2, 2016 was approximately $3.5 million and $3.8 million, respectively. As of April 1, 2017, we had $2.9 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 $1.3 million in the next twelve months.

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 July 2, 2016 ("2016 Form 10-K") related to revenue recognition and sales returns, inventory valuation, business combinations, impairment of 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 2016 Form 10-K.

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LIQUIDITY AND CAPITAL RESOURCES

Cash Flows from Operating Activities

Net cash provided by operating activities for the nine months ended April 1, 2017 was $63.5 million, primarily resulting from net income adjusted for non-cash items of $103.0 million, partially offset by $39.5 million decrease in cash due to changes in operating assets and liabilities. The adjustment to net income for non-cash items consisted of $15.4 million in depreciation and amortization, an $8.5 million charge related to the issuance of common stock to settle a portion of the interest make-whole and induced conversion liabilities in connection with the 6.00% Notes, $7.9 million of expense related to stock-based compensation and $0.1 million from the amortization of the debt discount and issuance costs in connection with the convertible notes, partially offset by $0.6 million from the amortization of a deferred gain from a sales-leaseback transaction in Caswell, U.K. The $39.5 million decrease in cash due to changes in operating assets and liabilities was comprised of a $32.4 million increase in accounts receivable attributable to an increase in revenues and timing of collections, a $16.6 million increase in prepaid expenses and other current assets primarily due to an increase in our non-trade receivables related to the increased volume of business going through our contract manufacturers, a $16.1 million increase in inventories resulting from the receipt of inventory intended for sale in future quarters, partially offset by a $14.1 million increase in accounts payable largely attributable to the timing of purchases and payments to vendors and $11.7 million increase in accrued expenses and other liabilities.

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, 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, 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.

Cash Flows from Investing Activities

Net cash used in investing activities for the nine months ended April 1, 2017 was $81.8 million, consisting of $41.8 million of capital expenditures and $40.0 million of purchases of available-for-sale short-term investments.

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

Cash Flows from Financing Activities

Net cash provided by financing activities for the nine months ended April 1, 2017 was $134.1 million, primarily consisting of $135.2 million in proceeds relating to the offering, issuance and sale of 17,250,000 shares of our common stock and $4.5 million in proceeds from the exercise of stock options, partially offset by $3.7 million related to shares repurchased for tax withholdings on vesting of restricted stock units and $1.9 million in payments on capital lease obligations.

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.

Notes

On February 19, 2015, we closed the private placement of our 6.00% Notes, representing $65.0 million in aggregate principal. 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 6.00% Notes. In August 2016, we entered into multiple privately negotiated agreements, pursuant to which all of our 6.00% Notes were canceled, and the indenture, dated as of February 19, 2015, by and between us and U.S. Bank National Association, pursuant to which the 6.00% Notes were issued, was satisfied and discharged. We issued in aggregate 34,659,972 shares of our common stock and made cash payments totaling $4.7 million in exchange for $65.0 million aggregate principal amount of our 6.00% Notes. These agreements are more fully discussed in Note 5, Credit Line and Notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report.

27

Future Cash Requirements

As of April 1, 2017, we held $254.8 million in cash, cash equivalents, short-term investments and restricted cash, comprised of $214.1 million in cash and cash equivalents, $40.0 million in short-term investments and $0.7 million in restricted cash (excluding $0.4 million of restricted cash in other non-current assets); and we had working capital of $366.7 million.

Based on our current cash and cash equivalent balances, we believe that we have sufficient funds to support our operations through the next 12 months, including approximately $25.0 million of capital expenditures that we expect to incur through the remainder of the current fiscal year.

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 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.

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 April 1, 2017, $60.1 million of the $254.8 million of our cash, cash equivalents, restricted cash and short-term investments 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 China, Germany and Japan where we decided to exit certain businesses in fiscal year 2015.

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 July 2, 2016, which is incorporated herein by reference. Our exposure to market risk has not changed materially since July 2, 2016.

INTEREST RATES

We finance our operations through a mixture of issuances of equity and debt securities, capital leases and working capital. We have exposure to interest rate fluctuations on our cash deposits and for amounts borrowed through our capital leases. At April 1, 2017, there was $3.9 million outstanding under capital leases. An increase in our average interest rate by 1.0 percent would increase our annual interest expense by less than $0.1 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 utilized by us to collect revenues and pay expenses could affect our operating results. This includes the Chinese yuan and the Euro, which we utilize to 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 April 1, 2017, our U.K. subsidiary had $102.3 million, net, in U.S. dollar denominated operating intercompany payables, $37.2 million in U.S. dollar denominated accounts receivable, net of accounts payable, related to sales to external customers and purchases from suppliers, and $42.7 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 $2.2 million (U.S. dollar weakening), or loss of $2.2 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 April 1, 2017, our Japan subsidiary had $4.3 million, net, in U.S. dollar denominated operating intercompany receivables, $13.2 million in U.S. dollar denominated accounts payable, net of accounts receivable, related to sales to external customers and purchases from suppliers, and $21.6 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 $1.3 million (U.S. dollar weakening), or loss of $1.3 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.

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 April 1, 2017, 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 and nine months ended April 1, 2017, we recorded a gain of $0.3 million and a loss of $0.2 million, respectively, in our condensed consolidated statement of operations. As of April 1, 2017, we did not have any outstanding foreign currency forward contracts.

BANK LIQUIDITY RISK

As of April 1, 2017, we have approximately $67.8 million in cash, excluding money market funds, 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.

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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 April 1, 2017. 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 April 1, 2017, 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 April 1, 2017 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 is described below. This legal proceeding, 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 proceeding described below. While it is not possible to accurately predict or determine the eventual outcome of this item, an adverse determination in the item 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. A pretrial conference is scheduled for June 14, 2017. 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 may 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 ramping the production of our 100 Gb/s QSFP28 client side transceivers at our Sagamihara, Japan facility, and through our contract manufacturers Toyo and Fabrinet in Thailand. 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 materially impact our revenues and adversely affect our results of operations.

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Many 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.

Many 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, including on short notice, 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.

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 and data communications systems industries are dominated by a small number of large companies. These companies in turn depend primarily on a limited number of major telecommunications carrier and data center customers to purchase their products that incorporate our optical components. 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.

During the nine months ended April 1, 2017 and for fiscal years ended July 2, 2016 and June 27, 2015, our three largest customers accounted for 54 percent, 44 percent and 45 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, government action or otherwise) could have a materially adverse impact on our financial conditions and results of operations. For example, as discussed below, in early March 2016, we temporarily ceased shipment of products to Zhongxing Telecommunications Equipment Corporation and its subsidiary, ZTE Kangxun Telecommunications Ltd. (collectively, "ZTE"), one of our significant customers, because the U.S. Department of Commerce (the "DOC") imposed additional licensing restrictions.

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 adjacent 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 and other Asian countries to take advantage of comparatively low manufacturing costs. Network equipment manufacturers and service providers may decide to design and manufacture the optical module and subsystems portion of their products in-house rather than outsourcing to companies such as us. 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 maintain profitability and sustainable cash flow from operations.

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, on June 23, 2016, the U.K. citizens voted in a referendum to exit the European Union, which resulted in a sharp decline in the value of the British pound, which may impact our future manufacturing overhead and operating expenses. Also during fiscal year 2016, the Japanese yen appreciated approximately 18 percent relative to the U.S. dollar, adversely impacting our manufacturing overhead and operating expenses. If the U.S. dollar appreciates 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.

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 gross margins from lower yields and additional rework costs. 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.

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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.

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.

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 DOC amended the Export Administration Regulations ("EAR") and imposed additional licensing restrictions on exports of certain products to ZTE. 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, and subsequently granted several extensions, before issuing a final rule on March 29, 2017 in connection with the settlement by ZTE and the U.S. government of certain administrative and criminal charges, eliminating the additional licensing restrictions imposed on ZTE. While the additional licensing restrictions imposed on ZTE have been eliminated, that does not preclude the DOC from imposing future licensing restrictions on ZTE if they violate the EAR or other export laws, or on other Chinese customers with whom we conduct business. Any future action by the U.S. government that precludes us from shipping product to ZTE, or to other customers in China, 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.

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.

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

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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.

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. 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.

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.

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, Venture in Malaysia, Toyo in Japan and Thailand, and eLASER in Taiwan to manufacture certain of our products. Some of these suppliers are our sole sources for certain materials and equipment. 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, trade disputes or other natural disasters.

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.

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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. 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. Any delays or failure to obtain qualifications would harm our operating results and customer relationships.

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, any patents will be issued from any application pending or filed by us, or, if patents are issued, the claims allowed will be sufficiently broad to deter or prohibit others 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 completed the transition of portions of these assembly and test operations to Venture in Malaysia.

Opnext historically relied on Hitachi, previously 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.

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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. 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 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 are also exposed to changes in tax law which can impact our current and future year's tax provision. For example, proposals in the United Kingdom’s 2016 Budget, if enacted, would result in restrictions on our ability to fully utilize our historical U.K. loss carry-forwards to offset current year income potentially resulting in additional income tax liability.

Failure to properly execute, or realize anticipated cost savings or benefits from, our ongoing information technology initiatives could have an adverse effect on our operating results and financial condition.

Our success is partly dependent upon properly executing, and realizing cost savings or other planned benefits from, our ongoing information technology initiatives. These initiatives are primarily designed to make our global manufacturing, supply chain, and logistics processes more efficient and robust, which is necessary in the highly competitive industry in which we operate. Failure to implement these complex initiatives properly, within budget and on a timely basis may, in addition to not meeting projected cost savings or planned benefits, result in a material interruption of product shipments, manufacturing, supply chain, logistics, customer service or accounting functions. Any of these results could have a material adverse effect on our operating results and financial condition.

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

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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.

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 I, Item 3, Legal Proceedings, "Raysung Commercial Litigation," in our 2016 Annual Report. 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 subject to frequent change, 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, particularly if the status of the free trade zone in Shenzhen changes 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.

We may undertake acquisitions or mergers, which 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.

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;

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• 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;

• 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;

• 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, and which uses contract manufacturing suppliers in Southeast Asia;

• inherited tax liabilities from our acquisitions together with the effect of tax laws and other legal and regulatory regimes due to increasing the scope 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.

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.

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

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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, data communications 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 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 April 1, 2017 and the fiscal years ended July 2, 2016, June 27, 2015 and June 28, 2014, 12 percent, 15 percent, 16 percent and 11 percent of our revenues, respectively, were derived from sales to customers located in the United States and 88 percent, 85 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;

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

• difficulty in enforcing or adequately protecting our intellectual property;

• ability to hire qualified candidates;

• foreign income, value added and customs taxes;

• 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.

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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 help mitigate the risk of liability for damages, we carry product liability insurance and errors and omissions insurance. We cannot assure you, however, that this insurance would adequately cover our costs arising from any product liability-related issues with 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 July 3, 2016 and April 1, 2017, the market price of our common stock ranged from a low of $4.58 per share to a high of $11.30 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;

• 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 certain of our past acquisitions and the conversion of our convertible notes, we have issued shares of our common stock. The issuance of these shares has diluted our existing stockholders and their subsequent sale 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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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.

