8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

August 3, 2005

JDS UNIPHASE CORPORATION

(Exact name of registrant as specified in its charter)

State of Delaware	0-22874	94-2579683
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1768 Automation Parkway

San Jose, CA 95131

(Address of principal executive offices, including zip code)

(408) 546-5000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Section 9 - Financial Statements and Exhibits	3
Item 9.01 Financial Statements and Exhibits	3
SIGNATURE	4
EXHIBIT INDEX
EXHIBIT 23.1
EXHIBIT 99.1*
EXHIBIT 99.2
EXHIBIT 99.3

* Previously filed

2

Explanatory Note

This Form 8-K/A is filed as an amendment (Amendment No. 1) to the Current Report on Form 8-K filed by JDS Uniphase Corporation on August 10, 2005 to include the financial information required under Item 9.01.

Item 9.01 Financial Statements and Exhibits

(a) Financial statements of business acquired

The audited consolidated financial statements of Acterna as of March 31, 2005 is filed as Exhibit 99.1 to this Amendment No. 1 and incorporated herein by this reference.

(b) Pro forma financial information

The pro forma financial information with respect to the transaction described in Item 2.01 is filed as Exhibit 99.2 to this Amendment No. 1 and incorporated herein by this reference.

(d) Exhibits

23.1		Consent of Independent Auditors
99.1	*	Text of Press Release, dated August 3, 2005, titled JDS Uniphase closes Acquisition of Acterna, Inc.
99.2		Acterna’s historical audited consolidated financial statements as of March 31, 2005 and for the year ended March 31, 2005
99.3		Unaudited Pro Forma Condensed Combined Financial Statement

* Previously filed

3

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Amendment No. 1 to Form 8-K/A to be signed on its behalf by the undersigned hereunto duly authorized.

	JDS UNIPHASE CORPORATION
Dated: October 19, 2005	/s/    DAVID VELLEQUETTE
	David Vellequette
	Senior Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

4

EXHIBIT INDEX

23.1		Consent of Independent Auditors
99.1	*	Text of Press Release, dated August 3, 2005, titled JDS Uniphase closes Acquisition of Acterna, Inc.
99.2		Acterna’s historical audited consolidated financial statements as of March 31, 2005 and for the year ended March 31, 2005
99.3		Unaudited Pro Forma Condensed Combined Financial Statements

* Previously filed

5

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-74716, 33-31722, 333-09937, 333-39423, 333-62465, 333-70339, 333-81911, 333-81909, 333-90301, 333-91313, 333-96481, 333-36114, 333-40696, 333-46846, 333-50176, 333-50502, 333-53642, 333-55182, 333-55560, 333-55796, 333-58718, 333-74226, 333-99745, 333-110497, and 333-125647) and Form S-3 (No. 333-27931, 333-70351, 333-91827, 333-39436, 333-48930, 333-70858, 333-75590, 333-110527 and 333-126868) of JDS Uniphase Corporation (formerly Uniphase Corporation) of our report dated July 29, 2005, relating to the financial statements of Acterna Inc., which appears in the Current Report on Form 8-K-A of JDS Uniphase Corporation dated August 3, 2005.

/s/ PricewaterhouseCoopers LLP

October 19, 2005

Tyson’s Corner, Virginia

EX-99.2

Exhibit 99.2

ACTERNA INC.

CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT AUDITORS	2
FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2005 AND 2004	3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2005 AND THE PERIOD FROM INCEPTION TO MARCH 31, 2004	5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE YEAR ENDED MARCH 31, 2005 AND THE PERIOD FROM INCEPTION TO MARCH 31, 2004	6
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 2005 AND THE PERIOD FROM INCEPTION TO MARCH 31, 2004	7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	8

1

PricewaterhouseCoopers LLP

1751 Pinnacle Drive

McLean VA 22102-3811

Telephone (703) 918 3000

Facsimile (703) 918 3100

www.pwc.com

Report of Independent Auditors

To the Board of Directors and Stockholders of Acterna Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Acterna Inc. and its subsidiaries (the Company) at March 31, 2005 and 2004 and the results of their operations and their cash flows for the year ended March 31, 2005 and the period from October 15, 2003 to March 31, 2004 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit of these statements in accordance with audit standards in the United States of America. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note B to the consolidated financial statements, the United States Bankruptcy Court for the Southern District of New York confirmed the Plan of Reorganization of Acterna Corporation (Predecessor Company) on September 25, 2003. Confirmation of the plan resulted in the extinguishment of approximately $770 million of indebtedness in exchange for 9,999,998 shares of common stock, for warrants to purchase 526,315 shares of common stock and for contingent payment rights. The confirmation of the plan also terminates all rights and interests of Predecessor Company equity security holders as provided for in the plan. The plan was substantially consummated on October 14, 2003 and the Company emerged from bankruptcy. In connection with its emergence from bankruptcy, the Company adopted fresh start accounting as of October 15, 2003.

As discussed in Note E to the consolidated financial statements, the Company entered into an Agreement and Plan of Merger, dated as of May 23, 2005, pursuant to which a wholly owned subsidiary of JDS Uniphase Corporation (“JDSU”) will merge with and into the Company (the “Merger”) in exchange for $760 million in cash and stock.

As discussed in Note D, the March 31, 2004 consolidated financial statements have been restated.

July 29,2005

2

ACTERNA INC.

CONSOLIDATED BALANCE SHEETS

	March 31,
	2005		2004
			(Restated)
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	72,181	$	82,477
Restricted cash		3,043		1,759
Accounts receivable, net of allowance of $2,181 and $3,079 respectively		74,838		64,958
Inventories, net:
Raw materials		16,372		15,537
Work in process		12,551		7,892
Finished goods		13,250		16,772
Total inventories		42,173		40,201
Deferred income taxes		993		1,010
Income tax receivable		2,329		13,754
Prepaid expenses		10,758		12,016
Other current assets		4,147		5,315
Total current assets		210,462		221,490
Property, plant and equipment, net		50,192		53,025
Investment		—		9,341
Goodwill, net		141,763		144,418
Intangible assets, net		69,146		80,470
Deferred income taxes		645		15,945
Other non-current assets		7,162		10,048
Total assets	$	479,370	$	534,737

3

ACTERNA INC.

CONSOLIDATED BALANCE SHEETS (Continued)

	March 31,
	2005			2004
				(Restated)
	(In thousands)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Overdraft facilities	$	75		$	32
Current portion of long-term debt		2,856			2,774
Accounts payable		25,957			22,977
Deferred revenue		14,013			18,743
Accrued expenses:
Compensation and benefits		31,952			18,695
Warranty		5,881			7,198
Interest		1,584			1,990
Restructuring		676			2,576
Other		17,485			25,104
Taxes other than income taxes		4,214			5,207
Accrued income taxes		5,529			8,812
Total current liabilities		110,222			114,108
Long-term debt		141,064			191,006
Deferred income taxes		571			10,582
Deferred compensation		87,625			79,849
Other long-term liabilities		1,509			1,035
Commitments and contingencies (Note O.)
Total stockholders’ equity:
Common stock, $0.01 par value; 15,000,000 shares authorized, 9,999,998 shares issued and outstanding		100			100
Contingent payment rights		25,000			25,000
Additional paid-in capital		127,062			127,062
Accumulated earnings (deficit)		4,528			(2,092	)
Unearned compensation		(1,901	)		(3,228	)
Accumulated other comprehensive loss		(16,410	)		(8,685	)
Total stockholders’ equity		138,379			138,157
Total liabilities and stockholders’ equity	$	479,370		$	534,737

The accompanying notes are an integral part of the Consolidated Financial Statements

4

ACTERNA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Year Ended March 31, 2005			From October 15, 2003 to March 31, 2004
				(Restated)
	(Amounts in thousands except per share data)
Net sales	$	448,499		$	213,822
Cost of sales		197,147			100,715
Gross profit		251,352			113,107
Selling, general and administrative expense		162,397			70,205
Product development expense		54,460			23,138
Amortization of intangibles		11,375			6,670
Restructuring and reorganization expense		1,774			5,325
Loss on sale of building		598			—
Total operating expenses		230,604			105,338
Operating income		20,748			7,769
Interest expense		(13,308	)		(6,628	)
Interest income		3,213			333
Other income (expense), net		1,488			(1,355	)
Income before income taxes		12,141			119
Provision for income taxes		5,521			2,211
Net income (loss)	$	6,620		$	(2,092	)
Net income (loss) per common share, basic	$	0.66		$	(0.21	)
Net income (loss) per common share, diluted	$	0.64		$	(0.21	)
Weighted average number of common shares:
Basic		9,999,998			9,999,998
Diluted		10,354,349			9,999,998

The accompanying notes are an integral part of the Consolidated Financial Statements.

5

ACTERNA INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands)

	Shares of Common Stock	Common Stock		Contingent Payment Rights		Additional Paid-In Capital		Unearned Compensation			Accumulated Earnings (Deficit)			Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance, October 15, 2003, as previously reported	10,000	$	100	$	25,000	$	71,728	$	—		$	—		$	—		$	96,828
Adjustments, see Note D.							51,524											51,524
Balance, October 15, 2003, as restated	10,000		100		25,000		123,252		—			—			—			148,352
Net loss for the Period from October 15, 2003 to March 31, 2004	—		—		—		—		—			(2,092	)		—			(2,092	)
Translation adjustment and minimum pension liability	—		—		—		—		—			—			(8,685	)		(8,685	)
Total comprehensive loss	—		—		—		—		—			(2,092	)		(8,685	)		(10,777	)
Issuance of stock options	—		—		—		3,810		(3,810	)		—			—			—
Amortization of unearned compensation	—		—		—				582			—			—			582
Balance, March 31, 2004	10,000	$	100	$	25,000	$	127,062	$	(3,228	)	$	(2,092	)	$	(8,685	)	$	138,157
Net income for the Period from April 1, 2004 to March 31, 2005	—		—		—		—		—			6,620			—			6,620
Translation adjustment and minimum pension liability	—		—		—		—		—			—			(7,725	)		(7,725	)
Total comprehensive loss	—		—		—		—		—			6,620			(7,725	)		(1,105	)
Amortization of unearned compensation	—		—		—		—		1,327			—			—			1,327
Balance, March 31, 2005	10,000	$	100	$	25,000	$	127,062	$	(1,901	)	$	4,528		$	(16,410	)	$	138,379

The accompanying notes are an integral part of the Consolidated Financial Statements.

