What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-08-17 compared with 2022-08-19 · 482 added, 429 removed, 1339 unchanged (40% of the section changed)

9 unchanged sentences

Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible debt instruments as of July 3, 2021 and the manner in which it accounts for leases as of June 30, 2019.

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible debt instruments as of July 3, 2021.

Basis for Opinions

11 unchanged sentences

We believe that our audits provide a reasonable basis for our opinions.

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Definition and Limitations of Internal Control over Financial Reporting

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Certain of the Company’s contracts with customers include performance obligations consisting of a variety of products and services and may involve a significant level of integration and interdependency between performance obligations.

Identifying and evaluating whether products and services are considered distinct performance obligations may require significant management judgment, particularly in the Network Enablement and Service Enablement reportable segments due to the nature of the products and service offerings.

The principal considerations for our determination that performing procedures relating to revenue recognition – identifying and evaluating performance obligations in certain customer contracts in the Network Enablement and Service Enablement reportable segments is a critical audit matter are the significant judgment by management in identifying and evaluating performance obligations, which in turn led to a high degree of auditor judgment and effort in performing procedures and evaluating audit evidence obtained related to whether such performance obligations were appropriately identified and evaluated by management.

2 unchanged sentences

These procedures also included, among others, testing on a sample basis, the completeness and accuracy of management’s identification and evaluation of performance obligations in certain customer contracts in the Network Enablement and Service Enablement reportable segments.

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/s/ PricewaterhouseCoopers LLP

2 unchanged sentences

We have served as the Company’s auditor since 2005.

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VIAVI SOLUTIONS INC.

1 unchanged sentence

(in millions, except per share data)

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Product revenue $ 936.1 $ 1,135.5 $ 1,051.4

11 unchanged sentences

Amortization of other intangibles 8.7 9.7 33.3

Restructuring and related (benefits) charges ( 0.1 ) ( 1.6 ) 3.5

Restructuring and related charges (benefits) 12.1 ( 0.1 ) ( 1.6 )

Total operating expenses 556.4 588.5 572.2

1 unchanged sentence

Loss on convertible note settlement (Note 11) — ( 101.8 ) —

( 101.8 ) — —

Loss on convertible note modification (Note 11) ( 2.2 ) — —

Interest and other income, net 7.6 5.2 3.3

10 unchanged sentences

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

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VIAVI SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Net income $ 25.5 $ 15.5 $ 67.5

Other comprehensive (loss) income:

Other comprehensive income (loss):

Net change in cumulative translation adjustment, net of tax 18.8 ( 76.1 ) 61.5

Net change in available-for-sale investments, net of tax:

Unrealized holding gains (losses) arising during period 0.1 — ( 0.1 )

Unrealized holding (losses) gains arising during period ( 0.3 ) 0.1 —

Net change in defined benefit obligation, net of tax:

Unrealized actuarial gains (losses) arising during period 13.9 4.1 ( 5.4 )

Amortization of actuarial losses 2.9 3.1 2.8

Net change in accumulated other comprehensive (loss) income ( 59.2 ) 68.7 ( 31.3 )

Comprehensive (loss) income $ ( 43.7 ) $ 136.2 $ 17.7

Unrealized actuarial gains arising during period 2.0 13.9 4.1

Amortization of actuarial (gains) losses ( 0.1 ) 2.9 3.1

Net change in accumulated other comprehensive income (loss) 20.4 ( 59.2 ) 68.7

Comprehensive income (loss) $ 45.9 $ ( 43.7 ) $ 136.2

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

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VIAVI SOLUTIONS INC.

22 unchanged sentences

Accrued expenses 21.2 29.3

Short-term debt (Note 11)

Short-term debt 96.2 68.4

Other current liabilities 49.8 56.3

Total current liabilities 343.5 369.3

Long-term debt (Note 11)

Long-term debt 629.5 616.5

Other non-current liabilities 186.7 170.4

15 unchanged sentences

(in millions)

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

OPERATING ACTIVITIES:

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Loss on disposal of long-lived assets 0.9 2.3 0.1

Loss on convertible note settlement 101.8 — —

Loss on convertible note debt modification and settlement 2.2 101.8 —

Deferred taxes, net 4.8 ( 10.5 ) 0.6

Restructuring 12.1 — —

Gain on legal settlement ( 6.7 ) — —

Other 4.7 2.0 2.8

10 unchanged sentences

INVESTING ACTIVITIES:

Purchases of short-term investments ( 13.1 ) — —

Acquisition of businesses, net of cash acquired ( 67.3 ) ( 8.3 ) ( 0.7 )

Purchase price adjustment related to business acquisition ( 0.7 ) — —

Capital expenditures ( 51.1 ) ( 72.5 ) ( 52.1 )

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Payment of financing obligations ( 0.1 ) ( 0.1 ) ( 1.2 )

Cash paid to note holders in convertible note settlement ( 347.3 ) — —

Cash paid to third parties in convertible note settlement ( 4.3 ) — —

Retirement of convertible notes upon maturity ( 68.1 ) — —

Cash paid in convertible note settlement — ( 351.6 ) —

Proceeds from exercise of employee stock options and employee stock purchase plan 7.9 7.8 6.6

2 unchanged sentences

Repayment of revolving credit facility — ( 150.0 ) —

Payment of acquisition related holdback ( 1.1 ) — ( 6.8 )

Payment of acquired debt ( 0.8 ) ( 2.8 ) —

Payment of acquisition related contingent consideration ( 4.1 ) ( 1.2 ) ( 0.7 )

Payment of acquisition related contingent consideration and obligations ( 7.8 ) ( 6.0 ) ( 4.0 )

Net cash used in financing activities ( 50.0 ) ( 210.4 ) ( 58.8 )

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Cash paid for interest $ 22.0 $ 17.9 $ 12.3

Cash paid for income taxes $ 78.7 $ 43.8 $ 50.6

(1) These amounts include both current and non-current balances of restricted cash totaling $ 10.6 million, $ 8.4 million and $ 8.9 million as of July 3, 2021, June 27, 2020, and June 29, 2019, respectively.

Cash paid for income taxes, net of refunds $ 47.5 $ 77.1 $ 36.7

(1) These amounts include both current and non-current balances of restricted cash totaling $ 12.9 million, $ 10.6 million and $ 8.4 million as of July 2, 2022, July 3, 2021, and June 27, 2020, respectively.

(2) These amounts include both current and non-current balances of restricted cash totaling $ 9.1 million, $ 12.9 million and $ 10.6 million as of July 1, 2023, July 2, 2022 and July 3, 2021, respectively.

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

5 unchanged sentences

Balance at June 27, 2020 228.3 $ 0.2 $ 70,146.1 $ ( 69,347.2 ) $ ( 165.9 ) $ 633.2

Cumulative adjustment for adoption of ASU 2016-02 (Topic 842) — — — 3.0 3.0

Net income — — — 67.5 — 67.5

Other comprehensive loss — — — — ( 31.3 ) ( 31.3 )

Other comprehensive income — — — — 68.7 68.7

Shares issued under employee stock plans, net of tax effects 3.0 — ( 11.5 ) — — ( 11.5 )

1 unchanged sentence

Repurchase of common stock ( 3.0 ) — — ( 42.6 ) — ( 42.6 )

Balance at June 27, 2020 228.3 $ 0.2 $ 70,146.1 $ ( 69,347.2 ) $ ( 165.9 ) $ 633.2

Balance at July 3, 2021 228.3 $ 0.2 $ 70,183.2 $ ( 69,322.3 ) $ ( 97.2 ) $ 763.9

Net income — — — 15.5 — 15.5

Other comprehensive income — — — — 68.7 68.7

Other comprehensive loss — — — — ( 59.2 ) ( 59.2 )

Shares issued under employee stock plans, net of tax effects 2.3 — ( 6.1 ) — — ( 6.1 )

1 unchanged sentence

Repurchase of common stock ( 14.8 ) — — ( 235.5 ) — ( 235.5 )

Convertible note settlement (Note 11)

10.6 — 141.1 — — 141.1

Balance at July 2, 2022 226.4 $ 0.2 $ 70,370.2 $ ( 69,542.3 ) $ ( 156.4 ) $ 671.7

4 unchanged sentences

Repurchase of common stock ( 7.3 ) — ( 0.3 ) ( 83.9 ) — ( 84.2 )

Convertible note settlement (Note 11)

Convertible note modification (Note 11)

— — 10.1 — — 10.1

9 unchanged sentences

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

The Company’s 2022 fiscal year was a 52-week year ending on July 2, 2022.

The Company’s 2021 fiscal year was a 53-week year ending on July 3, 2021;

fiscal year 2020 was a 52-week fiscal year ending on June 27, 2020.

The Company’s first quarter of fiscal year 2021 was a 14-week quarter compared to the standard 13-week quarters.

The Company’s 2023 and 2022 fiscal years were 52-week years ending on July 1, 2023 and July 2, 2022, respectively.

The Company’s 2021 fiscal year was a 53-week fiscal year ending on July 3, 2021 as the first quarter of fiscal year 2021 was a 14-week quarter compared to the standard 13-week quarters.

Principles of Consolidation

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If estimates or assumptions differ from actual results, subsequent periods are adjusted to reflect more readily available information.

Actual results may differ from these estimates due to the uncertainty around the magnitude, duration and effects of the COVID-19 pandemic, as well as other factors.

A novel strain of coronavirus (COVID-19) declared an international pandemic by the World Health Organization (WHO) in March 2020 continues to have a global impact more than two years since it was first identified.

The worldwide spread of the COVID-19 virus resulted in a global slowdown of economic activity which could continue to impact demand for a broad variety of goods and services, including from the Company’s customers, while also continuing to disrupt sales channels and marketing activities for an unknown period of time.

New and potentially more contagious variants of the virus have emerged over the course of the pandemic, along with a surge in cases in several regions across the globe, including Europe and Asia, resulting in renewed shutdown, mandatory quarantines and shelter in place orders in certain regions.

These events have led, at times, to slowdowns in shipping and commercial activities.

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

As economies recover, there are shipping and logistics challenges and continued supply chain constraints, shortages and delays, along with inflationary pricing pressures.

Governmental vaccine mandates and mandated quarantines could lead to attrition and operational challenges.

While the Company expects that all of this could have a negative impact to its sales and its 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 Annual Report on Form 10-K.

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

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash and Cash Equivalents

The Company considers highly liquid instruments such as treasury bills, commercial paper and other money market instruments with original maturities of 90 days or less at the time of purchase to be cash equivalents.

Cash equivalents also include certain term deposits with financial institutions that the Company can liquidate with 30 days’ advance notice without incurring penalties.

Restricted Cash

At July 1, 2023 and July 2, 2022, the Company’s short-term restricted cash balances were $ 4.5 million and $ 3.6 million, respectively.

The Company’s long-term restricted cash balances, included in other non-current assets in the Company’s Consolidated Balance Sheets, were $ 9.3 million and $ 6.3 million as of July 2, 2022 and July 3, 2021, respectively.

These balances primarily include interest-bearing investments in bank certificates of deposit and money market funds which act as collateral supporting the issuance of letters of credit and performance bonds for the benefit of third parties.

The Company’s long-term restricted cash balances, included in Other non-current assets on the Consolidated Balance Sheets, were $ 4.6 million and $ 9.3 million as of July 1, 2023 and July 2, 2022, respectively.

These balances primarily include interest-bearing investments in bank deposit and money market funds which act as collateral supporting the issuance of standby letters of credit and performance bonds for the benefit of third parties.

Refer to “Note 18.

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The cost of securities sold is based on the specific identified method.

Unrealized gains and losses resulting from changes in fair value on available-for-sale investments, net of tax, are reported within accumulated other comprehensive loss.

Unrealized gains and losses resulting from changes in fair value on available-for-sale investments, net of tax, are reported as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company periodically reviews investments in debt securities for impairment.

3 unchanged sentences

and, (ii) the portion of the loss that is not related to credit factors, or the non-credit loss portion.

The credit loss portion is recorded as an allowance to credit loss through interest and other income, net, and the non-credit loss portion is recorded as a separate component of other comprehensive loss.

The credit loss portion is recorded as an allowance to credit loss through Interest and other income, net, in the Consolidated Statement of Operations and the non-credit loss portion is recorded as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets.

The Company’s investments also include fixed term deposits with interest earned recorded as a component of Interest and other income, net, in the Consolidated Statement of Operations.

Fair Value of Financial Instruments

11 unchanged sentences

The significant inputs for the valuation model usually include benchmark yields, reported trades, broker and dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, and industry and economic events.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 July 1, 2023 and July 2, 2022, the Company did not hold any Level 3 investment securities.

The Company’s Level 3 liabilities as of July 2, 2022 and July 3, 2021 consist of contingent purchase consideration.

The Company has aggregate contingent liabilities related to its business and asset acquisitions completed during fiscal 2022.

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 Company’s Level 3 liabilities as of July 1, 2023 and July 2, 2022 consist of contingent purchase consideration liabilities related to business acquisitions.

The fair value of such earn-out liabilities are generally 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 certain earn-out liabilities is derived using the estimated probability of success of achieving the earn-out milestones discounted to present value.

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 (SG&A) expense of the Consolidated Statements of Operations.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s inventory is valued at standard cost, which approximates actual cost computed on a first-in, first-out basis, not in excess of net realizable value.

11 unchanged sentences

Lease expense is recognized on a straight-line basis over the lease term.

Operating ROU assets are included in other non-current assets and lease liabilities are included in other current liabilities and other non-current liabilities in the Company’s Consolidated Balance Sheets.

Operating ROU assets are included in Other non-current assets and lease liabilities are included in Other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets.

