What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2021-02-09 · 248 added, 227 removed, 685 unchanged (41% of the section changed)

3 unchanged sentences

(in millions, except per share data)

Three Months Ended Six Months Ended

January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Product revenue $ 266.6 $ 223.8 $ 776.6 $ 770.5

11 unchanged sentences

Amortization of other intangibles 8.3 8.9 24.9 26.4

Restructuring and related charges (benefits) 0.2 ( 0.9 ) ( 0.4 ) ( 0.6 )

Restructuring and related benefits ( 0.4 ) ( 1.6 ) ( 0.8 ) ( 2.2 )

Total operating expenses 146.1 137.7 422.0 435.9

Income from operations 35.9 9.1 109.5 74.8

Interest income and other income, net 1.1 1.3 1.7 4.0

Interest income and other (loss) income, net ( 0.9 ) 5.3 0.8 9.3

Interest expense ( 9.0 ) ( 8.4 ) ( 27.0 ) ( 25.1 )

1 unchanged sentence

Provision for income taxes 14.2 38.8 35.3 57.0

Net income $ 21.9 $ 28.0 $ 36.2 $ 34.8

Net income per share:

Net income (loss) $ 11.8 $ ( 32.8 ) $ 48.0 $ 2.0

Net income (loss) per share:

Basic $ 0.05 $ ( 0.14 ) $ 0.21 $ 0.01

5 unchanged sentences

VIAVI SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

Three Months Ended Six Months Ended

January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019

Net income $ 21.9 $ 28.0 $ 36.2 $ 34.8

Other comprehensive income:

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Net income (loss) $ 11.8 $ ( 32.8 ) $ 48.0 $ 2.0

Other comprehensive income (loss):

Net change in cumulative translation adjustment, net of tax ( 4.9 ) ( 33.7 ) 57.1 ( 33.1 )

Amortization of actuarial income 0.7 0.8 1.5 1.5

Net change in accumulated other comprehensive income 35.1 28.8 63.5 2.1

Comprehensive income $ 57.0 $ 56.8 $ 99.7 $ 36.9

Unrealized holding loss arising during period — ( 0.1 ) — ( 0.1 )

Amortization of actuarial income (loss) 0.8 0.7 2.3 2.2

Net change in accumulated other comprehensive income (loss) ( 4.1 ) ( 33.1 ) 59.4 ( 31.0 )

Comprehensive income (loss) $ 7.7 $ ( 65.9 ) $ 107.4 $ ( 29.0 )

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

2 unchanged sentences

(in millions, except share and par value data)

January 2, 2021 June 27, 2020

April 3, 2021 June 27, 2020

Current assets:

27 unchanged sentences

1 billion shares authorized;

229 million shares at January 2, 2021 and 228 million shares at June 27, 2020, issued and outstanding

229 million shares at April 3, 2021 and 228 million shares at June 27, 2020, issued and outstanding

Additional paid-in capital 70,299.0 70,274.3

7 unchanged sentences

(in millions)

Six Months Ended

January 2, 2021 December 28, 2019

Nine Months Ended

April 3, 2021 March 28, 2020

OPERATING ACTIVITIES:

37 unchanged sentences

(1) These amounts include both current and non-current balances of restricted cash totaling $ 8.4 million and $ 8.9 million as of June 27, 2020 and June 29, 2019, respectively.

(2) These amounts include both current and non-current balances of restricted cash totaling $ 8.5 million and $ 8.4 million as of January 2, 2021 and December 28, 2019, respectively.

(2) These amounts include both current and non-current balances of restricted cash totaling $ 9.8 million and $ 8.4 million as of April 3, 2021 and March 28, 2020, respectively.

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

2 unchanged sentences

(in millions)

Three Months Ended January 2, 2021

Three Months Ended April 3, 2021

Additional Paid-In Capital

1 unchanged sentence

Accumulated Other Comprehensive Loss

Balance at October 3, 2020 229.3 $ 0.2 $ 70,280.7 $ ( 69,389.6 ) $ ( 137.5 ) $ 753.8

Balance at January 2, 2021 228.5 $ 0.2 $ 70,288.0 $ ( 69,384.8 ) $ ( 102.4 ) $ 801.0

Net income — — — 11.8 — 11.8

Other comprehensive income — — — — 35.1 35.1

Other comprehensive loss — — — — ( 4.1 ) ( 4.1 )

Shares issued under employee stock plans, net of tax 0.6 — — — — —

1 unchanged sentence

Repurchase of common stock ( 0.5 ) — — ( 7.9 ) — ( 7.9 )

Balance at January 2, 2021 228.5 $ 0.2 $ 70,288.0 $ ( 69,384.8 ) $ ( 102.4 ) $ 801.0

Three Months Ended December 28, 2019

Balance at April 3, 2021 228.6 $ 0.2 $ 70,299.0 $ ( 69,380.9 ) $ ( 106.5 ) $ 811.8

Three Months Ended March 28, 2020

Additional Paid-In Capital

1 unchanged sentence

Accumulated Other Comprehensive Loss

Balance at September 28, 2019 230.4 $ 0.2 $ 70,245.4 $ ( 69,376.2 ) $ ( 161.3 ) $ 708.1

Net income — — — 28.0 — 28.0

Other comprehensive income — — — — 28.8 28.8

Balance at December 28, 2019 230.2 $ 0.2 $ 70,254.0 $ ( 69,357.4 ) $ ( 132.5 ) $ 764.3

Net loss — — — ( 32.8 ) — ( 32.8 )

Other comprehensive loss — — — — ( 33.1 ) ( 33.1 )

Shares issued under employee stock plans, net of tax 0.6 — ( 0.1 ) — — ( 0.1 )

1 unchanged sentence

Repurchase of common stock ( 2.8 ) — — ( 33.1 ) — ( 33.1 )

Balance at December 28, 2019 230.2 $ 0.2 $ 70,254.0 $ ( 69,357.4 ) $ ( 132.5 ) $ 764.3

Six Months Ended January 2, 2021

Other — — — 0.1 — 0.1

Balance at March 28, 2020 228.0 $ 0.2 $ 70,265.5 $ ( 69,423.2 ) $ ( 165.6 ) $ 676.9

Nine Months Ended April 3, 2021

Additional Paid-In Capital

7 unchanged sentences

Repurchase of common stock ( 2.3 ) — — ( 31.7 ) — ( 31.7 )

Balance at January 2, 2021 228.5 $ 0.2 $ 70,288.0 $ ( 69,384.8 ) $ ( 102.4 ) $ 801.0

Six Months Ended December 28, 2019

Balance at April 3, 2021 228.6 $ 0.2 $ 70,299.0 $ ( 69,380.9 ) $ ( 106.5 ) $ 811.8

Nine Months Ended March 28, 2020

Additional Paid-In Capital

5 unchanged sentences

Net income — — — 2.0 — 2.0

Other comprehensive income — — — — 2.1 2.1

Other comprehensive loss — — — — ( 31.0 ) ( 31.0 )

Shares issued under employee stock plans, net of tax 2.8 — ( 12.7 ) — — ( 12.7 )

1 unchanged sentence

Repurchase of common stock ( 3.6 ) — — ( 43.8 ) — ( 43.8 )

Balance at December 28, 2019 230.2 $ 0.2 $ 70,254.0 $ ( 69,357.4 ) $ ( 132.5 ) $ 764.3

Other — — — 0.1 — 0.1

Balance at March 28, 2020 228.0 $ 0.2 $ 70,265.5 $ ( 69,423.2 ) $ ( 165.6 ) $ 676.9

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

3 unchanged sentences

The financial information for Viavi Solutions Inc.