6

ACTERNA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Year Ended March 31, 2005			From October 15, 2003 to March 31, 2004
				(Restated)
	(Amounts in thousands)
Operating Activities:
Net income (loss)	$	6,620		$	(2,092	)
Adjustment for non-cash items included in net income:
Depreciation		13,652			7,821
Bad debt		(18	)		269
Gain on investment		(1,352	)		—
Debt forgiveness on officer loan		580
Amortization of intangibles		11,375			6,670
Amortization of unearned compensation		1,327			582
Loss on sale of building		598			—
Non-cash interest expense, net		7,151			3,590
Change in deferred income taxes		3,818			(4,569	)
Changes in operating assets and liabilities		3,876			6,048
Net cash flows provided by operating activities	$	47,627		$	18,319
Investing Activities:
Purchases of property and equipment		(7,284	)		(3,228	)
Proceeds from sale of building		2,683			—
Proceeds from sale of investment		11,900			—
Other		—			(92	)
Net cash flows used in investing activities	$	7,299		$	(3,320	)
Financing Activities:
Payments on mortgages and other debt		(3,021	)		(1,433	)
Repayment of long-term debt		(60,710	)		—
Repayment of capital lease obligations		(28	)		(31	)
Other		—			(100	)
Net cash flows used in financing activities	$	(63,759	)	$	(1,564	)
Effect of exchange rates on cash		(1,463	)		(1,091	)
Increase (decrease) in cash and cash equivalents		(10,296	)		12,344
Cash and cash equivalents at beginning of the period		82,477			70,133
Cash and cash equivalents at end of the period	$	72,181		$	82,477
Change in operating asset and liability components:
Increase in trade accounts receivable	$	(8,160	)	$	(7,752	)
Decrease (increase) in inventories		(328	)		8,853
Decrease in other current assets		14,833			9,300
Increase in accounts payable		3,758			6,562
Decrease (increase) in accrued expenses, taxes and other		(6,227	)		(10,915	)
Changes in operating assets and liabilities	$	3,876		$	6,048
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	6,217		$	2,204
Income taxes, net	$	5,163		$	3,690

The accompanying notes are an integral part of the Consolidated Financial Statements.

7

ACTERNA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. FORMATION AND BACKGROUND

Acterna Inc. (the “Company” or “Acterna”) was incorporated in October 2003 and is a global communications equipment company focused on network technology solutions. The Company’s operations are conducted by wholly owned subsidiaries located principally in the United States of America and Europe with other operations, primarily sales offices, located in Asia, Canada and Latin America. The Company is managed in two business segments: communications test and digital color enhancement systems (“da Vinci Systems LLC”).

The communications test segment develops, manufacturers and markets instruments, systems, software and services used to test, deploy, manage and optimize communications networks, equipment and services. da Vinci Systems LLC provides digital color enhancement systems. da Vinci Systems LLC products are sold to post-production and video production professionals and producers of content for the standard-and high-definition television markets.

The Company operates on a fiscal year ended March 31 in the calendar years indicated (references to the “Period” are references to the period which began October 15, 2003 (“Inception”) and ended March 31, 2004).

B. REORGANIZATION AND EMERGENCE FROM CHAPTER 11

On May 6, 2003 (the “Filing Date”) Acterna Corporation (the “Predecessor Company”) and its seven United States subsidiaries and affiliates filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (“Chapter 11”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). The Predecessor Company’s non-U.S. subsidiaries were not included in the filing. By order dated September 25, 2003, the Bankruptcy Court confirmed the Predecessor Company’s Plan of Reorganization (the “POR”). On October 14, 2003 (the “Effective Date”), the Predecessor Company formally emerged from bankruptcy. In connection with the reorganization, the Predecessor Company extinguished approximately $770 million of indebtedness in exchange for 9,999,998 shares of Acterna Inc. common stock, $75 million of new term notes, warrants to purchase 526,315 shares of common stock, contingent payment rights of Acterna LLC, and newly issued common stock of the Predecessor Company, renamed Eningen Realty Inc. All of the Predecessor Company’s preexisting outstanding stock was cancelled; the Predecessor Company continues to exist independently as a real estate holding company.

The Predecessor Company’s senior secured indebtedness was restructured in connection with the POR under the current credit facility providing for a new U.S. term loan of approximately $75 million and a German term loan of approximately 83 million Euros (approximately $79 and $103 million as of March 31, 2005 and 2004, respectively).

As part of the POR, on the Effective Date, the following series of events occurred:

• Acterna Inc. was formed;

• Acterna LLC transferred certain assets to Acterna Business Trust in partial satisfaction of an intercompany note between them;

• Acterna Business Trust distributed the balance of the intercompany note to Acterna LLC;

• Acterna LLC distributed its ownership interest in Acterna Business Trust to the Predecessor Company;

• The Predecessor Company transferred to Acterna Inc. all of its ownership interests in Acterna LLC, which represented 100% of the ownership of Acterna LLC, and all of the other assets of the Predecessor Company other than its ownership interest in Acterna Business Trust and certain other designated assets (collectively “Retained Assets”);

• In consideration for the transfer, Acterna Inc. transferred to the Predecessor Company all of its common stock, new secured term notes, new warrants, and the contingent payment rights in da Vinci Systems LLC;

8

• The Predecessor Company distributed to holders of senior secured lender claims, all of the newly issued Acterna Inc. common stock, the new U.S. term loan, and the contingent payment rights, and newly issued common stock of the Predecessor Company, and to the holders of allowed subordinated notes claims, new warrants.

As part of emergence, the Company adopted fresh start accounting pursuant to the American Institute of Certified Public Accountants’ Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (“SOP 90-7”). For financial reporting purposes, the effects of the completion of the POR as well as adjustments for fresh start accounting have been recorded as of the Effective Date based on the Company’s determination of reorganization value on the Effective Date. The carrying values of the Company’s assets were adjusted to their fair value as of the Effective Date. As a result, the financial statements for periods following October 14, 2003 are not comparable with those prepared before that date.

The table below shows the Company’s consolidated balance sheet that reflects reorganization and fresh start accounting adjustments that were effective as of October 15, 2003. These adjustments, which have been restated as described in Note D., primarily include the following:

• Reclassification of $95 million German term note from liabilities subject to compromise to long-term debt.

• The extinguishment of $1 billion of vendor claims and other liabilities as part of Chapter 11 relief.

• The issuance of a new $75 million U.S. term note.

• The cancellation of all outstanding common stock and other equity interests and elimination of all components of stockholders’ equity, including paid-in-capital, accumulated deficit, unearned compensation and accumulated other comprehensive loss.

• The issuance of 9,999,998 shares of new Acterna Inc. common stock and new common stock of the Predecessor Company to the holders’ of the Predecessor Company’s Senior Secured Credit Facility in exchange for the cancellation of that debt.

• The issuance of warrants entitling the holders to purchase 526,315 shares of common stock. The warrants were issued to the holders of the Predecessor Company’s senior subordinated notes in exchange for the cancellation of that debt. The warrants expire in three years from the effective date of the POR. Each warrant entitles the holder to purchase one share of common stock at a price of $52.53 per share.

• The issuance of contingent payment rights.

• The $220 million adjustment to the carrying values of assets, including goodwill, based on estimates of their relative fair values, which were determined in consultation with external valuation specialists.

9

	Predecessor Company October 15, 2003			Debt Discharge		Fresh Start Adjustments			Exit Financing		Acterna Inc. October 15, 2003
						(Restated)					(Restated)
ASSETS
Current assets:
Cash and cash equivalents	$	70,183		$	—	$	(50	)	$	—	$	70,133
Restricted cash		2,400			—		—			—		2,400
Accounts receivable, net of allowance		55,725			—		—			—		55,725
Inventories, net:
Raw materials		13,350			—		—			—		13,350
Work in process		14,597			—		—			—		14,597
Finished goods		14,842			—		3,853			—		18,695
Total inventories		42,789			—		3,853			—		46,642
Deferred income taxes		1,238			—		—			—		1,238
Income tax receivable		790			—		8,852			—		9,642
Prepaid expenses		18,206			—		(2,818	)		—		15,388
Other current assets		8,254			—		1,453			—		9,707
Total current assets		199,585			—		11,290			—		210,875
Property, plant and equipment, net		70,829			—		(15,828	)		—		55,001
Other assets:
Investment		—			—		9,341			—		9,341
Goodwill, net		343			—		143,533			—		143,876
Intangible assets, net		93			—		87,047			—		87,140
Deferred taxes, long term		(118	)		—		766			—		648
Other non-current assets		26,352			—		(16,567	)		—		9,785
Total assets	$	297,084		$	—	$	219,582		$	—	$	516,666

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	Predecessor Company October 15, 2003			Debt Discharge			Fresh Start Adjustments			Exit Financing			Acterna Inc. October 15, 2003
							(Restated)						(Restated)
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Overdraft facilities	$	155		$	—		$	—		$	—		$	155
Current portion of long-term debt		5,333			—			—			—			5,333
Accounts payable		15,440			—			—			—			15,440
Deferred revenue		14,435			—			—			—			14,435
Accrued expenses:
Compensation and benefits		21,280			—			—			—			21,280
Warranty		7,494			—			—			—			7,494
Interest		1,083			—			—			—			1,083
Restructuring		10,612			(3,784	)		—			—			6,828
Other		22,461			7,367			(2,339	)		—			27,489
Taxes other than income taxes		5,725			—			—			—			5,725
Accrued income taxes		2,473			—			—			—			2,473
Total current liabilities		106,491			3,583			(2,339	)		—			107,735
Long-term debt		9,966			95,953			—			75,000			180,919
Deferred income taxes		3,941			—			692			—			4,633
Other long-term liabilities		75,123			—			(96	)		—			75,027
Liabilities subject to compromise		1,036,707			(1,036,707	)		—			—			—
Total Stockholders’ equity (deficit):
Common stock, Acterna Corporation, par value		1,953						(1,953	)					—
Common stock, Acterna Inc., par value		—			—			100			—			100
Contingent payment rights		—			—			25,000			—			25,000
Additional paid-in capital		767,484			937,239			(1,506,471	)		(75,000	)		123,252
Accumulated deficit		(1,669,117	)		—			1,669,117			—			—
Unearned compensation		(24,060	)		—			24,060			—			—
Accumulated other comprehensive loss		(11,404	)		(68	)		11,472			—			—
Total Stockholders’ equity (deficit)		(935,144	)		937,171			221,325			(75,000	)		148,352
Total Liabilities and Stockholders’ equity (deficit)	$	297,084		$	—		$	219,582		$	—		$	516,666

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C. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation. The Consolidated Financial Statements include the accounts of the Company and its wholly owned domestic and international subsidiaries.

Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Significant estimates in these financial statements include allowances for accounts receivable, net realizable value of inventories, carrying values of long-lived assets, pension assets and liabilities, tax valuation reserves and nonrecurring charges. Actual results could differ from those estimates.

Fair Value of Financial Instruments. The fair value of cash and cash equivalents, accounts receivable and accounts payable approximated book value as of March 31, 2005 and 2004. Other financial instruments include debt. (See Note J. Notes Payable and Debt)

Cash Equivalents. Cash equivalents represent highly liquid investment instruments with an original maturity of three months or less at the time of purchase.

Restricted Cash. Restricted cash includes $3.0 and $1.7 million in cash held as collateral for letters of credit as of March 31, 2005 and 2004, respectively.

Concentration of Credit Risk. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash investments and accounts receivable.

The Company maintains its cash accounts in various institutions worldwide and places its cash investments in prime quality certificates of deposit, commercial paper, or mutual funds. The Company’s counterparties to the investment agreements consist of various corporations and financial institutions of high credit standing. The Company does not believe there is significant risk of non-performance by these counterparties.

Credit risk related to its accounts receivable is limited due to the large number of customers and their dispersion across many business and geographic areas. However, a significant amount of trade receivables are with customers within the telecommunications industry, which is currently experiencing a significant downturn. The Company extends credit to its customers based upon an evaluation of the customer’s financial condition and credit history and generally does not require collateral. The Company has historically incurred insignificant credit losses.