Lease and non-lease components for all leases are accounted for separately.

6 unchanged sentences

and furniture, fixtures, software and office equipment 2 to 10 years.

Leasehold improvements are amortized on the straight-line method over the lesser of the estimated useful lives of the asset or the initial lease term.

Demonstration units are amortized on the straight-line method and are Company products used for demonstration purposes for existing and prospective customers.

Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the asset or the remaining lease term.

Demonstration units are amortized using the straight-line method and are Company products used for demonstration purposes for existing and prospective customers.

These assets are generally not intended to be sold and have an estimated useful life of 3 to 5 years.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Costs related to software acquired, developed or modified solely to meet the Company’s internal requirements and for which there are no substantive plans to market are capitalized in accordance with the authoritative guidance on accounting for the costs of computer software developed or obtained for internal use.

Only costs incurred after the preliminary planning stage of the project and after management has authorized and committed funds to the project are eligible for capitalization.

Costs capitalized for computer software developed or obtained for internal use are included in Property, plant and equipment, net, on the Company’s Consolidated Balance Sheets.

Costs capitalized for computer software developed or obtained for internal use are included in Property, plant and equipment, net, on the Consolidated Balance Sheets.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Business Combinations

The Company includes the results of operations of the businesses that it acquires from the acquisition date.

In allocating the purchase price of a business combination, the Company records all assets acquired and liabilities assumed at fair value as of the date of acquisition, with the excess of the purchase price over the aggregate fair values recorded as goodwill.

Additionally, any contingent consideration is recorded at fair value on the acquisition date and classified as a liability.

The Company determines the estimated fair values after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management.

The fair value assigned to identifiable intangible assets acquired is based on estimates and assumptions made by management at the time of the acquisition.

The Company adjusts the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as it obtains more information as to facts and circumstances existing as of the acquisition date.

Acquisition-related costs are recognized separately from the business combination and are expensed as incurred.

Goodwill represents the excess of the purchase price paid over the net fair value of assets acquired and liabilities assumed.

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Otherwise, no further testing is required.

Under the quantitative test, if the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recorded in the Consolidated Statements of Operations as impairment of goodwill.

Measurement of the fair value of a reporting unit is based on one or more of the following fair value measures:

(i) using present value techniques of estimated future cash flows;

(ii) using valuation techniques based on multiples of earnings or revenue;

or (iii) a similar performance measure.

Under the quantitative test, the Company compares the fair value of a reporting unit to its carrying value.

If the estimated fair value exceeds book value, goodwill is considered not to be impaired.

However, if the fair value of the reporting unit is less than book value, then goodwill will be impaired by the amount that the carrying amount exceeds the fair value, not to exceed the carrying amount of the goodwill.

To estimate the fair value of each reporting unit, a combination of the income and market approach is used.

The income approach uses discounted future cash flows in which sales, operating income and cash flow projections are based on assumptions driven by current economic conditions.

Key assumptions used in the discounted future cash flow model include, but are not limited to, long-term annual growth rates, terminal growth rates, weighted average cost of capital and the Company’s effective tax rate.

The market approach utilizes the Guideline Public Company Method and Guideline Transaction Method to derive fair value.

The Guideline Public Company Method determines the fair value of an entity based upon trading multiples calculated using market value of minority interests in publicly-traded companies that are similar to the subject company.

The Guideline Transaction Method calculates the fair value of an entity by analyzing recent sales of comparable entities.

Refer to “Note 9.

Goodwill” for more information.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible Assets

In connection with the Company’s acquisitions, the Company generally recognize assets for customer relationships, acquired developed technologies, patents, proprietary know-how, trade secrets, in-process research and development (IPR&D) and trademarks and trade names.

In connection with the Company’s acquisitions, the Company generally recognizes assets for customer relationships, acquired developed technologies, patents, proprietary know-how, trade secrets, in-process research and development (IPR&D) and trademarks and trade names.

Finite lived intangible assets are amortized using the straight-line method over the estimated economic useful lives of the assets, which is the period during which expected cash flows support the fair value of such intangible assets.

6 unchanged sentences

Measurement of an impairment loss would be based on the excess of the carrying amount of the asset or asset group over its estimated fair value.

Estimates of future cash flow require significant judgment based on anticipated future and operating results, which are subject to variability and change.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Pension and Other Postretirement Benefits

Estimates of future cash flow require significant judgment based on anticipated future operating results, which are subject to variability and change.

Pension and Other Post-retirement Benefits

The funded status of the Company’s retirement-related benefit plans is recognized on the Consolidated Balance Sheets.

The funded status is measured as the difference between the fair value of plan assets and the benefit obligation at fiscal year end, the measurement date.

For defined benefit pension plans, the benefit obligation is the projected benefit obligation (PBO) and for the non-pension postretirement benefit plan the benefit obligation is the accumulated postretirement benefit obligation (APBO).

The PBO represents the actuarial present value of benefits expected to be paid upon its employee’s retirement.

The APBO represents the actuarial present value of postretirement benefits attributed to employee services already rendered.

Unfunded or partially funded plans, with the benefit obligation exceeding the fair value of plan assets, are aggregated and recorded as a retirement and non-pension postretirement benefit obligation equal to this excess.

For defined benefit pension plans, the benefit obligation is the projected benefit obligation (PBO) and for the non-pension post-retirement benefit plan the benefit obligation is the accumulated post-retirement benefit obligation (APBO).

The PBO represents the actuarial present value of benefits expected to be paid upon its employees’ retirement.

The APBO represents the actuarial present value of post-retirement benefits attributed to employee services already rendered.

Unfunded or partially funded plans, with the benefit obligation exceeding the fair value of plan assets, are aggregated and recorded as a retirement and non-pension post-retirement benefit obligation equal to this excess.

The current portion of the retirement-related benefit obligation represents the actuarial present value of benefits payable in the next 12 months in excess of the fair value of plan assets, measured on a plan-by-plan basis.

This liability is recorded in other current liabilities in the Consolidated Balance Sheets.

Net periodic pension cost is recorded in the Consolidated Statements of Operations and includes service cost, interest cost, expected return on plan assets, amortization of prior service cost or credit, and gains or losses previously recognized as a component of accumulated other comprehensive loss.

This liability is recorded in Other current liabilities on the Consolidated Balance Sheets.

Service cost represents the actuarial present value of participant benefits attributed to services rendered by employees in the current year.

8 unchanged sentences

In estimating the expected return on plan assets, the Company considers historical returns on plan assets, diversification of plan investments, adjusted for forward-looking considerations, inflation assumptions and the impact of the active management of the plan’s invested assets.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company measures its benefit obligation and plan assets using the month-end date of June 30, which is closest to the Company’s fiscal year-end.

7 unchanged sentences

Potential risk of loss with any one counterparty resulting from such risk is monitored by the Company on an ongoing basis.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments.

2 unchanged sentences

These percentages consider a variety of factors including, but not limited to, current economic trends, historical payment and bad debt write-off experience.

The Company classifies bad debt expenses as SG&A expense.

The Company classifies bad debt expenses as SG&A expense in the Consolidated Statements of Operations.

The Company is not able to predict changes in the financial stability of its customers.

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While the Company’s allowance for doubtful accounts balance is based on historical loss experience along with anticipated economic trends, unanticipated financial instability in the telecommunications industry could lead to higher than anticipated losses.

As of July 1, 2023, there were no customer balances that represented 10% or more of the Company’s total accounts receivable, net.

As of July 2, 2022, one customer represented 10 % or more of the Company’s total accounts receivable, net.

As of July 3, 2021, two customers represented 10 % or more of the Company’s total accounts receivable, net.

During fiscal 2023, 2022 and 2021, one customer generated 10 % or more of total net revenues.

6 unchanged sentences

The Company could experience reduced or delayed product shipments or incur additional inventory write-downs and cancellation charges or penalties, which may result in increased costs and have a material adverse impact on the Company’s results of operations.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign Currency Forward Contracts

2 unchanged sentences

The Company evaluates foreign exchange risks and utilizes foreign currency forward contracts to reduce such risks, hedging the gains or losses generated by the re-measurement of significant foreign currency-denominated monetary assets and liabilities.

The fair value of these contracts is reflected as other current assets or liabilities and the change in fair value of these 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.

The gain or loss from the change in fair value of these foreign currency forward contracts largely offsets the change in fair value of the foreign currency denominated monetary assets or liabilities, which is also recorded as a component of Interest and other income, net.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair value of these contracts is reflected as other current assets or liabilities and the change in fair value of these foreign currency forward contracts is recorded as gain or loss in the Consolidated Statements of Operations as a component of Interest and other income, net.

Foreign Currency Translation

Assets and liabilities of non-U.S.

subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated into U.S.

VIAVI transacts business in various foreign currencies.

In general, the functional currency of our non-US subsidiaries is the country’s local currency.

Consequently, the assets and liabilities of non-U.S.

subsidiaries are translated into U.S.

dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets.

5 unchanged sentences

NE and SE are collectively referred to as Network and Service Enablement (NSE).

The Company’s Optical Security and Performance (OSP) products include proprietary pigments used for optical security and optical filters used in commercial and government 3D Sensing applications.

The Company’s Optical Security and Performance (OSP) products include proprietary pigments used for optical security and optical filters used in commercial, government and 3D Sensing applications.

The Company also offers a range of product support and professional services, primarily in the NE and SE segments, designed to comprehensively address customer requirements.

13 unchanged sentences

The Company utilizes judgment to determine the customer’s ability and intent to pay, which is based upon various factors including the customer’s historical payment experience or credit and financial information and credit risk management measures implemented by the Company.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Identify the performance obligations in the contract:

6 unchanged sentences

support and maintenance which includes hardware support that extends beyond the Company's standard warranties, software maintenance, installation, professional and implementation services, and training.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Identifying and evaluating whether products and services are considered distinct performance obligations may require significant judgment particularly in NSE due to the nature of the product and service offerings.

24 unchanged sentences

For other professional services or time-based labor contracts, revenue is recognized as the Company performs the services and the customers receive and/or consume the benefits.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue policy and practical expedients

3 unchanged sentences

Therefore, the Company does not evaluate whether the shipping and handling activities are promised services.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• Incremental costs of obtaining contracts that would have been recognized within one year or less are recognized as an expense when incurred.

These costs are included in SG&A expense.

These costs are included in SG&A expense in the Consolidated Statements of Operations.

The costs of obtaining contracts where the amortization period for recognition of the expense is beyond a year are capitalized and recognized over the revenue recognition period of the original contract.

3 unchanged sentences

Disaggregation of Revenue

The Company's revenue is presented on a disaggregated basis on the Consolidated Statements of Operations and in “Note 19.

The Company's revenue is presented on a disaggregated basis in the Consolidated Statements of Operations and in “Note 19.

Operating Segments and Geographic Information”.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Government Assistance

From time to time the Company will receive government assistance in the form of grants and tax credits in certain jurisdictions, generally recorded as a reduction of R&D expense in the Consolidated Statements of Operations.

The Company recorded approximately $ 4.0 million in the form of R&D credits during fiscal 2023.

As of July 1, 2023, the Company had pending receipts of approximately $ 14.5 million related to government assistance primarily in the U.K.

included in Prepayments and other current assets on the Consolidated Balance Sheets.

Stock-Based Compensation

2 unchanged sentences

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.

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

Time-based restricted stock awards will generally vest in annual installments over a period of three to 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 one to four years .

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Likewise, if the Company determines that it is not more likely than not that its deferred tax assets will be realized, then a valuation allowance may be established for such deferred tax assets and the Company’s tax provision may increase in the period in which the Company makes the determination.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The authoritative guidance on accounting for uncertainty in income taxes prescribes the recognition threshold and measurement attributes for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

4 unchanged sentences

If the Company ultimately determines that the payment of such a liability is not necessary, then it reverses the liability and recognizes a tax benefit during the period it is determined no longer necessary.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The recognition and measurement of current taxes payable or refundable and deferred tax assets and liabilities requires that the Company make certain estimates and judgments.

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The Company regularly evaluates current information available to determine whether such accruals should be adjusted and whether new accruals are required.

Contingent liabilities include contingent consideration in connection with the Company’s acquisitions, which represent earn-out payments and is recognized at fair value on the acquisition date and is remeasured each reporting period with subsequent adjustments recognized in the SG&A expense of the Company’s Consolidated Statements of Operations.

While the Company believes the estimates and assumptions are reasonable, there is significant judgment and uncertainty involved.

5 unchanged sentences

The Company derecognizes ARO liabilities when the related obligations are settled.

The Consolidated Balance Sheets included ARO of ( in millions ):

As of July 1, 2023, and July 2, 2022, the Consolidated Balance Sheets included ARO balance of $ 0.5 million in Other current liabilities and $ 3.8 million and $ 3.7 million, respectively, in Other non-current liabilities.

A summary of the activity in the ARO accrual is outlined below ( in millions ):

Balance at Beginning of Period Liabilities Incurred Liabilities Settled Accretion Expense Revisions to Estimates Balance at End of Period

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Year ended July 2, 2022 $ 3.7 $ 0.8 $ ( 0.4 ) $ 0.1 $ — $ 4.2

As of July 2, 2022, and July 3, 2021, $ 0.5 million and $ 1.3 million, respectively, in other current liabilities and $ 3.7 million and $ 2.4 million, respectively, in other non-current liabilities.

VIAVI SOLUTIONS INC.

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Recent Accounting Pronouncements Adopted

In the first quarter of fiscal 2020 the Company adopted ASC 842 - Leases using the modified retrospective approach.

The Company elected to apply the optional transition approach of not adjusting comparative period financial information for the adoption impact.