(VIAVI also referred to as the Company) for the three and six months ended January 2, 2021 and December 28, 2019 is unaudited, and includes all normal and recurring adjustments Company’s management considers necessary for a fair statement of the financial information set forth herein.

(VIAVI also referred to as the Company) for the three and nine months ended April 3, 2021 and March 28, 2020 is unaudited, and includes all normal and recurring adjustments Company’s management considers necessary for a fair statement of the financial information set forth herein.

The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (U.S.

3 unchanged sentences

For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K, for the year ended June 27, 2020.

There have been no material changes to the Company’s accounting policies during the three and six months ended January 2, 2021, as compared to the significant accounting policies presented in “Note 1.

There have been no material changes to the Company’s accounting policies during the three and nine months ended April 3, 2021, as compared to the significant accounting policies presented in “Note 1.

Basis of Presentation” of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report for the year ended June 27, 2020 on Form 10-K, filed with the SEC on August 24, 2020.

1 unchanged sentence

GAAP for complete financial statements.

The results for the three and six months ended January 2, 2021 and December 28, 2019 may not be indicative of results for the fiscal year ending July 3, 2021 or any future periods.

The results for the three and nine months ended April 3, 2021 and March 28, 2020 may not be indicative of results for the fiscal year ending July 3, 2021 or any future periods.

The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to June 30th.

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In late 2020, new and potentially more contagious variants of the virus emerged, along with a surge in cases in several regions across the globe, resulting in renewed shutdown and shelter in place orders.

While rollout of several vaccines commenced in December 2020 in the UK and US, the pace of the rollout has been slow and the demand for vaccine far outpaces available supply.

While rollout of several vaccines commenced in December 2020, the pace of the rollout has been slow and the demand for vaccine far outpaces available supply.

While, the Company expects this could have a negative impact to our sales and our results of operations, the Company is not aware of any specific event or circumstances that would require an update to the estimates or judgments or a revision of the carrying value of assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q.

These estimates may change,

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

estimates may change, as new events occur and additional information becomes available.

as new events occur and additional information becomes available.

Actual results may differ materially from these estimates assumptions or conditions.

16 unchanged sentences

The guidance is effective for the Company in the first quarter of fiscal year 2023 and early adoption is permitted.

The Company is evaluating the effects that the impact of adoption of this guidance will have on its consolidated financial statements.

The Company is evaluating the effects that the adoption of this guidance will have on its consolidated financial statements.

VIAVI SOLUTIONS INC.

2 unchanged sentences

The following table sets forth the computation of basic and diluted net income per share ( in millions, except per share data ):

Three Months Ended Six Months Ended

January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019

Net income $ 21.9 $ 28.0 $ 36.2 $ 34.8

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Net income (loss) $ 11.8 $ ( 32.8 ) $ 48.0 $ 2.0

Weighted-average shares outstanding:

4 unchanged sentences

Diluted 240.2 230.0 233.8 236.3

Net income per share:

Net income (loss) per share:

Basic $ 0.05 $ ( 0.14 ) $ 0.21 $ 0.01

6 unchanged sentences

The following table sets forth the weighted-average potentially dilutive securities excluded from the computation of the diluted net income per share because their effect would have been anti-dilutive ( in millions ):

Three Months Ended Six Months Ended

January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Restricted stock units 0.3 7.3 0.4 0.2

Stock options and ESPP — 1.2 — —

Shares issuable from Convertible Notes — 1.3 — —

Total potentially dilutive securities 0.3 9.8 0.4 0.2

(1) As the Company incurred a loss from continuing operations in the period, potential securities from employee stock options, ESPP, restricted stock units (RSUs) and performance stock units (PSUs) have been excluded from the dilutive net loss per share computations as their effects were deemed anti-dilutive.

(2) The Company’s 1.75 % Senior Convertible Notes due 2023 are not included in the table above.

The par amount of convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and unpaid interest and then the “in-the money” conversion benefit feature at the conversion price above $ 13.94 per share is payable in cash, shares of the Company’s common stock or a combination of both, at the Company’s election.

The Company’s average stock price for the period presented did not exceed the conversion price of $ 13.94 .

Refer to “Note 11.

Debt” for more details.

Accumulated Other Comprehensive Loss

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the six months ended January 2, 2021, the changes in accumulated other comprehensive loss, net of tax, by component were as follows ( in millions ):

For the nine months ended April 3, 2021, the changes in accumulated other comprehensive loss, net of tax, by component were as follows ( in millions ):

Unrealized losses on available-for sale investments Foreign

currency translation adjustments

Change in unrealized components of defined benefit obligations (1)

currency translation adjustments, net of tax Change in unrealized components of defined benefit obligations (1)

Beginning balance as of June 27, 2020 $ ( 5.1 ) $ ( 129.6 ) $ ( 31.2 ) $ ( 165.9 )

2 unchanged sentences

Net current-period other comprehensive income — 57.1 2.3 59.4

Ending balance as of January 2, 2021 $ ( 5.1 ) $ ( 67.6 ) $ ( 29.7 ) $ ( 102.4 )

(1) The amount reclassified out of accumulated other comprehensive loss represents the amortization of actuarial losses included as a component of cost of revenues, research and development (R&D) and selling, general and administrative (SG&A) in the Consolidated Statement of Operations for the six months ended January 2, 2021.

There was no tax impact for the six months ended January 2, 2021.

Ending balance as of April 3, 2021 $ ( 5.1 ) $ ( 72.5 ) $ ( 28.9 ) $ ( 106.5 )

There was no tax impact for the nine months ended April 3, 2021.

Refer to “Note 17.

6 unchanged sentences

On October 30, 2018 (RPC Close Date), the Company acquired all of the equity interest of RPC Photonics, Inc.

(RPC) for approximately $ 33.4 million in cash and an additional earn-out of up to $ 53.0 million in cash based on the achievement of certain gross profit targets over approximately a four year period, subsequent to the RPC Close Date.

The achievement or distributions of earn-out payments are not limited in any one period.

(RPC) for approximately $ 33.4 million in cash and an additional earn-out of up to $ 53.0 million in cash to be paid based on the achievement of certain gross profit targets over approximately a four year period, subsequent to the RPC Close Date.

The acquisition of RPC expands the Company’s 3D Sensing offerings.

Other Acquisition

During the twelve months ended June 27, 2020, the Company completed a business acquisition for total consideration of approximately $ 5.2 million in cash paid at close and contingent consideration (earn-out) of up to $ 5.5 million in cash to be paid based on the occurrence or achievement of certain agreed upon targets.

During the twelve months ended June 27, 2020, the Company completed a business acquisition for total consideration of approximately $ 5.2 million in cash paid at close and an earn-out liability of up to $ 5.5 million in cash to be paid based on the occurrence or achievement of certain agreed upon targets.

