Non-Controlling Interest Redeemable Convertible Preferred Stock and Derivative Liability

12 Months Ended

Jun. 27, 2020

Temporary Equity Disclosure [Abstract]

Non-Controlling Interest Redeemable Convertible Preferred Stock and Derivative Liability

Note 11. Non-Controlling Interest Redeemable Convertible Preferred Stock and Derivative Liability

On July 31, 2015, our wholly-owned subsidiary, Lumentum Inc., issued 40,000 shares of its Series A Preferred Stock to Viavi Solutions Inc. (“Viavi”). Pursuant to a securities purchase agreement between us, Viavi and Amada Holdings Co., Ltd. (“Amada”), 35,805 shares of Series A Preferred Stock were sold by Viavi to Amada in August 2015. The remaining 4,195 shares of the Series A Preferred Stock were canceled. The Series A Preferred Stock was referred to as our Non-Controlling Interest Redeemable Convertible Preferred Stock of $35.8 million on our consolidated balance sheets through the date of conversion in fiscal 2019.

On October 15, 2018, we issued a 30-day notice of intent to the holders of Series A Preferred Stock to convert all shares of Series A Preferred Stock at a conversion price equal to the Issuance Value divided by $24.63 plus the accrued and unpaid dividends on each share and any past due dividends, whether or not authorized or declared. On November 2, 2018, we received notice from Amada of their intent to convert the Series A Preferred Stock and we issued 1.5 million shares of our common stock to Amada upon the conversion of the 35,805 shares of Series A Preferred Stock and recorded $79.4 million in additional paid in capital in the balance sheet.

Through the date of conversion, holders of Series A Preferred Stock, in preference to holders of common stock or any other class or series of our outstanding capital stock ranking in any such event junior to the Series A Preferred Stock, were entitled to receive, when and as declared by the board of directors, quarterly cumulative cash dividends at the annual rate of 2.5% of the

Issuance Value per share on each outstanding share of Series A Preferred Stock. The accrued dividends were payable on March 31, June 30, September 30 and December 31 of each year commencing on September 30, 2015. During each of the years ended June 29, 2019 and June 30, 2018, we paid $0.7 million in dividends to the holders of Series A Preferred Stock.

Through the date of conversion, the Series A Preferred Stock conversion feature was bifurcated from the Series A Preferred Stock and accounted for separately as a derivative liability. The derivative liability was measured at fair value each reporting period, and at the date of conversion, with the change in fair value recorded in the consolidated statements of operations.

The following table provides a reconciliation of the fair value of the embedded derivative for the Series A Preferred Stock for the years ended June 29, 2019 and June 30, 2018 (in millions):

	Years Ended
		June 29, 2019			June 30, 2018
Balance as of beginning of period		$	52.4		$	51.6
Unrealized (gain) loss on the Series A Preferred Stock derivative liability up through the conversion date		(8.8		)	0.8
Settlement of the derivative liability upon conversion of Series A Preferred Stock		(43.6		)	—
Balance as of end of period		$	—		$	52.4