The Company also elected the package of practical expedients to not reassess whether a contract contains a lease, lease classification and accounting for initial direct costs.

For additional information refer to “Note 12.

In August 2018, the FASB issued ASU 2018-14 Defined Benefit Plans (Topic 715-20) - Changes to the Disclosure Requirements for Defined Benefit Plans, to amend the disclosure requirements related to defined benefit pension and other post-retirement plans.

The Company adopted this guidance in the first quarter of fiscal 2022.

The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, by removing specific exceptions to the general principles in Topic 740, Income Taxes and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

The Company adopted this guidance in the first quarter of fiscal 2022.

The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplifies the accounting for convertible instruments with characteristics of liability and equity.

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Consequently, the temporary equity balance for the Senior Convertible Notes as of July 3, 2021 was eliminated.

In addition, interest expense was reduced and net income was increased by $ 21.4 million and $ 20.3 million for fiscal 2021 and 2020, respectively.

In addition, interest expense was reduced and net income was increased by $ 21.4 million for fiscal 2021.

The adoption had no impact on total cash provided by (used in) operating, investing or financing activities in the Consolidated Statements of Cash Flows.

The following table presents the impact of the standard adoption to select line items of the Company’s Consolidated Balance Sheet as of July 3, 2021 ( in millions ):

The following table presents the impact of the standard adoption to select line items of the Consolidated Balance Sheet as of July 3, 2021 ( in millions ):

As Reported Adjustment As Adjusted

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the impact of the standard adoption to select line items of the Company’s Consolidated Statement of Operations for the years ended July 3, 2021 and June 27, 2020 ( in millions, except per-share data ):

The following table presents the impact of the standard adoption to select line items of the Consolidated Statement of Operations for the year ended July 3, 2021 ( in millions, except per-share data ):

Year Ended July 3, 2021

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Diluted 235.9 0.4 236.3

Year Ended June 27, 2020

As Reported Adjustment As Adjusted

Interest Expense $ ( 33.7 ) $ 20.3 $ ( 13.4 )

Net income $ 28.7 $ 20.3 $ 49.0

Net income per share:

Basic $ 0.13 $ 0.08 $ 0.21

Diluted $ 0.12 $ 0.09 $ 0.21

Shares used in per-share calculation:

Basic 229.4 — 229.4

Diluted 233.7 1.1 234.8

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606.

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC 606 as if it had originated the contracts.

This guidance is effective for the Company in first quarter of fiscal 2024 and early adoption is permitted.

The Company elected to early adopt this guidance in the second quarter of fiscal 2022 on a retrospective basis to the beginning of the fiscal year.

The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recent Accounting Pronouncements Not Yet Adopted

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance, to increase the transparency of government assistance including the disclosure of the types of assistance, an entity's accounting for the assistance, and the effect of the assistance on an entity's financial statements.

This guidance is effective for the Company’s fiscal 2023 annual disclosures with early adoption permitted.

The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements but does not expect any material impact.

Disclosures by Business Entities about Government Assistance .

ASU 2021-10 requires annual disclosures about transactions with a government entity that are accounted for by applying a grant or contribution accounting model including the disclosure of the types of assistance, an entity's accounting for the assistance, and the effect of the assistance on an entity's financial statements.

ASU 2021-10 is effective for annual periods beginning after December 15, 2021.

The Company adopted ASU 2021-10 on July 3, 2022 on a prospective basis.

We often receive government assistance in the form of research grants and tax credits in certain jurisdictions, recorded as a reduction of R&D expense in the Consolidated Statements of Operations.

The Company recorded approximately $ 4.0 million in R&D credits during fiscal 2023.

As of July 1, 2023, the Company had pending receipts of approximately $ 14.5 million related to government assistance primarily in the U.K.

included in Prepayments and other current assets on the Consolidated Balance Sheets.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815) , which clarifies guidance on fair value hedge accounting of interest rate risk for portfolios of financial assets.

The amendments in this update expand the current last-of-layer method of hedge accounting that permits only one hedged layer to allow multiple hedged layers of a single closed portfolio.

The amendments in this update expand the current last-of-layer method of hedge accounting that permits only one hedged layer to now allow designation of multiple hedged layers with a single closed portfolio.

To reflect that expansion, the last-of-layer method is renamed the portfolio layer method.

This guidance is effective for the Company in the first quarter of fiscal 2024 with early adoption permitted.

The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.

The Company adopted this guidance in the fourth quarter of fiscal 2023, which did not have an impact on the Company’s Consolidated Financial Statements.

We will assess future impact, if any, in subsequent periods.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) , which eliminates the accounting guidance on troubled debt restructurings for creditors in ASC 310 and amends the guidance on vintage disclosures to require disclosure of current-period gross write-offs by year of origination.

The ASU also updates the requirements related to the accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancing and restructurings for borrowers experiencing financial difficulty.

This guidance is effective for the Company in the first quarter of fiscal 2024 with early adoption permitted.

The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.

The Company adopted this guidance in the fourth quarter of fiscal 2023, which did not have an impact on the Company’s Consolidated Financial Statements.

We will assess future impact, if any, in subsequent periods.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820):

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The new guidance is required to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption.

This guidance is effective for the Company in the first quarter of fiscal 2025 with early adoption permitted.

The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.

The Company adopted this guidance in the fourth quarter of fiscal 2023, which had no impact on the Company’s Consolidated Financial Statements.

We will assess future impact, if any, in subsequent periods.

In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations , which makes a number of changes meant to add certain disclosure requirements for a buyer in a supplier finance program.

The amendments require a buyer that uses supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period, and associated rollforward information.

Only the amount outstanding at the end of the period must be disclosed in interim periods.

The Company adopted this guidance in the fourth quarter of fiscal 2023, which did not have an impact on the Company’s disclosures in the Annual Report on Form 10-K for the year ended July 1, 2023.

We will assess future impact, if any, in subsequent periods.

VIAVI SOLUTIONS INC.

6 unchanged sentences

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

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Net income $ 25.5 $ 15.5 $ 67.5

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Diluted $ 0.11 $ 0.07 $ 0.29

(1) Represents the dilutive impact for the Company's 1.75 % Senior Convertible Notes due 2023 and the 1.00 % Senior Convertible Notes due 2024.

As of July 2, 2022, the if-converted value in excess of outstanding principal of the 1.75 % Senior Convertible Notes due 2023 and the 1.00 % Senior Convertible Notes due 2024 was $ 2.1 million and $ 19.4 million, respectively.

(1) Represents the dilutive impact for the Company's 1.75 % Senior Convertible Notes due 2023 (2023 Notes), the 1.00 % Senior Convertible Notes due 2024 (2024 Notes) and the 1.625 % Senior Convertible Notes due 2026 (2026 Notes).

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

Refer to “Note 11.

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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 ):

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Full Value Awards (1)

Total potentially dilutive securities 0.6 0.4 0.2

(1) See Note 16.

5 unchanged sentences

Changes in accumulated other comprehensive loss by component, net of tax, were as follows ( in millions ):

Unrealized (losses) gains

Unrealized (losses)

on available-for-sale

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(1) Activity before reclassifications to the Consolidated Statements of Operations during the fiscal year ended July 1, 2023 relates to the unrealized actuarial gain of $ 2.8 million, net of income tax effect of $ 0.8 million.

The amount reclassified out of accumulated other comprehensive (loss) income represents the amortization of actuarial losses included as a component of SG&A in the Consolidated Statement of Operations for the year ended July 2, 2022.

The amount reclassified out of accumulated other comprehensive (loss) income represents the amortization of actuarial losses included as a component of SG&A expense in the Consolidated Statement of Operations for the year ended July 1, 2023.

Refer to “Note 17.

Employee Pension and Other Benefit Plans” for more details on the computation of net periodic cost for pension plans.

RPC Photonics, Inc.

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

The consideration paid for RPC was 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.

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

On October 5, 2022, the Company acquired all of the equity of Jackson Labs Technologies, LLC (Jackson Labs), a privately held company which specializes in Position, Navigation and Timing (PNT) solutions for critical infrastructure serving both military and civilian applications.

The acquisition enables the Company to broaden its solutions offering into the rapidly developing PNT landscape.

The total purchase consideration included approximately $ 49.9 million paid in cash at closing and additional contingent consideration of up to $ 117.0 million for which future cash payments are dependent on the achievement of certain operational and revenue targets over the course of a three-year period beginning in January 2023.

The cash consideration paid at closing included escrow payments of $ 5.0 million for indemnity holdback and $ 2.0 million subject to final cash and net working capital adjustments.

The acquisition met the definition of a business and has been accounted for in accordance with the authoritative guidance on business combinations;

therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date.

Acquisition related costs incurred were approximately $ 0.8 million and have been recorded within SG&A expense in the Consolidated Statements of Operations.

The Company has included the financial results of Jackson Labs in its consolidated financial statements from the date of acquisition.

Pro forma results of operations have not been presented because the effect of the acquisition was not material to the Consolidated Statements of Operations.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The total purchase consideration was allocated to tangible and intangible assets acquired and liabilities assumed based on the preliminary fair value on the acquisition date.

The following table presents the allocation of the purchase price (in millions):

Cash and cash equivalents $ 1.1

Accounts receivable, net 2.3

Inventory, net 3.2

Identified intangible assets acquired 30.6

Other non-current assets 0.1

Accounts payable ( 0.6 )

Accrued expenses ( 3.4 )

Deferred revenue ( 2.1 )

Other current liabilities ( 0.5 )

Total purchase consideration $ 79.0

1) Goodwill at acquisition date of $ 48.8 million reduced by measurement period adjustment of $ 0.5 million.

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition ( in millions, except useful life ):

Estimated Useful Life Amount

Developed technology 6 years $ 25.0

Customer relationship 3 years 2.7

Tradename 2 years 0.5

Backlog 1 year 2.4

Total identifiable assets acquired $ 30.6

Goodwill represents the excess of the preliminary estimated purchase consideration over the preliminary estimates of the fair value of the net tangible and intangible assets acquired and has been allocated to the Network Enablement segment.

Goodwill is primarily attributable to expected synergies in the acquired technologies that may be leveraged by the Company in future PNT offerings.

The goodwill is expected to be deductible for U.S.

income tax purposes.

Other Acquisitions:

On May 13, 2022 and May 20, 2022, the Company completed business acquisitions for total consideration of approximately $ 9.5 million in cash paid at close and an earn-out liability of up to $ 3.3 million cash to be paid based on the occurrence or achievement of certain agreed upon targets.

In connection with these acquisitions, the Company recorded $ 7.3 million of developed technology and other intangibles, $ 10.0 million of goodwill, and $ 1.6 million of deferred tax liability resulting from the acquisitions.

The acquired developed technology and other intangible assets are being amortized over their estimated useful lives ranging from one to six years .

On September 17, 2021, the Company acquired all of the equity of one business for approximately $ 1.6 million cash consideration, of which $ 1.2 million was paid with cash on hand and $ 0.4 million remains in current liabilities.

The acquisition was accounted for as an asset purchase under the authoritative guidance.

The developed technology will be amortized over its estimated useful life of five years .

On March 13, 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 cash to be paid based on the occurrence or achievement of certain agreed upon targets.

In connection with this acquisition, the Company recorded $ 6.2 million of developed technology and customer relationships, $ 4.3 million of goodwill, 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 .

On March 29, 2023, April 21, 2023 and June 8, 2023, the Company completed acquisitions accounted for as asset purchases consisting of cash paid at closing of $ 2.9 million and $ 0.2 million of indemnity holdback.

In connection with these acquisitions, the Company recorded developed technology intangibles of $ 2.5 million which will be amortized over their estimated useful life of five years .

On July 18, 2022, the Company completed an acquisition accounted for as a business combination consisting of cash paid at closing of $ 17.5 million and $ 2.0 million of indemnity holdback.

In connection with this acquisition, the Company recorded approximately $ 11.2 million of goodwill, $ 5.1 million of developed technology and $ 1.8 million of deferred tax liability.

The acquired developed technology asset is being amortized over its estimated useful life of four years .

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Goodwill consists of expected future economic benefits that will result from expected future product sales, operating efficiencies and other synergies and is not expected to be deductible for tax purposes.

On May 13, 2022 and May 20, 2022, the Company completed acquisitions accounted for as business combinations for cash paid at close of $ 9.5 million, additional earn-outs of up to $ 3.3 million cash to be paid based on the occurrence or achievement of certain agreed upon targets and $ 2.0 million of indemnity holdback.

In connection with these acquisitions, the Company recorded $ 10.0 million of goodwill, $ 7.3 million of developed technology and other intangibles and $ 1.6 million of deferred tax liability.

The acquired developed technology and other intangible assets are being amortized over their estimated useful lives ranging from one to six years .

On September 17, 2021, the Company acquired all of the equity of one business for approximately $ 1.6 million.

The acquisition was accounted for as an asset purchase.

The developed technology will be amortized over its estimated useful life of five years .

Acquisition-related Contingent Consideration

The following table provides a reconciliation of changes in fair value of the Company’s earn-out liabilities for the years ended July 1, 2023 and July 2, 2022, as follows ( in millions ):

June 27, 2020 $ 9.9

Balance July 3, 2021 $ 4.0

Additions to Contingent Consideration 2.5

Change in Fair Value measurement 0.3

Currency translation adjustment 0.1

Payments of Contingent Consideration ( 4.4 )

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Change in Fair Value measurement ( 4.6 )

Currency translation adjustment 0.1

Payments of Contingent Consideration ( 7.6 )

Balance July 1, 2023 (2)

(1) Amount is included in other current liabilities in the Consolidated Balance Sheets.