Inventories. Inventory values are stated at the lower of cost or market. Cost is determined based on a currently-adjusted standard basis, which approximates actual cost on a first-in, first-out basis. The Company’s inventory includes raw materials, work in process, and finished goods. The Company periodically reviews its recorded inventory and estimates a reserve for obsolete or slow-moving items. The Company reserves the entire value of all obsolete items. The Company determines excess inventory based upon current and forecasted usage, and a reserve is provided for the excess inventory.

Property, Plant and Equipment. Property, plant and equipment is principally recorded at cost and depreciated on a straight-line basis over the estimated useful lives of the assets as follows:

Buildings	30 years
Leasehold improvements	Remaining life of lease
Machinery and equipment	3 to 10 years
Furniture and fixtures	3 to 5 years
Computer software/hardware	3 years
Tooling	3 years
Vehicles	3 years

When a fixed asset is disposed of, the cost of the asset and any related accumulated depreciation are written off and any gain or loss is recognized. Maintenance and repairs expenditures and assets with an individual value less than one thousand dollars are expensed when incurred.

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Property, Plant and Equipment consists of the following at March 31:

	2005			2004
Land	$	5,846		$	5,761
Buildings		18,163			16,841
Automobiles		50			81
Machinery and equipment		27,353			24,315
Furniture and fixtures		12,611			9,026
Leasehold improvements		5,084			4,637
Construction in progress		164			184
Total property, plant and equipment		69,271			60,845
Less accumulated depreciation		(19,079	)		(7,820	)
Net property, plant and equipment	$	50,192		$	53,025

Goodwill. Goodwill represents the excess of fair value of the Company over the fair value of specific tangible or identified intangible assets at emergence from Chapter 11. The Company assesses whether goodwill and trademarks are impaired on an annual basis, in accordance with the provisions of SFAS No. 142 “Goodwill and Other Intangible Assets”. Upon determining the existence of goodwill and/or trademark impairment, the Company measures that impairment based on the amount by which the book value of goodwill and/or trademarks exceeds its fair value. The implied fair value of goodwill is determined by deducting the fair value of a reporting unit’s identifiable assets and liabilities from the fair value of the reporting unit as a whole, as if that reporting unit had just been acquired and the purchase price were being initially allocated. Additional impairment assessments may be performed on an interim basis if the Company encounters events of changes in circumstances that would indicate that, more likely than not, the book value of goodwill and/or trademarks has been impaired. The Company performed its annual assessment during fiscal year 2005 and the period from Inception to March 31, 2004, and based on that assessment, no impairment adjustment was required.

Intangible Assets. Identified intangible assets were valued based on management’s assumptions and other considerations for estimating fair values. The significant assumptions relating to each category are discussed in Note H. Intangible Assets. These intangible assets are being amortized over their respective useful lives according to the estimated present value of the net earning potential of each asset category.

Long-Lived Assets. SFAS No. 144 “Accounting for the Impairment of Long-Lived Assets,” establishes accounting standards for the impairment of long-lived assets. The Company periodically evaluates the recoverability of long-lived assets, whenever events and changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Impairment is measured by the amount fair values are less than book value. Fair values are based on quoted market prices and assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk. If the Company determines that any of the impairment indicators exist, and these assets are determined to be impaired, an adjustment to write down the long-lived assets would be charged to income in the period such determination is made. In December 2004, the Company accepted an offer from a third party to sell its facility in Plymouth, U.K. The offer was below the carrying value of the asset, therefore the Company recorded a loss on sale of building charge of $0.6 million in the third quarter of fiscal year 2005.

Other Comprehensive Income (Loss). SFAS No. 130 “Reporting Comprehensive Income,” requires a full set of general-purpose financial statements to include the reporting of “comprehensive income”. Other comprehensive income (loss) consists of foreign currency translation adjustments and adjustments for minimum pension liabilities. The functional currency for the majority of the Company’s foreign operations is the applicable local currency. The translation from the local foreign currencies to U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. The unrealized gains or losses resulting from such translation are included in stockholders’ equity. The realized gains or losses resulting from foreign currency transactions are included in other income. During the year ended March 31, 2005 and the period of Inception to March 31, 2004 the Company recorded transaction losses of $0.7 million and $1.1 million, respectively.

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Stock-Based Compensation. The Company accounts for stock-based awards to its employees using the intrinsic value-based method as prescribed in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB 25”) and related interpretations.

Had compensation cost for the Company’s stock-based compensation plans been recorded based on the fair value of awards or grant date consistent with the method prescribed by SFAS No. 123, “Accounting for Stock-Based Compensation,” (“SFAS No.123”) the Company’s net income (loss) and income (loss) per share would approximate the pro forma amounts indicated below:

	March 31, 2005			March 31, 2004
				(Restated)
	(Amounts in thousands except per share information)
Net income (loss), as reported	$	6,620		$	(2,092	)
Add: Stock-based employee compensation expense included in reported net income (loss), net of related tax effects		1,327			582
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards net of tax related effects		(3,151	)		(1,185	)
Pro forma net income (loss)	$	4,796		$	(2,695	)
Income (loss) per share:
Basic - as reported	$	0.66		$	(0.21	)
Basic - pro forma	$	0.48		$	(0.27	)
Diluted - as reported	$	0.64		$	(0.21	)
Diluted - pro forma	$	0.46		$	(0.27	)

The fair market value of each option granted during the year ended March 31, 2005 and the Period ended March 31, 2004 is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	2005			2004
Expected volatility		100	%		80	%
Risk-free rate of return		3.37	%		2.65	%
Expected life (in years)		5 years			5 years
Weighted average fair value	$	15.01		$	12.34
Dividend yield		0	%		0	%

During the year ended March 31, 2005 and the Period of Inception to March 31, 2004, the Company granted stock options to members of the board of directors and key employees. In March 2004, stock options were granted to key employees with an exercise price of $9.34 which was below the estimated fair market value of the common stock at the date of the grant. As a result, the Company recorded unearned compensation which is being amortized to expense over the three year vesting period of the options. No unearned compensation was recorded for the options granted during 2005, as all options granted to employees during the year had an exercise price equal to the market value of the underlying common stock on the date of grant. The Company recorded $1.3 and $0.6 million of expense related to unearned compensation in the year ended March 31, 2005 and the period of Inception to March 31, 2004, respectively.

Revenue Recognition. The Company’s revenues are primarily derived from product sales. The Company recognizes revenue when it is earned. The Company considers revenue earned when it has persuasive evidence of an arrangement, the product has been shipped or the services have been provided to the customer; title and risk of loss have passed to the customer, the sales price is fixed or determinable, and collectibility is reasonably assured.

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Revenue from product sales is generally recognized at the time the products are shipped to the customer. In certain cases where the Company has not transferred the risks and rewards of ownership, revenue recognition is deferred. Upon shipment, the Company also provides for estimated costs that may be incurred for product warranties and sales returns. Service and maintenance revenues are deferred and recognized over the contract period, as services are rendered, or over the period of the maintenance agreement.

Revenue on multi-element arrangements is recognized among each of the deliverables based on the relative fair value. The relative fair value is determined based on objective evidence that is specific to each vendor. If such evidence of fair value for any undelivered element of the arrangement does not exist, all revenue from the arrangement is deferred until such time that evidence of fair value does exist or until all elements of the arrangement are delivered, subject to certain limited exceptions.

Product Development Expense. Costs relating to research and development are expensed as incurred. These costs include salary, benefits, contractor costs, allocation of facilities and other operating costs.

Computer Software Costs. The Company amortizes the license costs of internal use software associated with advanced license fees over the lesser of the estimated life of the software or the term of the license. The expense is reported in the Consolidated Statements of Operations based on the underlying use of the software.

Warranty Costs. The Company generally warrants its products for 90 days to three years after delivery. A provision for estimated warranty costs, based on expected return rates and repair costs, is recorded at the time revenue is recognized. (See Note I. Warranty).

Income Taxes. The provision for income taxes is based on the consolidated United States entities and the individual foreign companies’ estimated tax rates for the applicable period. Deferred taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between the financial accounting and tax basis of assets and liabilities under the applicable tax laws. Deferred income tax provisions and benefits are based on the changes in deferred tax asset or liability from period to period. These assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect at the time the differences are expected to reverse. The Company’s deferred tax assets are evaluated as to whether it is more likely than not they will be recovered from future income. To the extent that the Company believes that recovery is not likely, a valuation allowance is recognized against deferred tax assets. (See Note L. Income Taxes.)

New Pronouncements. In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151 (“SFAS 151”), “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” This statement amends the guidance in ARB No. 43 Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that “. .. .under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal to require treatment as a current period charges . . . “ This statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this statement will be effective for inventory costs during the fiscal years beginning after June 15, 2005. The Company does not believe that the adoption of this statement will have a material impact on its financial condition or results of operations.

In December 2004, the FASB issued SFAS 123R, “Share-Based Payment,” a revision of SFAS 123, “Accounting for Stock-based Compensation.” SFAS 123R requires public companies to recognize expense associated with share-based compensation arrangements, including employee stock options, using a fair value-based option pricing model, and eliminates the alternative to use Opinion 25’s intrinsic value method of accounting for share-based payments. The standard allows three alternative transition methods for public companies: modified prospective application without restatement of prior interim periods in the year of adoption; modified prospective application with restatement of prior interim periods in the year of adoption; and retroactive application with restatement of prior financial statements to include the same amounts that were previously included in pro forma disclosures. SFAS 123R is effective for nonpublic entities the first reporting period that begins after December 15, 2005. The Company is still evaluating the impact of the statement and has not determined which transition method it will adopt.

In December 2004, the FASB issued SFAS 153, “Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29,” “Accounting for Nonmonetary Transactions.” SFAS 153 is based on the principle that exchange of nonmonetary assets should be measured based on the fair market value of the assets exchanged. SFAS 153 eliminates the exception of nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS 153 is effective for nonmonetary asset exchanges in fiscal periods beginning after June 15,

15

2005. The Company is currently evaluating the provisions of SFAS 153 and does not believe that its adoption will have a material impact on financial condition, results of operations and liquidity.

D. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

During fiscal year 2005, the Company determined that it omitted certain items from the determination of the reorganization value on the Effective Date. The Company identified assets that existed at the time of reorganization that were not included in determining the opening equity or goodwill balances at Inception. Therefore, the Company restated its balance sheets as of October 15, 2003 and March 31, 2004, respectively, and the statement of operations and stockholders’ equity for the Period ended March 31, 2004 to correct the errors in fresh start accounting.

The Company recorded adjustments to the opening value of certain assets, equity and goodwill. The adjustments related to the amount of cash the Company retained at emergence in excess of the amount previously assumed in the determination of reorganization value, the value assigned to the net assets of da Vinci Systems LLC and certain assets not considered in the determination of reorganization value. There was no impact on net income for any period related to these adjustments.

