Lumentum Holdings (LITE) 10-K risk factor changes: FY2019 vs FY2018

The development of new, technologically advanced products is a complex and uncertain process requiring high levels of innovation and the accurate prediction of [removed: technological] [added: technology] and market trends.

The introduction of new products also [added: often] requires significant investment to ramp up production capacity, [removed: for which] [added: the] benefit [added: of which] may not be realized if we are not successful in the production of such products or if customer demand does not develop as expected.

As a result, the markets for optical [removed: subsystems and] [added: subsystems,] components [added: and laser diodes] are highly competitive.

Additionally, if significant competitors were to merge or consolidate, [added: for example, the pending acquisitions of Finisar by II-VI and Acacia Communications by Cisco,] they may be able to offer a lower cost structure through economies of scale that we may be unable to match and which may intensify competition in the various markets.

We have consistently relied on a small number of customers for a significant portion of our sales and in certain of our markets, such as 3D [removed: sensing,] [added: sensing and commercial lasers,] this customer concentration is particularly acute.

[added: In addition, changes in the business requirements, vendor selection, project prioritization, financial prospects, capital resources, and expenditures, or purchasing behavior (including product mix] purchased or timing of purchases) of our key customers, or any real or perceived quality issues related to the products that we sell to such customers, could significantly decrease our sales to such customers or could lead to delays or cancellations of planned purchases of our products or services, which increases the risk of quarterly fluctuations in our revenues and operating results.

The manufacturing of our products may be adversely affected if [removed: our contract manufacturers and suppliers fail to meet our production requirements or if] we are unable to manufacture certain products in our manufacturing [removed: facilities.][added: facilities or if our contract manufacturers and suppliers fail to meet our production requirements.]

We [added: also] rely on several independent contract manufacturers to supply us with certain products.

For many products, a particular contract manufacturer may be the sole source of the [removed: finished-good] [added: finished good] products.

Additionally, [added: our ability to fulfill our customers’ demand, or] the ability of our contract manufacturers to fulfill their [removed: obligations] [added: obligations,] may be affected by natural disasters, changes in legal requirements, labor strikes and other labor unrest and economic, political or other forces that are beyond our control.

[removed: For example, we recently experienced a labor strike at one of our contract manufacturers] which threatened the contract manufacturer’s ability to fulfill its product commitments to us and, in turn, our ability to fulfill our obligations to our customers.

Further, certain of our contract manufacturers are located in China, which exposes us to risks associated with Chinese laws and [removed: regulations,] [added: regulations and U.S. laws, regulations and policies with respect to China,] such as those related to import and export policies, tariffs, taxation and intellectual property.

Chinese laws and regulations are subject to frequent change, and if our contract manufacturers are unable to obtain or retain the requisite legal permits or otherwise to comply with Chinese legal requirements, we may be forced to obtain products from other manufacturers or to make other operational changes, including transferring our manufacturing to another manufacturer or to our [removed: Thailand] [added: own] manufacturing [removed: facility.][added: facilities.]

[removed: In 2018, the] [added: The] United States [added: has recently] imposed tariffs on the import of certain products manufactured in China, and [removed: has proposed] [added: may propose] further [removed: tariffs,] [added: tariffs in the future,] which could increase costs associated with the [removed: manufacture] [added: manufacturing] of our products in [removed: China] [added: China,] and [added: potentially other countries, and] negatively impact our sales levels and profit margins.

[removed: In addition, some] [added: Some] of our purchase commitments with contract manufacturers are not cancellable which may impact our [removed: earnings] [added: results of operations] if customer forecasts driving these purchase commitments do not materialize and we are unable to sell the products to other customers.

Alternatively, our contract manufacturers may not be able to meet our demand which would inhibit our ability to meet [removed: customer demand] [added: our customers’ demands] and maintain or grow our revenues.

We manufacture some of [added: our finished good products as well as some of] the components that we provide to our contract manufacturers, [removed: along with our own finished goods,] in our [removed: Thailand] [added: China, Italy, Japan, Thailand, U.K.,] and San Jose, California manufacturing facilities.

In addition, for a variety of reasons, including changes in circumstances at our contract manufacturers or [added: regarding] our own business strategies, we may [added: choose or] be required [removed: to, or voluntarily may,] [added: to] transfer the manufacturing of certain products to other manufacturing sites, including [added: to] our [removed: new Thailand] [added: own] manufacturing [removed: facility.][added: facilities.]

For example, we are in the process of transitioning the manufacturing of our products with one of our contract manufacturers in China to our [added: Shenzhen and] Thailand manufacturing [removed: facility.][added: facilities and to other contract manufacturers.]

If such transfers are [removed: unsuccessful,] [added: unsuccessful or take a longer period of time than expected,] it could result in interruptions in supply and would likely impact our financial condition and results of operations.

Major developments in tax policy or trade relations, such as the imposition of tariffs on imported products, could increase our product and product-related costs or require us to seek alternative suppliers, either of which could result in decreased sales or [removed: increases] [added: increased] product and product-related costs.

[removed: However, some] [added: Some] of our customers [removed: also] require that our manufacturing lines pass their specific qualification standards and that we, and any subcontractors that we may use, be registered under international quality standards.

We may encounter quality control issues as a result of [added: setting up new manufacturing lines in our facilities,] relocating our manufacturing lines or introducing new products to fill production.

We may be unable to [removed: obtain customer qualification of our manufacturing lines] [added: obtain,] or we may experience delays in [removed: obtaining] [added: obtaining,] customer qualification of our manufacturing lines.

[removed: In general, we] [added: We] have not entered into long-term agreements with [removed: our] [added: many of these] suppliers.

As a result, these suppliers [removed: generally] may stop supplying us materials and equipment at any time.

[removed: Any disruption in the] supply of the raw materials, packaging or components used in the manufacture and delivery of our products could have a material adverse impact on our business, financial condition and results of operations.

| • | changes in or limitations imposed by trade protection laws or other regulatory orders or requirements in the United States or in other countries, including tariffs, sanctions, or other costs or requirements which may affect our ability to import or export our products from various [removed: countries;] [added: countries or increase the cost to do so, including government action to restrict our ability to sell to foreign customers where sales of products may require export licenses (such as the U.S. Department of Commerce’s addition of Huawei to the Entity List in May 2019 and the prohibition of export and sale of certain products to ZTE Corporation in early 2018) and increased tariffs on various products that have been proposed by the U.S. government and other non-U.S. governments;] |

| • | the impact of the following on service provider and government spending patterns as well as our contract and internal manufacturing: political considerations, unfavorable changes in tax treaties or laws, unfavorable events that affect foreign currencies, natural disasters, epidemic disease, labor unrest, earnings expatriation restrictions, [removed: misappropriation of intellectual property, military actions, acts of terrorism, political and social unrest and difficulties in staffing and managing international operations.] |

Since the beginning of 2018, there has been increasing rhetoric, in some cases coupled with legislative or executive action, from several U.S. and foreign leaders regarding [removed: the possibility of] instituting tariffs against foreign imports of certain materials.

More specifically, [added: since 2018,] the United States and China [removed: have] applied [added: or proposed to apply] tariffs to certain of each other’s [removed: exports.][added: exports, and we expect these actions to continue for the foreseeable future.]

The institution of trade tariffs both globally and between the United States and China specifically carries the risk of negatively impacting overall economic conditions, which could have negative repercussions on [removed: the Company.][added: our industry and our business.]

Furthermore, imposition of tariffs [added: or new or revised export, import or doing-business regulations, including trade sanctions,] could cause a decrease in the sales of our products to customers located in China or other customers selling to Chinese end users, which would directly impact our [removed: business.][added: business and results of operations.]

| • | the [removed: ability] [added: inability] to retain and obtain required regulatory approvals, licenses and permits; |

| • | [removed: potential loss] [added: unexpected losses] of key employees of the acquired [removed: companies] [added: company,] or [removed: difficulty maintaining] [added: inability to maintain] our company culture; |

If we are unable to successfully manage any of these risks in relation to any future [removed: acquisitions, including our acquisition of Oclaro,] [added: acquisitions or divestitures,] our business, financial condition and results of operations could be adversely impacted.

Moreover, an increase in the rejection rate of products during the quality control process, before, during or after [removed: manufacture, results in lower gross margins from lower yields and additional rework costs.]

We have not [added: yet] operationalized the new [removed: international] structure to the full extent possible [removed: at this time] due to various factors including the [removed: pending] acquisition of [removed: Oclaro, which could significantly impact our existing tax strategy.][added: Oclaro in the second quarter of fiscal 2019.]

[removed: If we are unable to fully adopt a new international structure or if it is successfully challenged by the U.S. or foreign tax authorities, we] [added: We] may [added: not] be [removed: unable] [added: able] to realize [removed: the anticipated] tax savings [added: from our international tax structure,] which could materially and adversely affect our operating results.

We initiated a new international corporate structure more closely aligned with our international operations during the [removed: fiscal] third quarter of [added: fiscal] 2018.

There are also continuing trade tensions with the U.S. and countries in Asia, which could materially impact our sales to key customers in these regions.

Our ability to sell our products to a significant customer has been restricted.

On May 16, 2019, Huawei Technologies Co. Ltd. and 68 designated non-U.S. affiliates (collectively, “Huawei”) were added to the Entity List of the Bureau of Industry and Security of the U.S. Department of Commerce, which imposes limitations on the

supply of certain U.S. items and product support to Huawei.

Sales to Huawei accounted for 15.2% of our total revenue for the fiscal year ended June 29, 2019.

We suspended shipments of all products to Huawei until we were able to review our product portfolio and determine whether our products are subject to the Export Administration Regulations (“EAR”), and therefore within the scope of the Entity List restrictions.

We resumed shipments of certain of our products to Huawei during the quarter ended June 29, 2019 after determining that such products are not subject to the EAR.

Notwithstanding our determination that we are able to ship certain products in compliance with applicable law, we believe that under the current regulatory regime, our business with Huawei may be more limited than it was in the past.

For example, we may be unable to supply certain other products or be limited or unable to work with Huawei on future product development while Huawei remains on the Entity List, which may negatively impact our financial condition and results of operations.

Huawei may seek to obtain similar or substitute products from our competitors that are not subject to these restrictions, or to develop similar or substitute products themselves.

We also cannot be certain what additional actions the U.S. government may take with respect to Huawei, including changes to the Entity List restrictions, export regulations, tariffs or other trade restrictions.

We are unable to predict the duration of the restrictions enacted in May 2019 or of additional actions, which could have a long-term adverse effect on our business.

We also manufacture customized products for Huawei, and therefore may be unable to sell certain finished goods inventory to alternative customers, or may be unable to utilize such manufacturing capabilities for products for alternative customers, which may result in excess and obsolete changes in future periods.

Our competitors include II-VI (which has announced an agreement to acquire Finisar), Acacia Communications (which has entered an agreement to be acquired by Cisco), AMS, Broadcom, Coherent, Finisar, Fujitsu Optical Components, Furukawa Electric, IPG Photonics, MACOM, Mitsubishi Electric, Molex, Neophotonics, nLight, O-net Communications, OSRAM, Sumitomo Electric Industries and Trumpf.

For example, in the past we experienced a labor strike at one of our contract manufacturers

There also may be delays with the transfer of manufacturing equipment and successfully setting up that equipment at the transfer sites and training new operators.

Additionally, supply of and costs of raw materials may be negatively impacted by trade protection policies such as tariffs, or escalating trade tensions, particularly with countries in Asia.

Any disruption in the

misappropriation of intellectual property, military actions, acts of terrorism, political and social unrest and difficulties in staffing and managing international operations.

The threat of increasing tariffs, particularly to goods traded between the United States and China, could materially and adversely affect our business and results of operations.

We have in the past acquired several companies, including our acquisition of Oclaro in December 2018.