(2) Includes $ 1.8 million in other current liabilities and $ 0.7 million in other non-current liabilities in the Consolidated Balance Sheets.

(1) Includes $ 1.8 million in Other current liabilities and $ 0.7 million in Other non-current liabilities on the Consolidated Balance Sheets.

(2) Includes $ 1.1 million in Other current liabilities and $ 18.6 million in Other non-current liabilities on the Consolidated Balance Sheets.

Balance Sheet and Other Details

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Contract liabilities are included in Other current liabilities on the Consolidated Balance Sheets.

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 table summarizes the activity related to deferred revenue, for the year ended July 1, 2023 ( in millions ):

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Year Ended July 2, 2022 $ 2.0 $ 0.9 $ ( 1.5 ) $ 1.4

Year Ended June 27, 2020 2.0 2.0 ( 1.0 ) 3.0

Year Ended July 3, 2021 $ 3.0 $ 1.1 $ ( 2.1 ) $ 2.0

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Inventories, net

5 unchanged sentences

Inventories, net $ 116.1 $ 110.1

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Prepayments and Other Current Assets

1 unchanged sentence

July 1, 2023 July 2, 2022

Refundable income taxes $ 27.6 $ 14.5

Prepayments 16.5 16.0

Assets held for sale 2.5 6.5

Advances to contract manufacturers 9.8 11.8

Refundable income taxes 14.5 5.9

Transaction tax receivables 5.1 10.4

Fair value of forward contracts 3.5 3.8

Assets held for sale 2.5 2.5

Other current assets 7.1 10.2

13 unchanged sentences

Property, plant and equipment, net $ 243.0 $ 228.9

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other non-current assets

The following table presents the components of other non-current assets, as follo ws ( in millions ):

July 1, 2023 July 2, 2022

Operating ROU assets (Note 12) $ 40.4 $ 45.2

Long-term restricted cash 4.6 9.3

Deferred contract cost 2.9 2.4

Debt issuance cost - Revolving Credit Facility 2.8 3.5

Deposits 2.3 1.9

Other non-current assets 8.7 3.5

Other non-current assets $ 61.7 $ 65.8

Other current liabilities

1 unchanged sentence

July 1, 2023 July 2, 2022

Customer prepayments $ 0.9 $ 0.4

Restructuring accrual — 0.5

Income tax payable 9.6 22.6

Warranty accrual 4.4 4.3

Transaction tax payable 11.5 4.9

Operating lease liabilities (Note 12)

Fair value of contingent consideration 1.8 4.0

$ 10.1 $ 10.1

Income tax payable 4.4 9.6

Restructuring accrual (Note 13)

Interest payable 5.5 4.6

Transaction tax payable 4.3 11.5

Warranty accrual 4.2 4.4

Acquisition related holdback and related accruals 4.1 0.1

Fair value of forward contracts 2.4 8.4

Fair value of contingent consideration (Note 5)

Other 7.9 5.8

Other current liabilities $ 49.8 $ 56.3

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other Non-current Liabilities

2 unchanged sentences

Pension and post-employment benefits $ 53.2 $ 59.6

Deferred tax liability 9.5 24.3

Financing obligation 16.0 16.1

Long-term deferred revenue 19.4 19.8

Operating lease liabilities (Note 12)

Long-term deferred revenue 23.4 19.4

Fair value of contingent consideration (Note 5)

Financing obligation 15.8 16.0

Uncertain tax position 15.8 12.9

Deferred tax liability 13.9 9.5

Warranty accrual 4.8 6.2

Asset retirement obligations 3.8 3.7

Other 8.0 8.9

Other non-current liabilities $ 186.7 $ 170.4

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Interest and Other Income, net

The following table presents the components of interest and other income, net, as follows ( in millions ):

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Interest income $ 10.2 $ 3.4 $ 2.9

1 unchanged sentence

Other income, net ( 0.4 ) 0.4 0.4

Loss on sale of investments — — ( 0.1 )

Interest and other income, net $ 7.6 $ 5.2 $ 3.3

1 unchanged sentence

Short-Term Investments

As of July 2, 2022, the Company’s short-term investments of $ 1.4 million were comprised primarily of trading securities related to the deferred compensation plan, of which $ 0.3 million was invested in debt securities, $ 1.0 million was invested in equity securities and $ 0.1 million was invested in money market instruments.

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 and other income, net.

As of July 3, 2021, the Company’s short-term investments of $ 1.6 million were comprised primarily of trading securities related to the deferred compensation plan, of which $ 0.3 million was invested in debt securities, $ 1.0 million was invested in equity securities and $ 0.3 million was invested in money market instruments.

As of July 1, 2023, the Company’s short-term investments of $ 14.6 million were comprised of a 30 -day term deposit of $ 13.1 million and trading securities related to the deferred compensation plan of $ 1.5 million, of which $ 0.1 million was invested in debt securities, $ 1.2 million was invested in equity securities and $ 0.2 million was invested in money market instruments.

Trading securities are reported at fair value, with the unrealized gains or losses resulting from changes in fair value recognized in the Consolidated Statements of Operations as a component of Interest and other income, net.

As of July 2, 2022, the Company’s short-term investments of $ 1.4 million were comprised of trading securities related to the deferred compensation plan, of which $ 0.3 million was invested in debt securities, $ 1.0 million was invested in equity securities and $ 0.1 million was invested in money market instruments.

Non-Designated Foreign Currency Forward Contracts

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of July 1, 2023, the Company had forward contracts that were effectively closed but not settled with the counterparties by year end.

Therefore, the fair value of these contracts of $ 3.8 million and $ 8.3 million is reflected as prepayments and other current assets and other current liabilities, respectively.

As of July 3, 2021, the fair value of these contracts of $ 2.6 million and $ 1.4 million is reflected as prepayments and other current assets and other current liabilities, respectively.

The forward contracts outstanding and not effectively closed, with a term of less than 120 days, were transacted near year end and had a fair value of $ 0.1 million which is reflected in other current liabilities in the Consolidated Balance Sheets as of July 2, 2022 and not significant as of July 3, 2021.

Therefore, the fair value of these contracts of $ 3.5 million and $ 2.4 million is reflected as Prepayments and other current assets and Other current liabilities on the Consolidated Balance Sheets, respectively.

As of July 2, 2022, the fair value of these contracts of $ 3.8 million and $ 8.3 million is reflected as Prepayments and other current assets and Other current liabilities on the Consolidated Balance Sheets, respectively.

The forward contracts outstanding and not effectively closed, with a term of less than 120 days, were transacted near fiscal year end;

therefore, the fair value of the contracts is minimal as of July 1, 2023 and a value of $ 0.1 million is reflected in Other current liabilities on the Consolidated Balance Sheets as of July 2, 2022.

As of July 1, 2023 and July 2, 2022, the notional amounts of the forward contracts that the Company held to purchase foreign currencies were $ 87.5 million and $ 119.1 million, respectively, and the notional amounts of forward contracts that Company held to sell foreign currencies were $ 19.3 million and $ 80.5 million, respectively.

The change in the fair value of these 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.

The change in the fair value of these foreign currency forward contracts is recorded as gain or loss in the Consolidated Statements of Operations as a component of Interest and other 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 a loss of $ 8.3 million and a gain of $ 14.5 million for the years ended July 2, 2022 and July 3, 2021, respectively.

The foreign exchange forward contracts incurred a gain of $ 1.2 million and a loss of $ 8.3 million for the years ended July 1, 2023 and July 2, 2022, respectively.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurements

19 unchanged sentences

Total liabilities $ 22.1 $ — $ 2.4 $ 19.7 $ 10.9 $ — $ 8.4 $ 2.5

(1) Included in other non-current assets on the Company’s Consolidated Balance Sheets.

(2) Includes as of July 2, 2022, $ 301.5 million in cash and cash equivalents, $ 3.1 million in restricted cash, and $ 8.6 million in other non-current assets on the Company’s Consolidated Balance Sheets.

Includes, as of July 3, 2021, $ 401.0 million in cash and cash equivalents, $ 2.7 million in restricted cash, and $ 5.2 million in other non-current assets on the Company’s Consolidated Balance Sheets.

(3) Included in short-term investments on the Company’s Consolidated Balance Sheets.

(4) Included in other current assets on the Company’s Consolidated Balance Sheets.

(5) Included in other current liabilities on the Company’s Consolidated Balance Sheets.

(6) As of July 2,2022, includes certain amounts in other current liabilities and other non-current liabilities on the Company’s Consolidated Balance Sheets.

As of July 3, 2021 balance included in other current liabilities on the Company’s Consolidated Balance Sheets.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Included in Other non-current assets on the Consolidated Balance Sheets.

(2) Includes, as of July 1, 2023, $ 336.5 million in cash and cash equivalents, $ 4.3 million in restricted cash and $ 4.0 million in Other non-current assets on the Consolidated Balance Sheets.

Includes, as of July 2, 2022, $ 301.5 million in cash and cash equivalents, $ 3.1 million in restricted cash, and $ 8.6 million in Other non-current assets on the Consolidated Balance Sheets.

(3) Included in Short-term investments on the Consolidated Balance Sheets.

(4) Included in Other current assets on the Consolidated Balance Sheets.

(5) Included in Other current liabilities on the Consolidated Balance Sheets.

(6) As of July 1, 2023 and July 2,2022, includes certain amounts in Other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets.

Other Fair Value Measures

Fair Value of Debt:

If measured at fair value on the Consolidated Balance Sheets, the Company’s 3.75 % Senior Notes (2029 Notes), 1.00 % Senior Convertible Notes (2024 Notes) and 1.75 % Senior Convertible Notes (2023 Notes) would be classified in Level 2 of the fair value hierarchy as they are not actively traded in the markets.

If measured at fair value on the Consolidated Balance Sheets, the Company’s 3.75 % Senior Notes (2029 Notes), 1.625 % Senior Convertible Notes (2026 Notes), 1.00 % Senior Convertible Notes (2024 Notes) and 1.75 % Senior Convertible Notes (2023 Notes) would be classified in Level 2 of the fair value hierarchy as they are not actively traded in the markets.

The Company’s debt measured at fair value for the periods presented are as follows:

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95.6 — 95.6 — 250.7 — 250.7 —

1.75 % Senior Convertible Notes

— — — — 73.4 — 73.4 —

Total liabilities $ 700.1 $ — $ 700.1 $ — $ 661.6 $ — $ 661.6 $ —

1 unchanged sentence

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Changes in the carry value of goodwill allocated segment are as follows (in millions) :

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Products Total

Balance as of June 27, 2020 (1)

$ 334.9 $ 4.3 $ 42.2 $ 381.4

Currency translation 14.8 0.3 — 15.1

Balance as of July 3, 2021 (1)

$ 349.7 $ 4.6 $ 42.2 $ 396.5

Acquisitions (2)

— 10.0 — 10.0

Currency translation and other adjustments ( 18.1 ) ( 0.8 ) — ( 18.9 )

Balance as of July 2, 2022 (3)

$ 331.6 $ 13.8 $ 42.2 $ 387.6

Acquisitions (2)

60.0 — — 60.0

Measurement period adjustment (2)

( 0.5 ) — — ( 0.5 )

Currency translation adjustments 6.9 1.2 — 8.1

Balance as of July 1, 2023 (4)

$ 398.0 $ 15.0 $ 42.2 $ 455.2

(1) Gross goodwill balances for NE, SE and OSP were $ 636.8 million, $ 276.9 million and $ 126.7 million, respectively as of June 27, 2020.

Accumulated impairment for NE, SE and OSP was $ 301.9 million, $ 272.6 million and $ 84.5 million, respectively as of June 27, 2020.

(1) Gross goodwill balances for NE, SE and OSP were $ 651.6 million, $ 277.2 million and $ 126.7 million, respectively as of July 3, 2021.

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Accumulated impairment for NE, SE and OSP was $ 301.9 million, $ 272.6 million and $ 84.5 million, respectively as of July 2, 2022.

(4) Gross goodwill balances for NE, SE and OSP were $ 699.9 million, $ 287.6 million and $ 126.7 million, respectively as of July 1, 2023.

Accumulated impairment for NE, SE and OSP was $ 301.9 million, $ 272.6 million and $ 84.5 million, respectively as of July 1, 2023.

Impairment of Goodwill

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The Company determined that, based on its organizational structure and the financial information that is provided to and reviewed by the Company’s Chief Operating Decision Maker (CODM) during fiscal 2023, 2022 and 2021 that its reporting units were NE, SE and OSP.

No indications of impairment were identified for fiscal years ending on July 2, 2022, July 3, 2021 and June 27, 2020.

As part of the annual impairment test, the Company performed a quantitative assessment of goodwill impairment for all reporting units.

For the quantitative analysis, the Company compares the fair value of a reporting unit to its carrying value.

If the estimated fair value exceeds book value, goodwill is considered not to be impaired.

To estimate the fair value of each reporting unit, we applied a combination of the income approach and the market approach.

The income approach used discounted future cash flows in which sales, operating income and cash flow projections were based on assumptions driven by current economic conditions.

The market approach utilized the Guideline Public Company Method and Guideline Transaction Method to derive fair value.

The Guideline Transaction Method calculates the fair value of an entity by analyzing recent sales of comparable entities.

Based on our testing during the fourth quarter of fiscal 2023, the fair value of each of the Company’s reporting units was at least two times the carrying value, and therefore no impairment was identified.

In addition, no indications of impairment were identified under the qualitative tests performed for fiscal years ending on July 2, 2022 and July 3, 2021.

VIAVI SOLUTIONS INC.