In connection with this acquisition, the Company recorded approximately $ 6.2 million of developed technology and customer relationships and $ 1.4 million of deferred tax liability resulting from the acquisitions.

The acquired developed technology and customer relationship assets are being amortized over their estimated useful lives of six years .

The fair value measurements for the earn-out liabilities associated with the Company’s acquisitions is discussed further in “Note 8.

Fair Value Measurements”.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides a reconciliation of changes in the fair value of the Company’s earn-out liabilities associated with Company’s acquisitions for the three and nine months ended April 3, 2021 and March 28, 2020 ( in millions ):

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Beginning period balance $ 8.9 $ 34.1 $ 9.9 $ 38.4

Fair value adjustment of earn-out liabilities ( 2.3 ) — ( 3.8 ) ( 4.3 )

Currency translation adjustment 0.1 — 0.6 —

Ending period balance $ 6.7 $ 34.1 $ 6.7 $ 34.1

No payments were made in connection with the Company’s earn-out liabilities during the three and nine months ended April 3, 2021 and March 28, 2020.

Balance Sheet and Other Details

9 unchanged sentences

Contract Assets, included in accounts receivable, net, on the Consolidated Balance Sheets, are not material to the Consolidated Financial Statements.

The prior year’s Consolidated Balance Sheets and Statements of Cash Flows have been updated to conform to the current period’s presentation.

Contract asset balances will fluctuate based upon the timing of transfer of services, billings and customers’ acceptance of contractual milestones.

Gross receivables include both billed and unbilled receivables (Unbilled Receivables and Contract Assets).

As of January 2, 2021, and June 27, 2020, the Company had total unbilled receivables of $ 5.5 million and $ 3.8 million, respectively.

As of April 3, 2021, and June 27, 2020, the Company had total unbilled receivables of $ 5.9 million and $ 3.8 million, respectively.

Deferred Revenue:

3 unchanged sentences

The Company also has short-term and long-term deferred revenues related to undelivered hardware and professional services, consisting of installations and consulting engagements, which are recognized as the Company's performance obligations under the contract are completed and accepted by the customer.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables summarize the activity related to deferred revenue ( in millions ):

January 2, 2021

Three months ended Six Months Ended

April 3, 2021

Three months ended Nine Months Ended

Deferred revenue:

9 unchanged sentences

Remaining Performance Obligations:

Remaining performance obligations represent the aggregate amount of the transaction price allocated to performance obligations that are not delivered or incomplete, as of January 2, 2021.

Remaining performance obligations represent the aggregate amount of the transaction price allocated to performance obligations that are not delivered or incomplete.

Remaining performance obligations include deferred revenue plus unbilled amounts not yet recorded.

1 unchanged sentence

Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, adjustments for revenue that have not materialized, and adjustments for currency.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The value of the transaction price allocated to remaining performance obligations as of January 2, 2021, was $ 202.6 million.

The value of the transaction price allocated to remaining performance obligations as of April 3, 2021, was $ 239.7 million.

The Company expects to recognize approximately 90 % of remaining performance obligations as revenue within the next 12 months, and the remainder thereafter.

4 unchanged sentences

Accounts receivable allowance

The following table presents the activities and balances for allowance for doubtful accounts ( in millions ):

The following table presents the activities and balances for allowance for credit losses ( in millions ):

June 27, 2020 Charged to Costs and Expenses Deductions (1)

January 2, 2021

Allowance for doubtful accounts $ 3.0 $ 0.6 $ ( 1.2 ) $ 2.4

April 3, 2021

Allowance for credit losses $ 3.0 $ 0.7 $ ( 1.5 ) $ 2.2

(1) Represents the effect of currency translation adjustments and write-offs of uncollectible accounts, net of recoveries.

1 unchanged sentence

The following table presents the components of inventories, net ( in millions ):

January 2, 2021 June 27, 2020

April 3, 2021 June 27, 2020

Finished goods $ 38.0 $ 30.0

2 unchanged sentences

Inventories, net $ 90.6 $ 83.3

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Prepayments and other current assets

The following table presents the components of prepayments and other current assets ( in millions ):

January 2, 2021 June 27, 2020

April 3, 2021 June 27, 2020

Prepayments $ 11.1 $ 10.9

5 unchanged sentences

Prepayments and other current assets $ 48.6 $ 50.8

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other current liabilities

The following table presents the components of other current liabilities ( in millions ):

January 2, 2021 June 27, 2020

April 3, 2021 June 27, 2020

Customer prepayments $ 0.4 $ 0.5

8 unchanged sentences

The following table presents components of other non-current liabilities ( in millions ):

January 2, 2021 June 27, 2020

April 3, 2021 June 27, 2020

Pension and post-employment benefits $ 105.6 $ 102.7

7 unchanged sentences

Other non-current liabilities $ 223.8 $ 231.2

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investments and Forward Contracts

Available-For-Sale Investments

The following table presents the Company’s available-for-sale securities as of January 2, 2021 ( in millions ):

The following table presents the Company’s available-for-sale securities as of April 3, 2021 ( in millions ):

Amortized Cost/

4 unchanged sentences

Total available-for-sale debt securities $ 0.9 $ — $ ( 0.4 ) $ 0.5

The Company generally classifies debt securities as available-for-sale and as cash equivalents, short-term investments, or other non-current assets based on the stated maturities;

however, certain securities with stated maturities of longer than twelve months which are highly liquid and available to support current operations are also classified as short-term investments.

As of January 2, 2021, the total estimated fair value of $ 0.5 million was classified as other non-current assets.

In addition to the amounts presented above, the Company’s short-term investments classified as trading securities related to the deferred compensation plan as of January 2, 2021, were $ 1.6 million, of which $ 0.4 million was invested in debt securities, $ 0.2 million was invested in money market instruments and funds and $ 1.0 million was invested in equity securities.

Trading securities are reported at fair value, with the unrealized gains or losses

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

resulting from changes in fair value recognized in the Company’s Consolidated Statements of Operations as a component of interest and other income, net.

During the three and six months ended January 2, 2021 and December 28, 2019, the Company recorded no other-than-temporary impairment charges in each respective period.

The following table presents contractual maturities of the Company’s debt securities classified as available-for-sale as of January 2, 2021, ( in millions ):

The Company generally classifies debt securities as available-for-sale and as cash equivalents, short-term investments, or other non-current assets based on the stated maturities of the securities.

In addition, certain securities with stated maturities of longer than twelve months , which are highly liquid and available to support current operations are also classified as short-term investments.

As of April 3, 2021, the total estimated fair value of $ 0.5 million was classified as other non-current assets.

In addition to the amounts presented above, the Company’s short-term investments classified as trading securities related to the deferred compensation plan as of April 3, 2021, were $ 1.5 million, of which $ 0.4 million was invested in debt securities, $ 0.2 million was invested in money market instruments and funds and $ 0.9 million was invested in equity securities.

Trading securities are reported at fair value, with the unrealized gains or losses resulting from changes in fair value recognized in the Company’s Consolidated Statements of Operations as a component of interest income and other (loss) income, net.

During the three and nine months ended April 3, 2021 and March 28, 2020, the Company recorded no other-than-temporary impairment charges in each respective period.