In connection with acquisitions, risks to us and our business include:

We have in the past, and may in the future, also divest or reduce its investment in certain businesses or product lines from time to time.

For example, during the third quarter of fiscal year 2019, we announced the divestiture of our Datacom module business in Japan which was completed in the fourth quarter of fiscal year 2019.

Such divestitures involve risks, such as difficulty

separating portions of or entire businesses, distracting employees, incurring potential loss of revenue, negatively impacting margins, and potentially disrupting customer relationships.

We may also incur significant costs associated with exit or disposal activities, related impairment charges, or both.

| • | loss of customers, suppliers or partners; |

| • | potential difficulties in completing projects associated with in-process R&D; |

| • | an acquisition or strategic transaction may not further our business strategy as we expected or we may overpay for, or otherwise not realize the expected return on, our investments; |

manufacture, results in lower gross margins from lower yields and additional rework costs.

Information regarding the Tax Act and the impact of the Tax Act on our tax profile is included in our Annual Report on Form 10-K for our fiscal year ended June 30, 2018.

During the period ended December 29, 2018, we completed our accounting for the Tax Act with no material adjustment to our provisional estimates.

On June 7, 2019, the Ninth Circuit Court of Appeals, reversing a previous decision of the U.S. Tax Court, held that the U.S. Treasury Department’s regulations requiring the inclusion of stock-based compensation expense in a taxpayer’s cost-sharing calculations were valid.

We have a research and development cost sharing arrangement with one of our foreign affiliates.

Our financial statements have been prepared consistent with the ruling and we will continue to monitor any ongoing developments, including the possibility of rehearing or appeal to the U.S. Supreme Court, to determine if future changes are required.

If we are unable to obtain adequate financing or financing on terms satisfactory to us

Although we have registered marks associated with the Lumentum brand, third parties may seek to oppose or otherwise challenge these registrations.

Further, a breach of our information technology infrastructure could result in the misappropriation of intellectual property, business plans or trade secrets.

Any failure of our systems or those of our third-party service providers could result in unauthorized access or acquisition of such proprietary information, and any actual or perceived security breach could cause significant damage to our reputation and adversely impact our relationships with our customers.

These competitors include II-VI, Acacia Communications, Applied Optoelectronics, Coherent, Finisar, Foxconn Interconnect Technology, Fujitsu Optical Components, Furukawa Electric, InnoLight Technology, IPG Photonics, Neophotonics, Source Photonics, and Sumitomo Electric Industries.

In addition, changes in the business requirements, vendor selection, project prioritization, financial prospects, capital resources, and expenditures, or purchasing behavior (including product mix

Changes in manufacturing processes are often required due to changes in product specifications, changing customer needs and the introduction of new products.

These changes may reduce manufacturing yields at our contract manufacturers and at our own manufacturing facilities, resulting in reduced margins on those products.

Our manufacturing lines have passed our qualification standards, as well as our technical standards.

| | |

| --- | --- |

We have made acquisitions of other businesses or technologies in the past and we will continue to review and may pursue acquisition and other strategic opportunities, for example, our proposed acquisition of Oclaro announced in March 2018.

Such strategic transactions involve numerous risks, including the following:

| • | difficulty forecasting revenues and margins; |

| • | incurrence or assumption of contingent liabilities, known or unknown, including potential lawsuits, infringement actions or similar liabilities; and |

| • | incurrence of impairment charges related to goodwill or other intangibles. |

We incorporated changes to our international corporate structure in the fiscal third quarter of 2018 in order to further reduce our effective tax rate.

principles and commensurate with functions performed, risks assumed and ownership of valuable corporate assets.

We have not operationalized the new structure to the full extent possible at this time due to various factors including the pending acquisition of Oclaro, which could significantly impact our existing tax strategy.

The changes include, but are not limited to, (1) a reduction in the U.S. federal corporate tax rate (resulting in a blended corporate rate of 28% for our fiscal year ended June 30, 2018, and a rate of 21% for our fiscal years thereafter); (2) a mandatory deemed repatriation tax (“Transition Tax”) on certain deferred income of foreign subsidiaries that, if the taxpayer so elects, is payable over eight years; (3) bonus depreciation that allows full expensing of qualified property; (4) elimination of the corporate alternative minimum tax; (5) addition of the Base Erosion and Anti-Abuse Tax (“BEAT”), a new minimum tax on taxable income adjusted for certain base erosion payments; (6) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (7) a new provision to currently tax Global Intangible Low-Taxed Income (“GILTI”); (8) a new limitation on deductible interest expense; (9) the repeal of the domestic production activity deduction; (10) limitations on the deductibility of certain executive compensation; (11) limitations on the use of foreign tax credits (“FTCs”) to reduce U.S. income tax liability; and (12) limitations on net operating losses generated in the taxable years beginning after December 31, 2017, to 80 percent of taxable income.

As we complete our analyses, and interpret any additional guidance, we may adjust the provisional amounts we have recorded, and those adjustments may materially impact our provision for income taxes in the period in which the adjustments are made.

During fiscal 2018, our subsidiary in Thailand operated under a tax holiday.

Although we intend to hedge for a portion of our foreign currency exposure, significant fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our net income.

Additionally, hedging programs rely on our ability to forecast accurately and could expose us to additional risks that could adversely affect our financial condition and results of operations.

We have in the past acquired several companies, and have announced that we signed a definitive agreement to acquire Oclaro.

| • | unexpected losses of key employees of the acquired company; |

In connection with acquisitions, we may:

| • | use a signification portion of our available cash; |

| • | issue equity securities, which would dilute current stockholders’ percentage ownership; |

| • | incur significant debt; |

| • | incur or assume contingent liabilities, known or unknown, including potential lawsuits, infringement actions or similar liabilities; |

| • | incur impairment charges related to goodwill or other intangibles; and |

| • | face antitrust or other regulatory inquiries or actions. |

Our operating results may be adversely affected by unfavorable economic and market conditions.

The Lumentum brand is the subject of trademark applications in the United States or other jurisdictions, but the trademarks have not yet proceeded to registration.

Although we will seek to obtain trademark registrations for the Lumentum brand, it is possible we may not be able to protect our brand through registration in one or more jurisdictions, for example, the applicable governmental authorities may not approve the registration.

Furthermore, even if the applications are approved, third parties may seek to oppose or otherwise challenge registration.

Lawsuits have been filed against us, Oclaro, its directors, and certain other parties challenging the Merger, and an adverse judgment in such lawsuits, or any similar lawsuit, may prevent the Merger from being consummated or from being consummated within the expected timeframe.

As described in greater detail in “Part I, Item 3.

Legal Proceedings” in this Annual Report on Form 10-K, we, along with Oclaro, Oclaro’s directors, and certain other parties were named as defendants in two putative class action lawsuits.

One of the lawsuits was filed in the United States District Court for the Northern District of California and the other was filed in the United States District Court for the District of Delaware.

Both have been voluntarily dismissed with prejudice.

Oclaro and its directors were also named as defendants in five additional lawsuits, including two putative class actions, each of which was filed in the United States District Court for the Northern District of California.

Four of these five additional lawsuits have been dismissed.

We are an [removed: industry leading] [added: industry-leading] provider of optical and photonic products defined by revenue and market share addressing a range of end-market applications including [removed: optical communications] [added: Optical Communications, which we refer to as OpComms,] and [removed: commercial lasers.][added: Lasers for manufacturing, inspection and life-science applications.]

We have two operating [removed: segments:] [added: segments,] OpComms and Lasers.

The two operating segments were primarily determined based on how [removed: the Chief Operating Decision Maker (“CODM”)] [added: our CODM] views and evaluates our operations.

Operating results are regularly reviewed by [removed: the] [added: our] CODM to make decisions about resources to be allocated to the segments and to assess their performance.

Our OpComms products include a wide range of components, modules and subsystems to support [removed: and maintain] customers including carrier networks [removed: for] [added: of] access (local), metro (intracity), long-haul (city-to-city and worldwide) [removed: and,] [added: and] submarine [removed: (undersea).][added: (undersea) applications.]

Additionally, our products address enterprise, cloud, and data center applications, including [removed: SANs, LANs,] [added: storage-access networks (“SANs”), local-area networks (“LANs”)] and [removed: WANs.][added: wide-area networks (“WANs”).]

We maintain leading positions in these fast growing OpComms markets through our extensive product portfolio, including [removed: ROADMs, tunable 10-gigabit small form-factor pluggable transceivers and tunable small form-factor pluggable transceivers.][added: reconfigurable optical add/drop multiplexers (“ROADMs”), coherent DWDM]

[removed: Additionally, we are engaging customers in the sale of] [added: We also sell] laser chips for use in the manufacture of high-speed [added: Datacom] transceivers.

Our products include [removed: VCSELs] [added: vertical cavity surface emitting lasers (“VCSELs”)] and edge emitting lasers which are used in 3D sensing depth imaging systems.

In addition, our industrial diode lasers are used primarily as pump sources for pulsed and [removed: CW Fiber Lasers.][added: kilowatt class fiber lasers.]

Our OpComms customers include [removed: Accelink, Alphabet (formerly Google),] [added: Alphabet,] Apple, [removed: Arista, Arris,] Ciena, Cisco [removed: Systems, Coriant, ECI, Facebook, FiberHome, Fujitsu, HiSilicon, Huawei Marine,] [added: Systems (which recently announced the acquisition of Acacia Communications, another customer of ours),] Huawei [removed: Technologies,] [added: Technologies (including HiSilicon),] Infinera, [removed: Microsoft, NEC,] [added: Innolight,] Nokia Networks (including Alcatel-Lucent International), O-Net, [removed: Oplink, Padtec, TE Subcom,] and [removed: Yahoo.][added: ZTE.]

Our Lasers customers include Amada, ASML Holding, Beckman Coulter, [removed: Becton, Dickinson and Company,] DISCO, Electro Scientific [removed: Industries, EO Technics,] [added: Industries (recently acquired by MKS Instruments, a competitor of ours),] Han’s Laser Technology, [added: KLA-Tencor, Lasertec, Life Technologies,] and [removed: KLA-Tencor.][added: NR Electric.]

In accordance with the terms of the Merger Agreement, each issued and outstanding share of Oclaro common stock [removed: will be exchanged for] [added: was automatically converted into the right to receive (i)] $5.60 in cash and [added: (ii)] 0.0636 of a share of Lumentum common [removed: stock, subject to the conditions and restrictions set forth in the Merger Agreement.][added: stock.]

[removed: As of August 23, 2018, the] [added: The] total transaction consideration was [removed: expected to be approximately $1.7] [added: $1.4] billion, [removed: which would be] funded [removed: by] [added: through] a combination of [removed: $700 million in] [added: the issuance of] Lumentum common stock, [removed: $500 million in] new [removed: debt, and the remaining amount from] [added: debt obtained through] the [added: Term Loan facility, and] cash balances of the combined company.

Refer to “Note [removed: 3.][added: 5.]

Our consolidated financial statements are prepared in accordance with [removed: GAAP] [added: U.S. generally accepted accounting principles (“GAAP”)] as set forth in the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”), and we consider the various staff accounting bulletins and other applicable guidance issued by the United States Securities and Exchange Commission (“SEC”).

[removed: | • |] [added: -] Inventory Valuation [removed: |]

[removed: | • |] [added: -] Revenue Recognition [removed: |]

[removed: | • |] [added: -] Income Taxes [removed: |]

[removed: | • |] [added: -] Long-lived Asset Valuation [removed: |]

[removed: | • |] [added: Unrealized Gain (Loss) on] Derivative Liability [removed: |]

[removed: | • |] [added: -] Business Combinations [removed: |]

[removed: | • |] [added: -] Goodwill [removed: |]

[added: Our estimates of realizable value] are based upon our analysis and assumptions including, but not limited to, forecasted sales levels and historical usage by product, expected product lifecycle, product development plans and future demand requirements.