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As of July 1, 2023 Weighted-Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net

Acquired developed technology 3.3 years $ 416.6 $ ( 375.8 ) $ 40.8

Acquired developed technology (1)

3.9 years $ 438.5 $ ( 390.2 ) $ 48.3

Customer relationships 2.0 years 195.2 ( 185.9 ) 9.3

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Total intangibles $ 642.3 $ ( 588.1 ) $ 54.2

(1) Other intangibles consist of customer backlog, non-competition agreements, patents, proprietary know-how and trade secrets, trademarks and trade names.

(1) During fiscal 2023, we recorded a $ 0.6 million non-cash charge due to the discontinued use of certain intellectual property.

This charge has been recorded within SG&A in the Consolidated Statements of Operations.

(2) Other intangibles consist of customer backlog, patents, proprietary know-how and trade secrets, trademarks and trade names.

Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of July 1, 2023, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows ( in millions ):

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Principal amount of 1.00 % Senior Convertible Notes

Unamortized 1.00 % Senior Convertible Notes debt issuance cost

Principal amount of 1.75 % Senior Convertible Notes

3 unchanged sentences

Principal amount of 3.75 % Senior Notes

$ 400.0 $ 400.0

Unamortized 3.75 % Senior Notes debt issuance cost

( 5.5 ) ( 6.4 )

Principal amount of 1.625 % Senior Convertible Notes

Unamortized 1.625 % Senior Convertible Notes debt discount

Unamortized 1.625 % Senior Convertible Notes debt issuance cost

Principal amount of 1.00 % Senior Convertible Notes

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The Company was in compliance with all debt covenants as of July 1, 2023 and July 2, 2022.

1.625 % Senior Convertible Notes (2026 Notes)

On March 6, 2023, the Company issued $ 250.0 million aggregate principal amount of 1.625 % Senior Convertible Notes due 2026 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The Company issued $ 132.0 million aggregate principal amount of the 2026 Notes to certain holders of the 1.00 % Senior Convertible Notes due 2024 (2024 Notes) in exchange for $ 127.5 million principal amount of the 2024 Notes (the Exchange Transaction) and issued and sold $ 118.0 million aggregate principal amount of the 2026 Notes in a private placement to accredited institutional buyers (the Subscription Transactions).

The Exchange Transaction was accounted for as a modification.

The $ 127.5 million principal of the 2024 Notes was reduced by $ 10.1 million, with offsetting increase to additional paid-in capital, to account for the increase in the fair value of the embedded conversion option in the modification.

The increase in principal and coupon interest, along with the increased option value, totaled $ 14.6 million and is a direct reduction from the carrying amount of the debt on the Consolidated Balance Sheets.

This amount will be accreted as an adjustment to interest expense on a straight-line basis and will accrete up to the full face value of the 2026 Notes at maturity.

The proceeds of the Subscription Transactions amounted to $ 113.8 million after issuance costs of $ 4.2 million.

The exchange resulted in $ 2.2 million of the issuance costs to be recorded as Loss on convertible note modification in the Consolidated Statements of Operations.

The remaining issuance costs of $ 2.0 million as well as $ 0.3 million of unamortized issuance costs carried over from the 2024 Notes at the exchange date were capitalized within Long-term debt (as a contra-balance) on the Consolidated Balance Sheets and will be amortized as an adjustment to interest expense on a straight-line basis until maturity.

The 2026 Notes are an unsecured obligation of the Company and bear interest at an annual rate of 1.625 %, payable in cash semi-annually in arrears on March 15 and September 15 of each year, beginning September 15, 2023.

The 2026 Notes mature on March 15, 2026 unless earlier converted, redeemed or repurchased.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2026 Notes may be converted under certain circumstances, based on an initial conversion rate of 75.7963 shares (equivalent to an initial conversion price of approximately $ 13.19 per share) at the option of the holders into cash up to the principal amount, with the remaining amount converted into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock at the Company’s election.

The initial conversion price represents a 22.5 % premium to the closing price of the Company’s common stock on the pricing date, March 1, 2023, which will be subject to customary anti-dilution adjustments.

The 2026 Notes may be converted at any time on or prior to the close of business on the business day immediately preceding December 15, 2025, in multiples of $1,000 principal amount, at the option of the holder under the following circumstances:

• On any date during any calendar quarter beginning after June 30, 2023 (and only during such calendar quarter) if the closing price of the Company’s common stock was more than 130 % of the then current conversion price for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading-day period ending on the last trading day of the previous calendar quarter;

• If the Company distributes to all or substantially all holders of its common stock rights or warrants (other than pursuant to a stockholder rights plan) entitling them to purchase, for a period of 45 calendar days or less, shares of VIAVI’s common stock at a price less than the average closing sale price of VIAVI’s common stock for the ten trading days preceding the declaration date for such distribution;

• If the Company distributes to all or substantially all holders of its common stock, cash or other assets, debt securities or rights to purchase our securities (other than pursuant to a stockholder rights plan), at a per share value exceeding 10 % of the closing sale price of the Company’s common stock on the trading day preceding the declaration date for such distribution;

• If the Company is party to a specified transaction, a fundamental change or a make-whole fundamental change (each as defined in the indenture of the 2026 Notes);

• During the five consecutive business-day period immediately following any ten consecutive trading-day period in which the trading price per $1,000 principal amount of the 2026 Notes for each day during such ten consecutive trading-day period was less than 98 % of the product of the closing sale price of VIAVI’s common stock and the applicable conversion rate on such date.

• If the Company calls any or all of the 2026 Notes for Optional Redemption.

During the periods from, and including, December 15, 2025 until the close of business on the business day immediately preceding March 15, 2026, holders may convert the 2026 Notes at any time regardless of the foregoing circumstances.

Holders of the 2026 Notes may require the Company to purchase all or a portion of the 2026 Notes upon the occurrence of a fundamental change at a purchase price equal to 100 % of the principal amount of the 2026 Notes to be purchased, plus accrued and unpaid interest to, but excluding, the fundamental repurchase date.

The Company may not redeem the 2026 Notes prior to March 20, 2025.

The Company may redeem for cash all or part of the 2026 Notes, at its option, on or after March 20, 2025 if the closing price of the Company’s common stock was at least 130 % of the then current conversion price for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides the redemption notice in accordance with the Indenture.

If the Company redeems less than all the outstanding 2026 Notes, at least $ 75.0 million aggregate principal amount of 2026 Notes must be outstanding and not subject to redemption as of the relevant redemption notice date.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Indenture provides for customary events of default, including payment defaults, breaches of covenants, failure to pay certain judgments and certain events of bankruptcy, insolvency and reorganization.

If an event of default occurs and is continuing, the principal amount of the 2026 Notes, plus accrued and unpaid interest, if any, may be declared immediately due and payable, subject to certain conditions set forth in the Indenture.

These amounts automatically become due and payable if an event of default relating to certain events of bankruptcy, insolvency or reorganization occurs.

As of July 1, 2023, the expected remaining term of the 2026 Notes is 2.7 years.

3.75 % Senior Notes (2029 Notes)

On September 29, 2021, the Company issued $ 400.0 million aggregate principal amount of 3.75 % Senior Notes due 2029 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

Proceeds of the 2029 Notes amounted to $ 393.0 million after issuance costs.

In connection with the issuance of the 2029 Notes, the Company incurred $ 7.0 million of issuance costs.

The debt issuance costs were capitalized and are being amortized to interest expense using the straight-line method.

The 2029 Notes are an unsecured obligation of the Company and bear annual interest of 3.75 %, payable semi-annually in arrears on April 1 and October 1 of each year, beginning April 1, 2022.

4 unchanged sentences

The Company issued $ 155.5 million aggregate principal of the 2023 Notes to certain holders of the 2033 Notes in exchange for $ 151.5 million principal of the 2033 Notes and issued and sold $ 69.5 million aggregate principal amount of the 2023 Notes in a private placement to accredited institutional buyers (the Private Placement).

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

The 2023 Notes are an unsecured obligation of the Company and bear interest at an annual rate of 1.75 % payable in cash semi-annually in arrears on June 1st and December 1st of each year, beginning December 1, 2018.

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2023 Notes may be converted under certain circumstances, based on an initial conversion rate of 71.7231 shares (equivalent to an initial conversion price of approximately $ 13.94 per share), at the option of the holders into cash up to the principal amount, with the remaining amount converted into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock at the Company’s election.

The conversion rate, and thus the conversion price, may be adjusted under certain circumstances.

The initial conversion price represents a 37.5 % premium to the closing sale price of the Company’s common stock on the pricing date, May 22, 2018, which will be subject to customary anti-dilution adjustments.

Holders may convert the 2023 Notes at any time on or prior to the close of business on the business day immediately preceding March 1, 2023 in multiples of $1,000 principal amount, under the following circumstances:

• On any date during any calendar quarter beginning after September 30, 2018 (and only during such calendar quarter) if the closing price of the Company’s common stock was more than 130 % of the then current conversion price for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading-day period ending the last trading day of the previous calendar quarter;

• Upon the occurrence of specified corporate events;

• If the Company is party to a specified transaction, a fundamental change or a make-whole fundamental change (each as defined in the indenture of the 2023 Notes);

• During the five consecutive business-day period immediately following any ten consecutive trading-day period in which the trading price per $1,000 principal amount of the 2023 Notes for each day of such ten consecutive trading-day period was less than 98 % of the product of the closing sale price of VIAVI common stock and the applicable conversion rate on such date.

During the periods from, and including, March 1, 2023, until the close of business on the business day immediately preceding June 1, 2023, holders may convert the 2023 Notes at any time, regardless of the foregoing circumstances.

Holders of the 2023 Notes may require the Company to purchase all or a portion of the 2023 Notes upon the occurrence of a fundamental change at a price equal to 100 % of the principal amount of the 2023 Notes to be purchased, plus accrued and unpaid interest to, but excluding the fundamental repurchase date.

The Company may redeem all or a portion of the 2023 Notes for cash at any time on or after June 1, 2021, at a redemption price equal to 100 % of the principal amount of the 2023 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date under certain conditions.

In connection with the issuance of the 2023 Notes, the Company incurred $ 2.2 million of issuance costs.

The debt issuance costs were capitalized and are being amortized to interest expense using the effective interest rate method from issuance date through June 1, 2023.

As of July 2, 2022, the unamortized portion of the debt issuance costs related to the 2023 Notes was $ 0.1 million, which was included as a direct reduction from the carrying amount of the debt on the Consolidated Balance Sheets.

As of July 2, 2022, the expected remaining term of the 2023 Notes is 11 months.

As a result, the carrying value of the 2023 Notes was re-classified to short-term debt on the Consolidated Balance Sheet.

The debt issuance costs were capitalized and amortized to interest expense using the effective interest rate method from issuance date through maturity on June 1, 2023.

See Senior Convertible Notes Settlement section below for details of the 2023 Notes exchange transactions during fiscal 2022.

On June 1, 2023, remaining 2023 Notes were retired upon maturity.

1.00 % Senior Convertible Notes (2024 Notes)

4 unchanged sentences

The 2024 Notes mature on March 1, 2024 unless earlier converted or repurchased.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In connection with the issuance of the 2024 Notes, the Company incurred $ 8.9 million of issuance costs.

The debt issuance costs were capitalized and are being amortized to interest expense using the straight-line method.

The 2024 Notes may be converted under certain circumstances, based on an initial conversion rate of 75.6229 shares (equivalent to an initial conversion price of approximately $ 13.22 per share), at the option of the holders into cash up to the principal amount, with the remaining amount converted into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock at the Company’s election.

1 unchanged sentence

The initial conversion price represents a 32.5 % premium to the closing sale price of the Company’s common stock on the pricing date, February 27, 2017, which will be subject to customary anti-dilution adjustments.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2024 Notes may be converted at any time on or prior to the close of business on the business day immediately preceding December 1, 2023, in multiples of $1,000 principal amount, at the option of the holder only under the following circumstances:

9 unchanged sentences

These amounts automatically become due and payable if an event of default relating to certain events of bankruptcy, insolvency or reorganization occurs.

In connection with the issuance of the 2024 Notes, the Company incurred $ 8.9 million of issuance costs.

The debt issuance costs were capitalized and are being amortized to interest expense using the effective interest rate method from issuance date through March 1, 2024.

As of July 2, 2022, the unamortized portion of the debt issuance costs related to the 2024 Notes was $ 1.0 million, which was included as a direct reduction from the carrying amount of the debt on the Consolidated Balance Sheets.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the fourth quarter of fiscal 2021, the closing price of the Company’s common stock exceeded 130 % of the applicable conversion price of the 2024 Notes on at least 20 of the last 30 consecutive trading days of the calendar quarter, causing the 2024 Notes to be convertible by the holders for the period of July 1, 2021 to September 30, 2021.

As a result, $ 456.6 million carrying value of the notes was reclassified to short-term debt as of July 3, 2021.

During fiscal 2022 the closing price of the Company’s stock did not exceed 130 % of the applicable conversion price of the 2024 Notes for at least 20 of the last 30 consecutive trading days of any of the calendar quarters.

The carrying value of the 2024 Notes was reclassified to long-term debt as of October 2, 2021.

As of July 1, 2023, the expected remaining term of the 2024 Notes is 0.7 years.

The 2024 Notes mature on March 1, 2024 unless earlier converted or repurchased.

See Senior Convertible Notes Settlement section below for details of the 2024 Notes exchange transactions during fiscal 2022.

2 unchanged sentences

The Company settled $ 93.8 million principal amount of the 2023 Notes and $ 181.2 million principal amount of the 2024 Notes in exchange for an aggregate of 10.6 million shares of its common stock, par value $ 0.001 per share, and $ 196.5 million in cash.

The Company recorded a loss of $ 85.9 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Company’s Consolidated Statements of Operations.