The following table presents contractual maturities of the Company’s debt securities classified as available-for-sale as of April 3, 2021, ( in millions ):

Amortized Cost/

10 unchanged sentences

In addition to the amounts presented above, as of June 27, 2020, the Company’s short-term investments classified as trading securities, related to the deferred compensation plan, were $ 1.4 million, of which $ 0.3 million was invested in debt securities, $ 0.2 million was invested in money market instruments and funds and $ 0.9 million was invested in equity securities.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Non-Designated Foreign Currency Forward Contracts

3 unchanged sentences

The Company does not use these foreign currency forward contracts for trading purposes.

As of January 2, 2021, the Company had forward contracts that were effectively closed but not settled with the counterparties by quarter end.

As of April 3, 2021, the Company had forward contracts that were effectively closed but not settled with the counterparties by quarter end.

Therefore, the fair value of these contracts of $ 2.1 million and $ 2.2 million is reflected as prepayments and other current assets and other current liabilities, respectively.

2 unchanged sentences

therefore, the fair value of the contracts is not significant.

As of January 2, 2021 and June 27, 2020, the notional amounts of the forward contracts the Company held to purchase foreign currencies were $ 142.4 million and $ 146.4 million, respectively, and the notional amounts of forward contracts the Company held to sell foreign currencies were $ 19.0 million and $ 22.0 million, respectively.

The change in the fair value of foreign currency forward contracts is recorded as gain or loss in the Company’s Consolidated Statements of Operations as a component of interest and other income, net.

As of April 3, 2021 and June 27, 2020, the notional amounts of the forward contracts the Company held to purchase foreign currencies were $ 120.2 million and $ 146.4 million, respectively, and the notional amounts of forward contracts the Company held to sell foreign currencies were $ 20.6 million and $ 22.0 million, respectively.

The change in the fair value of foreign currency forward contracts is recorded as gain or loss in the Company’s Consolidated Statements of Operations as a component of Interest income and other (loss) income, net.

The cash flows related to the settlement of foreign currency forward contracts are classified as operating activities.

The foreign exchange forward contracts incurred gains of $ 6.9 million and $ 13.3 million for the three and six months ended January 2,

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2021 and gains of $ 4.8 million and $ 2.2 million for the three and six months ended December 28, 2019, respectively.

The foreign exchange forward contracts incurred a loss of $ 0.1 million and a gain of $ 13.3 million for the three and nine months ended April 3, 2021, respectively and losses of $ 4.0 million and $ 1.8 million for the three and nine months ended March 28, 2020, respectively.

Fair Value Measurements

9 unchanged sentences

Level 2 instruments of the Company generally include certain U.S.

and foreign government and agency securities, commercial paper, corporate and municipal bonds and notes, asset-backed securities, certificates of deposit, and foreign currency forward contracts.

and foreign government and agency securities, commercial paper, corporate and municipal bonds and notes, asset-backed securities, certificates of deposit, foreign currency forward contracts and long-term debt.

To estimate their fair value, the Company utilizes pricing models based on market data.

1 unchanged sentence

includes financial instruments for which fair value is derived from valuation-based inputs, that are unobservable and significant to the overall fair value measurement.

As of January 2, 2021 and June 27, 2020, the Company did not hold any Level 3 investment securities.

The fair value of the Company’s contingent liabilities was determined using Level 3 inputs .

The Company’s Level 3 liabilities as of January 2, 2021, consist of contingent purchase consideration related to its business and asset acquisitions completed during fiscal 2020 and 2019.

The fair value of earn-out liabilities was determined using a Monte Carlo Simulation that includes significant unobservable inputs such as the risk-adjusted discount rate, gross profit volatility, and projected financial forecast of acquired business over the earn-out period.

The fair value of contingent consideration liabilities is remeasured at each reporting period at the estimated fair value based on the inputs on the date of remeasurement, with the change in fair value recognized in the Selling, General and Administrative expense of the Consolidated Statements of Operations.

As of April 3, 2021 and June 27, 2020, the Company did not hold any Level 3 investment securities.

The Company’s Level 3 liabilities as of April 3, 2021, consist of contingent purchase consideration.

The company has aggregate contingent liabilities related to its

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

business and asset acquisitions completed during fiscal 2020 and 2019.

Fair Value Measurements

The Company’s assets and liabilities measured at fair value (categorized by input measure) for the periods presented are as follows ( in millions ):

January 2, 2021 June 27, 2020

April 3, 2021 June 27, 2020

Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3

13 unchanged sentences

Total liabilities $ 8.9 $ — $ 2.2 $ 6.7 $ 11.4 $ — $ 1.5 $ 9.9

(1) $ 8.4 million and $ 2.2 million in prepayments and other current assets on the Company’s Consolidated Balance Sheets as of January 2, 2021 and June 27, 2020, respectively.

(2) Includes as of January 2, 2021, $ 379.6 million in cash and cash equivalents, $ 1.6 million in short-term investments, $ 3.0 million in restricted cash, $ 8.4 million in prepayments and other current assets and $ 5.1 million in other non-current assets on the Company’s Consolidated Balance Sheets.

(1) $ 2.1 million and $ 2.2 million in prepayments and other current assets on the Company’s Consolidated Balance Sheets as of April 3, 2021 and June 27, 2020, respectively.

(2) Includes as of April 3, 2021, $ 372.8 million in cash and cash equivalents, $ 1.5 million in short-term investments, $ 2.7 million in restricted cash, $ 2.1 million in prepayments and other current assets and $ 5.1 million in other non-current assets on the Company’s Consolidated Balance Sheets.

Includes as of June 27, 2020, $ 327.2 million in cash and cash equivalents, $ 1.4 million in short-term investments, $ 3.4 million in restricted cash, $ 2.2 million in prepayments and other current assets, and $ 4.5 million in other non-current assets on the Company’s Consolidated Balance Sheets.

(3) Includes $ 1.5 million and $ 1.5 million in other current liabilities on the Company’s Consolidated Balance Sheets as of January 2, 2021 and June 27, 2020, respectively.

(4) Includes $ 6.9 million and $ 9.4 million in other non-current liabilities and $ 2.0 million and $ 0.5 million in other current liabilities as of January 2, 2021 and June 27, 2020, respectively.

The following table provides a reconciliation of changes in the fair value of the Company’s Level 3, contingent consideration liabilities, for the three and six months ended January 2, 2021 ( in millions ):

Three Months Ended Six Months Ended

January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019

Beginning period balance $ 9.9 $ 40.1 $ 9.9 $ 38.4

Fair value adjustment of contingent consideration liabilities ( 1.5 ) ( 6.0 ) ( 1.5 ) ( 4.3 )

Currency translation adjustment 0.5 — 0.5 —

Balance as of October 3, 2020 $ 8.9 $ 34.1 $ 8.9 $ 34.1

No payments were made in connection with the Company’s contingent earn-out liabilities during the three and six months ended January 2, 2021 and December 28, 2019.

(3) $ 2.2 million and $ 1.5 million in other current liabilities on the Company’s Consolidated Balance Sheets as of April 3, 2021 and June 27, 2020, respectively.

(4) Includes $ 1.8 million and $ 9.4 million in other non-current liabilities and $ 4.9 million and $ 0.5 million in other current liabilities as of April 3, 2021 and June 27, 2020, respectively.