[added: Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset, significant adverse changes in the business climate or legal factors, accumulation of] costs significantly in excess of the amount originally expected for the acquisition or construction of the asset, current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset, or current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.

[removed: Recent] [added: Recently Issued] Accounting Pronouncements” in the [removed: Notes] [added: notes] to [removed: Consolidated Financial Statements.][added: consolidated financial statements.]

| | June [added: 29, 2019 | | | June] 30, 2018 | | | July 1, 2017 | | [removed: | July 2, 2016 | |]

| OpComms | [removed: 84.9] [added: 87.5] | % | | [removed: 85.6] [added: 84.9] | % | | [removed: 84.3] [added: 85.6] | % |

| Lasers | [removed: 15.1] [added: 12.5] | | | [removed: 14.4] [added: 15.1] | | | [removed: 15.7] [added: 14.4] | |

| Cost of sales | [removed: 65.1] [added: 69.8] | | | [removed: 67.6] [added: 65.1] | | | [removed: 68.5] [added: 67.6] | |

| Amortization of acquired [removed: developed technologies] [added: intangibles] | [removed: 0.3] [added: 3.0] | | | [removed: 0.6] [added: 0.3] | | | [removed: 0.8] [added: 0.6] | |

| Gross profit | [removed: 34.6] [added: 27.2] | | | [removed: 31.8] [added: 34.6] | | | [removed: 30.7] [added: 31.8] | |

| Research and development | [removed: 12.6] [added: 11.8] | | | [removed: 14.8] [added: 12.6] | | | [removed: 15.6] [added: 14.8] | |

| Selling, general and administrative | [removed: 10.3] [added: 12.8] | | | [removed: 11.0] [added: 10.3] | | | [removed: 13.0] [added: 11.0] | |

| Restructuring and related charges | [removed: 0.6] [added: 2.0] | | | [removed: 1.2] [added: 0.6] | | | [removed: 0.8] [added: 1.2] | |

| Total operating expenses | [removed: 23.4] [added: 28.6] | | | [removed: 27.0] [added: 23.4] | | | [removed: 29.4] [added: 27.0] | |

| [removed: Income] [added: Income/(loss)] from operations | [removed: 11.2] [added: (1.4] | [added: )] | | [removed: 4.8] [added: 11.2] | | | [removed: 1.3] [added: 4.8] | |

| Unrealized [removed: loss] [added: gain (loss)] on derivative [removed: liabilities] [added: liability] | [removed: (0.1] [added: 0.6] | [removed: )] | | [removed: (10.4] [added: (0.1] | ) | | [removed: (0.1] [added: (10.4] | ) |

| Interest and other income (expense), net | [removed: (0.8] [added: (1.3] | ) | | [removed: (0.3] [added: (0.8] | ) | | [removed: (0.1] [added: (0.3] | ) |

| [removed: Income (loss)] [added: Income/(loss)] before income taxes | [removed: 10.4] [added: (2.1] | [added: )] | | [removed: (6.0] [added: 10.4] | [removed: )] | | [removed: 1.1] [added: (6.0] | [added: )] |

We seek to use our core optical and photonic technology and our volume manufacturing capability to expand into attractive emerging markets that benefit from advantages that optical or photonics-based solutions provide, including 3D sensing for consumer electronics and diode light sources for a variety of consumer and industrial applications.

On December 10, 2018, we completed the acquisition of Oclaro, a provider of optical components and modules for the long-haul, metro and data center markets.

The total transaction consideration was $1.4 billion, which was funded through the issuance of Lumentum common stock, new debt (refer to “Note 7.

Term Loan Facility”), and cash balances of the combined company.

Business Combination” in the notes to consolidated financial statements for further discussion of the merger.

During our fiscal 2019, we recorded $20.9 million in restructuring and related charges in our consolidated statements of operations, attributable to severance and employee related benefits associated with Oclaro’s executive severance and retention agreements.

These retention agreements provide, under certain circumstances, for payments and benefits upon an involuntary termination of employment, including following a change in control of Oclaro.

The payments and benefits payable under these arrangements in the event of a change in control of Oclaro are subject to a “double trigger,” meaning that both a change in control of Oclaro and a subsequent involuntary termination of employment are required.

In other words, the change in control of Oclaro does not by itself trigger any payments or benefits.

Instead, payments and benefits are paid only if the employment of the employee is subsequently terminated without “cause” (or the employee resigns for “good reason”) during a specified period following the change in control.

We incurred total expense of $20.9 million, of which $5.7 million relates to cash severance as part of our restructuring expense, refer to “Note 14.

Restructuring and Related Charges” and $15.2 million relates to acceleration of equity awards, refer to “Note 17.

Stock-Based Compensation and Stock Plans.”

pluggable transceivers, and tunable small form-factor pluggable transceivers.

Following the acquisition of Oclaro, during our fiscal 2019, we made several strategic changes to our OpComms business as follows:

First, for overlapping products as a result of the acquisition, we are transitioning to a common lower cost design and manufacturing platform, which we expect will result in gross margin improvement over time.

In addition, we are discontinuing certain Telecom product lines that we believe have muted growth and profitability trends that are inconsistent with our long term model.

We expect that these transitions will be completed in our fiscal 2021.

For the Telecom product lines we are exiting, we do not expect significant revenue declines until fiscal 2021 as in fiscal 2020 we are continuing to satisfy customers’ product needs with respect to these product lines.

Second, we announced our plan to discontinue development and manufacturing of Lithium Niobate modulators, and we plan to wind down these operations in San Donato, Italy during fiscal year 2020.

Development and manufacturing will also be discontinued in our San Jose, California manufacturing locations within the next few quarters in order to facilitate our customers’ transition to new products.

We expect our Indium Phosphide photonic integrated circuits will replace Lithium Niobate modulators over time.

Third, we announced the sale of many of our Datacom transceiver module products to Cambridge Industries Group (“CIG”).

This transaction closed on April 18, 2019.

For further information regarding this transaction, refer to “Note 5.

Business Combination”.

We expect Datacom transceiver sales to ramp down to zero during fiscal year 2020.

We are investing in new Datacom chip development and expect sales of these chips to customers serving the Datacom and 5G wireless markets will grow over time.

With the exit from the business of selling Datacom transceivers, we recorded an impairment charge of $30.7 million to our Long-lived assets that were not deemed to be useful, as they were retired from active use and classified as held-for-sale.

These assets were valued at fair value less cost to sell.

We also recorded inventory write down charges of $20.8 million related to the decision to exit the Datacom module and Lithium Niobate product lines in our cost of goods sold of consolidated statements of operations.

These actions do not qualify as discontinued operations for disclosure purposes as they do not represent a strategic shift having a major effect on an entity’s operations and financial results.

For additional information, refer to “Note 15.

Impairment Charges”.

During fiscal year 2019, we removed valuation of derivative liability from the list of critical accounting policies and estimates due to the conversion of the Series A Preferred Stock to common stock on November 2, 2018.

Refer to “Note 12.

Non-Controlling Interest Redeemable Convertible Preferred Stock and Derivative Liability” for additional information.

Adoption of Topic 606

Pursuant to Topic 606, our revenues are recognized upon the application of the following steps:

| • | identification of the contract, or contracts, with a customer; |

During fiscal 2018, we made good progress on our key strategic objectives that accelerated growth, margin expansion, and customer and end-market diversification.

We ramped new major product lines in 3D sensing for mobile devices and engaged numerous customers globally, which we believe will facilitate future product and customer expansion.

Our 10G, 40G legacy transceivers and a growing portfolio of 100G pluggable transceivers support LAN/SAN/WAN needs and the cloud for customers building enterprise and hyperscale data center networks.

Acquisition of Oclaro

On March 11, 2018, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Oclaro, Inc. (“Oclaro”), Prota Merger Sub, Inc., and Prota Merger, LLC, pursuant to which we will acquire Oclaro and Oclaro will become a wholly-owned subsidiary of Lumentum.

The total transaction consideration was approximately $1.8 billion as of the date of the Merger Agreement.

Oclaro stockholders will own approximately 16% of the combined company following the closing.

Oclaro’s stockholders approved the Merger Agreement on July 10, 2018 and we have received approval for the transaction under the Hart-Scott Rodino Act in the United States.

We are in the process of obtaining antitrust approval in China.

The Merger Agreement contains certain termination rights for both Lumentum and Oclaro.

The Merger Agreement further provides that upon termination of the Merger Agreement under specified circumstances relating to failure to obtain regulatory approvals, Lumentum may be required to pay Oclaro a termination fee of $80 million.

Separation from JDSU

Lumentum Holdings Inc. was incorporated in Delaware as a wholly owned subsidiary of JDS Uniphase Corporation (“JDSU”) on February 10, 2015 and is comprised of the former communications and commercial optical products (“CCOP”) segment and the WaveReady product lines of JDSU.

On August 1, 2015, we became an independent publicly-traded company through the distribution by JDSU to its stockholders of 80.1% of our outstanding common stock (the “Separation”).

Each JDSU stockholder of record as of the close of business on July 27, 2015 received one share of Lumentum common stock for every five shares of JDSU common stock held on the record date.

JDSU was renamed Viavi in connection with the Separation and retained ownership of 19.9% of Lumentum’s outstanding shares.

Since the Separation, Viavi has sold a significant portion of its shares and is no longer a significant shareholder of Lumentum.

On July 31, 2015, prior to the Separation, Viavi transferred substantially all of the assets and liabilities and operations of the CCOP segment and WaveReady product lines to Lumentum.

Our financial statements for periods prior to the Separation were prepared on a stand-alone basis and were derived from Viavi’s consolidated financial statements and accounting records.

For the period from June 28, 2015 to August 1, 2015, expenses were allocated to us using estimates that we consider to be a reasonable reflection of the utilization of services provided to or benefits received by us.

The consolidated financial statements include certain assets and liabilities that were historically held at the Viavi level but which were transferred to us in the Separation.

Viavi’s debt and related interest expense were not attributed or allocated to us for

the periods presented since we are not the legal obligor of the debt and Viavi’s borrowings were not directly attributable to us.

Certain intercompany transactions between us and Viavi were considered to be effectively settled in the consolidated financial statements at the time the transactions were recorded.

The total net effect of the settlement of these intercompany transactions is reflected in our consolidated statements of cash flows as a financing activity and on the consolidated balance sheets as Viavi net investment.

The consolidated statements of operations include our direct expenses for cost of sales, R&D, sales and marketing, and administration as well as allocations of expenses arising from shared services and infrastructure provided by Viavi to us through the Separation.

These allocated expenses include costs of information technology, human resources, accounting, legal, real estate and facilities, corporate marketing, insurance, treasury and other corporate and infrastructure services.

In addition, other costs allocated to us include restructuring and stock-based compensation related to Viavi’s corporate and shared services employees as well as other public company costs.

These expenses were allocated to us using estimates that we consider to be a reasonable reflection of the utilization of services provided to or benefits received by our business.

The allocation methods include revenue, headcount, square footage, actual consumption and usage of services and others.

There were no allocations of expenses from Viavi for the fiscal years ended June 30, 2018 or July 1, 2017.

Related Party Transactions” in the Notes to Consolidated Financial Statements for allocations during the fiscal year ended July 2, 2016.

The preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes.

Management bases its estimates on historical experience and various other assumptions believed to be reasonable.

Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, actual results may be different from the estimates.

Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management.

Those policies are short-term investments, impairment of marketable and non-marketable securities, inventory valuation, goodwill and intangibles, long-lived asset valuation, pension benefits, revenue recognition, stock-based compensation, income taxes, restructuring, derivative liabilities, business combinations, and warranty.

| | |

| --- | --- |

| • | Warranty |

Due to the impact of changes in foreign currency exchange rates between the U.S. Dollar and foreign currencies, for the fiscal years ended June [added: 29, 2019, June] 30, 2018, [added: and] July 1, 2017, [removed: and July 2, 2016,] we recorded unrealized gain (loss) of [removed: $0.3] [added: $(0.6)] million, [removed: $0.6 million] [added: $(0.3) million,] and [removed: $(0.9)] [added: $0.6] million, respectively, in [removed: the] interest and other income (expense), net in the [removed: Consolidated Statements] [added: consolidated statements] of [removed: Operations included in this Annual Report.][added: operations.]

Although we sell primarily in [added: the] U.S. Dollar, we have foreign currency exchange risks related to our operating expenses denominated in currencies other than the U.S. Dollar, principally the [removed: Thai Baht, Taiwan Dollar,] [added: Chinese Yuan,] Canadian Dollar, [added: Thai Baht,] Japanese Yen, [added: UK Pound,] Swiss [removed: Franc, Euro,] [added: Franc] and [removed: Chinese Yuan.][added: Euro.]

We are exposed to equity price risk related to the conversion options embedded in our [removed: Series A Preferred Stock and the] 2024 Notes.

As of June [removed: 30, 2018,] [added: 29, 2019,] we had cash, cash equivalents, and short-term investments of [removed: $711.5] [added: $768.5] million.

As of June [removed: 30, 2018,] [added: 29, 2019,] the weighted-average [removed: duration] [added: life] of our investment portfolio was [removed: less than six] [added: approximately seven] months.

Based on our investment portfolio balance as of June [removed: 30, 2018,] [added: 29, 2019,] a hypothetical increase or decrease in interest rates of 1% (100 basis points) would have resulted in a decrease or an increase in the fair value of our portfolio of approximately [removed: $2.5] [added: $2.2] million, and a hypothetical increase or decrease of 0.5% (50 basis points) would have resulted in a decrease or an increase in the fair value of our portfolio of approximately [removed: $1.2] [added: $1.1] million.

A hypothetical increase or decrease of 0.5% (50 basis points) in interest rates would have resulted in an approximate $2.5 million increase or decrease in our interest expense for the year on the Term Loan Facility.

Bank Liquidity Risk

As of June 29, 2019, we had approximately $213.8 million of unrestricted cash (excluding money market funds) in operating accounts that are held with domestic and international financial institutions.

These cash balances could be lost or become inaccessible if the underlying financial institutions fail or if they are unable to meet the liquidity requirements of their depositors and if they are not supported by the national government of the country in which such financial institution is located.

Notwithstanding, to date, we have not incurred any losses and have had full access to our operating accounts.

We believe any failures of domestic and international financial institutions could impact our ability to fund our operations in the short term.

Our Series A Preferred Stock is convertible, at the option of the holder, into shares of our common stock commencing on the second anniversary of the closing of the securities purchase (absent a change of control of us or similar event) using a conversion price of $24.63.

The conversion feature is bifurcated from the Series A Preferred Stock and accounted for separately as a derivative liability.

On a quarterly basis, the derivative liability is marked to market based on the fair values of the conversion feature, with the resulting income or loss recorded as unrealized gain (loss) on a derivative liability on our consolidated statements of operations.

The determination of fair values includes various inputs, including volatility and interest rate assumptions (see “Note 12.

Derivative Liability”).

However, the change in the fair value of our common stock has the largest impact to the fair value of the derivative.

Based on a hypothetical $10.00 per share increase or decrease in the fair value of our common stock, our net income would be reduced or increased by approximately ($14.5) million or $14.5 million, respectively, for the Series A Preferred Stock derivative.

Our headquarters are located in Milpitas, California, and we employed approximately [removed: 2,930] [added: 5,161] full-time employees around the world as of June [removed: 30, 2018.][added: 29, 2019.]

Since the Separation, Viavi has sold [removed: a significant portion of] its shares and is no longer a [removed: significant] shareholder of Lumentum.

The fundamental laser component technologies which we acquired through these acquisitions, form the basis of virtually all optical networks [removed: today] [added: today,] and we believe will continue to do so for the foreseeable future.

Our optical and laser solutions, developed in close collaboration with OEM partners, are [removed: well positioned] [added: well-positioned] to meet demand resulting from these trends.

We have two operating [removed: segments:] [added: segments,] OpComms and Lasers.

The two operating segments were primarily determined based on how [removed: the] [added: our] Chief Operating Decision Maker (“CODM”) views and evaluates our operations.

Operating results are regularly reviewed by [removed: the] [added: our] CODM to make decisions about resources to be allocated to the segments and to assess their performance.

Other factors, including market separation and customer specific applications, go-to-market channels, products and manufacturing, are considered [removed: in determining the formation of these operating segments.]

We do not track [removed: all of] our property, plant, and equipment by operating segments.

For the geographic identification of these assets, refer to “Note [removed: 19.][added: 20.]

The table below discloses [removed: the percentage of] our total net revenue attributable to [added: each of] our two reportable segments.

| | Years Ended | | | | | | | | | [added: | | | | | | | |]

| | June [added: 29, 2019 | | | | | | June] 30, 2018 | | | [added: | | |] July 1, 2017 | | | [removed: July 2, 2016] | | [removed: |]

For further information regarding our operating segments, please refer to “Note [removed: 19.][added: 20.]

Our OpComms products include a wide range of components, modules and subsystems to support [removed: and maintain] customers including carrier networks [removed: for] [added: of] access (local), metro (intracity), long-haul (city-to-city and worldwide) and submarine [removed: (undersea).][added: (undersea) applications.]

We maintain leading positions in these fast growing OpComms markets through our extensive product portfolio, including reconfigurable optical add/drop multiplexers (“ROADMs”), [removed: tunable 10-gigabit small form-factor] [added: coherent DWDM] pluggable [removed: transceivers] [added: transceivers,] and tunable small form-factor pluggable transceivers.

[removed: Additionally, we are engaging customers in the sale of] [added: We also sell] laser chips for use in the manufacture of high-speed [added: Datacom] transceivers.

Our products include [removed: VCSELs] [added: vertical cavity surface emitting lasers (“VCSELs”)] and edge emitting lasers which are used in 3D sensing depth imaging systems.

In addition, our industrial diode lasers are used primarily as pump sources for pulsed and [removed: CW Fiber Lasers.][added: kilowatt class fiber lasers.]

Our OpComms customers include [removed: Accelink, Alphabet (formerly Google),] [added: Alphabet,] Apple, [removed: Arista, Arris,] Ciena, Cisco [removed: Systems, Coriant, ECI, Facebook, FiberHome, Fujitsu, HiSilicon, Huawei Marine,] [added: Systems (which recently announced the acquisition of Acacia Communications, another customer of ours),] Huawei [removed: Technologies,] [added: Technologies (including HiSilicon),] Infinera, [removed: Microsoft, NEC,] [added: Innolight,] Nokia Networks (including Alcatel-Lucent International), O-Net, [removed: Oplink, Padtec, TE Subcom,] and [removed: Yahoo.][added: ZTE.]

During fiscal [added: 2019,] 2018, [removed: 2017,] and [removed: 2016,] [added: 2017,] net revenue generated from a single customer which represented 10% or more of our total net revenue of the applicable fiscal year is summarized in the table below:

| | June [added: 29, 2019 | | | June] 30, 2018 | | | July 1, 2017 | | [removed: | July 2, 2016 | |]

| [removed: APPLE] [added: Apple] | [removed: 30.0] [added: 21.0] | % | | [removed: *] [added: 30.0] | [added: %] | | * | |

| [removed: HUAWEI] [added: Huawei] | [removed: 11.0] [added: 15.2] | % | | [removed: 16.7] [added: 11.0] | % | | [removed: 17.1] [added: 16.7] | % |

| [removed: CIENA] [added: Ciena] | [removed: 11.0] [added: 13.7] | % | | [removed: 18.5] [added: 11.0] | % | | [removed: 17.1] [added: 18.5] | % |

| [removed: CISCO] [added: Cisco] | * | | | [removed: 12.4] [added: *] | [removed: %] | | [removed: 13.0] [added: 12.4] | % |

To remain competitive, network operators worldwide must offer broader suites of digital [removed: services.][added: services at competitive prices.]

In our OpComms segment, we are focused on technology leadership through [removed: collaborative] innovation with our customers, cost leadership and functional integration.

We compete against various public and private companies in the [added: commercial laser] markets we [removed: serve.][added: serve including Coherent and IPG Photonics.]

These products use dense wavelength division multiplexing technology to enable high capacity (from 20 to [added: over] 40Tb/s in the C-Band) links driven by increasing internet demand.

[removed: Our] [added: In the Datacom market, optical] transceivers are [removed: also] used to connect servers, switches, routers and other information technology infrastructure critical for today’s [removed: email,] [added: internet applications, web services, video streaming,] enterprise [removed: resource planning and other cloud services such as streaming of high definition] [added: networks] and [removed: 4k video.][added: service provider solutions.]

For the [removed: high] 100G [added: and higher] data [removed: rate,] [added: rates,] we offer several [added: source laser] technologies to balance technical and commercial requirements.

VCSELs are ideal for short [removed: reaches] [added: reach applications] because they [removed: are] [added: enable] low [removed: power consumption,] [added: power,] low cost [removed: and] [added: optical solutions that are] highly scalable.

Our individual lasers and compact laser arrays offer an innovative solution for the LANs, SANs, broadband [removed: Internet] [added: Internet, 5G Wireless] and metro-area network as well as hyperscale datacenter applications.

Our Lasers customers include Amada, ASML Holding, Beckman Coulter, [removed: Becton, Dickinson and Company,] DISCO, Electro Scientific [removed: Industries, EO Technics,] [added: Industries (recently acquired by MKS Instruments, a competitor of ours),] Han’s Laser Technology, [added: KLA-Tencor, Lasertec, Life Technologies,] and [removed: KLA-Tencor.][added: NR Electric.]

During fiscal [added: 2019,] 2018, [removed: 2017,] and [removed: 2016,] [added: 2017,] we did not have any single customer attributable to our Lasers segment that generated net revenue of 10% or more of our total net revenue for the applicable fiscal year.

Innovative / Next generation product designs require precise [added: micromachining and materials processing, such as micro bending, soldering and welding.]

In connection with the acquisition, we paid upfront cash consideration of $5.1 million, incurred liabilities of $2.7 million contingent upon the achievement of certain production targets being achieved within 36 months following the acquisition date, and retained $0.9 million of the purchase price as security for the seller’s indemnification obligations, which [removed: was fully paid] [added: resulted in the cash payment of $1.0 million] to the seller [removed: subsequent to] [added: during fiscal 2019 (based on] the [removed: year ended June 30, 2018.][added: exchange rate at the date of payment).]

We continue to engage in targeted restructuring plans primarily intended to reduce costs, consolidate our operations, rationalize the manufacturing of our products and align our business in response to market [removed: needs.][added: needs and as a result of our acquisition of Oclaro.]

During fiscal [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] we incurred R&D expenses of [added: $184.6 million,] $156.8 million, [removed: $148.3 million] and [removed: $141.1] [added: $148.3] million, respectively.

On December 10, 2018, we completed a merger with Oclaro, Inc. (“Oclaro”), a provider of optical components and modules for the long-haul, metro and data center markets.

Oclaro’s products provide differentiated solutions for optical networks and high-speed interconnects driving the next wave of streaming video, cloud computing, application virtualization and other bandwidth-intensive and high-speed applications.

This acquisition has strengthened our product portfolio, including by gaining Oclaro’s indium phosphide laser and photonic integrated circuit and coherent component and module capabilities; broadens our revenue mix; and positions us strongly to meet the future needs of our customers.

in determining the formation of these operating segments.

In addition, it discloses the percentage of our total net revenue attributable to our product offerings which serve the Telecom, Datacom, and Consumer and Industrial markets which accounted for 10% or more of our total net revenue during the periods presented (in millions, except percentage data):

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | |

| OpComms: | | | | | | | | | | | | | | | | | |

| Telecom | $ | 786.5 | | 50.2 | % | | $ | 476.3 | | 38.1 | % | | $ | 610.7 | | 61.0 | % |

| Datacom | 166.4 | | | 10.6 | % | | 150.4 | | | 12.1 | % | | 201.3 | | | 20.0 | % |

| Consumer and Industrial | 417.3 | | | 26.7 | % | | 432.5 | | | 34.7 | % | | 45.8 | | | 4.6 | % |

| Total OpComms | $ | 1,370.2 | | 87.5 | % | | $ | 1,059.2 | | 84.9 | % | | $ | 857.8 | | 85.6 | % |

| Lasers | 195.1 | | | 12.5 | % | | 188.5 | | | 15.1 | % | | 143.8 | | | 14.4 | % |

| Total Revenue | $ | 1,565.3 | | | | | $ | 1,247.7 | | | | | $ | 1,001.6 | | | |

Following the acquisition of Oclaro, during our fiscal 2019, we made several strategic changes to our OpComms business as follows:

First, for overlapping products as a result of the acquisition, we are transitioning to a common lower cost design and manufacturing platform, which we expect will result in gross margin improvement over time.

In addition, we are discontinuing certain Telecom product lines that we believe have muted growth and profitability trends that are inconsistent with our long term model.

We expect that these transitions will be completed in our fiscal 2021.

For the Telecom product lines we are exiting, we do not expect significant revenue declines until fiscal 2021 as in fiscal 2020 we are continuing to satisfy customers’ product needs with respect to these product lines.

Second, we announced our plan to discontinue development and manufacturing of Lithium Niobate modulators, and we plan to wind down these operations in San Donato, Italy during fiscal year 2020.

Development and manufacturing will also be discontinued in our San Jose, California manufacturing locations within the next few quarters in order to facilitate our customer

s’ transition to new products.

We expect our Indium Phosphide photonic integrated circuits will replace Lithium Niobate modulators over time.

Third, we announced the sale of many of our Datacom transceiver module products to Cambridge Industries Group (“CIG”).

This transaction closed on April 18, 2019.

For further information regarding this transaction, refer to “Note 5.

Business Combination”.

We expect Datacom transceiver sales to ramp down to zero during fiscal year 2020.

We are investing in new Datacom chip development and expect sales of these chips to customers serving the Datacom and 5G wireless markets will grow over time.

With the exit from the business of selling Datacom transceivers, we recorded an impairment charge of $30.7 million to our Long-lived assets that were not deemed to be useful, as they were retired from active use and classified as held-for-sale.

These assets were valued at fair value less cost to sell.

We also recorded inventory write down charges of $20.8 million related to the decision to exit the Datacom module and Lithium Niobate product lines in our cost of goods sold of consolidated statements of operations.

These actions do not qualify as discontinued operations for disclosure purposes as they do not represent a strategic shift having a major effect on an entity’s operations and financial results.

For additional information, refer to “Note 15.

Impairment Charges”.

We believe the optical communications market has started to expand beyond a small number of very large service providers, and is transitioning to a variety of open and captive networks created for in house use by large video services, search engines and companies offering a variety of cloud computing services.

We believe that the trend towards an increase in demand for optical solutions, which increase network capacity, is in response to growing bandwidth demand driven by increased transmission of video, voice and data over optical communications networks.

Additionally, service providers also seek to decrease the total cost of ownership of their networks.

The emerging data center and Web 2.0 markets are two of the fastest growing segments in optical communications, both in terms of capital network equipment investment and growth of high data rate optical transceivers.

We are an industry leading provider of optical and photonic products defined by revenue and market share addressing a range of end-market applications including optical communications and commercial lasers.

In addition, it discloses the percentage of our total net revenue attributable to product offerings within the OpComms segment:

| | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Optical Communications: | | 84.9 | % | | 85.6 | % | | 84.3 | % |

| Telecom | | 38.1 | % | | 61.0 | % | | 61.5 | % |

| Datacom | | 12.1 | % | | 20.1 | % | | 18.1 | % |

| Consumer and Industrial | | 34.7 | % | | 4.5 | % | | 4.7 | % |

| Lasers | | 15.1 | % | | 14.4 | % | | 15.7 | % |

Our 10G, 40G legacy transceivers and a growing portfolio of 100G pluggable transceivers support LAN/SAN/WAN needs and the cloud for customers building enterprise and hyperscale data center networks.

Publicly traded companies providing optical communications components include II-VI, Acacia Communications, Accelink, ams AG, Applied Optoelectronic, Finisar, Foxconn Interconnect Technology, Furukawa Electric, Neophotonics, Oclaro, and Sumitomo Electric Industries.

Private companies and subsidiaries of public companies providing optical communications components include Fujitsu Optical Components - a subsidiary of Fujitsu, Innolight Technology, Nistica - a subsidiary of Fujikura, and O-Net.

In the Datacom market, which relies on storing, moving and manipulating vast amounts of data, we offer transmission products, such as our optical transceivers for Fiber Channel and Ethernet applications.

Our integrated fiber optic transceivers provide cost effective and scalable connectivity and are used in the hardware that runs many of the applications people use daily such as email, social networking, cloud storage, online gaming and streaming video.

They are available in several hot-pluggable form factors and allow for very compact, high-density hardware designs.

For high-performance, longer distance applications we have our distributed feedback laser (“DFB”)

and electro-absorption modulated laser (“EML”).

micromachining and materials processing, such as micro bending, soldering and welding.

We compete against various public and private companies in the commercial laser markets we serve.

Publicly traded companies providing commercial laser products include Coherent and IPG Photonics.

On March 11, 2018, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Oclaro, Inc. (“Oclaro”), Prota Merger Sub, Inc., and Prota Merger, LLC, pursuant to which we will acquire Oclaro and Oclaro will become a wholly-owned subsidiary of Lumentum.

In accordance with the terms of the Merger Agreement, each issued and outstanding share of Oclaro common stock will be exchanged for $5.60 in cash and 0.0636 of a share of Lumentum common stock, subject to the conditions and restrictions set forth in the Merger Agreement.

The total transaction consideration was approximately $1.8 billion as of the date of the Merger Agreement.

Oclaro stockholders will own approximately 16% of the combined company following the closing.

Oclaro’s stockholders approved the Merger Agreement on July 10, 2018 and we have received approval for the transaction under the Hart-Scott Rodino Act in the United States.

We are in the process of obtaining antitrust approval in China.

The Merger Agreement contains certain termination rights for both Lumentum and Oclaro.

The Merger Agreement further provides that upon termination of the Merger Agreement under specified circumstances relating to failure to obtain regulatory approvals, Lumentum may be required to pay Oclaro a termination fee of $80 million.

As of August 23, 2018, the total transaction consideration was expected to be approximately $1.7 billion, which would be funded by a combination of $700 million in Lumentum common stock, $500 million in new debt, and the remaining amount from the cash balances of the combined company.

In March 2017, we completed the purchase of a property in Thailand for additional manufacturing capacity for our future growth.

As of June 30, 2018, we have not acquired any assets under this TSA.

Contract manufacturers can save a significant amount of dollars on labor, material and other related production expenses.

As of June 30, 2018,

[removed: Were] [added: Should we experience] an unfavorable final [removed: outcome to occur,] [added: outcome,] there exists the possibility of a material adverse impact on our financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable.

Both the [removed: Neinstat] [added: Neinast] Lawsuit and the Franchi Lawsuit were voluntarily dismissed with prejudice.

The remaining Lawsuit (the Karri Lawsuit) currently purports to seek, among other things, [removed: injunctive relief preventing the parties from consummating the Merger,] damages to be awarded to the plaintiff and any class if the Merger is consummated, and litigation costs, including attorneys’ fees.

Merger Litigation

For the fiscal year ended June [removed: 30, 2018][added: 29, 2019]

| Title of each class | | [added: Trading Symbol(s) | |] Name of exchange on which registered |

| Common Stock, par value of $0.001 per share | | [added: LITE | |] Nasdaq Global Select Market |

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T [added: (§ 232.405 of this chapter)] during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

| Large accelerated filer | x | Accelerated filer | o | Non-accelerated filer [removed: (Do not check if a smaller reporting company)] | o | Smaller reporting company | o |

As of December [removed: 30, 2017,] [added: 29, 2018,] the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately [removed: $1,678] [added: $2,264] million based on the closing sales price of the registrant’s common stock as reported on the NASDAQ Stock Market on December [removed: 29, 2017] [added: 28, 2018] of [removed: $48.90] [added: $41.57] per share.

As of August [removed: 23, 2018,] [added: 20, 2019,] the Registrant had [removed: 63.3] [added: 76.9] million shares of common stock outstanding.

Portions of the information called for by Part III of this Annual Report on Form 10-K is hereby incorporated by reference from the definitive proxy statement for the Registrant’s annual meeting of stockholders, which will be filed with the Securities and Exchange Commission not later than 120 days after the Registrant’s fiscal year ended June [removed: 30, 2018.][added: 29, 2019.]

| | [ITEM [removed: 1.](#sB104E697DDC95DF6803FD5968F6CFAD7)] [added: 1.](#s853cec84e07d4bacbbb87619a285cd18)] | [removed: [BUSINESS](#sB104E697DDC95DF6803FD5968F6CFAD7)] [added: [BUSINESS](#s853cec84e07d4bacbbb87619a285cd18)] | [removed: [3](#sB104E697DDC95DF6803FD5968F6CFAD7)] [added: [2](#s853cec84e07d4bacbbb87619a285cd18)] |

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| [PART [removed: III](#sE4C742048CA95232858CB8B7348291FE)] [added: III](#sc20a2219477f4dc9ad67aa3265230d67)] | | | |

| | [ITEM [removed: 10.](#s8A8D3886EF77550D9E8E40836C552352)] [added: 10.](#sAE994E67CE7E5FFA8BBF171A320D1A43)] | [DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE [removed: GOVERNANCE](#sE4C742048CA95232858CB8B7348291FE)] [added: GOVERNANCE](#sAE994E67CE7E5FFA8BBF171A320D1A43)] | [removed: [107](#s8A8D3886EF77550D9E8E40836C552352)] [added: [118](#sAE994E67CE7E5FFA8BBF171A320D1A43)] |

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| | [ITEM [removed: 14.](#s5AB717DC4C4353E5A89B1587B7442CFD)] [added: 14.](#se453b5b0ca404237a8c77046d6c8231f)] | [PRINCIPAL ACCOUNTING FEES AND [removed: SERVICES](#s5AB717DC4C4353E5A89B1587B7442CFD)] [added: SERVICES](#se453b5b0ca404237a8c77046d6c8231f)] | [removed: [107](#s5AB717DC4C4353E5A89B1587B7442CFD)] [added: [118](#se453b5b0ca404237a8c77046d6c8231f)] |

| | [ITEM [removed: 15.](#sA06023F88D345D5A9E6F62B47057DE59)] [added: 15.](#s68793685F62051F49E692C75BA9D3C6C)] | [EXHIBITS, FINANCIAL STATEMENTS [removed: SCHEDULES](#sA06023F88D345D5A9E6F62B47057DE59)] [added: SCHEDULES](#s68793685F62051F49E692C75BA9D3C6C)] | [removed: [108](#sA06023F88D345D5A9E6F62B47057DE59)] [added: [119](#s68793685F62051F49E692C75BA9D3C6C)] |

| | [ITEM [removed: 16.](#sA06023F88D345D5A9E6F62B47057DE59)] [added: 16.](#sdca1a91a9e244573a1ded854deb52012)] | [FORM 10-K [removed: SUMMARY](#s1C3B615D540B5D1994B559F4A96A0831)] [added: SUMMARY](#sdca1a91a9e244573a1ded854deb52012)] | [removed: [111](#s1C3B615D540B5D1994B559F4A96A0831)] [added: [123](#sdca1a91a9e244573a1ded854deb52012)] |

These statements relate to, among other things, our [removed: markets,] [added: markets and industry,] products and strategy, sales, gross margins, operating expenses, capital expenditures and requirements, liquidity, product development and R&D efforts, manufacturing plans, litigation, effective tax rates and tax reserves, our corporate and financial reporting structure, our plans for growth and innovation, [added: our plans to discontinue certain operations and product lines, our expectations regarding US-China relations and market conditions,] the successful integration of Oclaro’s business (including [removed: personnel) after closing,] [added: personnel),] and expected synergies and non-GAAP earnings accretion from the acquisition of Oclaro, and are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements.

10-K 1 lumentumfy19-10k.htm 10-K

| | | | | |

| --- | --- | --- | --- | --- |

| | | | | |

| [PART I](#sf25d72df2c0f49a9bd4391e84b7275a9) | | | |

| [PART II](#s39db17b0e8c54e6ab8b5c7da2e4b3a66) | | | |

| [PART IV](#sbcea2d3c1cb44ef2840b6aa27cd6f6f1) | | | |

| [SIGNATURES](#s36F57E4666495A32A95320389EFB8B4D) | | | [124](#s36F57E4666495A32A95320389EFB8B4D) |

10-K 1 lumentumfy1810k.htm 10-K

| | | |

| --- | --- | --- |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

(Check one):

| [PART I](#sB104E697DDC95DF6803FD5968F6CFAD7) | | | |

| [PART II](#s29DD8D307912576D9E830B9FE463B7A9) | | | |

| [PART IV](#sB7F743904F245DE8A3A6EA42081622F0) | | | |

| [SIGNATURES](#s83BDE3F7B34A578D9B798D56FFB27364) | | | [112](#s83BDE3F7B34A578D9B798D56FFB27364) |

Our [added: current] corporate headquarters [removed: of] [added: is] approximately 126,000 square feet [removed: is] [added: and] located in Milpitas, California.

As of June [removed: 30, 2018,] [added: 29, 2019,] our leased and owned properties in total [removed: were] [added: are] approximately [removed: 1,200,000] [added: 2,100,000] square feet, of which we [removed: owned] [added: own] approximately [removed: 650,000] [added: 900,000] square feet, including [removed: a] [added: the] 560,000 square feet manufacturing site in [removed: Thailand.][added: Thailand and the new 238,000 square feet San Jose campus.]

Larger leased sites include properties located in Canada, [removed: China] [added: China, Japan] and the United States.

In May 2019, we purchased a three-building campus property consisting of approximately 238,000 square feet in San Jose, California.

We plan to relocate our corporate headquarters to this new San Jose campus and consolidate another leased San Jose site to this campus by end of calendar year 2019.

| Fiscal [removed: 2017] [added: 2019] Quarter Ended: | | | | | | | |

According to records of our transfer agent, we had [removed: 2,530] [added: 2,957] stockholders of record as of August [removed: 23, 2018] [added: 20, 2019] and we believe there is a substantially greater number of beneficial holders.

[removed: Holders] [added: Up through the date] of [added: conversion, holders of] Series A Preferred Stock, in preference to holders of [removed: Lumentum Inc.’s] common stock or any other class or series of [removed: its] [added: our] outstanding capital stock ranking in any such event junior to the Series A Preferred Stock, [removed: are] [added: were] entitled to receive, when and as declared by the board of directors, quarterly cumulative cash dividends at the annual rate of 2.5% of the Issuance Value per share on each outstanding share of Series A Preferred Stock.

The accrued dividends [removed: are] [added: were] payable on March 31, June 30, September 30 and December 31 of each year commencing on September 30, 2015.

During [removed: fiscal] [added: the years ended June 29, 2019, June 30,] 2018, [removed: Lumentum Inc.] [added: and July 1, 2017, we] paid $0.7 [removed: million] [added: million, $0.7 million, and $0.9 million, respectively,] in dividends to the holders of Series A Preferred Stock.

The following graph compares the cumulative total return of our common stock with the total return for the NASDAQ Composite Index (the “IXIC”) and the NASDAQ 100 Technology Sector Index (the “NDXT”) from August 4, 2015 through June [removed: 30, 2018.][added: 29, 2019.]

[removed: ][added: ]

| June 29, 2019 | $ | 63.74 | | | $ | 40.47 | |

| March 30, 2019 | $ | 56.54 | | | $ | 39.01 | |

| December 29, 2018 | $ | 62.36 | | | $ | 37.50 | |

| September 29, 2018 | $ | 68.80 | | | $ | 52.10 | |

On November 2, 2018, all 35,805 shares of Series A Preferred Stock, were converted into 1.5 million shares of our common stock.

The accrued dividends as of November 2, 2018, the effective date of the conversion of all outstanding Series A Preferred Stock, and June 30, 2018, were $0.3 million and $0.4 million, respectively.

We do not expect to pay cash dividends on our common stock in the foreseeable future.

| July 1, 2017 | $ | 65.10 | | | $ | 42.75 | |

| April 1, 2017 | $ | 54.70 | | | $ | 34.40 | |

| December 31, 2016 | $ | 44.50 | | | $ | 33.60 | |

| October 1, 2016 | $ | 41.99 | | | $ | 23.30 | |

Our historical consolidated financial statements [added: for the fiscal years ended July 2, 2016 and June 27, 2015,] include allocations of expenses arising from shared services and infrastructure provided by Viavi to us, including costs of information technology, human resources, accounting, legal, real estate and facilities, corporate marketing, insurance, treasury and other corporate and infrastructure services.

There were no allocations of expenses from Viavi for the fiscal years ended June [added: 29, 2019, June] 30, [removed: 2018] [added: 2018,] or July 1, 2017.

| | June [added: 29, 2019 (1) | | | | June] 30, 2018 [added: (2)] | | | | July 1, 2017 [removed: (4)] [added: (3)] | | | | July 2, 2016 | | | | June 27, 2015 [removed: (1) | | | | June 28, 2014 (2)] [added: (4)] | | |

| Net revenue | $ | [removed: 1,247.7] [added: 1,565.3] | | | $ | [removed: 1,001.6] [added: 1,247.7] | | | $ | [removed: 903.0] [added: 1,001.6] | | | $ | [removed: 837.1] [added: 903.0] | | | $ | [removed: 817.9] [added: 837.1] | |

| Gross profit | [removed: 432.1] [added: 425.9] | | | | [removed: 318.1] [added: 432.1] | | | | [removed: 277.3] [added: 318.1] | | | | [removed: 257.9] [added: 277.3] | | | | [removed: 256.6] [added: 257.9] | | |

| Income (loss) from operations | [added: (21.6 | | ) | |] 139.9 | | | | 47.6 | | | | 11.5 | | | | (23.4 | | ) | [removed: | 8.7 | | |]

| Net (loss) income | [added: (36.4 | | ) | |] 248.1 | | | | (102.5 | | ) | | 9.3 | | | | (3.4 | | ) | [removed: | 10.7 | | |]

| Cumulative dividends on Series A Preferred Stock | [removed: (0.9] [added: (0.3] | | ) | | (0.9 | | ) | | [removed: (0.8] [added: (0.9] | | ) | | [removed: —] [added: (0.8] | | [added: )] | | — | | |

| Accretion of Series A Preferred Stock | — | | | | — | | | | [removed: (11.7] [added: —] | | [removed: )] | | [removed: —] [added: (11.7] | | [added: )] | | — | | |

| Earnings allocated to Series A Preferred Stock | [removed: (5.7] [added: (1.2] | | ) | | [removed: —] [added: (5.7] | | [added: )] | | — | | | | — | | | | — | | |

| Net income (loss) attributable to common stockholders | $ | [removed: 241.5] [added: (37.9] | [added: )] | | $ | [removed: (103.4] [added: 241.5] | [removed: )] | | $ | [removed: (3.2] [added: (103.4] | ) | | $ | [removed: (3.4] [added: (3.2] | ) | | $ | [removed: 10.7] [added: (3.4] | [added: )] |

| Net income (loss) per share attributable to common [removed: stockholders(3):] [added: stockholders (5):] | | | | | | | | | | | | | | | | | | | |

| Basic | $ | [removed: 3.88] [added: (0.54] | [added: )] | | $ | [removed: (1.71] [added: 3.88] | [removed: )] | | $ | [removed: (0.05] [added: (1.71] | ) | | $ | [removed: (0.06] [added: (0.05] | ) | | $ | [removed: 0.18] [added: (0.06] | [added: )] |

| Diluted | $ | [removed: 3.82] [added: (0.54] | [added: )] | | $ | [removed: (1.71] [added: 3.82] | [removed: )] | | $ | [removed: (0.05] [added: (1.71] | ) | | $ | [removed: (0.06] [added: (0.05] | ) | | $ | [removed: 0.18] [added: (0.06] | [added: )] |

| Shares used to compute net income (loss) per share attributable to common [removed: stockholders(3):] [added: stockholders (5):] | | | | | | | | | | | | | | | | | | | |

| Basic | [removed: 62.3] [added: 70.7] | | | | [removed: 60.6] [added: 62.3] | | | | [removed: 59.1] [added: 60.6] | | | | [removed: 58.8] [added: 59.1] | | | | 58.8 | | |

| Diluted | [removed: 63.3] [added: 70.7] | | | | [removed: 60.6] [added: 63.3] | | | | [removed: 59.1] [added: 60.6] | | | | [removed: 58.8] [added: 59.1] | | | | 58.8 | | |

| Cash and cash equivalents | $ | [removed: 397.3] [added: 432.6] | | | $ | [removed: 272.9] [added: 397.3] | | | $ | [removed: 157.1] [added: 272.9] | | | $ | [removed: 14.5] [added: 157.1] | | | $ | [removed: 19.9] [added: 14.5] | |

| Total assets | [removed: 1,581.5] [added: 2,716.6] | | | | [removed: 1,232.9] [added: 1,581.5] | | | | [removed: 726.3] [added: 1,232.9] | | | | [removed: 512.6] [added: 726.3] | | | | [removed: 492.1] [added: 512.6] | | |

| Convertible notes | [removed: 334.2] [added: 351.9] | | | | [removed: 317.5] [added: 334.2] | | | | [removed: —] [added: 317.5] | | | | — | | | | — | | |

| Derivative liability | [removed: 52.4] [added: —] | | | | [removed: 51.6] [added: 52.4] | | | | [removed: 10.3] [added: 51.6] | | | | [removed: —] [added: 10.3] | | | | — | | |

| Other non-current liabilities | [removed: 19.0] [added: 33.7] | | | | [removed: 25.0] [added: 19.0] | | | | [removed: 9.1] [added: 25.0] | | | | [removed: 9.8] [added: 9.1] | | | | [removed: 19.6] [added: 9.8] | | |

| Total redeemable convertible preferred stock | [removed: 35.8] [added: —] | | | | 35.8 | | | | 35.8 | | | | [removed: —] [added: 35.8] | | | | — | | |

| Total stockholders’ equity | [removed: 926.1] [added: 1,497.1] | | | | [removed: 618.8] [added: 926.1] | | | | [removed: 497.4] [added: 618.8] | | | | [removed: 380.6] [added: 497.4] | | | | [removed: 335.6] [added: 380.6] | | |

| [removed: (1)] [added: (4)] | [removed: During the third quarter of] [added: In] fiscal 2015, we settled an audit in a non-U.S. jurisdiction which resulted in the recognition of a $21.8 million tax benefit. In addition, we recognized $14.1 million of additional deferred tax assets which were fully offset by a corresponding increase in the deferred tax valuation allowance. |

| [removed: (3)] [added: (5)] | On August 1, 2015, JDSU distributed 47.1 million shares, or 80.1% of the outstanding shares of Lumentum common stock to existing holders of JDSU common stock. JDSU was renamed Viavi and at the time of distribution, retained 11.7 million shares, or 19.9% of Lumentum’s outstanding shares. Basic and diluted net income (loss) per share for all periods through June 27, 2015 is calculated using the shares of Lumentum common stock outstanding on August 1, 2015. [removed: Refer to “Note 4. Earnings Per Share” in the Notes to Consolidated Financial Statements.] |

| [removed: (4)] [added: (3)] | During the third quarter of fiscal 2017, we completed the acquisition of a privately held [removed: company in accordance with the authoritative guidance on business combinations.] [added: company.] Results of operations and financial position of the business acquired have been included in our consolidated financial statements subsequent to the date of acquisition. |

| | June 29, 2019 (1) | | | | June 30, 2018 (2) | | | | July 1, 2017 (3) | | | | July 2, 2016 | | | | June 27, 2015 (4) | | |

| Term loan, non-current | 484.0 | | | | — | | | | — | | | | — | | | | — | | |

| (1) | On December 10, 2018, we completed the acquisition of Oclaro, a provider of optical components and modules for the long-haul, metro and data center markets, for $1.4 billion, which was funded through the issuance of Lumentum common stock, new debt, and cash balances of the combined company. Refer to “Note 5. Business Combination” in the notes to consolidated financial statements for further discussion of the merger. Results of operations and financial position of the business acquired have been included in our consolidated financial statements subsequent to the date of acquisition. |

| (2) | During the second quarter of fiscal 2018, we had a credit of $207.0 million primarily related to a release of a U.S. valuation allowance, which was offset by a write-down of deferred tax assets in the amount of $83.0 million due to the lower corporate tax rate enacted under the 2017 “Tax Cuts and Jobs Act” reform. |

| | |

| --- | --- |

| (2) | During the third quarter of fiscal 2014, we acquired Time-Bandwidth in a transaction accounted for in accordance with the authoritative guidance on business combinations. The Consolidated Statement of Operations for fiscal 2014 included the results of operations from Time-Bandwidth subsequent to the date of acquisition, and the Consolidated Balance Sheets as of June 28, 2014 included Time-Bandwidth’s financial position. |

To the [added: Stockholders and the] Board of Directors [removed: and Stockholders] of Lumentum Holdings Inc.

We have audited the accompanying consolidated balance sheets of Lumentum Holdings Inc. and subsidiaries (the “Company”) as of June [removed: 30, 2018] [added: 29, 2019] and [removed: July 1, 2017,] [added: June 30, 2018,] the related consolidated statements of operations, comprehensive income (loss), cash flows, and redeemable convertible preferred [removed: stock, stockholders’ equity] [added: stock] and [removed: invested] [added: stockholders’] equity for each of the [removed: two] [added: three] years in the period ended June [removed: 30, 2018,] [added: 29, 2019,] and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June [removed: 30, 2018] [added: 29, 2019] and [removed: July 1, 2017,] [added: June 30, 2018,] and the results of its operations and its cash flows for each of the [removed: two] [added: three] years in the period ended June [removed: 30, 2018,] [added: 29, 2019,] in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June [removed: 30, 2018,] [added: 29, 2019,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August [removed: 28, 2018,] [added: 27, 2019,] expressed an unqualified opinion on the Company's internal control over financial reporting.

| | June [removed: 30, 2018] [added: 29, 2019] | | | | [removed: July 1, 2017] [added: June 30, 2018] | | | | July [removed: 2, 2016] [added: 1, 2017] | | |

| Net revenue | $ | [removed: 1,247.7] [added: 1,565.3] | | | $ | [removed: 1,001.6] [added: 1,247.7] | | | $ | [removed: 903.0] [added: 1,001.6] | |

| Cost of sales | [removed: 812.4] [added: 1,092.9] | | | | [removed: 677.0] [added: 812.4] | | | | [removed: 618.9] [added: 677.0] | | |

| Amortization of acquired [removed: developed technologies] [added: intangibles] | [removed: 3.2] [added: 46.5] | | | | [removed: 6.5] [added: 3.2] | | | | [removed: 6.8] [added: 6.5] | | |

| Gross profit | [removed: 432.1] [added: 425.9] | | | | [removed: 318.1] [added: 432.1] | | | | [removed: 277.3] [added: 318.1] | | |

| Research and development | [removed: 156.8] [added: 184.6] | | | | [removed: 148.3] [added: 156.8] | | | | [removed: 141.1] [added: 148.3] | | |

| Selling, general and administrative | [removed: 128.2] [added: 200.3] | | | | [removed: 110.2] [added: 128.2] | | | | [removed: 117.3] [added: 110.2] | | |

| Restructuring and related charges | [removed: 7.2] [added: 31.9] | | | | [removed: 12.0] [added: 7.2] | | | | [removed: 7.4] [added: 12.0] | | |

| Total operating expenses | [removed: 292.2] [added: 447.5] | | | | [removed: 270.5] [added: 292.2] | | | | [removed: 265.8] [added: 270.5] | | |

| [removed: Income] [added: Income/(loss)] from operations | [removed: 139.9] [added: (21.6] | | [added: )] | | [removed: 47.6] [added: 139.9] | | | | [removed: 11.5] [added: 47.6] | | |

| Unrealized [removed: loss] [added: gain (loss)] on derivative [removed: liabilities] [added: liability] | [removed: (0.8] [added: 8.8] | | [removed: )] | | [removed: (104.2] [added: (0.8] | | ) | | [removed: (0.6] [added: (104.2] | | ) |

| Interest and other income (expense), net | [removed: (9.7] [added: (7.3] | | ) | | [added: (6.1 | | ) | | (4.7 | | ) | | (2.4 | | ) | | (1.0 | | ) | | (2.1 | | ) | |] (3.2 | | ) | | [removed: (1.2] [added: (3.4] | | ) |

| [removed: Income (loss)] [added: Income/(loss)] before income taxes | [removed: 129.4] [added: (33.3] | | [added: )] | | [removed: (59.8] [added: 129.4] | | [removed: )] | | [removed: 9.7] [added: (59.8] | | [added: )] |

| Provision for (benefit from) income taxes | [removed: (118.7] [added: 3.1] | | [removed: )] | | [removed: 42.7] [added: (118.7] | | [added: )] | | [removed: 0.4] [added: 42.7] | | |

| Net [removed: income (loss)] [added: income/(loss)] | [removed: 248.1] [added: $] | [added: (36.4] | [added: )] | | [removed: (102.5] [added: $] | [added: 248.1] | [removed: )] | | [removed: 9.3] [added: $] | [added: (102.5] | [added: )] |

| Items reconciling net [removed: income (loss)] [added: income/(loss)] to net [removed: income (loss)] [added: income/(loss)] attributable to common stockholders: | | | | | | | | | | | |

| [added: Less:] Cumulative dividends on Series A Preferred Stock | [removed: (0.9] [added: (0.3] | | ) | | (0.9 | | ) | | [removed: (0.8] [added: (0.9] | | ) |

| [added: Less:] Earnings allocated to Series A Preferred Stock | [removed: (5.7] [added: (1.2] | | ) | | [removed: —] [added: (5.7] | | [added: )] | | — | | |

| Net [removed: income (loss)] [added: income/(loss)] attributable to common stockholders - Basic | $ | [removed: 241.5] [added: (37.9] | [added: )] | | $ | [removed: (103.4] [added: 241.5] | [removed: )] | | $ | [removed: (3.2] [added: (103.4] | ) |

| Net [removed: income (loss)] [added: income/(loss)] attributable to common stockholders - Diluted | $ | [removed: 241.5] [added: (37.9] | [added: )] | | $ | [removed: (103.4] [added: 241.5] | [removed: )] | | $ | [removed: (3.2] [added: (103.4] | ) |

| Net [removed: income (loss)] [added: income/(loss)] per share attributable to common stockholders: | | | | | | | | | | | |

| Basic | $ | [removed: 3.88] [added: (0.54] | [added: )] | | $ | [removed: (1.71] [added: 3.88] | [removed: )] | | $ | [removed: (0.05] [added: (1.71] | ) |

| Diluted | $ | [removed: 3.82] [added: (0.54] | [added: )] | | $ | [removed: (1.71] [added: 3.82] | [removed: )] | | $ | [removed: (0.05] [added: (1.71] | ) |

| Shares used to compute net [removed: income (loss)] [added: income/(loss)] per share attributable to common stockholders: | | | | | | | | | | | |

| Basic | [removed: 62.3] [added: 70.7] | | | | [removed: 60.6] [added: 62.3] | | | | [removed: 59.1] [added: 60.6] | | |

| Diluted | [removed: 63.3] [added: 70.7] | | | | [removed: 60.6] [added: 63.3] | | | | [removed: 59.1] [added: 60.6] | | |

| Net [removed: income (loss)] [added: income/(loss)] | $ | [removed: 248.1] [added: (36.4] | [added: )] | | $ | [removed: (102.5] [added: 248.1] | [removed: )] | | $ | [removed: 9.3] [added: (102.5] | [added: )] |

| Net change in cumulative translation adjustment | [removed: (0.2] [added: (0.6] | | ) | | [removed: (1.2] [added: (0.2] | | ) | | [removed: (2.0] [added: (1.2] | | ) |

| Net change in unrealized [removed: loss] [added: gain (loss)] on available-for-sale securities | [removed: (1.6] [added: 2.5] | | [removed: )] | | [removed: —] [added: (1.6] | | [added: )] | | — | | |

| Net change in defined benefit [removed: obligation] [added: obligations] | [removed: 0.8] [added: (1.2] | | [added: )] | | [removed: (0.8] [added: 0.8] | | [removed: )] | | [removed: (1.1] [added: (0.8] | | ) |

| Other comprehensive income (loss), net of tax | [removed: (1.0] [added: 0.7] | | [removed: )] | | [removed: (2.0] [added: (1.0] | | ) | | [removed: (3.1] [added: (2.0] | | ) |

| Comprehensive income (loss), net of tax | $ | [removed: 247.1] [added: (35.7] | [added: )] | | $ | [removed: (104.5] [added: 247.1] | [removed: )] | | $ | [removed: 6.2] [added: (104.5] | [added: )] |

| | June [added: 29, 2019 | | | | June] 30, 2018 | | | | July 1, 2017 | | |

| Cash and cash equivalents | $ | [removed: 397.3] [added: 432.6] | | | $ | [removed: 272.9] [added: 397.3] | |

| Short-term investments | [removed: 314.2] [added: 335.9] | | | | [removed: 282.4] [added: 314.2] | | |

| Accounts receivable, net | [removed: 197.1] [added: 238.0] | | | | [removed: 166.3] [added: 197.1] | | |