The Company recorded a loss of $ 85.9 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Consolidated Statements of Operations.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On November 17, 2021 and November 22, 2021, the Company entered into separate privately-negotiated agreements with certain holders of its 2023 and 2024 Notes.

The Company settled $ 20.6 million principal amount of the 2023 Notes and $ 25.0 million principal amount of the 2024 Notes in exchange for $ 59.0 million in cash.

The Company recorded a loss of $ 6.4 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Company’s Consolidated Statements of Operations.

The Company recorded a loss of $ 6.4 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Consolidated Statements of Operations.

On March 2, 2022, the Company entered into separate privately-negotiated agreements with certain holders of its 2023 and 2024 Notes.

The Company settled $ 23.2 million principal amount of the 2023 Notes and $ 26.8 million principal amount of the 2024 Notes in exchange for $ 64.7 million in cash.

The Company recorded a loss of $ 6.4 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Consolidated Statements of Operations.

On June 3, 2022, the Company entered into separate privately-negotiated agreements with certain holders of its 2023 and 2024 Notes.

The Company settled $ 19.3 million principal amount of the 2023 Notes and $ 3.1 million principal amount of the 2024 Notes in exchange for $ 27.1 million in cash.

The Company recorded a loss of $ 3.1 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Company’s Consolidated Statements of Operations.

As of July 2, 2022, the outstanding principal amount of the 2023 and 2024 Notes was $ 68.1 million and $ 223.9 million, respectively, in each case, with terms unchanged.

The Company recorded a loss of $ 3.1 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Consolidated Statements of Operations.

Senior Secured Asset-Based Revolving Credit Facility

4 unchanged sentences

The obligations under the Credit Agreement are secured by substantially all of the assets of the Company and those of its subsidiaries that are borrowers and guarantors under the Credit Agreement.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Amounts outstanding under the Credit Agreement accrue interest as follows:

2 unchanged sentences

In addition, the Credit Agreement contains certain financial covenants that require the Company to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 if excess availability under the facility is less than the greater of 10 % of the lesser of maximum revolver amount and borrowing base and $ 20 million.

As of July 2, 2022, we had no borrowings under this facility and our available borrowing capacity was approximately $ 206.4 million.

As of July 1, 2023, we had no borrowings under this facility and our available borrowing capacity was approximately $ 172.5 million, net of outstanding standby letters of credit of $ 4.1 million.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revolving Credit Facility

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

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Interest expense-contractual interest $ 19.2 $ 16.5 $ 8.5

Amortization of debt issuance cost 2.5 2.8 2.3

Accretion of debt discount 1.6 — —

Other 3.8 4.0 3.9

1 unchanged sentence

The effective interest rate on the Company’s contractual debt was 2.65 %, 2.25 % and 1.25 % for fiscal 2023, 2022 and 2021, respectively.

As discussed in “Note 2.

Recent Accounting Pronouncements”, upon adoption of ASU 2020-06 the non-cash discount amortization for the 2023 and 2024 Notes is eliminated.

As a result, the interest expense recognized for these instruments will typically be closer to the coupon interest rate.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company is a lessee in several operating leases, primarily real estate facilities for office space.

1 unchanged sentence

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the fiscal years ended July 2, 2022 and July 3, 2021, the total operating lease costs were $ 14.0 million and $ 13.9 million, respectively.

Total variable lease costs were immaterial during the fiscal years ended July 2, 2022 and July 3, 2021.

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 July 2, 2022, the weighted-average remaining lease term was 7.2 years, and the weighted-average discount rate was 4.4 %.

During the fiscal years ended July 2, 2022 and July 3, 2021, cash paid for amounts included in the measurement of operating lease liabilities was $ 15.5 million and $ 15.1 million, respectively;

and operating ROU assets obtained in exchange of new operating lease liabilities was $ 14.7 million and $ 15.4 million, respectively.

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

Other non-current assets $ 45.2

Total operating ROU assets $ 45.2

Lease expense, cash flow and balance sheet information related to our operating leases is as follows ( in millions ):

July 1, 2023 July 2, 2022

Operating lease costs (1)

$ 13.1 $ 14.0

Cash paid for amounts included in the measurement of operating lease liabilities 14.4 15.5

Operating ROU assets obtained in exchange for operating lease obligations 7.0 14.7

Operating ROU assets (Other non-current assets) 40.4 45.2

Other current liabilities 10.1 10.1

1 unchanged sentence

Total operating lease liabilities $ 39.5 $ 43.6

Weighted-average remaining lease term 6.8 years 7.2 years

Weighted-average discount rate 4.8 % 4.4 %

(1) Total variable lease costs were immaterial during the fiscal years ended July 1, 2023 and July 2, 2022.

The total operating costs were included in cost of revenues, R&D and SG&A in the Consolidated Statements of Operations.

Future minimum operating lease payments as of July 1, 2023 are as follows ( in millions ):

9 unchanged sentences

Present value of lease liabilities $ 39.5

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Future minimum operating lease payments as of July 2, 2022, were as follows ( in millions ):

9 unchanged sentences

Present value of lease liabilities $ 43.6

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restructuring and Related Charges

The Company’s restructuring events are primarily intended to reduce costs, consolidate operations, integrate various acquisitions, streamline product manufacturing and address market conditions.

Restructuring charges include severance, benefit and outplacement costs to eliminate a specified number of positions.

The timing of associated cash payments is dependent upon the jurisdiction of the affected employees and can extend over multiple periods.

Fiscal 2023 Plan

During the second quarter of fiscal 2023, Management approved a restructuring and workforce reduction plan (the Fiscal 2023 Plan) to better align the Company’s workforce with current business needs and strategic growth opportunities.

The Company expects approximately 5 % of its global workforce to be affected.

As a result, the Company recorded charges of $ 12.1 million during the year to Restructuring and related charges (benefits) line within our Consolidated Statements of Operations, of which $ 10.4 million is related to Phase I of the Fiscal 2023 Plan and $ 1.7 million is related to Phase II of the Fiscal 2023 Plan.

The first phase of the Fiscal 2023 Plan impacted all segments and corporate functions and the Company anticipates this phase of the Fiscal 2023 Plan to be substantially complete by the end of the first quarter of fiscal 2024.

The second phase of the Fiscal 2023 Plan is primarily focused on reducing costs in our SE segment and the Company anticipates this phase of the Fiscal 2023 Plan to be substantially complete by the end of the second quarter of fiscal 2024.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of the activity in the restructuring accrual is outlined below (in millions):

Balance as of July 2, 2022 Restructuring and related charges Cash Settlements Balance as of July 1, 2023

Fiscal 2023 Plan

NSE/Corp $ — $ 9.1 $ ( 5.6 ) $ 3.5

OSP — 1.3 ( 0.7 ) 0.6

Fiscal 2023 Plan Phase I — 10.4 ( 6.3 ) 4.1

NSE — 1.7 — 1.7

Fiscal 2023 Plan Phase II — 1.7 — 1.7

$ — $ 12.1 $ ( 6.3 ) $ 5.8

(1) Included in Other current liabilities on the Consolidated Balance Sheets as of July 1, 2023.

During fiscal 2022 and 2021, the Company recorded a benefit related to restructuring actions of $ 0.1 million and $ 1.6 million, respectively.

During fiscal 2020, the Company recorded a charge related to restructuring actions of $ 3.5 million.

A summary of the activity in the remaining restructuring plan is outlined below ( in millions ):

Balance as of July 3, 2021 Fiscal 2022 Benefit Cash

Settlements Non-cash

Adjustments Balance as of July 2, 2022

Fiscal 2019 NSE $ 0.5 $ ( 0.1 ) $ ( 0.4 ) $ — $ —

The NSE Restructuring Plan was approved by Management during the first quarter of fiscal 2019 as part of a strategy to improve overall profitability in the NSE business segment and included actions related to consolidation, integration and workforce reduction.

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

The balance of $ 0.5 million as of July 3, 2021 is included in other current liabilities on the Consolidated Balance Sheets and the plan closed after remaining payments were made during fiscal 2022.

The Company’s income (loss) before income taxes consisted of the following ( in millions ):

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Domestic $ ( 37.6 ) $ ( 82.6 ) $ ( 21.7 )

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The Company’s income tax expense (benefit) consisted of the following ( in millions ):

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Current $ — $ — $ —

3 unchanged sentences

Deferred — — —

Total state income tax (benefit) expense ( 2.2 ) 20.1 2.7

Total state income tax expense (benefit) 2.6 ( 2.2 ) 20.1

Current 27.6 63.2 44.8

2 unchanged sentences

Total income tax expense $ 35.2 $ 49.6 $ 63.3

The state current benefit primarily relates to a true-up of the estimated state tax impact of the internal intellectual property restructuring transaction which, was undertaken in the fourth quarter of fiscal 2021.

The state current expense primarily relates to the impact of additional capitalization of R&D costs.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The foreign current expense primarily relates to the Company’s profitable operations in certain foreign jurisdictions including the current expense related an internal intellectual property restructuring and withholding tax related to intercompany dividends.

The foreign deferred tax (benefit) expense relates to the release of valuation allowance in a foreign jurisdiction, a reclassification of deferred tax expense accrued on intercompany dividends to current tax expense upon dividend declaration and the amortization of purchased intangible assets.

The foreign current expense primarily relates to the Company’s profitable operations in certain foreign jurisdictions.

The foreign deferred tax expense primarily relates to deferred tax expense accrued on intercompany dividends.

A reconciliation of the Company’s income tax expense at the federal statutory rate to the income tax expense at the effective tax rate is as follows ( in millions ):

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Income tax expense computed at federal statutory rate $ 12.8 $ 13.7 $ 27.5

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Fair value change of the earn-out liability ( 1.0 ) 0.1 ( 1.5 )

Reversal of previously accrued taxes ( 8.6 ) ( 2.1 ) ( 3.7 )

Impact of prior years’ taxes ( 0.5 ) ( 8.6 ) ( 2.1 )

Research and experimentation benefits and other tax credits ( 1.3 ) ( 1.1 ) ( 0.5 )

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Balance as of

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Gross deferred tax assets:

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The federal tax net operating loss carryforwards start to expire in fiscal 2024 and at various dates through 2038 if not utilized.

The federal credit carryforwards start to expire fiscal 2023 and at various dates through fiscal 2043 if not utilized.

The federal research credit carryforwards start to expire fiscal 2024 and at various dates through fiscal 2044 if not utilized.

The state tax net operating loss carryforwards start to expire in fiscal 2024 and at various dates through 2041 if not utilized.

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Loss carryforward limitations may result in the expiration or reduced utilization of a portion of the Company’s net operating losses.

On July 2, 2022, the Company completed a planned internal transaction moving certain of VIAVI’s intellectual properties out of a foreign jurisdiction where tax rates are scheduled to increase to the U.S.

During fiscal 2022, the Company completed a planned internal transaction moving certain of VIAVI’s intellectual properties out of a foreign jurisdiction where tax rates are scheduled to increase to the U.S.

entity established in fiscal 2021 to own and manage VIAVI’s other intellectual properties.

The Company recorded foreign tax expense of $ 13.2 million related to this transaction which is included in the internal intellectual property restructuring line of the current year effective tax rate reconciliation.

The Company recorded foreign tax expense of $ 13.2 million related to this transaction.

Foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries have not been provided on $ 7.9 million of undistributed earnings for certain foreign subsidiaries.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On July 2, 2021, the Company completed a planned series of internal transactions restructuring certain of VIAVI’s intellectual properties.

During fiscal 2021, the Company completed a planned series of internal transactions restructuring certain of VIAVI’s intellectual properties.

The result of which aligned the properties in a single entity which owns, manages, directs, and protects the properties, including but not limited to patents, product designs, processes, manufacturing technologies, know-how, and trade secrets.

In conjunction with the internal restructuring $ 2.3 billion ($ 482 million tax effected) of U.S.

federal net operating loss carryforwards were utilized, the Company recognized a new deferred tax asset relating to the book and tax basis difference of certain intangible assets of $ 589 million.

federal net operating loss carryforwards were utilized, and the Company recognized a new deferred tax asset relating to the book and tax basis difference of certain intangible assets of $ 589 million.

Given the full valuation allowance that is carried on the Company’s U.S.

deferred tax assets, the change in the deferred taxes as a result of the transaction does not have material impact on the financial statements.

deferred tax assets, the change in the deferred taxes as a result of the transaction does not have a material impact on the financial statements.

The Company recorded state tax expense including reserves for uncertain tax positions of $ 19.1 million related to this transaction .

During fiscal 2020, in light of the economic uncertainty caused by COVID-19, the Company reevaluated its historic assertion on foreign earnings and no longer considered a majority of its earnings to be permanently reinvested resulting in a $ 32.5 million charge for withholding taxes expected to be paid on the repatriation of $ 324.0 million of foreign earnings that the Company does not consider to be permanently reinvested.

During the third quarter of fiscal 2020, which included changing the Company’s intent with regard to the indefinite reinvestment of such foreign earnings, the Company initially accrued $ 31.6 million for withholding taxes expected to be paid on the repatriation of $ 316.4 million of accumulated foreign earnings that it no longer considers to be permanently reinvested as of the third quarter.

During fiscal 2020, the Company paid $ 19.5 million withholding income tax on the repatriation of foreign earnings.

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

and provides greater U.S.

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

The foreign earnings are being repatriated to the U.S.

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

On March 27, 2020, the House passed the Coronavirus Aid, Relief, and Economic Security Act (The CARES Act), also known as the Third COVID-19 Supplemental Relief bill, and the president signed the legislation into law.

Tax provisions of the Act include the deferral of certain payroll taxes, relief for retaining employees, and other provisions.