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.

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 April 1, 2017, we had an accumulated deficit of $1,273.8 million. Although we achieved income from continuing operations during the nine months ended April 1, 2017 and the year ended July 2, 2016, 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 April 1, 2017, we held $254.8 million in cash, cash equivalents, short-term investments and restricted cash, comprised of $214.1 million in cash and cash equivalents, $40.0 million in short-term investments and $0.7 million in short-term restricted cash; and we had working capital, including cash, of $366.7 million. At April 1, 2017, we had debt of $3.9 million, consisting of capital leases.

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. As a result of these factors, 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 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.

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

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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.

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. For example, we raised funds in a public offering of our common stock in September 2016, which diluted our existing stockholder base. If we raise funds in the future 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

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Note 5, Credit Line and Notes, elsewhere in this Quarterly Report, for further details). The exchangeable bonds issued in 2012 and the convertible notes issued in 2015 were subsequently exchanged for common stock and, in the case of the convertible notes issued in 2015, a cash payment. 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.

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.

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, while we incurred minimal restructuring charges in fiscal year 2017 and 2016, 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 fiscal years 2015 and 2014, we incurred $4.0 million and $13.2 million, respectively, 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 in the future. 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 3, Business Combinations and Dispositions, in our 2016 Annual Report, 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.” 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.

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.

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

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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 April 1, 2017, we had $0.8 million in other intangible assets and $100.5 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.

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 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

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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:

• 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.

47

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.

48

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.

49

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 8, 2017	By:	/s/ GREG DOUGHERTY
		Greg Dougherty Chief Executive Officer (Principal Executive Officer)
May 8, 2017	By:	/s/ PETE MANGAN
		Pete Mangan Chief Financial Officer (Principal Financial Officer)

50

EXHIBIT INDEX

Exhibit Number	Description of Exhibit
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.
10.1 (1)(2)	Offer Letter of Craig Cocchi, Executive Vice President, Global Operations, dated March 7, 2017.
10.2 (1)(2)	Amendment to Offer Letter of Craig Cocchi, Chief Operating Officer, dated April 10, 2017.
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.

(2) Management contract or compensatory plan or arrangement.

51

EX-10.1

PRIVATE AND CONFIDENTIAL

March 7, 2017

Craig S. Cocchi

RE:    Offer of Employment

Dear Craig:

We are pleased to offer you the position of Executive Vice President, Global Operations, reporting directly to Greg Dougherty, CEO of Oclaro, Inc. (the “Company” or “Oclaro”). We believe that you will bring great value to Oclaro, and we are excited about you joining our team.

Your base compensation for the regular, full-time, exempt position will be at the annualized rate of $350,000.00. Such rate may be adjusted from time to time in accordance with normal business practices and in the sole discretion of the Company. Applicable payroll deductions as required by state and federal law will be withheld from your paycheck, along with any mandatory or voluntary deductions that you authorize. The Company issues payroll on a bi-weekly basis. Your compensation package also includes:

1. Eligibility to participate in the Company’s Amended and Restated Variable Pay Program (“VPP”), a bonus program that is based on Company performance of specific objectives. Your target participation level will be 60% of your base compensation. If you are not actively employed with the Company as of the date the Company’s Compensation Committee determines payments due under the VPP for a performance period, you will not be eligible to receive any variable pay under the VPP, and no right to such variable pay will have accrued. Details of the VPP will be provided to you by Human Resources. The Company reserves all rights to terminate, amend, suspend, withdraw or modify the VPP at any time.

2. Participation in the Company’s Benefits Program is effective on the first day of the month following your date of hire. A Benefits Summary is enclosed. Further details will be provided to you by Human Resources at the New Hire Orientation.

3. As an Executive Vice President, you will also be entitled to enter into an Executive Severance and Retention Agreement (“ESRA”). Further details regarding the ESRA will be shared with you at the start of your employment with the Company.

4. Subject to formal approval by the Company’s Board of Directors (the "Board"), the position being offered to you includes an award of 130,000 Restricted Stock Units under the terms of the Company’s Fifth Amended and Restated 2001 Long-Term Stock Incentive Plan and any other policies, laws or rulings that may govern such equity and its issuance (“RSU Award”). The grant date of the RSU Award is expected to be on the 10th day of the month following the month of your first day of employment. The first 25% of the total number of shares underlying the RSU Award would vest on or before the first February 10th, May 10th, August 10th or November 10th that occurs on or immediately preceding the one year anniversary of the date of grant. Thereafter, 6.25% of the total number of shares underlying the RSU Award would vest on each February 10th, May 10th, August 10th and November 10th over the following three years of continuous service to the Company. All vesting would cease upon termination of employment.

Pursuant to the Immigration Reform and Control Act of 1986, the Company is required to verify the identity and employment eligibility of all new hires. In order to comply with this legal obligation, we can only hire those individuals who are eligible to work in the United States. As a condition of employment, you will be required to provide documents verifying your identity and your eligibility to work in the United States; and to complete an Employment Eligibility Verification form I-9 within three (3) business days from your hire date. To verify your identity, we have enclosed a list of acceptable documents for the I-9 which you will complete at the New Hire Orientation. If you anticipate having difficulty producing the required documents, please contact the Human Resources Department at (408) 919-6070.

You represent that you are not bound by any employment contract, restrictive covenant or other restriction preventing you from entering into employment with or carrying out your responsibilities for the Company, or which is in any way inconsistent with the terms of this Offer Letter.

Oclaro, Inc. | 225 Charcot Avenue, San Jose, CA 95131 | Tel: +1.408.383.1400                     www.oclaro.com

To accept this offer, subject to the foregoing conditions and the other conditions set forth herein, please sign in the space provided below, and return the signed Offer Letter to me by close of business on Friday, March 10, 2017. I have enclosed a copy of the Offer Letter for your records.

This employment opportunity is contingent upon the completion of an application for employment, satisfactory references and background checks and upon your signature of the Company’s Conditions of Employment for At Will Employee, a copy of which will be distributed and reviewed in the New Hire Orientation. Any future employment at the Company is subject to the terms and conditions of the Company and is terminable at will by either you or the Company. Further details will be provided to you by Human Resources.

Except as otherwise specifically provided for in the ESRA between you and the Company, the offer outlined in this Offer Letter contains the entire agreement between you and the Company and constitutes the complete, final and exclusive embodiment of the subject matter herein. This Offer Letter is executed without reliance upon any promise, warranty, or representation by the Company or any representatives of the Company not expressly contained herein. This Offer Letter may not be modified unless in writing signed by the Company’s Chief Executive Officer, except that the policies of the company may be modified from time to time with reasonable advance notice.

We look forward to your joining Oclaro and hope that you find your employment with the Company enjoyable and professionally rewarding.

Yours Sincerely,

Greg Dougherty

CEO

I HAVE READ AND UNDERSTAND THE PROVISIONS OF THIS AGREEMENT. I FULLY INTEND TO COMPLY WITH, AND BE BOUND BY, THE PROVISIONS SET FORTH HEREIN.

I accept this offer of employment with Oclaro, Inc. and will begin work on or before April 17, 2017.

I AM NOT RELYING ON ANY REPRESENTATIONS OTHER THAN AS SET FORTH ABOVE.

Signed: /s/ Craig S. Cocchi              Date: March 8, 2017

Craig S. Cocchi

Oclaro, Inc. | 225 Charcot Avenue, San Jose, CA 95131 | Tel: +1.408.383.1400                     www.oclaro.com

EX-10.2

PRIVATE AND CONFIDENTIAL

April 10, 2017

Craig S. Cocchi

RE:    Amendment to Offer of Employment Dated March 7, 2017

Dear Craig:

I am pleased to confirm on behalf of Oclaro, Inc. (“Oclaro”) that subsequent to your acceptance of our offer to serve as Executive Vice President, Global Operations, our Board of Directors has approved your appointment to serve as Oclaro’s Chief Operating Officer, reporting to me.

Except as set forth in this letter, all other terms and conditions of your offer letter dated March 7, 2017 will continue to remain in effect.

Kindly acknowledge your acceptance of this appointment and agreement to the terms of this letter by signing the attached copy of this letter and returning it to me.

Yours Sincerely,

Greg Dougherty

CEO

ACKNOWLEDGED AND AGREED

Signed: /s/ Craig S. Cocchi

Date: April 10, 2017

Craig S. Cocchi                            

Oclaro, Inc. | 225 Charcot Avenue, San Jose, CA 95131 | Tel: +1.408.383.1400                  www.oclaro.com

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 April 1, 2017;

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 8, 2017	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 April 1, 2017;

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 8, 2017	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 April 1, 2017, 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 8, 2017	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 April 1, 2017, 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 8, 2017	By:	/s/ PETE MANGAN
		Pete Mangan
		Chief Financial Officer
		(Principal Financial Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Apr. 01, 2017	May 01, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Apr. 01, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Trading Symbol	OCLR
Entity Registrant Name	OCLARO, INC.
Entity Central Index Key	0001110647
Current Fiscal Year End Date	--07-01
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		167,284,390

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Apr. 01, 2017	Jul. 02, 2016
Current assets:
Cash and cash equivalents	$ 214,063	$ 95,929
Restricted cash	716	715
Short-term investments	40,005	0
Accounts receivable, net of allowances for doubtful accounts of $1,550 and $1,674 as of April 1, 2017 and July 2, 2016, respectively	123,695	93,571
Inventories	88,676	76,369
Prepaid expenses and other current assets	38,396	23,591
Total current assets	505,551	290,175
Property and equipment, net	100,459	65,045
Other intangible assets, net	840	1,498
Other non-current assets	2,474	2,331
Total assets	609,324	359,049
Current liabilities:
Accounts payable	92,346	71,201
Accrued expenses and other liabilities	44,031	34,818
Capital lease obligations, current	2,431	3,753
Total current liabilities	138,808	109,772
Deferred gain on sale-leaseback	5,844	6,809
Convertible notes payable	0	62,058
Capital lease obligations, non-current	1,516	2,105
Other non-current liabilities	10,956	11,694
Total liabilities	157,124	192,438
Commitments and contingencies (Note 7)
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; 167,281 shares issued and outstanding at April 1, 2017 and 112,207 shares issued and outstanding at July 2, 2016	1,673	1,122
Additional paid-in capital	1,685,961	1,471,280
Accumulated other comprehensive income	38,346	39,821
Accumulated deficit	(1,273,780)	(1,345,612)
Total stockholders’ equity	452,200	166,611
Total liabilities and stockholders’ equity	$ 609,324	$ 359,049