In addition to the adjustments to the reorganization value, the Company adjusted the initial fair market value allocated to property, plant and equipment. The adjustment was made as a result of a full physical inventory of assets in the U.S. conducted in September 2004. The analysis indicated that the value of the property, plant and equipment as of October 15, 2003 should be increased $12.5 million and Goodwill decreased by a corresponding amount in fresh start accounting as of the Effective Date. The step-up in value related to property, plant and equipment resulted in additional depreciation expense of $4.1 million and $1.9 million in the year ended March 31, 2005 and the period from October 15, 2003 to March 31, 2004, respectively.

In addition the Company determined that it did not properly account for the pension obligation in the period October 15, 2003 to March 31, 2004. As a result, the Company corrected the error by recording $0.4 million in expense and a corresponding adjustment to the minimum pension liability in equity as of March 31, 2004.

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As a result of the adjustments to reorganization value and the resulting allocation of goodwill to individual legal entities in the Company, the Company recalculated the deferred tax accounts as of October 15, 2003 and March 31, 2004 and the provision for income taxes for the period from Inception to March 31, 2004. Those changes are noted in the table below.

The following is a summary of the effects of the restatement on the Company’s consolidated balance sheets as of October 15, 2003 and March 31, 2004, consolidated statement of operations for the Period of Inception to March 31, 2004 and consolidated statement of cash flows for the Period ended March 31, 2004.

Consolidated Balance Sheet

(in thousands)

	As Previously Reported			Change			As Restated
As of October 15, 2003 (Inception)
Income tax receivable	$	790		$	8,852		$	9,642
Property, plant and equipment, net		42,501			12,500			55,001
Goodwill, net		114,117			29,759			143,876
Deferred taxes, long term		(118	)		766			648
Total assets		464,789			51,877			516,666
Accrued other		27,828			(339	)		27,489
Deferred income tax liability		3,941			692			4,633
Additional paid-in capital		71,728			51,524			123,252
Total stockholders’ equity		96,828			51,524			148,352
As of March 31, 2004
Deferred income taxes, short term	$	2,312		$	(1,302	)	$	1,010
Income tax receivable		1,391			12,363			13,754
Property, plant and equipment, net		42,434			10,591			53,025
Goodwill, net		114,117			30,301			144,418
Deferred income taxes, long term		6,012			9,933			15,945
Total assets		472,851			61,886			534,737
Accrued other		25,380			(276	)		25,104
Accrued income taxes		3,479			5,333			8,812
Deferred income tax liability		3,880			6,702			10,582
Deferred compensation		79,750			99			79,849
Additional paid-in capital		75,538			51,524			127,062
Accumulated earnings (deficit)		170			(2,262	)		(2,092	)
Accumulated other comprehensive loss		(9,451	)		766			(8,685	)
Total stockholders’ equity		88,129			50,028			138,157

Consolidated Statement of Operations

(in thousands)

	As Previously Reported			Change			As Restated
For the Period of Inception to March 31, 2004
Cost of sales	$	100,344		$	371		$	100,715
Gross profit		113,478			(371	)		113,107
Selling, general and administrative expense		68,980			1,225			70,205
Product development expense		22,431			707			23,138
Total operating expenses		103,406			1,932			105,338
Operating income		10,072			(2,303	)		7,769
Other income (expense), net		(1,352	)		(3	)		(1,355	)
Income before income taxes		2,425			(2,306	)		119
Provision for income taxes		2,255			(44	)		2,211
Net income (loss)		170			(2,262	)		(2,092	)
Net income (loss) per common share, basic and diluted		0.02			(0.23	)		(0.21	)

Consolidated Statement of Cash Flows

(in thousands)

	As Previously Reported			Change			As Restated
For the Period of Inception to March 31, 2004
Net income (loss)	$	170		$	(2,262	)	$	(2,092	)
Depreciation		5,911			1,910			7,821
Change in deferred income taxes		(2,826	)		(1,743	)		(4,569	)
Change in operating assets and liabilities		3,953			2,095			6,048
Decrease (increase) in accrued expenses, taxes and other		(13,010	)		2,095			(10,915	)

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E. SUBSEQUENT EVENT

The Company entered into an Agreement and Plan of Merger, dated as of May 23, 2005, as amended, pursuant to which a wholly owned subsidiary of JDS Uniphase Corporation (“JDSU”) will merge with and into the Company (the “Merger”). Upon the closing of the Merger (the “Closing”), JDSU will deliver to the stockholders and option holders of the Company cash and common stock of JDSU. Based on JDSU’s closing stock price on May 23, 2005, at the Closing JDSU will deliver to the Company’s stockholders and option holders that number of shares of JDSU common stock (the “Stock Consideration”) having an aggregate value of $310 million and $450 million in cash, subject to certain adjustments (the “Cash Consideration”). As more fully described in the Merger Agreement, if the five-day trading average of JDSU’s common stock ending on the second trading day prior to the Closing (the “JDSU Closing Price”) is higher than $1.672, the aggregate value of the Stock Consideration will be higher than $310 million, and if the JDSU Closing Price is less than $1.236, such aggregate value will be lower than $310 million. All shares of common stock of the Company and all options to purchase common stock of the Company will be cancelled at the Closing. At the Closing, JDSU will transfer approximately $51.1 million of the Cash Consideration to a representative of the stockholders to (i) administer the post-closing cash adjustment to the purchase price, if any, (ii) administer the indemnity obligations, if any, of the stockholders to JDSU and (iii) pay the representative’s expenses. In addition, JDSU will deposit approximately $3.9 million in a separate account from which JDSU will pay additional compensation to each option holder in the same amount for each share of common stock which was issuable upon exercise of the option immediately prior to the effective time as the representative distributes with respect to each share of common stock.

The Merger is subject to customary closing conditions and regulatory approvals. Closing of the Merger is expected to occur in the third calendar quarter of 2005. The debt of the Company is expected to be paid in full as a part of the Closing process.

F. RESTRUCTURING AND REORGANIZATION

The Company continues to implement cost reduction programs aimed at aligning its ongoing operating costs with its expected revenues.

For the year ended March 31, 2005, the Company recorded $1.8 million of restructuring charges primarily related to professional fees associated with the settlement and administration of claims resulting from the Chapter 11 filing.

For the period of Inception to March 31, 2004, the Company implemented restructuring plans and recorded $5.3 million of restructuring charges related to continued efforts to align costs with the reduced level of revenues in the Company’s communication test segment and professional fees associated with the Chapter 11 filing.

During the year ended March 31, 2005 and the period of Inception to March 31, 2004, the Company paid approximately $3.7 and $9.6 million in severance, facilities and other related costs, respectively. At March 31, 2005, approximately $0.7 million was left to be paid for the restructuring programs, of which all is in the Company’s communications test segment. The Company anticipates that this balance will be paid primarily during the first half of fiscal 2006.

A summary of restructuring actions taken during the year ended March 31, 2005 and the period of Inception to March 31, 2004 are outlined as follows:

	(Amounts in thousands)
	Balance October 15, 2003		Expense		Paid			Balance March 31, 2004		Expense			Paid			Balance March 31, 2005
Workforce-related	$	4,916	$	3,267	$	(6,958	)	$	1,225	$	388		$	(1,003	)	$	610
Facilities		1,770		466		(1,164	)		1,072		(1	)		(1,061	)		10
Other		142		1,592		(1,455	)		279		1,387			(1,610	)		56
Total	$	6,828	$	5,325	$	(9,577	)	$	2,576	$	1,774		$	(3,674	)	$	676

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G. INVESTMENT

The Company owned 6,300 shares of Class A Cumulative Redeemable Preferred Stock in CMSI Holdings Corp (“CMSI Stock”). The carrying value of the shares and accrued dividends at March 31, 2005 and 2004 was $0.0 and $9.3 million, respectively, and the shares were subject to mandatory redemption provisions at March 31, 2004.

On April 13, 2004, the Company redeemed 6,300 shares and accrued dividends of CMSI Stock in exchange for cash of $4.0 million and a promissory note for $7.9 million. Payments on the promissory note were due in two installments on October 31, 2004 and April 30, 2005. The interest rate on the promissory note was twelve percent (12%) per annum, compounded every six (6) months, and the interest was due on the final installment. However at Inception, due to concerns over CMSI’s ability to pay, the Company concluded that a provision was required which resulted in the investment being recorded at $9.3 million at Inception.

The Company received the $4.0 million October installment in full on October 29, 2004, and $2.5 million of the April installment on December 31, 2004 and the balance plus accrued interest ($2.0 million) on March 16, 2005. On receipt of the final installment the Company recorded a gain of $1.4 million, included in other income.

H. INTANGIBLE ASSETS

The intangible assets as of March 31, 2005 are as follows:

Amortized intangible assets:

	Communication Test		da Vinci		Total Company		Weighted Average Life
	(amounts in thousands)						(in years)
Gross carrying amount
Core technology	$	38,150	$	1,790	$	39,940	7
Trademark/Names		3,880		1,010		4,890	12
Customer base		34,110		1,540		35,650	22
Favorable contract		1,300		—		1,300	1
Order backlog		5,210		150		5,360	1
Total	$	82,650	$	4,490	$	87,140
Accumulated amortization
Core technology	$	7,948	$	373	$	8,321
Trademark/Names		566		73		639
Customer base		2,261		112		2,373
Favorable contract		1,300		—		1,300
Order backlog		5,210		150		5,360
Total	$	17,285	$	708	$	17,993
Net intangible assets	$	65,365	$	3,782	$	69,147
Aggregate amortization expense:
For the period of Inception to March 31, 2005		17,285		708		17,993
Estimated amortization expense:
For the year ended March 31, 2006		7,388		383		7,771
For the year ended March 31, 2007		7,388		383		7,771
For the year ended March 31, 2008		7,388		383		7,771
For the year ended March 31, 2009		7,388		383		7,771
For the year ended March 31, 2010		7,388		383		7,771
Thereafter		28,425		1,867		30,292
	$	65,365	$	3,782	$	69,147

Core technology. The value of this asset was determined at Inception by using the income approach, or specifically, the relief-from-royalty method. The fair value of the technology is represented by the present value of the stream of future estimated after-tax royalty payments, based on an average royalty rate of four percent (4.0%); discounted at an appropriate risk-adjusted rate of return of eighteen percent (18.0%). This method was applied to all existing technologies which had reached technological feasibility, after considering risks relating to: (i) the characteristics and applications of the technology, (ii) existing and future

19

markets, and (iii) life cycles of the technology. Estimates of future revenues and expenses used to determine the value of developed technology was consistent with the historical trends in the industry and expected outlooks, and was based on management’s projected revenues over a period of seven (7) years, ending March 31, 2011.

Trademark/Names. The value of trademarks was determined at Inception. The relief-from-royalty method was also used to determine the value of the trademark/names. For this valuation, an estimated royalty rate of one-quarter percent (0.25%) and a discount rate of eighteen (18.0%) was used. Management’s projected revenues for a twelve (12) year period were utilized in determining the value of the trademark/names.

Customer base and favorable contract. The values of the customer base and favorable contract were determined at Inception by discounting net cash flows attributable to current customer relationships and a current contract with a customer adjusted to take into account expected attrition. The value of the customer base was determined using estimated consolidated revenue growth for the Company and a customer attrition rate of approximately four percent (4.0%) for significant customer relationships and a customer attrition rate of twenty percent (20%) for other customer relationships. The value of the favorable contract was determined by using the discounted net cash flow method and applying specific terms of the contract.