The provisions of the legislation did not have a significant impact on the effective tax rate or the income tax payable and deferred income tax positions of the Company.

The Company continues to monitor additional guidance issued by the U.S.

Treasury Department, the Internal Revenue Service and others.

The valuation allowance increased by $ 11.9 million in fiscal 2022, decreased by $ 114.2 million in fiscal 2021, and decreased by $ 4.9 million in fiscal 2020.

The valuation allowance increased by $ 30.7 million in fiscal 2023, increased by $ 11.9 million in fiscal 2022, and decreased by $ 114.2 million in fiscal 2021.

The increase during fiscal 2023 was primarily due to the increase in capitalization of federal research expenditures in the U.S.

This includes the effects of the mandatory capitalization and amortization of research and development expenses incurred in fiscal 2023, as required by the 2017 Tax Cuts and Jobs Act (Tax Act) .

The increase during fiscal 2022 was primarily due to the increase in capitalization of federal research expenditures in the U.S.

The decrease during fiscal 2021 was primarily due to the expiration of federal net operating losses, federal capital losses, and federal research credits.

The increase during fiscal 2020 was primarily due to the business acquired during the year.

The following table provides information about the activity of our deferred tax valuation allowance (in millions) :

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Year Ended July 2, 2022 $ 1,308.9 $ 101.7 $ ( 89.8 ) $ 1,320.8

Year Ended June 27, 2020 $ 1,427.9 $ 90.1 $ ( 94.9 ) $ 1,423.1

Year Ended July 3, 2021 $ 1,423.1 $ 617.5 $ ( 731.7 ) $ 1,308.9

(1) Additions include current year additions charged to expenses and current year build due to increases in net deferred tax assets, return to provision true-ups, and other adjustments.

(2) Deductions include current year releases credited to expenses and current year reductions due to decreases in net deferred tax assets, return to provision true-ups, other adjustments and increases in deferred tax liabilities .

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A reconciliation of unrecognized tax benefits between June 27, 2020 and July 1, 2023 is as follows ( in millions ):

1 unchanged sentence

Additions based on tax positions related to current year 14.8

Additions based on tax positions related to prior year 0.3

Reduction based on tax positions related to prior year ( 6.8 )

1 unchanged sentence

Reductions for lapse of statute of limitations ( 0.4 )

Balance at June 27, 2020 52.0

Balance at July 3, 2021 59.1

Additions based on tax positions related to current year 0.4

Additions based on tax positions related to prior year 2.6

Reduction based on tax positions related to prior year ( 2.6 )

Reduction related to settlement ( 0.5 )

Reductions for lapse of statute of limitations ( 6.1 )

5 unchanged sentences

Balance at July1, 2023 $ 54.9

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The unrecognized tax benefits relate primarily to the allocations of revenue and costs among the Company’s global operations and the validity of some U.S.

2 unchanged sentences

The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits within th e income tax provision.

The amount of interest and penalties accrued as of July 2, 2022, July 3, 2021 and June 27, 2020 was approximately $ 2.1 million, $ 4.0 million, and $ 2.7 million, respectively.

During fiscal 2022, the Company’s accrued interest and penalties decreased by $ 1.9 million.

The amount of interest and penalties accrued as of July 1, 2023, July 2, 2022 and July 3, 2021 was approximately $ 2.9 million, $ 2.1 million, and $ 4.0 million, respectively.

During fiscal 2023, the Company’s accrued interest and penalties increased by $ 0.8 million.

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.

2 unchanged sentences

The Company believes that adequate amounts have been provided for any adjustments that may result from these examinations.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the Company’s major tax jurisdictions and the tax years that remain subject to examination by such jurisdictions as of July 1, 2023:

11 unchanged sentences

Repurchase of Common Stock

In September 2019, the Board of Directors authorized a stock repurchase plan (“2019 Repurchase Plan”) of up to $ 200 million of the Company’s common stock through open market or private transactions before September 30, 2021.

On August 18, 2021, the Board of Directors approved to extend the 2019 Repurchase Plan until September 30, 2022.

Under the 2019 Repurchase Plan, the Company may repurchase its common stock from time to time at the discretion of the Company’s management.

During fiscal 2022, the Company repurchased 3.1 million shares of its common stock for $ 45.5 million under the 2019 Repurchase plan.

As of July 2, 2022, the Company had approximately $ 67.3 million remaining under the program.

In September 2021, the Board of Directors authorized a new stock repurchase plan (“2021 Repurchase Plan”) of up to $ 190 million.

The 2021 Repurchase plan is separate from the 2019 Repurchase Plan noted above and was solely used for the repurchase of the Company’s common stock issued in connection with the exchange transaction with certain holders of its Senior Convertible Notes (refer to Senior Convertible Notes Settlement section of “Note 11.

In September 2022 the Board of Directors authorized a new stock repurchase plan (“2022 Repurchase Plan”) of up to $ 300 million effective October 1, 2022 which will remain in effect until the amount authorized has been fully repurchased or until suspension or termination of the program.

Under the 2022 Repurchase Plan, the Company is authorized to repurchase shares through a variety of methods, including open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans.

The timing of repurchases under the plan will depend upon business and financial market conditions.

The 2022 Repurchase Plan replaces the $ 200 million stock repurchase plan that the Board previously authorized in September 2019 (“2019 Repurchase Plan”) and expired on September 30, 2022, as well as the stock repurchase plan that the Board of Directors authorized in September 2021 (“2021 Repurchase Plan”) used during fiscal 2022 for the purpose of repurchasing the Company’s common stock issued in connection with the exchange transactions with certain holders of its Senior Convertible Notes (refer to Senior Convertible Notes Settlement section of “Note 11.

Debt” for more details).

During fiscal 2023, the Company repurchased 1.3 million shares of its common stock for $ 18.7 million under the 2019 Repurchase Plan.

As of July 2, 2022, there is no remaining authorization under this plan.

During fiscal 2023, the Company repurchased 6.0 million shares of its common stock for $ 65.2 million under the 2022 Repurchase Plan.

As of July 1, 2023, the Company had remaining authorization of $ 234.8 million for future share repurchases under the 2022 Repurchase Plan.

VIAVI SOLUTIONS INC.

1 unchanged sentence

The following table summarizes share repurchase activity related to the Company’s stock repurchase program (in millions, except average price per share amounts) :

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Total number of shares repurchased 7.3 14.8 3.0

4 unchanged sentences

All common shares repurchased during fiscal 2023, 2022 and 2021 have been canceled and retired.

On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) was enacted into law.

The Company evaluated the provisions of the new legislation, which included an excise tax on share repurchases.

The IRA was effective as of January 1, 2023 and repurchase activity after that date resulted in an accrual of $ 0.3 million recorded in Other current liabilities on the Consolidated Balance Sheets.

Preferred Stock

5 unchanged sentences

Stock Option Plans

On November 13, 2019, the Company's stockholders approved the amendment and restatement of the Company’s Amended and Restated 2003 Equity Incentive Plan (the 2003 Plan, as most recently amended and restated, the Amended and Restated 2003 Plan).

An additional 10.5 million shares were authorized under the re-approved 2003 plan effective as of November 13, 2019.

The Amended and Restated 2003 Plan provides for the granting of stock options, stock appreciation rights (SARs), dividend equivalent rights, restricted stocks, restricted stock units, performance units and performance shares, the vesting of which may be time-based or upon satisfaction of performance criteria or other conditions.

As of July 2, 2022, the Company had 7.4 million shares subject to (i) stock options and Full Value Awards (defined below) issued and outstanding under the Amended and Restated 2003 Plan, (ii) inducement grants made in connection with the appointment of new CEO in fiscal 2016 and (iii) stock options and Full Value Awards issued and outstanding under various other plans the Company assumed through acquisitions.

The Company’s Amended and Restated 2003 Plan provides for the granting of stock options, stock appreciation rights (SARs), dividend equivalent rights, restricted stocks, restricted stock units, performance units and performance shares, the vesting of which may be time-based or upon satisfaction of performance criteria or other conditions.

As of July 1, 2023, the Company had 8.7 million shares subject to (i) Full Value Awards (defined below) issued and outstanding under the Amended and Restated 2003 Plan and (ii) stock options grant made in connection with the new CEO appointment in fiscal 2016.

The exercise price for stock options is equal to the fair value of the underlying stock at the date of grant.

The Company issues new shares of common stock upon exercise of stock options.

Options generally become exercisable over a three - or four-year period and, if not exercised, expire from five to ten years after the date of grant.

As of July 1, 2023, 7.5 million shares of common stock, primarily under Amended and Restated 2003 Plan, were available for grant.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Employee Stock Purchase Plans

1 unchanged sentence

The ESPP is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986.

The ESPP will terminate upon the earlier of November 15, 2027 or the date on which all shares available for issuance have been sold.

As of July 1, 2023, 1.5 million shares remained available for issuance.

The ESPP as adopted provided for a 5 % discount with a look-back period of six months .

In May 2019, the ESPP was amended to provide for a 15 % discount.

The ESPP as amended provides for a 15 % discount with a look-back period of six months .

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Full Value Awards

3 unchanged sentences

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

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

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

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

2 unchanged sentences

The impact on the Company’s results of operations of recording stock-based compensation expense by function for fiscal 2023, 2022 and 2021 was as follows ( in millions ):

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Cost of revenue $ 4.8 $ 5.2 $ 4.8

2 unchanged sentences

Total stock-based compensation expense $ 51.2 $ 52.3 $ 48.3

Approximately $ 1.2 million of stock-based compensation expense was capitalized to inventory at July 2, 2022.

Approximately $ 1.2 million of stock-based compensation expense was capitalized to inventory at July 1, 2023 and July 2, 2022.

Stock Option Activity

There has been no activity for stock-based compensation expense related to stock options during the fiscal years ended July 2, 2022, July 3, 2021, and June 27, 2020.

The following table summarized outstanding and exercisable options as of July 2, 2022 all of which have been fully amortized and recognized since before June 29, 2019.

There has been no activity for stock-based compensation expense related to stock options during the fiscal years ended July 1, 2023, July 2, 2022, and July 3, 2021.

The following table summarizes outstanding and exercisable options as of July 1, 2023 all of which have been fully amortized and recognized since before June 29, 2019.

Options Outstanding Options Exercisable

4 unchanged sentences

$ 5.95 1,180,257 0.62 $ 5.95 $ 6.3 1,180,257 0.62 $ 5.95 $ 6.3

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $ 13.09 as of July 2, 2022, which would have been received by the option holders had all option holders exercised their options as of that date.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $ 11.33 as of July 1, 2023, which would have been received had the options been exercised as of that date.

The total number of in-the-money options exercisable as of July 1, 2023 was 1.2 million.

4 unchanged sentences

The cost will be recognized in the first quarter of fiscal 2024.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Full Value Awards Activity

7 unchanged sentences

Awards forfeited ( 0.2 ) ( 0.5 ) ( 0.7 ) $ 13.83

Non-vested June 27, 2020 1.0 5.1 6.1 $ 12.97

Non-vested July 3, 2021 1.5 4.8 6.3 $ 13.98

Awards granted 0.4 2.4 2.8 $ 16.95

13 unchanged sentences

As of July 1, 2023, $ 60.1 million of unrecognized stock-based compensation cost related to Full Value Awards remains to be amortized.

That cost is expected to be recognized over an estimated amortization period of 1.8 years.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

That cost is expected to be recognized over the remaining amortization period of 1.6 years.

Valuation Assumptions

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

The Company estimates the fair value of time-based RSU awards based on the closing market price of the Company’s common stock on the date of grant.

In the case of PSUs that are performance-based awards without a market condition, the Company will estimate the fair value of the awards using a probability weighted model.

In the case of MSUs or PSUs, that are performance based awards and 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.

The weighted-average assumptions used to measure fair value were as follows:

July 2, 2022 July 3, 2021 June 27, 2020

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

The weighted-average assumptions used to measure fair value of performance-based awards with a market condition were as follows:

July 1, 2023 July 2, 2022 July 3, 2021

Volatility of common stock 31.2 % 33.8 % 38.5 %

2 unchanged sentences

Risk-free interest rate 3.4 % 0.2 % 0.3 %

The Company did no t issue stock option grants during the fiscal years ended July 2, 2022, July 3, 2021 and June 27, 2020.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company did no t issue stock option grants during the fiscal years ended July 1, 2023, July 2, 2022 and July 3, 2021.

The Company estimates the fair value ESPP purchase rights using a BSM valuation model.

1 unchanged sentence

Employee Stock Purchase Plans

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Expected term (in years) 0.5 0.5 0.5

7 unchanged sentences

The expected volatility for stock options was based on the historical volatility of the Company's common stock and its peers.

The expected volatility for ESPP purchase rights was based on the historical volatility of its stock price with similar expected term.

The expected volatility for ESPP purchase rights was based on the historical volatility of its stock price with a similar expected term.

Risk-Free Interest Rate:

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Employee Defined Benefit Plans

The Company is responsible for a non-pension post-retirement benefit obligation assumed from a past acquisition, which is closed to new participants.

As of July 1, 2023 and July 2, 2022, the liability balances related to the non-pension post-retirement benefit plan were $ 0.4 million.

The liability balances were included in Other non-current liabilities on the Consolidated Balance Sheets.

The Company sponsors significant qualified and non-qualified pension plans for certain past and present employees in the U.K.

and Germany including the plan assumed in a prior acquisition.

The Company also is responsible for the non-pension postretirement benefit obligation assumed from a past acquisition.

Most of the plans have been closed to new participants and no additional service costs are being accrued, except for certain plans in Germany assumed in connection with an acquisition during fiscal 2010.