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Apr. 01, 2017	Jul. 02, 2016
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 1,550	$ 1,674
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	275,000,000
Common stock, shares issued	167,281,000	112,207,000
Common stock, shares outstanding	167,281,000	112,207,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016
Income Statement [Abstract]
Revenues	$ 162,182	$ 101,050	$ 451,588	$ 282,729
Cost of revenues	95,394	74,114	277,680	206,488
Gross profit	66,788	26,936	173,908	76,241
Operating expenses:
Research and development	14,479	11,379	41,344	33,399
Selling, general and administrative	14,736	13,055	42,883	39,054
Amortization of other intangible assets	150	247	635	748
Restructuring, acquisition and related (income) expense, net	(301)	(59)	92	(21)
(Gain) loss on sale of property and equipment	(16)	(145)	(127)	22
Total operating expenses	29,048	24,477	84,827	73,202
Operating income	37,740	2,459	89,081	3,039
Other income (expense):
Interest income (expense), net	175	(1,203)	(13,613)	(3,726)
Gain (loss) on foreign currency transactions, net	687	(865)	(3,155)	(861)
Other income (expense), net	233	174	583	644
Total other income (expense)	1,095	(1,894)	(16,185)	(3,943)
Income (loss) before income taxes	38,835	565	72,896	(904)
Income tax provision	621	476	1,064	2,360
Net income (loss)	$ 38,214	$ 89	$ 71,832	$ (3,264)
Net income (loss) per share:
Basic (in USD per share)	$ 0.23	$ 0.00	$ 0.46	$ (0.03)
Diluted (in USD per share)	$ 0.22	$ 0.00	$ 0.44	$ (0.03)
Shares used in computing net income (loss) per share:
Basic (in shares)	166,808	110,882	155,037	110,212
Diluted (in shares)	169,841	113,699	163,237	110,212

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 38,214	$ 89	$ 71,832	$ (3,264)
Other comprehensive income (loss):
Unrealized loss on marketable securities	(10)	0	(5)	0
Currency translation adjustments	1,775	593	(1,470)	(1,886)
Pension adjustments	0	0	0	(10)
Total comprehensive income (loss)	$ 39,979	$ 682	$ 70,357	$ (5,160)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Apr. 01, 2017	Mar. 26, 2016
Cash flows from operating activities:
Net income (loss)	$ 71,832	$ (3,264)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of deferred gain on sale-leaseback	(553)	(648)
Amortization of debt discount and issuance costs in connection with convertible notes payable	102	609
Depreciation and amortization	15,360	12,198
Interest make-whole charge and induced conversion expense related to convertible notes	8,463	0
Stock-based compensation expense	7,922	6,440
Other non-cash adjustments	(128)	22
Changes in operating assets and liabilities:
Accounts receivable, net	(32,402)	(12,969)
Inventories	(16,068)	(7,553)
Prepaid expenses and other current assets	(16,579)	502
Other non-current assets	(275)	264
Accounts payable	14,090	1,433
Accrued expenses and other liabilities	11,746	5,959
Net cash provided by operating activities	63,510	2,993
Cash flows from investing activities:
Purchases of property and equipment	(41,846)	(12,362)
Purchases of short-term investments	(40,001)	0
Transfer (to) from restricted cash	(1)	2,453
Net cash used in investing activities	(81,848)	(9,909)
Cash flows from financing activities:
Proceeds from the exercise of stock options	4,531	179
Shares repurchased for tax withholdings on vesting of restricted stock units	(3,675)	(1,504)
Proceeds from the sale of common stock in connection with public offering, net of expenses	135,153	0
Payments on capital lease obligations	(1,897)	(2,303)
Net cash provided by (used in) financing activities	134,112	(3,628)
Effect of exchange rate on cash and cash equivalents	2,360	4,785
Net increase (decrease) in cash and cash equivalents	118,134	(5,759)
Cash and cash equivalents at beginning of period	95,929	111,840
Cash and cash equivalents at end of period	214,063	106,081
Supplemental disclosures of cash flow information:
Cash paid for interest make-whole and induced conversion charges related to the exercise of convertible notes	4,700	0
Supplemental disclosures of non-cash transactions:
Issuance of common stock in exchange for the net carrying value of the liability component of convertible notes	62,125	0
Purchases of property and equipment funded by accounts payable	11,831	9,567
Capital lease obligations incurred for purchases of property and equipment	$ 397	$ 2,392

XML

BASIS OF PREPARATION

9 Months Ended

Apr. 01, 2017

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 April 1, 2017 and for the three and nine months ended April 1, 2017 and March 26, 2016 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 April 1, 2017 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending July 1, 2017.

The condensed consolidated balance sheet as of July 2, 2016 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 July 2, 2016 ("2016 Form 10-K").

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 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 2016 Form 10-K.

Fiscal Years

We operate on a 52/53 week year ending on the Saturday closest to June 30. Our fiscal year ending July 1, 2017 will be a 52 week year, with the quarter ended April 1, 2017 being a 13 week quarterly period. Our fiscal year ended July 2, 2016 was a 53 week year, with the quarter ended March 26, 2016 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 loss, cash flows, cash and cash equivalents or stockholders’ equity as previously reported.

Recent Developments

In August 2016, we entered into multiple privately negotiated agreements, pursuant to which all of our 6.00% Notes were cancelled, and the indenture, by and between us and U.S. Bank National Association, pursuant to which the 6.00% Notes were issued, was satisfied and discharged. In connection with these privately negotiated agreements, we issued a total of 34,659,972 shares of our common stock and made total cash payments of $4.7 million. See Note 5, Credit Line and Notes, for additional information.

In September 2016, we entered into an underwriting agreement with Jefferies LLC, as representative of several underwriters, pursuant to which we sold 17,250,000 shares of our common stock in a public offering. The net proceeds to us after deducting underwriting discounts and commissions and offering expenses was approximately $135.2 million. See Note 3, Balance Sheet Details for additional information.

In November 2016, our stockholders approved an amendment to the Fifth Amended and Restated 2001 Long-Term Stock Incentive Plan, adding 6.0 million shares of common stock to the share reserve. See Note 8, Employee Stock Plans, for additional information.

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RECENT ACCOUNTING STANDARDS

9 Months Ended

Apr. 01, 2017

Accounting Policies [Abstract]

RECENT ACCOUNTING STANDARDS

RECENT ACCOUNTING STANDARDS

In March 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, changing the presentation of net periodic benefit cost in the income statement. The guidance will be effective for us in the first quarter of fiscal 2019, with early adoption permitted. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations: Clarifying the Definition of a Business, providing guidance for evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. The guidance will be effective for us in the first quarter of fiscal 2019. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash to standardize the presentation of transfers between cash and restricted cash in the cash flow statement. Amounts described as restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance will be effective for us in the first quarter of fiscal 2019, with early adoption permitted. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory, to reduce the complexity related to the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. This guidance will be effective for us in the first quarter of fiscal 2019, with early adoption permitted. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments to reduce the diversity in practice related to the presentation and classification of various cash flow scenarios. This guidance will be effective for us in the first quarter of fiscal 2019, with early adoption permitted. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In May 2014 and May 2016, the FASB issued ASU 2014-09, Revenue from Contracts with Customers and ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, respectively. These updates clarify the principles for recognizing revenue and develop a common revenue standard for 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. The guidance permits two methods of adoption, the full retrospective method applying the standard to each prior reporting period presented, or the modified retrospective method with a cumulative effect of initially applying the guidance recognized at the date of initial application. We currently plan on adopting this guidance on July 1, 2018, the start to our first quarter of fiscal 2019, using the modified retrospective method with a cumulative catch up adjustment and providing additional disclosures comparing results to previous rules. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In March 2016, the FASB issued 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 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 likely impact 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 likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

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BALANCE SHEET DETAILS

9 Months Ended

Apr. 01, 2017

Balance Sheet Details [Abstract]

BALANCE SHEET DETAILS

BALANCE SHEET DETAILS

Cash, Cash Equivalents and Short-Term Investments

The following table provides details regarding our cash, cash equivalents and short-term investments at the dates indicated:

	April 1, 2017		July 2, 2016
	(Thousands)
Cash and cash equivalents:
Cash-in-bank	$	67,803	$	70,925
Money market funds	95,825		25,004
Commercial paper	19,996		—
Corporate bonds	22,449		—
U.S. Treasury securities	3,995		—
U.S. agency securities	3,995		—
	$	214,063	$	95,929
Short-term investments:
Commercial paper	$	23,961	$	—
Corporate bonds	8,051		—
U.S. Treasury securities	3,998		—
U.S. agency securities	3,995		—
	$	40,005	$	—

We classify short-term investments, which consist primarily of securities purchased with original maturities at date of purchase of more than three months and less than one year, as “available for sale securities”. These short-term investments are reported at market value, with the aggregate unrealized holding gains and losses reported as a component of accumulated other comprehensive income in stockholders’ equity. All realized gains and losses and unrealized losses resulting from declines in fair value that are other than temporary and not involving credit losses are recorded in the consolidated statements of operations in the period they occur.

Restricted Cash

As of April 1, 2017, we had restricted cash of $1.1 million, comprised of $0.7 million in current assets and $0.4 million in other non-current assets, representing 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:

	April 1, 2017		July 2, 2016
	(Thousands)
Inventories:
Raw materials	$	25,067	$	23,751
Work-in-process	35,061		32,819
Finished goods	28,548		19,799
	$	88,676	$	76,369

Property and Equipment, Net

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

	April 1, 2017			July 2, 2016
	(Thousands)
Property and equipment, net:
Buildings and improvements	$	9,691		$	10,389
Plant and machinery	83,367			59,696
Fixtures, fittings and equipment	2,875			3,005
Computer equipment	11,583			9,846
	107,516			82,936
Less: Accumulated depreciation	(7,057		)	(17,891		)
	$	100,459		$	65,045

Property and equipment includes assets under capital leases of $3.9 million and $5.9 million at April 1, 2017 and July 2, 2016, respectively. Amortization associated with assets under capital leases is recorded in depreciation expense. During the nine months ended April 1, 2017, we disposed and/or sold approximately $13.0 million of fully depreciated property and equipment related to our high-bit products.

Other Intangible Assets, Net

The following table summarizes the activity related to our other intangible assets for the nine months ended April 1, 2017:

	Core and Current Technology		Development and Supply Agreements			Customer Relationships		Patent Portfolio		Other Intangibles		Amortization			Total
	(Thousands)
Balance at July 2, 2016	$	6,249	$	4,509		$	2,402	$	915	$	3,338	$	(15,915	)	$	1,498
Amortization	—		—			—		—		—		(635		)	(635		)
Translations and adjustments	—		(23		)	—		—		—		—			(23		)
Balance at April 1, 2017	$	6,249	$	4,486		$	2,402	$	915	$	3,338	$	(16,550	)	$	840

We expect the amortization of intangible assets to be $0.2 million for the remainder of fiscal year 2017 and $0.6 million for fiscal year 2018, based on the current level of our other intangible assets as of April 1, 2017.

Accrued Expenses and Other Liabilities

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

	April 1, 2017		July 2, 2016
	(Thousands)
Accrued expenses and other liabilities:
Trade payables	$	11,208	$	6,429
Compensation and benefits related accruals	12,385		14,038
Warranty accrual	4,659		3,827
Accrued restructuring, current	—		204
Purchase commitments in excess of future demand, current	5,292		1,723
Other accruals	10,487		8,597
	$	44,031	$	34,818

Common Stock

In August 2016, we issued a total of 34,659,972 shares of our common stock in connection with the cancellation of our 6.00% Notes. See Note 5, Credit Line and Notes, for additional information.

On September 21, 2016, we entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, as representative of the several underwriters (the “Underwriters”), relating to the offering, issuance and sale (the “Offering”) of 15.0 million shares of our common stock, par value $0.01 per share (the “Common Stock”). The price to the public in the Offering was $8.35 per share. Under the terms of the Underwriting Agreement, we granted the Underwriters a 30-day option to purchase up to an additional 2,250,000 shares of Common Stock. The option was exercised in full by the Underwriters on September 23, 2016. All of the shares in the Offering were sold by us. The Offering closed on September 27, 2016, subject to customary closing conditions. The net proceeds to us after deducting underwriting discounts and commissions and offering expenses were approximately $135.2 million.

Accumulated Other Comprehensive Income

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

	April 1, 2017			July 2, 2016
	(Thousands)
Accumulated other comprehensive income:
Currency translation adjustments	$	38,714		$	40,184
Unrealized loss on marketable securities	(5		)	—
Japan defined benefit plan	(363		)	(363		)
	$	38,346		$	39,821

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FAIR VALUE

9 Months Ended

Apr. 01, 2017

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 and short-term investment instruments are generally classified within Level 1 or Level 2 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 money market and marketable securities. Such instruments are generally classified within Level 1 of the fair value hierarchy. The types of instruments valued based on other observable inputs include investment-grade corporate bonds and commercial paper. Such instruments are generally classified within Level 2 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 April 1, 2017 and July 2, 2016:

	Fair Value Measurement at April 1, 2017 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	$	95,825	$	—	$	—	$	95,825
Commercial paper	—		19,996		—		19,996
Corporate bonds	—		22,449		—		22,449
U.S. Treasury securities	—		3,995		—		3,995
U.S. agency securities	—		3,995		—		3,995
Short-term investments:
Commercial paper	—		23,961		—		23,961
Corporate bonds	—		8,051		—		8,051
U.S. Treasury securities	—		3,998		—		3,998
U.S. agency securities	—		3,995		—		3,995
Restricted cash:
Money market funds	712		—		—		712
Total assets measured at fair value	$	96,537	$	90,440	$	—	$	186,977

⁽¹⁾  Excludes $67.8 million in cash held in our bank accounts at April 1, 2017.

	Fair Value Measurement at July 2, 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	$	25,004	$	—	$	—	$	25,004
Restricted cash:
Money market funds	712		—		—		712
Total assets measured at fair value	$	25,716	$	—	$	—	$	25,716

⁽¹⁾  Excludes $70.9 million in cash held in our bank accounts at July 2, 2016.

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CREDIT LINE AND NOTES

9 Months Ended

Apr. 01, 2017

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 are being used for general corporate purposes, including working capital for, among other things, investing in development of new products and technologies.

The Purchase Agreement contained 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, agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).

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 would have received a notice of conversion had exceeded the conversion price in effect on each such trading day, we would have, in addition to delivering shares upon conversion by the holder of 6.00% Notes, together with cash in lieu of fractional shares, made 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.

The 6.00% Notes were scheduled to mature on February 15, 2020 and bore 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. In August 2016, we entered into multiple privately negotiated agreements, pursuant to which all of our 6.00% Notes were canceled, and the indenture, by and between us and U.S. Bank National Association, pursuant to which the 6.00% Notes were issued, was satisfied and discharged. In connection with these privately negotiated agreements, we issued a total of 34,659,972 shares of our common stock and made total cash payments of $4.7 million.

• On August 8, 2016, we entered into a privately negotiated agreement pursuant to which we (i) issued 12,051,282 shares of our common stock, and (ii) made a cash payment equal to $4.7 million during August 2016 in exchange for approximately $23.5 million aggregate principal amount of our 6.00% Notes.

• On August 9, 2016, we entered into privately negotiated agreements pursuant to which we agreed to issue (i) an aggregate of 20,564,101 shares of our common stock, plus (ii) a to be determined number of additional shares of our common stock based on certain formulaic consideration in exchange for $40.1 million aggregate principal amount of our 6.00% Notes. On August 12, 2016, including the additional shares of common stock, we issued an aggregate of 21,852,477 shares of our common stock.

• On August 18, 2016, we entered into privately negotiated agreements, pursuant to which, on August 22, 2016, we issued an aggregate of 756,213 shares of our common stock, in exchange for $1.4 million aggregate principal amount of our 6.00% Notes.

Pursuant to the terms of the indenture governing the 6.00% Notes, we recorded an interest make-whole charge of $5.9 million in interest (income) expense, net, in the condensed consolidated statements of operations for the nine months ended April 1, 2017, which was settled with a combination of common stock issuances and cash payments. We also recorded an induced conversion expense of $7.4 million, which we recorded in interest (income) expense, net, in the condensed consolidated statements of operations for the nine months ended April 1, 2017.

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 we are required to pay a minimum interest payment of $45,000 each fiscal quarter. The minimum interest payment is in lieu of a stand-by charge.

On March 28, 2017, the Loan Agreement expired, and was not renewed. There are no amounts outstanding under the Loan Agreement.

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POST-RETIREMENT BENEFITS

9 Months Ended

Apr. 01, 2017

Compensation and Retirement Disclosure [Abstract]

POST-RETIREMENT BENEFITS

POST-RETIREMENT BENEFITS

We maintain a defined contribution plan and a defined benefit plan that provide retirement benefits to our employees in Japan. We also contribute to a U.K. based defined contribution pension scheme for employees.

Japan Defined Contribution Plan

Under the defined contribution plan in Japan, contributions are provided based on grade level and totaled $0.1 million and $0.4 million for the three and nine months ended April 1, 2017, respectively and $0.1 million and $0.3 million for the three and nine months ended March 26, 2016, 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 years of service. Employees are entitled to a lump sum benefit upon retirement or upon certain instances of termination.

As of April 1, 2017, there were no plan assets associated with the Japan Plan. As of April 1, 2017, there was $0.2 million in accrued expenses and other liabilities and $6.6 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
	April 1, 2017		March 26, 2016		April 1, 2017		March 26, 2016
	(Thousands)
Service cost	$	172	$	132	$	480	$	376
Interest cost	1		11		3		32
Net periodic pension costs	$	173	$	143	$	483	$	408

We made minimal benefit payments under the Japan Plan during the three months ended April 1, 2017 and $0.2 million during the nine months ended April 1, 2017. We made zero and $0.1 million in benefit payments during the three and nine months ended March 26, 2016, respectively.

U.K. Defined Contribution Pension Scheme

Under the defined contribution pension scheme, contributions totaled $0.3 million and $0.8 million for the three and nine months ended April 1, 2017, respectively, and $0.3 million and $0.9 million for the three and nine months ended March 26, 2016, respectively.

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Apr. 01, 2017

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
	April 1, 2017			March 26, 2016			April 1, 2017			March 26, 2016
	(Thousands)
Warranty provision—beginning of period	$	4,560		$	3,097		$	3,827		$	2,932
Warranties issued	991			615			2,533			1,472
Warranties utilized or expired	(901		)	(553		)	(1,505		)	(1,241		)
Foreign currency translation and other adjustments	9			(32		)	(196		)	(36		)
Warranty provision—end of period	$	4,659		$	3,127		$	4,659		$	3,127

Capital Leases

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

The following table shows the future minimum lease payments due under non-cancelable capital leases at April 1, 2017:

	Capital Leases
	(Thousands)
Fiscal Year Ending:
2017 (remaining)	$	926
2018	1,748
2019	591
2020	629
2021	286
Thereafter	12
Total minimum lease payments	4,192
Less amount representing interest	(245		)
Present value of capitalized payments	3,947
Less: current portion	(2,431		)
Long-term portion	$	1,516

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 April 1, 2017 and July 2, 2016, the liability for these purchase commitments was $4.5 million and $1.7 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 through an administrative appeal, and believe that additional appeal options may be available to us if we do not obtain a favorable resolution. 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, we may not be able to recover some of these GST amounts. Of the $2.4 million in GST claims, we recorded $1.9 million net of reserves, as a receivable classified in prepaid expenses and other current assets in our condensed consolidated balance sheet at April 1, 2017.

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 is described below. This legal proceeding, 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 proceeding described below. While it is not possible to accurately predict or determine the eventual outcome of this item, an adverse determination in the item 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. A final pretrial conference is scheduled for June 14, 2017. We intend to vigorously defend against this litigation.

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EMPLOYEE STOCK PLANS

9 Months Ended

Apr. 01, 2017

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

EMPLOYEE STOCK PLANS

EMPLOYEE STOCK PLANS

Stock Incentive Plans

On November 18, 2016, our stockholders approved an amendment to the Fifth Amended and Restated 2001 Long-Term Stock Incentive Plan (the "Plan"), adding 6.0 million shares of common stock to the share reserve under the Plan. As of April 1, 2017, there were approximately 13.7 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 ("RSU") 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 Stock Units

In August 2015, our board of directors approved a grant of 0.9 million performance-based restricted stock units ("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 adjusted EBITDA 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 first quarter of fiscal year 2016. As a result, these PSUs cliff vested with respect to 33.4 percent of the underlying shares on August 10, 2016, and will vest with respect to 8.325 percent of the underlying shares each subsequent quarter over the following two years, subject to continuous service.

In August 2016, our board of directors approved a grant of 0.8 million PSUs to certain executive officers with an aggregate estimated grant date fair value of $4.8 million. Subject to the achievement of an aggregate of $25.0 million or more of free cash flow (defined as adjusted EBITDA less capital expenditures delivered) over any consecutive four fiscal quarters ending on or before June 27, 2020, as determined by our board of directors, these PSUs will vest with respect to 25 percent of the shares subject to the PSUs on August 10, 2017, and with respect to 6.25 percent of the underlying shares each subsequent quarter over the following three years, subject to continuous service.

Restricted Stock Units

In July 2015, our board of directors approved a long term incentive grant of 0.9 million RSUs to certain executive officers and 1.5 million RSUs to other employees, which vest over three years.

In August 2016, our board of directors approved a long term incentive grant of 0.8 million RSUs to certain executive officers and 2.0 million RSUs to other employees, which vest over four years.

Stock Incentive Plan Activity

The following table summarizes the combined activity under all of our equity incentive plans for the nine months ended April 1, 2017:

	Shares Available For Grant		Stock Options / SARs Outstanding		Weighted- Average Exercise Price		Time and Performance-based Restricted Stock Awards / Units Outstanding		Weighted- Average Grant Date Fair Value
	(Thousands)		(Thousands)				(Thousands)
Balance at July 2, 2016	12,824		2,975		$	7.03	5,022		$	2.67
Increase in share reserve	6,000		—		—		—		—
Granted	(5,460	)	—		—		3,900		6.45
Exercised or released	140		(960	)	4.84		(2,873	)	2.54
Forfeited or expired	208		(69	)	16.30		(102	)	4.69
Balance at April 1, 2017	13,712		1,946		$	7.78	5,947		$	5.17

Supplemental disclosure information about our stock options and stock appreciation rights ("SARs") outstanding as of April 1, 2017 is as follows:

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
	(Thousands)			(Years)	(Thousands)
Options and SARs exercisable	1,837	$	8.12	2.9	$	6,039
Options and SARs outstanding	1,946	$	7.78	3.1	$	6,891

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 $9.82 on March 31, 2017, which would have been received by the option holders had all option holders exercised their options as of that date. There were approximately 1.2 million shares of common stock subject to in-the-money options which were exercisable as of April 1, 2017. We settle employee stock option exercises with newly issued shares of common stock.

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STOCK-BASED COMPENSATION

9 Months Ended

Apr. 01, 2017

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.

As there were no stock options granted during the three and nine months ended April 1, 2017 and March 26, 2016, the Black-Scholes assumptions used to value stock option grants is not applicable.

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

	Three Months Ended				Nine Months Ended
	April 1, 2017		March 26, 2016		April 1, 2017			March 26, 2016
	(Thousands)
Stock-based compensation by category of expense:
Cost of revenues	$	630	$	523	$	1,381		$	1,451
Research and development	590		455		1,573			1,370
Selling, general and administrative	1,670		1,095		4,968			3,619
	$	2,890	$	2,073	$	7,922		$	6,440
Stock-based compensation by type of award:
Stock options	$	32	$	52	$	102		$	167
Restricted stock awards	2,747		1,962		7,950			6,258
Inventory adjustment to cost of revenues	111		59		(130		)	15
	$	2,890	$	2,073	$	7,922		$	6,440

As of April 1, 2017 and July 2, 2016, we had capitalized approximately $0.5 million and $0.3 million, respectively, of stock-based compensation as inventory.

As of April 1, 2017, we had capitalized approximately $0.2 million of stock-based compensation in connection with the development of internal use software.

As of April 1, 2017, we had $0.1 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 1.2 years, and $18.0 million in unrecognized stock-based compensation expense related to unvested time-based restricted stock awards and restricted stock units, net of estimated forfeitures, that will be recognized over a weighted-average period of 2.4 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 to 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. As of April 1, 2017, we determined that the achievement of the performance conditions associated with the PSUs issued in August 2016 is probable at 100 percent of the target level.

During the three and nine months ended April 1, 2017, we recorded $0.7 million and $1.9 million, respectively, in stock-based compensation in connection with the PSUs issued in August 2015 and August 2016. During the three and nine months ended March 26, 2016, we recorded $0.2 million and $1.2 million, respectively in stock-based compensation expense in connection with the issuance of PSUs.

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INCOME TAXES

9 Months Ended

Apr. 01, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The income tax provision of $0.6 million and $1.1 million for the three and nine months ended April 1, 2017, respectively, relates primarily to our foreign operations. The income tax provision of $0.5 million and $2.4 million for the three and nine months endedMarch 26, 2016, respectively, relates primarily to our foreign operations.

The total amount of our unrecognized tax benefits as of April 1, 2017 and July 2, 2016 was approximately $3.5 million and $3.8 million, respectively. As of April 1, 2017, we had $2.9 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 $1.3 million in the next twelve months.

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NET INCOME (LOSS) PER SHARE

9 Months Ended

Apr. 01, 2017

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
	April 1, 2017		March 26, 2016		April 1, 2017		March 26, 2016
	(Thousands, except per share amounts)
Net income (loss)	$	38,214	$	89	$	71,832	$	(3,264	)
Weighted-average shares - Basic	166,808		110,882		155,037		110,212
Effect of dilutive potential common shares from:
Stock options and stock appreciation rights	651		280		712		—
Restricted stock units and awards	2,382		2,537		2,484		—
Convertible notes	—		—		5,004		—
Weighted-average shares - Diluted	169,841		113,699		163,237		110,212
Basic net income (loss) per share	$	0.23	$	0.00	$	0.46	$	(0.03	)
Diluted net income (loss) per share	$	0.22	$	0.00	$	0.44	$	(0.03	)

For the three and nine months ended April 1, 2017, we excluded 0.6 million and 0.8 million, respectively, of outstanding stock options, stock appreciation rights and unvested restricted stock awards from the calculation of diluted net income (loss) per share because their effect would have been anti-dilutive.

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 shares issuable in connection with convertible notes from the calculation of diluted net income (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

Apr. 01, 2017

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
	April 1, 2017		March 26, 2016		April 1, 2017		March 26, 2016
	(Thousands)
Asia-Pacific:
China	$	57,882	$	43,935	$	180,551	$	112,170
Thailand	24,722		1,964		78,852		2,727
Malaysia	4,000		7,986		15,703		24,146
Other Asia-Pacific	6,329		1,378		12,693		3,294
Total Asia-Pacific	$	92,933	$	55,263	$	287,799	$	142,337
Americas:
United States	22,832		15,913		54,574		45,880
Mexico	8,930		10,015		26,290		36,549
Other Americas	14,115		2,338		22,327		5,312
Total Americas	$	45,877	$	28,266	$	103,191	$	87,741
EMEA:
Italy	7,577		6,353		23,601		20,242
Germany	5,116		5,686		11,493		14,638
Other EMEA	6,836		3,315		18,182		12,638
Total EMEA	$	19,529	$	15,354	$	53,276	$	47,518
Japan	$	3,843	$	2,167	$	7,322	$	5,133
Total revenues	$	162,182	$	101,050	$	451,588	$	282,729

Product Groups

The following table sets forth revenues by product group:

	Three Months Ended				Nine Months Ended
	April 1, 2017		March 26, 2016		April 1, 2017		March 26, 2016
	(Thousands)
100 Gb/s transmission modules	$	125,818	$	58,569	$	337,424	$	148,951
40 Gb/s and lower transmission modules	36,364		42,481		114,164		133,778
	$	162,182	$	101,050	$	451,588	$	282,729

Significant Customers and Concentration of Credit Risk

For the three months ended April 1, 2017, four customers accounted for 10 percent or more of our revenues, representing approximately 18 percent, 17 percent, 12 percent and 12 percent of our revenues, respectively. For the nine months ended April 1, 2017four customers accounted for 10 percent of more of our revenues, representing 19 percent, 18 percent, 16 percent and 11 percent of our revenues, respectively.

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.

As of April 1, 2017, three customers accounted for 10 percent or more of our accounts receivable, representing approximately 21 percent, 13 percent and 11 percent of our accounts receivable, respectively. As of July 2, 2016, four customers accounted for 10 percent or more of our accounts receivable, representing approximately 23 percent, 16 percent, 13 percent and 10 percent of our accounts receivable, respectively.

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BASIS OF PREPARATION (Policies)

9 Months Ended

Apr. 01, 2017

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 April 1, 2017 and for the three and nine months ended April 1, 2017 and March 26, 2016 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 April 1, 2017 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending July 1, 2017.

The condensed consolidated balance sheet as of July 2, 2016 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 July 2, 2016 ("2016 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 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 2016 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 1, 2017 will be a 52 week year, with the quarter ended April 1, 2017 being a 13 week quarterly period. Our fiscal year ended July 2, 2016 was a 53 week year, with the quarter ended March 26, 2016 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 loss, cash flows, cash and cash equivalents or stockholders’ equity as previously reported.

Recent Accounting Standards

RECENT ACCOUNTING STANDARDS

In March 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, changing the presentation of net periodic benefit cost in the income statement. The guidance will be effective for us in the first quarter of fiscal 2019, with early adoption permitted. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations: Clarifying the Definition of a Business, providing guidance for evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. The guidance will be effective for us in the first quarter of fiscal 2019. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash to standardize the presentation of transfers between cash and restricted cash in the cash flow statement. Amounts described as restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance will be effective for us in the first quarter of fiscal 2019, with early adoption permitted. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory, to reduce the complexity related to the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. This guidance will be effective for us in the first quarter of fiscal 2019, with early adoption permitted. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments to reduce the diversity in practice related to the presentation and classification of various cash flow scenarios. This guidance will be effective for us in the first quarter of fiscal 2019, with early adoption permitted. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In May 2014 and May 2016, the FASB issued ASU 2014-09, Revenue from Contracts with Customers and ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, respectively. These updates clarify the principles for recognizing revenue and develop a common revenue standard for 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. The guidance permits two methods of adoption, the full retrospective method applying the standard to each prior reporting period presented, or the modified retrospective method with a cumulative effect of initially applying the guidance recognized at the date of initial application. We currently plan on adopting this guidance on July 1, 2018, the start to our first quarter of fiscal 2019, using the modified retrospective method with a cumulative catch up adjustment and providing additional disclosures comparing results to previous rules. We are currently evaluating the likely impact the implementation of this standard will have on our financial statements and footnote disclosures.

In March 2016, the FASB issued 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 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 likely impact 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 likely impact 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

Apr. 01, 2017

Balance Sheet Details [Abstract]

Schedule of Cash and Cash Equivalents

The following table provides details regarding our cash, cash equivalents and short-term investments at the dates indicated:

	April 1, 2017		July 2, 2016
	(Thousands)
Cash and cash equivalents:
Cash-in-bank	$	67,803	$	70,925
Money market funds	95,825		25,004
Commercial paper	19,996		—
Corporate bonds	22,449		—
U.S. Treasury securities	3,995		—
U.S. agency securities	3,995		—
	$	214,063	$	95,929
Short-term investments:
Commercial paper	$	23,961	$	—
Corporate bonds	8,051		—
U.S. Treasury securities	3,998		—
U.S. agency securities	3,995		—
	$	40,005	$	—

Schedule of Inventories

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

	April 1, 2017		July 2, 2016
	(Thousands)
Inventories:
Raw materials	$	25,067	$	23,751
Work-in-process	35,061		32,819
Finished goods	28,548		19,799
	$	88,676	$	76,369

Schedule of Property and Equipment, Net

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

	April 1, 2017			July 2, 2016
	(Thousands)
Property and equipment, net:
Buildings and improvements	$	9,691		$	10,389
Plant and machinery	83,367			59,696
Fixtures, fittings and equipment	2,875			3,005
Computer equipment	11,583			9,846
	107,516			82,936
Less: Accumulated depreciation	(7,057		)	(17,891		)
	$	100,459		$	65,045

Summary of Other Intangible Assets

The following table summarizes the activity related to our other intangible assets for the nine months ended April 1, 2017:

	Core and Current Technology		Development and Supply Agreements			Customer Relationships		Patent Portfolio		Other Intangibles		Amortization			Total
	(Thousands)
Balance at July 2, 2016	$	6,249	$	4,509		$	2,402	$	915	$	3,338	$	(15,915	)	$	1,498
Amortization	—		—			—		—		—		(635		)	(635		)
Translations and adjustments	—		(23		)	—		—		—		—			(23		)
Balance at April 1, 2017	$	6,249	$	4,486		$	2,402	$	915	$	3,338	$	(16,550	)	$	840

Schedule of Accrued Expenses and Other Liabilities

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

	April 1, 2017		July 2, 2016
	(Thousands)
Accrued expenses and other liabilities:
Trade payables	$	11,208	$	6,429
Compensation and benefits related accruals	12,385		14,038
Warranty accrual	4,659		3,827
Accrued restructuring, current	—		204
Purchase commitments in excess of future demand, current	5,292		1,723
Other accruals	10,487		8,597
	$	44,031	$	34,818

Components of Accumulated Other Comprehensive Income

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

	April 1, 2017			July 2, 2016
	(Thousands)
Accumulated other comprehensive income:
Currency translation adjustments	$	38,714		$	40,184
Unrealized loss on marketable securities	(5		)	—
Japan defined benefit plan	(363		)	(363		)
	$	38,346		$	39,821

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FAIR VALUE (Tables)

9 Months Ended

Apr. 01, 2017

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 April 1, 2017 and July 2, 2016:

	Fair Value Measurement at April 1, 2017 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	$	95,825	$	—	$	—	$	95,825
Commercial paper	—		19,996		—		19,996
Corporate bonds	—		22,449		—		22,449
U.S. Treasury securities	—		3,995		—		3,995
U.S. agency securities	—		3,995		—		3,995
Short-term investments:
Commercial paper	—		23,961		—		23,961
Corporate bonds	—		8,051		—		8,051
U.S. Treasury securities	—		3,998		—		3,998
U.S. agency securities	—		3,995		—		3,995
Restricted cash:
Money market funds	712		—		—		712
Total assets measured at fair value	$	96,537	$	90,440	$	—	$	186,977

⁽¹⁾  Excludes $67.8 million in cash held in our bank accounts at April 1, 2017.