Other Fair Value Measures

Fair Value of Long-term Debt:

If measured at fair value in the Consolidated Balance Sheets, the Company’s 1.75 % Senior Convertible Notes (2023 Notes) and 1.00 % Senior Convertible Notes (2024 Notes) would be classified in Level 2 of the fair value hierarchy as they are not actively traded in the markets.

As of April 3, 2021 and June 27, 2020, the fair value of the 2023 Notes was approximately $ 286.8 million and $ 251.4 million, respectively and the fair value of the 2024 Notes was approximately $ 614.1 million and $ 523.3 million, respectively.

See “Note 11.

Debt”, for further discussion of the Company’s long-term debt.

VIAVI SOLUTIONS INC.

5 unchanged sentences

Currency translation adjustments 15.0 — — 15.0

Balance as of January 2, 2021 $ 348.5 $ 4.7 $ 42.2 $ 395.4

Balance as of April 3, 2021 $ 349.9 $ 4.3 $ 42.2 $ 396.4

The Company tests goodwill for impairment at the reporting unit level annually during the fourth quarter of each fiscal year, or more frequently if events or circumstances indicate that the asset may be impaired.

In the fourth quarter of fiscal 2020, the Company reviewed goodwill under the qualitative assessment of the authoritative guidance and concluded that it was more likely than not that the fair value of each reporting unit exceeded its carrying amount and that no indication of impairment existed.

There were no events or changes in circumstances which triggered an impairment review during the three and six months ended January 2, 2021.

There were no events or changes in circumstances which triggered an impairment review during the three and nine months ended April 3, 2021.

Acquired Developed Technology and Other Intangibles

The following tables present details of the Company’s acquired developed technology, customer relationships and other intangibles ( in millions ):

As of January 2, 2021 Gross Carrying Amount Accumulated Amortization Net

As of April 3, 2021 Gross Carrying Amount Accumulated Amortization Net

Acquired developed technology $ 449.2 $ ( 374.3 ) $ 74.9

11 unchanged sentences

The following table presents the amortization recorded relating to acquired developed technology, customer relationships and other intangibles ( in millions ):

Three Months Ended Six Months Ended

January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Cost of revenues $ 8.3 $ 8.0 $ 24.9 $ 24.8

1 unchanged sentence

Total amortization of intangible assets $ 16.6 $ 16.9 $ 49.8 $ 51.2

Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of January 2, 2021, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows ( in millions ):

Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of April 3, 2021, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows ( in millions ):

Remainder of 2021 $ 16.5

2 unchanged sentences

The acquired developed technology, customer relationships and other intangibles balance are adjusted quarterly to record the effect of currency translation adjustments.

As of January 2, 2021 and June 27, 2020, the Company’s long-term debt on the Consolidated Balance Sheets represented the carrying amount of the liability component of the Senior Convertible Notes, net of unamortized debt discounts and issuance costs.

As of April 3, 2021 and June 27, 2020, the Company’s long-term debt on the Consolidated Balance Sheets represented the carrying amount of the liability component of the Senior Convertible Notes, net of unamortized debt discounts and issuance costs.

The following table presents the carrying amounts of the liability and equity components of our debt ( in millions ):

January 2, 2021 June 27, 2020

April 3, 2021 June 27, 2020

Principal amount of 1.00 % Senior Convertible Notes

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(1) Included in additional paid-in-capital on the Consolidated Balance Sheets.

The Company was in compliance with all debt covenants as of January 2, 2021 and June 27, 2020.

The Company was in compliance with all debt covenants as of April 3, 2021 and June 27, 2020.

VIAVI SOLUTIONS INC.

8 unchanged sentences

We are required to pay a commitment fee on the unutilized portion of the facility which ranges between 0.30 % and 0.40 % per annum depending on our consolidated secured leverage ratio.

As of January 2, 2021 and June 27, 2020, we had no amounts outstanding under the Credit Agreement.

As of April 3, 2021 and June 27, 2020, we had no amounts outstanding under the Credit Agreement.

1.75 % Senior Convertible Notes (2023 Notes)

2 unchanged sentences

The carrying value of the liability component at issuance was calculated as the present value of its cash flows using a discount rate of 5.3 % based on the 5 -year swap rate plus credit spread as of the issuance date.

As of January 2, 2021, the expected remaining term of the 2023 Notes is 2.4 years.

As of April 3, 2021, the expected remaining term of the 2023 Notes is 2.2 years.

The proceeds from the 2023 Notes Private Placement amounted to $ 67.3 million after issuance costs.

1 unchanged sentence

The 2023 Notes mature on June 1, 2023 unless earlier converted, redeemed or repurchased.

Based on quoted market prices as of January 2, 2021 and June 27, 2020, the fair value of the 2023 Notes was approximately $ 280.0 million and $ 251.4 million, respectively.

The 2023 Notes are classified within Level 2 as they are not actively traded in markets.

1.00 % Senior Convertible Notes (2024 Notes)

5 unchanged sentences

The carrying value of the liability component at issuance was calculated as the present value of its cash flows using a discount rate of 4.8 % based on the 7 -year swap rate plus credit spread as of the issuance date.

As of January 2, 2021, the expected remaining term of the 2024 Notes is 3.2 years.

Based on quoted market prices as of January 2, 2021 and June 27, 2020, the fair value of the 2024 Notes was approximately $ 595.6 million and $ 523.3 million, respectively.

The 2024 Notes are classified within Level 2 as they are not actively traded in markets.

As of April 3, 2021, the expected remaining term of the 2024 Notes is 2.9 years.

VIAVI SOLUTIONS INC.

2 unchanged sentences

The following table presents the interest expense for contractual interest, amortization of debt issuance costs and accretion of debt discount ( in millions ):

Three Months Ended Six Months Ended

January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Interest expense-contractual interest $ 2.4 $ 2.1 $ 7.1 $ 6.4

14 unchanged sentences

The Company's leases do not contain any material residual value guarantees.

For the three months ended January 2, 2021 and December 28, 2019, the total operating lease costs were $ 3.4 million and $ 3.3 million, respectively.

For the six months ended January 2, 2021 and December 28, 2019, the total operating lease costs were $ 6.8 million and $ 6.6 million, respectively.

Total variable lease costs were immaterial during the three and six months ended January 2, 2021 and December 28, 2019, respectively.

For the three months ended April 3, 2021 and March 28, 2020, the total operating lease costs were $ 3.6 million and $ 3.6 million, respectively.

For the nine months ended April 3, 2021 and March 28, 2020, the total operating lease costs were $ 10.4 million and $ 10.2 million, respectively.

Total variable lease costs were immaterial during the three and nine months ended April 3, 2021 and March 28, 2020.

The total operating costs were included in cost of revenues, research and development, and selling, general and administrative in the Company’s Consolidated Statements of Operations.

As of January 2, 2021, the weighted-average remaining lease term was 5.0 years, and the weighted-average discount rate was 4.7 %.

For the three months ended January 2, 2021 and December 28, 2019, cash paid for amounts included in the measurement of operating lease liabilities were $ 3.7 million and $ 5.8 million, respectively;

As of April 3, 2021, the weighted-average remaining lease term was 4.8 years, and the weighted-average discount rate was 4.6 %.