August 27, 2019

| Impairment charges | 30.7 | | | | — | | | | — | | |

| Interest expense | (36.3 | | ) | | (18.2 | | ) | | (5.5 | | ) |

| Other income (expense), net | 15.8 | | | | 8.5 | | | | 2.3 | | |

| Inventories | 228.8 | | | | 174.1 | | |

| Goodwill | 368.9 | | | | 11.3 | | |

| Other intangible assets, net | 395.4 | | | | 7.0 | | |

| Term loan, current | 5.0 | | | | — | | |

| Term loan, non-current | 484.0 | | | | — | | |

| Deferred tax liability | 55.9 | | | | 0.3 | | |

| Impairment charges | 30.7 | | | | — | | | | — | | |

| Amortization of debt issuance costs on term loan | 0.8 | | | | — | | | | — | | |

| Amortization of inventory fair value adjustment in connection with Oclaro acquisition | 54.6 | | | | — | | | | — | | |

| Amortization of favorable/unfavorable leases | 0.5 | | | | — | | | | — | | |

| Proceeds from sale of product lines | 25.5 | | | | — | | | | — | | |

| Payment for asset acquisition | (1.3 | | ) | | — | | | | — | | |

| Tax payments related to restricted stock | (2.4 | | ) | | — | | | | — | | |

| Payment of acquisition related holdback | (1.0 | | ) | | — | | | | — | | |

| Proceeds from term loan, net of debt issuance costs | 490.8 | | | | — | | | | — | | |

| Repayment of term loan | (2.5 | | ) | | — | | | | — | | |

CONSOLIDATED STATEMENTS OF CASH FLOWS

| Supplemental disclosure of non-cash transactions: | | | | | | | | | | | |

| Issuance of common stock upon conversion of Series A Preferred Stock | 79.4 | | | | — | | | | — | | |

| Net transfer of assets from property plant and equipment to assets held-for-sale | 4.9 | | | | — | | | | — | | |

| Issuance of common stock and replacement awards in connection with Oclaro acquisition | 460.1 | | | | — | | | | — | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net income (loss) | — | | | — | | | | — | | | — | | | | — | | | | (36.4 | | ) | | — | | | | (36.4 | | ) |

| Declared dividend for preferred stock | — | | | — | | | | — | | | — | | | | — | | | | (0.3 | | ) | | — | | | | (0.3 | | ) |

| Issuance of shares pursuant to equity plans, net of tax withholdings | — | | | — | | | | 1.1 | | | — | | | | (0.4 | | ) | | — | | | | — | | | | (0.4 | | ) |

| Issuance of shares pursuant to merger agreement, net of tax withholdings | — | | | — | | | | 11.0 | | | — | | | | 460.1 | | | | — | | | | — | | | | 460.1 | | |

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Cumulative-effect adjustment for adoption of Topic 606 | — | | | — | | | | — | | | — | | | | — | | | | (0.6 | | ) | | — | | | | (0.6 | | ) |

| Conversion of preferred stock to common stock | — | | | (35.8 | | ) | | 1.5 | | | — | | | | 79.4 | | | | — | | | | — | | | | 79.4 | | |

| Balance as of June 29, 2019 | — | | | $ | — | | | 76.7 | | | $ | 0.1 | | | $ | 1,360.8 | | | $ | 129.1 | | | $ | 7.1 | | | $ | 1,497.1 | |

The preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

San Jose, California

August 28, 2018

In our opinion, the consolidated statements of operations, of comprehensive income (loss), of redeemable convertible preferred stock, stockholders’ equity, and invested equity and of cash flows for the year ended July 2, 2016 present fairly, in all material respects, the results of operations and cash flows of Lumentum Holdings Inc. and its subsidiaries for the year ended July 2, 2016, in conformity with accounting principles generally accepted in the United States of America.

In addition, in our opinion, the financial statement schedule for the year ended July 2, 2016, appearing under Item 15(2), presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

These financial statements and financial statement schedule are the responsibility of the Company's management.

Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit.

We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those 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 audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

September 2, 2016

| Accretion of Series A Preferred Stock | — | | | | — | | | | (11.7 | | ) |

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| Inventories | 153.6 | | | | 145.2 | | |

| Goodwill and intangibles, net | 18.3 | | | | 21.5 | | |

| Net transfers from Viavi | — | | | | — | | | | 134.2 | | |

| Payment of financing obligation related to acquisition | — | | | | — | | | | (2.3 | | ) |

| Accretion of Series A Preferred Stock | — | | | | — | | | | 11.7 | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Balance as of June 27, 2015 | — | | | $ | — | | | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 12.5 | | | $ | 368.1 | | | $ | 380.6 | |

| Pre-Separation activity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Transfers from Viavi | — | | | — | | | | — | | | — | | | | — | | | | — | | | | — | | | | 136.5 | | | | 136.5 | | |

| Total pre-Separation activity | — | | | — | | | | — | | | — | | | | — | | | | — | | | | (4.7 | | ) | | 124.8 | | | | 120.1 | | |

| Post-Separation activity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Issuance of common stock and reclassification of parent company investment in connection with the Separation | — | | | — | | | | 58.8 | | | 0.1 | | | | 457.0 | | | | — | | | | — | | | | (457.1 | | ) | | — | | |

| Issuance of redeemable convertible preferred stock, net of issuance costs of $2.0 | — | | | 33.8 | | | | — | | | — | | | | — | | | | — | | | | — | | | | (35.8 | | ) | | (35.8 | | ) |

| Accretion of equity issuance costs | — | | | 2.0 | | | | — | | | — | | | | (2.0 | | ) | | — | | | | — | | | | — | | | | (2.0 | | ) |

| Recognition of the bifurcation of the preferred stock’s derivative liability component | — | | | (9.7 | | ) | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |

| Recognition of the redemption value of the convertible preferred stock | — | | | 9.7 | | | | — | | | — | | | | (9.7 | | ) | | — | | | | — | | | | — | | | | (9.7 | | ) |

| Release of common stock shares upon vesting of restricted stock units | — | | | — | | | | 0.8 | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |

| Shares withheld for the withholding on vesting of restricted stock units | — | | | — | | | | (0.3 | ) | | — | | | | (6.8 | | ) | | — | | | | — | | | | — | | | | (6.8 | | ) |

| Exercise of stock options | — | | | — | | | | 0.1 | | | — | | | | 1.9 | | | | — | | | | — | | | | — | | | | 1.9 | | |

| Total post-Separation activity | — | | | 35.8 | | | | 59.6 | | | 0.1 | | | | 467.7 | | | | 20.2 | | | | 1.6 | | | | (492.9 | | ) | | (3.3 | | ) |

On July 31, 2015, prior to the Separation, Viavi transferred substantially all of the assets and liabilities and operations of the CCOP segment and WaveReady product lines to Lumentum.

Financial statements for periods prior to the Separation were prepared on a stand-alone basis and were derived from Viavi’s consolidated financial statements and accounting records.

The Company prepared consolidated financial statements for the period from June 28, 2015 to August 1, 2015 where expenses were allocated to us using estimates that we consider to be a reasonable reflection of the utilization of services provided to, or benefits received by, us.

Management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June [removed: 30, 2018.][added: 29, 2019.]

Based on the evaluation of our disclosure controls and procedures as of June [removed: 30, 2018,] [added: 29, 2019,] our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level.

Management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal [removed: Control—Integrated] [added: Control-Integrated] Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on the assessment, management has concluded that its internal control over financial reporting was effective as of June [removed: 30, 2018] [added: 29, 2019] to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP.

Deloitte & Touche LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Form 10-K, has issued a report, included herein, on the effectiveness of the Company’s internal control over financial reporting as of June [removed: 30, 2018.][added: 29, 2019.]

There were no changes in our internal control over financial reporting [added: as defined in Exchange Act Rules 13a-15(f) and 15d-15(f),] identified in connection with the evaluation required by [removed: Rule 13a-15 and 15d-15 of the] Exchange Act [added: Rules 13a-15(d) or 15d-15(d)] that occurred during [removed: the] [added: our most recently completed fiscal] quarter [removed: ended June 30, 2018] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

[removed: INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS][added: (d) Inherent Limitations on Effectiveness of Controls]

We have audited the internal control over financial reporting of Lumentum Holdings Inc. and subsidiaries (the “Company”) as of June [removed: 30, 2018,] [added: 29, 2019,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June [removed: 30, 2018,] [added: 29, 2019,] based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended June [removed: 30, 2018,] [added: 29, 2019,] of the Company and our report dated August [removed: 28, 2018,] [added: 27, 2019,] expressed an unqualified opinion on those financial statements.

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying [removed: Management's Annual report] [added: Management’s Report] on Internal [removed: control over] [added: Control Over] Financial Reporting.

On December 10, 2018, we acquired Oclaro (see “Note 5.

Business Combination” to the accompanying consolidated financial statements for additional information).

Management excluded Oclaro from its assessment of internal control over financial reporting as of June 29, 2019.

Total assets and revenues of Oclaro excluded from our assessment of internal control over financial reporting, were 24% as of June 29, 2019, and 16% for the year ended June 29, 2019, respectively.

We are in the process of integrating the acquired business into our existing operations and evaluating the internal controls over financial reporting of the acquired business.

As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Oclaro, Inc. (Oclaro).

Oclaro was acquired on December 10, 2018 and its financial statements constitute 24% and 16% of consolidated total assets and revenues, respectively, as of and for the year ended June 29, 2019.

Accordingly, our audit did not include the internal control over financial reporting at Oclaro.

August 27, 2019

August 28, 2018

This is called “incorporation by reference.” We intend to file our definitive proxy statement for our [removed: 2018] [added: 2019] annual meeting of stockholders (the “Proxy Statement”) pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report, and certain information to be contained therein is incorporated in this report by reference.

| [Report of Independent Registered Public Accounting [removed: Firm](#s9020F3AD00E35DD6A143E25B185FC122)] [added: Firm](#sa4278b18fe8b493d9c88c1000c27df5c)] | [removed: [53](#s9020F3AD00E35DD6A143E25B185FC122)] [added: [54](#sa4278b18fe8b493d9c88c1000c27df5c)] |

| [Consolidated Statements of Operations—Years Ended June [added: 29, 2019, June] 30, 2018, [removed: July 1, 2017,] and July [removed: 2, 2016](#s45CECC0AD05F59FCB6C4D0D56CE93B38)] [added: 1, 2017](#s556ECDD80B3450B7870F450A3E3A7C37)] | [removed: [56](#sCF4D7BFD82345CDE94A9F23D77E0D641)] [added: [55](#s556ECDD80B3450B7870F450A3E3A7C37)] |

| [Consolidated Statements of Comprehensive Income (Loss)—Years Ended June [added: 29, 2019, June] 30, 2018, [removed: July 1, 2017,] and July [removed: 2, 2016](#s45CECC0AD05F59FCB6C4D0D56CE93B38)] [added: 1, 2017](#sBA6694DD84A85024810D5B87593E0D2E)] | [removed: [57](#s45CECC0AD05F59FCB6C4D0D56CE93B38)] [added: [56](#sBA6694DD84A85024810D5B87593E0D2E)] |

| [Consolidated Balance Sheets—June [removed: 30, 2018] [added: 29, 2019] and [removed: July 1, 2017](#s9E248844881C58E48F3E07E85298B199)] [added: June 30, 2018](#s0CCD5B1D7BAA5F5E871B8912EBA38571)] | [removed: [58](#s9E248844881C58E48F3E07E85298B199)] [added: [57](#s0CCD5B1D7BAA5F5E871B8912EBA38571)] |

| [Consolidated Statements of Cash Flows—Years Ended June [added: 29, 2019, June] 30, 2018, [removed: July 1, 2017,] and July [removed: 2, 2016](#s7C689D9A562F5F2D9C5CE926F01674CB)] [added: 1, 2017](#s2D4CB2975C625963892B6F8C9D948C77)] | [removed: [59](#s7C689D9A562F5F2D9C5CE926F01674CB)] [added: [58](#s2D4CB2975C625963892B6F8C9D948C77)] |

| [Consolidated Statements of Redeemable Convertible Preferred [removed: Stock, Stockholders’ Equity,] [added: Stock] and [removed: Invested] [added: Stockholders’] Equity—Years Ended June [added: 29, 2019, June] 30, 2018, [removed: July 1, 2017,] and July [removed: 2, 2016](#sB7B66404E5D55A76AD8C5ED9B14176FD)] [added: 1, 2017](#s025EA3E1432C503C86649E9630EBC282)] | [removed: [60](#sB7B66404E5D55A76AD8C5ED9B14176FD)] [added: [60](#s025EA3E1432C503C86649E9630EBC282)] |