	Fair Value Measurement at July 2, 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	$	25,004	$	—	$	—	$	25,004
Restricted cash:
Money market funds	712		—		—		712
Total assets measured at fair value	$	25,716	$	—	$	—	$	25,716

⁽¹⁾  Excludes $70.9 million in cash held in our bank accounts at July 2, 2016.

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POST-RETIREMENT BENEFITS (Tables)

9 Months Ended

Apr. 01, 2017

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
	April 1, 2017		March 26, 2016		April 1, 2017		March 26, 2016
	(Thousands)
Service cost	$	172	$	132	$	480	$	376
Interest cost	1		11		3		32
Net periodic pension costs	$	173	$	143	$	483	$	408

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COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Apr. 01, 2017

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
	April 1, 2017			March 26, 2016			April 1, 2017			March 26, 2016
	(Thousands)
Warranty provision—beginning of period	$	4,560		$	3,097		$	3,827		$	2,932
Warranties issued	991			615			2,533			1,472
Warranties utilized or expired	(901		)	(553		)	(1,505		)	(1,241		)
Foreign currency translation and other adjustments	9			(32		)	(196		)	(36		)
Warranty provision—end of period	$	4,659		$	3,127		$	4,659		$	3,127

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 at April 1, 2017:

	Capital Leases
	(Thousands)
Fiscal Year Ending:
2017 (remaining)	$	926
2018	1,748
2019	591
2020	629
2021	286
Thereafter	12
Total minimum lease payments	4,192
Less amount representing interest	(245		)
Present value of capitalized payments	3,947
Less: current portion	(2,431		)
Long-term portion	$	1,516

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EMPLOYEE STOCK PLANS (Tables)

9 Months Ended

Apr. 01, 2017

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 April 1, 2017:

	Shares Available For Grant		Stock Options / SARs Outstanding		Weighted- Average Exercise Price		Time and Performance-based Restricted Stock Awards / Units Outstanding		Weighted- Average Grant Date Fair Value
	(Thousands)		(Thousands)				(Thousands)
Balance at July 2, 2016	12,824		2,975		$	7.03	5,022		$	2.67
Increase in share reserve	6,000		—		—		—		—
Granted	(5,460	)	—		—		3,900		6.45
Exercised or released	140		(960	)	4.84		(2,873	)	2.54
Forfeited or expired	208		(69	)	16.30		(102	)	4.69
Balance at April 1, 2017	13,712		1,946		$	7.78	5,947		$	5.17

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 April 1, 2017 is as follows:

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
	(Thousands)			(Years)	(Thousands)
Options and SARs exercisable	1,837	$	8.12	2.9	$	6,039
Options and SARs outstanding	1,946	$	7.78	3.1	$	6,891

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STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Apr. 01, 2017

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

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
	April 1, 2017		March 26, 2016		April 1, 2017			March 26, 2016
	(Thousands)
Stock-based compensation by category of expense:
Cost of revenues	$	630	$	523	$	1,381		$	1,451
Research and development	590		455		1,573			1,370
Selling, general and administrative	1,670		1,095		4,968			3,619
	$	2,890	$	2,073	$	7,922		$	6,440
Stock-based compensation by type of award:
Stock options	$	32	$	52	$	102		$	167
Restricted stock awards	2,747		1,962		7,950			6,258
Inventory adjustment to cost of revenues	111		59		(130		)	15
	$	2,890	$	2,073	$	7,922		$	6,440

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NET INCOME (LOSS) PER SHARE Net Income (Loss) Per Share (Tables)

9 Months Ended

Apr. 01, 2017

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

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

	Three Months Ended				Nine Months Ended
	April 1, 2017		March 26, 2016		April 1, 2017		March 26, 2016
	(Thousands, except per share amounts)
Net income (loss)	$	38,214	$	89	$	71,832	$	(3,264	)
Weighted-average shares - Basic	166,808		110,882		155,037		110,212
Effect of dilutive potential common shares from:
Stock options and stock appreciation rights	651		280		712		—
Restricted stock units and awards	2,382		2,537		2,484		—
Convertible notes	—		—		5,004		—
Weighted-average shares - Diluted	169,841		113,699		163,237		110,212
Basic net income (loss) per share	$	0.23	$	0.00	$	0.46	$	(0.03	)
Diluted net income (loss) per share	$	0.22	$	0.00	$	0.44	$	(0.03	)

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

9 Months Ended

Apr. 01, 2017

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
	April 1, 2017		March 26, 2016		April 1, 2017		March 26, 2016
	(Thousands)
Asia-Pacific:
China	$	57,882	$	43,935	$	180,551	$	112,170
Thailand	24,722		1,964		78,852		2,727
Malaysia	4,000		7,986		15,703		24,146
Other Asia-Pacific	6,329		1,378		12,693		3,294
Total Asia-Pacific	$	92,933	$	55,263	$	287,799	$	142,337
Americas:
United States	22,832		15,913		54,574		45,880
Mexico	8,930		10,015		26,290		36,549
Other Americas	14,115		2,338		22,327		5,312
Total Americas	$	45,877	$	28,266	$	103,191	$	87,741
EMEA:
Italy	7,577		6,353		23,601		20,242
Germany	5,116		5,686		11,493		14,638
Other EMEA	6,836		3,315		18,182		12,638
Total EMEA	$	19,529	$	15,354	$	53,276	$	47,518
Japan	$	3,843	$	2,167	$	7,322	$	5,133
Total revenues	$	162,182	$	101,050	$	451,588	$	282,729

Revenues by Product Group

The following table sets forth revenues by product group:

	Three Months Ended				Nine Months Ended
	April 1, 2017		March 26, 2016		April 1, 2017		March 26, 2016
	(Thousands)
100 Gb/s transmission modules	$	125,818	$	58,569	$	337,424	$	148,951
40 Gb/s and lower transmission modules	36,364		42,481		114,164		133,778
	$	162,182	$	101,050	$	451,588	$	282,729

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BASIS OF PREPARATION (Details) - USD ($) $ in Millions							1 Months Ended		9 Months Ended
	Nov. 18, 2016	Sep. 27, 2016	Aug. 22, 2016	Aug. 12, 2016	Aug. 09, 2016	Aug. 08, 2016	Sep. 30, 2016	Aug. 31, 2016	Apr. 01, 2017	Oct. 31, 2015	Feb. 19, 2015
Debt Instrument [Line Items]
Stated interest rate (percent)										1.15%
Stock issued in September (shares)		15,000,000
Proceeds from issuance of common stock, net		$ 135.2					$ 135.2
Additional shares reserved under the Plan (shares)	6,000,000.0								6,000,000
Convertible Notes | 6.00% Convertible Senior Notes due 2020
Debt Instrument [Line Items]
Stated interest rate (percent)								6.00%			6.00%
Payment on 6% Notes						$ 4.7		$ 4.7
Common Stock
Debt Instrument [Line Items]
Shares issued in settlement of debt (shares)			756,213	21,852,477	20,564,101	12,051,282		34,659,972
Stock issued in September (shares)							17,250,000

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BALANCE SHEET DETAILS - Schedule of Cash and Cash Equivalents (Details) - USD ($) $ in Thousands	Apr. 01, 2017	Jul. 02, 2016	Mar. 26, 2016	Jun. 27, 2015
Cash and cash equivalents:
Cash and cash equivalents	$ 214,063	$ 95,929	$ 106,081	$ 111,840
Short-term investments:
Short-term investments	40,005	0
Commercial paper
Short-term investments:
Short-term investments	23,961	0
Corporate bonds
Short-term investments:
Short-term investments	8,051	0
U.S. Treasury securities
Short-term investments:
Short-term investments	3,998	0
U.S. agency securities
Short-term investments:
Short-term investments	3,995	0
Cash-in-bank
Cash and cash equivalents:
Cash and cash equivalents	67,803	70,925
Money market funds
Cash and cash equivalents:
Cash and cash equivalents	95,825	25,004
Commercial paper
Cash and cash equivalents:
Cash and cash equivalents	19,996	0
Corporate bonds
Cash and cash equivalents:
Cash and cash equivalents	22,449	0
U.S. Treasury securities
Cash and cash equivalents:
Cash and cash equivalents	3,995	0
U.S. agency securities
Cash and cash equivalents:
Cash and cash equivalents	$ 3,995	$ 0

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BALANCE SHEET DETAILS - Schedule of Inventories (Details) - USD ($) $ in Thousands	Apr. 01, 2017	Jul. 02, 2016
Inventories:
Raw materials	$ 25,067	$ 23,751
Work-in-process	35,061	32,819
Finished goods	28,548	19,799
Total inventories	$ 88,676	$ 76,369

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BALANCE SHEET DETAILS - Schedule of Property and Equipment, Net (Details) - USD ($) $ in Thousands	Apr. 01, 2017	Jul. 02, 2016
Property and equipment, net:
Buildings and improvements	$ 9,691	$ 10,389
Plant and machinery	83,367	59,696
Fixtures, fittings and equipment	2,875	3,005
Computer equipment	11,583	9,846
Property and equipment, gross	107,516	82,936
Less: Accumulated depreciation	(7,057)	(17,891)
Total property and equipment, net	$ 100,459	$ 65,045

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BALANCE SHEET DETAILS - Summary of Other Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016
Other Intangible Assets, Gross:
Translations and adjustments			$ (23)
Other Intangible Assets, Accumulated Amortization:
Beginning balance, Accumulated amortization			(15,915)
Amortization	$ (150)	$ (247)	(635)	$ (748)
Ending balance, Accumulated amortization	(16,550)		(16,550)
Other Intangible Assets, Net:
Beginning balance			1,498
Amortization	(150)	$ (247)	(635)	$ (748)
Translations and adjustments			(23)
Ending balance	840		840
Core and Current Technology
Other Intangible Assets, Gross:
Beginning balance			6,249
Translations and adjustments			0
Ending balance	6,249		6,249
Other Intangible Assets, Net:
Translations and adjustments			0
Development and Supply Agreements
Other Intangible Assets, Gross:
Beginning balance			4,509
Translations and adjustments			(23)
Ending balance	4,486		4,486
Other Intangible Assets, Net:
Translations and adjustments			(23)
Customer Relationships
Other Intangible Assets, Gross:
Beginning balance			2,402
Translations and adjustments			0
Ending balance	2,402		2,402
Other Intangible Assets, Net:
Translations and adjustments			0
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

XML

BALANCE SHEET DETAILS - Schedule of Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands	Apr. 01, 2017	Jul. 02, 2016
Accrued expenses and other liabilities:
Trade payables	$ 11,208	$ 6,429
Compensation and benefits related accruals	12,385	14,038
Warranty accrual	4,659	3,827
Accrued restructuring, current	0	204
Purchase commitments in excess of future demand, current	5,292	1,723
Other accruals	10,487	8,597
Total accrued expenses and other liabilities	$ 44,031	$ 34,818

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BALANCE SHEET DETAILS - Components of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	Apr. 01, 2017	Jul. 02, 2016
Accumulated other comprehensive income:
Currency translation adjustments	$ 38,714	$ 40,184
Unrealized loss on marketable securities	(5)	0
Japan defined benefit plan	(363)	(363)
Accumulated other comprehensive income	$ 38,346	$ 39,821

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BALANCE SHEET DETAILS - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands						1 Months Ended		9 Months Ended
	Sep. 27, 2016	Aug. 22, 2016	Aug. 12, 2016	Aug. 09, 2016	Aug. 08, 2016	Sep. 30, 2016	Aug. 31, 2016	Apr. 01, 2017	Sep. 21, 2016	Jul. 02, 2016	Oct. 31, 2015	Feb. 19, 2015
Balance Sheet Components [Line Items]
Restricted cash and cash equivalents								$ 1,100
Restricted cash, current								716		$ 715
Assets under capital lease								3,900		$ 5,900
Disposal/sale of fully depreciated property and equipment								13,000
Expected amortization of intangible assets in fiscal year 2017								200
Expected amortization of intangible assets in fiscal year 2018								$ 600
Stated interest rate (percent)											1.15%
Stock issued in September (shares)	15,000,000
Common stock, par value (in usd per share)								$ 0.01	$ 0.01	$ 0.01
Stock offering, price per share (in USD per share)									$ 8.35
Stock offering, underwriter option period	30 days
Proceeds from issuance of common stock, net	$ 135,200					$ 135,200
Other Current Assets [Member]
Balance Sheet Components [Line Items]
Restricted cash, current								$ 700
Other non-current assets
Balance Sheet Components [Line Items]
Restricted cash, noncurrent								$ 400
Common Stock
Balance Sheet Components [Line Items]
Shares issued in settlement of debt (shares)		756,213	21,852,477	20,564,101	12,051,282		34,659,972
Stock issued in September (shares)						17,250,000
Underwriter option
Balance Sheet Components [Line Items]
Stock issued in September (shares)	2,250,000
Convertible Notes | 6.00% Convertible Senior Notes due 2020
Balance Sheet Components [Line Items]
Stated interest rate (percent)							6.00%					6.00%

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FAIR VALUE - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Apr. 01, 2017	Jul. 02, 2016	Mar. 26, 2016	Jun. 27, 2015
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Cash and cash equivalents	$ 214,063	$ 95,929	$ 106,081	$ 111,840
Restricted cash:
Total assets measured at fair value	186,977	25,716
Quoted Prices in Active Markets for Identical Assets (Level 1)
Restricted cash:
Total assets measured at fair value	96,537	25,716
Significant Other Observable Inputs (Level 2)
Restricted cash:
Total assets measured at fair value	90,440
Commercial Paper
Short-term investments:
Short-term investments	23,961
Commercial Paper | Significant Other Observable Inputs (Level 2)
Short-term investments:
Short-term investments	23,961
Corporate bonds
Short-term investments:
Short-term investments	8,051
Corporate bonds | Significant Other Observable Inputs (Level 2)
Short-term investments:
Short-term investments	8,051
U.S. Treasury securities
Short-term investments:
Short-term investments	3,998
U.S. Treasury securities | Significant Other Observable Inputs (Level 2)
Short-term investments:
Short-term investments	3,998
U.S. agency securities
Short-term investments:
Short-term investments	3,995
U.S. agency securities | Significant Other Observable Inputs (Level 2)
Short-term investments:
Short-term investments	3,995
Money market funds
Restricted cash:
Restricted cash	712	712
Money market funds | Quoted Prices in Active Markets for Identical Assets (Level 1)
Restricted cash:
Restricted cash	712	712
Cash-in-bank
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Cash and cash equivalents	67,803	70,925
Money market funds
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Cash and cash equivalents	95,825	25,004
Cash and cash equivalents:
Cash and cash equivalents	95,825	25,004
Money market funds | Quoted Prices in Active Markets for Identical Assets (Level 1)
Cash and cash equivalents:
Cash and cash equivalents	95,825	25,004
Commercial Paper
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Cash and cash equivalents	19,996	0
Cash and cash equivalents:
Cash and cash equivalents	19,996
Commercial Paper | Significant Other Observable Inputs (Level 2)
Cash and cash equivalents:
Cash and cash equivalents	19,996
Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Cash and cash equivalents	22,449	0
Cash and cash equivalents:
Cash and cash equivalents	22,449
Corporate bonds | Significant Other Observable Inputs (Level 2)
Cash and cash equivalents:
Cash and cash equivalents	22,449
U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Cash and cash equivalents	3,995	0
Cash and cash equivalents:
Cash and cash equivalents	3,995
U.S. Treasury securities | Significant Other Observable Inputs (Level 2)
Cash and cash equivalents:
Cash and cash equivalents	3,995
U.S. agency securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Cash and cash equivalents	3,995	$ 0
Cash and cash equivalents:
Cash and cash equivalents	3,995
U.S. agency securities | Significant Other Observable Inputs (Level 2)
Cash and cash equivalents:
Cash and cash equivalents	$ 3,995

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CREDIT LINE AND NOTES - 6.00% Convertible Senior Notes (Details)						1 Months Ended	9 Months Ended
	Aug. 22, 2016 USD ($) shares	Aug. 12, 2016 shares	Aug. 09, 2016 USD ($) shares	Aug. 08, 2016 USD ($) shares	Feb. 19, 2015 USD ($) d	Aug. 31, 2016 USD ($) shares	Apr. 01, 2017 USD ($)	Oct. 31, 2015
Debt Instrument [Line Items]
Fixed interest rate								1.15%
Common Stock
Debt Instrument [Line Items]
Shares issued in settlement of debt (shares) | shares	756,213	21,852,477	20,564,101	12,051,282		34,659,972
Convertible Notes | 6.00% Convertible Senior Notes due 2020
Debt Instrument [Line Items]
Fixed interest rate					6.00%	6.00%
Principal value of the liability component	$ 1,400,000.0		$ 40,100,000.0	$ 23,500,000.0	$ 65,000,000
Percentage of stock price the Notes were sold					100.00%
Proceeds from the sale of convertible notes, net					$ 61,600,000
Unamortized value of the debt discount and issuance costs					3,400,000
Offering expenses					$ 600,000
Number of threshold trading days | d					20
Consecutive trading days					30 days
Threshold trading days					5 days
Payment on 6% Notes				$ 4,700,000		$ 4,700,000
Convertible Notes | 6.00% Convertible Senior Notes due 2020 | Interest Income (Expense), Net
Debt Instrument [Line Items]
Interest make-whole charge							$ 5,900,000
Convertible Notes | 6.00% Convertible Senior Notes due 2020 | Other Income (Expense), Net
Debt Instrument [Line Items]
Induced conversion expense							$ 7,400,000

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CREDIT LINE AND NOTES - Silicon Valley Bank Credit Facility (Details) - Oclaro Technology Limited - Silicon Valley Bank - USD ($)	Mar. 28, 2014	Apr. 01, 2017
Minimum
Ceded Credit Risk [Line Items]
Interest paid under Loan Agreement	$ 45,000
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

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POST-RETIREMENT BENEFITS - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016
Defined Benefit Plan Disclosure [Line Items]
Contributions made under U.K. defined contribution pension scheme	$ 300,000	$ 300,000	$ 800,000	$ 900,000
Japan Plan
Defined Benefit Plan Disclosure [Line Items]
Total contribution provided	100,000	100,000	400,000	300,000
Plan assets			0
Accrued expenses and other liabilities	200,000		200,000
Other non current liabilities	$ 6,600,000		6,600,000
Defined benefit plan, benefits paid		$ 0	$ 200,000	$ 100,000

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POST-RETIREMENT BENEFITS - Net Periodic Pension Costs (Details) - Japan Plan - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 172	$ 132	$ 480	$ 376
Interest cost	1	11	3	32
Net periodic pension costs	$ 173	$ 143	$ 483	$ 408

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COMMITMENTS AND CONTINGENCIES - Additional Information (Details) $ in Millions		1 Months Ended	9 Months Ended
	Nov. 23, 2016 patent	Oct. 31, 2015 installment	Apr. 01, 2017 USD ($)	Jul. 02, 2016 USD ($)
Contingencies And Commitments [Line Items]
Capital lease term		5 years
Number of capital lease installment payments | installment		20
Interest rate on capital lease (percent)		1.15%
Malaysian goods and services tax refund claim | $			$ 2.4
Prepaid Expenses and Other Current Assets
Contingencies And Commitments [Line Items]
Malaysian goods and services tax refund claim | $			1.9
Inventory in Excess of Future Demand Forecasts | Accrued Expenses and Other Liabilities
Contingencies And Commitments [Line Items]
Purchase commitments | $			$ 4.5	$ 1.7
Minimum
Contingencies And Commitments [Line Items]
Warranty for products from date of sale			12 months
Maximum
Contingencies And Commitments [Line Items]
Warranty for products from date of sale			36 months
Oyster Optics Litigation
Contingencies And Commitments [Line Items]
Number of patents allegedly infringed | patent	7
Oyster Optics Litigation, Cisco 40G Optical Platform
Contingencies And Commitments [Line Items]
Number of patents allegedly infringed | patent	4
Oyster Optics Litigation, Cisco 100G Optical Platform
Contingencies And Commitments [Line Items]
Number of patents allegedly infringed | patent	3

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COMMITMENTS AND CONTINGENCIES - Movements in Warranty Accrual for Period (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016
Warranty Provision Roll Forward:
Warranty provision—beginning of period	$ 4,560	$ 3,097	$ 3,827	$ 2,932
Warranties issued	991	615	2,533	1,472
Warranties utilized or expired	(901)	(553)	(1,505)	(1,241)
Foreign currency translation and other adjustments	9	(32)	(196)	(36)
Warranty provision—end of period	$ 4,659	$ 3,127	$ 4,659	$ 3,127

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COMMITMENTS AND CONTINGENCIES - Summary of Future Minimum Lease Payments Due Under Non-Cancelable Capital Leases (Details) $ in Thousands	Apr. 01, 2017 USD ($)
Fiscal Year Ending:
2017 (remaining)	$ 926
2018	1,748
2019	591
2020	629
2021	286
Thereafter	12
Total minimum lease payments	4,192
Less amount representing interest	(245)
Present value of capitalized payments	3,947
Less: current portion	(2,431)
Long-term portion	$ 1,516

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EMPLOYEE STOCK PLANS - Additional Information (Details) $ / shares in Units, $ in Millions		1 Months Ended			9 Months Ended
	Nov. 18, 2016 shares	Aug. 31, 2016 USD ($) quarter shares	Aug. 31, 2015 USD ($) shares	Jul. 31, 2015 shares	Apr. 01, 2017 shares	Mar. 31, 2017 $ / shares	Jul. 02, 2016 shares
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Additional shares reserved under the Plan (shares)	6,000,000.0				6,000,000
Number of shares issued under the ESPP (shares)					13,712,000		12,824,000
Closing price of common stock (in usd per share) | $ / shares						$ 9.82
Number of shares of common stock subject to in-the-money options (in shares)					1,200,000
Restricted Stock Awards / Units Outstanding
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Units outstanding after adjustments (in shares)					5,947,000		5,022,000
PSUs | Certain Executive Officers
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Award vesting period			2 years
Number of granted shares (shares)		800,000	900,000
Aggregate estimated grant date fair value of PSU | $		$ 4.8	$ 2.5
Number of consecutive fiscal quarters | quarter		4
Free cash flow requirement | $		$ 25.0
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 | Certain Executive Officers | August 10, 2017
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Percentage of shares that will vest		25.00%
PSUs | Certain Executive Officers | Subsequent Quarter over Following Three Years
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Award vesting period		3 years
Percentage of shares that will vest		6.25%
RSUs
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Award vesting period		4 years		3 years
RSUs | Certain Executive Officers
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Number of granted shares (shares)		800,000.0		900,000.0
RSUs | Employees
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Number of granted shares (shares)		2,000,000.0		1,500,000.0
Minimum | Stock Options
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Award vesting period					2 years
Minimum | Restricted Stock Awards / Units Outstanding
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Award vesting period					1 year
Maximum | Stock Options
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Award vesting period					4 years
Maximum | Restricted Stock Awards / Units Outstanding
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Award vesting period					4 years

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EMPLOYEE STOCK PLANS - Summarizes Combined Activity Under All of Our Equity Incentive Plans (Details) - $ / shares		9 Months Ended
	Nov. 18, 2016	Apr. 01, 2017
Shares Available For Grant
Balance at beginning of period (in shares)		12,824,000
Increase in share reserve (shares)	6,000,000.0	6,000,000
Granted (in shares)		(5,460,000)
Exercised or released (in shares)		140,000
Forfeited or expired (in shares)		208,000
Balance at end of period (in shares)		13,712,000
Stock Options / SARs Outstanding
Balance at beginning of period (in shares)		2,975,000
Granted (in shares)		0
Exercised or released (in shares)		(960,000)
Forfeited or expired (in shares)		(69,000)
Balance at end of period (in shares)		1,946,000
Weighted- Average Exercise Price
Balance at beginning of period (in usd per share)		$ 7.03
Granted (in usd per share)		0.00
Exercised or released (in usd per share)		4.84
Forfeited or expired (in usd per share)		16.30
Balance at end of period (in usd per share)		7.78
Weighted- Average Grant Date Fair Value
Balance at beginning of period (in usd per share)		2.67
Granted (in usd per share)		6.45
Exercised or released (in usd per share)		2.54
Forfeited or expired (in usd per share)		4.69
Balance at end of period (in usd per share)		$ 5.17
Restricted Stock Awards / Units Outstanding
Time and Performance-based Restricted Stock Awards / Units Outstanding
Balance at beginning of period (in shares)		5,022,000
Granted (in shares)		3,900,000
Exercised or released (in shares)		(2,873,000)
Forfeited or expired (in shares)		(102,000)
Balance at end of period (in shares)		5,947,000

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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
	Apr. 01, 2017	Jul. 02, 2016
Schedule Of Stock Options [Line Items]
Shares, Options and SARs exercisable (shares)	1,200
Shares, Options and SARs outstanding (shares)	1,946	2,975
Weighted-Average Exercise Price, Options and SARs outstanding (in usd per share)	$ 7.78	$ 7.03
Stock options and SARs
Schedule Of Stock Options [Line Items]
Shares, Options and SARs exercisable (shares)	1,837
Shares, Options and SARs outstanding (shares)	1,946
Weighted-Average Exercise Price, Options and SARs exercisable (in usd per share)	$ 8.12
Weighted-Average Exercise Price, Options and SARs outstanding (in usd per share)	$ 7.78
Weighted-Average Remaining Contractual Life, Options and SARs exercisable	2 years 10 months 15 days
Weighted-Average Remaining Contractual Life, Options and SARs outstanding	3 years 1 month 13 days
Aggregate Intrinsic Value, Options and SARs exercisable	$ 6,039
Aggregate Intrinsic Value, Options and SARs outstanding	$ 6,891

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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
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	$ 2,890	$ 2,073	$ 7,922	$ 6,440
Stock options
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	32	52	102	167
Restricted stock awards
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	2,747	1,962	7,950	6,258
Inventory adjustment to cost of revenues
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	111	59	(130)	15
Cost of revenues
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	630	523	1,381	1,451
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	590	455	1,573	1,370
Selling, general and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share-based compensation expense	$ 1,670	$ 1,095	$ 4,968	$ 3,619

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STOCK-BASED COMPENSATION - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016	Jul. 02, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized stock-based compensation expense	$ 100		$ 100
Unrecognized stock-based compensation expense, weighted-average period for recognition			1 year 2 months 15 days
Allocated share-based compensation expense	2,890	$ 2,073	$ 7,922	$ 6,440
Restricted stock awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized stock-based compensation expense, weighted-average period for recognition			2 years 4 months 15 days
Unrecognized stock-based compensation expense other than options	18,000		$ 18,000
Allocated share-based compensation expense	$ 2,747	1,962	$ 7,950	6,258
PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Probable achievement of PSU performance target, (percent)	100.00%		100.00%
Allocated share-based compensation expense	$ 700	$ 200	$ 1,900	$ 1,200
Inventory
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation capitalized			500		$ 300
Development of Internal Use Software
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation capitalized			$ 200

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INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016	Jul. 02, 2016
Income Tax Disclosure [Abstract]
Income tax provision	$ 621	$ 476	$ 1,064	$ 2,360
Unrecognized tax benefits	3,500		3,500		$ 3,800
Unrecognized tax benefits that would affect effective tax rate	2,900		2,900
Estimated decrease in unrecognized tax benefits	$ 1,300		$ 1,300

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NET INCOME (LOSS) PER SHARE - Calculation of EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016
Earnings Per Share [Abstract]
Net income (loss)	$ 38,214	$ 89	$ 71,832	$ (3,264)
Weighted-average shares - Basic (shares)	166,808	110,882	155,037	110,212
Effect of dilutive potential common shares from:
Stock options and stock appreciation rights (shares)	651	280	712	0
Restricted stock units and awards (shares)	2,382	2,537	2,484	0
Convertible notes (shares)	0	0	5,004	0
Weighted-average shares - Diluted (shares)	169,841	113,699	163,237	110,212
Basic net income (loss) per share (in USD per share)	$ 0.23	$ 0.00	$ 0.46	$ (0.03)
Diluted net income (loss) per share (in USD per share)	$ 0.22	$ 0.00	$ 0.44	$ (0.03)

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NET INCOME (LOSS) PER SHARE - Additional Information (Details) - shares shares in Millions	3 Months Ended		9 Months Ended
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of earnings per share	0.6	35.5	0.8	38.3

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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
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016
Geographic Information [Line Items]
Revenues	$ 162,182	$ 101,050	$ 451,588	$ 282,729
Total Asia-Pacific
Geographic Information [Line Items]
Revenues	92,933	55,263	287,799	142,337
China
Geographic Information [Line Items]
Revenues	57,882	43,935	180,551	112,170
Thailand
Geographic Information [Line Items]
Revenues	24,722	1,964	78,852	2,727
Malaysia
Geographic Information [Line Items]
Revenues	4,000	7,986	15,703	24,146
Other Asia-Pacific
Geographic Information [Line Items]
Revenues	6,329	1,378	12,693	3,294
Total Americas
Geographic Information [Line Items]
Revenues	45,877	28,266	103,191	87,741
United States
Geographic Information [Line Items]
Revenues	22,832	15,913	54,574	45,880
Mexico
Geographic Information [Line Items]
Revenues	8,930	10,015	26,290	36,549
Other Americas
Geographic Information [Line Items]
Revenues	14,115	2,338	22,327	5,312
EMEA
Geographic Information [Line Items]
Revenues	19,529	15,354	53,276	47,518
Italy
Geographic Information [Line Items]
Revenues	7,577	6,353	23,601	20,242
Germany
Geographic Information [Line Items]
Revenues	5,116	5,686	11,493	14,638
Other EMEA
Geographic Information [Line Items]
Revenues	6,836	3,315	18,182	12,638
Japan
Geographic Information [Line Items]
Revenues	$ 3,843	$ 2,167	$ 7,322	$ 5,133

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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
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016
Segment Information [Line Items]
Revenues	$ 162,182	$ 101,050	$ 451,588	$ 282,729
100 Gb/s transmission modules
Segment Information [Line Items]
Revenues	125,818	58,569	337,424	148,951
40 Gb/s and lower transmission modules
Segment Information [Line Items]
Revenues	$ 36,364	$ 42,481	$ 114,164	$ 133,778

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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
	Apr. 01, 2017	Mar. 26, 2016	Apr. 01, 2017	Mar. 26, 2016	Jul. 02, 2016
Revenues
Revenue, Major Customer [Line Items]
Number of major customers	4	4	4	3
Revenues | Customer A
Revenue, Major Customer [Line Items]
Percentage of revenues	18.00%	20.00%	19.00%	19.00%
Revenues | Customer B
Revenue, Major Customer [Line Items]
Percentage of revenues	17.00%	14.00%	18.00%	14.00%
Revenues | Customer C
Revenue, Major Customer [Line Items]
Percentage of revenues	12.00%	12.00%	16.00%	10.00%
Revenues | Customer D
Revenue, Major Customer [Line Items]
Percentage of revenues	12.00%	11.00%	11.00%
Accounts Receivable
Revenue, Major Customer [Line Items]
Number of major customers			3		4
Accounts Receivable | Customer A
Revenue, Major Customer [Line Items]
Percentage of accounts receivable	21.00%		21.00%		23.00%
Accounts Receivable | Customer B
Revenue, Major Customer [Line Items]
Percentage of accounts receivable	13.00%		13.00%		16.00%
Accounts Receivable | Customer C
Revenue, Major Customer [Line Items]
Percentage of accounts receivable	11.00%		11.00%		13.00%
Accounts Receivable | Customer D
Revenue, Major Customer [Line Items]
Percentage of accounts receivable					10.00%