For the three months ended April 3, 2021 and March 28, 2020, cash paid for amounts included in the measurement of operating lease liabilities were $ 3.3 million and $ 3.7 million, respectively;

and operating ROU assets obtained in exchange of new operating lease liabilities were $ 2.8 million and $ 0.6 million, respectively.

For the six months ended January 2, 2021 and December 28, 2019, cash paid for amounts included in the measurement of operating lease liabilities were $ 8.1 million and $ 9.2 million, respectively;

For the nine months ended April 3, 2021 and March 28, 2020, cash paid for amounts included in the measurement of operating lease liabilities were $ 11.4 million and $ 12.9 million, respectively;

and operating ROU assets obtained in exchange of new operating lease liabilities were $ 6.3 million and $ 15.1 million, respectively.

2 unchanged sentences

The balance sheet information related to our operating leases is as follows ( in millions ):

January 2, 2021

Other non-current assets $ 39.9

Total operating ROU assets $ 39.9

Other current liabilities $ 12.1

Other non-current liabilities 25.7

Total operating lease liabilities $ 37.8

Future minimum operating lease payments as of January 2, 2021 are as follows ( in millions ):

April 3, 2021

Other Non-Current Assets Other Current Liabilities Other Non-Current Liabilities Total

ROU Assets $ 39.1 $ — $ — $ 39.1

Operating Lease Liabilities $ — $ 12.0 $ 24.8 $ 36.8

Future minimum operating lease payments as of April 3, 2021 are as follows ( in millions ):

Fiscal Years Operating Leases

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The timing of associated cash payments is dependent upon the type of restructuring charge and can extend over multiple periods.

Fiscal 2019 Plans - NSE, including AvComm and Wireless (AW) Restructuring Plan

During the first quarter of fiscal 2019, the Company’s management approved restructuring and workforce reduction plans within its Network Service and Enablement (NSE) business, including actions related to the acquired AW business.

The plan was re-approved in the third quarter of fiscal 2019 and the fourth quarter of fiscal 2020 to include additional headcount and to further drive operational improvement.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of January 2, 2021 and June 27, 2020, the Company’s total restructuring accrual was $ 3.6 million and $ 6.5 million, respectively.

During the three and six months ended January 2, 2021, the Company recorded restructuring and related charges (benefits) of $ 0.2 million and $( 0.4 ) million, respectively.

During the three and six months ended December 28, 2019, the Company recorded restructuring and related benefits of $( 0.9 ) million and $( 0.6 ) million, respectively.

Summary of Restructuring Plans

The following table presents the adjustments to the accrued restructuring expenses related to all of the Company’s restructuring plans described below for the three and six months ended January 2, 2021 (in millions) :

Balance June 27, 2020 Six Months Ended January 2, 2021 Benefits Cash

Non-cash Settlements

and Other Adjustments (2)

Balance January 2, 2021

Fiscal 2019 Plan

NSE, including AW (1)

$ 6.5 $ ( 0.4 ) $ ( 2.5 ) $ — $ 3.6

(1) Plan type includes workforce reduction cost.

The following table presents the adjustments to the accrued restructuring expenses for the Company’s restructuring plans for the nine months ended April 3, 2021 (in millions) :

Fiscal 2019 NSE,

Including AW Plan

Beginning of period balance, June 27, 2020 (2)

Cash settlements ( 3.5 )

Restructuring and related benefits ( 0.8 )

Non-cash Settlements and Other Adjustments (1)

End of period balance, April 3, 2021 (2)

(1) Other adjustments represents the effect of currency translation adjustments.

(3) $ 3.6 million and $ 6.5 million in other current liabilities on the Consolidated Balance Sheets as of January 2, 2021 and June 27, 2020, respectively.

Fiscal 2019 Plans

NSE, including AvComm and Wireless (AW) Restructuring Plan

The plan was re-approved in the third quarter of fiscal 2019 and the fourth quarter of fiscal 2020 to include additional headcount and to further drive operational improvement.

During the three and six months ended January 2, 2021, restructuring charges (benefits) of $ 0.2 million and $( 0.4 ) million, respectively were recorded, as adjustments to severance and employee benefits.

The Company recorded an income tax expense of $ 12.5 million and $ 21.1 million for the three and six months ended January 2, 2021, respectively.

The Company recorded an income tax expense of $ 9.9 million and $ 18.2 million for the three and six months ended December 28, 2019, respectively.

The income tax provision for the three and six months ended January 2, 2021 and December 28, 2019 primarily relates to income tax in certain foreign and state jurisdictions based on the Company’s forecasted pre-tax income or loss for the respective fiscal year.

The income tax provision recorded differs from the expected tax provision that would be calculated by applying the federal statutory rate to the Company’s income from continuing operations before taxes primarily due to the changes in valuation allowance for deferred tax assets attributable to the Company’s domestic and foreign income from continuing operations.

As of January 2, 2021, and June 27, 2020, the Company’s unrecognized tax benefits totaled $ 48.4 million and $ 48.4 million, respectively, and are included in deferred taxes and other non-current tax liabilities, net.

The Company had $ 3.9 million accrued for the payment of interest and penalties as of January 2, 2021.

(2) Included in other current liabilities on the Consolidated Balance Sheets as of April 3, 2021 and June 27, 2020, respectively.

During the three and nine months ended April 3, 2021 and March 28, 2020 the Company recorded restructuring and related benefits, as follows:

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

FY2019 NSE, Including AW Plan ( 0.4 ) ( 1.6 ) ( 0.8 ) ( 2.2 )

The Company recorded an income tax expense of $ 14.2 million and $ 35.3 million for the three and nine months ended April 3, 2021, respectively.

The Company recorded an income tax expense of $ 38.8 million and $ 57.0 million for the three and nine months ended March 28, 2020, respectively.

The income tax provision for the three and nine months ended April 3, 2021 primarily relates to income tax in certain foreign and state jurisdictions based on the Company’s forecasted pre-tax income or loss for the respective fiscal year.

The income tax provision for the three and nine months ended March 28, 2020 primarily related to a $ 31.6 million charge for withholding taxes expected to be paid on the repatriation of $ 316.4 million of foreign earnings that the Company no longer considered to be permanently reinvested.

In light of the economic uncertainty caused by COVID-19, the Company reevaluated its historic assertion on foreign earnings and no longer considered these earnings to be permanently reinvested.

The repatriation of these earnings increased available cash in the U.S.

and provided greater U.S.

financial flexibility to assist the Company in navigating the expected downturn in the economy.

The foreign earnings were repatriated to the U.S.

without incurring any significant additional U.S current or deferred tax expense.

In addition, the income tax provision for the period includes the income tax in certain foreign and state jurisdictions based on the Company’s forecasted pre-tax income or loss for the respective fiscal year.

The income tax provision recorded differs from the expected tax provision that would be calculated by applying the federal statutory rate to the Company’s income from continuing operations before taxes primarily due to the withholding taxes accrued on foreign earnings and the changes in valuation allowance for deferred tax assets attributable to the Company’s domestic and foreign income from continuing operations.

As of April 3, 2021, and June 27, 2020, the Company’s unrecognized tax benefits totaled $ 48.4 million and $ 48.4 million, respectively, and are included in deferred taxes and other non-current tax liabilities, net.