Order backlog. The value of the order backlog was determined at Inception by discounting the expected future cash flows, adjusted to reflect the probability that some five percent (5.0%) revenue will not be realized. Since other tangible and intangible assets contribute to the value of order backlog, future cash flows were adjusted to allow a fair return on these assets.

I. WARRANTY

The Company accrues for warranty costs at the time of shipment, based on estimates of expected rework rates and warranty costs to be incurred. While the Company engages in product quality programs and processes, the Company’s warranty obligation is affected by product failure rates, material usage and service delivery costs. Should actual product failure rates, material usage or service delivery costs differ from the Company’s estimates, the amount of actual warranty costs could differ from the Company’s estimates. The Company’s warranty period ranges from 90 days to three years.

The following table summarizes the warranty expenses and settlements incurred during the year ended March 31, 2005 and the period of Inception to March 31, 2004 (in thousands):

	Beginning Balance		Provision for New Warranties		Settlements Made to Warranty Obligations		Other Adjustments			Exchange Rate Effect		Ending Balance
	(amounts in thousands)
For the Period of Inception to March 31, 2004	$	7,494	$	1,194	($1,637	)	$	37		$	110	$	7,198
For the Year Ended March 31, 2005	$	7,198	$	2,162	($3,032	)	($	518	)	$	71	$	5,881

J. NOTES PAYABLE AND DEBT

Notes payable and term debt consists of the following:

	March 31,
	2005		2004
	(amounts in thousands)
Senior secured credit facility	$	133,774	$	181,234
Mortgages and other debt		10,146		12,546
Overdraft facilities		75		32
Total debt		143,995		193,812
Less current portion		2,931		2,806
Long-term debt	$	141,064	$	191,006

20

The book value of the debt under the Senior Secured Credit Facility approximates fair market value at March 31, 2005 and 2004.

The following table lists the future payments for debt obligations: (in thousands)

Debt obligations:	Fiscal 2006		Fiscal 2007		Fiscal 2008		Fiscal 2009		Fiscal 2010		Thereafter		Total
Senior secured credit facility		—		—		—	$	133,774		—		—	$	133,774
Overdraft facilities		75		—		—		—		—		—		75
Mortgages and other debt		2,856		2,289		1,874		1,071		631		1,425		10,146
Total	$	2,931	$	2,289	$	1,874	$	134,845	$	631	$	1,425	$	143,995

Senior Secured Credit Facility

In connection with the Company’s emergence from Chapter 11 in October 2003, the Company entered into a new senior secured credit facility (the “Senior Secured Credit Facility”) which includes a $75 million term note (the “US Term Note”) and a 83.5 million EUR term note (the “German Term Note”). As of March 31, 2005 and 2004, the Company had $133.8 and $181.2 million of indebtedness outstanding under the Senior Secured Credit Facility, respectively.

The obligations under the Senior Secured Credit Facility are collateralized by a pledge of substantially all of the assets of the Company’s U.S. operations and a pledge of sixty-five percent (65%) of the stock of certain of the Company’s foreign subsidiaries.

The US Term Note under the Senior Secured Credit Facility bears interest at a rate of twelve percent (12%) per annum. Two percent (2%) is payable in cash on a monthly basis and ten percent (10%) is paid-in-kind and added to the principal value of the US Term Note if it is not paid in cash on a monthly basis. The German Term Note under the Senior Secured Credit Facility bears interest at a base rate equal to the one, two, or three month Euribor plus a two percent (2%) margin. As of March 31, 2005 and 2004 the interest rate was 4.30% and 4.09%, respectively. Interest on the German Term Note is payable on a quarterly basis.

The annual weighted-average interest rate on the loans under the Company’s Senior Secured Credit Facility was 7.46% and 7.48% during the year ended March 31, 2005 and the period from Inception to March 31, 2004, respectively.

Covenant Restrictions

The Senior Secured Credit Facility imposes restrictions on the ability of the Company to make capital expenditures and requires the Company to achieve certain leverage ratios, interest coverage ratios, and earnings. These financial condition covenant restrictions are stated below. Consolidated leverage is defined as the ratio on the last day of the period of the Company’s total debt to EBITDA for the period. Consolidated interest coverage is defined as the ratio of the Company’s EBITDA less the aggregate amount actually paid by the Company for capital expenditures to consolidated interest expense for the period.

The Company must achieve a consolidated leverage ratio of 11.7:1; 10.7:1; 9.7:1 and 8.9:1 for the four consecutive quarters ending June 30, 2005, September 30, 2005, December 31, 2005 and March 31, 2006, respectively, and decreasing thereafter to 4.6:1 as of March 31, 2009. The Company must achieve a consolidated interest coverage ratio of 1.0, 1.0, 1.0, and 1.2 for the four consecutive quarters ending June 30, 2005, September 30, 2005, December 31, 2005 and March 31, 2006, respectively, and increasing thereafter to 3.1 as of March 31, 2009. The Company must achieve minimum consolidated EBITDA as adjusted in accordance with the Senior Secured Credit Facility (see Note Q. Segment Information and Geographic Areas for detail of adjusted EBITDA calculation) of $17,000,000; $18,700,000; $20,900,000 and $22,900,000 for the four consecutive quarters ending June 30, 2005, September 30, 2005, December 31, 2005 and March 31, 2006, respectively, and increasing thereafter to $50,000,000 as of March 31, 2009. Capital expenditures are limited to $5,200,000 in the period April 1 to June 30, 2005; $9,800,000 in the period April 1 to September 30, 2005; $11,800,000 in the period April 1 to December 31, 2005 and $13,100,000 in the period April 1, 2005 to March 31, 2006.

21

In addition, the covenants contained in the Senior Secured Credit Facility restrict the Company’s ability to incur additional indebtedness, create liens, dispose of property, pay dividends, make equity or debt investments, make acquisitions, change the business conducted by the Company and its subsidiaries taken as a whole or engage in certain transactions with affiliates. In addition, the term loans under the Senior Secured Credit Facility are governed by affirmative covenants which, among other things, require the Company to provide regular monthly, quarterly and annual financial statements and provide a certification of the financial statements by an officer of the Company.

As of March 31, 2005 and 2004, the Company was in compliance with all covenants under the Senior Secured Credit Facility.

Mortgages and Other Debt

Certain of the Company’s foreign subsidiaries have entered into mortgage loan agreements for the purchase of real property. The terms of the mortgage loan agreements included a periodic, fixed payment over a number of years. The real property is collateral for the mortgage loan agreement. The average interest rate on these loan agreements as of March 31, 2005 and 2004 was approximately 4.02% and 4.04%, respectively.

Overdraft Facilities

Certain of the Company’s foreign subsidiaries have agreements with banks that provide for short-term revolving advances and overdraft facilities (the “Overdraft Facilities”) in an aggregate total amount of approximately $1.3 million as of March 31, 2005 and 2004, respectively. Certain of these bank agreements also provide for long-term borrowings and are generally secured by the assets of the local subsidiary and guaranteed by the Company. Most of these agreements do not have stated maturity dates, but are cancelable by the banks at any time and, accordingly, are classified as short-term liabilities.

Revolving borrowings under these Overdraft Facilities vary significantly by country. The interest on the Overdraft Facilities is based on the published Euribor rate plus a margin.

K. STOCKHOLDER’S EQUITY

The stockholders’ equity of the Company is comprised of the following:

• 9,999,998 shares of common stock, par value $0.01, issued and outstanding.

• 526,315 warrants to purchase common stock at a price of $52.53 per share.

• Contingent payment rights to the holders of senior lender claims entitling the holders to a pro rata share of eighty-eight percent (88%) of the net cash proceeds from the sale of all or substantially all of the stock or assets of da Vinci Systems LLC and its subsidiaries. The contingent payment rights are unsecured and evidenced by certificates. The remaining twelve percent (12%) of the net cash proceeds from the sale of all or substantially all of the stock or assets of da Vinci Systems LLC and its subsidiaries is retained by the Company in the event of a sale. These contingent payment rights have been recorded at their estimated fair market value of $25 million in fresh start accounting.

Basic earnings per share is computed on the basis of the weighted average number of common shares outstanding. Diluted earnings per share is computed on the basis of the weighted average number of common shares outstanding plus the effect of outstanding stock options using the “treasury stock” method. Potential common shares are not included in the computation of diluted earnings per share if they are antidilutive. The Company incurred a net loss in the Period ended March 31, 2004 and accordingly, did not assume exercise of any of the Company’s outstanding options because to do so would be antidilutive.

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The components of basic and diluted earnings per share were as follows:

	For the Year Ended March 31, 2005		For the Period of Inception to March 31, 2004
Net income (loss)	$	6,620,917	$	(2,092,701	)
Weighted average common shares outstanding		9,999,998		9,999,998
Assumed exercise of stock options		354,351		—
Adjusted weighted average shares - diluted		10,354,349		9,999,998
Basic earnings per share	$	0.66	$	(0.21	)
Diluted earnings per share	$	0.64	$	(0.21	)

The securityholders’ agreement and the credit agreement require that, at any time prior to a decoupling event, any (i) transfer of common stock of Acterna Inc. be accompanied by a ratable share of the loans beneficially owned by the transferor at the time of the transfer and (ii) any transfer of loans under one facility be accompanied by a ratable transfer of loans under the other facility (if any) and by a transfer of a ratable share of common stock of the Company.

A decoupling event means the earliest to occur of the date on which (i) the consolidated EBITDA of Acterna LLC is at least $30 million as at the last day of each of two consecutive quarters of four consecutive fiscal quarters of Acterna LLC, (ii) the consolidated leverage ratio of Acterna LLC is less than 5.00 to 1.00 as at the last day of each of two consecutive periods of four consecutive fiscal quarters of Acterna LLC, (iii) an effective registration statement is filed under the Securities Act of 1993 with respect to the common stock of the Company or (iv) October 14, 2006.

Effective with the quarter ended December 31, 2004 the Company achieved consolidated EBITDA of at least $30 million as of the last day of each of two consecutive quarters of four consecutive fiscal quarters of the Company. As a result, the Company’s common shares, debt and contingent payment rights have traded independently from that date forward.