Most of these pension plans have been closed to new participants and no additional service costs are being accrued, except for certain plans in Germany assumed in connection with an acquisition during fiscal 2010.

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

As of July 1, 2023, the U.K.

plan was partially funded while the other plans were unfunded.

plan was fully funded while the other plans were unfunded.

The Company’s policy for funded plans is to make contributions equal to or greater than the requirements prescribed by law or regulation.

For unfunded plans, the Company pays the postretirement benefits when due.

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

Future estimated benefit payments are summarized under the Future Benefit Payments’ section below.

4 unchanged sentences

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

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Service cost $ — $ 0.2 $ 0.2

1 unchanged sentence

Expected return on plan assets ( 1.7 ) ( 1.7 ) ( 1.7 )

Recognized net actuarial losses 2.9 3.1 2.8

Net periodic cost $ 3.0 $ 3.1 $ 3.5

Recognized net actuarial (gains) losses ( 0.1 ) 2.9 3.1

Net periodic benefit cost $ 0.9 $ 3.0 $ 3.1

VIAVI SOLUTIONS INC.

1 unchanged sentence

The Company’s accumulated other comprehensive (loss) income includes unrealized net actuarial (gains)/losses.

The amount expected to be recognized in net periodic benefit cost during fiscal 2023 is $ 0.2 million.

Refer to “Note 18.

Commitments and Contingencies” for further information on the provision for legal proceeding.

The amount of unrealized net actuarial (gain)/loss expected to be recognized in net periodic benefit cost during fiscal 2024 is $ 0.1 million.

The changes in the benefit obligations and plan assets of the pension and benefits plans were ( in millions ):

20 unchanged sentences

July 1, 2023 July 2, 2022

Amount recognized in the Consolidated Balance Sheets at end of year:

Amount recognized on the Consolidated Balance Sheets at end of year:

Non-current assets $ 5.6 $ —

Current liabilities 7.8 7.0

Non-current liabilities 52.8 59.2

Net amount recognized at end of year $ 66.2 $ 104.3

Amount recognized in accumulated other comprehensive (loss) income at end of year:

Actuarial losses, net of tax $ ( 7.2 ) $ ( 24.0 )

Net amount recognized at end of year $ ( 7.2 ) $ ( 24.0 )

Other changes in plan assets and benefit obligations recognized in other comprehensive (loss) income:

Net actuarial gain $ 2.0 $ 13.9

Amortization of accumulated net actuarial losses 2.9 3.1

Amortization of accumulated net actuarial (gains) losses ( 0.1 ) 2.9

Total recognized in other comprehensive income (loss) $ 1.9 $ 16.8

As of July 2, 2022 and July 3, 2021, the liability balances related to the post retirement benefit plan were $ 0.4 million.

The liability balances were included in other non-current liabilities on the Consolidated Balance Sheets.

During fiscal 2023, the Company (amounts represented as £ and $ denote GBP and USD, respectively) contributed £ 1.0 million or approximately $ 1.2 million, while in fiscal 2022, the Company contributed £ 1.0 million or approximately $ 1.3 million to its U.K.

1 unchanged sentence

These contributions allowed the Company to comply with regulatory funding requirements.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Underlying both the calculation of the PBO and net periodic cost are actuarial valuations.

1 unchanged sentence

At a minimum, the Company evaluates these assumptions annually and makes changes as necessary.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The discount rate reflects the estimated rate at which the pension benefits could be effectively settled.

4 unchanged sentences

Pension Benefit Plans

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Used to determine net period cost at end of year:

7 unchanged sentences

The Company’s investment objectives for its funded pension plan are to ensure that there are sufficient assets available to pay out members’ benefits as and when they arise and that, should the plan be discontinued at any point in time, there would be sufficient assets to meet the discontinuance liabilities.

To achieve these objectives, the trustees of the U.K.

pension plan are responsible for regularly monitoring the funding position and managing the risk by investing in assets expected to outperform the increase in value of the liabilities in the long term and by investing in a diversified portfolio of assets in order to minimize volatility in the funding position.

The trustees invest in a range of frequently traded funds (pooled funds) rather than direct holdings in individual securities to maintain liquidity, achieve diversification and reduce the potential for risk concentration.

To achieve these objectives, the trustee of the U.K.

pension plan is responsible for regularly monitoring the funding position and managing the risk by investing in assets expected to outperform the increase in value of the liabilities in the long term and by investing in a diversified portfolio of assets in order to minimize volatility in the funding position.

The trustee invests in a range of frequently traded funds (pooled funds) rather than direct holdings in individual securities to maintain liquidity, achieve diversification and reduce the potential for risk concentration.

The funded plan assets are managed by professional third-party investment managers.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurement of Plan Assets

7 unchanged sentences

Total assets $ 31.1 100.0 % $ 2.7 $ 28.4

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the plan’s assets at fair value and the percentage of assets allocations as of July 2, 2022 ( in millions, except percentage data ):

12 unchanged sentences

Other consists of several funds that primarily invest in global equities, bonds, private equity, global real estate and infrastructure funds.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Future Benefit Payments

The following table reflects the total expected benefit payments to defined benefit pension plan participants.

The following table reflects the expected benefit payments to defined benefit pension plan participants.

These payments have been estimated based on the same assumptions used to measure the Company’s PBO at fiscal year end and include benefits attributable to estimated future compensation increases ( in millions ).

1 unchanged sentence

2029-2033 25.4

Thereafter 13.6

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Commitments and Contingencies

10 unchanged sentences

While the Company seeks to maintain a sufficient safety stock of such products and maintains on-going communications with its suppliers to guard against interruptions or cessation of supply, the Company’s business and results of operations could be adversely affected by a stoppage or delay of supply, substitution of more expensive or less reliable products, receipt of defective parts or contaminated materials, increases in the price of such supplies, or the Company’s inability to obtain reduced pricing from its suppliers in response to competitive pressures.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Financing Obligations

8 unchanged sentences

As of July 2, 2022, $ 0.1 million was included in Other current liabilities , and $ 16.0 million was included in Other non-current liabilities .

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of July 1, 2023, future minimum annual lease payments of Santa Rosa’s non-cancelable leaseback agreements were as follows (in millions) :

12 unchanged sentences

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 July 1, 2023 and July 2, 2022.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Outstanding Letters of Credit and Performance Bonds

Outstanding Standby Letters of Credit and Performance Bonds

As of July 1, 2023, the Company had standby letters of credit of $ 8.4 million, and other claims of $ 0.7 million collateralized by restricted cash.

1 unchanged sentence

The Company provides reserves for the estimated costs of product warranties at the time revenue is recognized.

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.

Prior to January 1, 2023 the Company offered its customers warranties up to three years for most of its products.

On January 1, 2023, the Company changed the standard warranty for most of its products to one year.

The Company 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.

In addition, 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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the changes in the Company’s warranty reserve during fiscal 2023 and 2022 ( in millions ):

10 unchanged sentences

The Company estimated the liability to range from (amounts represented as £ denote GBP) £ 5.7 million to £ 8.4 million.

The Company determined that the likelihood of loss to be probable and accrued £ 5.7 million as of July 2, 2016 in accordance with authoritative guidance on contingencies.

The accrual is included as a component of other non-current liabilities, in the Company’s Consolidated Balance Sheets.

The Company determined the likelihood of loss to be probable and accrued £ 5.7 million as of July 2, 2016 in accordance with authoritative guidance on contingencies.

The Company pursued an appeal of the court decision.

In March 2018, the appellate court affirmed the decision of the lower court.

The Company is pursuing a deed of rectification claim and continues to pursue a claim against the U.K.

The Company pursued a motion for summary judgement on the deed of rectification claim and continues to pursue a claim against the U.K.

law firm responsible for the error.

As of July 2, 2022, the related accrued pension liability was £ 5.4 million or $ 6.5 million.

As of July 2, 2022, the related accrued pension liability of £ 5.4 million or $ 6.5 million was included in pension and post-employment benefits within Other non-current liabilities on the Consolidated Balance Sheets.

In September 2022, the Company received a favorable court decision which removed completely and definitively the obligation to fund the increased pension benefit with retrospective effect to 1999.

As a result of the judgment, and in accordance with authoritative guidance on contingencies, the Company reversed the liability and recorded a gain (reduction to SG&A expense in the Consolidated Statements of Operations) of £ 5.7 million or $ 6.7 million during fiscal 2023.

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

51 unchanged sentences

Operating margin 15.6 % 40.5 % 14.3 %

Year Ended June 27, 2020

Year Ended July 3, 2021

Network and Service Enablement

10 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Corporate reconciling items impacting gross profit:

10 unchanged sentences

Change in fair value of contingent liability 4.5 ( 0.3 ) 5.3

Other charges unrelated to core operating performance (1)

Other benefits (charges) unrelated to core operating performance (1)

2.0 ( 9.6 ) ( 3.4 )

Restructuring and related benefits (charges) 0.1 1.6 ( 3.5 )

Restructuring and related (charges) benefits ( 12.1 ) 0.1 1.6

GAAP operating income from continuing operations $ 82.4 $ 185.0 $ 142.2

(1) During the years ended July 2, 2022, July 3, 2021, and June 27, 2020 other (charges) benefits unrelated to core operating performance primarily consisted of certain acquisition and integration related charges, transformational initiatives such as site consolidations, reorganization, and loss on disposal of long-lived assets.

(1) During the years ended July 1, 2023, July 2, 2022, and July 3, 2021 other benefits (charges) unrelated to core operating performance primarily consisted of certain acquisition and integration related charges, transformational initiatives such as site consolidations, reorganization, accretion of debt discount, intangible impairment and loss on disposal of long-lived assets.

The Company operates primarily in three geographic regions:

3 unchanged sentences

The following table presents net revenue by the three geographic regions the Company operates in and net revenue from countries that exceeded 10% of the Company’s total net revenue ( in millions ):

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

Product Revenue Service Revenue Total Product Revenue Service Revenue Total Product Revenue Service Revenue Total

6 unchanged sentences

Total Asia-Pacific $ 343.7 $ 33.8 $ 377.5 $ 432.7 $ 29.0 $ 461.7 $ 384.3 $ 26.2 $ 410.5

Switzerland $ 62.4 $ 0.3 $ 62.7 $ 76.2 $ 0.4 $ 76.6 $ 64.5 $ 0.1 $ 64.6

Other EMEA 225.7 56.6 282.3 242.4 53.8 296.2 248.4 40.3 288.7

Total EMEA $ 288.1 $ 56.9 $ 345.0 $ 318.6 $ 54.2 $ 372.8 $ 312.9 $ 40.4 $ 353.3

$ 228.6 $ 61.9 $ 290.5 $ 288.1 $ 56.9 $ 345.0 $ 318.6 $ 54.2 $ 372.8

Total net revenue $ 936.1 $ 170.0 $ 1,106.1 $ 1,135.5 $ 156.9 $ 1,292.4 $ 1,051.4 $ 147.5 $ 1,198.9

2 unchanged sentences

SICPA Holding SA Company (SICPA), a customer of the Company’s OSP segment, generated more than 10% of VIAVI net revenue from continuing operations during fiscal 2023, 2022 and 2021 as summarized below ( in millions ):

July 2, 2022 July 3, 2021 June 27, 2020

July 1, 2023 July 2, 2022 July 3, 2021

SICPA - OSP customer $ 157.7 $ 178.4 $ 193.9

12 unchanged sentences

The following table presents the Company’s selected quarterly financial information from the Consolidated Statements of Operations for fiscal 2023 and 2022 ( in millions, except per share data ):

July 2, 2022 April 2, 2022 January 1, 2022 October 2, 2021 July 3, 2021 April 3, 2021 January 2, 2021 October 3, 2020

July 1, 2023 April 1, 2023 December 31, 2022 October 1, 2022 July 2, 2022 April 2, 2022 January 1, 2022 October 2, 2021

Net revenue $ 263.6 $ 247.8 $ 284.5 $ 310.2 $ 335.3 $ 315.5 $ 314.8 $ 326.8

Gross profit 146.0 141.0 167.0 184.8 201.1 186.9 190.5 195.0

Net income (loss) $ 16.5 $ 19.2 $ 34.6 $ ( 54.8 ) $ 3.3 $ 17.2 $ 27.3 $ 19.7

Net income (loss) per share - basic:

Net income (loss) (1)

Net (loss) income $ ( 0.1 ) $ ( 15.4 ) $ 8.4 $ 32.6 $ 16.5 $ 19.2 $ 34.6 $ ( 54.8 )

Net (loss) income per share - basic:

Net (loss) income (1)

$ — $ ( 0.07 ) $ 0.04 $ 0.14 $ 0.07 $ 0.08 $ 0.15 $ ( 0.24 )

Net income (loss) per share - diluted:

Net income (loss) (1)

Net (loss) income per share - diluted:

Net (loss) income (1)

$ — $ ( 0.07 ) $ 0.04 $ 0.14 $ 0.07 $ 0.08 $ 0.14 $ ( 0.24 )

2 unchanged sentences

Diluted 222.2 224.1 227.1 230.4 231.3 236.8 242.3 231.1

(1) Net income (loss) per share is computed independently for each of the fiscal quarters presented.

Therefore, the sum of the quarterly basic and diluted Net income (loss) per share amounts may not equal the annual basic and diluted Net income (loss) per share amount for the full fiscal years.

Subsequent Events

On July 18, 2022, the Company completed a business acquisition for total consideration of approximately $ 19 million.

(1) Net (loss) income per share is computed independently for each of the fiscal quarters presented.

Therefore, the sum of the quarterly basic and diluted Net (loss) income per share amounts may not equal the annual basic and diluted Net (loss) income per share amount for the full fiscal years.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data