The Company had $ 3.7 million accrued for the payment of interest and penalties as of April 3, 2021.

The timing and resolution of income tax examinations is uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities may differ from the amounts accrued for each year.

7 unchanged sentences

Under the new repurchase program, the Company may repurchase its common stock from time to time at the discretion of the Company’s management.

During the three and six months ended January 2, 2021, the Company repurchased 1.3 million and 1.9 million shares of its common stock for $ 17.1 million and $ 23.8 million, respectively.

As of January 2, 2021, the Company had remaining authorization of $ 131.8 million for future share repurchases.

During the three and nine months ended April 3, 2021, the Company repurchased 0.5 million and 2.3 million shares of its common stock for $ 7.9 million and $ 31.7 million, respectively, of which $ 0.6 million was included as an unsettled liability at the end of April 3, 2021.

As of April 3, 2021, the Company had remaining authorization of $ 123.9 million for future share repurchases.

The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including business and financial market conditions.

Stock-Based Compensation

The impact on the Company’s results of operations of recording stock-based compensation by function for the three and six months ended January 2, 2021 and December 28, 2019, as follows ( in millions ):

Three Months Ended Six Months Ended

January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019

The Company's stock-based compensation includes a combination of time-based restricted stock awards and performance-based awards.

Restricted stock awards are granted without an exercise price and are converted to shares immediately upon vesting.

When converted into shares upon vesting, shares equivalent in value to the minimum withholding taxes liability on the vested shares are withheld by the Company for the payment of such taxes.

The Company generally estimates the fair value of stock-based awards based on the closing market price of the Company’s common stock.

In the case of performance-based awards that include a market condition, the Company will estimate the fair value of the award using a combination of the closing market price of the Company’s common stock on the grant date and the Monte Carlo simulation model.

For performance-based awards, shares attained over target upon vesting are reflected as awards granted during the period.

Time-based restricted stock awards will generally vest in annual or quarterly installments over a period of four years subject to the employees’ continuing service to the Company.

The Company's performance-based awards may include performance conditions, market conditions, time-based service conditions or a combination there of and are generally expected to vest over a one to four years.

In addition, the actual number of shares awarded upon vesting of performance-based grants may vary from the target shares depending upon the achievement of the relevant performance or market based conditions.

During the nine months ended April 3, 2021 and March 28, 2020, the Company granted $ 3.2 million and $ 3.2 million time-based restricted stock awards, respectively.

The aggregate grant-date fair value of time-based restricted stock awards granted during the nine months ended April 3, 2021 and March 28, 2020 were estimated to be $ 44.8 million and $ 43.9 million, respectively.

Time-based restricted stock awards granted to eligible employees generally vest in annual or quarterly installments over a period of four years , are subject to the employees’ continuing service to the Company and do not have an expiration date.

During the nine months ended April 3, 2021 and March 28, 2020, the Company granted $ 1.1 million and $ 0.5 million, performance-based awards, respectively.

In addition, during the nine months ended April 3, 2021 and March 28, 2020, the Company granted an additional 0.1 million and 0.2 million shares, respectively, due to performance-based shares attained over target.

The aggregate grant-date fair value of performance-based awards granted during the nine months ended April 3, 2021 and March 28, 2020 were estimated to be $ 15.7 million and $ 7.7 million, respectively.

The majority of performance-based awards vest in equal annual installments over four years based on the attainment of certain performance measures and the employee’s continued service through the vest date.

Performance-based awards with market conditions were valued using a Monte Carlo simulation.

As of April 3, 2021, $ 68.5 million of unrecognized stock-based compensation costs, remain to be amortized.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The impact on the Company’s results of operations of recording stock-based compensation by function for the three and nine months ended April 3, 2021 and March 28, 2020, as follows (in millions):

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Cost of revenues $ 1.2 $ 1.2 $ 3.6 $ 3.2

2 unchanged sentences

Total stock-based compensation expense $ 11.0 $ 11.7 $ 33.4 $ 33.3

Approximately $ 1.1 million and $ 1.2 million of stock-based compensation expense was capitalized to inventory as of January 2, 2021 and December 28, 2019, respectively.

Full Value Awards

Full Value Awards refer to restricted stock units that are granted without an exercise price and are converted to shares immediately upon vesting.

Performance-based awards are performance-based with market conditions, performance conditions, time-based or a combination, and are expected to vest over one to four years .

When converted into shares upon vesting, shares equivalent in value to the minimum withholding taxes liability on the vested shares are withheld by the Company for the payment of such taxes.

During the six months ended January 2, 2021 and December 28, 2019, the Company granted 2.7 million and 3.1 million time-based Full Value Awards, respectively.

The fair value of these are based on the closing market price of the Company’s common stock on the date of award.

These time-based awards granted to eligible employees generally vest in annual or quarterly installments over a period of three years , are subject to the employees’ continuing service to the Company and do not have an expiration date.

During the six months ended January 2, 2021 and December 28, 2019, the Company granted 0.6 million and 0.5 million, performance-based awards, respectively.

These performance-based shares represent the target amount of grants, and the actual number of shares awarded upon vesting may vary depending upon the achievement of the relevant performance conditions.

The shares attained over target upon vesting are reflected as awards granted during the period.

Accordingly, during the six months ended January 2, 2021 and December 28, 2019, the Company granted an additional 0.1 million and 0.2 million shares, respectively, due to performance-based shares attained over target.

The aggregate grant-date fair value of performance-based awards granted during the six months ended January 2, 2021 and December 28, 2019 were estimated to be $ 8.9 million and $ 7.7 million, respectively.

The majority of performance-based awards vest in equal annual installments over three years based on the attainment

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

of certain performance measures and the employee’s continued service through the vest date.

The performance-based awards with market conditions were valued using a Monte Carlo simulation.

As of January 2, 2021, $ 63.9 million of unrecognized stock-based compensation cost related to Full Value Awards remains to be amortized.

Approximately $ 1.2 million and $ 1.1 million of stock-based compensation was capitalized to inventory as of April 3, 2021 and March 28, 2020, respectively.

Employee Pension and Other Benefit Plans

3 unchanged sentences

Benefits are generally based upon years of service and compensation or stated amounts for each year of service.

As of January 2, 2021, the U.K.

As of April 3, 2021, the U.K.

plan was partially funded while the other plans were unfunded.

1 unchanged sentence

For unfunded plans, the Company pays the post-retirement benefits when due.

During the six months ended January 2, 2021, the Company contributed $ 1.3 million to the U.K.

During the nine months ended April 3, 2021, the Company contributed $ 1.6 million to the U.K.

plan and $ 4.3 million to the other plans.

1 unchanged sentence

The following table presents the components of net periodic cost for the pension and benefits plans ( in millions ):

Three Months Ended Six Months Ended

January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Service cost $ 0.1 $ — $ 0.3 $ 0.2

7 unchanged sentences

The Company expects to incur cash outlays of approximately $ 10.5 million related to its defined benefit pension plans during fiscal 2021 to make current benefit payments and fund future obligations.

As of January 2, 2021, approximately $ 3.1 million had been incurred.

As of April 3, 2021, approximately $ 5.9 million had been incurred.