L. INCOME TAXES

The components of income before income taxes are as follows:

	For the Year Ended March 31, 2005			For the period from Inception to March 31, 2004
	(amounts in thousands)
US Federal & State	$	(3,978	)	$	1,536
Foreign		16,119			(1,417	)
Total	$	12,141		$	119

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The components of the provision for income taxes are as follows:

	For the Year Ended March 31, 2005			For the period from Inception to March 31, 2004
	(amounts in thousands)
US Federal & State	$	(55	)	$	599
Foreign		5,576			1,612
Total	$	5,521		$	2,211

The components of the income tax provision (benefit) are as follows:

	For the Year Ended March 31, 2005			For the period from Inception to March 31, 2004
	(amounts in thousands)
Current:
Federal	$	(4,925	)	$	4,697
Foreign		7,282			1,423
State		(654	)		660
Total current	$	1,703		$	6,780
Deferred:
Federal	$	4,848		$	(4,172	)
Foreign		(1,706	)		189
State		676			(586	)
Total deferred	$	3,818		$	(4,569	)
Total	$	5,521		$	2,211

Reconciliation between US federal statutory rate and the effective tax rate is as follows:

	For the Year Ended March 31, 2005		For the period from Inception to March 31, 2004
US federal statutory income tax (benefit) rate	35.00	%	35.00	%
Increases (reductions) to statutory tax rate resulting from:
Foreign taxes, net	5.68	%	1765.83	%
State income taxes, net of federal income tax benefit			40.52	%
Other permanent differences	2.57	%	11.05	%
Others	2.22	%
Effective income tax (benefit) rate before extraordinary items	45.47	%	1852.40	%

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The principal components of the deferred tax assets and liabilities are as follows:

	March 31,
	2005			2004
	(amounts in thousands)
Deferred tax assets:
Net operating loss and credit carryforwards	$	78,822		$	84,505
Accrued interest related to long-term debt					1,365
Foreign accrued liabilities and reserves		1,638			2,272
Compensation accruals		1,585			2,872
Plant and equipment		238			629
Accrued insurance		699			2,063
Intercompany trademarks and royalties					984
Warranty reserves		1,492			2,243
Deferred revenue		402
Inventory reserves		509
Other accruals and reserves		1,468			1,618
Gross deferred tax asset		86,853			98,551
Valuation allowance		(80,721	)		(86,780	)
Net deferred tax asset		6,132			11,771
Deferred tax liabilities:
Goodwill and intangible asset amortization		(4,270	)		(6,717	)
State income taxes		(138	)		(176	)
Other accrued liabilities		(664	)
Gross deferred tax liability		(5,072	)		(6,893	)
Net deferred tax asset (liability)	$	1,060		$	4,878

The Company had a valuation allowance of approximately $80.7 and $86.8 million as of March 31, 2005 and 2004, respectively, to reduce deferred income tax assets to the amount that is more likely than not to be realized in future periods. In evaluating the Company’s ability to recover its deferred income tax assets the Company considers all available positive and negative evidence, including its operating results, ongoing prudent and feasible tax planning strategies and forecasts of future taxable income on a jurisdiction by jurisdiction basis. At March 31, 2005, of the amount for which a valuation allowance has been provided approximately $62.9 million relates to foreign net operating losses acquired in business combination and will adjust goodwill when realized. Approximately $15.9 million of the valuation allowance relates to foreign net operating losses that will reduce the provision for income taxes if and when utilized.

During the year ended March 31, 2005, the Company closed several federal and state tax examinations for periods ended March 31, 1996 through March 31, 2002, which resulted in a net federal refund of $5.1 million, including interest, and a net state refund of $3.8 million, including interest. The federal tax refunds were received in February 2005 and the state tax refunds were received in March 2005. The Company expects to receive an additional $1.5 million related to settlement of the aforementioned federal examination in its second quarter of fiscal year 2006.

The Company has not provided for U.S. federal income and foreign withholding taxes on $14.0 million of non-U.S. subsidiaries’ undistributed earnings as of March 31, 2005, because such earnings are intended to be indefinitely reinvested in the operations outside of the United States. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. income taxes (subject to an adjustment for foreign tax credits). It is not practicable to determine the income tax liability that might be incurred if these earnings were to be distributed.

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M. EMPLOYEE RETIREMENT PLANS

Defined Contribution Plan

The Company sponsors the Acterna Inc. 401(k) Savings Plan (“the Plan”), a Defined Contribution Plan under ERISA, which provides retirement benefits for its eligible employees through tax deferred salary deductions. The Plan allows employees to contribute up to 18% of their annual compensation, with such contributions limited to $14,000 in calendar year 2005 as set by the Internal Revenue Service. The Company reinstated the employer matching contributions during the year ended March 31, 2005 and expensed $0.8 million during the fiscal year. The Plan provided for a 50% match of employees’ contributions up to the first 6% of annual compensation. The Company made no voluntary contributions to the Plan during the Period of Inception to March 31, 2004.

Defined Benefit Plans

The Company sponsors several qualified and non-qualified pension plans for its employees. For those employees participating in defined benefit plans, benefits are generally based upon years of service and compensation or stated amounts for each year of service. Pension plans consist primarily of managed funds that have underlying investments in stocks and bonds. The Company’s policy for funded plans is to make contributions equal to or greater than the requirements prescribed by law in each country.

The following table provides a reconciliation of the changes in the plans’ benefits obligations:

	For the Year Ended March 31, 2005			For the period from Inception to March 31, 2004
				(Restated)
	(amounts in thousands)
Obligation at beginning of the period	$	95,811		$	89,011
Service cost		62			42
Interest cost		5,244			2,385
Actuarial (gain)/loss		5,540			1,533
Benefits paid		(4,511	)		(2,264	)
Foreign currency exchange rate changes		5,215			5,104
Obligation at end of the period	$	107,361		$	95,811

The following table provides a reconciliation of the changes in the fair value of pension plan assets:

	For the Year Ended March 31, 2005			For the period from Inception to March 31, 2004
	(amounts in thousands)
Fair value of plan assets at beginning of the period	$	15,962		$	13,858
Actual return on plan assets		1,523			728
Employer contributions		1,864			756
Benefits paid		(645	)		(241	)
Foreign currency exchange rate changes		1,032			861
Fair value of plan assets at end of the period	$	19,736		$	15,962

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The following table represents a statement of the funded status:

	For the Year Ended March 31, 2005			For the period from Inception to March 31, 2004
	(amounts in thousands)
Accrued pension costs	$	87,522		$	79,710
Unrecognized (gain)/loss, net		(16,994	)		1,368
Accumulated other comprehensive income (deficit)		16,994			(1,328	)
Deficit	$	87,522		$	79,750

The following table provides the components of the net periodic cost for the plans:

	For the Year Ended March 31, 2005			For the period from Inception to March 31, 2004
				(Restated)
	(amounts in thousands)
Service cost	$	17		$	42
Actuarial loss		429			—
Interest cost		4,932			2,385
Expected return of plan assets, net of gain/loss amortization		(634	)		—
Net periodic pension cost	$	4,744		$	2,427

The following table provides the weighted average actuarial assumptions for the Company’s plans:

	For the Year Ended March 31, 2005		For the period from Inception to March 31, 2004
Discount rate	4.75 - 5.50	%	5.50	%
Expected return on plan assets	6.20	%	6.30	%
Rate of compensation increases	2.75	%	2.25	%

In determining the expected return on plan assets, the Company considers the relative weighting of plan assets by class and individual asset class performance expectations as provided by its external advisors.

The Company’s investment strategy for its pension plans is to manage the plans on a going-concern basis. Current investment policy is to achieve a superior return on assets, subject to a prudent level of portfolio risk for the purpose of enhancing the security of benefits for participants. This policy results in a diversified portfolio of assets with a predominant holding in bonds. Future contributions are being invested into fixed interest assets so as to move more towards a less volatile investment portfolio.

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Pension plans have the following weighted-average asset allocations at March 31:

Asset Category	2005		2004
Equity securities	32	%	39	%
Debt securities	59	%	59	%
Cash and other	9	%	2	%
Total	100	%	100	%

The Company’s funding policy is to make contributions in accordance with the laws and customs of the various countries in which it operates as well as to make discretionary voluntary contributions from time-to-time. The Company anticipates that at a minimum it will make the minimum required contributions to its pension plans in fiscal year 2006 of $0.3 million.

Benefits payments, including those amounts to be paid out of corporate assets and reflecting future expected service as appropriate, are expected to be paid as follows:

	(in thousands)
2006	$	4,871
2007		5,206
2008		4,794
2009		4,491
2010		4,773
Total	$	24,135

N. STOCK COMPENSATION PLANS

The Company maintains a stock option plan in which common stock-based awards are available for grant to key employees and members of the Board of Directors at prices generally not less than fair market value at the date of grant determined by the Board of Directors. Incentive or nonqualified stock options may be issued under the Plan and are exercisable from one to ten years after grant. There are 928,962 shares of common stock reserved for issuance under the Plan. Stock options for the Plan vest in equal amounts over three years from the date of the grant (i.e. 33 1/3% vests each year).

A summary of activity in the Company’s stock option plan for the year ended March 31, 2005 and the Period ended March 31, 2004 is as follows:

	Number of Shares	Weighted Average Exercise Price
Options outstanding, at Inception	—		—
Options granted in the Period	628,837	$	9.34
Options exercised	—		—
Options cancelled and expired	—		—
Options outstanding, March 31, 2004	628,837		9.34
Options granted in fiscal year 2005	190,000		30.77
Options exercised	—		—
Options cancelled and expired	22,000		35.19
Options outstanding, March 31 , 2005	796,837	$	13.74

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The following table summarizes information about currently outstanding and exercisable stock options at March 31, 2005:

Range of Exercise Prices	Number of Options Outstanding	Weighted Average Remaining Contractual (Years) Life	Weighted Average Exercise Price		Number of Options Exercisable	Weighted Average Exercise Price
$21.20 to $ 35.41	158,000	9.5	$	31.51	—		—
$ 9.34	638,837	8.5	$	9.34	209,591	$	9.34
Total	796,837		$	13.74	209,591	$	9.34

O. COMMITMENTS AND CONTINGENCIES

The Company has operating leases covering plant, office facilities, and equipment that expire at various dates through 2013. Future minimum annual fixed rentals required during the years ending in fiscal 2006 through 2010 under non-cancelable operating leases having an original term of more than one year are $7.9, $6.1, $4.8, $4.6, and $4.3 million, respectively. The aggregate obligation subsequent to fiscal 2010 is $15.4 million. Leases are expensed on a straight-line basis resulting in deferred rent charges. Rent escalations range from 3 % to 6% through fiscal year 2010. Rent expense was approximately $8.6 and $4.0 million in the year ended March 31, 2005 and the period from Inception to March 31, 2004, respectively. Future minimum payments during the year ending in fiscal 2006 under unconditional purchase obligations are $2.5 million.

The Company has a three-tier holding structure in Germany. A tax pooling structure has been established between these entities effective for fiscal years ended March 31, 2001 and 2002 for the various entities involved. It was recently discovered that the tax pooling structure between two of the entities may not be effective for German tax purposes due to a clerical error. On June 14, 2005, the Company filed a ruling request with the German tax authorities requesting a ruling that the Company’s adoption of a written clarifying confirmation will be sufficient to make the tax pooling structure effective. There can be no assurance as to the timing or outcome of the Company’s ruling request. If the tax pooling structure is declared not effective for German tax purposes, it could result in a maximum 27.2 million EUR ($35.2 million as of March 31, 2005) income tax exposure for the Company, plus interest through the settlement date. The Company intends to vigorously defend itself in this matter. Due to the preliminary nature of the matter and the fact that cases with similar fact patterns are pending before the German courts it is not possible to determine to potential outcome. As a result no provision for loss has been recorded in the consolidated financial statements as of March 31, 2005.

The Company from time to time has been involved in various legal proceedings, all of which have arisen in the ordinary course of business and some of which are covered by insurance.

P. RELATED PARTY

On April 1, 2001, the Predecessor Company loaned the President and Chief Executive Officer (the “Officer”) $1,160,000 for the purpose of paying taxes associated with the exercise of stock options. The loan carried interest at a rate of 8.5% per annum.

Effective February 27, 2004, the Company amended the promissory note dated April 1, 2001. The interest rate was amended from 8.5% to 1.67% per annum. The amended note also included a debt forgiveness clause, which stated that $580,000 would be forgiven on March 31, 2005 and $580,000 would be forgiven on March 31, 2006, provided that the Officer is still employed with the Company. The debt forgiveness will be treated as additional compensation to the Officer, when forgiven. Interest is payable quarterly starting April 1, 2004. As of March 31, 2005, $580,000 was outstanding on the loan, including principal and interest was paid current.

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On April 1, 2001, the Company loaned another officer of the Company $575,000 for the purpose of paying taxes associated with the exercise of stock options. The loan carried interest at a rate of 8.5% per annum.

Effective February 27, 2004, the Company amended the promissory note dated April 1, 2001. The interest rate was amended from 8.5% to 1.58% per annum. A payment of $75,000 was made on the original note; therefore the amended note principal balance is $500,000. Interest is payable annually starting April 1, 2005. The entire unpaid balance of the note, including unpaid accrued interest, is due April 1, 2007. As of March 31, 2005, $507,900 was outstanding on the loan, including principal and accrued interest. Subsequent to the period end, the officer paid $7,900 in accrued interest to the Company.

Under letter Agreements dated May 20, 2005, the outstanding principal indebtedness under the promissory notes described above will be forgiven upon consummation of the merger with JDS Uniphase described in Note E.

The loans described above are presented as a component of other non-current assets as of March 31, 2005.

JP Morgan is both a shareholder of the Company and administrative agent for the Company’s credit agreement. In their capacity as administrative agent JP Morgan received $88,380 and $0 in compensation from the Company in the period ended March 31, 2005 and the period of Inception to March 31, 2004, respectively.

Q. SEGMENT INFORMATION AND GEOGRAPHIC AREAS

Segment Information.

The Company is currently managed in two business segments: communications test segment and digital color enhancement systems segment. Communications test develops, manufactures and markets instruments, systems, software and services to test, deploy, manage and optimize communications networks and equipment. The Communications Test Segment includes corporate expenses that have not been allocated to da Vinci Systems LLC. The Company offers products that test and manage the performance of equipment found in modern, converged networks, including optical transmission systems for data communications, voice services, wireless voice and data services, cable services, and video delivery. da Vinci Systems LLC provides digital color enhancement systems used in the production of television commercials and programming. Digital color enhancement systems products are sold to post-production and video production professionals and producers of content for the standard- and high-definition television market.

The Company measures the performance of its segments by their respective earnings before interest, taxes, depreciation and amortization of intangibles (“Adjusted EBITDA”), which excludes non-recurring and one-time charges. The information below includes net sales and Adjusted EBITDA for the Company’s communications test segment and digital color enhancement systems.

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Selected Segment Information

	For the Year Ended March 31, 2005			For the period of Inception to March 31, 2004
				(Restated)
	(Amounts in thousands)
Communications test :
Net Sales	$	428,630		$	201,104
Adjusted EBITDA		46,489			21,687
Total Assets		472,408			526,343
Capital Expenditures		8,671			2,692
Digital color enhancement systems:
Net Sales	$	19,869		$	12,718
Adjusted EBITDA		3,123			5,125
Total Assets		6,962			8,394
Capital Expenditures		512			536
Total Company:
Net Sales	$	448,499		$	213,822
Adjusted EBITDA		49,612			26,812
Total Assets		479,370			534,737
Capital Expenditures		9,183			3,228
The following are excluded from the calculation of Adjusted EBITDA:
Amortization of intangibles and stock options	$	(12,702	)	$	(7,252	)
Depreciation		(13,652	)		(7,821	)
Restructuring expense		(1,774	)		(5,325	)
Gain on investments - included in other income		1,350			—
Asset impairment		(598	)		—
Total excluded items		(27,376	)		(20,398	)
Other (income) expense, net		(1,488	)		1,355
Operating income	$	20,748		$	7,769

The accounting policies for the Company’s segments are the same as those described in the summary of significant accounting policies. (See Note C. Summary of Significant Accounting Policies).

No single customer accounted for more than 10% of net sales from continuing operations during the year ended March 31, 2005 and the period of Inception to March 31, 2004.

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Geographic Information.

The Company is a multi-national corporation with continuing operations in the United States and Europe as well as distribution and sales offices in Asia Pacific, Canada and Latin America. Information by geographic areas for the year ended March 31, 2005 and the period of Inception to March 31, 2004 are summarized below:

	United States			Outside U.S.			Combined
	(a)			(b)
	(amounts in thousands)
Sales to unaffiliated customers
2005	$	255,711		$	192,788		$	448,499
2004	$	131,114		$	82,708		$	213,822
Income (loss) before provision for income taxes
2005	$	(3,978	)	$	16,119		$	12,141
2004	$	1,536		$	(1,417	)	$	119
Long-lived assets at March 31:
2005	$	245,980		$	22,928		$	268,908
2004	$	268,231		$	35,675		$	303,906

(a) Sales within the United States include export sales of $45.4 million, and $20.7 million in 2005 and 2004, respectively.

(b) Sales outside the United States include sales from foreign subsidiaries to the United States of $10.3 million and $4.6 million in 2005 and 2004, respectively.

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EX-99.3

EXHIBIT 99.3

JDS UNIPHASE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements are based on the historical financial statements of JDS Uniphase Corporation (the “Company” or “JDSU”) and Acterna, Inc. (“Acterna”) after giving effect to the Company’s acquisition of Acterna (the “Acquisition”) and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The Company acquired Acterna on August 3, 2005.

The unaudited pro forma condensed combined balance sheet as of June 30, 2005 is presented as if the Acquisition occurred on June 30, 2005. The unaudited pro forma condensed combined statement of operations of JDSU and Acterna for the year ended June 30, 2005 is presented as if the Acquisition had taken place on July 1, 2004. The Financial statements of Acterna are as of March 31, 2005 and for the period from April 1, 2004 through March 31, 2005.

The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial statements is based upon a preliminary valuation. The estimated fair values of certain assets and liabilities have been determined with the assistance of a third-party valuation firm and such firm’s preliminary work. The Company’s estimates and assumptions are subject to change upon the finalization of the valuation. The primary areas of the purchase price allocation which are not yet finalized relate to the fair value of customer relationships, certain land and buildings located outside the Unites States, pension liability, and tax related adjustments associated with the opening balance sheet.

The unaudited pro forma condensed combined financial statements are not intended to represent or be indicative of the consolidated results of operations or financial position of JDSU that would have been reported had the Acquisition been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial position of JDSU. The unaudited pro forma financial statements do not reflect any operating efficiencies and cost savings that the Company may achieve with respect to the combined companies. The unaudited pro forma condensed combined financial statements should be read in conjunction with JDSU’s historical consolidated financial statements and accompanying notes in JDSU’s annual reports on Form 10-K and Acterna’s consolidated financial statements at and for the period ended March 31, 2005 which are incorporated herein as Exhibit 99.2.

JDS UNIPHASE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Year Ended June 30, 2005

(In millions, except per share data)

	Historical
	For the Year Ended June 30, 2005			For the Year Ended March 31, 2005			Pro Forma Adjustments			Pro Forma Combined
	JDS Uniphase			Acterna
Net revenue	$	712.2		$	448.5		$	—		$	1,160.7
Cost of goods sold		586.6			197.1			—			783.7
Gross profit		125.6			251.4			—			377.0
Operating expenses:
Research and development		93.7			54.4			—			148.1
Selling, general and administrative		157.3			162.4			—			319.7
Amortization of other intangibles		19.8			11.4			37.1	(C)		68.3
Acquired in-process research and development		1.1			—			—			1.1
Reduction of goodwill and other long-lived assets		69.8			0.6			—			70.4
Restructuring charges		18.2			1.8			—			20.0
Total operating expenses		359.9			230.6			37.1			627.6
Income/(loss) from operations		(234.3	)		20.8			(37.1	)		(250.6	)
Interest and other income, net		(19.7	)		(8.7	)		—			(28.4	)
Loss on sale of subsidiaries’ net assets		(4.7	)		—			—			(4.7	)
Gain on sale of investments		20.0			—			—			20.0
Reduction in fair value of investments		(9.2	)		—			—			(9.2	)
Gain/(loss) on equity method investments		(6.7	)		—			—			(6.7	)
Income/(loss) before income taxes		(254.6	)		12.1			(37.1	)		(279.6	)
Income tax provision		6.7			5.5			—			12.2
Net income/(loss)	$	(261.3	)	$	6.6		$	(37.1	)	$	(291.8	)
Loss per share - basic and diluted	$	(0.18	)							$	(0.18	)
Shares used in per-share calculation—basic and diluted		1,445.4						200.5			1,645.9

See accompanying notes to consolidated financial statements

JDS UNIPHASE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of June 30, 2005

(In millions)

	Historical
	June 30, 2005			March 31, 2005			Pro Forma Adjustments			Pro Forma Combined
	JDS Uniphase			Acterna
ASSETS
Current assets:
Cash, cash equivalents and short-term investments	$	1,304.5		$	75.2		$	(520.8	)(A)	$	858.9
Accounts receivable, net		112.3			74.8			—			187.1
Inventories, net		97.4			42.3			41.8	(D)		181.5
Other current assets		74.0			18.2			—			92.2
Total current assets		1,588.2			210.5			(479.0	)		1,319.7
Property, plant and equipment, net		162.1			50.2			—			212.3
Goodwill and other intangibles, net		285.1			210.9			479.9	(B, C)		975.9
Other assets		45.0			7.8			—			52.8
Total assets	$	2,080.4		$	479.4		$	0.9		$	2,560.7
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long term debt	$	—		$	2.9		$	(2.9	)(F)	$	—
Accounts payable		75.1			26.0			—			101.1
Accrued payroll and related expenses		30.5			32.0			—			62.5
Restructuring accrual		23.0			0.7			—			23.7
Other current liabilities		111.2			48.6			(3.8	)(E)		156.0
Total current liabilities		239.8			110.2			(6.7	)		343.3
Long-term debt		466.9			141.1			(141.1	)(F)		466.9
Other non-current liabilities		44.0			89.7			—			133.7
Commitments and contingencies
Stockholders’ equity:
Common stock		1.4			0.1			0.1	(G)		1.6
Contingent payment rights		—			25.0			(25.0	)(G)		—
Additional paid-in capital		68,592.5			127.1			177.5	(G)		68,897.1
Accumulated deficit		(67,273.3	)		4.5			(22.1	)(G)		(67,290.9	)
Accumulated other comprehensive income (loss)		9.1			(18.2	)		18.2	(G)		9.1
Total stockholders’ equity		1,329.7			138.5			148.7			1,616.9
Total liabilities and stockholders’ equity	$	2,080.4		$	479.4		$	0.9		$	2,560.7

See accompanying notes to consolidated financial statements

JDS UNIPHASE CORPORATION

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1. BASIS OF PRO FORMA PRESENTATION

The unaudited pro forma condensed combined balance sheet as of June 30, 2005 and the unaudited pro forma condensed combined statements of operations for the year ended June 30, 2005 are based on the historical financial statements of JDS Uniphase Corporation (the “Company” or “JDSU”) and Acterna, Inc. (“Acterna”) after giving effect to the Company’s acquisition of Acterna (the “Acquisition”) and the assumptions and adjustments described in the notes herein. Acterna’s fiscal year ends on March 31 and JDSU’s fiscal year ends on June 30. Certain historical Acterna balances have been reclassified to conform to the pro forma combined presentation. No pro forma adjustments were required to conform Acterna’s accounting policies to JDSU’s accounting policies.

The unaudited pro forma condensed combined balance sheet as of June 30, 2005 is presented as if the Acquisition occurred on June 30, 2005, and due to different fiscal period ends, combines the historical balance sheet for JDSU at June 30, 2005 and the historical balance sheet of Acterna at March 31, 2005.

The unaudited pro forma condensed combined statement of operations of JDSU and Acterna for the year ended June 30, 2005 is presented as if the Acquisition had taken place on July 1, 2004, and due to different fiscal period ends, combines the historical results of JDS Uniphase for the year ended June 30, 2005 and the historical results of Acterna for the year ended March 31, 2005.

The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial statements is based upon a preliminary valuation. The estimated fair values of certain assets and liabilities have been determined with the assistance of a third-party valuation firm and such firm’s preliminary work. The Company’s estimates and assumptions are subject to change upon the finalization of the valuation. The primary areas of the purchase price allocation which are not yet finalized relate to the fair value of customer relationships, certain land and buildings located outside of the United States, pension liability, and tax related adjustments associated with the opening balance sheet.

The unaudited pro forma condensed combined financial statements are not intended to represent or be indicative of the consolidated results of operations or financial position of JDSU that would have been reported had the Acquisition been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial position of JDSU. The unaudited pro forma financial statements do not reflect any operating efficiencies and cost savings that the Company may achieve with respect to the combined companies. The unaudited pro forma condensed combined financial statements should be read in conjunction with JDSU’s historical consolidated financial statements and accompanying notes in JDSU’s annual reports on Form 10-K and Acterna’s consolidated financial statements at and for the period ended March 31, 2005 which are incorporated herein as Exhibit 99.2.

2. ACTERNA ACQUISITION

On August 3, 2005, the Company completed the acquisition of privately held Acterna, Inc. (“Acterna”), a leading worldwide provider of broadband and optical test and measurement solutions for telecommunications and cable service providers and network equipment manufacturers, for approximately $450.0 million in cash and $310.0 million in JDSU’s common stock, which equated to 200,467,802 shares. Starting the first quarter of fiscal 2006, the addition of Acterna’s Test and Measurement business will comprise a new reportable segment to the Company’s business.

The acquisition of Acterna has been accounted for as a business combination. Assets acquired and liabilities assumed were recorded at their fair values as of August 3, 2005. The total preliminary purchase price is $764.8 million is comprised of:

Cash	$	366.9
Long-term debt		141.4
Acterna’s cash applied to purchase consideration		(58.3	)
Securities Exchanged		304.8
Transaction costs		10.0
Total preliminary purchase price	$	764.8

The pro forma basic and diluted earnings per share are based on the weighted average number of shares of JDSU common stock outstanding and 200,467,802 shares of JDSU’s common stock issued relating to the Acquisition. The number of shares issued was determined using an average price of $1.546, which represented the average closing price of the Company’s common stock from five trading days before the acquisition date of August 3, 2005, less 49,662 shares which were not issued by JDSU (i) to certain option holders of Acterna, in exchange for cash which JDSU provided these option holders to cover such option holders’ tax withholdings resulting from the cash and stock consideration they received in the Acquisition, and (ii) in respect of the aggregate fractional shares resulting from the Acquisition. The shares were valued based on the closing price of the Company’s stock on August 3, 2005, resulting in a total stock consideration of $304.8 million.

Under business combination accounting, the total preliminary purchase price will be allocated to Acterna’s net tangible and identifiable intangible assets based on their estimated fair values as of August 3, 2005. The excess of the purchase price over the net tangible and identifiable intangible assets will be recorded as goodwill. Based upon a preliminary valuation, the total preliminary purchase price was allocated as follows (in millions):

Goodwill	$	346.4
Identified intangible assets		362.1
Net working capital (excluding inventory and deferred revenue)		(7.6	)
Inventory		84.0
Deferred revenue		(6.1	)
Net fixed assets		46.2
Other assets		(60.2	)
Total preliminary purchase price	$	764.8

The preliminary allocation of the purchase price was based upon a preliminary valuation, as described below, and the estimates and assumptions are subject to change upon the finalization of the valuation.

Goodwill: represents the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired. Goodwill amounts are not amortized, but rather are tested for impairment at least annually. In the event that the Company determines that the value of goodwill has become impaired, it will incur an accounting charge for the amount of impairment during the fiscal quarter in which such determination is made.

Acterna is a leading worldwide provider of broadband and optical test and measurement solutions for telecommunications and cable service providers and network equipment manufacturers. The acquisition doubles the size of JDSU’s addressable communications market, and expands the Company’s product portfolio to enhance the deployment of Internet Protocol (IP)-based data, voice and video services over optical long haul, metro, fiber-to-the-home, DSL and cable networks. These factors contributed to the reorganization of goodwill.

Identifiable intangible assets: acquired consist of developed technology, trademark/names, customer backlog, customer relationships, and non-compete agreements. The preliminary estimated fair value of identifiable intangible assets was determined with the assistance of a third-party valuation.

Net tangible assets: Net tangible assets were valued at their respective carrying amounts as the Company believes that these amounts approximate their current fair values, except for adjustments to inventory and deferred revenues. The purchase price allocation relate to the fair value of customer relationships, certain land and buildings located outside the Unites States, pension liability, tax related adjustments associated with the opening balance sheet are not yet finalized.

In-process research and development: Projects that qualify as in-process research and development represent those that have not yet reached technological feasibility and which have no alternative future use. Acterna is currently developing new products in multiple product areas that qualify as in-process research and development.

A preliminary estimate of $17.6 million has been allocated to in-process research and development. Due to its non-recurring nature, the in-process research and development expense has been excluded from the unaudited pro forma condensed combined statement of operations.

The value assigned to in-process research and development was determined by discounting the cash flow directly related to the products expecting to result from the research and development. The rate utilized to discount the net cash flows to their present value was based upon Acterna’s weighted-average cost of capital. The weighted-average cost of capital was adjusted to reflect the difficulties and uncertainties in completing each project and thereby achieving technological feasibility. Based on these factors, a discount rate of 10% was deemed appropriate for valuing the in-process research and development.

The estimates used in valuing in-process research and development were based upon assumptions believed to be reasonable but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may differ from current projections.

Inventory: The pro forma condensed combined statement of operations for the year ended June 30, 2005 does not reflect the impact on cost of sales of $41.8 million of manufacturing profit that will be capitalized in inventory as a result of the application of purchase accounting to the acquisition and subsequently amortized to cost of sales as the inventory is sold to end users. Under SEC rules and regulations relating to pro forma financial statements, the amount is considered to be a nonrecurring charge and is thus excluded from the pro forma statement of operations. However, the Company’s future income statements will be impacted by the pro forma adjustment. The increased basis of inventories will be amortized to cost of sales using the straight-line method over the estimated period required to sell the inventories to end users. Based on historical trends, the Company expects to sell these inventories during fiscal 2006.

The Company has currently not identified any pre-acquisition contingencies where a liability is probable and the amount of the liability can be reasonably estimated. If information becomes available to the Company prior to the end of the purchase price allocation period, which would indicate that a liability is probable and the amount can be reasonably estimated, such items will be included in the purchase price allocation.

3. PRO FORMA ADJUSTMENTS

The following pro forma adjustments are included in the unaudited pro forma condensed combined balance sheet. Historical amounts are as of March 31, 2005, whereas preliminary fair values are as of August, 3, 2005.

(A) To record the following adjustments to cash (in millions):

To record cash paid for Acterna common stock	$	(366.9	)
To record payment of the current portion long-term debt		(2.8	)
To record payment of long-term debt		(141.1	)
To record cash paid for direct transaction costs		(10.0	)
Total adjustments to cash	$	(520.8	)

(B) To eliminate Acterna’s historical goodwill and record the preliminary fair value of goodwill (in millions):

	Historical Amount, Net		Preliminary Fair Value		Increase (Decrease)
Goodwill	$	141.8	$	346.4	$	204.6

(C) To record the difference between the preliminary fair value and the historical amount of intangible assets (in millions):

	Historical Amount, Net		Preliminary Fair Value		Increase (Decrease)		Annual Amortization*		Estimated Useful Life
Developed technology	$	31.6	$	182.8	$	151.2	$	22.9	8 yrs.
Trademark/Names		4.3		10.1		5.8		1.0	10 yrs.
Customer relationships		33.3		148.4		115.1		18.6	8 yrs.
Customer backlog		—		2.1		2.1		2.1	1 yr.
Non-compete agreements		—		1.1		1.1		0.4	3 yrs.
Total identified intangible assets	$	69.2	$	344.5	$	275.3		44.9
Acterna historical amortization								7.8
							$	37.1

* Pro forma amortization expense is calculated using the straight-line method. However, upon completion of the valuation process, the Company may conclude that intangible assets should be amortized using an accelerated method.

(D) To record the difference between the preliminary fair value and the historical amount of Acterna’s inventory (in millions):

	Historical Amount, Net		Preliminary Fair Value		Increase (Decrease)
Raw materials	$	16.4	$	19.6	$	3.2
Work in process		12.6		28.3		15.7
Finished goods		13.2		36.1		22.9
Total inventory	$	42.2	$	84.0	$	41.8

(E) To record the preliminary fair value adjustment to deferred revenue acquired (in millions):

	Historical Amount, Net		Preliminary Fair Value		Increase (Decrease)
Deferred revenue	$	9.9	$	6.1	$	(3.8	)

(F) To record the following adjustments for long-term debt (in millions):

Current portion of long-term debt	$	(2.9	)
Long-term debt	$	(141.1	)

(G) To record the following adjustments to stockholders’ equity (in millions):

To eliminate Acterna’s historical stockholders’ equity	$	(138.5	)
To expense IPR&D*		(17.6	)
To record the issuance of JDSU common stock		304.8
Total adjustments to stockholders’ equity	$	148.7

* In accordance with Statement of Financial Accounting Standard No. 141, “Business Combinations” (“SFAS 141”), the Company expenses the purchase valuation assigned to intangible research and development assets that have no alternative future uses.

4. PRO FORMA LOSS PER SHARE

The pro forma basic and diluted earnings per share are based on the weighted average number of shares of JDSU common stock outstanding and 200,467,802 shares of JDSU’s common stock issued relating to the Acquisition. The number of shares issued was determined using an average price of $1.546, which represented the average closing price of JDSU’s common stock from five trading days before the acquisition date of August 3, 2005, less 49,662 shares which were not issued by JDSU (i) to certain option holders of Acterna, in exchange for cash which JDSU provided these option holders to cover such option holders’ tax withholdings resulting from the cash and stock consideration they received in the Acquisition, and (ii) in respect of the aggregate fractional shares resulting from the Acquisition. These shares were valued based on the closing prior of the Company’s stock on August 3, 2005, resulting in a total stock consideration of $304.8 million.