These payments have been estimated based on the same assumptions used to measure the Company’s projected benefit obligation at June 27, 2020.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Commitments and Contingencies

6 unchanged sentences

The accrual is included in pension and post-employment benefits, which is a component of other non-current liabilities in the Company’s Consolidated Balance Sheets.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company pursued an appeal of the court decision.

2 unchanged sentences

law firm responsible for the error.

As of January 2, 2021, the related accrued pension liability was £ 6.5 million or $ 8.8 million.

As of April 3, 2021, the related accrued pension liability was £ 6.5 million or $ 9.0 million.

The Company is subject to a variety of claims and suits that arise from time to time in the ordinary course of our business.

11 unchanged sentences

Because the obligated amounts of these types of agreements often are not explicitly stated, the overall maximum amount of the obligations cannot be reasonably estimated.

Historically, the Company has not been obligated to make significant payments for these obligations, and no liabilities have been recorded for these obligations on the Consolidated Balance Sheets as of January 2, 2021 and June 27, 2020.

Outstanding Letters of Credit and Performance Bonds

As of January 2, 2021, the Company had standby letters of credit of $ 7.6 million and performance bonds of $ 0.9 million collateralized by restricted cash.

Outstanding Letters of Credit, Performance Bonds and Other Claims

As of April 3, 2021, the Company had standby letters of credit of $ 7.3 million, performance bonds of $ 0.9 million and other claims of $ 1.6 million, collateralized by restricted cash.

Product Warranties

1 unchanged sentence

In general, the Company offers its customers warranties up to three years and has accrued a reserve for the estimated costs of product warranties at the time revenue is recognized.

It estimates the costs of its warranty obligations based on its historical experience of known product failure rates, use of materials to repair or replace defective products and service delivery costs incurred in correcting product failures.

From time to time, specific warranty accruals may be made if unforeseen technical problems arise.

The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

It estimates the costs of its warranty

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the changes in the Company’s warranty reserve during the three and six months ended January 2, 2021 and December 28, 2019, ( in millions ):

Three Months Ended Six Months Ended

January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019

obligations based on its historical experience of known product failure rates, use of materials to repair or replace defective products and service delivery costs incurred in correcting product failures.

From time to time, specific warranty accruals may be made if unforeseen technical problems arise.

The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

The following table presents the changes in the Company’s warranty reserve during the three and nine months ended April 3, 2021 and March 28, 2020, ( in millions ):

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Balance as of beginning of period $ 9.6 $ 9.2 $ 9.4 $ 8.7

25 unchanged sentences

The Company allocates corporate-level operating expenses to its segment results, except for certain non-core operating and non-operating activities as discussed below.

The Company does not allocate stock-based compensation, acquisition-related charges, amortization of intangibles, restructuring and related (benefits) charges, impairment of goodwill, changes in fair value of contingent consideration liabilities, non-operating income and expenses, or other charges unrelated to core operating performance to its segments because management does not include this information in its measurement of the performance of the operating segments.

These items are presented as “Other Items” in the table below.

Additionally, the Company does not specifically identify and allocate all assets by operating segment.

The Company does not allocate stock-based compensation, acquisition-related charges, amortization of intangibles, restructuring and related benefits, impairment of goodwill, changes in fair value of contingent

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables presents information on the Company’s reportable segments for the three months ended January 2, 2021 and December 28, 2019 ( in millions ):

Three Months Ended January 2, 2021

consideration liabilities, non-operating income and expenses, or other charges unrelated to core operating performance to its segments because management does not include this information in its measurement of the performance of the operating segments.

These items are presented as “Other Items” in the table below.

Additionally, the Company does not specifically identify and allocate all assets by operating segment.

The following tables present information on the Company’s reportable segments for the three months ended April 3, 2021 and March 28, 2020 ( in millions ):

Three Months Ended April 3, 2021

Network and Service Enablement

7 unchanged sentences

Operating margin 9.9 % 43.9 % 11.8 %

Three Months Ended December 28, 2019

Three Months Ended March 28, 2020

Network and Service Enablement

10 unchanged sentences

Three Months Ended

January 2, 2021 December 28, 2019

April 3, 2021 March 28, 2020

Corporate reconciling items impacting gross profit:

10 unchanged sentences

Other charges unrelated to core operating performance (1)

Restructuring and related (benefits) charges ( 0.2 ) 0.9

( 0.6 ) ( 1.9 )

Restructuring and related benefits 0.4 1.6

GAAP operating income from continuing operations $ 35.9 $ 9.1

(1) During the three months ended January 2, 2021 and December 28, 2019, other charges unrelated to core operating performance primarily consisted of certain acquisition and integration related changes, transformational initiatives such as, site consolidations, and reorganization, and loss on disposal of long-lived assets.

Six Months Ended January 2, 2021

(1) During the three months ended April 3, 2021 and March 28, 2020, other charges (benefits) unrelated to core operating performance primarily consisted of certain acquisition and integration related changes, transformational initiatives such as, site consolidations, and reorganization, and loss on disposal of long-lived assets.

The following tables present information on the Company’s reportable segments for the nine months ended April 3, 2021 and March 28, 2020 (in millions):

Nine Months Ended April 3, 2021

Network and Service Enablement

9 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended December 28, 2019

Nine Months Ended March 28, 2020

Network and Service Enablement

7 unchanged sentences

Operating margin 11.5 % 37.2 % 8.6 %

Six Months Ended

January 2, 2021 December 28, 2019

Nine Months Ended

April 3, 2021 March 28, 2020

Corporate reconciling items impacting gross profit:

10 unchanged sentences

Other charges unrelated to core operating performance (1) ( 0.7 ) ( 5.8 )

( 0.1 ) ( 3.9 )

Restructuring and related charges 0.8 2.2

GAAP operating income from continuing operations $ 109.5 $ 74.8

(1) During the six months ended January 2, 2021 and December 28, 2019, other charges unrelated to core operating performance primarily consisted of certain acquisition and integration related changes, transformational initiatives such as, site consolidations, and reorganization, and loss on disposal of long-lived assets.

(1) During the nine months ended April 3, 2021 and March 28, 2020, other charges unrelated to core operating performance primarily consisted of certain acquisition and integration related changes, transformational initiatives such as, site consolidations, and reorganization, and loss on disposal of long-lived assets.

VIAVI SOLUTIONS INC.

4 unchanged sentences

For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers.

The following tables present net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue for the three and six months ended January 2, 2021 and December 28, 2019 (in millions):

The following tables present net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue for the three and nine months ended April 3, 2021 and March 28, 2020 (in millions):

Three Months Ended

January 2, 2021 December 28, 2019

April 3, 2021 March 28, 2020

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

10 unchanged sentences

Total net revenue $ 266.6 $ 36.8 $ 303.4 $ 223.8 $ 32.4 $ 256.2

Six Months Ended

January 2, 2021 December 28, 2019

Nine Months Ended

April 3, 2021 March 28, 2020

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

10 unchanged sentences

Total net revenue $ 776.6 $ 111.4 $ 888.0 $ 770.5 $ 99.2 $ 869.7

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subsequent Events

The Company purchased land and building in Chandler, Arizona, on April 26, 2021, for $ 14.3 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements